Ultra High Net Worth Investment Strategies

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Ultra-Wealthy Clients Adding Leverage to Place Wagers: UBS’s Naratil

The sooner you start investing and the longer you remain invested, the higher the potential for returnthanks to the magic of compounding returns.

This phenomenon, more commonly called compound interest, enables you to grow exponentially larger sums over long periods of time. Thats because each time you earn interest or returns, it raises the base amount your future interest or returns are calculated from. This results in an ever larger engine of wealth creation.

While the stock market may look pretty volatile over the near term, it has consistently delivered impressive returns on investment over the long haul. Take the benchmark S& P 500 index, which has provided average annual returns of about 10% over the past 100 years, despite wars, pandemics, recessions and the Great Depression.

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What Do Ultra High Net Worth Individuals Invest In

The shortest answer to this question is a little bit of everything. Ultra high net worth individuals invest in a variety of asset types. This means they invest in things like:

  • stocks and bonds
  • savings strategy

Of course, each ultra high net worth asset allocation is going to vary from person to person. You have to consider what high net worth individuals want, from lifestyle to risk tolerance. With that in mind, lets take a look at some of the different assets listed above, and how they play into a big-picture investment strategy.

The Wealth Report 2020 Says Ultra

Ultra High Net Worth Individuals in Singapore are planning to alter their 2020 investing strategies to offset the effects of the global economic slowdown, political upheaval and negative rates, according to The Wealth Report 2020.

In the Attitudes Survey* of 620 wealth advisors managing approximately US$3.3 trillion on behalf of UHNWIs across the globe, 100% of Singaporean respondents indicated that they were actively making changes to their clients investing strategies, outstripping the regional average , and the global average .

The year 2019 was a positive year for Singaporean UHNWIs, with 71% stating their wealth had increased, slightly outstripping the regional and global averages. They appear to be more muted about the year ahead, largely due to global political and economic challenges rather than domestic, with 53% expecting their wealth to increase in 2020.

Singaporean ultra-high-net-worth individuals investment strategies will include homes

The Wealth Report 2020 also reveals that about one in four Singaporean UHNWIs will buy a new home in 2020, outstripping the global average of about one in five. The main drivers for purchases are to upgrade their main residence, for their childrens education, or for business purposes. The most popular locations, other than Singapore, are the UK, Australia and US, wealth mangers say.

Where are your UHNWI clients planning a home purchase in 2020?

Rank

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Uhnw Strategies To Protect Your Wealth

Ultra-high net worth individuals have a policy of privacy regarding keeping their assets safe. However, most of them do not want to take a risk by maintaining their assets by themselves, so they will hire a financial advisor to help them. To make your assets grow and be successfully invested, you need to implement the following high net worth investment strategies:

Allocating 100% Of Investments To The Public Markets

Wealth Preservation

UHNWIs understand that real wealth is generated in the private markets rather than the public or common markets. The ultra wealthy may gain a lot of their initial wealth from private businesses, often through business ownership or as an angel investor in private equity. Additionally, top endowments, such as those run at Yale and Stanford, use private equity investments to generate high returns and add to the funds’ diversification.

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Drafting A Proper Estate Plan:

Even minus the taxes, estate planning can be crucial to maintain peace and harmony in a family. Ultra-high-net-worth families can have multiple disputable assets like vacation homes, luxury cars, businesses, collectibles and antiques, jewelry, Non Fungible Tokens , etc. The division of these assets can lead to feuds between the family members. Business succession planning can also create similar situations of unrest between the family members. Hence, estate planning is essential for ultra-high-net-worth individuals. It may help for the head of the family to discuss the estate with all the heirs. Seeking out what each member of the family wishes to have can help simplify crucial decisions. The same prudence can be applied in the case of business succession as well. Ultra-high-net-worth families can have multiple businesses big and small. The transfer of these businesses can be a complex process depending on who the business is transferred to. For instance, is the business being transferred to a child or a grandfather or is the business being transferred to an existing partner. In some cases, the business may also be transferred to an employee or shareholder. All the parties concerned must be in agreement with the decision being made. Otherwise, the will of the owner can be contested in court and go through the expensive and time-consuming process of probate.

Failing To Rebalance A Personal Portfolio

Financial literacy is a big problem in America, but everyone should understand the practice of rebalancing their portfolios. Through consistent rebalancing, investors can ensure their portfolios remain adequately diversified and proportionally allocated. However, even if some investors have specific allocation goals, they often do not keep up with rebalancing, allowing their portfolios to skew too far one way or the other.

A balanced portfolio typically includes the right mix of cash, stocks, and bonds based on a person’s age and risk tolerance.

For the ultra-wealthy, rebalancing is a necessity. They can undertake this rebalancing monthly, weekly, or even daily, but all UHNWIs rebalance their portfolios on a regular basis. For the people who don’t have the time to rebalance or the money to pay someone to do it, it’s possible to set rebalancing parameters with investment firms based on asset prices.

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High Net Worth Asset Allocation Models

As an investors wealth increases, so does the complexity of their financial life. Along with this complexity, there is an increased need for professional advice to ensure that their wealth is managed in a way that is consistent with their goals and objectives. This is where high net worth asset allocation models come in.

Asset allocation models are designed to help investors determine how to best allocate their assets across different asset classes. These models take into account factors such as an investors risk tolerance, time horizon, and investment objectives.

There are a number of different high net worth asset allocation models available, each with its own strengths and weaknesses. As such, it is important for investors to work with a financial advisor to select the model that is right for them.

Some of the most popular high net worth asset allocation models include:

1. The Capital Asset Pricing Model

  • Greater adoption of indirect ownership, particularly in the stock area, is the outcome of a desire to attain further diversification.
  • HNW investors assigned a sizable amount of their stock holdings to funds in 2018, and this proportion had increased by 2021. Diversification is a major force behind this trend, but there are many other factors at play as well.

Thinking You Can Do It Better

Ultra-Wealthy Clients Are Leaving U.K., Says $21-Billion Wealth Manager

UHNWI tend to be highly accomplished, intelligent, and influential people and should be proud of the extraordinary wealth theyve accrued. However, this can make it difficult for them to entrust the management of their wealth and financial decision-making to someone else. Weber Global Management founders Chris Weber and Briton Hill have spent their entire careers exhaustively researching and analyzing the markets, accumulating massive wealth for their clients in the process. For wealthy and accomplished professionals, putting all of their assets into their reasoned and rational hands can bring the reassurance that their wealth will continue to accrue and be preserved for generations to come.

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Rollover Of An Ira Into A Roth Ira

Unfortunately, the IRS does notallow you to open a Roth IRA if your earnings are too high. However, there arestill benefits to having a Roth IRA.

One way for HNWIs to get a RothIRA is through a process called the backdoor IRA. HNWIs may open a traditionalIRA, accumulate funds in it through a majority of the earning years, and rollit over into a Roth IRA. This way, you can have a retirement savings accountthat is tax-free upon withdrawal and one that also has benefits when it comesto estate and legacy planning.

Digital Assets As Alternative Investments

Cryptocurrency has been a fringe investment for years now, and it became considerably more popular in 2020.

It has also helped spur growth in popularity for more blockchain-based assets, including non-fungible tokens . Many NFTs are used to buy and sell digital art, bringing alternative art investments to the digital world.

A report by Capgemini found that digital assets, which include the aforementioned cryptocurrencies and NFTs, are highly popular among high-net-worth individuals . According to Capgemini’s survey,

  • 71% of high-net-worth individuals have invested in digital assets and
  • 91% of high-net-worth individuals younger than 40 have invested in digital assets.

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Additional Resources For Ultra High Net Worth Investing

In addition to a seasoned wealth management firm, there are additional resources available to UHNWI to manage your financials. A family office, for example, can help balance external and internal advisors while keeping you out of matters that arent of high importance. While its not a necessity for everyone, it can have compelling benefits.

If youre an investor in the UHNW classification, youve accomplished an incredible amount in your lifetime. In entrusting a UHNW wealth management team as an extension of your legal and accounting professionals, youll gain an experienced voice in the room to help guide you and to ensure your wealth and legacy remain intact. At Weber Global Management, we are honored to serve as trusted experts and advisors to UHNW investors and their families. Well create a global, diversified portfolio with your goals in mind, designed to weather market volatility, ward off potential threats, and preserve your wealth for many lifetimes. If youre ready to work with a true partner and fiduciary that specializes in the reasoned guidance and services UHNW investors need, reach out to us.

Reducing Your Tax Bill With Tax

What Is Considered A Wealthy Net Worth

An investment into a qualifying Venture Capital Trust , Enterprise Investment Scheme or Seed Enterprise Investment Scheme attracts significant tax benefits.

These investments were created by the government as an initiative designed to help small and medium sized companies raise finance by offering tax benefits to investors.

Given the type of companies they invest in, they are perceived to be high-risk investments and it is therefore important to seek professional financial assistance when considering an investment of this type.

It is worth noting that the regulator of financial services in the UK, the Financial Conduct Authority, has placed marketing restrictions around these types of products and has its own definition of a High Net Worth Individual in this context.

To be eligible to receive information and invest in these types of products under the High Net Worth investor exemption you need to meet the following criteria:

  • Had, during the financial year of investment, an annual income of £100,000 or more
  • Held, throughout the same year, net investable assets of £250,000 or more
  • Have sufficient relevant knowledge and experience of investing to understand the risks

The definition of investable assets also excludes the value of your pension funds and proceeds from a life assurance contract. A separate exemption is available for sophisticated investors.

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Instilling Financial Responsibility In Your Children

While it takes years and years of hard work to accumulate substantial wealth, all of it can be lost in a proverbial moment.

Self-made individuals are aware of the true value of money as they have built their wealth through years of hard work. However, this essential value might not be shared by their children and grandchildren, who have grown up in a more privileged environment.

If you want your wealth to last across multiple generations, its crucial to teach the importance of financial responsibility to your children. There are various strategies that can help you in this regard.

The first one involves giving your children a reasonable allowance and instructing them to divide it into expenses, savings and charity. This helps children develop budgeting skills, instills the value of money in them, and teaches them to become socially responsible. Another effective strategy is setting up a monthly budget that can cover the reasonable expenses and activities of the whole family. If your children ask you for something that exceeds the budget, tell them you will consider it next month.

Alternative Investment Use Among Investors

For the everyday investor, alternative investments typically make up a small portion of their overall assets. Retail investors have about 5% of their portfolios in alternative investments, according to a survey from the Chartered Alternative Investment Analyst Association.

Among millionaire and multi-millionaire investors, it’s a whole different story. A survey from global investing firm KKR found that high-net-worth investors allocated 26% of their assets to alternative investments in 2020.

Ultra-high-net-worth investors had 50% of their assets in alternative investments. Here’s how these two groups of wealthy investors distributed their money:

Data source: KKR .
3.6%

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Ensuring Financial Literacy And Money Management Skills Among Heirs:

Ultra-high-net-worth individuals spend the majority of their lives working hard and creating wealth. However, in many cases, the family members who inherit this wealth lack the foresight to maintain its value and grow it further. Equipping the surviving family members like the children and grandchildren requires time and effort and should ideally start from a young age. Something as simple as offering the children a tight budget when they are young and encouraging them to study and work hard can be instrumental in shaping them. It may be advised to motivate the younger generations to earn their own wealth before they can inherit their share of the large estate. This forces them to value money and use it effectively. Charitable donations also help children imbibe social responsibility and contribute to society. In the case of a business, ultra-high-net-worth individuals can ensure that the successors understand the core principles of the business and are willing to abide by them and reflect them in their work. This can ensure that the family maintains its status of being in the ultra-high-net-worth bracket.

Getting Down To Business

Identifying High Net Worth (HNW) and Ultra HNW Individuals using Archetypes

First impressions are essential, but obviously they are only a starting point. When it comes to your actual business relationship and the service you provide, what makes the HNW individual tick in other words, what are his/her concerns and how do you address them?

From the outset, in all your dealings with wealthy clients, you must be proactive, attentive, responsive, reliable, and always very discreet. These clients need to feel that they can confide in you and trust you with confidential information. They also want to feel that they are part of the process and are being heard. They may not be experts at money management, but they typically know want they want. Two-way communication and alignment of interests is thus vital. You can only achieve this by listening carefully and asking questions.

Many HNW individuals might come to you with complex situations. They seek you out because they have needs that may be critical or urgent, and they may have been disappointed in their previous experiences with an advisor. You must plan and develop a clear strategy with steps showing execution and oversight. They expect you to have access to all the right professionals in order to provide them with a full solution, and to coordinate all of the elements and professionals required, so the execution of the plan is seamless. You are expected to make things easy for them throughout the process. Ultimately, they want you to simplify their life.

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Why Strategic Investment Is Crucial For High

The scope of financial matters that high-net-worth-individuals have to consider when looking at wealth appreciation is much more be it taxes, retirement planning, or even estate planning. They may be constantly looking for ways to protect the wealth they have gained over the years.

But what about growing thiswealth further?

While some HNWIs prefer aconservative route and explore debt or mutual fund markets, some others areopen to exploring even the riskier asset classes like PE or hedge funds someeven invest their wealth in new age avenues such as cryptocurrency or NFTs.However, there is no one-size-fits-all approach possible in the financialspace. There are far too many moving factors that influence individual casesand, therefore, the outcome.

Given the investible amount islarge for HNWIs, the risk is much higher. That is why strategic investmentdecisions are important for HNWI. Remember, the key to becoming ultra-wealthyand making sure money doesnt run out is a top-notch investment strategy. Ofcourse, there are simple mistakes that several billionaires will tell you toavoid. The number one rule in Warren Buffetts words is not to lose money. That further reinforces theneed for a sound investment strategy.

Establish Trusts For Your Closest Heirs

Begin by making a list. Who do you want, with absolute certainty, to be taken care of financially if something happens to you or a large portion of your wealth?

You can set up a living trust or a testamentary trust. In brief, a living trust can take effect while youre still alive, whereas a testamentary trust takes effect as part of your last will and testament. An ultra-high net worth wealth advisor can help you with the details. But imagine this scenario:

Your business gets hit with a cyberattack, costing your company millions. The fallout leads to lawsuits from customers, employees, and vendors. One way or another, youre going to pay. If its severe enough, this can be permanently crippling. Now, you may have been planning to pass on $1 million to a handful of close family members, and $5 million to a disabled relative who cant work. But with this business crisis, tens of millions in value you were counting on having when you die has suddenly vanished, and along with it your plans for these heirs. Now is when you need a plan to put to work your high net worth investment strategies.

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