High-net-worth individuals and households often need more sophisticated and tailored wealth management expertise.
Terms such as high-net-worth (HNW), very-high-net-worth (VHNW), and ultra-high-net-worth (UHNW) show up in a growing number of wealth advisor-related news articles, advertisements, and marketing materials. More than just shorthand descriptors of a household’s financial assets, these terms also allude to the greater depth, breadth, and sophistication of financial advisory needs that often arise as individual or family wealth grows.
We’ve compiled this short Q&A to help shed light on specialized services and expertise one should expect from a qualified wealth advisor when assets surpass the high-net-worth threshold.
What qualifies someone as having a high, very-high, or ultra-high-net-worth?
An individual’s net worth comprises financial assets such as property, land, stocks, and bonds; minus debts and/or liabilities. More specifically, financial services providers regard a HNW client as someone whose portfolio includes at least $1 million in liquid—or investable—financial assets. From there, clients with between $5-$30 million are considered VHNW, while UHNW clients have assets greater than $30 million in their portfolio.
As someone’s household assets climb beyond these levels, what should a well-qualified wealth advisor be prepared to handle?
Here are three desirable realms of knowledge and expertise:
- Tax strategy and planning often grow much more complex as asset levels rise, especially beginning around the $5 million threshold. As part of managing non-qualified investments, a wealth advisor with in-house tax planning and preparation experience is more apt to recommend strategies that can reduce clients’ year-end tax liability.
- Estate planning above the $5 million asset mark also becomes increasingly complex due to multiple accounts and tax situations. Whereas an IRA can simply change hands with a beneficiary designation on file, strategies for passing along non-qualified assets in an HNW, VHNW, or UHNW portfolio, like jewelry or art, typically involve trusts and corporate entities. Other types of investment accounts, as well as real estate holdings, also tend to require more sophisticated wealth management and planning expertise.
- Risk management and insurance planning are more relevant as well. Beyond the essential policy needs of a typical household—like automotive, home, and life insurance—larger net-worth portfolios often require added protection. Entity planning through an LLC or other corporation and higher levels of personal umbrella liability coverage are two examples of risk and insurance planning.
Mercer Advisors is among the wealth management firms that offer a dedicated, extended network of premium services and resources specifically tailored to the needs of VHNW and UHNW households.
When does it make sense for an HNW individual to hire an advisor?
The financial stakes involved can quickly exceed what most people feel equipped to manage on their own at these asset levels. In weighing a decision, consider three facets:
- How would you prefer to spend your free hours?
- Are you—or do you aspire to be—well-versed in the ever-evolving stock-and-bond markets, tax laws, estate planning, and related areas of financial expertise?
- Can you maintain an objective view of your personal wealth situation—and stay true to your long-term financial plan—through periods of market volatility and economic uncertainty?
Unless your answer to these questions is an unreserved “yes,” then you should probably consider hiring an advisor to help you achieve loftier goals and strengthen your legacy through a holistic, personalized approach.
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