In the past, social norms dictated how people defined wealth. It was black and white: You were rich, or you weren’t. You had money, or you didn’t. It was as simple as that.
Today, most advisors and their clients would agree that being wealthy means more than just having money in the bank. It can mean being able to provide for your loved ones, see the world, leave a positive legacy through giving and surrounding yourself with the things that bring you joy. True wealth, and living out your dreams, means something different for everyone.
Of course, money is an important instrument; without it, you can’t support your favorite charity, buy that vacation home or send your kids to college debt-free. Like it or not, financial, emotional and personal wealth are tangled up together in a complex web, and it can be difficult for the average person to sort out how to achieve all these things at once.
Financial advisors understand these connections deeply. While on the surface they may be working to help clients achieve purely financial wealth, their jobs encompass much more than that. Advisors who focus purely on the financial aspects of their clients’ lives are missing the point.
I’ve been thinking about this a lot as Hightower has evolved its focus to better encompass all aspects of wealth. I see our advisors help their clients in so many different ways every day, many of which have nothing at all to do with money. They act as therapists, stewards, friends and trusted counsellors to their clients. In addition, they often get involved in supporting life decisions that have very little to do with finances.
Here are four ways advisors can help their clients achieve their own unique personal definitions of wealth:
#1 – Finding Wealth in Health
For many people, the necessity of financial wealth pales in comparison to achieving physical wellness, but as most advisors intimately understand, a person’s health goals can and should work in tandem with their financial goals. An effective advisor can analyze their client’s cash flow and budget to see where to pull from to fund health and wellness initiatives, such as joining a concierge medical practice, hiring a personal chef or participating in a health-focused hobby such as mountain climbing, running marathons or attending yoga retreats.
Some key considerations for advisors with clients who consider health to be the ultimate form of wealth is to help them with myriad decisions and actions. For example, our advisors often assist with helping their clients set up a health savings account (HSA). They will need to have a high-deductible health insurance plan to qualify, and there is an annual cap on contributions (currently $3,550 for an individual and $7,100 for a family), but an HSA can act as an additional retirement account where clients can store pretax money that can eventually be used for legitimate medical expenses. Left to mature for 15-20 years, an HSA can grow into a tax-free savings account that can be extremely useful for people as they age into retirement, come upon unexpected medical costs, or simply want to lessen the financial burden of everyday medical expenses, such as dental work, prescription costs or even a new pair of glasses. This has proven to be an effective strategy for advisors as they work with the children of their existing clients who may not have a large savings pool just yet.
Another health-related consideration that our advisors provide clarity and guidance on is understanding the many long-term care solutions that are available to them, ensuring they pick the approach that’s right for their finances and their family situation. This is proving to be a paramount investment to make, as people are living longer and require more assistance.
According to the U.S. Department of Health and Human Services, here are some national average costs for long-term care in the United States. Average costs for specific states are also available through the HHS website.
- $225 a day or $6,844 per month for a semiprivate room in a nursing home
- $253 a day or $7,698 per month for a private room in a nursing home
- $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit)
- $20.50 an hour for a health aide
- $20 an hour for homemaker services to help with household chores
- $68 per day for services in an adult day health care center
Considering a loved one, or yourself, may need this type of care for many years, it is important to plan for it when you don’t need it.
#2 – Finding Wealth in Adventure
Wealth for some people means using their time on the planet to see as much of it as possible. Financial advisors can help their travel-bug clients achieve this goal—both by using their network and centers of influence to help connect clients with the right opportunities, and by helping them build the financial means needed to expand their horizons beyond the backyard.
For example, an advisor may set up a client who is looking to purchase an out-of-state vacation home with an established real estate agent in that area. If they’re paying cash, their advisor can take a deep dive into their various accounts and investments to find the most tax-efficient place to pull from, and if they’re planning on getting a mortgage, their advisor can help them get the best possible rate by connecting them with the right mortgage broker.
Alternately, we see advisors help clients who want to purchase a luxury vehicle or yacht get the best bang for their buck by offering to help with due diligence before the purchase, by finding experts who can educate the client on all the immediate and long-term costs associated with the purchase. Advisors can provide valuable cash-flow analysis on the likely ongoing or future financial impacts, acting as the voice of reason if they’re concerned about affordability. I know one advisor who has helped more than one client with the purchase of a private jet.
#3 – Finding Wealth in Family
Helping to pass down wealth from generation to generation may seem like an obvious aspect of a financial advisor’s job, but in practice it can be rife with complications. When a parent passes or a significant inheritance is in play, tensions and emotions often run very high, and serious drama can ensue if the situation isn’t handled with care.
For advisors, this kind of care can mean working with clients, their families and their legal teams to hash out the details of a will or trust before the worst happens and making a comprehensive plan for how to handle potential road bumps. I know an advisor who holds annual “legacy planning meetings,” inviting the entire family and their estate planners, accountants and other trusted advisors to talk through the nuances of inherited wealth.
Advisors also often work with their older clients to ensure that the fortune they worked for their entire lives can be left to their family when they’re gone, not swallowed up by medical costs in the last few years of their lives or handed to the government in the form of taxes. Unfortunately, this situation is all too common, as around-the-clock care for conditions such as Alzheimer’s can cost in the tens of thousands every month, and the cost of medication and unexpected surgeries only escalates as we age.
However, the financial burden of getting older can be somewhat mitigated through savvy advising and careful timing. For example, moving assets out of the client’s hands and into a trust designated to a child or grandchild can help an elderly client qualify for assistance from Medicare, while still preserving the family’s generational wealth. Advisors also play an important role in reviewing the tax-planning benefits of various life insurance strategies.
#4 – Finding Wealth in Favorite Things
Hobbies and activities can bring wealth into a person’s life by allowing them to devote their time and money to their passions, and advisors can help clients pursue their individual hobbies in a variety of ways.
For clients who are into collecting—be it art, wine, stamps or sports memorabilia—advisors can help them determine the value of the collection, reaching out into their professional network to find local appraisers and antique experts. An advisor I know has had Sotheby’s or Christie’s come and provide insights onto the value of inherited art or purchased art, and I know another advisor who works with an insurance provider to ensure proper protection is held on all of these types of “hard” assets for his clients.
Sometimes a hobby can evolve into an income-earner. A client who has achieved professional success may seek to spend the latter part of his or her career putting time and energy into a passion project. Whether it’s investing in a Chilean winery, a Brooklyn craft brewing company or an eco-resort in Costa Rica, advisors can provide valuable guidance to ensure the investment makes sense in the context of the individual’s long-term objectives.
When the passion project is philanthropy-oriented, advisors can advise on a range of tax-optimized strategies such as setting up a private foundation or donor-advised fund. Partnering with a family on philanthropy planning can set up future generations to continue the family’s legacy of giving to favorite charities.
Most advisors know that their job goes way beyond money. The modern advisor wears many hats, and in many ways, may bear more similarities to a holistic life coach than to a traditional finance professional. They’re not just helping clients grow their fortunes, they’re helping them plan for the future, smooth over anxieties and pave a brighter path for the next generation. Wealth means something different to everyone, and good advisors do the work needed to fully understand and meet each client’s individual goals.
Abby Salameh is the chief marketing officer at Hightower Advisors.
