3 Best Things To Consider Before A Liquidity Event

HNWIs have unique opportunities in life – they also face unique challenges. While most people struggle to acquire enough money to enjoy their time during retirement, HNWIs face a different challenge – knowing what to do with their money and time after a liquidity event.

Here are some of the questions and issues I raise with client’s in planning for a large exit and the accompanying changes to their lives.  

Money

In my experience, HNWIs have a great ability to see business moves that will make them great fortunes. However, some struggle to change gears and adopt a mentality more focused on wealth preservation.

What investment strategy will help preserve your wealth?

What currency will your assets be denominated in?

What asset classes will you hold and in what percentages?

What will be your investing goals?

What kind of returns will you be looking for?

Will you feel comfortable being an angel investor and not running the show?

Do you have financial and investment advisors that understand your goals and can help you achieve them?

These questions and many more should be given serious consideration before the money is in the bank.

Time

A surprising number of HNWIs fail to give serious thought as to how they will spend their time after stepping back from a business. They share a common trait – business is their primary (sometimes only) interest.

HNWIs with hobbies and non-business-related interests generally have no problem finding ways to spend their time. They create non-monetary goals to pursue for the novelty of the challenge and rewards involved. Their hobbies help them stay mentally engaged.

Of course, there’s nothing wrong with having business as your first passion in life. But this mindset can present unique challenges with respect to preserving your wealth and enjoying your life.

Dangerous Combination

Idle hands and a large influx of cash tend to fuel the often-dangerous temptation to “do something” which can lead to poor investment decisions.

Some HNWIs make investments in projects despite having little to no experience in that sector or business model – like commercial real estate projects for example. They ignore sound advice and red flags about certain financial advisors and entrepreneurs looking to raise capital.

I’ve witnessed several individuals rush into an investment deal or professional relationship only to be swindled out of eight-figure sums.

Talking through your options and coming up with a plan (even if it’s a generic one) before cash hits your account can prevent serious missteps and miscalculations.

Need Help With Your Next Big Move?

I cannot tell you what investments to make. I don’t know how you can best enjoy your time.

But I can help you talk through your options and hopefully avoid some traps I’ve seen ensnare other HNWIs after a liquidity event.

If you’d like to discuss your tax and wealth planning, you can contact us here.

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