I’m a Financial Advisor: These Are the Top 4 Questions High Net Worth People Ask Me
Money can be complicated, and it doesn’t necessarily get any less so if you have a ton of it. In fact, it can get even more complex. Even high net worth individuals have stumbling blocks and points of confusion.
GOBankingRates spoke with financial experts who manage high net worth clients to learn about the most common money-related questions people with a lot of wealth ask — and the best ways to answer them.
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Retirement Planning: Whether you're planning for retirement, dealing with a significant life event or simply looking to make smarter financial decisions, a financial advisor can offer the expertise and guidance you need. Here are some compelling reasons why you should consider a financial advisor -- even if you're not wealthy.
‘Will I Outlast My Wealth — Or Vice Versa?’
In the world of high net worth clients, Charlie Massimo, SVP and financial advisor at Wealth Enhancement Group, sees one critical concern looming especially large: The question of whether they will outlast their wealth — or vice versa.
“Surprisingly, many high net worth investors find themselves uncertain when faced with this pivotal question,” Massimo said. “There is an approach which is simple yet profound: We guide them to set specific, tangible goals and not vague aspirations like outperforming the market, but concrete objectives, such as generating $300,000 post-tax income by age 65.”
From there, Massimo crafts a plan tailored to support these goals, ensuring that every financial decision aligns with the client’s big plan rather than market ups and downs.
Learn More: Here’s the Income Needed To Be in the Top 1% in All 50 States
‘Can I Retire?’
Even high net worth individuals are wondering about whether a comfortable retirement is feasible for them. Katherine Fox, CFP, founder of Sunnybranch Wealth, often hears the question: “Can I retire?”
“The answer to this question depends on two factors,” Fox said. “How much money you have saved and how much income you need every year.”
Many of Fox’s clients are in their 20s, 30s and 40s and looking to retire early.
“They can usually accomplish this goal within their ideal timeframe, but it means taking a deep dive into their current and future spending and understanding what tradeoffs may come with an early retirement,” Fox said. “The ‘safe’ rule of thumb is that if you plan to withdraw 4% or less from your portfolio each year, your investments can support your lifestyle in retirement.”
Yet this rule of thumb, Fox noted, glosses over the important aspects of retirement planning for young, high net worth individuals.
“Retirement expenses are rarely static, and many wealthy people expect to maintain their current standard of living in retirement,” Fox said. “If the market was down significantly for several years, withdrawing 4% per year may not pay for your lifestyle expenses, and withdrawing more than that may mean you run out of money too soon.”
Instead of asking clients to rely on a flat percentage, Fox looks at their spending with them to understand how much they think they will spend on a monthly basis in retirement.
“We then think about how to account for unforeseen retirement expenses,” Fox said. “These can include fun expenses, like major vacations or second/third houses, or less-fun expenses, like high medical or end-of-life costs.”
‘What Should I Do With My Inheritance?’
Many high net worth folks came into their wealth — or some of it — via an inheritance. Fox is frequently asked by such people what they should do with their gift.
“First, pay off all high interest debt. This excludes mortgages but includes car payments, student debt, credit card loans and other personal debt,” Fox said. “After paying off high interest debt, I recommend inheritors create a plan to manage an inheritance based on their needs and future goals.”
‘How Do I Talk to My Parents About Their Estate Plan?’
Fox also has high net worth clients asking, “How do I talk to my parents about their end-of-life and estate plan?”
For starters: Just start the conversation!
“Chances are that your parents have also worried about what will happen after they die, but they haven’t raised the issue because they aren’t sure how you’re going to react,” Fox said. “Don’t get caught in a game of chicken that ends when your parents die.”
Fox recommended kicking off the conversation about your parents’ end-of-life and estate plan with gentle, open-ended questions, like:
“Have you thought about where you want to live as you get older?”
“Do you have a vision for how things happen in our family after you die?”
“What was your experience like when your [close family member] died?”
Be sure to stay calm and persistent here. Give your parents a bit of space and time if this is all a bit too heavy for them to tackle right away.
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: These Are the Top 4 Questions High Net Worth People Ask Me