Planning for High Net Worth Clients

A different conversation

As financial planners, we get used to consulting to clients who are possibly moderately wealthy, and we help to guide them as to how much income they can expect to draw from their assets,
how their assets should be invested in order to last their expected lifetimes.

However, when it comes to consulting to high net worth clients, the financial planning is different.

These clients have more than sufficient assets to last their lifetimes, and the conversation is then not about how much income they can draw; the discussions start revolving around more complicated issues such as trusts (sometimes multiple trusts), the family company, philanthropic activities, and the different members within the family.   The concern that these high net worth clients have is that their financial planner understands their different entities, and is able to advise with the requisite expertise on a number of different topics, or has access to people who can advise on these topics, if they are not expert.

Shirtsleeves to shirtsleeves

Issues such as the adage “shirtsleeves to shirtsleeves in three generations” start concerning them.   The patriarch or matriarch who originally generated the family wealth becomes concerned as to how they can teach their  family to look after this wealth, and to continue to generate future wealth.   Very often they also become involved in philanthropic endeavours, and feel the need to give back to others who are not as fortunate as they are, and also to teach their families about the importance of philanthropy, and that not all people have as much as they

Starting blocks

On the financial planning side, I have found that setting an investment strategy for the family as a
whole, is the best way to start.   Once this investment strategy has been set, the financial planner can then set up various investments in order to address the different needs of the family.   There can be a tendency for the family trust to be regarded as the family banker to allow the different members within the family to pursue their dreams.   However, these monies should be repaid, at preferential rates, in order that there are funds available to assist future generations to follow their dreams.  For this reason some of the investments within the trust may be shorter term in nature.

Other investments will be more longer term in nature, and are intended to be grown over many years to increase the overall family wealth.  Thease investments need to be looked at from a tax-efficient and investment growth point of view.

As a financial planner consulting to such families, you are expected to add value to the family.   The financial planner is expected to be able to do this in a number of different areas.  Whilst being able to advise on the investment strategy, and how this should be implemented, the financial planner should also act in an educational capacity as well.   They should assist to educate the family on how the family wealth should be viewed, and yet at the same time what they should be doing to increase their own wealth, and be a contribution to the family as a whole.

Not just about the money

The development of the human capital and intellectual capital within the family is extremely
important.   It is vital that the human capital is nurtured, to ensure that the members within the family are happy, and pursuing their dreams.The development of the intellectual capital of these same family members is also significant to ensure that all the members are being educated to their full potential, as some of these members will also become involved in the future growth of the family.   Whilst many people regard the financial capital as being the most important within the family, without the human and intellectual capital, the financial capital does not achieve the goal of making the family happy.

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