RSS Facebook Twitter LinkedIn

Featured Advisor

Asset Preservation Advisors


State: GA

APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

Click to see the full profile

Share |

High Net Worth Wealth Management: Risk, Diversity and Taxes

Risk, diversity and tax considerations form the foundation of high net worth wealth management, according to Millionaire Corner research on the attitudes and behaviors of wealthy investors.

| BY Adriana Reyneri

Risk, diversity and tax considerations form the foundation of high net worth wealth management, according to Millionaire Corner research conducted in the first quarter of 2012.

Households with a net worth of $5 million to $25 million, not including primary residence, rank investment risk (95 percent), diversity of investments (91 percent) and the tax implications of investments (86 percent) as their top three criteria when making financial decisions in the current economic climate.

Why are risk, diversity and tax consequences such vital components of high net worth wealth management? A closer look will help explain the importance of each factor.

Risk: The national debt, prolonged economic downturn and European credit crisis - key concerns of affluent investors - appear to be curbing the role of risk-taking in high net worth wealth management. More than half (55 percent) of high net worth individuals surveyed in the first quarter say it’s more important to protect principal that grow investments, while 42 percent say they are willing to take significant risk on a portion of their investments in order to earn a higher return.

Diversity:  Affluent investors appreciate the role diversification can play in minimizing risk and enhancing returns. High net worth investors surveyed by Millionaire Corner at the end of 2011 reported owning highly diversified portfolios, including a mix of stocks, bonds, investment real estate, private business ownership and alternative investments, such as private equity, hedge funds and commodities. Alternatives – including precious metals and Real Estate Investment Trusts or REITS – figure more prominently in high net worth wealth management than in the management of assets of non-millionaire investors, according to our research. (Learn more about alternatives and high net worth wealth management here.)

Tax consequences: Most affluent investors expect taxes to go up in the near future and want to be positioned to minimize the impact of taxes on their earnings. High net worth wealth management incorporates numerous tax-advantaged strategies, such as  contributing to 529 college savings plans, purchasing municipal bonds, participating in 401(k) retirement plans, owning IRAS, purchasing life insurance and annuities, establishing trusts and creating charitable gift funds or other giving strategies.  (For more information on tax-advantaged investing, click here.)

A less important component of high net worth wealth management: Only 27 percent of high net worth investors consider the social responsibility of an investment.