10/23/2015
Risk Management Strategies and Outcomes: Protecting, Preserving, and Growing Your Wealth

Risk Management Strategies and Outcomes: Protecting, Preserving, and Growing Your Wealth

As the saying goes, nothing in life is certain — and that applies doubly when it comes to finances. Taking controlled risks is a vital part of both growing and maintaining financial health. Here at OptiFour, our job is to holistically manage risk throughout our client’s financial lifetimes. Read on for a preview of the art and science of our risk management process.

What Responsible Risk Management Starts With

Any effective risk manager — whether they’re working for an individual client or as a financial advisor to a 401(k) plan — begins with a two-tiered plan of wealth accumulation and wealth preservation. Ideally, these two strategies can feed into one another, creating critical mass for financial success.

The first step is assessing the client’s current portfolio, investment objective, time horizon, goals, and tolerance for risk. Holistic risk management does not just look at investment risks, it incorporates financial planning risks, estate and mortality risk, and tax risk. Only with this kind of exhaustive preparation and analysis are we able to plan for potential future events. Clients with children, for example, need to determine future college goals and costs and develop a plan to achieve them that minimizes the chance of a shortfall. With wealth managers like those at OptiFour, everything is taken into account. It’s the only way to measure risk and reward.

Proactivity is Key

Accumulating wealth for future goals is the cornerstone of any financial plan. However, building up this wealth is not as easy as it sounds. It requires diversification not only by asset class, a process called asset allocation, but also diversification by account type, called tax diversification, which locates the most tax-efficient investments in taxable accounts and the less tax efficient ones in tax-deferred accounts, like IRAs. Giving thought to these types of allocations can give portfolios a better chance of achieving long-term profitability. Concentrated stock holdings are a little trickier, but the professionals at OptiFour know how to manage concentrated stock positions by developing a plan to diversify single stock risk in a tax-efficient manner. For some investors with vesting stock options, filing an 83(b) election can be a good option. If it fits your circumstances, it could protect your assets against a liquidity event and see them taxed at the at-grant value.

Protection, Growth, and Thinking Ahead

Of course, evaluating the blind spots in portfolios and retirements plans is just the beginning. A good risk management strategy is one that allows for evolution and change as new opportunities arise. It’s a full-time job, to be sure, and most high-net-worth individuals are simply too busy to give their assets the attention they deserve. For a range of financial services from competent, dedicated professionals contact OptiFour or visit our homepage to find out more about our integrated wealth management solutions.

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