5 Unique Risks for the Affluent Investor Epstein and White

You may think that as a high net worth individual, or even a millionaire next door, you may have an easy road ahead in maintaining your wealth. But a greater amount of wealth to protect introduces unique challenges that are specific to the size of what they have to protect. Although many investing and wealth-preservation principles apply to anyone – such as developing a tax plan, assessing a portfolio’s risk exposure, and more – there are key risks that come about when you have more money and more valuable assets to preserve.

Being Too Conservative

You may think that having a lot of money makes preserving it simple. However, protecting a large amount of wealth comes with unique challenges. A tax plan, a portfolio risk evaluation, and other investing and wealth-preservation principles are applicable to anyone. However, there are specific risks that come about when you have a large amount of money and greatly valuable assets to safeguard.

Not Taking Inventory of Collectibles

The affluent tend to invest in their passions, and many collectibles, such as rare or historic items and artwork, can provide potential returns on average over the years. However, one common mistake is not keeping up-to-date appraisals on record. Forgoing this important task may have adverse consequences regarding estate liquidity and taxes.[1]

Undiversified Equity

Over the years, some senior-level employees and executives of companies accumulate large stock positions in the company that employs them.  This can provide a particular risk, which can be minimized by consulting with a financial advisor to determine the best approach to diversify your equity in a tax-efficient manner.

A Do-It-Yourself Mentality

Among the most successful investors, intelligence, hard work, and self-confidence are three of the most crucial qualities. Those who are very successful naturally believe that managing a successful company is similar to managing a large amount of money. However, it requires a different array of knowledge and experience. And sometimes, it can simply be too much work to take on with so many large assets to take care of. A financial professional can help take the burden off you while providing their expertise. 

Too Many Cooks in the Kitchen

Wealthy individuals often place their assets with separate financial advisors or firms, thinking that they’ll achieve better results through having a greater level of stewardship and by diversifying their trust to reduce the risk of ill-intentioned managers. However, many of the key needs for larger portfolios, such as risk management and tax efficiency, can suffer since there is no overarching vision and strategy that can steer their ship in a concerted direction. The independent actions by separate professionals acting on their own accord, likely with the best of intentions, may not produce the best results. Instead, you can benefit from a single institution whose financial managers communicate fluidly with each other so that they can manage all that you have to safeguard in a coordinated, concerted way.

With increased wealth comes even more unique challenges beyond those covered here. If you’re looking to optimize your wealth management strategy, Click here to sign up for a complimentary review of your financial plan.

[1] https://www.investopedia.com/articles/tax/09/calculate-property-tax.asp


Please Note: Epstein & White is a tradename. All services provided by Epstein & White investment professionals are provided in their individual capacities as investment adviser representatives of Mercer Global Advisors Inc. (“Mercer Advisors”), an SEC registered investment adviser principally located in Denver, Colorado, with various branch offices throughout the United States doing business under different tradenames, including Epstein & White. The information contained herein is for informational and illustrative purposes only and is general in nature.  We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.

Investment in securities carries a risk of loss, including loss of principal amount invested.  Different types of investments involve varying degrees of risk. It should not be assumed that diversification or asset allocation protects a portfolio from loss or that such will produce profitable results.