As a financial planner working with high net worth 30-50 year olds, I find blind spots in everyone's financial life.
Many people get the basics right, but are neglecting important topics beyond that.
Here are the 5 most common blind spots I see so you can avoid them.
As you build wealth, financial planning becomes 10x more important.
Small tweaks can lead to 6-7 figure differences in wealth.
Let’s go through each area:
Every single client who comes into working with us is overpaying on taxes. Plan and simple.
This can be from this year’s taxes. But it also can be from a lack of long term planning and setting themselves up to pay way more taxes in the future than they need to.
Most are not:
Tax planning is crucial.
For most high net worth folks, planning for estate taxes and around their business sale can lead to 7-8 figures in tax savings over their lifetime.
It pays to do real tax planning.
Most people have no clue what they are doing with insurance. At the end of the day insurance planning can be pretty simple once you learn it. The key concept is to protect the big risks. The large outlays of cash. Note your $750 phone.
I am going through each insurance and what to look out for.
Most need term insurance and enough to protect their family if they pass away early.
Get a rider to convert to permanent incase you need it for any reason, like estate taxes. And do not forget
You want to get coverage to protect belongings but also liabilities. This is crucial.
If you have poor coverage and hit a doctor and get sued for $2mil, then most of that will be coming out of pocket.
Max out the liability coverages!
Do not worry about low deductibles.
You want to get an umbrella to sit on top of your liability maxes (home and auto).
This way, if you are sued for $2mil this can kick in and protect you from a large outlay of cash.
You typically want your liquid net worth in coverage.
It definitely depends on your options for what to pick, but make sure you are protected to not have to pay large dollar amounts out of pocket. I hope you are understanding the theme here.
Your $2k deductible does not hurt you, but $100k out of pocket does.
So many folks really mess up with their investments.
They take too much risk and buy:
This can set you back so far when done poorly.
You want to have a globally diversified portfolio around your business, equity comp, etc.
Nail the asset allocation and then invest as much and as often as possible.
At its' core, estate planning is about making sure everything goes the way you want it to as you pass.
Many families do not even have these basic documents done.
But beyond this, estate planning can be all about tax planning and asset protection.
Many high net worth people are not leveraging any trusts. Meaning they will pay 40% tax on all wealth above the threshold. You do not want to pay a 40% tax on any additional dollars than needed.
That eats up a ton of the wealth you built up.
Many need to start doing advanced estate planning like:
Just to name a few.
Cash flow planning starts with just understanding where money goes in your own budget and what your surplus is.
Some can handle this, but few do this well with their business.
Most come into working with us with so much cash in their business because they have no direction.
They don't know what they need in
WE help go through the business and show:
This direction allows them to finally have a set schedule and understand what needs to stay in the business and what can be pulled out and reallocated.
You need to know your numbers deeply to really manage your finances well.
These are 5 areas that high net worth people we work with do not have nailed down at all prior to working with us.
Financial Advisor