For a young person or couple starting out, building wealth can be difficult because of expensive, competing priorities like paying for housing, education, retirement, travel, and more. However, we can all take a few plays out of the playbook that ultra-high net worth families use when they undertake their own financial and wealth planning. These families have amassed significant wealth and have developed high net worth strategies to maintain and grow their fortunes. While this may be hard to believe, the truth is that sustaining wealth over time can require just as much discipline as growing wealth, and there are fundamental lessons we all can learn for our own financial future from the ultra-high net worth crowd.
While it is important to consult with a professional wealth advisor about your own situation, here are a few key points intended for younger people to help them with wealth planning and building wealth.
What Is High Net Worth Wealth Management?
We all may have a picture of what being really wealthy might look like. We may picture expensive clothing, fancy cars, and traveling to exotic locations. While this may be the case in some situations, that does not exactly match up with reality as I have experienced it in my career.
In my experience working with some very wealthy families over 26 years, more often the wealthiest clients wear dirty blue jeans and boots, and their work ethic and discipline have been paramount to their success. They have lived their lives saving first and spending second. Their disciplined approach to not touching their wealth and letting it grow paid off. Often, they have not tapped into concentrated assets like business interests, real estate, single stock concentrations, or even a portfolio of securities. With compounding interest and assets appreciating, this long-term, disciplined approach to high net worth wealth management has proven to be a successful strategy.
High Net Worth Strategies
Living Below Your Means
While ultra-high net worth families certainly have the means to live extravagantly, many choose to live below their means to nurture their wealth and financial security. They understand the importance of financial discipline and avoid making frivolous purchases or accumulating debt to ensure a bright financial future.
Young professionals and families can learn from this approach by adopting a similar mindset and focusing on living below their means. This type of family financial planning might include creating a budget and tracking expenses, avoiding debt, and making strategic purchases that align with their financial goals. By living below their means, young professionals and families can free up more money to invest in their financial future.
Transparency and Open Communication
Another wealth planning lesson we can learn from the ultra-wealthy is to foster open communication and collaboration on financial matters. Too often mistakes are made due to a lack of communication and understanding when it comes to money. The ultra-high net worth often consult tax advisors, attorneys, financial advisors, and hold family meetings to discuss the implications, challenges, and opportunities that exist because of their wealth. Bringing kids into family financial planning helps them to understand not only what they have but also the why behind how they got to the assets, which can provide meaningful perspective.
While young couples might not have the available resources to meet with high-end wealth management advisors, they can, and should, talk openly about money with one another. In doing so, they should identify what is important in terms of financial priorities and what it will take to achieve these priorities. This can be supported by doing research online or listening to financial podcasts, seeking counsel from available resources like their retirement plan educators, friends, and family members, or by attending seminars. The key is open communication and transparency.
Creating A Financial Plan And Sticking To It
One of the most important lessons to learn from ultra-high net worth families is the importance of creating a financial plan and sticking to it. These families, who either build a fortune or inherit their wealth through the generations, have very often worked with financial advisors to create a plan that includes both short-term and long-term financial goals. Your plan should include a budget, a savings strategy, and an investment strategy. Once the plan is in place, stick to it and adjust it as needed over time. This discipline is critical to long-term success.
Learning To Invest Wisely
Investing wisely is another wealth planning lesson from ultra-high net worth families’ playbooks. These families often have diversified investment portfolios that include stocks, bonds, mutual funds, Exchange Traded Funds (ETFs), and alternative investments.
They also understand the importance of long-term thinking when it comes to investing and avoid making impulsive decisions based on short-term market fluctuations. Ultra-high net worth families do not often try to time the market, by going in and out of the market to avoid market fluctuations or volatility. Instead, they take a long-term view and understand why they buy and sell assets, whether for long-term appreciation, income, diversification, or a combination of factors.
Young professionals and families can learn from this wealth planning approach by educating themselves on investment strategies and working with professional advisors to create a diversified portfolio that aligns with their financial goals and risk tolerance. They can also avoid making impulsive investment decisions based on emotions or short-term market fluctuations.
Protecting Assets And Creating A Risk Mitigation Plan
Ultra-high net worth families also take extensive measures that include protecting assets and creating a risk mitigation plan. This includes setting up trusts, creating legal structures to minimize taxes, and purchasing insurance policies. They also work with attorneys and wealth management advisors to create comprehensive estate plans that ensure their wealth is passed on to future generations in a tax-efficient manner.
Young professionals and families can learn from this high net worth wealth management approach by taking steps to protect their own assets. This might include purchasing insurance policies to protect against unexpected events, creating a will and estate plan, and exploring strategies to minimize taxes. Understanding the risks associated with various financial decisions and taking steps to mitigate them will help you protect the wealth you build.
Giving Back To Your Community
Finally, ultra-high net worth families often understand the importance of giving back to their communities and making a positive impact in the world. They often create charitable foundations or donate to causes they care about, and they talk openly and encourage their children to do the same.
Young professionals and families can learn from this high net worth wealth management approach by finding ways to give back to their own communities. This might include volunteering time or resources to local charities, donating to causes they care about, or simply being more mindful of how their actions impact those around them. By giving back, young professionals and families can make a positive impact in the world and create a sense of purpose and fulfillment that goes beyond financial success.
A Bright Financial Future: Measuring Your Success
It is worth noting that even though ultra-high net worth families have resources that far outpace those of young professionals and families, the broad wealth planning lessons often are applicable to many. How you achieve financial success and a bright financial future might look different from the uber-wealthy, however, by learning from their approach to family financial planning and high net worth wealth management, young professionals and families can gain valuable insights that can help them achieve their own financial goals.
I would also like to point out that financial success is not just about money. Ultra-high net worth families understand that true wealth comes from living a rich life that is aligned with your values and passions. Young people can learn from this approach by focusing on what is profoundly important in life, and by using their wealth to create a life that is fulfilling, meaningful, and full of purpose.
In conclusion, we can learn quite a bit from ultra-high net worth families when it comes to family financial planning and managing wealth. By adopting a mindset of financial discipline, setting clear priorities, investing wisely, protecting assets, living below means, and giving back to communities, young people can create a more secure financial future for themselves and their families. And by prioritizing what is profoundly important in life, they can find fulfillment and happiness that money simply cannot buy.