What Are Held Away Assets and Why Do They Matter?
Uncover the importance of incorporating all your assets, even those managed elsewhere, for a truly comprehensive financial plan.
Individuals often manage their financial assets through a primary financial institution or with a dedicated advisor. While much wealth resides in these central accounts, not all assets are consolidated in one location. This distributed nature introduces the concept of assets not directly managed by a primary financial manager, which can impact overall financial oversight.
Understanding Held Away Assets
Held away assets are financial holdings an individual possesses that are not managed or custodied by their main financial advisor or institution. This distinguishes them from “assets under management” (AUM), which refers to the total market value of investments a financial professional or firm directly supervises and controls for clients. These assets often include retirement accounts from previous employers, such as a 401(k) or 403(b), which remain with the former employer’s plan administrator.
Other common examples of held away assets include direct stock ownership in individual company shares, often held through a transfer agent or a different brokerage account. Real estate holdings, such as rental properties or vacation homes, also qualify as held away assets because they are managed independently of a financial advisor. Private equity investments, alternative investments like hedge funds, and annuities purchased directly from insurance companies are frequently held away from a primary financial advisor’s direct management.
Significance for Financial Strategy
Understanding and accounting for all held away assets is fundamental to developing a comprehensive financial strategy. A complete financial picture, encompassing both managed and held away assets, is necessary for an accurate assessment of an individual’s overall risk exposure. Without this holistic view, a financial advisor cannot fully evaluate the combined risk of all investments, potentially leading to an unbalanced portfolio. Proper diversification across all holdings also relies on knowing the composition of held away assets, ensuring that investments are spread appropriately across different asset classes and sectors.
Effective tax planning is significantly enhanced by incorporating held away assets into the financial strategy. Different asset types and account structures, such as pre-tax retirement accounts versus taxable brokerage accounts, have varying tax implications. Considering all assets allows for optimized strategies like tax-loss harvesting or making informed decisions about which accounts to draw from first during retirement to minimize tax liabilities. Comprehensive estate planning also benefits from this complete view, as it allows for proper asset titling, beneficiary designations, and the establishment of trusts to ensure wealth transfer according to an individual’s wishes. Accurate tracking of progress toward financial goals, such as retirement or a major purchase, requires including all assets, as excluding held away assets would provide an incomplete and potentially misleading assessment of an individual’s financial standing.
Practical Approaches to Managing Them
Managing held away assets effectively begins with identifying and documenting all existing holdings. Individuals should gather statements and account information from all institutions where they hold assets, including former employers for retirement plans, direct stock transfer agents, and any other investment platforms. Maintaining an updated personal financial inventory, which could be a simple spreadsheet or a dedicated personal finance software, helps consolidate this information in one accessible location. This inventory should detail account numbers, institutions, asset types, and current values.
Communicating openly and regularly about these assets with a primary financial advisor is a practical step to ensure they are factored into overall financial planning. While advisors may not directly manage these assets, knowing their existence and characteristics allows them to provide more informed advice regarding asset allocation, tax implications, and estate planning. Regularly reviewing and updating the inventory, perhaps annually or whenever significant changes occur, ensures the financial picture remains current. This proactive approach helps integrate all aspects of an individual’s wealth into a cohesive and effective financial strategy.