5 High-Net-Worth Investment Management and Financial Planning Tips

Written by Blaine Malcolm, Wealth Manager, Partner

There are millions of high-net-worth individuals (HNWI) in the United States, more than any other country on Earth. You might think the HNWI label is reserved for celebrities or tech moguls, but most financial experts classify anyone with more than $1 million in investable assets as a high net worth individual. As much as people love daydreaming about what their life would be like if they had more money, they lose sight of the concrete steps and principles that most HNWIs used to amass their wealth. Even if an individual inherited their money, they still have to maintain solid investment strategies and financial planning to ensure they can also leave behind an inheritance. Experts have found the majority of wealthy families see their wealth diminished by around 90% by the third generation. Clearly losing money is a chronic problem, and the only remedy is continuous care.

Whether you’re already a HNWI who is looking for a financial planner, or you’re mapping out your path into acquiring a significant amount in investable assets, here are five HNWI investment management and financial planning tips to help you prepare.

Save Early & Save Often

The most overlooked is also the most crucial and can be accomplished no matter where you are in life. “Learn how to save money, save early, and save often,” says Blaine Malcolm of Merit Financial. “You need to commit to your budget and adapt your lifestyle to it.” One major thing that sets HNWIs apart from others is their ability to save and stick to their budget. For example, when most people contribute to their 401(k), they choose the minimum or an amount that won’t impact their paycheck too much. HNWI will often choose the maximum. If you do that from the first paycheck then you won’t notice the difference, and your budget and lifestyle will be built within your current means.

Balance is Key

As you begin to accumulate wealth, avoid over-concentration by diversifying your portfolio. The stock market grabs everyone’s attention early, but the higher up an individual’s net worth climbs, the more unrealistic it is to invest solely in stocks. Any downswing could potentially expose you to irreconcilable losses. “What we commonly see and recommend is to divide investments fairly equally,” says Blaine. “Putting 20%-30% in real estate, 20%-30% in stocks and 20%-30% into your own business or a startup can protect against unnecessary risk.” An emerging trend among younger HNWIs is cryptocurrency. Crypto is currently unregulated and much more volatile, but items like Bitcoin and Ethereum aren’t going anywhere and can’t be ignored as potential investment options.

Make a Plan

Focus on retirement and estate planning earlier than you think. If you’re contributing the maximum to your 401(k) and getting a matching contribution from your company, then you’re starting on the right path for retirement. But estate planning can easily be forgotten. HWNIs generally start estate planning as soon as they’re expecting their first child. Everyone hopes for the best, but financially sound and forward-thinking people have a plan to optimize their estate to ensure their family’s future.

Knowledge is Power

When investing, you need to have more than belief in a venture. That means having detailed knowledge about the industry, stock, or market before putting your money on the line. Having a rooted interest and a hands-on approach keeps you informed and in a position to make the best decision. If dedicating that much time isn’t an option, surround yourself with people who you emphatically trust. Remember, you’re the one who amassed your wealth, and you can be as picky as you want to be with your investments.

Know When To Cut Your Losses

HNWIs know when to cut ties. If you work with a financial advisor, you should proactively set parameters to mitigate your losses. A stop-loss order for a stock will differ from a cryptocurrency, and both differ from a real estate venture, but when that threshold gets hit, stick to your decision to pull out.

Above all else, HNWIs know when they need help. They recognize that even though the company they founded or the investments they made built them their wealth, the more wealth that’s built the more difficult it is to manage. When you reach the point where your attention is getting pulled too thin, it’s time to seek advice on how to plan for your retirement, your estate, and how to ensure your legacy when the time comes. Reach out to Merit Financial Advisors today to schedule a consultation.