Most wealthy families are making at least one six-figure mistake… and they don’t even know it.
Most successful families don’t have a money problem. They have a coordination problem. What we hear in meetings isn’t “what stock should I buy?”
It’s questions like:
- Are we doing this right?
- Are we missing something?
- Do we actually have enough?
So today, I’m walking through 10 real questions we hear from high-net-worth families and giving you some straight answers.
QUESTION 1:
Are we paying more in taxes than we should be?
Short answer: Probably.
Not because your CPA isn’t good. Most are very good. But many are looking in the rearview mirror. They’re reporting what happened last year when opportunity is in what you do next year.
For example:
Two families want to sell the same $1 million position that they have held over a year and has a $900,000 gain. One does it all at once and writes a massive check for capital gains taxes.
The other spreads the sale over multiple years, pairs it with losses, and layers in some charitable giving.
Same assets. Same gain. Very different tax bill.
QUESTION 2:
Do we actually have enough?
This is the question behind almost every other question and guess what? Net worth doesn’t answer it.
You have to map out spending, inflation, healthcare, taxes, and longevity, and then stress-test it. See if the plan holds up to bad markets, interest rate changes, emergency health issues, inflation changes, tax law changes, and future changes to social security.
It is very important to account for all of these contingencies. By planning for and anticipating these risks, you can potentially increase the probability that your plan will hold up.
QUESTION 3:
Should we be doing Roth conversions?
This one is everywhere now and it is not as simple as it seems. Of course, we want money in accounts that offer tax-free distributions, but If you are already in a high bracket, converting aggressively just means paying more tax today.
The opportunity is in lower-income years before your required minimum distributions begin and also in years where the markets are lower. Lower balances mean lower cost to convert.
QUESTION 4:
What is the biggest mistake you see people like us make?
Running everything in silos:
- Investment portfolios over here
- 401k Plan over there
- CPA doing their thing and calling you once a year for your 1099s
- ROTH you opened up at the bank
- Life insurance your brother-in-law sold you 20 years ago
- Estate planning documents sitting in a binder since the kids were in middle school.
And nobody is coordinating any of it. Complexity doesn’t hurt you, but lack of coordination does.
QUESTION 5:
How much risk should we take?
Most people default to age-based risk advice. Basically, that is taking your age and allocating that percentage of your portfolio to fixed income and the remainder to equities. That’s a shortcut and a lazy one at that. (And it explains the proliferation of target date funds in 401ks).
Risk should be aligned with PURPOSE.
For example: money you need for a wedding next year…no need to risk getting your daughter married on the cheap. Money needed for retirement in 20 years from now? That can absorb more volatility.
When you separate those buckets, everything gets clearer and you can manage risk better. Don't chase returns or run from them. Start aligning risk with actual goals.
QUESTION 6:
Should we pay off our mortgage or keep investing?
Everyone wants a clean answer and there isn’t one. If you rate is low enough, investing often wins the math. But math isn’t the whole story.
- Overall liquidity matters.
- Flexibility matters.
- Some people value being debt free more than squeezing out extra return.
The right answer depends on your full picture, so the best answer on paper may not be the best answer for you.
QUESTION 7:
Do we still need life insurance?
At higher net worth levels, the purpose for life insurance can shift. While It CAN be about income replacement for a high wage earner, it more often is about solving specific problems like:
- Estate taxes
- Liquidity problems
- Equalizing inheritances
- Creating a legacy
So, if your life insurance doesn’t have a specific job, you may not really need it.
QUESTION 8:
How do we prepare the kids for wealth without spoiling them?
People do worry about this one a lot because we have all seen the horror stories of trust fund kids wrecking mom's and dad's hard work while attempting to become Instagram stars.
So, when do we recommend doing it? Sooner than you think. And don’t start with numbers...start with involvement.
- Let them see the decisions.
- Let them understand the tradeoffs.
- Teach them the values and the judgement, not just information.
Wealth without that context tends to disappear.
QUESTION 9:
What should we do before meeting with an estate attorney?
Most people think Estate Planning is just about documents. While paperwork IS a big part of it, it’s more about getting a clear picture.
- Who do you want to benefit?
- How much control do you want?
- What are you really worried about?
Family dynamics matter so much more than legal structure. Have a clear picture of what you want to happen when you are gone, and, in the end, the documents should reflect that.
QUESTION 10:
How do you know if your advisor is adding value?
If the answer is just investment performance, then that’s just not enough. Investment returns are cheap. Markets, as we have seen lately, go up and down. You can't expect the advisor to make your Apple go up if everyone else's is going down.
A good advisor's value shows up:
In decisions.
In tax strategy.
In avoiding mistakes.
In coordinating everything.
In being there during the good times AND the bad.
In giving you the confidence and understanding in a plan that you deserve.
In Summary
If you’re asking these questions, you’re ahead of most people. If you don’t have clear answers, that’s fixable. That’s the whole point of good planning.
If you or someone you know needs some clarity, please reach out to us at info@fredericawealth.com or click on any of the CONTACT US bottons on this website.