Financial Strategies the Ultra-Wealthy Use
By Brian Famigletti, Managing Director & Head of Marketing
Ultra-Wealth, On the Rise
If you feel like there are a lot more ultra-wealthy people in the world these days, you’re not wrong.
According to Capgemini, the number of people with $30 million or more — officially termed ultrahigh net-worth individuals or “UHNWIs” in the wealth industry — leapt 28% from 2016 to 2023. Tech innovation and wealth transfer have much to do with the rise of ultra-wealthy beneficiaries, entrepreneurs, and senior executives.
Related reading: What the Multi-Trillion Wealth Transfer Means for Markets and the Economy
But windfalls and inheritances aren’t the whole story. UHNWIs have created generational wealth by following several borrowing and tax-saving strategies that have stood the test of time. Here are some of the tactics UHNWIs use to build and protect their wealth.
Rethink Borrowing
It’s a common practice in the world of personal finance to pay down debts and slowly build an asset base. But ultrahigh net-worth individuals rethink this norm.
These individuals have built a level of wealth based on borrowing to build their asset base and used their assets as collateral to take out cost-effective loans and buy more assets tax-efficiently.
Many billionaires use a combination of intricate tax strategies to reduce their tax costs as they continue to tap into their wealth to borrow and buy more assets. The basic principle behind this strategy is to reduce borrowing costs and taxes so that the cost of adding assets is lower than the rate the assets appreciate.
For example, if your stock portfolio is large enough, you may be able to take out a Securities Backed Line of Credit (SBLOC). This kind of loan allows you to tap into the value of your portfolio without having to sell off any assets and pay capital gains tax in the process. These loans are also less expensive than standard loans because you have collateralized them with your securities.
Investing Ingenuity
UHNWIs also utilize some key investing strategies to build their wealth. Historically, many have used alternative assets wrapped in closed-end funds to boost their portfolio returns.
Additionally, ultra-wealthy investors have learned to tune out the day-to-day noise of public markets and focus on the economic undercurrents that drive institutional investment decisions.
Major economic indicators like GDP, employment rates, consumer spending, monthly payroll numbers, inflation, and government deficits often dictate the direction of monetary and fiscal policies that can rock markets or fuel geopolitical strains. Ultra-wealthy individuals keep abreast of these indicators while tending to tune out the short-term trends chased by some retail investors.
Through these strategies, UHNWIs are able to build net worth, keep more of what they make, and preserve generational wealth for their children. Are you interested in learning more about how to protect and grow wealth? The advisors at Griffin Asset Management can help you implement these strategies.
Sources:
Forbes: Strategies Ultrahigh Net Worth Individuals Use To Build And Keep Their Wealth
U.S Bank: What is tax loss harvesting?
CNBC: How to claim the mortgage interest deduction
Equifund: Buy, Borrow, Die: How to Get Richer & Avoid Taxes Like Billionaires
SmartAsset: How to Use Debt to Build Wealth
Bankrate: What is a hurdle rate?
Dominion: 5 Strategies the Wealthy Use to Grow their Fortunes
State Street: The rise of private credit: A new frontier for investors
AAM: The Rise of Private Credit
TheStreet: What Is an Accredited Investor? Definition, Privileges & Requirements
