Broker Check

Wealth Management

Advice for Growing, Protecting and Transferring Wealth

How to Select Your Wealth Manager

Chances are you've spent a lifetime saving what you have.

In fact, maybe it’s been two lifetimes, yours plus that of your spouse. Doesn’t it make sense to work with a professional who can help you protect and preserve what you’ve earned?

When considering a wealth manager look for someone who is independent and offers unbiased and objective investment advice, so each party’s interest is properly aligned. And as you should be working together for a long time, be sure you are comfortable with your wealth manager.

While many professionals can offer financial services such as stock brokers and accountants as well as bank and insurance company representatives, these types of “advisors” tend to fall into two categories:

Investment generalists: These offer a broad range of investment products but do not specialize in a single product type or specialized service. While they offer many different products, they do not make consulting an essential part of their business model rather they are “transaction focused.”

Product specialists: These focus exclusively on an investment-oriented product niche and frequently offer a single product type as a “solution.” They often offer such products as managed accounts, stocks or fixed-income alternatives. This can be especially problematic for those who may need a variety of financial solutions. Like investment generalists, these advisors do not have a consultative orientation and tend to be transactional.

Wealth managers: These advisors take a comprehensive approach to meeting your needs and use a highly consultative plan to construct integrated strategies for your specific problems. While many advisors call themselves wealth managers, the following hallmarks are of those who truly practice wealth management:

  • Consultative Process: They establish a close relationship with you to gain a detailed understanding of your goals and most important financial wants and needs.

  • Customized Choices: Wealth managers take into account a range of interrelated financial services, such as investment management, insurance, estate planning and retirement planning. Their solutions should be designed to meet your specific needs.

  • Unique Strategies: Your wealth manager should work with you on an ongoing basis to identify your specific needs while designing custom strategies to meet them.

  • Tax Planning = Tax Minimization: Holding onto your money is as important as earning it. A wealth manager can provide a wide range of tax-minimization products such as individual 401(k) plans which work like 401(k) plans offered by large companies, as well as SEP-IRAs designed for the self-employed. Unlike other retirement plans, an individual 401(k) is strictly for sole proprietors and entrepreneurs with no other employees (although your spouse may contribute if he or she earns income from your business).

  • Tactical Investing: Could you benefit from a unique strategy focusing on wide participation in rising markets while providing loss protection in down markets? Would you like to manage “risk” from your perspective? True wealth managers often offer the flexibility to be fully invested and to re-allocate to “defensive” sectors, or to cash equivalents in down markets. When you enter the “draw-down stage,” you likely will need some growth of capital to help preserve your nest egg. Combining risk management with upside potential can provide a true, long-term investment strategy.

New Wealth Creates New Responsibilities

Appreciating real estate values, insurance, and divorce settlements, stock options and inheritances, have created new levels of near-instant millionaires. But how does one manage the new responsibilities that often accompany new-found wealth?

A pre-retiree who inherits property that her parents bought soon after the Second World War or the 20-year manager who has regularly bought company stock and made automatic 401(k) contributions can find themselves with a stratospheric bank account. After they take that trip around the world then what?

When a large amount of money’s concerned, communicate your feelings about it with your spouse and family members. Understanding feelings about wealth is a key concern and should be addressed early. Suddenly receiving a large sum of money can also have drastic emotional consequences. It’s important not to rush into anything.

It is not unusual for members of one generation to view wealth differently than those from another, even if they were raised in the same household. Those who were raised to value every dollar – common among seniors who remember the Great Depression – will usually view wealth differently than someone comfortable carrying a large amount of debt – typically a Baby Boomer. It takes time to adjust. After five or six months, spending habits become more defined. The first six months are critical. People may view you differently. A new set of solicitors will contact you.

That’s why one of the first things to do, well before discussing money or investments, is to divulge emotions. Questions to consider are: Have you ever received money before? In what type of financial household were you raised? How were your finances before you became wealthy? Do you have an adequate cash reserve? How about significant credit card debt?

Consider aligning yourself with a financial advisor who works with a team of professionals to help give you access to the services and products that can help preserve what you’ve earned. Articulate your risk tolerance and long-term goals and before discussing the products that can help you achieve them.

Diversified portfolios with an eye on long-term performance, professional guidance and a healthy amount of real estate exposure have historically helped the affluent preserve what they’ve earned and pass it on to the next generation. While each investment carries some risk, those who’ve accumulated wealth often shift their financial plan from one focusing on accumulation to preservation. Top-of-the-list items often include capital preservation, tax minimization, upgraded insurance and an estate plan.

While an inheritance may seem like an overnight success, chances are it took the dedication of at least one generation to build. It takes a similar mindset to make it last.

The Sudden Wealth Check List

  • Communicate your feelings about wealth with family members

  • Consider enlisting the help of an independent financial advisor

  • Respect the views of others who may not agree with you

  • Prepare to be treated differently by some individuals

  • Do not make any “rush” or “snap” financial decisions

Most of us Have Never Been Taught How to Achieve Wealth

While we learn things like budgeting, balancing our checkbook and paying our mortgage, the idea of creating wealth eludes many of us.

For those who are serious about improving our finances and truly wish to accumulate real, long-term wealth, one of the first things we need to do is change habits and attitudes. Most of us procrastinate when it comes to saving and are not taught how to plan or set goals. Overcoming one’s fear of the stock market and to reverse generations of bad financial habits and misunderstandings can be a big step as one’s attitude has a lot to do with how one approaches money and investing. For many, taking advantages of the numerous opportunities available is a matter of breaking old habits. It does not have to be difficult. Therefore, the first step is to write down on your calendar, one hour a week to focus and learn about everything financial, including, saving, investing and building net worth. Here are a few other steps you can take:

  • Run your household like a business.

  • Understand compound interest and how it can help you.

  • Permanently get out of debt.

  • Read books on wealth-building/attend investing seminars.

  • Understand your risk tolerance.

Outlining your current financial life is also important. Learn how much of your income is coming in against how much is going out of your household. After that look ahead and decide how much you’d like to be earning/saving five, ten and 20 years in the future. The three other basic goals are to eliminate debt, save more and be patient. Making your money work for you is almost as important as actually earning it. While it can take a few years to see significant results from these habits it’s more sensible than trying to get rich quickly or not trying at all.

Most of us don’t want to go through this process. We want to get rich quickly and unfortunately fail at this approach 99 percent of the time. If you have a die-hard “buy cheap” mentality created by a lifetime of hearing “traditional wisdom,” then you will always think cheap and safe, plus you may have missed some valuable opportunities.

Wealth Building 101

When it comes to wealth building, there can be four parts to your foundation: real estate, equity investments, i.e. the stock market, Internal Revenue Service-approved retirement funds and business equity. If you need help with this, consider assembling a professional financial team. This can include realtors, technology and business consultants, such as accountants and a financial advisor to help guide you. For those who may feel this is too risky or expensive, consider that trying to save$1,000 by avoiding a consultant’s fee could cost more in missed opportunities depending on the value of the advice they provide.

Salaried workers should probably be in their company’s defined-benefit or defined-contribution plan, which helps one save for retirement on a tax-deferred basis. Those working for a non-profit institution can use a 403(b). If you're self-employed or own a small business, you're probably hurting your own financial future if you’ve not opened a Simplified Employee Pension (SEP) and/or an Individual Retirement Account (IRA) plan. These are relatively easy and inexpensive to administer. An individual or solo 401(k) can also provide a good combination of benefits for the self-employed.

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