A Guide to
Wealth Management for
High-Net-Worth Empty Nesters
01
Contents
03
04
06
08
09
11
An introduction to wealth management
The importance of: A financial plan
The importance of: An investment strategy
The importance of: Tax planning
The importance of: Intergenerational and inheritance tax planning
How Equilibrium can help
02
An Introduction To Wealth Management
We all want to protect our money as best we can, especially after working so
hard to accumulate our wealth. This wealth management guide will serve as a
handy accompaniment for people considering their financial options, and explain
the importance of creating - and sticking to - a coherent financial plan.
For high-net-worth empty nesters, effective wealth
management is essential. Now is the perfect time
to assess your finances and ensure you are fully
prepared for the future. Having spent so long
focusing on your children’s development, you can
now focus on yourself. Typically, an empty nester is
between the ages of 45 and 60, and will have seen
the last of their children moving out of the family
home. This is an important time for many parents,
and you will likely experience mixed feelings as
you help your children pack up their belongings.
While sad to see them fly the nest, you may also be
excited to start this new chapter of your life. You
will likely find your disposable income increases, as
your children become more independent and pay for
things for which they previously relied on you. This
shift means there is no better time to take stock of
your financial situation and put the foundations in
place to grow your assets in the future.
This guide explains why wealth management is a
necessity for high-net-worth empty nesters eager
to both protect and increase their assets. Planning
ahead is key, and what better time to get your
finances in order than when you have both extra
time and extra income at your disposal? By making
wealth management a priority at this stage, you
will give yourself the best opportunity to meet your
long-term financial goals.
“...there is no better time to take stock of your financial situation and
put the foundations in place to grow your assets.”
03
The Importance Of:
A Financial Plan
It almost goes without saying that looking after
your money is imperative all the way through your
life. However, when you reach the age when you
are old enough that your children have left home,
but young enough to have plenty of working days
ahead, it is particularly important to get your affairs
in order. Previously, you may have spent significant
money raising your children. Now you can think
about how best to use your money for you. Some
considerations at this point might include how best
to increase your assets, how best to consolidate
what you already have, or how best to save for
retirement. A sound financial plan can help you in all
these aspects.
Effective wealth management, based on a strategic
financial plan, can help you make the most of your
assets and ensure your financial objectives are met.
Whether through effective tax planning or sound
investment, you need to make sure your money
keeps working for you.
Without a financial plan, you are less likely to set
realistic goals and remain on track to meet them.
By failing to identify your financial strengths and
weaknesses, you are unlikely to build on the former
and address the latter. Nor are you likely to put a
plan into action and monitor its progress. A financial
plan adds the organisation you need to make sure
nothing slips through the net.
High-net-worth empty nesters:
Managing money
The way you, as a high-net-worth empty nester,
manage your wealth will likely differ to that of
empty nesters with fewer assets. Although we
should avoid overgeneralising, it is useful to consider
the different attitudes to money that certain groups
have.
For instance, you are likely to be particularly savvy
with your finances, and likely to have effective
money management techniques already in place.
When it comes to using your money - or, indeed,
how you make your money work for you - you are
likely to:
• Have specific goals for your money
• Be keen to make more money
• Be smart with your money - understand that
higher risk investments have the potential to
generate a higher return, but also have the
potential to fall quite significantly
• Want diversification in your investments
• Know when to do it yourself or when to trust
an expert
Seeking financial advice
This last point is key. People who accumulate
significant wealth do not necessarily know the
best decisions to make, but are willing to seek the
advice of someone who does. Also, the effects of
the financial crisis from 2008 will not have been
forgotten, especially among investors keen to recoup
any money lost.
A financial plan enables you to be smarter with your
money. A service tailored to match your personality
and objectives will give you the best chance of
getting the results you want.
04
05
The Importance Of:
An Investment Strategy
Investment forms an integral part of a successful
financial plan. It can be particularly important not to mention rewarding - for high-net-worth
individuals with more assets at their disposal. By
investing strategically, you can continue to grow
your assets as you progress through life.
Investment recommendations will vary depending
on the individual. Portfolios are compiled to meet an
individual’s needs, preferences and goals, and no two
portfolios are likely to be the same.
However, it is common for a high-net-worth client’s
risk to be spread across a well-diversified portfolio
- one that includes a mix of bonds and equities,
property and alternative assets. For instance their
portfolios tend to be managed on a more bespoke
basis, especially when they are larger in size and
include many different options. Where appropriate,
this can often involve higher exposure to risk.
Greater risk capacity
Indeed, although the level of risk depends on the
individual, high-net-worth clients are often able
to take more risk than others. This is in contrast
to people with fewer assets, who typically do
not have a high capacity for loss. For instance, an
individual not classified as high-net-worth might be
more likely to invest into a portfolio with a higher
proportion of lower risk assets such as cash, fixed
interest and property.
There are notable differences between the financial
needs of high-net-worth clients such as yourself,
and those outside this bracket. You may find you
are often cited as the target market for the latest
‘flavour of the month’ financial products - products
that are not necessarily the best fit for you. You are
also more likely to either seek or be given advice
from many different people. While this has its
obvious benefits, it increases the likelihood you
are not following a coherent strategy - therefore
hindering opportunities to get the best returns.
Targeted investment strategy
It is therefore essential you follow an organised,
coherent and targeted investment strategy, making
the most of the assets at your disposal. Although you
may have more opportunity to take on greater risk,
your strategy needs to account for your personal
tolerance for risk, how much risk you need to take
and how much you want to.
As a high-net-worth empty nester, you are therefore
advised to seek assistance, ensuring your strategy
has the right mix. When constructing a strategy,
emphasis also tends to be placed on spreading risk
- a tactic aimed at protecting you from any sudden
changes in the markets.
06
Diversification
But what is the best way to spread risk? One of the most common methods is diversification. This involves
investing in different areas, many of which have no connection to another.
There are various ways to diversify a portfolio, and these include:
• A mixture of assets
There are various assets in which you can
invest, including bonds, shares, commercial
property and alternative investments, while
you can also opt for more ‘independent’ asset
types, such as commodities and buy-to-let
property
• Different sectors
Investing in different sectors could offer less
volatility, as movement in some industries will
have little effect on others
• A spread of companies
You can delve a little deeper by investing in
individual companies either within the same
or across different sectors. Again, risk can
be spread further by investing in multiple
businesses
• Consider different regions
To maximise the spread of risk, consider
investing in different regions. This has
value for many reasons, such as reducing
dependence on one country’s economy
07
The Importance Of:
Tax Planning
Tax planning is essential in the formation of
an effective financial plan, especially given the
complexity of the subject. Tax legislation rarely
stands still - it is very fluid and changes regularly.
It is therefore essential you stay ahead of the curve
and do not suffer simply because changes have
passed you by.
This is because tax planning is increasingly important
with larger portfolios. People are often not aware
of changes in relation to tax, and it can be difficult
to actively manage tax on an ongoing basis. As a
consequence, individuals may pay more tax than
they are required to - and this can have a huge
impact on high-net-worth individuals.
Through effective tax planning, you can ensure you
keep on top of regulatory change and do not pay
more than you are required. Income tax, inheritance
tax and capital gains tax each have their own
intricacies, and people will often need assistance to
safely navigate these murky waters.
Tax mitigation strategy
Investment portfolio tax planning
Tax planning with regard to investment portfolios
is an often-overlooked area of financial advice.
However, we feel it is essential this gap is plugged especially when it comes to high-net-worth clients.
A simple tax mitigation strategy, flexible enough to
deal with change, can help you stay one step ahead,
ensuring tax continues to work for and not against
you. It is important to use the right tax wrapper
best suited to your needs. Indeed, there are various
tax wrappers compatible with larger portfolios.
By selecting the right tax wrapper for the right
investment, you can go a long way to ensuring your
tax planning delivers the best results.
08
The Importance Of:
Intergenerational and Inheritance Tax Planning
Intergenerational planning
While you, as an empty nester, may no longer
provide for your children on a daily basis, you may
want to continue helping them in other ways.
For high-net-worth individuals, this might mean
offering them a loan, or even simply giving them
money. While this might sound simple enough,
there are various things to consider, such as whether
a loan might be best defined as a gift, or whether
gifts are susceptible to inheritance tax. This is why
intergenerational planning is an important part of
any empty nester’s financial plan.
inheritance. Many of us are living longer, which
means our children are receiving their inheritances
at an older age. By giving them a gift, you can better
plan when they will receive, and use, the money.
This could be when they are planning to start or
extend their family, or when looking to move house,
for example. For more information on how to help
your children with financial support at the right time,
read our article - Beat the barriers to helping your
children - in our equinox magazine.
Inheritance tax planning
It is not uncommon for parents to be asked for, or
to offer, a loan to their children. However, to do this
effectively you should consider whether defining this
as a gift might be more beneficial - if, for inheritance
tax purposes, you are hoping to reduce your estate
value, for example. If not, ensure that agreements
are in place regarding repayments and rates of
interest.
It is never too early to think about matters such as
inheritance, and a strong financial plan gives you the
peace of mind that everything is falling into place.
Leaving a sizable inheritance to family, friends or
an organisation of your choice is something we all
hope to do. It makes sense that the money you have
accumulated throughout your life should be passed
on to whomever you wish, giving them the best
chance of making the most of their own life.
By planning for these events properly, not only
can you ensure everything runs smoothly, but
that everyone involved gets the desired outcome.
For instance, it can be far more beneficial for your
children to receive money as a gift rather than as
However, inheritance tax is something that can
make a serious dent in the amount you leave to your
beneficiaries - so it is important you minimise the
loss through effective inheritance tax planning.
09
Asset allocation
Because inheritance tax is only due if your estate
(which may include assets held in trusts and gifts
made within seven years of death) is valued above
the current inheritance tax threshold of £325,000,
and sits at a rate of 40%, it is imperative high-networth individuals can plan how best to allocate their
assets.
By moving assets both at the right time and in the
right way, you can reduce the amount of money you
waste through inheritance tax. We recommend you
consider an inheritance tax plan sooner rather than
later, ensuring you are able to allocate your assets as
you wish.
Effective inheritance tax planning and
giving to charity
With these calculations made, you can enjoy greater
peace of mind that your affairs will be managed
comprehensively upon death.
To whom you wish to offer gifts is another major
consideration. As well as, or instead of, family
members, you may be keen to support a charity or
political cause. Indeed, you can stand to reduce your
inheritance tax bill by giving to charity. If you leave
10% of your taxable estate to charity, the tax paid
may be at a reduced rate- 36% instead of 40%.
This is because any gifts made to a qualifying charity
are exempt from inheritance tax, and if you leave
at least 10% of the net value of your estate to
such a charity - which is the sum of all assets after
debts, exemptions, reliefs, liabilities and the nil-rate
band have been deducted - you can qualify for the
reduced rate.
It is important that calculations are made to ensure
the value of your estate, and the subsequent
inheritance tax levied on it, is correct.
10
How Equilibrium Can Help
For high-net-worth empty nesters, effective wealth
management organised through a sound financial
plan is a great way to ensure you make the most of
your assets. This is an important stage of your life,
and with your children now making their own way
in life, you have an opportunity to concentrate on
protecting and increasing your assets. This guide
has shown that, as a high-net-worth individual, you
need to think a little differently when putting your
financial plan together. There is no one-size-fits-all
approach in wealth management - strategies must
be tailored to the individual, based on numerous
factors.
Among the main considerations are personality and
objectives. Your investments, for instance, are based
on your circumstances and the level of risk you are
comfortable with, while they must also meet your
goals. It is therefore important to devise a coherent
strategy with multiple factors in mind, such as
investment, tax planning, intergenerational planning
and inheritance planning. These are particularly
important for high-net-worth empty nesters, keen to
both safeguard what they already have and to and to
ensure assets are passed on correctly.
High-net-worth empty nesters tend to diversify
their investments and are more willing to take bigger
risks with them, for example. But it must be stressed
that every plan needs to be different, specifically
tailored to meet the needs of the individual.
Equilibrium recognises this, and we place great emphasis on
understanding our clients from the very outset of our journey
together. Our fact-finding exercises help us understand all we can
about our clients and we draw up our financial plans with their
significant input. From here, we help them make the right decisions,
with our experience and expertise complementing their personal
wants and needs.
Equilibrium Asset Management offers Restricted advice. Our investments are not like building society or bank deposit accounts,
as the capital value and any income can rise and fall and your capital is at risk. The tax treatment of investments depends on your
individual circumstances and may be subject to change in the future.
11
We can help you make the right decisions on investments, tax planning,
intergenerational planning, inheritance tax planning, and all other aspects of
wealth management. You know where you want to be - and we can help you
get there. But don’t just take our word for it, here’s what some of our clients
have to say:
“I was impressed with the way that Equilibrium Asset Management
explained how my portfolio had been managed over a twelve
month period”
- Mr Snook
“A personal but also very corporate service at Equilibrium.
Clear newsletters explaining strategy”
- Mr Thompson
Equilibrium Asset Management offers Restricted advice. Our investments are not like building society or bank deposit accounts, as the capital value
and any income can rise and fall and your capital is at risk. The tax treatment of investments depends on your individual circumstances and may be
subject to change in the future.
12
Head Office:
Equilibrium Asset Management LLP
Brooke Court
Lower Meadow Road
Handforth Dean
Wilmslow
Cheshire
SK9 3ND
Chester Office:
Equilibrium Asset Management LLP
19a Telford Court,
Chester Gates Business Park
Chester
CH1 6LT
t:
t:
e:
w:
+44 (0)161 486 2250
+44 (0)800 168 0748
[email protected]
www.eqllp.co.uk
Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium
Asset Management is entered on the Financial Services Register under reference 452261. The FCA regulates advice which we provide on investment
and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset
Management LLP. Not to be reproduced without permission.
13