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Personalized Wealth Management For High-Net-Worth Families: What To Consider

Are you responsible for allocating a significant amount of family wealth to meet your family’s financial needs and long-term financial objectives?

While the Canadian wealth management landscape offers no shortage of investment management and advisory solutions, high-net-worth families often have sophisticated needs and must be careful to ensure that they obtain services that are structured to meet these needs.

In this article, we explore 3 key attributes to consider when looking into wealth management products and services to help you find a truly personalized approach to managing your family’s wealth.

1. Model Portfolios Versus Segregated Portfolios

If you have met with an investment advisor or manager, you should have discussed your financial objectives, goals, risk tolerance and constraints. At the end of your discussion, you may have been classified as an investor who is “conservative,” “moderately conservative,” “moderately aggressive,” or some other classification.

Based on this classification, your wealth will be invested in a model portfolio or in a personalized portfolio, also known as segregated portfolio. A model portfolio is a master portfolio in which all clients with a similar investor profile to you are invested. The portfolio manager will monitor and make changes as required to this model portfolio, which in turn impacts how the wealth of all investors in the same classification is invested.

Though effort-efficient for the investment manager, a model portfolio approach to investing clients’ wealth by its very nature restricts the ability for the portfolio to be truly personalized for an particular client given that there is little to no room to tailor the portfolio and its holdings to meet all of the client’s specific needs. For instance, a client’s family situation may call for a focus on a certain type of income yield for tax purposes; however, the use of model portfolios will generally allow for minimal (if any) ability to meet such specific needs.

Segregated or personalized portfolios, on the other hand, are tailored to each client’s specific situation, and can be changed as time goes on and the client’s financial needs evolve.

2. True Independence For Financial Solutions Offering

Sound investment advice and the best outcomes for clients generally arise when the investment manager is objective and when their interests align with their clients’ interests. It is important to note that not all wealth management and investment advisory services satisfy these two important criteria.

Even with the best and most professional of intentions, a non-independent investment manager may not be able to provide the best advice and devise optimal investment strategies because better fitting products or strategies may fall outside of what they are allowed to offer. This greatly reduces the spectrum of choice for clients and could fall short of providing the best outcomes as a result of the more limited nature of these wealth management solutions.

To truly assess the scope of any proposed offering, you may want to interview multiple firms to inquire as to just how objective the advisor is and the universe from which they can recommend solutions. Larger organizations tend to be top-of-mind for many investors, but there are boutique, independent firms who may be able to provide greater flexibility and diversity of product, perhaps along with access to strategies and platforms not available to the mainstream retail market. It may be advisable to include such firms amongst your research and interview process.

3. Comprehensive Financial Planning Beyond Wealth Sustainability

Lastly, many financial planners specialize in helping their clients retire and ensuring that these years will be sustainable. While this is definitely a valuable service, there may be a need for planning beyond this scope, particularly in the case of high-net-worth families seeking comprehensive guidance in managing their wealth beyond wealth sustainability. For instance, philanthropy may be very central to your family’s goals, and such a focus may merit the involvement of donor advisory services led by an advisor well versed in strategic philanthropic planning. For this reason, it is important to ensure that the specific expertise and planning acumen you will be receiving really does match your family’s personal goals and planning requirements.

This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.

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