What Is Comprehensive High Net Worth Financial Planning?
Most financial advisors never ask to see your tax returns or use them as the basis for your wealth management. This significant gap alone could be costing you significantly in unnecessary taxes, even if you have a CPA.
Comprehensive high-net-worth financial planning examines every aspect of your finances, including taxes, estate planning, investments, and insurance.
Vance Barse, CPWA®, AIF®, Wealth Strategist, was a guest on The Purpose-Focused Advisor podcast, where host Rob Brown got the full story on why Your Dedicated Fiduciary® was built.
More importantly, Barse used the opportunity to shed light on what high-net-worth individuals and families in the mid-range, from $2 million to $25 million in investable assets, should look out for when reevaluating their wealth management strategies.
Here’s the breakdown of that conversation on identifying financial planning gaps.
Common Planning Gaps in High Net Worth Wealth Management
Earlier in the interview, Barse provided an example of how a disjointed or siloed planning team can create gaps in collaboration, communication, tax reduction, and potential growth.
“It really is what I call a siloed business model, where there’s not a lot of cross-collaboration among the different members of the so-called planning team.”
Later, Barse pinpoints this siloed client service model as ultimately limiting the implementation of maximum tangible value because of significant planning gaps that you may have.
Example Planning Gaps Overlooked
Here’s what gets missed when advisors don’t combine the focus on tax efficiency and comprehensive planning:
- Expensive, tax-inefficient mutual funds: Legacy products advisors use by default.
- Capital gains distributions: The tax consequences of those legacy mutual funds often means you have huge capital gains being forced onto the Schedule D of your tax return – yes, even in years when the stock market is down.
- Taxable vs. Retirement Account Treatment: IRAs = less of a problem when it comes to legacy mutual funds, but taxable accounts = bigger problem.
- Tax return analysis:All prudent wealth management begins and ends with the tax return. A medical specialist always wants to see your general health history from your GP. It’s no different when it comes to your wealth management: your financial advisor must understand your tax return profile to bring you maximum value, such as understanding historical gains, loss carryforwards, Schedule F farmland, income restructuring opportunities, patterns in your Schedule D, and so much more.
- Portfolio “under-the-hood” review: What is actually generating the taxes and whether or not you have specific tax lots within your legacy mutual fund line-up that can be cleaned up to lower the cost of your investments and allow time value of money and compound interest to be working more in your favor as a result.
These gaps were the first building blocks of YDF. So, what does comprehensive planning actually look like in practice?
The Family Office Approach to High Net Worth Financial Planning
Barse’s background as a former insider, where he consulted and taught leading wealth management firms, framed his approach to founding YDF.
“I spent 10 years meeting with different private wealth teams around the country to advise them on a number of things, but largely how to incorporate institutional alternative Investments for their high-net-worth and ultra-high-net-worth clients…”
After those experiences, Barse felt an immense obligation to help clients bridge the significant gaps that he often saw left behind, even by the largest award-winning wealth management firms.
YDF is not a family office; however, Barse modeled the private wealth management firm after family office principles, including comprehensive coordination, independence from product sales, and sophisticated multigenerational planning.
With that model in mind, the firm was founded with a simple mission: to be authentic, transparent, and deliver maximum value to the lives of those we serve.
This approach isn’t for everyone. Here’s who benefits most from comprehensive financial planning.
Who Needs Advanced High Net Worth Financial Planning?
The Underserved Cohort: $2 Million to $25 Million
According to Barse, investors with $2 million to $25 million in investable assets are the most underserved cohort in wealth management because their planning needs have outgrown the expertise available from their retail financial advisor.
“That’s a big range, but the reason for that is so much of the wealth management industry focuses on the so-called retail Millionaire-Next-Door, and there are certain planning requirements that they have.”
Further, investors with assets under management (AUM) of less than $25 million do not meet the minimum asset requirements of most family offices and trust companies.
‘Fiduciary’ vs. Financial Advisor
Not all financial advisors are the same. Many “financial advisors” are actually relationship managers whose home office manages your portfolio, not the financial advisor. Here’s how it works: you find a “financial advisor” you like, move your assets to the firm, and then the “financial advisor” (relationship manager) puts your investments into portfolios managed by the home office. You, and all other clients of that firm who have your risk score and investment objective, get the same portfolio.
On the surface, it might not seem like a big deal, but if your portfolios aren’t managed uniquely to your tax return profile, you may be paying way too much in capital gains taxes.
Further, a financial advisor who claims to have your best interest in mind may not be held to the same legal and ethical standards as a fiduciary financial advisor.
The word ‘fiduciary’ means that the financial advisor is legally required to do what is in your best interest at all times. Fiduciary financial advisors have a duty of loyalty, a duty of care, and must be transparent. This is in contrast to the “suitability standard” that exists in wealth management, which means that a non-fiduciary financial advisor can make recommendations that are suitable, but not necessarily in your best interest.
“I wanted to present to our clients and the public that we, without question, 100% of the time are going to do what is in that client’s best interest, not only as it relates to the products within the portfolio but also as it relates to the strategies that we would introduce.”
Full circle, YDF steps in alongside the client and operates as the bridge between the siloed professionals in the wealth management and financial planning process.
How Your Dedicated Fiduciary® Operates
YDF fulfills the duties of loyalty, care, and transparency to our clients in the following ways:
- Centralize everything: All accounts, documents, and professionals are all in one dashboard, literally at your fingertips, including outside assets, business holdings, and real estate.
- Enable collaboration: We seamlessly coordinate all planning with your CPA, estate planning attorney, insurance agents, mortgage lender, realtor, etc., as your in-house financial steward.
- Implement advanced strategies: From tax bracket management to Roth conversions to multigenerational wealth transfer, we present all strategies to you and implement those that bring the most value to your estate.
How to Evaluate Your Current High Net Worth Financial Planner
If you’re already working with an advisor, here’s how to determine if they’re truly comprehensive or just managing your portfolio:
- Estate planning collaboration: Does my financial planner work with my estate planning attorney to develop a strategy for my estate?
- CPA coordination: Does my financial planner collaborate with my CPA to implement tax reduction strategies and minimize my tax liability on an annual basis?
- Business owner value: As a business owner whose net worth is tied up in my business and not much in investments, is my financial planner presenting estate freezing and discounting techniques that can keep as much of my wealth in my estate and significantly reduce the taxes when I sell my business?
- Risk management: Has my financial planner presented strategies aimed at minimizing downside risk and protecting my assets?
- Familial unity: Has my financial planner written a Family Heritage Statement that fosters familial unity based on our core values instead of my estate being the reason my family falls apart?
Flat-Cost Assessment – Independent, Expert Second Opinion
YDF understands that switching advisors can be a daunting experience, which is why we will never ask you to move your assets to the firm unless you want to. Very likely, your relationship with your advisor goes back years, possibly even decades, and you believes their work has been good. However, you owe it to yourself to conduct your own due diligence to identify any planning gaps that you may have. YDF offers a flat-cost assessment to provide a thorough snapshot.
Here’s how it works:
- Document review: YDF securely obtains investment account statements, tax returns, estate planning documents, all insurance policies, and a household balance sheet or ledger, if available.
- Comprehensive analysis: The team conducts a deep dive into your complete financial picture to identify what’s working, what isn’t, and what major planning gaps you have, particularly in the world of advanced planning strategies.
- Independent report: An objective overview of what should remain, what needs to change, areas that need improvement, and any significant planning gaps, along with specific strategies to fill them.
This assessment is about delivering clarity. If this post resonates with you, YDF invites you to start a conversation. No pressure, no sales pitch.
Book your confidential, free introduction to share your specific financial situation and goals. The introduction and flat-cost assessment are opportunities for honest discussions about current planning and identifying potential opportunities to keep more of your money in your estate.
As Barse puts it, “there can be inadvertent planning gaps, and part of our job is to fill those gaps to make sure at the end of the day the entirety of that estate is in a nice, pretty box with a metaphorical pretty bow on top and the clients can simply live their lives with purpose and fulfillment.”
Watch the full interview on YouTube.
Disclaimer: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Contact your financial professional for more information specific to your situation.