High Net Worth Financial Planning Strategies: How to Protect What You’ve Built

high net worth financial planning

 

Building significant wealth is an extraordinary achievement—one that only a small percentage of U.S. households have attained. [i] Yet, maintaining that wealth is an even greater challenge: research suggests that 70% of affluent families lose their wealth by the second generation, and 90% by the third.[ii]  Without the right strategies in place, years of hard work can be undone by a myriad of factors including taxes, too little risk management, or poor planning. In reality, protecting wealth demands an entirely different skill set than the risk-taking required to create it in the first place.  In this article, we’ll look at high net worth financial planning strategies that can help put the odds firmly back on your side.

Choose Your Financial Advisors Wisely

Managing significant wealth is a high-stakes responsibility, where big mistakes can often have lasting consequences.  Generic advice or inexperienced advisors can expose you to unnecessary risks or cause you to miss valuable opportunities to save money and grow your wealth.

The cost of bad advice can be steep—whether it’s an advisor chasing risky returns that lead to outsized losses or failing to find strategies that protect your financial position. That’s why it’s essential to work with experienced professionals who take a holistic approach, carefully managing risk while aligning every decision with your unique financial goals.

Then, be selective about who you hire.  Not all advisors are equal.  How can you find the best ones?  Look for those who voluntarily hold themselves to the highest professional standards. Advisors without critical credentials—such as the Certified Financial Planner (CFP®) designation or compliance with Global Investment Performance Standards (GIPS®)—may lack the expertise or accountability necessary to manage significant wealth effectively.

Here are a few other key factors to keep in mind to help preserve and protect your wealth.

1) Prioritize Tax Planning

Taxes are one of the most significant threats to wealth. A generalist approach often misses opportunities for meaningful tax savings. High-net-worth individuals usually do best with advanced strategies to minimize tax liabilities.

That means regular tax planning, which is far beyond simple annual tax preparation.  Instead, you should have regular strategy sessions to look for opportunities to save.  At our firm, periodic tax planning is part of our scope of services.  We work closely with our clients and their tax professionals to look for ways to save them money.

However you accomplish it, ensure you work with those with up-to-date knowledge of the changing tax environment.  And whatever you do, don’t skip this step.  Without personalized planning, you could unnecessarily lose a substantial portion of your wealth to taxes.

2) Invest in Estate and Legacy Planning

A solid estate plan is essential for protecting your assets and passing them on tax-efficiently. Without it, your heirs could face unnecessary taxes, costly legal battles, and other challenges—far from the legacy most of us intend to leave behind.

The best results come when your financial advisor and estate planning attorney work together. Your attorney can handle the legal framework—wills, trusts, and other documents—while your advisor ensures the plan aligns with your overall financial strategy. Trusts, for example, often play a significant role for high-net-worth families but must be carefully structured and coordinated.

Philanthropy can also be integrated into your plan, offering a way to reduce taxes while leaving a meaningful legacy. Options range from donor-advised funds to private foundations, depending on your goals.

Finally, setting up the plan is only the beginning. Regular reviews with your financial advisor are critical to ensure it functions as intended—verifying beneficiary designations, properly titling trust assets, and adapting to any changes in your life or tax laws. Without this ongoing maintenance, even the best plans can fall short, leaving your wealth and legacy at risk.

3) Don’t Forget Risk Management

As your wealth grows, so does your exposure to risk—lawsuits being a prime example. Substantial assets can make you a target, even for baseless claims, resulting in costly legal fees and unnecessary distractions. If you’re a business owner, landlord, or in a high-risk profession, proactive asset protection strategies are essential.

Beyond legal risks, other potential threats—such as natural disasters, market events, or liability concerns—can often be mitigated with carefully selected insurance policies or financial products tailored to your unique circumstances. Taking precautions in advance can be key to managing risks.

Insurance is most effective when it’s tailored to your specific needs. As part of your wealth management strategy, your financial advisor should review your policies regularly to ensure they provide appropriate and comprehensive coverage.

Beyond insurance, you may need additional layers of protection. Legal structures such as LLCs or asset protection trusts can play a vital role in shielding your wealth from lawsuits and creditors while enhancing privacy. However, selecting the right structure requires careful consideration. Your financial advisor team can collaborate with specialized professionals to identify and implement the most appropriate solutions for your unique situation.

4) Hold Your Advisors Accountable

For those with significant assets, it’s crucial to monitor your financial advisors and professionals carefully. The stakes are higher when large sums are involved, and mistakes can sometimes have far-reaching consequences. That’s why it’s essential to work exclusively with advisors who prioritize transparency and accountability.

Financial advisors who do not adhere to Global Investment Performance Standards (GIPS®) may lack the level of transparency needed for you to accurately evaluate their performance. Conversely, those who comply with these rigorous standards demonstrate a commitment to providing clear, consistent, and reliable reporting—an indicator of both competence and professionalism.

Regardless, you need transparent reporting and regular performance reviews to  monitor results.  Yes, asking may feel awkward, but don’t let that stop you. Mistakes made by underqualified or unscrupulous advisors can erode decades of wealth creation in just a few years.  And those who provide high-quality services will appreciate an educated client.

Then, don’t hesitate to seek second opinions.  You’d do that for a serious health condition, so why should your financial health not warrant that same diligence?  There’s no cost, and it doesn’t take too much time.  Either way, you’ll usually walk away with new insights or feel confident your wealth management is on the right track.

5) Seek Advice Before Major Transactions and Decisions

When making significant financial moves—like selling a private business or a highly appreciated piece of real estate—pulling your professional team into the conversation early is wise.  With enough preparation time, larger transactions are often opportunities to utilize tax strategies to generate far better after-tax results.

For example, selling a business can trigger significant tax liabilities. By consulting with your advisors in advance, you might be able to use strategies such as installment sales or charitable trusts to minimize taxes and maximize your proceeds.  Likewise, these transactions can be an opportunity to incorporate wealth transfer strategies, such as gifting business shares to heirs before the sale to reduce estate taxes.

Key Takeaway about High Net Worth Financial Planning 

As the statistics imply, maintaining significant wealth is not easy, and mistakes can be costly.  Don’t rely on generalists or cookie-cutter solutions. Work with highly qualified advisors who tailor strategies to your unique needs.  Most importantly, take the time to ensure you select a team that can help you achieve your goals and protect your wealth for years to come.

 

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[i] https://www.investopedia.com/average-americans-net-worth-8713595

[ii] https://business.smu.edu.sg/master-wealth-management/lkcsb-community/how-beat-third-generation-curse