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5 Unique Risks for the Affluent Investor

5 Unique Risks for the Affluent Investor Cornerstone Wealth Management

5 Unique Risks for the Affluent Investor Cornerstone Wealth Management

You may think that as a high-net-worth individual, or even a millionaire next door, you may have an easy road ahead in maintaining your wealth. But a greater amount of wealth to protect introduces unique challenges that are specific to the size of what they have to protect. Although many investing and wealth-preservation principles apply to anyone – such as developing a tax plan, assessing a portfolio’s risk exposure, and more – there are key risks to be aware of when you have more money and more valuable assets to protect.

Being Too Conservative

You may think that having a lot of money makes preserving it simple. However, protecting a large amount of wealth comes with unique challenges. A tax plan, a portfolio risk evaluation, and other investing and wealth-preservation principles apply to anyone. However, specific risks come about when you have a large amount of money and precious assets to safeguard.

Not Taking Inventory of Collectibles

The affluent tend to invest in their passions, and many collectibles – such as rare or historic items and artwork – have generated great returns on average over the years. However, one common mistake is not keeping up-to-date appraisals on record. Forgoing this important task may have adverse consequences regarding estate liquidity and taxes.[1]

Undiversified Equity

Some senior-level employees and executives of companies accumulate large stock positions in the company that employs them over the years they work there. This creates a unique risk and can potentially be mitigated by talking to a financial advisor to figure out how best to diversify your equity in a tax-efficient way.

A Do-It-Yourself Mentality

Among the most successful investors, intelligence, hard work, and self-confidence are three of the most crucial qualities. Those who are very successful naturally believe that managing a successful company is similar to managing a large amount of money. However, it requires a different array of knowledge and experience. And sometimes, it can simply be too much work to take on with so many large assets to take care of. A financial professional can take the burden off you while providing their expertise.

Too Many Cooks in the Kitchen

Wealthy individuals often place their assets with separate financial advisors or firms, thinking that they’ll achieve better results through having a greater level of stewardship and by diversifying their trust. However, many of the key needs for larger portfolios, such as risk management and tax efficiency, may suffer since there is no overarching vision and strategy that can steer their ship in a concerted direction. The independent actions by separate professionals acting on their own accord, likely with the best of intentions, may not produce the best results. Instead, you may benefit from a single institution whose financial managers communicate fluidly with each other so that they can manage all that you have to protect in a coordinated, concerted way.

With increased wealth comes even more unique challenges beyond those covered here. If you’re looking to optimize your wealth management strategy, Click here to talk to us today for a complimentary meeting to get your estate planning on track.

[1] https://www.investopedia.com/articles/tax/09/calculate-property-tax.asp


The article and opinions in this publication are for general information only and are not intended to provide specific advice or Recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your Individual situation. This content was created by Lone Beacon.

Registered Representatives offer securities through Independent Financial Group, LLC (IFG), Member FINRA/SIPC. Investment Advisor Representatives offer Advisory services through Independent Financial Group, LLC (IFG), a Registered Investment Adviser. Cornerstone Wealth Management, Cornerstone Tax Advisory and IFG are unaffiliated entities.

This material was partially prepared by Lone Beacon and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate.

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