When you have a high net worth, the complexity of managing your wealth can increase significantly.
High net-worth individuals (HNWIs) face unique financial challenges and opportunities requiring a specialized wealth management approach.
Who Are HNWIs?
HNWIs are typically those with substantial investable assets, often exceeding a million dollars. Their financial profiles can be quite diverse, including business owners, entrepreneurs, executives, professionals, and inheritors of significant wealth.
Managing a high net-worth portfolio isn’t just about accumulating wealth; it’s about preserving and growing it while ensuring it aligns with your financial goals and lifestyle.
The Importance of Wealth Management
Wealth management is a comprehensive approach to financial planning and investment that considers the unique needs and goals of HNWIs. Here are some key reasons why wealth management is crucial for HNWIs:
Diverse Asset Portfolios
HNWIs often have many assets, including businesses, stocks, bonds, real estate, and private equity. Managing this diverse portfolio requires expertise, careful planning, and risk management.
Tax efficiency is critical to HNWIs because they typically have more assets and a greater potential tax burden. By implementing tax-efficient strategies, HNWIs can minimize their tax liability, maximize their after-tax returns, and preserve wealth.
Tax efficiency can help HNWIs achieve their financial goals more quickly by reducing the drag on their investment returns caused by taxes.
HNWIs often have substantial estates that need to be managed and passed on to future generations. Effective estate planning can help minimize estate taxes and ensure a smooth transfer of assets.
The Role of a Certified Public Accountant Financial Advisor
Some financial advisors are also Certified Public Accountants (CPAs). This combination of skills can be especially beneficial for HNWIs.
A CPA is a professional who has earned the CPA credential by meeting specific education, examination, and experience requirements. CPAs are widely recognized for their accounting, taxation, auditing, and financial planning expertise.
CPAs help individuals and businesses maintain accurate financial records, prepare financial statements, and comply with accounting standards.
They offer tax planning and preparation services, helping clients minimize tax liabilities while complying with tax laws.
CPAs examine financial statements and internal controls for compliance and accuracy.
CPAs, who are also financial advisors, can offer financial planning services to help clients set and achieve their financial goals.
Requirements to Become a CPA
To become a CPA, candidates must meet stringent requirements, which typically include the following:
Education: A bachelor’s degree in accounting or a related field. Some states may require additional coursework beyond the bachelor’s degree.
CPA Exam: Candidates must pass the Uniform CPA Exam, a comprehensive and challenging four-part examination covering auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation.
Experience: Most states require candidates to complete a certain number of hours of supervised accounting or auditing work, often under the guidance of a licensed CPA.
Ethics: Applicants must adhere to a code of professional conduct and ethics.
After meeting these requirements, candidates can apply for a CPA license from their state’s board of accountancy.
How CPAs Can Help HNWIs Achieve Their Financial Goals
Here’s how the training, knowledge, and experience of CPAs who are also financial advisors can help HNWIs achieve financial goals:
Comprehensive Financial Planning: CPAs have a deep understanding of financial principles, which allows them to create comprehensive financial plans tailored to the unique needs and goals of HNWIs. These plans encompass wealth preservation, investment strategies, tax, retirement, and estate planning.
Tax Efficiency: CPAs are well-versed in tax laws and regulations, enabling them to develop tax-efficient strategies that help clients minimize their tax liabilities while staying compliant.
Risk Assessment and Mitigation: CPAs can assess the financial risks of investments and strategies. They help HNWIs make informed decisions to protect and preserve their wealth through diversification, insurance, and risk management.
Estate Planning CPAs can create estate plans that align with their client’s wishes and help them navigate complex estate tax laws. While they don’t create legal documents, they can coordinate with trust and estate attorneys to implement a carefully crafted estate plan.
Compliance and Reporting: CPAs ensure that financial transactions and reporting comply with accounting standards and regulations. This is particularly important for HNWIs with complex financial holdings and investment structures.
Objective Financial Advice: CPAs have a fiduciary duty to act in the best interests of their clients. This means they provide objective and unbiased financial advice.
Retaining a Certified Public Accountant who also serves as a financial advisor can be an optimal choice for HNWIs. A CPA with expertise in wealth management can be your trusted partner in navigating the complexities of high-net-worth financial planning and help you achieve your financial goals.
The founder of Aura Wealth Advisors, Bert Doerhoff, is a financial advisor and a Certified Public Accountant.