Asset Allocation Across Net-Wealth Tiers

Some interesting insights from the Federal Reserve Survey of Consumer Finances continue to come up repeatedly as private high wealth groups consider their asset allocation and how they fare against their peers.


It is understood this data is sourced within the US and does not take into consideration any geopolitical factors nor financial cultural factors that may differ in the Asia Pacific regions. Nonetheless they offer some form of a benchmark in considering the strategies clients use to spread risk, and the tax risks that follow based on their asset classes. This is particularly important for budding high wealth groups who are looking for a portfolio of green growth with minimal tax risks in their early journey.


Traditional private high wealth groups in Asia are often concerned of succession planning and adequacy of family succession in the next generation who will take the lead. Hence, they often require them to prove themselves before acceding to high responsibility levels.


For high wealth groups with these traditional financial values, is also important that they understand what assets generally make up wealth within each net wealth tier as they climb up in their net wealth through a fast-track route to the head of with familial help.




The net wealth in the chart above considers any wealth, net of loans. Hence if anyone as assets worth millions and commensurate levels of debt, it is likely their net worth may be in the lower tiers in the above chart, even if they have high earnings.


Key Observations


The results are as expected, that lower net-wealth tiers have a higher proportion of their wealth tied up in liquid assets, their primary residence, pensions, and life insurance. These are all assets that provide zero to marginal growth in wealth, but have relatively high maintenance or holding costs.


On the other hand, the higher the net-wealth tier, the more diversified their assets are. One common trait is that most of their asset classes are income producing, while having significant scope for capital appreciation.


The ultra-wealthy have a major risk appetite for having direct investments in stocks as well as business interests. While this may surprise the risk-averse, this trend is validated for investments in businesses in industries they live and breathe, which they know inside out and are comfortable with assuming risks while putting their intellect to fruition.


The main conservative asset classes are allocated in a way that could preserve their lifestyle if there were any major downturn to their business interests.


The key legacy question:


A key question older high wealth figureheads tend to ask budding successors:

"How would you conserve your position so that if you lost your business interests tomorrow, it hurts enough to learn the lesson, but not enough to break you?"




Here’s how advisors can help

  1. Validate tax strategy across asset protection

  2. Validate succession planning tax efficiency on a national and international level

  3. Validate international disclosure requirements for foreign interests.

  4. Tax modelling for future contingent wealth balancing strategies.