Managing wealth goes far beyond simply managing investments. It requires a holistic approach that addresses every aspect of your financial life. We call these “aspects” the8 pillars of wealth management:
- Risk management
- Asset management
- Tax planning
- Estate management
- Cash management
- Income distribution
- Philanthropy
- Concierge services
My goal is to explain to you why these pillars are important—and how they empower you to build generational wealth when they’re used in the right context.
WHY THESE PILLARS ARE IMPORTANT
Think of these 8 pillars as the tools of wealth management. Just as a carpenter perfects his craft using the best tools, a financial advisor uses these 8 pillars to help you pursue generational wealth with the utmost precision and accuracy.
THE FINANCIAL CONSEQUENCES OF NOT USING THE 8 PILLARS (OR USING THEM INCORRECTLY)
These pillars can’t be provided in a vacuum. Your wealth advisor must fully comprehend your financial situation before they can give you the best recommendations.
Similar to what physicians call malpractice (prescribing a treatment before a complete diagnosis), the application of a pillar must coincide with a complete understanding of your financial picture, goals, and objectives. Your advisor must be aware of the “side effects” of each “treatment” they recommend.
Introduce the wrong pillar at the wrong time, and it can have these “side effects”:
- Limited liquidity.To truly know your liquidity liability, your advisor must perform a thorough forecast of your financial needs based on various risk probabilities (i.e., potential disruptions of income in your industry, your profession, health, lifestyle, and objectives). Then they use this information to address your lifetime liquidity needs and ensure you can convert your assets to cash in a timely manner if needed.
- Negative tax impacts.Your wealth advisor must have a complete understanding of your tax picture projected over time to accurately assess your taxable events. If you miss opportunities for both tax losses and gains when the opportunity strikes (aka when you’re in the right investor stage), it can result in lower net returns and increased taxes.
- Unrealized liability exposures.Unrealized liability exposure means you don’t have the buying power of your invested dollars when you need them most. With comprehensive wealth management, however, your advisor looks at the time frames of your liquidity needs (short, intermediate, and long term), and then they create athree-bucket investment strategythat aligns with each time frame. This ensures you have the liquidity, preservation, and long-term buying power you need to build generational wealth.
YOUR ENTIRE BOARD OF ADVISORS SHOULD USE THE 8 PILLARS OF WEALTH MANAGEMENT
Managing your wealth as a successful family business owner takes a lot of time and focus—time and focus you could be using to run your business. Because of this, many business owners deploy a board of advisors to help them build, manage, and monitor their assets.
But here’s something you may not know: these 8 pillars aren’t just limited to financial service providers. Experts in the fields of legal, accounting, tax reporting, and family governance all use some of them too.
The best wealth management practices will work directly with these experts—or have a team of their own—to enhance the core financial services they offer and ensure you’re getting comprehensive recommendations.
OUR TEAM IS HERE FOR YOU
AtWealth Management Solutions, LLC, we specialize in serving successful family business owners and their heirs. The quality of service we provide is rooted in these 8 pillars of wealth management, coupled withthe 4 cornerstones, a professional discovery and assessment process, and aproven service model. If you have any questions about your finances or need help deploying some of these pillars, schedule a complimentary consultation by contacting us at (949) 475-9700 or[email protected]. We’d love to chat with you.
ABOUT RICHARD
Richard Riva, the founding partner of Wealth Management Solutions, helps families advance their purpose in the framework of family financial matters. He brings comprehensive experience in banking, trust and investment services, and as an independent financial business, the passion in helping people and families, as a trusted advisor. Richard is a proud veteran and currently serves on the California State Guard.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The opinions voiced in this material are for general information only and are not intended to provide specific investment advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.
