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Common Financial Mistakes of the Wealthy

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Andrew R. Michaud

• November 10, 2023

Being rich does not guarantee immunity from costly financial mistakes. In this week's edition of Advisor Big Q, we asked financial advisors to highlight errors often made by wealthy individuals. Advisors mentioned a few common mistakes, such as clients putting too much emphasis on stockholdings in their own company. Another notable mistake is including spousal lifetime access trusts (SLATs) in estate plans, which do not dissolve in the event of a divorce - a painful outcome indeed. Additionally, there are numerous other mistakes to consider when it comes to passing on wealth to future generations.

The Temptation of Early Retirement

The allure of early retirement is growing stronger, leading financial advisors to receive more inquiries from clients looking to retire sooner than anticipated. However, accelerating one's retirement timeline requires meticulous planning and a step-by-step approach. This includes seeking advice from a devil's advocate, conducting thorough financial analysis, and considering part-time work. Sometimes, individuals struggle to truly believe that their early retirement plans will be viable, but financial advisors assure us that those who stick to their financial strategies can turn this dream into a reality.

Pathstone's Unique Approach

Pathstone, a leading multifamily office based in Englewood, N.J., has earned recognition as one of the top RIAs. CEO Matt Fleissig shed light on the firm's unbundled fee model, where clients only pay for the specific family office services they utilize. Since its inception in 2010 with $1.4 billion in assets, Pathstone has impressively grown to manage $25 billion in assets under management. When considering assets under advisement and administration, this figure balloons to $100 billion. Fleissig maintains an optimistic outlook on further expansion opportunities for the firm.

Hightower's Strategic Acquisition

In a recent move, wealth management aggregator Hightower announced its acquisition of Resource Consulting Group, based in Orlando, Fla. With approximately $2.5 billion in assets, Resource Consulting Group provides fee-based planning services to high-net-worth and ultrahigh-net-worth households across the nation. This acquisition marks Hightower's 11th successful purchase so far this year, demonstrating their commitment to growth and extension of their comprehensive advisory services.

Fightin’ words

The Insured Retirement Institute, a trade group for annuity professionals, has responded strongly to President Joe Biden's recent comments about the industry. As the administration unveiled a proposal to expand fiduciary responsibilities for retirement advisors, Wayne Chopus, the head of the Insured Retirement Institute, criticized Biden for failing to provide a clear justification for the proposal. Chopus also accused the President of "demonizing and joking about the insured retirement industry." Biden's rollout of the Department of Labor's fiduciary proposal included pointed criticisms, with the President stating that "millions of Americans, especially seniors, are being targeted by financial advice and insurance brokers selling bad annuities that work for the broker and not for the client."

Thanks, but no thanks

UBS is taking steps to divest itself of certain wealth management assets acquired through its merger with Credit Suisse earlier this year. The bank has transferred $5 billion of invested assets from Credit Suisse's wealth management division to its noncore and legacy division, known as NCL. Additionally, UBS has reclassified $30 billion of accounts from Credit Suisse that are "related to nonstrategic relationships." The bank has not provided an explanation for the wind-down of these assets, but its CEO has stated that a comprehensive investigation into its former rival's holdings will be conducted.

Advisor Q&A: From Accountant to Advisor

In this week's Advisor Q&A, we had the opportunity to speak with Virgil Kahl, a top-ranked woman advisor and president of Spring Ridge Financial Group, which manages $1.1 billion in assets. Kahl shared her journey from being an accountant to becoming an advisor, highlighting why she believes more accountants should make this career transition. She also provided insights into her recommendations for wealthy clients in light of potential tax hikes. Moreover, Kahl discussed why her practice does not operate as a work-from-home office, outlining the reasons behind this decision.

We hope you have a wonderful weekend.