One of the best plans to take from the financial playbook of the Super Rich—those with a net worth of $500 million or more—is to work with professionals to help manage your financial and lifestyle concerns. 

But, as the Super Rich know, you can’t stop there. We also need to regularly assess whether the financial advice we get—and the financial solutions we rely on—are truly up to snuff. 

The Super Rich regularly take this step, and so should you. One reason: As your circumstances or the world around you changes, the solutions you have in place may no longer be optimal for your needs. “Life happens,” as they say—and strategies that were ideal for you a decade ago might be in need of revision. 

That’s where a technique known as stress testing can make a big difference. 

From piecemeal to comprehensive 

A stress test can help you see whether the wealth management solutions you are using are not only in alignment with your goals and objectives but also appropriately state-of-the-art. Stress testing is a systematic way to determine how your wealth management solutions are likely to hold up under different scenarios—and ultimately deliver the results you expect. 

There are two main reasons why the Super Rich regularly conduct stress tests: 

•    To avoid potentially destructive economic and legal situations.
•    To ensure they are benefiting from all possible opportunities. 

One big reason why your wealth planning efforts may need fine-tuning (or possibly more) is that far too many investors do piecemeal planning. That means they address one concern without considering their more significant situation. Then, maybe two years later, they address another consideration—again without factoring in other aspects of their financial lives. 

Often, that results in little to no coordination among the various professionals helping them and little to no coordination among the different financial solutions or strategies they implement. Because of the fragmented and disjointed way that a plan was developed, it may not be setup in the best way to succeed.  

Stress testing allows people and families to look at their situation holistically to see whether they’re addressing the goals and objectives and using the most appropriate, cost-effective and up-to-date strategies and solutions. 

The good news: The overall trend of democratization in financial services—which has brought once-exclusive solutions to more investors—is also bringing stress testing to a larger audience.

A good time to consider a stress test on your finances is whenever you are not sure you are using the best available wealth management solutions—and, as a result, you are concerned that:

•    Your wealth plan may have errors.
•    There may be opportunities to improve your plan may be missing.

By stress testing your plan or specific aspects of it, you can potentially confirm that you are on target—or identify corrections that will put you on the right track toward the end results you most want to achieve.

We suggest the following steps to help ensure a high-quality professional is doing a stress test. 

1.    Seek out professionals who can clearly explain the process of stress testing and its value. 

It’s a good sign when a financial professional can explain stress testing—the value it can bring and the reasons for doing a stress test in the first place. For starters, stress testing is not about being sold services or products, nor is it going to always result in making any changes to the current wealth plan. 

Instead, think of stress testing more like an annual physical checkup. You may not have any medical concerns going into the appointment, but you show up because you want to ensure the doctor uncovers any unidentified or hidden problems. That way, you can take steps before the problems become serious. 

2.    Work with professionals who focus on the human element. 

The purpose of stress testing is to help you see if that strategy is still best suited for you based on your needs, wants and preferences. Therefore, a stress test has to take into account important personal and even emotional traits to be effective. This human element is vital in ensuring you are getting the desired wealth management results—and that those results are within the parameters you establish. 

That means the professional who does the stress test must have a deep understanding of you—including your goals and values as a person, not just your net worth. Such an understanding takes some time to develop and often relies on individuals sharing their concerns as well as their hopes and wishes. The professionals who employ systematic processes to develop insights into their clients and are able to “connect the dots” based on these insights will be best able to consistently create significant advantages for their clients through stress testing.

3. Work with professionals who are highly technically proficient. 

Although the human element takes center stage, it won’t do much good if the person doing the stress test can’t expertly evaluate your current wealth solutions or ones that potentially could be a good fit for you. 

A highly proficient professional can evaluate sophisticated and complex wealth management solutions to see if they are working as expected and are not in any way skirting laws or regulations. He or she will also be knowledgeable about alternative strategies and products and be able to bring in specialists if needed to evaluate current strategies and potential alternatives that may be superior.

Keven Prather specializes in serving the needs of business owners through Financial and Business Transition/Exit Planning. Keven uses a Total Wealth Planning approach to complex issue managing by collaborating with business owners and their partners. Article prepared by VFO Inner Circle for use by Keven Prather. Keven can be reached at (216) 592-7314, kprather@financialguide.com, or www.TransitioNextAdvisors.com. Keven is a registered representative of and offers securities and investment advisory services through MML Investors Services LLC. Member SIPC. Supervisory Office: 1956 Carter Rd., Suite 200, Cleveland, Ohio 44113. (216) 621-5680. For more information: https://www.hvacrbusiness.com/staff/keven-prather/.