Dream of Legacy Consulting

The Gap Between Generating Income and Building Wealth

Generating income is only half the battle for business owners and high earners, building wealth, protecting it, and passing it down is the real challenge.

We hear it far too often: stories of people who made significant amounts of money only to lose it because of poor financial advice or habits or mismanagement by professionals they trusted.

These stories aren’t just headlines—they’re real, painful reminders of why financial literacy and constant oversight matter at every stage of the wealth lifecycle —from accumulation to preservation to transfer.

Lessons on Building Wealth from Celebrities’ Financial Failures

Even celebrities aren’t immune to the consequences of poor financial management. In 2012, Grammy-winning singer and beauty mogul Rihanna sued her former accounting firm for gross negligence. Despite her success she reportedly lost millions of dollars and was close to bankruptcy due to their mishandling of her finances. Likewise, in 2008, comedian and host Steve Harvey discovered after his accountant’s death that his taxes hadn’t been filed for seven years. As a result, he owed over $20 million to the IRS in back taxes and interest.

These stories highlight the importance of staying engaged and educated because it’s not just about earning money, it’s about managing it properly, growing your wealth, and protecting it.

This article is part of a series for business owners and high earners seeking to grow, protect, and pass down their wealth.

Building Wealth with a Solid Investment Strategy

Your investment strategy serves as your personal roadmap as you are building wealth. It should reflect your financial goals, risk tolerance, and long-term vision, and it should serve as a compass for every investment decision you make. Your investment strategy should evolve as your life and goals evolve.

When defining your investment strategy, it’s important to reflect on what wealth means to you, what your short-term and long-term goals are, determine your target net worth and decide on the level of risk you are comfortable with.

You can start by reflecting on these questions when creating your investment philosophy and strategy:

• What is my personal definition of wealth?
• What income do I want to generate passively —both now and in retirement?
• On a scale of 1 to 10 what is my risk tolerance, 1 being risk averse?
• What are my short-term and long-term net worth goals?
• Am I currently focused more on growing or preserving my wealth?
• What is my ideal asset allocation between real estate, stocks, cash, and alternative investments?
• What role, will philanthropy or charitable giving play in my financial life, if any?

It’s important to write these goals down and revisit them annually. Most wealthy individuals diversify their portfolios across the stock market and real estate. This doesn’t exclude other investments, but those typically play a smaller, complementary role in a well-balanced strategy. Real estate and the stock market each have their strengths, for example real estate provides tangible assets and tax advantages, while stocks and ETFs offer liquidity and compounding growth.

When it comes to investing in the stock market, consider this rule of thumb: 110 minus your age = ideal percentage of your portfolio in stocks. So, if you’re 55, aim for 55% in stocks, and the remaining in gold, bonds or other conservative assets. Of course, the younger you are the more flexibility you have around this rule of thumb. But, allocating a portion of your investments in more conservative assets will give you peace of mind in case of a market downturn or if you’re going through a challenging financial period .

As part of your investment strategy, consider how much of your portfolio will be dedicated to alternative investments like investing in startups, venture capital firms or bitcoin. However, even if you’re passionate about investing in businesses or buying cryptocurrency, remember that more than two thirds of startups fail according to the Harvard Business Review, and that crypto markets are highly volatile. So those investments should complement, not replace, foundational investments.

Building Wealth and Protecting Wealth with The Right Team

As business owners and high earners are building wealth, they often reach a point where they no longer have the time or the appropriate knowledge to do it all.

That’s when building the right team becomes essential. Your team should support your goals around building and preserving wealth. And just as importantly, you should equip yourself with knowledge to have meaningful conversations with the professionals you hire.

Oftentimes, the first hire is an accountant. Hiring a CPA, preferably a tax strategist, especially if you own a business or have multiple income streams can make a huge difference.

When it comes to investing, Low-cost ETFs and index funds can take you a long way. However, if you reach a point where you need support with investing and are considering hiring a financial advisor, it’s essential to ensure they have a fiduciary responsibility—meaning they are legally obligated to act in your best interest.

Ask them directly if they are a fiduciary. Understand how they are compensated (flat fee vs. commission), and request clarity around any incentives.

A qualified and ethical attorney can prevent and save you from difficult situations and help you elevate your wealth. When interviewing lawyers, ask about their experience with clients similar to you, and clarify their billing practices—hourly, retainer, flat fee. Make sure they’re familiar with business contracts, and asset protection vehicles like trusts and operating agreements.

It’s crucial to talk to several candidates to find the right expert for you. When interviewing them, rank them based on a scorecard you have created that includes their credentials that you have verified, their integrity and alignment score, their compensation structure, their client retention and testimonials, their responsiveness and availability among other things.

Check credentials annually using regulatory websites like the National Association of State Boards of Accountancy for CPAs, BrokerCheck (FINRA), or SEC Adviser Search for financial advisors, or verify a lawyer’s licensing through the state’s bar association.

Here a few questions you can ask your wealth team:

1. How do you ensure transparency in all financial and legal decisions you work on?
2. Can you walk me through how you’re compensated and any potential conflicts of interest?
3. How do you coordinate with other professionals on my team?
4. What steps do you take to keep my best interests prioritized?
5. What processes are in place to catch red flags or prevent errors before they escalate?
6. Can I speak with current and former clients for references?
7. Are you licensed to operate in all the jurisdictions relevant to my business or estate?

Building Wealth and Protecting Your Assets

If you are building wealth, protecting it is a non-negotiable.

Establishing proper legal structures is a foundational step. Using LLCs or corporations to separate personal and business assets and limit liability and reduce risk. For more advanced planning, family trusts or irrevocable trusts can help shield assets and facilitate tax-efficient wealth transfers.

Insurance is critical as well. This includes business liability insurance, umbrella liability policies, short- and long-term disability, and life insurance. Insurance can help protect you from unexpected legal or financial difficulties.

In today’s digital world, cybersecurity cannot be ignored to protect your data, networks, computers, systems. Wealthy individuals are high-value targets. J.P. Morgan and Chase recommends a zero-trust cybersecurity approach—trust no one, and verify everything. Use password managers, multi-factor authentication, and network monitoring tools to guard your sensitive data.

Due diligence is another critical part of asset protection. Consider personally submitting your tax payment to the IRS after your CPA has prepared them, review your tax returns every year. Avoid signing any contract or legal document without full understanding and performing your due diligence. Take time to review your contracts, especially clauses around termination, indemnity, auto-renewal, and survival. Always look for red flag language like perpetuity, forever, or irrevocable… Review your bank and credit cards’ activity once a month. Tools like Empower help you track your personal finances in real time every day. For business finances, routinely monitoring account activity and personally approving transactions above a certain threshold can be life savers.

You can learn contracts basics using free resources like Yale University’s Contract Law Course on Coursera or listen to legal podcasts like the Simplifying Legal or the Legalpreneur.

Here are a few questions you can ask your team about asset protection:

• What kind of cybersecurity practices do we have in place to protect sensitive information?
• How do we stay up to date with best cybersecurity practices?
• How are my legal documents, trusts, and estate plans properly set up and maintained?
• What steps are we taking to ensure my personal assets are not at risk?
• What type of insurances do I currently have and what is my coverage?

Building and protecting your wealth is your responsibility. Your wealth team is there to advise and assist you —not replace your oversight.

Know your numbers. Review them regularly. Pay close attention to your finances —including your investments — and track their performance over time. Perform regular financial reviews and revisit your investment strategy every year. The more knowledgeable you are about your finances and contracts, the harder it becomes for someone to take advantage of you. Be a good steward of your wealth by keeping a close eye on it so it can continue to grow.

Building wealth and keeping it requires strategy. Once you’ve developed a plan to build wealth, the next step is making sure you’re monitoring and protecting it effectively. That’s exactly what we’ll explore in the next installment of the series: Building Wealth, Monitoring It and Optimizing Your financial Ecosystem.

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