The Importance of a Wealth Planning Strategy
Wealth planning can help protect the wealth you’ve worked hard to accumulate, setting you up for a secure and sustainable future.
Updated 
8 min. read
While we can never be sure exactly what the future has in store, it’s safe to say that it will come with financial decisions to make and expenses to manage. As such, a carefully planned wealth management strategy can help you navigate change and ensure you’ll always have the funds you need to maintain the lifestyle you’ve worked so hard for.
Developing a strategy, especially with the guidance of wealth management professionals, can help address key questions around retirement planning, transferring assets to younger generations, and business succession.
What is wealth planning?
Wealth planning is an ongoing process geared toward protecting the wealth you’ve generated through all stages of life. In a nutshell, the objective is to take a holistic look at your current finances and align them with your long-term goals.
You can think of wealth planning as an umbrella term for a number of financial processes, including:
- Investment planning
- Tax planning
- Retirement planning
- Business succession planning
- Legacy Planning
Why is wealth planning important?
Unlike general financial planning, which often focuses on budgeting for short-term goals or specific purchases, wealth management takes a much broader approach that can be passed down to future generations.
Given the financial complexity and investment patterns of high-net-worth individuals and families in today’s digital, global environment, a solid wealth management strategy is more important than ever. For those with diverse income streams, shifting family structures, and international assets, it’s essential.
The value of wealth planning and why wealth needs a strategy
When you've given it your all to grow your assets, build a business, or raise a family, the last thing you want is to watch it fall away due to a lack of planning. A comprehensive wealth plan takes it all into account to ensure your dedication pays off over time. Here are a few reasons why:
Putting your financial decisions into context
Wealth planning can help ensure that all the financial decisions you make over your lifetime serve a greater purpose: establishing and protecting your family’s future. Purchasing property, growing a business, and managing investments are big decisions that should not be taken lightly. When you put these choices into the larger context of your wealth management strategy, you can ensure they ladder up to a comfortable future for everyone involved.
Staying solvent through retirement
Whether your retirement goals include seeing every country around the globe, golfing the world's best courses, or sailing the Caribbean, strategic wealth planning can help you ensure you've got the funds you need to make it happen. They can also help you look beyond your most active retirement years to keep you covered for long-term healthcare or assisted living.
Mitigating tax exposure
Another critical piece of the wealth management puzzle is tax planning and learning how to lessen your exposure. Wealth planning not only helps you reduce your tax burden throughout your life, but it can also minimize estate and capital gains taxes your heirs owe following the future sale of a business, property, or other investments.
Preserving family legacy
Coming up with a strong wealth planning strategy and sticking to it is one of the best ways to preserve your family’s stability, as it helps them sustain their lifestyle even after you’re gone. With a wealth planning strategy in place, there is no ambiguity around protecting any property, business, or other asset you own.
Who needs wealth planning?
Contrary to popular belief, wealth planning is not only for the ultra-rich. The truth is, just about anyone with investable assets can benefit from having a strategy in place. That said, for high-net-worth ($1 million to $5 million), very-high-net-worth ($5 million to $30 million), and ultra-high-net-worth ($30 million+) individuals and families, it’s essential.
At the upper levels, the choices you make around asset ownership, wealth transfer, taxes, and business succession can make a huge difference. In some cases, they may even decide whether your beneficiaries can afford to keep assets you transfer down to them, such as a vacation property or cottage.
For business owners and entrepreneurs, it’s also important to note that since personal and business finances can often get intertwined, you might need a bespoke strategy. If a family member is taking over the business, everything from taxation to real estate portfolios to equity can come into play.
Wealth planning is also especially important for people who are nearing retirement age or already in their retirement years. Questions about converting your RRSP into an RRIF or whether to pull from your TFSA are all a part of the process.
The core components of wealth planning
An integrated wealth planning strategy should consider your complete financial picture, from investments to estate structures. Let’s break it down into parts so you don’t miss anything.
Investment strategy
A solid investment strategy can help you align your portfolio with your long-term goals. Depending on your needs, this might include investing in:
- Equities
- Fixed income
- Pensions
- Registered plans (e.g., RRSPs, RRIFs, and TFSAs)
- Other investment vehicles (e.g., alternative investments, mutual funds, ETFs, or GICs)
The goal behind a solid investment strategy is to ensure you can maintain your lifestyle over the years, support your loved ones, and build wealth that gets you through retirement and carries down generations.
Tax planning
An effective tax planning strategy can help minimize your tax burden and maximize your returns. This is especially relevant when it comes to transferring assets, converting registered accounts into income, or selling a business.
Retirement planning
While some of us may choose to work a bit in retirement to keep active and generate income, for many, retirement means money stops coming in and starts going out. Coordinating pensions, registered accounts, and withdrawal strategies ahead of time helps you continue your lifestyle without any hitches when the time comes to retire.
Wills, trusts, and inheritance
The complexities of Wills, trusts, and inheritance strategies also make working with an effective wealth management team a necessity for high-net-worth families and individuals. With an effective strategy in place, your family can protect the wealth you’ve accumulated and ensure a smooth transition to the next generation when the time comes.
Risk management and insurance
Whether it’s an unexpected health issue, economic downturn, or natural disaster, insurance solutions can help you protect your assets from whatever life throws at you. Incorporating insurance and other risk management strategies into your wealth plan helps you and your family safeguard what matters most: your lives, health, income, and property.
Wealth planning vs. financial planning
Wealth planning and financial planning share some similarities but have key differences that make them distinct. For starters, financial planning is focused on shorter-term financial goals, like paying off a mortgage or going on a once-in-a-lifetime vacation.
On the other hand, wealth planning goes beyond one-time expenses and takes a broader, long-term view. It looks at all of life’s stages, knitting them together into a cohesive strategy. This might involve managing retirement income and investments, advanced tax planning, and even philanthropy. Check out this table for a closer look at the differences between the two:
| Criteria | Financial planning | Wealth planning |
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Wealth management is a team effort
This longer-term view makes wealth planning quite a bit more complex than financial planning alone. As such, it typically requires a mix of skillsets and management approaches to accomplish.
While you can usually nail down a financial plan with a single advisor, a sustainable wealth management plan is a team effort that can involve:
- Private wealth professionals
- Estate lawyers
- Tax accountants
- Investment managers
Common misconceptions about wealth planning
Many people make assumptions about wealth planning that simply aren’t the case. It’s important to nip these misunderstandings in the bud to start your wealth planning journey off on the right foot. Common misconceptions include:
- Wealth planning is only for the ultra-rich: Anyone with investments, assets, or long-term financial goals can benefit.
- It’s only about accumulating wealth: Wealth planning involves a multi-disciplined approach that considers tax planning, retirement, business succession, and legacy wealth preservation.
- Some are too young to start wealth planning: The sooner you start planning for the future, the more you can set yourself up for financial success. Starting early allows for compounding growth and better long-term outcomes, even with modest resources.
- Once a plan is in place, it’s set: Life comes with lots of changes, both expected and unexpected. A strong wealth plan is dynamic, so you should regularly review yours to reflect life changes, fluctuating market conditions, and evolving goals.
- Advisory services are too expensive: Many advisors offer scalable solutions that in the long run can provide immense value that outweighs the cost.
A flexible option for long-term wealth preservation
From one day to the next, and from one year to another, nothing truly stays the same. A wealth plan can ensure that you and your family are financially prepared for whatever might come.
Thanks to the flexible nature of wealth planning, no matter what your unique goals or outlook might look like, speaking with a wealth professional can help you start making the most of the years ahead. The sooner you get started, the better. You, your family, and your future nest egg will thank you.
Start the conversation
Get in touch with a BMO Wealth Professional or let us contact you.
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