As a wealth manager I see people making good choices and poor choices every day. While everyone wants to build wealth that will last for multiple generations, most people do not see the often invisible sources that drain their wealth. Like the proverbial holes in the dike that leak water, these wealth drainers prevent people from retaining and growing their wealth.

In my experience, people lose wealth to two sources: things they cannot control and things they can control. In this article I want to show you how to identify impediments to wealth creation that are beyond your control and how to address them. In my next article, I will discuss how to address impediments to wealth building that you do control.

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"I take great pleasure in helping my clients find better and more tax efficient ways to pass their wealth on to the ones they love and the charities about which they are passionate."


7 Impediments that are outside of your control

Over the years I have seen people lose wealth to many factors that are beyond their control. Here are the top 7 I have witnessed:

  1. Changes to employment 
  2. Divorce
  3. Disability
  4. Medical or legal expenses for loved ones
  5. Too little or the wrong life insurance
  6. Changes in tax laws
  7. Stock market crash

Let’s look at each of these briefly.


Changes to employment

If you are not an employee or a business owner, then obviously this point does not apply to you. Many of my clients who are still working and not yet retired are lawyers, business owners or senior executives in successful companies.

Most people visualize their careers as a liner progression. We often see ourselves as continuously climbing the proverbial ladder. Yet, like most journeys in life, our careers are usually not a line of bread crumbs that we simply follow.

For executives, the big changes come from switching companies, a promotion, a demotion or being let go. All of these changes impact their financial standing and often these changes are well beyond their control.

My colleague Brian Henderson has written a great article for executives about whether or not to change companies and how this can impact you financially. I encourage you to read this article if you are thinking about switching.

When people are promoted, usually a financial component is included. This should definitely trigger a change to your financial plan. More often than not, I recommend that a promoted executive keep the same lifestyle as before and save and invest the new income.

When an executive is demoted or let go, their financial situation changes significantly. But this does not mean they should panic. This is one of the most important times that you should be talking to your financial advisor. A solid financial plan will take into account these moments and help you get through them.

For business owners, the big changes that are outside their control usually come from fat and lean years. The wisdom of the ages tells us that there will be seasons of heavy rain and seasons of drought. Most business owners do not get to control the economic weather. But they do get to control how they plan for and respond to these. Wise business owners are saving and investing in years of plenty so they can ride out the years of drought. Business owners in particular need the support and guidance of a financial partner to help them even out the ups and downs of their economic journey.



I’ve written another article about the financial impact of divorce. But suffice it to say that divorce is a major source of wealth leak. Sometimes you can prevent a divorce, but other times it’s beyond your control. Either way you should be aware that divorce will wreak havoc on your finances. So think carefully about what you really want before going down that path.



It is not recognized by most people that disability while you are of a working age is far more probable than death. In my experience, most people underestimate the financial impact of disability and the likelihood that they might become disabled. This is very dangerous, in my opinion. Why do I say this?

I serve just a handful of wealthy families. Yet you may not know that a disproportionately high number of my clients, compared to national averages, draw income from disability. Thank goodness they had the foresight to get this insurance because otherwise their financial situation could have been dire.

Disability insurance is very affordable and should be a key consideration in your wealth plan. However, choosing the right disability insurance is a financial and lifestyle decision. These decisions are usually best made in consultation with your financial advisor who knows what you want and need for both income and lifestyle.


Medical or legal expenses for loved ones

When most people build their wealth creation plans, they think primarily about their income versus their expenses. But what about decisions made by loved ones whom you do not control? What about aging parents and their need for support?

I have seen two types of scenarios in which high-income earners who have practiced good financial discipline and invested wisely have, in fact, lost wealth because they chose to support loved ones. Here is what I mean.

I know of an affluent first-generation wealth creator who gave up a huge portion of his wealth to pay for his child’s legal fees. His child made a mistake and ended up in a protracted legal battle. The father decided to support the child and pay the fees which were very substantial. These legal fees were never a part of the father’s financial plan and caught him by surprise.

I know of several families right now who are supporting their parents in their last years of life. Medical care for the aged is now very expensive. It is often difficult for parents to admit that they have exhausted their financial resources. More than once I have seen this come as a surprise to a child who then stepped up to the plate financially.

When these moments come, the decision to support a loved one is usually a matter of the heart, not the wallet. And yet the impact to the wallet can be very substantial. This is why you should be talking to your Whitnell financial advisor. We make it a habit not just to know the people generating and investing the wealth, but also the people they love. When we know who a client loves, their commitment to support that person and the life situation of the loved ones, we can help a great deal. We can help prevent these surprises through insurance planning, trust and estate vehicles and other means.


Too little or the wrong life insurance

Probably the biggest uncontrollable event in our lives is the moment of our passing. Many people buy life insurance to mitigate the impact of their death on loved ones. But I do see people making mistakes when it comes to life insurance.

Many people need more life insurance than they have. In some cases that is because they bought whole life insurance with high premiums to support not only the death benefit but also to create a savings program to offset the future increase in mortality costs. If the budget for insurance is limited, it is far wiser to buy term insurance that will provide a much larger death benefit that will be more appropriate to handle the needs of the family caused by the death of a family provider.

The more expensive insurance policies become more appropriate to create effective ways of transferring one’s estate to the family in a tax efficient manner. If you are not sure about how appropriate your life insurance is compared to your needs, let’s have a conversation.


A change in the tax law

Changes in tax laws are certainly beyond your control. But what is not beyond your control is timely planning and responses to these changes. Far too often I hear of families who have made changes to their financial plan too late to avoid taxes that they would not have had to pay.

At Whitnell we are in the habit of bringing solutions to our clients once tax laws are changed. But many financial advisors will not do this. If a significant change is coming to local, state or federal tax laws, your financial plan should change accordingly. There are many financial vehicles and other opportunities to mitigate taxes and it is wise to explore all of them.


Stock market crash

No one controls the stock market and downturns and volatility are, historically, a part of the investment process. But there is a great deal you can do to prepare for these. A solid financial plan assumes down-turns and takes these into account.

Most people place this at the top of the list of situations beyond their control that drain their wealth. You’ll notice that it’s at the bottom of my list. Why? Because a solid financial plan will help you weather these unforeseen events and even benefit from them.

At Whitnell we are experts in building investment portfolios that are optimized for tax mitigation and volatility. It takes financial and emotional discipline to transform a down-turn into an opportunity to grow wealth instead of losing it. If you have been wise and disciplined before a crash, you could come out of it with a much stronger financial position.


Next article

In my next article I will outline major impediments to wealth creation and show you how to address those as well. If you or someone you care about is experiencing any of the situations I’ve described in this article, I believe we could help a great deal. Let’s have a conversation.


The information contained in this article is provided for informational purposes only. No illustration or content in it should be construed as a substitute for informed professional tax, legal, and/or financial advice.