5 Threats Wealthy Investors Face and How to Overcome Them

Wealthy investors have many of the same fears as everyone else, the stakes are just higher when you’re rich. This post describes five common threats wealthy investors face and how to combat them.

Cybersecurity

We live in a world of many passwords and we share information with our professional advisors and bankers through e-mail and online portals constantly. This means there are situations where your personal information is exposed.

The first step to protecting your privacy from such threats is implementing a process for managing information. This means creating standards about how to receive, document, store, and share your information.

It starts with managing physical documents including time stamping, scanning to shared drive, and filing all physical mail. If mail arrives at your home address (statements, bills, etc), consider forwarding it to your family office or another secure location (such as a mailbox service designed for this purpose).

Especially if you spend part of the year at your vacation home or travelling, securing your mail is critical.

Make as much correspondence digital as practical. This means electing to receive investment statements, CRA correspondence, and bills electronically rather than by mail.

When mail is received, scan physical documents and save them to a shared drive. Your shared drive should have customized accessibility for family members and your professional advisors.

Develop a Standard Process

Develop a process to manage your online passwords. This can include a password protected spreadsheet within a folder on your shared drive, a password storage app, and a paper backup copy of core passwords stored in your safety deposit box or at your lawyer’s office.

Consider backing up all your digital documents onto an encrypted USB stick.

Create a digital will that contains instructions on how to access your social media profiles, e-mail accounts, your phone, and your online banking for your executors and heirs.

Avoid phishing by NEVER responding to or clicking on a link from an inbound e-mail. When you receive a phone call, NEVER disclose any information about yourself (don’t even confirm your identity). When you receive e-mails and phone calls from your service providers, obtain their contact information from their own website (search on Google to obtain) or use their contact info from your own records instead of using the contact information contained in a correspondence you receive.

Markdale Financial Management can conduct a cybersecurity audit for you and design an information management process for you and your family to follow. Our audit will identify gaps and vulnerabilities in your current methods and make recommendations to close those gaps.

Taxes

The threats with taxes is a big risk for wealthy investors. Finding ways to reduce tax is one threat and finding ways to reduce administration is another.

Consider the raw amount of taxes you need to pay. Your family office, accountant, and your lawyer should be working together as a team to regularly review your tax plans and suggest new ways for you to decrease the amount of taxes you pay. Your family office should be coordinating at least an annual tax review with your accountant to bring new ideas to the table.

Consider the complexity of filing taxes including the documentation required. Your bookkeeping and document management systems should work to overcome this threat.

Your family office should be suggesting strategies and implementing document management systems to combat administrative burden. When you field recommendations from your family office, accountant, and lawyer, keep complexity in mind. Consider strategies that reduce the ongoing administrative burden that certain tax strategies might add and weigh those costs against the potential tax savings.

Certain estate, trust, and corporate structures put in place to avoid taxes are difficult if not impossible to unwind. Some strategies used to reduce taxes can also add significant administrative burdens to future generations.

Health

A major change in your health and the health of the most important people in your life is another major threat. Oftentimes we focus on the security of the numbers in our financial lives without making strategies to secure our physical health.

Clearing our mind will support better financial decisions.

Daily exercise and healthy eating habits support a clear mind. Especially as we age, healthy eating and exercise habits become ever more important. Make health a priority.

Property Damage & Security

Many wealthy investors own their own home plus a vacation property such as a cottage. So, implementing a property maintenance schedule will help you avoid “surprise” time sucking repairs on your properties. If you’d rather not spend your own time doing property maintenance, then work with a property manager or use your family office to supervise or co-ordinate your property’s maintenance.

Your family office can co-ordinate maintenance and repairs on your properties to ensure you live in a safe environment. This includes security systems that protect you and your family from physical threats.

Our family office will perform an audit of your properties and design maintenance schedules which will include an assessment of the security risks at your homes.

Relationships

As the financial stakes become higher, the risk of relationship breakdown becomes a bigger threat to our financial security.

Our spouse and family are our most important relationships, but we also need to consider the risks from the relationships we make with our professional advisors. Investing time and effort into our spouse, kids, family and friends is an important way to support our mental health and the mental health of the most important people in our lives.

We should also invest time building strong relationships with our professional advisors. This means spending time with your family office team members, your accountant, your lawyer and getting to know your bankers. If you treat people like a commodity you’re paying for, they will treat you the same way.

Just as you would treat your employees with respect and invest in their growth and development, you should also invest in your team of professional advisors to foster trusting long term relationships. Doing so will create more stability in your financial life and help you get the best service and advice from those who serve you.

Family Office Advantage

Protecting your wealth from threats can become a business process like any other. The job of your family office is to do the tasks that your lawyer, accountant, investment advisors, and bankers cannot do. This means your family office can conduct cybersecurity audits and design processes to protect your digital security. Your family office can help you reduce the risks of tax compliance, reduce your administrative burden, and assist you to support the maintenance of your properties.

What makes our service unique is we will actually listen to you and learn about the threats that you consider the most important and then focus on those things that are most important to you.