The CEO and founder of a US-based real estate business that harnesses technology talks about how investment property-focused wealth management can give firms an edge in winning wealthy clients.

The following article comes from David Wieland, founder and CEO of Realized. The business applies what is called “modern portfolio theory” (in fact, it is now quite old) to the bricks-and-mortar world. It’s an example of how this news service aims to get deep into the details of investment stories and get beyond the superficialities. (See a previous example here and here.)

The usual editorial disclaimers apply to guest articles. The editors are very pleased to share these insights and invite replies. Email tom.burroughes@wealthbriefing.com

While financial advisors don’t typically assist clients with real estate investments, those who do can acquire a significant portfolio of new business. Real estate often makes up a substantial portion of a high net worth individual’s portfolio, meaning that Investment Property Wealth Management, or IPWM, could afford new opportunities, both in serving existing clients and in securing new ones, while also representing a defensive strategy to protect one’s business. 
 
Understanding high net worth clients
According to the 2022 World Wealth Report from Capgemini Research Institute, the US was home to 7.4 million HNW individuals in 2021, an increase of 13.5 per cent from 2020. The largest population of HNW individuals in the world, these two percenters hold a combined asset value of $86 trillion. And, because of the work required to maintain and preserve their assets, these specific investors represent a high-demand opportunity for private wealth managers who usually earn a percentage of the total assets they manage.

HWN individuals are those who have at least $1 million in liquid financial assets, and they typically seek guidance from financial advisors to strategize investments and manage wealth. They may also have a significant amount of net worth tied to real estate properties. And some may be looking for ways to transition out of real estate management into a more passive income-seeking option, such as a Delaware Statutory Trust, which can help investors manage risk through diversification.

But it’s not all about investment returns for HNW individuals. They also want to protect their hard-earned assets and leverage them, often for retirement, philanthropy, or building generational wealth. They may require additional personalized services, such as estate and tax planning, and separately managed investment accounts versus typical investments. HNW individuals may want someone to help them oversee all these investments while helping them meet long-term financial goals and avoiding costly tax implications or investment mistakes.

How IPWM differs from traditional wealth management
Traditional financial advisors typically don’t handle commercial real estate (CRE) investments for clients beyond assets like REIT ETFs, but for those willing to learn the ropes or partner with a trusted CRE advisory firm, real estate wealth management can be a value-added addition to their service offerings.

Investment Property Wealth Management®, or IPWM, involves a strategy similar to the management of a traditional portfolio, where diversification is key to risk management. Advisors who understand the IPWM concept can help transition real estate investments to more diversified or transferable assets, such as DSTs or DSTs with an Umbrella Partnership Real Estate Investment Trust (UPREIT) option. This can provide alternatives to investors in or approaching retirement, who may want to reduce the time they spend actively managing assets.