Comprehensive Wealth Management: An Overview

Comprehensive wealth management is, in other words, full-service personal financial planning and administration. A financial advisor who offers comprehensive wealth management takes a holistic approach to helping you cover all of your personal financial bases, from taxes and estate planning to investments, retirement and financial planning.

You’ll discover that an advisor who offers comprehensive wealth management will really take his or her time to get to know you as a person and to learn about your ideologies and goals, in order to help you create the best, most customized plans for you and your unique financial situation. Your wealth manager is like a financial concierge, whose only goal is to help you achieve your goals.

With this type of comprehensive wealth management service, you can expect to receive the kind of personal attention, expertise and knowledge you would lend to your own financial planning, if you only had the time and experience.

But you’re not the type of person to just hand off the reins to a pro and forget about it. Understanding comprehensive wealth management and each of its components, as well as how these plans are implemented, will help you go even further to stay on track and achieve your financial goals. When you fully grasp this concept, you’ll see how a comprehensive wealth management plan can benefit any and all seekers of financial freedom, especially YOU!

The components of wealth management: 

  • Risk Management 
  • Income Planning 
  • Investment Management 
  • Tax Planning 
  • Legacy and Estate Planning
  • Financial Planning

We’ll talk more in depth about the components of comprehensive wealth management in the following chapters.

One caveat before we dive deeper: Please know that it is not always enough just to know and understand what comprehensive wealth management is. You probably wouldn’t read a book about electrical basics and then take on rewiring an old house by yourself. Similarly, an experienced financial advisor will help you to truly know, grow and preserve your wealth. It is one of the best things you can do for your future self, to work with someone one who will take a holistic approach in handling your investments, retirement income, tax liability and legacy plan.

 

Chapter 1

Risk Management

Although managing and attempting to limit risk is just one part of a comprehensive wealth management plan, most – if not all – of retirement planning is really about managing risk. During your working years, you are able to assume more risk in your efforts to accumulate greater levels of wealth. This is because you have a longer time horizon – which is to say more years until you plan to retire and need to tap into your retirement funds – during which to recover from any losses you experience due to taking risks.

As you get closer to retirement age, on the other hand, your ability to tolerate risk decreases exponentially. After you’ve retired, it becomes especially critical to manage your risk levels to ensure that you do not take any big losses, because your time horizon is short – you don’t have as much time to recoup such losses.

Risks you are likely to face in retirement:

  • Longevity risk – This is, in short, the chance that you will live longer than your retirement income. 
  • Sequence of returns risk – Sequence risk is simply the risk of taking withdrawals at inopportune times from a retirement account, and the negative effect that bad timing can have on an investor’s overall rate of return. An example the impact of bad timing is that the same withdrawal during a bear market costs more than during a bull market. Essentially, this risk means needing to withdraw from your investments during a down market, thereby compounding your portfolio loss. 
  • Rising health care cost risk – These risks in retirement may be not just the rising costs of Medicare and insurance premiums, but also that you may require long-term care, expensive home healthcare, the cost of prescription drugs, etc. 
  • Stock market risk – People often forget that investing in the stock market is a gamble. Stock market risk is the potential for you to lose your principal investment.
  • Inflation risk – This is the loss of purchasing power your money will have in the future thanks to inflation, (historically about 3 percent each year) which can be a significant problem for retirees living on a fixed income who dont have a plan to adjust based on inflation.

Overall, having a plan in place to manage these types of risks will be a major contributing factor to a successful retirement. Working with a comprehensive wealth manager is perhaps the best thing you can do to mitigate these risks.

Chapter 2

Income Planning

Most people put so much focus and energy into the wealth-accumulation portion of retirement planning, such that planning for post-retirement income and spending kind of falls by the wayside.

Whether or not you realize it, you’re going to need a strategy for dealing with your expenses and income in retirement, one that ensures not only that the expenses never exceed the income but also that you don’t outlive your funds.

There are lots of things you must take into consideration as part of your retirement income plan, many of which can be variable, like inflation, the cost of health care, and your life expectancy. The goal is to establish a stress-tested plan that accounts for these variables and will provide you with the most tax-efficient, yet reliable and sustainable income stream during your golden years.

Social Security will definitely be part of any retirement income plan, and it offers benefits no other retirement savings can, like guaranteed income you can’t outlive, protection against inflation, and so on. But since the average retiree only receives about 40 percent of his or her pre-retirement income, Social Security by itself will not be enough to cover your expenses in retirement. It’s a great supplementary source of income in retirement, but it’s meant to just bridge the gap, so to speak, between your other retirement savings and unexpected expenses.

According to the 4-percent rule, if you can comfortably live on withdrawals of 4 percent from your retirement savings (adjusted each year for inflation), it’s relatively safe to assume that you will not run out of money for at least 30 years. Experts agree though, that the 4-percent rule may not apply equally to everyone, since one person’s magic number might be different from another’s.

Annuities can provide a guaranteed stream of income for retirees that they can’t outlive. Also, studies show that retirees with guaranteed income spend twice as much annually, when compared to retirees whose only withdrawal income comes from their investment portfolio.

Chapter 3

Investment Management

Regardless of what stage of retirement planning you are currently in, having a professional in your corner guarantees a solid investment plan to grow your wealth, save on taxes and fees, and avoid mistakes and regret.

When it comes to investment management, most people are familiar with the concepts of active and passive investing. But the details of each of those approaches are quite complex. Most tend to take either an active or a passive approach. At SGL Financial, we believe in investing for the long term. We use what is known as “evidence-based investing” when designing portfolios.

    Your investment plan should always include

  • Short- and long-term goals
  • Timeline for achieving goals
  • Amount to invest now, and in the future
  • Concerns about current assets or tax exposures
  • Risk tolerance
  • Investment approach
  • Plans for asset allocation and rebalancing
Chapter 4

Tax Planning

It’s not enough just to save for retirement and plan for withdrawals and expenses – you must also have strategies well in advance of retirement for minimizing taxes, or otherwise potentially lose a larger-than-necessary chunk of your nest egg to Uncle Sam.

Comprehensive wealth managers are like a multipurpose tool. They can help you open the right types of accounts and use them in the most advantageous way possible for your unique financial situation. This may include utilizing health savings accounts, 529 college savings plans, Roth conversions, asset-withdrawal strategies, life-insurance strategies, managing required minimum distributions (RMDs), and implementing strategies for tax-free income.

It is worth mentioning here that as a comprehensive wealth management firm, SGL financial also offers tax preparation services.

Chapter 5

Legacy & Estate Planning

Lots of people think estate planning is just establishing a will that designates who gets what after you pass away. But estate planning involves so much more than just the distribution of your property and assets.

It may also outline how your affairs should be handled if you are incapacitated, establish guardianship for your children, set up a trust, designate power of attorney, create an advance healthcare directive or living will, and perhaps most importantly, strategize for minimizing taxes in order to leave as much of your estate to your heirs as possible.

Another common myth about estate plans is that you really only need one if you’re super wealthy or if you have kids. But the truth is that everyone (over the age of 18) should have an estate plan, even if you don’t have children or a lot of assets, if for no other reason than to simply lay out your wishes.

Ultimately, the amount of money you’ll be able to leave behind for your friends and family depends on how well your portfolio is managed, which is why legacy and estate planning are an integral part of comprehensive wealth management.

Chapter 6

Financial Planning

At first glance, financial planning and comprehensive wealth management may sound like the same thing, but they’re definitely not.

Comprehensive wealth management is the umbrella that financial planning comes under. In other words, financial planning is just one element of comprehensive wealth management.

Financial planning is more about lifestyle planning – like budgeting, saving for college and retirement. Comprehensive wealth management, on the other hand, is financial planning and more, including estate planning, risk management, and all of the other topics we’ve covered previously.

Wherever you are in your retirement-planning journey, remember that a successful financial plan starts with an experienced advisor well versed in delivering solid comprehensive wealth management. SGL advisors are fiduciaries (and not all advisors are), which means we are legally obligated to operate in your best interests – in fact, we enjoy doing so.

So if you are looking to establish or further your comprehensive wealth management planning, let’s chat soon, to determine if SGL Financial would be a good fit for your complete financial needs. To learn more about how we can serve you, contact us today.

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