When sizable assets are involved, going without a detailed, comprehensive plan could put your financial future at risk.
It’s a small group with big assets: Canada’s high-net-worth (HNW) and ultra-high-net-worth population numbers about 320,000 people, or roughly one per cent of the country, according to a 2014 World Wealth Report from Capgemini. This exclusive group boasts an aggregate wealth estimated at US$979-billion.
At this top level of wealth, getting help from a professional financial planner isn’t just a highly recommended move – it’s an absolute necessity, says Alexandre Viau, vice-president of Private Banking 1859 at National Bank.
“Financial planning is a detailed, comprehensive process that requires hands-on experience and a strong technical understanding of the issues involved,” says Mr. Viau. “With high-net-worth and ultra high-net-worth individuals, financial planning can be especially complicated, not only because of the significant size of their assets but also because many of them have businesses, multiple homes and extended families.”
As an example, Mr. Viau points to many of his wealthy clients who are entrepreneurs without a company-sponsored pension plan. These individuals will need to build their retirement fund themselves, perhaps by contributing to an registered retirement savings plan (RRSP) or setting up an individual or personal pension plan.
“In order to make that decision, the pros and cons will need to be analyzed using a rigorous approach, and you need a financial adviser with the knowledge and experience to do that,” says Mr. Viau. “The financial adviser also needs to know how their recommendation in one area – such as personal tax planning – can affect other areas like insurance, investments, retirement planning and estate planning.”
While most people of great wealth consult with financial advisers, there are still some who don’t, notes Bill Green, a fee-only financial planner based in Bracebridge, Ont.
In some cases, these individuals are entrepreneurs who are used to seeking advice from accountants and lawyers, says Mr. Green. But while these professionals may provide sound advice in their area of expertise, they’re unlikely to have the ability to see the entire financial picture.
“Financial planners can act as quarterbacks who can pull everything together to look at the big picture,” says Mr. Green. “Whereas a lawyer may just look at the legal issues and an accountant will focus more on accounting issues.”
Choosing a financial planner or adviser who has worked extensively with HNW clients is key, says Mr. Green. But he says getting references from other ultra-wealthy clients can be a challenge because many of these individuals tend to be fiercely protective of their privacy.
In the absence of references, Mr. Green recommends sitting down with a prospective adviser for an initial financial review.
“Get a feel for the adviser, because you have to like and trust this person,” he says. “If you’re not happy, move on.”
In the early stages of this relationship, it’s also a good idea to get all key advisers – financial, legal and accounting – in one room to ensure everyone is working towards a cohesive plan for the client.
Without the guidance of an experienced financial adviser, HNW clients could find their financial future – and their family’s financial future – at risk, says Mr. Viau.
“You need to have a professional who’s used to working every day with high-net-worth clients and who knows the rules inside and out.”
For example, Mr. Viau says that advisers need to be aware of new measures that may be included in the next federal budget and how those changes may affect their clients.
“A financial adviser who deals every day with high-net-worth clients will be at ease with any new rules because part of their job is keeping up to date with any new developments that could affect their clients, and making sure that they’re taking advantage of any new rules that could benefit their clients,” he says.
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