High-Net-Worth Financial Planning

A graphic of a man holding a big calculator next to a circle graph with a money symbol in the middle.

High Net Worth Financial Planning: What Does It Look Like?

It’s a simple statement, but it’s true: Financial planning is an important consideration for just about everyone.

However, high-net-worth individuals and couples may find especially valuable benefits through financial planning. A high-net-worth often means there are unique needs, risks, and opportunities that aren’t always in play for those with average net worth.

Effective high-net-worth financial planning can address those factors through specialized knowledge and experience. Complex financial positions, a wide range of assets, and high tax liabilities can require special attention when building a comprehensive financial plan.

Keep reading to learn more about financial planning for high-net-worth individuals.

Defining High-Net-Worth Individuals

High-net-worth is typically defined as having $1 million in investable assets, excluding the primary residence. Beyond that, high-net-worth individuals are all different. They don’t necessarily share a common geographic area, career, background, or age.

You’ll find successful entrepreneurs in this group, entertainers, athletes, lottery winners, and those who have inherited wealth. Those who are blessed with a net worth of at least $30 million are considered “ultra-high-net-worth.”

Every state and every major city in the U.S. has high-net-worth individuals. Each is unique, but they share many of the same complexities concerning tax planning, estate planning, risk management, and investment management. When a financial advisor builds a comprehensive financial plan, each area is important to consider, but the high-net-worth individual faces some unique challenges.

What Is High-Net-Worth Financial Planning?

High-net-worth financial planning is a specialized area of financial planning. Because high-net-worth individuals typically have more complicated financial situations, their needs are unique, as are the risks they face. Successful planning always focuses on the key issues, concerns, or problems facing the client, so financial planning for high-net-worth individuals needs to focus on their unique situation.

Financial planning, in general, is the process of identifying where you are and where you want to go in your financial life and then developing the strategies and tactics to get you there.

This process takes into consideration all your financial components from liquid assets, investments, real estate, income, expenses, current income, future income from pensions and social security, tax liability now and in the future, and the threats to your net worth and income which can occur along the way.

We often refer to financial planners specializing in wealth management as wealth managers or wealth management advisors as they engage in financial planning for high-net-worth individuals. It is critical that high-net-worth individuals work with a qualified financial advisor who specializes in this area because the potential risks and pitfalls are so much greater.

Is High-Net-Worth Financial Planning Similar to Standard Financial Planning?

The easy answer is, yes. Financial planning is a process as described above. In that sense, high-net-worth financial planning will look the same as standard financial planning.

But as each area of someone’s financial situation is reviewed, the complexities start to grow quickly. Standard financial planning will typically focus on helping someone attain financial stability.

High-net-worth individuals have, by definition, attained financial stability. The primary goal becomes one of preserving their net worth, growing it, protecting it, and then passing it along to heirs and favorite causes.

The Problem of More

We’ve described this as “the problem of more.” Because high-net-worth individuals have significant assets to manage, they have more to lose, more to protect, and more complex financial needs to fill.

It is critical for a high-net-worth individual to find the right type of financial planner. A financial advisor who does not regularly deal with “the problem of more” and the greater complexities of these types of financial plans may not be able to rise to the occasion. A great analogy can be drawn from medicine.

You might be willing to have the inexperienced or freshly graduated doctor set a broken arm, but you certainly want to use the seasoned, experienced surgeon to perform heart surgery. Many financial advisors can claim to be wealth managers or investment advisors, but that doesn’t mean they are all equally good at it.

Similarly, financial advisors who have attained the certified financial planner designation aren’t necessarily experienced in dealing with high-net-worth individuals any more than a doctor who just earned the title of “surgeon” is experienced in all surgeries.

Work With a Qualified Financial Advisor

A true wealth manager is someone who has experience in this area and who meets the fiduciary standard. Fiduciaries are morally and legally bound to act only in the client’s best interest. They should not sell any financial or insurance product or take a commission. Anything that compromises their 100% objectivity invalidates any claim they might make about being a wealth manager.

Working with a fiduciary financial advisor is important no matter where you are in the financial spectrum. Whether you’re just starting out, already affluent, have a high-net-worth, or have ultra-high-net-worth, you should never use a financial “advisor” who sells financial products. See those people for who they truly are – product salespeople pretending to offer objective advice.

Experience is equally important and deserves some discussion. Don’t accept a financial advisor’s claims at face value. Ask them how long they’ve been providing objective advice. Ask them how many of their clients have high-net-worth. Ask them whether they have specific experience with the issues you face. The list of questions to ask a financial advisor is a long one, but these questions are an important part of picking the right advisor for your situation, needs, and goals. 

To provide context, we at First Financial Consulting have been providing objective advice for more than 45 years, and the vast majority of our clients are high-net-worth. This experience and client base have given us exposure and expertise in almost any imaginable situation facing a high-net-worth individual.

In addition, and because the needs of high-net-worth individuals are unique and complicated, we take the time to truly become your personal financial advisor. We develop retirement plans and wealth management plans specifically designed for each client.

What Makes Financial Planning for High-Net-Worth Individuals Unique?

High-net-worth financial planning is unique because of the unique financial situations, risks, and complexities the high-net-worth client faces. High-net-worth individuals and families may have achieved financial security, but because of their wealth, they face increased exposure to key risks. Whether it’s market risks and volatility, onerous tax burdens, or complex legacy goals, the risks are different because of the larger quantity and value of their financial assets.

These high-net-worth individuals typically have several homes, which, in many instances, are each larger and more expensive. Simple insurance solutions are often ineffective in protecting these assets. A privately held business is often involved, and ownership transition becomes critical. Because tax rates increase with income, high-net-worth individuals face the real possibility that their tax rate might start reducing their net worth.

Additionally, wealth planning is always multi-generational. Going beyond financial stability means there will be estate planning needs. Higher net worth and higher income levels mean that estate taxes may cripple future generations.

The best of us also want our legacy to mean something. We don’t want the inheritance the kids or grandkids receive to be squandered or to ruin the values we work hard as parents to instill in our kids.

As we’ve often said to our high-net-worth clients, if you leave $2 million outright to an 18-year-old, we can almost guarantee that he or she won’t have anything left by the time they’re 30, and they will then feel guilty for the rest of their lives because they squandered it. Estate plans for high-net-worth individuals must consider how assets are inherited and protected, not just how much is inherited.

It should be obvious by now that developing an individualized and comprehensive wealth management plan is critical to achieving your financial goals and continued financial success. The key components of comprehensive wealth management include:

Income Continuation

When you retire, you still will have a significant living standard to maintain. We want to ensure that your income can continue without jeopardizing the assets generating those earnings.

Investment Management

As you accumulate investment assets, their composition becomes very important. We want to ensure that your investment assets are properly diversified to generate needed income and keep up with inflation through all economic cycles, including recessions and major market downturns.

Risk Mitigation

It’s one thing to identify the risks your net worth faces; it’s an entirely different thing to protect your net worth from those risks. We take steps to reduce the severity of risks you face and protect you against those that cannot be avoided.

Tax Minimization

No matter what you do to grow your net worth and protect it, the I.R.S. may prove to be your biggest adversary. The highest tax brackets in our country have ranged from 50% to 94%. On top of that, estate tax rates have been 50% or higher. We design strategies to reduce tax liability and other tax implications as part of our tax planning process and in our on-going management process.

Estate Planning

Leaving the right legacy in the right way to the right beneficiaries and causes is important. We develop and implement the tools to create your personal legacy for the future.

Successful High-Net-Worth Financial Planning Requires The Right Help

Whether you aspire to achieve a high-net-worth, need to protect it, or want to bless your heirs and favorite causes, your situation is unique and complex. Getting this right is important, and time is not your friend. The longer you delay, the greater risk you face. Tackling this by yourself leaves you open to critical mistakes.

Tackling this with the wrong “financial advisor” means you will probably get bad advice in the form of a great sales pitch. Some of the biggest advisors are really just the best salespeople at one of the large financial product providers. Brokerage companies and insurance firms have spent decades and millions of dollars perfecting highly successful sales pitches.

Don’t let a sales pitch or a do-it-yourself approach cripple your financial future. First Financial Consulting is dedicated to providing 100% objective advice to high-net-worth individuals. We have been doing this successfully for more than 45 years and meet the fiduciary standard – the highest standard of client dedication to the client. We understand your unique situation and the complexities you face.

We would love to discuss how we can help you, your family members, and future generations. If you’d like to start exploring different financial planning strategies, please use the button below to schedule a complimentary introductory appointment.

Greg Welborn is a Principal at First Financial Consulting. He works with high-net-worth individuals and privately-owned businesses on financial planning issues including investment, retirement, and tax planning, among others.

Greg Welborn is a Principal at First Financial Consulting. He works with high-net-worth individuals and privately-owned businesses on financial planning issues including investment, retirement, and tax planning, among others.


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