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March 05, 2024 at 02:33 PM
What You Need to Know
- People who earn a lot become accustomed to spending a lot.
- Creating a holistic financial plan for the uber-wealthy can be challenging within today’s planning tools.
- Comprehensive approaches incorporate customized investments, retirement considerations and tax management.
Few universals in wealth management apply across the client spectrum, from the mass affluent to the super wealthy. In the experience of Anthony LaBrake, a CFP and wealth planning specialist at Element Pointe Family Office, cash flow management is one of them.
“It doesn’t matter whether a client has $100,000 in the bank or $100 million,” LaBrake says. “Without a clear view of their spending habits, people can get themselves in trouble.”
LaBrake made the point during a recent interview with ThinkAdvisor, during which he reflected on the upcoming anniversary of his move to Element Pointe from the subscription-based planning firm Facet. His focus at Element Pointe is serving the ultra-high-net-worth marketplace, but prior roles at Facet and other firms have given him insights that apply across the planning spectrum.
“At this point in my career I’ve kind of seen it all, and that mix of experience has been useful,” LaBrake explains. “Each marketplace is different and teaches you different lessons. With the mass affluent, for example, we are focused on what to do with the paycheck, and sometimes there’s some basic estate planning, but the big goal is, when and how can I retire?”
Within the UHNW context, planning looks different, with some exceptions.
“You’re trying to plan for much more complex opportunities and problems, but the biggest commonality is probably helping people measure their spending and ensure they aren’t overdoing it,” LaBrake said. “When we do a financial plan for a highly wealthy client, we sometimes see people being pretty shocked and surprised by their spending. I don’t think they’re ashamed, necessarily, but they are almost taken aback.”
Oddly enough, LaBrake said, this means one of the most highly valued services is helping UHNW clients set and stick to a budget — even though that’s not generally top-of-mind when they come in the door at Element Pointe.
Liquidity Questions and Cash Flow
People often come to Element Pointe after they have gone through a big liquidity event, LaBrake noted. Perhaps they sold a closely held business that was highly successful, or maybe they’ve signed a big new contract as a professional athlete. In other cases, the money may have been inherited or even won in a lawsuit or lottery.
“For these clients, the budget is so critical, because it’s about helping them make sure this money is going to last and support them,” he said. “Obviously, if you have an event like this and you’re in your 30s or 40s, we have to think a little differently than if you’re in your 60s.”
Often, people who generate a lump sum of money think they can spend it aimlessly.
“The truth is that this is almost never the case, especially when people are younger,” LaBrake warned. “You always have to sit down and do the math. Luckily, our clients recognize the importance of this kind of planning, and that’s why they come to work with us. Sometimes they tell us, ‘Nobody has ever pushed back on my spending before.’”
