Key Points

• High-net-worth clients have $1M+ in investable assets and face unique financial challenges.

• High-net-worth individuals benefit from dedicated financial advisors with specialized expertise in managing larger portfolios.

• Choosing a fiduciary, fee-only advisor focused on custom strategies for high-net-worth clients helps ensure you’re receiving advice based on what’s truly best for you.

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How Do I Know If I’m a High-Net-Worth Client?

Knowing if you’re a high-net-worth client helps guide your wealth management decisions because high-net-worth clients face complex challenges that are unique to their situation. The higher your net worth, the more value a specialized HNW financial advisor can provide. Navigating the intricacies of investing, tax minimization, estate planning, wealth transfer, and legacy creation requires very specific expertise.

What Is the Definition of a High-Net-Worth Individual?

According to the Federal Reserve's Survey of Consumer Finances, median household wealth in the US rose to $192,900 in 2022. With inflation recently reaching its highest level in 40 years, what qualifies someone as a high net worth (HNW) individual looks different today than it did in the past.

Simply having a high annual income does not necessarily make someone a HNW individual. Instead, financial professionals measure total net worth — encompassing both liquid and non-liquid assets — to determine true HNW status. There is no definitive threshold, but most consider those with investable assets over $1 million to be HNW.

What Financial Challenges Do High-Net-Worth Individuals Face?

Being a high-net-worth individual comes with its own set of financial challenges. Here are some areas that we see our HNW clients commonly seeking guidance on:

Complex Investment Portfolios and Tax Strategies

HNW individuals often have diverse investment holdings that require sophisticated management and optimization to minimize tax liability.

Generating enough return while balancing risk across equities, fixed income, real estate, and other alternative investments takes strategic expertise. Staying on top of tax law and utilizing vehicles like trusts and donor-advised funds to reduce tax exposure adds yet another layer of complexity.

Customized Legacy and Estate Planning

For HNW clients, legacy and estate planning is much more complicated than just sorting out a basic will. Instead, it includes developing customized strategies around inheriting businesses, minimizing estate taxes, creating charitable foundations, and securing the family legacy for multiple generations. This level of planning requires a very specialized advisor.

Cash Flow Management with Multiple Properties

From managing monthly expenses across multiple homes to budgeting for property upkeep and tax payments, HNW cash flow planning requires extreme attention to detail. An independent advisor can help optimize cash management and lending options between the array of real estate and liquid holdings.

Philanthropic Endeavors and Gifting

Charitable giving and gifting to family members or trusts must balance personal values with tax efficiency. An independent advisor can help HNW clients align their philanthropic vision with their wealth transfer goals through vehicles like donor-advised funds, charitable trusts, or private foundations.

Do I Need a Dedicated Financial Advisor?

If the complexities of the financial challenges outlined above resonate with your situation, then a dedicated financial advisor can provide immense value.

Here are some key benefits of working with an independent financial advisor who specializes in serving HNW clients.

Objective Guidance Based on Your Personal Financial Situation

A dedicated high-net-worth financial advisor will get to know your unique circumstances in order to provide unbiased guidance tailored to you. What’s best for a HNW individual with $2-$5 million in liquid assets is oftentimes not the same as what’s best for someone with, for example,  a $30 million portfolio. This level of personalization is difficult for a general wealth manager to match.

Expertise in HNW-Specific Areas

Advisors dedicated to HNW individuals have specialized knowledge in areas critical for preserving and growing substantial wealth, such as wealth transfer, charitable planning, and tax minimization. These advisors incorporate the latest financial strategies and applicable updates to tax law into their recommendations for HNW clients.

Big Picture Oversight of Your Investments and Assets

Looking across your overall asset allocation, risk management, and income sustainability allows an advisor to identify potential issues others may overlook if they’re only viewing isolated portions of your financial picture.

Access to Additional Specialist Support

HNW advisory firms like Capstone have connections to estate attorneys, tax accountants, and other professionals to augment their service. This provides quick access to experts across multiple facets of wealth management when needed.

How Do I Choose the Right Financial Advisor?

An advisor dedicated to serving high-net-worth clients can guide you through the intricacies of managing substantial wealth. Their expertise and custom service model aim to provide clarity and confidence, but not all financial advisors are equipped to serve high-net-worth clients. To find the right one, you’ll want to look for the following:

• Look for an independent, fee-only fiduciary.
  Seek out an advisor that has your best interests in mind while not being tied to any particular financial product. Fee-only compensation models help eliminate conflicts of interest. Fiduciaries are required ethically and by law to make recommendations that serve your best interest.

• Verify expertise with HNW-specific credentials and experience.
  Look for advisors with certifications like the CFP® or CFA® as well as a solid history of clients in a similar financial situation as yourself.

• Prioritize custom strategies over pre-set products or services.
  Opt for an advisor who develops comprehensive financial plans based on your unique goals rather than selling generic “off-the-shelf” products.

• Ask about their network of specialist partners.
  Choose an advisor who collaborates with tax, legal, and other partners to assemble the right team for your needs.

Working with a team like Capstone Financial which specializes in serving high-net-worth clients gives you all these benefits. Our client-focused approach centers on providing customized strategies and guidance based on your individual financial life goals. Our team has decades of combined experience working with high-net-worth individuals and families to preserve generational wealth.

Disclosures:

This article is not a substitute for personalized advice from Capstone and nothing contained in this presentation is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed by other businesses and activities of Capstone. Descriptions of Capstone’s process and strategies are based on general practice, and we may make exceptions in specific cases. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.