High Net Worth Fiduciary: Providing High Net Worth Clients With Specialized Advice

October 23, 2017

High net worth individuals have a multitude of needs that require specialized expertise and attention: strategies to avoid estate taxes so that wealth being passed on to beneficiaries can be maximized, tax-deferral/tax avoidance strategies to avoid paying high marginal tax rates on income, etc.

These strategies often require counsel from attorneys or specialists with high level expertise in life insurance and other products. While experienced attorneys are a good advisory source since they are being paid to act in your interests, often times so-called “specialists” are not. These specialists are more often than not just salesmen looking to sell you a product and gain a large commission for themselves. Often times these salesman are not qualified to evaluate whether the product they are selling is in your best interests or not.

High net worth individuals need someone with high level product expertise that is compensated to act in their best interests. What they need is a high net worth fiduciary. A high net worth fiduciary has a depth of expertise in the subject matter, is obligated to act in the clients best interests, and is not compensated on whether a product is sold or not.

What should clients look for when looking for a high net worth fiduciary or advisor?

Advisor competence: How much understanding does the high net worth fiduciary have of the products being evaluated? Can they explain the value both qualitatively and quantitatively?

Advisor compensation: How is the advisor being compensated? Can the client pay these fees directly?

Annuities have long been proposed by agents as a means to solve this dilemma of clients who want to grow their retirement nest egg while either protecting principal or providing tax-deferred growth that traditional bond investing won’t provide. Unfortunately annuities have often been associated with high fees that reduce the viability of these products for clients seeking to reduce market or interest rate risk. These high fees (either implicit or explicit) were often a necessity for the insurance companies as a means to counter the high commissions being paid to agents selling these products.

Rajiv Rebello

Rajiv Rebello

Author

Rajiv Rebello, FSA, CERA is the Principal and Chief Actuary of Colva Actuarial Services and Colva Capital. Colva helps family offices, RIAs, and high net worth individuals create better after-tax and risk-adjusted portfolio solutions through the use of life insurance vehicles and low-correlation alternative assets. He can be reached at [email protected].

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