While tempting to react to the latest headlines about imposed tariffs, HNW individuals can afford to stick with what works for their financial goals, whether that includes balancing their assets in equities, fixed income and alternative investments. Much in the same way, investment strategies for institutional investors are designed with a long glide path to weather short-term losses. Depending on their mandates and investment guidelines, institutional investors execute investment strategies that balance risk tolerance with a variety of asset classes.
With a wide-ranging perspective on risk, both HNW individuals and institutional investors require complex investment strategies that can factor in short-term losses and gains while remaining focused overall financial growth.
Wealth Stature
A distinctive financial profile and access to investment managers are two additional qualities that HNW individuals and institutional investors share. What makes a person stand out as a HNW individual is the value of their investable assets. Similarly, an institution that has been established for 50 years or more has amassed assets that far surpass the average organization. Both occupy a status that is outside of the financial norm because of their collected wealth. It is this wealth that allows them unique access to investment managers and investment products that are not typically available to retail investors.
Building Portfolios That Suit HNW Investors’ Needs
What is the best approach to take then when constructing portfolios for high-net-worth individuals? On the client relations side, having a low and transparent cost structure and generating a return to cover management expenses are basic attributes of HNW portfolios. This builds trust and a good foundation for the advisor-investor relationship. On top of that foundation, a portfolio that is designed to outpace inflation is critical to its longevity. Inflation increases the cost of everyday goods and services, with long-term effects on withdrawal rates, especially when maintaining a certain lifestyle. In the same way, if a portfolio does not address a HNW individual’s lifestyle needs by meeting or exceeding current income requirements, it will run out of funds. Finally, protecting and growing assets for beneficiaries is a long-term goal that all advisors should aim for when building HNW investment portfolios.
Christopher Crawford is the director of advisor relationships for the Buffalo Funds in Mission, Kansas. With over 10 years of experience working with financial advisors supporting their business development efforts, Christopher notes that success for advisors begins with being a good communicator and a better listener.