Thanks to their substantial resources, UHNWIs have several advantages when it comes to assessing risks, including the ability to:
- avoid day-to-day financial pressures and focus on building long-term value rather than short-term gains, and
- build a strong support network of financial advisors, wealth managers, and other professionals for expert guidance and assistance.
Even so, UHNWIs cannot fully leverage these advantages without a strong foundation of:
01 Self-knowledge
While the term “ego” often carries negative connotations, it serves a crucial function in human psychology. For example, a healthy ego can help UHNWIs set personal boundaries, assert independence, and exercise resilience.
An unhealthy ego, however, can cloud judgement and prevent risks from being identified, let alone calculated. A track record of wealth-building can make it easy to form an inflated sense of infallibility.
Your Wealth, Our Priority: Altoo's Consolidation Power, Secure Document Management, and Seamless Stakeholder Sharing for High Net Worth Individuals. Preview Platform.
One of billionaire investor Ray Dalio’s principles is to “understand your ego barrier.” Dalio identifies the “need to be important and the fear of not mattering” as barriers to the conscious awareness of decision making and the application of logic and reasoning.
Judging from the diversity of the asset portfolios they typically hold, many UHNWIs rationally understand that not all investment decisions will be standout winners. UHNWIs will do well to remember, however, that an unhealthy ego can be particularly problematic when it comes to lifestyle choices.
Among the ultra-wealthy, it is all too common to encounter pressure to spend extravagantly to maintain appearances. In many ways this pressure is itself a risk, and managing it starts with knowing oneself. Rational UHNWIs make lifestyle spending decisions based on what will meaningfully improve their own lives and portfolios, not on what they believe to be other people’s opinions.
02 High-quality, up-to-date information
As mentioned earlier, a high degree of diversification is a hallmark of UHNWIs’ investment portfolios.
Steering well-diversified portfolios towards growth involves an ongoing stream of calculated decisions to buy or sell individual assets based on multiple factors like allocation targets and performance.
It’s no surprise that calculated financial decisions are only as accurate as the financial information on which they are based.
What may be surprising, however, is how much advanced technology can speed up the process of obtaining and presenting up-to-date information across even the most diversified portfolios.
For instance, solutions like the Altoo Wealth Platform can automatically aggregate data on equity prices, account balances, and more from all institutions with which a UHNWI works. The platform analyses and visualises this data to provide actionable insights in a fraction of the time it would have taken a person or even a team of people. Additionally, the platform enables wealth owners to view real estate holdings and collectibles in one place, ensuring a comprehensive visibility of their portfolios from every angle.
03 Strong relationships with stakeholders
The larger and more diverse a UHNWI’s portfolio, the more wealth stakeholders they are likely to have.
UHNWIs tend to maintain relationships with multiple professionals, lawyers, and other advisors to aid in taking calculated risks. More importantly, UHNWIs consider future heirs, often even those not yet born, when calculating wealth risks. The highly individualised risks associated with preserving wealth over multiple generations are among the most challenging to identify and manage.
Strong relationships play a crucial role here. Advisors who fully understand a UHNWI’s goals and have full access to all relevant information can provide superior guidance. And building strong connections with heirs is essential for instilling values and principles that will guide future decisions for years to come.
While face-to-face interactions are ideal for building relationships, UHNWIs should not overlook the significant complementary benefits technology can bring in today’s age. Digital communication tools can speed up routine professional workflows, especially when advisors have necessary files and analysis at their fingertips. Also, Millennial and Gen X heirs often cannot imagine handling any aspect of their lives – including stepping into the role of a wealth steward – without the help of easy-to-use digital tools.
The Altoo Wealth Platform therefore features highly secure digital messaging and file storage options to help UHNWIs and their stakeholders take a modern approach to relationship building. Access to messages and files can be enabled on a need-to-know basis, ensuring that information is shared only where and when it should be.
Takeaway
Successfully taking calculated risks starts with building insightful relationships with people – including oneself. Advanced technology can be an invaluable ally in the process, and the Altoo Wealth Platform is designed to be exactly that. Please get in touch to learn more!
We think you might like
