High-net-worth individuals (HNWI) are often talented at creating wealth, but the art of wealth preservation doesn’t always come as naturally. As you build up your wealth, you also need to use some carefully crafted wealth preservation strategies to help you keep what you have built, make it grow, and protect it against the unpredictable demands of life and the markets. Let’s take a look at some of the strategies you can put in place, working with an experienced wealth manager.

Build a Long-Term Financial Plan to Protect Family Wealth

The most important strategy for protecting the wealth you build for your family is to develop a long-term financial plan. It is not enough merely to create wealth, nor to place your money in various investments and hope for the best. An active strategy for wealth preservation is essential. Creating and implementing such a plan is not always exciting; it requires careful financial goal setting, drawing up budgets, and constant monitoring, reviews and adjustments. It is all about creating a long-term plan, and then adopting short-term habits to ensure that the plan is always being implemented.

Why do you need a plan? Life, business and investments don’t always go as planned – in fact, they usually don’t! Without a plan, you may find yourself having to go into damage control mode just to restore some semblance of order when something goes wrong. A plan provides a blueprint for your financial path, including contingency plans to keep you covered when things don’t turn out as you thought they would. Your plan should include portfolio diversification, tax planning and optimization, insurance planning, and estate planning. If you have a business, contingency planning and succession planning are crucial to preserving your life’s work and provide a smooth transition when you are ready to step away.

Consider Insurance for Risk Management

If you want to build an effective wealth preservation strategy, you will need to make a point of identifying potential threats to your earnings and livelihood, so you can put measures in place to counter them. Insurance planning is one of the best ways to do this. Good insurance policies provide sources of emergency funds that you can draw upon in the event of losses or certain unexpected expenses. 

Your insurance strategy should include term life insurance, which provides fixed-rate coverage over specific periods. Other products to consider are disability insurance, whole life insurance and long-term care insurance. Speak to a financial advisor to decide which insurance products are best for you.

Tax Planning: Utilize Tax-Advantaged Accounts

You and your financial advisor should always be on the lookout for the best ways to reduce your tax liability as far as possible. This could include building a tax-diversified investment portfolio or making smart use of charitable giving, but it should also involve using tax-advantaged accounts such as RRSPs or TFSAs. Tax-advantaged accounts are those that are tax-exempt, tax-deferred, or have a variety of tax-saving functions. TFSAs are key tools in tax planning. The funds from these accounts can be withdrawn tax-free later in life, even though they offer no upfront tax breaks. 

Save for Emergencies or Large Purchases to Protect Family Wealth

At the heart of most wealth preservation strategies is the desire and ability to save. Set money aside every month to cover both unplanned events and day-to-day cash flow. The best method is to open an account that is not to be touched except in times of extreme need and when other financial provisions have gone wrong. A certain amount of money can then be automatically transferred to that account on a regular basis. The balance can thus grow and gather interest until it is needed. If it is never needed, so much the better. 

Momentum Financial Services is a boutique wealth management and investment planning firm based in Halton Hills, ON. We are here to help our clients with their unique investment objectives and approaches. We provide excellent wealth management strategies for individuals and families.  Contact us to find out more about our services and what they can do for you.