When most people hear the term “wealth management,” they may automatically assume that it is for only the very wealthy. However, it is important to manage and plan for your future as you build your business or move through your career, regardless of your current net worth.
Investments are a common starting point in your wealth management considerations. They are an integral part of managing wealth, and there are many aspects to consider when positioning your investments in your wealth management game plan. Time horizon, risk tolerance, return expectations, and short- and longterm goals all need to be aligned with your asset allocations. A tip is to make sure you have several “buckets” of investment accounts. They can all be at the same custodian, just not the same allocation. Instead of having one million dollars all invested in a 50 percent stock and 50 percent bond portfolio, invest one-third in 20 percent stocks and 80 percent bonds, one-third in 50 percent stocks and 50 percent bonds, and one-third in 80 percent stocks and 20 percent bonds. The overall allocation mix is identical; however, the outcomes for withdrawals can be more successful by utilizing the three-bucket approach. If the market crashes, the 50 percent stock/50 percent bond account will generally decline much more than a 20 percent stock/80 percent bond account. The latter account’s increased stability can better sustain withdrawals in a down market. When the market rebounds, you can sell off market gains in the aggressive account to replenish the conservative account. In addition, there are psychological benefits to seeing the account that is providing you income not fluctuating as much as the overall market. Further, this approach addresses asset location (owning tax inefficient holdings in low turnover or tax-deferred accounts) rather than only considering asset allocation, which can help with minimizing taxes.
For comprehensive planning, you must also coordinate business interests with investments. An established, stable business is very different than a startup. If you are involved with a startup, your other investments should probably be more conservative. With an established company, it may be acceptable to take on more risk with your outside investments. Of course, these are broad statements based on a number of assumptions. Your situation, wealth, and goals will dictate individual decisions and investments.
Current and prospective wealth management encompasses many other facets outside of investments. For example, asset protection should be addressed. Proper titling of accounts and assets can have a significant effect on your business, wealth and beneficiaries. Asset protection can be more important than asset growth, so exploring your liability coverage is also very important. An umbrella liability policy is almost a must-have for any business owner.
An estate plan is critical if you intend to leave any assets behind. Do you want to leave assets directly to beneficiaries or place them in trust? Keeping beneficiaries up-to-date and coordinating which accounts should be left to people versus trusts or charities can have a meaningful impact. Should beneficiaries have access to principal or only the income until a certain age? If trusts are created, ensuring they are funded with the proper assets is critical. There are also philanthropic planning strategies that can help a charity, provide current tax benefits and provide you with an income stream.
My experience tells me that most business-minded people and entrepreneurs like to have a certain level of control in all aspects of their lives, but it is also important to realize the value of delegating tasks to qualified professionals. A business owner may delegate tasks to managers and employees, allowing the owner to focus on his or her strengths and business operations. Wealth management professionals can help strategize your current and future wealth position and estate plan, allowing you to focus on other important areas of your life. If you choose to explore hiring a comprehensive wealth manager, inquire as to if they hold credentials and professional designations such as being a certified financial planner. Also, ask if they charge a fee for their planning. No planning fee sounds attractive, but in a fee-based planning situation, the adviser is paid to provide expertise outside of any specific company or product influence. The focus is on your success and your success only.
WJ offers securities through Valmark Securities, Inc. (Member of FINRA/SIPC). He also offers advisory Services through Koss Olinger Consulting, LLC, an SEC Registered Investment Advisor. Valmark Securities, Inc. is separate from Koss Olinger Consulting. Koss Olinger is located at 2700-A NW 43rd Street, Gainesville, FL 32606. The material contained in the herein is for informational purposes only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. The information provided has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the material discussed, nor does it constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned. The opinions expressed do not necessarily reflect those of author and are subject to change without notice.
WJ ROSSI is a partner with Koss Olinger, a Gainesville-based wealth management firm that has been helping business owners succeed for nearly 50 years. WJ sits on Koss Olinger’s Investment Advisory Committee and is key in the firm’s investment management, estate planning and income distribution strategies. WJ can be reached at [email protected] or 352-373-3337.