Those who acquire significant wealth often find that effective wealth management is comparable to running a small business. Whether you are the builder of the wealth or it has been inherited, whether your annual spending is $250,000 a year or $10 million a year, financial discipline and structure is imperative to building a successful financial future.
I hear regularly of people who have run out of money and are going back to work because they never developed smart, long term financial planning. Let me give you a few examples:
- The professional athlete who retired in his 30’s but continued to spend as he did when he was getting the large paychecks. He lacked any financial planning know how or professional wealth management advisers, so he burned through his cash and investments by the time he reached the age of 40.
- The business owner who sold the business he built while still in his 40’s and thought he would never run out of assets and money. Twenty years later he was nearly broke and was looking to go back to work.
- The widow whose husband left her tens of millions of dollars, but she spent through the more liquid assets, then sold the real estate and artwork while continuing to spend. Eventually she reached her mid-70’s and her only income is social security. She is in good health but due to her financial planning failure she is looking for a job so that she can continue to afford the small apartment she is renting.
- The 25 year old who inherited from wealthy parents but never had an education for handling complex trusts and investments. The ‘advisors’ took huge fees, far out of proportion to the services actually provided and are now gone, along with most of the assets.
A common theme in all these examples is the belief that the money will never run out and the lack of having someone with strong financial discipline involved in setting a plan. Does your financial plan actually work in practice, thereby allowing you to accomplish the goals you’ve set for your lifetime? Is smart financial planning one of your top priorities?
For most individuals managing significant wealth, a personal CFO is required. An individual to help with wealth management and structure the financial discipline needed. There are few who have the background and training necessary to perform in this capacity. Some of the primary qualifications would include the following:
- Communicates clearly and directly with you and your family.
- Sophistication and experience to interact and coordinate between you and your specialized advisors, such as those providing tax and legal advice in order to pull your entire picture together in a cost-effective manner that achieves your plans.
- Extensive experience in finance and accounting to understand a broad range of investments, markets and cash management.
- Short and long-term lifestyle funding and planning.
- Monitoring these plans and having the flexibility to make ongoing adjustments is just as important.
Ensuring that your investments, spending and life expectations work together in balance and harmony is essential to maintaining your lifestyle and achieving your goals over your lifetime. With the correct financial planning and preparations, reaching your retirement target won’t just be a pipe dream.
By Lucinda Alden, CIMA®, CRPC®
Senior Vice President | Wealth Management Advisor
