Ultra High Net Worth Financial Planning: Achieving Financial Serenity and Optimal Wealth Management

How Financial Planners Guide You Towards a Reliable, Safe, Fulfilling Life and Retirement

Every ultra high net worth individual needs financial planning. This is the crucial differentiator between financial planners and financial advisors. Financial planning is an endeavor everyone purports to undertake, regardless of their proficiency.

Financial planning is the financial service that assists you in reaching your objectives and the lifestyle you aspire to. It is the catalyst that ignites your financial aspirations. Without it, discussions remain mere words. The dialogue comes first, but the financial blueprint translates the conversation into the investment success and financial tranquility everyone craves but few — especially ultra high net worth investors — can effectively attain.

What follows is a comprehensive guide to formulating a financial plan, what it entails, why it’s indispensable, its foundational principles, and how to identify the ideal financial planner for your unique circumstances.

If you are pursuing ultra high net worth financial planning, Pillar Wealth Management, a fee-only financial planner, is an excellent choice.

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STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

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The biggest Financial Planners' Mistake That Will Hurt Your Financial Security!
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How Pillar's High Net Worth Financial Planning Process Is Different
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Ultra High Networh Financial Planning

What Does Financial Planning Involve?

Financial planning is a way to actualize your financial and lifestyle ambitions. It considers your present financial details — your liquid and non-liquid assets, debt, income, and foreseeable and unpredictable future expenses — and designs the strategies that will enable you to accomplish your short and long-term goals.

Your financial scheme will leverage savings, investments, retirement funds like IRAs, and cash flow, along with life insurance, real estate, debt, student loans, and non-liquid assets like art and collectibles. If you have a business, it integrates that too.

Table of Contents

Why is Financial Planning Essential

Why is Financial Planning Essential?

The candid reality is that financial matters and associated decisions become increasingly complicated and time-intensive as your life evolves. And the stakes are perpetually escalating.

Less Stress

Financial planning allows you to sidestep feeling stressed by the multitude of financial data. For instance, it eliminates concerns about maintaining your credit card’s credit score or optimizing tax reductions with effective tax planning.

It provides a distinct path and a roadmap to guide your journey. A financial strategy imparts clarity and certainty.

Testimonial From Satisfied Clients

Maintaining Tranquility Amid Chaos

During global disruptions, a financial strategy helps you remain composed when the world around you seems to be in turmoil. As the saying goes, every financial planner shines when the economy thrives. But when a crisis rocks the markets, that's when genuine financial strategists prove their worth. A well-crafted plan anticipates both favorable and unfavorable scenarios. Many self-proclaimed financial planners function more like data entry professionals. They input your details into a computer and give you an illusion of control over your wealth by allowing you to select your preferred asset allocation. Then, they set it to autopilot and observe as your wealth ebbs and flows with the market.

Preparation for Life Changes and Milestones

An exceptional financial advisor foresees your upcoming significant life changes and prepares you for their financial implications. Do you have children on the verge of graduating from high school or college? How will this impact your finances? These considerations should be included in your plan from their early childhood.

Continuous Adaptations

Regarding asset allocation, a financial plan doesn't merely select one for you. It constantly adjusts your portfolio to maintain the most beneficial allocation. Pillar's bespoke financial plans tweak and rebalance your portfolio every quarter — four times annually.

You might be surprised at how infrequently — if at all — some financial planners incorporate regular adjustments into their strategies.

Freeing Your Time

Possibly the primary reason ultra high net worth investors need financial planning assistance is their lack of time to handle it themselves. High and ultra high net worth households have significantly more complex and distinct financial requirements.

Establish Your Financial Objectives

Establish Your Financial Objectives

So, how does one craft an ultra high net worth financial plan? The process begins by determining and clarifying personalized goals for your life and wealth. You should compile a list of your immediate and long-term financial aspirations.

These aspirations may be family-oriented, like funding your children's college education or providing for an elderly relative or a child with special needs. They could be associated with leisure activities, such as travel. They could pertain to things like owning real estate and businesses and diversifying your income streams. They could involve making a difference in the world, such as through charitable endeavors.

Alternatively, you might prefer a more relaxed lifestyle, like spending your retirement years enjoying television without worrying about finances. That's a perfectly valid choice for some people. But, from a financial standpoint, that's vastly different from someone who aspires to own two properties and explore a new country each year of their retirement.

When examined in these contexts, “Impressive performance” and “freedom from worry” will have markedly different implications.

Hence, you must establish explicit financial objectives — your sought-after lifestyle outcomes. Some examples might include:

  • Ensuring adequate funds to manage future medical costs without tapping into my IRA.
  • Covering basic living costs with my pension and Social Security benefits, leaving the rest of my wealth for life's pleasures.
  • Creating a charitable organization when I turn 70 and financing it with $500,000.
  • Bequeathing each of my children $1 million upon my passing but allowing them access to only $250,000 initially.
  • Purchasing property in Costa Rica when I turn 60 and vacationing there for two months each year.

Can you see the specificity of these goals? This is what we mean when we advise people to "set objectives." And again, it's evident why "goals" may not be the ideal term for these. These are financial-related ambitions. They are deeply ingrained dreams and hopes that hold significant meaning for you.

This encapsulates what it means to define your financial objectives in ultra high net worth financial planning.

5 Phases of Financial Planning

What Constitutes the 5 Phases of Financial Planning?

The first phase, which underpins all the subsequent ones, has already been outlined. Enumerate your aspired lifestyle outcomes. Assign a financial value to them whenever feasible (which is most of the time). Here are all five fundamental phases in financial planning.

1. Define Your Financial Objectives

2. Develop a Blueprint for Investment Expansion and Safeguarding

Your objectives provide you with benchmarks to strive for. In the instance mentioned above, they are $1 million for each of your three children, $500,000 for the foundation, $500,000 for the Costa Rican property, and $2 million for future healthcare costs.

Evaluate your current financial circumstances. Factor in your monthly expenditures. How much growth do you require to accomplish all these objectives within each of their timelines? From this point, you can develop your blueprint for reaching each objective. Determine the annual growth required for your portfolio.

3. Determine Your Asset Allocation

This is the juncture where the craft of financial planning begins to unfold. You'll frequently hear discussions about allocating 70% to stocks and 30% to bonds, or perhaps 60/40, or 80/20, or slightly adjusting it as you age. Much of this discourse must include the first two phases of financial planning.

Let's consider an extreme example: someone outlines all their specific desired lifestyle outcomes, and they'll need $4 million to finance all of them. They already have $20 million. For such an individual, investment performance isn't a significant concern!

However, imagine a similar individual with $20 million, but their objectives will necessitate $50 million, and they are 55 years old. Now, we're dealing with different requirements that will necessitate a markedly different asset allocation.

The point is that asset allocation doesn't govern the plan. The plan, driven by the objectives, unveils the most optimized asset allocation. There's no "best" allocation.

4. Adjust and Refresh Every Quarter

As we frequently point out, any plan will falter if left untouched in a drawer. It's vital to consistently review your plan, update it as your life circumstances and aspired outcomes evolve, and realign your portfolio to conform to your asset allocation.

Alternatively, if the time arrives when your allocation needs to be modified, then that must also be executed. As time progresses, the objectives you set long ago will evolve. Maybe a hurricane ravages Costa Rica, and you decide you don't want to relocate there after all. Funds you had earmarked are freed up and can now be reallocated. But then, perhaps your business is sued, and you have to allocate a substantial amount of money to a legal fight.

It's crucial to revise your plan when significant life events occur.

5. Allocate Consistent Monthly Income

This is particularly vital during retirement. Otherwise, it's easy to start fretting about whether your finances will suffice for your lifetime, and you end up unnecessarily curtailing your spending. Conversely, for a different type of person, it can be too easy to spend freely without considering the amounts because they have millions saved up.

No amount of money exists that can't be exhausted. Hence, your plan should specify a monthly income, and you operate based on that, except for significant purchases and critical life events.

If you're not an ultra high net worth individual, these five phases should give you a solid foundation for financial planning. If you are, you'll want more detail in phases 2 and 3.

Decipher Your Existing Financial Situation

 Optimal financial planning, especially for affluent families, necessitates significant groundwork in the early stages. This is particularly true when crafting a retirement plan, which demands even more consideration.

For a systematic approach to retirement planning, we've devised a 29-item checklist containing essential financial details you'll require. This list is divided into four primary segments:

  1. Retirement Fund Assets: This section covers a broad spectrum, from bank balances and IRAs to health savings accounts and Social Security benefits, among others.
  2. Ongoing Debt: Debt can stem from various sources like business obligations, medical bills, and divorce settlements. Listing all these outstanding liabilities is a crucial step before shaping your financial retirement plan, or any plan, for that matter.
  3. Discretionary Expenses During Retirement: Here's where your desired lifestyle aspirations come into play. What are your life objectives, and how will your finances facilitate these ambitions?
  4. Fundamental Steps to Initiate Now: This checklist section truly delivers value. There are specific proactive measures you should be taking now to secure your future, particularly concerning retirement. Thoroughly examine all the items in this checklist, and your retirement planning journey will become considerably less strenuous.

Predict Future Outcomes — “What If” Scenarios

Preparing for a financially secure retirement starts by implementing actions within the fourth segment mentioned above. This comprises actions such as:

  • Maximizing yearly contributions to all eligible accounts
  • Understanding the taxation nuances for withdrawals from each account
  • Structuring your estate plan
  • Procuring appropriate insurance coverage

Planning for the Future — “What if” Situations

A future strategy should account for what we refer to as “what if” situations. This aspect of financial planning is so significant that we have created numerous free resources to delve deeper into it. Here are some common scenarios:

Care for Family Members: This includes aging family members but can also encompass children with expensive medical conditions or special needs. Medical expenses can quickly erode even the most extensive portfolios. Long-term care can cost upwards of $10,000 per month.

Unexpected Health Issues: Medical emergencies can affect any family member, including yourself. The financial impact is two-pronged: higher expenses and potential income reduction due to the inability to work. If your spending plan accounts for unforeseen medical costs, your once-flawless financial plan can quickly become valuable.

Global Events Worldwide: incidents can wreak as much havoc on your portfolio and financial planning as personal ones. The coronavirus pandemic is a prime example of an unforeseeable but impactful global event. Savvy financial planning incorporates such contingencies into its design.

Inheritance: Not all what-if situations have negative financial implications. If your parents are high net worth, you may inherit a significant sum. Top financial planners will incorporate this possibility into your plan, regardless of when you expect it to occur.

In our experience, we've seen three common reactions to a large inheritance:

  1. Remain inactive and accomplish nothing
  2. Take action without a plan, leading to squandering the inheritance
  3. Act and implement thoughtful planning to maximize the inheritance's impact

In the context of ultra high net worth financial planning, it's crucial to understand these situations and be prepared for various outcomes. This is the hallmark of robust financial planning.

Optimizing Your Portfolio with Our Financial Planning Approach

Optimizing Your Portfolio with Our Financial Planning Approach

Let's imagine, among various retirement plans, you've decided to engage a financial planner to help elevate your financial situation. If you're seeking the best financial advisor in your vicinity or someone best aligned with your financial needs, don't merely opt for the first individual with an attractive social media ad.

So, how does Pillar craft successful and wholly personalized financial planning for our affluent clientele?

Our unique methodology harnesses approximately 100 years of historical market performance data, tracing back to before the Great Depression, along with 1,000 what-if market-centric scenarios. Leveraging 100 years of data enables us to assess how your portfolio would have fared amidst all the turbulence of wars, economic recessions, prosperous times, market downturns, and periods of high inflation.

With the 1,000 what-if scenarios, we can simulate how your portfolio would respond to a broader range of situations than those observed historically. Crucial to the success of this approach is that these scenarios are extrapolated from the historical data. It took us several years to refine and perfect this process. You can test the resilience of your financial plan by subjecting it to these 1,000 scenarios. Since your plan is built on the bedrock of your desired lifestyle outcomes rather than an arbitrarily chosen asset allocation, our projections will definitively state whether you're surpassing, meeting, or falling short of your targeted outcomes.

If you're not exceeding your goals in 70–85% of these 1,000 scenarios, we'll fine-tune your plan until you do. Given our over 30 years of experience in ultra high net worth financial planning, this is the most reliable method to guarantee you'll accomplish everything you aspire to.

Once your investment strategy is established and integrated into your portfolio, you can take a step back and observe its initial functioning. This, however, is only for three months. Every quarter, it's crucial to revisit your plan, update it based on any life changes, and recalibrate your portfolio. This recalibration is how you handle the finances in your portfolio, and what you aim to manage is your asset allocation.

A widely recognized study by Brinson, Beebower, and Hood established that over 90% of the variation in your portfolio's investment returns could be attributed to your asset allocation. This is, without a doubt, the most significant variable in financial planning and ongoing financial management.

Once you've determined the optimal asset allocation for your financial plan, it's essential to sustain it. Regarding risk tolerance, if equities surge in one or two quarters, skewing your allocation, you need to adjust your assets to return to the ideal allocation. If equities depreciate or don't see much growth, you'll want to bolster them to regain the correct balance. This is an ongoing process that must continue throughout your lifetime. And the rewards it brings are highly satisfying. You gain financial tranquility — the absence of any worry about money. You get to fulfill all your most coveted lifestyle outcomes.

Managing asset allocation is how you oversee your finances. So, this continual management is incorporated into your financial plan from the outset. In advance, you schedule dates to review your progress, update the plan, and adjust your asset allocation. In this way, your plan remains on course.

Once your plan has been crafted, allocate time to evaluate it thoroughly, including the plan for ongoing financial management. You may identify something that needs to be added, such as a lifestyle outcome you forgot to include. That's okay. The present moment is the ideal time to correct it, as you can make adjustments with the least effort and disruption as you progress. In ultra high net worth financial planning, precision is critical to achieving your financial goals.

How Do You Determine Whom to Entrust with Your Finances

How Do You Determine Whom to Entrust with Your Finances?

All of this is appealing. Whether you opt to use Pillar or another service, you're primed for assistance with financial planning because you're eager to realize all your most cherished lifestyle goals.

However, there's one obstacle. How do you determine who is trustworthy?

When it comes to finances and financial advisors, trust has two facets:

Can I entrust you with my finances — on a personal level?

Can I rely on you to execute your job proficiently — on a professional level?

But you don't want to be defrauded, and you don't want to be let down.

The most accomplished financial advisors fulfill both these aspects for all their clients.

On a personal level, here are six questions you can pose to ascertain if you can rely on a financial advisor with your portfolio.

Do you harbor a passion for financial planning?

A financial advisor should be passionate about their job. They should relish aiding people in achieving goals and mitigating their worries about finances. They should be fully committed to securing your stability, even in times of financial turmoil. Passion can only be discerned through a genuine conversation. It can be seen in writing, but you need to hear it, too.

Are you persistent?

Not in terms of sales but in terms of commitment. The most proficient financial advisors tirelessly work on the plan until it comes to fruition. They aren't content with merely collecting their fee and calling it a day. The success of their clients is of paramount importance to them.

Do we have a good rapport?

It's challenging to trust someone you don't get along with. Pay attention to this aspect.

Do you promptly respond to my communication?

The most reliable financial advisors answer their calls and reply to emails. They don't leave you hanging. If you have pressing needs and time-sensitive inquiries, you need timely responses. An advisor's responsiveness in the initial stages of communication indicates their future interactions.

Are you an independent fiduciary?

Both these qualities are essential. You want an independent certified financial planner, implying a private practice and not a large corporate bank, and a fiduciary.

Do I feel optimistic about my future after our conversation?

You should. Engaging with the most competent financial advisors should provide a sense of reassurance akin to satisfaction from a user-friendly website. A proficient financial advisor can devise the best investment management strategy to guide you on where to invest your money for a promising financial future correctly.

Empowered. Confident. Hopeful. More enthusiastic about your future. That's what we offer and what you should experience after interacting with us. This is what ultra high net worth financial planning should feel like.

Frequently Asked Questions

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A high-net-worth financial plan is a plan created for individuals with $1 million in investable assets and may include investments such as hedge funds or venture capital funds.

Some key considerations in ultra-high-net-worth financial planning strategies are generational wealth transition, business succession planning, tax management, and legacy planning.

Philanthropic strategies to consider include donating appreciated assets instead of cash and grouping donations into one tax year to take advantage of a larger deduction.

Alternative investments for high net worth typically include private equity, venture capital funds, hedge funds, art, and real estate, which require large minimum investments.

Insurance can protect ultra-high-net-worth families from lawsuits, invasion of privacy, and cyber threats; highly diversified investment portfolios also mitigate risks.

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