Today's economy and society have become more complex than ever before, and we are entering an era in which the future is difficult to predict. Under these circumstances, in order to protect and steadily increase one's valuable assets, it is essential to have an asset management strategy based on a long-term perspective, rather than being swayed by short-term market fluctuations.
Especially for high net worth individuals who own a large number of assets, the existence of a trusted partner, or "long-term advisor," is extremely important in achieving sustainable growth of assets and smooth succession of assets from generation to generation.
However, advisors vary widely in their areas of expertise and approaches to clients. It is also true that there are advisors who pursue short-term profits and do not fully understand the wishes of their clients. In this article, we will explain the conditions for identifying a truly trustworthy "long-term advisor" from a professional perspective with specific examples based on our experience with many high-net-worth clients as INA&Associates, Inc.
In asset management, the selection of advisors is the cornerstone of success. Unfortunately, however, there is no end to the number of cases in which high net worth individuals fail in their choice of advisors, resulting in a significant loss of their assets. Here are three typical failure patterns that high-net-worth individuals tend to fall into.
Some advisors may prioritize suggesting products with high commissions as their own incentive over their clients' long-term interests. Be especially wary of advisors who recommend frequent trading. While buying and selling in response to short-term market trends may appear to be a profitable opportunity, the commissions incurred each time can cause assets to slip away in the long run.
Advisors have their own areas of expertise. For example, some advisors are strong in real estate, while others are well-versed in stock investments. However, if their knowledge is biased toward a particular area, they may lack the perspective to optimize the client's overall portfolio of assets. As a result, there is a risk that risk will be concentrated in certain assets, resulting in an asset mix that is vulnerable to market fluctuations.
It is dangerous to easily trust an advisor simply because he or she is an acquaintance you have known for many years or because he or she was introduced to you. Personal trust does not necessarily equate to professional competence. Due diligence from an objective perspective is essential in making investment decisions. You must be willing to calmly evaluate the advisor's track record and proposals without being caught up in sentimentality.
To avoid these patterns of failure, it is important not to rely on the advisor's proposals, but to always collect information from multiple perspectives and be aware that the final decision is yours.
A truly trustworthy long-term partner does more than simply sell financial products. They take a holistic view of their clients' assets and provide optimal solutions from a generational perspective. Here we explain the five conditions common to such advisors.
Asset management requires a wide range of knowledge, not only in financial products, but also in real estate, taxation, and legal matters. Reliable advisors have not only expertise in specific areas, but also a broad range of knowledge across these areas.
For example, when proposing a real estate investment, they should be able to provide comprehensive advice that takes into account not only the profitability of the property, but also future inheritance tax strategies and the tax-saving benefits of incorporation. For complex matters, it is also essential to have a network that enables the formation of an optimal team in cooperation with outside specialists such as lawyers and tax accountants.
It is extremely important to determine whether the advisor's proposal is truly in the client's best interest or not, and whether the advisor's own interests come first. A client-oriented advisor, like an IFA (Independent Financial Advisor), is not bound by the sales policies of a particular financial institution, but proposes the best products and services for the client from a neutral standpoint.
The transparency of their compensation structure and their ability to logically explain why their proposals are best for their clients are evidence of their high ethical standards.
Past performance is an important indicator of an advisor's ability. In particular, confirming how the advisor responded to market turmoil such as the Lehman Shock and Corona Shock and how it protected clients' assets is an effective way to judge the advisor's risk management capabilities.
Advisors with a proven track record are honest in disclosing not only their successes, but also their failures and analysis of the causes of those failures. This highly transparent attitude is the foundation of a long-term relationship of trust.
Wealth succession for high-net-worth individuals is not something that can be completed in a single generation. Long-term planning for children and grandchildren is essential. A good advisor will not only support the current owner's asset management, but also provide consulting on asset and business succession to the next generation.
For example, an advisor who can establish a comprehensive support system for the family's asset management, as in the case of a family office, can truly be a partner that transcends generations.
Many high-net-worth individuals are also business executives. Therefore, they are faced with issues related not only to their personal assets, but also to the growth and stability of their businesses as a whole. True partners go beyond mere asset management advice to help solve business issues from a manager's perspective.
For example, they must be able to provide strategic advice with an eye on the entire life cycle of a company, such as business expansion through M&A, investment in new businesses, or facilitating business succession. This is a high value-added service that is only possible because the advisors themselves have management experience or are deeply familiar with corporate management.
When choosing an advisor, determining whether their stance is short-term or long-term can greatly affect the future of your assets. It is important to clearly understand the differences between the two and choose a partner that meets your objectives. The table below compares the critical differences.
| Comparison Items | Short-term advisors | Long-term partner |
|---|---|---|
| Proposal Perspective | Selling products with high commissions, seeking profit based on short-term market fluctuations | Overall client life planning, intergenerational asset succession, business growth strategies |
| Relationship | Transaction-based relationship, limited communication | Companionship based on ongoing trust, regular reporting and dialogue |
| Disclosure | Limited, emphasis on product benefits | High transparency, honest disclosure of risks, disadvantages and cost structure |
| Scope of services | Limited to brokerage of specific financial products and real estate | Optimization of overall assets (financial assets, real estate, business succession, inheritance planning, etc.) |
| Remuneration Structure | Mainly based on commission per transaction (commission) | Commission based on the balance of assets under custody (fee) or consulting contract |
As this comparison shows, short-term advisors tend to focus on the "transaction" itself, while long-term partners focus on the "relationship" with their clients, helping them achieve their lifetime goals through overall asset optimization, is committed to being a "long-term partner" in the latter category, and we are committed to being there for each and every client's future.
Real estate often plays a central role in the asset portfolios of high-net-worth individuals. It is effective as part of a diversified investment portfolio because its price movements are different from those of financial assets such as stocks and bonds, and it can also be expected to function as an inflation hedge. In addition, stable rental income (income gain) provides a foundation for long-term asset building.
However, real estate investment is highly specialized, and analysis from multiple perspectives is essential for success. When selecting a property, you need to analyze not only superficial information such as location, building age, and yield, but also the market from a macro perspective, such as demographics of the area, redevelopment plans, and future projections of rental demand. In addition, without a long-term plan that considers post-purchase operations and management, exit strategies (sale), and even inheritance, there is a risk of incurring unexpected losses.
This is where the presence of a "long-term advisor" who is well versed in real estate investment is important. A trusted advisor does more than simply broker properties. Based on a deep understanding of your overall asset situation and life plan, we provide comprehensive support, including the following
| Support Contents | Specific actions |
|---|---|
| Investment strategy development | Based on the client's risk tolerance and target return, we propose the most appropriate property type (residential, office, retail, etc.), area, and investment size. |
| Property due diligence | We provide objective reports by thoroughly investigating legal and tax risks, physical building conditions (legal compliance, repair history, etc.) as well as profitability simulations. |
| Fund Procurement and Corporate Utilization | We support negotiations with financial institutions to procure financing on favorable terms. We also propose schemes for tax reduction and asset succession through the establishment and utilization of asset management companies. |
| Operational Management and Exit Strategies | We accompany our clients from a long-term perspective, from the selection of a property management company after purchase, to exit strategies such as selling the property at the optimum timing or reorganizing it. |
Purchasing a property is not the goal of real estate investment. Rather, it is the start of long-term management. That is why a partner who will accompany you not only for immediate profit, but also for the next 10 to 20 years and even for the next generation will make the difference between success and failure.
In this article, we have explained the conditions for a "long-term advisor," which are essential for high-net-worth individuals to protect their assets and to connect them to the future. What is important is to identify a true partner who can look at your entire assets and your entire life and walk with you, without being distracted by short-term gains or immediate tax benefits.
A trusted advisor combines a high level of professionalism and client-oriented ethics, and provides transparent information backed by a long-term track record. And they are committed to achieving each client's goals with intergenerational support andthe ability to solve problems from a management perspective.
Choosing an advisor is nothing less than choosing your own future. We encourage you to interview multiple advisors and carefully determine whether their values and goals align with your own, based on the perspectives presented in this article.
INA&Associates Inc. will do its utmost to support your long-term asset building as an asset management professional with a focus on real estate. The initial consultation is free of charge, so please feel free to discuss your vision and concerns with us. We sincerely hope that we can be your partner to whom you can entrust your future.
Q1. How can I confirm the advisor's fee structure?
A1. Please be sure to ask for a written explanation of the compensation structure at the initial meeting. It is important to confirm the specific structure, such as whether it is commission-based, fee-based, or a combination of both. Also, ask for a transparent explanation of the breakdown of commissions received by the advisor for the proposed financial product or real estate transaction.
Q2. What should I be aware of when consulting with an advisor for the first time?
A2. We recommend that you organize your asset situation, future goals, and attitude toward risk in advance. You do not need to provide specific information, but by communicating your thoughts, the advisor will be able to make more precise proposals. Also, the key to avoiding failure is to interview several advisors and compare their proposals and compatibility, rather than focusing on one advisor from the beginning.
Q3. When should I seek a second opinion?
A3. The time to seek a second opinion is when you have even the slightest doubt about your current advisor's proposal, or when you feel that you want an objective opinion that looks at your assets as a whole. In particular, it is extremely effective to obtain the opinion of another expert before making a decision of a large amount of money, such as the purchase of real estate or the succession of a business. By obtaining advice from a different point of view, you will be able to make a more convincing decision.