Wealth Management Atlanta
The greater your wealth, the more complex your financial planning needs are likely to be. An investor with a $10 million estate will need more tailored services than someone with $1 million. Wealth management is the area of financial planning designed for high net-worth individuals. It pulls together many areas of financial planning, such as investment management, retirement planning, tax guidance and estate planning, to develop a holistic plan that incorporates all of these complexities.
Rather than having to go to an expert in each of these areas, high net-worth individuals often benefit from having a single wealth advisory team that can be their “go-to” resource for financial matters. Before you meet with a wealth advisor, however, it can be helpful to see how wealth management can benefit you through the various stages of your life. Wealth management is our specialty here at Linscomb & Williams, and has been for 50 years. Here, we’ll look at wealth management from beginning to end to give you an idea of what to expect.
The first step in wealth management is developing clarity regarding what you want to accomplish and how you want to set your priorities. Once the goals are prioritized, we can then allocate our resources appropriately.
Identify your goals and work with a financial advisor to quantify what it will take to achieve them. Some goals revolve around a lump-sum, like saving to buy a boat. Others represent a steady cashflow, like the income stream you’ll need in retirement. The clearer you can be on how much money you’ll need for each goal, the easier it will be to create a plan to accomplish them.
Once you know your goals, wealth management is about finding the best way to manage your resources in pursuit of those goals.
In the early years of your career, the focus is on gaining clarity around your financial goals and developing a plan to reach them. Once you reach your mid-career, the question becomes, “Am I on the right path?”
It’s easy to get swept up in life’s other chores in the middle of your career and let your financial plan fall to the backburner, but this is an important time in your financial life. Mid-career is the best time to have regular check-ins with your financial advisor because there’s still ample time to make changes. You may find yourself drifting from the path you created for yourself or perhaps your goals have changed and the original path requires re-thinking.
You’re also likely facing big wealth management questions in your mid-career, such as if you should change careers. The answer usually comes back to determining what you value. If a career change comes with salary cuts, can you afford your current lifestyle on a lower income? If not, are you willing to give up some of your current comforts to enable the change?
A wealth manager can help you weigh the pros and cons of such major life decisions.
Bonuses and benefits are also an important consideration if you choose to change careers. It’s tempting to choose the job that offers the highest starting salary, but annual bonuses and benefits, like health insurance and long-term disability coverage, are also valuable.
Since companies often have upward limits on the salaries they’re willing to offer, bonuses and benefits can be useful bargaining chips when negotiating a job offer. Being more flexible with your starting salary in exchange for other benefits can help you come to a consensus with potential employers. You never know when you might actually end up using those benefits. Health insurance can make a big difference in an emergency.
Reaching retirement is all in the planning. The better you plan and prepare for retirement, the easier it is to get there comfortably. Some of the key components of wealth management for pre-retirees include ensuring your investment risk is appropriate for your time horizon and goals, accounting for inflation, and strategizing such decisions as when to start your Social Security benefits.
As you near retirement, you have fewer years to ride out market downturns. It’s important to review your risk regularly to compensate for this shorter time horizon. That said, you shouldn’t go blindly conservative either. With life expectancies in the 90s now, you could live for 30 or more years in retirement. If you don’t have at least some avenues of growth within your portfolio, you may not keep up with inflation during that timeframe.
This brings us to the second key wealth management consideration for pre-retirees: Inflation protection. Many pre-retirees forget to account for inflation when planning for retirement. They predict their income and expenses in today’s dollars without accounting for the fact that a gallon of milk will likely cost significantly more in 30 years than it does today. It’s important that your portfolio is able to grow at least enough, after considering withdrawals, to keep pace with rising inflation, which averages 2 to 3 percent per year.
Another important consideration for pre-retirees is when to start taking Social Security benefits. The longer you wait before claiming your benefits (all the way up until age 70), the higher your benefit will be. That said, if delaying your benefits requires withdrawing more than planned from your retirement portfolio, it may not be worth it. Taking too much out of your portfolio in the early years leaves less resources for your portfolio to grow in later years, and as we already discussed, growth potential is essential in retirement. This is a decision that requires careful evaluation and analysis.
Wealth management in retirement is about managing your income and expenses to ensure you don’t run out of money. Most retirees get two types of retirement income: Guaranteed income, such as that from Social Security; a pension or an annuity; and variable income from your investments, be it a 401(k) plan or real estate. You’ll also likely have two types of expenses: Necessary, like your mortgage or utilities; and discretionary expenses, such as vacations and dining out.
The trick to wealth management in retirement is ensuring your guaranteed income covers your necessary expenses. Then, you can allocate any variable income to your discretionary expenses without needing to worry about a down market forcing you to cut back on necessities. Doing this allows you to be more flexible with your spending in retirement.
The more flexibility you can build into your budget, the better. You can’t control the stock market and the income you can take from your investments. If you can reduce your expenses in bear markets, this will help prevent you from accidentally withdrawing too much from your portfolio.
Wealth management isn’t just about planning for your life; it also incorporates the legacy you want to leave behind. And legacy planning isn’t just the amount of money you want to leave behind. You also need to think about how you want to leave it.
Legacy planning begins with a will and estate plan, but it should also involve strategizing the best investments to leave your heirs and how to transfer them to minimize the impact of taxes. A Roth IRA, for instance, can shelter your beneficiaries from owing taxes on any retirement assets you bequeath them.
Another element beyond tax planning that people don’t often think about is the wealth management of their inheritance after they’re gone. Do you need to leave guidelines or restrictions for how your wealth will be received by your heirs? Certain legal structures, like trusts, allow you to retain more control over the treatment of your assets after death.
Most importantly for legacy planning is to make sure you keep your accounts up-to-date. Make sure you regularly review your estate planning documents. At the very least, check them once a year or anytime something significant changes in an area of your life.
No matter how diligently you plan, life has a way of surprising you. Never has this been clearer than with the 2020 Coronavirus pandemic. Investors of every age and income bracket have been shaken by the sudden uptick in volatility and uncertainty. How can you create a plan when so much about the future is uncertain?
While uncertainty makes planning hard, there are steps you can take to increase your chances of not getting derailed by unforeseen events. Here are three important wealth management tips for special situations:
- Run simulation tests: When you’re in the pre-retirement planning stages, one of the best things you can do is run simulation tests on your retirement plan. A wealth advisor should use probability distributions to evaluate the possible outcomes for your portfolio in hundreds of scenarios. Stress-testing your portfolio is key.
- Build flexibility into your budget: As discussed before, one of the best ways to protect yourself and your assets in retirement is by building flexibility into your budget. While you can’t control what happens in the stock market or economy, you can control how much you spend. Plan for ways you can reduce your spending, if circumstances call for it, before you enter retirement.
- Keep a cash reserve: Having an emergency fund of at least six months’ worth of expenses set aside in a liquid account can be a game-changer. When you retire and no longer have regular income, your cash reserve should probably be a bit larger. You should also aim for a higher cash reserve if you work in a volatile industry where your income or job may be less certain.
Risk management is an important aspect of wealth management. Risks to your assets can come from any number of sources, from macro and external risks, like pandemics or recessions, to micro risks that are more personal such as lawsuits, accidents or property damage. While you can’t necessarily prevent these risks from happening, you can take steps to mitigate the impact it has on your wealth.
Elements as basic as carrying adequate insurance can go a long way to mitigating financial risks. The first step to risk management is identifying the potential sources of risk to your portfolio. From there you can find ways to avoid or minimize this risk. The Linscomb & Williams credentialed and experienced wealth management team can help you with either or both of these steps. In our 50 years of helping families, there is little that we’ve not seen.