5 signs you may be too busy to manage significant wealth

You have a substantial asset base, varied sources of income and multiple financial structures – which means you also have greater complexity in your life. It probably didn’t happen overnight. The complexity may have crept up on you as your income and wealth have grown. This is a nice problem to have, but when you no longer have the time to give the needed attention to your financial affairs, well…as one client put it, “Inaction has a cost.”

Below are five tell-tale signs that the management of your wealth may be neglected because you don’t have the time or mental bandwidth to focus on it. If any of these scenarios feels too close to home, you’re not alone! They are common to wealth creators with demanding careers and full lives. It may also mean it’s time to take a different approach to managing your affairs.

1. Cash is piling up in your bank account

You are, year over year, accumulating more cash than you need for your spending or liquidity. That’s the good news. But it bothers you to have cash sitting idle because it’s not working for you. Maybe you remain undecided about investing your cash longer-term because you’re concerned about the stock market and where it’s headed. Alternatively, maybe you just don’t have the time to think about where to invest or how much of your cash to invest.

The consequence is that with idle cash, your returns are negative after inflation. It also means your net worth may be falling further behind others who are putting their money to work.

Even if your decision to keep a high cash balance is strategic, have you negotiated the highest rate of return you can with your private banker or financial advisor? At Newport, we view cash as an asset class that we manage along with the others – strategically and tactically – and negotiate the best rates we can.

2. Your financial to-do-list remains undone

Does this sound familiar? You put off wealth planning tasks even though you know they’re important because you can’t find the time to focus on them. Or if you start them, you don’t finish. For example: Maybe you’ve wanted to hire a money manager to properly manage your investments, but never find the time to research who would be the best fit for you. Or you had meetings regarding your estate plan but got bogged down at one stage and now it sits in your “For Review” folder. Or your philanthropic goals point you in the direction of starting a family foundation, but you continue making one-off charitable donations instead.

“For many people, the enormity of the tasks can feel overwhelming,” says Newport Portfolio Manager, Ian Maclean. “The second someone suggests, say, an estate freeze, you’re thinking you’ll have months of work to do and it becomes very easy to kick the can down the road… and pretty soon ten years have passed, along with the opportunity to benefit from having a plan in place.”

Instead, consider these two things: The first is to prioritize planning initiatives according to urgency and importance and break them down into a series of manageable tasks. The second is to assemble and delegate some of the work to a team of advisors – who will work together as your financial partners in helping you manage and grow your net worth in the most efficient and tax effective manner possible.

As Maclean notes, “At Newport, we work with our clients to do a journey map – breaking the tasks down, prioritizing them with milestones and timelines doing a lot of the heavy lifting to remove the burden from the client. Often this involves working directly with our clients’ other advisors to move the process along more efficiently.”

He cited the example of a new client who, having accumulated a number of insurance policies, some of which he no longer needed, thought an insurance review was priority one. But when Maclean discovered the client had no will or power of attorney, that became the priority. “We’re working on the estate plan now with the client’s estate lawyer. The insurance review will be done in six months and it’s up to me to diarize that and get it back on the table to be dealt with. A big part of our job as trusted advisors is to ensure that financial tasks do not fall between the cracks,” added Maclean.

3. It’s been a while since you reviewed your asset mix

It’s been over a year since you last took a close look at your asset mix across all of the assets that you own. Maybe you’ve never had the benefit of reviewing a consolidated picture of your asset mix, aggregated across all funds or accounts you own.

If you self-manage your investments, when did you last ask yourself: Am I too heavily weighted in any one asset class? Where am I underweight? Am I well positioned for the next phase of the economy and market cycle? What changes do I need to make? Do I have enough exposure to asset classes that are going to flourish in the future? How will I access these if I don’t?

If your investments are being managed for you, your money manager should be accountable to answer these questions and, in fact, they should do this review proactively, annually at a minimum.

The consequence of not staying on top of this can be portfolio “drift” – like an unmanned boat at sea – which can cost you many thousands of dollars in missed opportunities or lost capital.

4. You’re missing tax planning opportunities

You’d be surprised how many high-income individuals with maximum allowable RRSP contribution limits fail to take advantage of them. RRSP deadlines get missed – as do TFSA contributions – for no other reason than time and inattention. While in isolation, these may be small amounts, but over time they accumulate, and the tax savings are considerable.

And then there are the more sophisticated tax planning strategies – everything from prescribed rate loans to estate freezes to insurance-based solutions designed to fund tax liabilities to Individual Pension Plans. Sometimes there is a trade-off to be made between minimizing tax and adding complexity to your life, but there are many strategies that can be implemented quite easily with the heavy lifting done by your advisors. The cost of proper tax planning advice is generally a fraction of the lost opportunity cost and unnecessary tax incurred in the absence of this advice.

Vincent Didkovsky, Vice President, Wealth Planning Group at Newport, gave this example: “We recently worked with an entrepreneur who was reluctant to seek professional advice regarding their estate structure because of the perceived cost. We illustrated that the tax savings from an effective structure could be in the millions for this particular client, which far and above exceeds the professional cost of setting it up.”

5. You have a hodge-podge of private investments

Over time you have accumulated “one-off” private alternative investments, such as equity stakes in various businesses or real estate holdings, to the point where you no longer have a clear sense of how they fit into your total financial picture.

Are these investments performing as expected? Have you placed a limit on the percentage allocated to illiquid investments? Are they properly valued on your balance sheet? Are you confident the managers of the assets/companies you’re invested in are accountable and giving you a clear picture of what the assets are worth? Are you getting accurate timely tax reporting? Is there an ultimate and defined path to liquidity?

If you’re unsure, it may be another sign you’re too busy to focus on what are clearly sideline investments and you may want to think about how you handle this component going forward.

If you relate to any of these five signs, it may be an indication that you need a more comprehensive and professional approach to the management of your wealth. A competent wealth management team who works with you and for you to advance your interests may be the answer. As one of our clients summed it up, “This wealth should not enslave me, it should free me.” It’s our goal to make that happen, and to help high-net-worth clients experience and enjoy their significant wealth as the special opportunity it is.

Please get in touch if you would like to begin a conversation. We are here to help and make these decisions easier for you.