Strategies to Protect and Grow your Wealth

“Wealth is the ability to fully experience life” — Henry David Thoreau

The definition of wealth is an abundance of valuable possessions or money. While being rich means that you have a lot of money, being wealthy means you do not have to worry about money. Being wealthy is measured by how much money you accumulate and save. In general, it’s defined by your net worth instead of your income, as being rich is defined by. Making money is only half the puzzle. Preserving and growing your wealth makes up the other half. It is important to understand the difference and to understand how to both protect the wealth you have accumulated and grow your wealth so it does not run out. 

How can you Protect and Grow your Wealth?

Proper Financial Planning

This is first on the list for good reason.  It doesn’t matter how well the wealth is grown in one generation, without proper planning the wealth could easily be lost in future generations to taxes, high professional fees, poor investments, and unprepared recipients of the wealth. It is important to start with a road map that plans the direction of the future sustainability of the family’s wealth. This road map should clearly outline how the wealth should be managed and invested for future generations. It should also incorporate tax planning strategies to minimize the effect that taxes have on wealth over generations. You should seek a financial planning professional who specializes in your area of focus as well as one who has experience working with your level of wealth. 

Investment Education

Education is extremely important if the family wants their wealth to last multiple generations – education in the form of experience and wisdom passed down from those family members who have either earned the wealth or have experience managing it successfully. If no one in the family has the skill set to educate the other family members, then professional advice should be sought to help in this education. Financial advisors, attorneys, and tax professionals are an important part of this process. Each should be sought out for a skill set that matches the family’s needs.

Real Estate

Besides storing wealth, real estate generates income from daily or annual rates, depending on your terms. Prevalent real estate assets include land, air space, fishing rights, industrial properties, residential and commercial buildings. These assets appreciate in value and are resistant to inflation. It is an asset which will always have a demand for it since people need somewhere to live, favorable income tax treatment, it is resistant to political and economic turmoil, and can be leveraged to suit risk tolerance of the family.

Precious Metals (Gold & Silver)

Over centuries gold and silver have been seen as the best forms of money for the following reasons: it is divisible, durable, consistent, convenient, and has a value in of itself. Regardless of whether gold and silver are actually used as money in day-to-day transactions for goods and services, they are seen to have one of the best characteristics of a store of wealth or money, an asset that retains its purchasing power over long periods of time.

Timberland

Timberland – if well managed – can provide long-lasting wealth protection and growth. The historical returns of timberland (according to NCREIF from 1987-2010) are approximately 13.5%. The correlation of timberland to US equities and US bonds is close to zero. This translates to consistent returns not tied to the performance of the stock and bond markets. Timberland also has an uncanny ability to outpace inflation, which tends to be a concern for families with multi-generational wealth.

Don’t Flaunt your Wealth

Some of the wealthiest people in the world tend to put on a façade of someone of average wealth in order to avoid targeting. Both friends and enemies will welcome an opportunity to spend money that is not their own and will not protect it in the same way as those who have earned it. With great wealth comes great responsibility.

The main considerations in protecting wealth for future generations of wealthy families are that the assets must be sustainable over several generations, resistant to inflation, and resistant to political and economic turmoil. It is possible to invest in certain assets that can fortify your wealth against some of these external risks. However, there is a much greater risk of future generations not being good stewards of sustainable wealth. Whether you are the first generation to create generational wealth, or you are researching how to sustain the wealth you have inherited, Peter Brunton can help. Peter is dedicated to removing the stress of financial planning from his clients’ lives while designing sophisticated, optimized investment strategies – Contact him today to ensure your wealth is in good hands.