The Ultimate Guide to High Net Worth Financial Planning

A high net worth investor (HNWI) is an individual with significant investment assets who will typically have complex financial needs. You may be uncertain about your own net worth. If so, calculating your net worth is a relatively simple exercise that takes into account your assets and liabilities. Here’s one tool you can use.  

Let’s take a look at some of the issues and guidance around high net worth financial planning.  

Understanding high net worth financial planning

No two individuals or families have the same financial needs, but high net worth investors do share commonalities that come with greater affluence. For families with substantial assets, the number and complexity of financial decisions can grow significantly. Topics such as the need for more diverse types of assets within investment portfolios, distribution planning, generational wealth transfer, charitable giving, and business exit planning are some of the issues that need to be discussed. Financial conversations in high net worth families become even more crucial to ensure clarity, understanding and intent among family members. 

High net worth financial planning is a key foundation to ensuring your family’s financial health for today and for future generations. It is an ongoing process: financial plans for wealthy families must be continually adapted to the changing financial landscape and specific family situation. End goals may include a combination of wealth preservation, wealth accumulation, legacy planning and community impact. Think of high net worth financial planning as designing a luxury car that needs to run on highways and dirt roads during periods of both calm and volatile weather with ongoing tune ups to ensure optimal performance over time.

The importance of a financial planning process

A financial plan for a high net worth investor requires a partner who is experienced in working with families with larger investment portfolios who have more complicated financial needs. The process begins with a thorough understanding of your future goals and objectives. Next, an assessment of your current situation will encompass everything from your assets and liabilities to your various income streams and expenses. The process continues with the development and implementation of a customized plan that sets you and your family on a financial path and identifies any gaps that need to be addressed.  

For high net worth individuals, the plan must address your family’s particular situation and should deliver highly personalized recommendations. Ongoing monitoring of the plan and regular meetings with the team providing you financial advice are crucial to ensure plan goals are met and gaps are clearly defined and can be addressed over time.   

Retirement is a common foundational goal for most individuals’ financial plans. In high net worth financial planning, however, funding for retirement may be a lesser challenge. As a result, your focus may shift to buying a second or third home, a yacht or art, supporting a grandchild’s private school or college tuition, or funding charitable legacies through tax-advantaged distributions.

Advice and guidance from the right partner

The role of a qualified financial professional in high net worth financial planning cannot be overstated. A trusted advisor must understand what makes you and your family’s financial situation unique. Your financial professional must listen carefully, understand the nuances of your specific situation, and have the experience to help high net worth investors like you plan for and achieve financial success. Only financial professionals with areas of diverse expertise and extensive experience in working with wealthy families like yours can successfully guide you on your path to financial success.  

Guidance on how to identify an advisor is readily available. Here is one article with key steps to follow.  

The right financial professional will know how and when to introduce you to specialists with expertise in areas that reflect your financial needs. These areas would likely include:

• Portfolio Management teams making investment decisions for larger investment portfolios beyond traditional equity, fixed income and cash investments. More diverse asset class could include alternative investments, currencies and real estate.
• Trust and Estate Planning: Trust and fiduciary services, and estate management
• Lending Services: Mortgage financing and custom lending solutions
• Business Banking: Services for creating, building and transitioning your business, including business funding, valuation and exit strategies
  
  

Involving family members in financial discussions

Involving family members in financial discussions can be particularly important for high net worth families with larger portfolios but may come with more challenges. No family handles these discussions in exactly the same way. Discussions in your family could range from the simple, like educating younger family members about the basics of financial management, to the more complex, such as involving them in the actual decision-making. 

Family financial discussions serve numerous purposes:

• Clearly communicate what role the next generation will have in family financial decision making.
• Establish how the younger generation is expected to work with their family’s wealth management team.
• Confirm that younger generations have the skills to assume their roles or highlight knowledge gaps that need to be filled.
• Ensure the next generation understands their family’s financial wishes, including charitable priorities.
• Clarify details of future wealth transfer intentions to reduce the likelihood of misunderstanding and conflict.
  
  

For more information about how to create a wealth management team of family members and professionals, see the first of our four-part Insights blog series about Generational Wealth Management, Assembling a Family Wealth Management Team.

Unique opportunities and challenges facing high net worth individuals 

Smart financial decision-making for every individual and family comes with questions and challenges. Greater wealth may bring greater financial opportunity but challenges and risks may increase as well. 

Investment Management

For high net worth individuals, portfolio diversification can extend beyond the traditional mix of equities, fixed income, and cash. Alternative investments like hedge funds, private equity and credit, or real estate and commodities can offer potentially higher returns and serve as potential hedges against market volatility. The key to high net worth financial planning will be for your investment manager to construct and invest a custom portfolio to align with your risk tolerance and financial objectives. 

Continuous monitoring and adjustment of your investments reflect that the financial world is dynamic, with constantly changing market and economic conditions. Your advisor should provide you with access to the research and insights of the individuals managing your investments. Regular portfolio reviews with your team will help ensure you understand how the portfolio is invested and that it remains aligned with your goals and risk tolerance. 

Risk Management 

Effective risk management is an essential aspect of high net worth financial planning and requires a skilled and experienced team to guide you. Managing the risk in your portfolios involves not just diversifying investments but also potentially employing strategies like hedging and using insurance products to protect your wealth. Risk management is about understanding the potential threats to your wealth, including market downturns, inflation, and changes in tax laws*, and taking proactive steps to mitigate these risks.

Distribution Planning 

Distribution planning is another term for tax management*. It is a particularly important process for high net worth individuals who may face complex tax situations due to diverse income sources, multiple residences, and investment portfolios which may consist of a variety of financial assets. Guidance from a team of financial professionals, along with your CPA, will include effective distribution planning and strategies. This can include making the most of tax-advantaged investments, timing income and deductions strategically, and utilizing trusts and other estate planning tools to transfer wealth efficiently. High net worth investors may also be able to structure their charitable contributions in a manner that takes into account their tax situation.

Estate Planning 

Estate planning for HNWIs involves much more than just drafting a will. It's about ensuring that your wealth is distributed according to your wishes in the most tax-efficient manner possible. This may involve working with experts to establish personal and multi-generational trusts, which can provide greater control over how your assets are distributed and can also offer tax benefits. Estate planning also includes making arrangements for incapacity, ensuring that your financial affairs can be managed according to your wishes even if you are no longer able to make decisions yourself. Additionally, establishing trusts can facilitate supporting causes you care about and preserving your legacy.

Business Exit Planning

Business ownership is often the source of a high net worth family’s wealth. Many high net worth individuals own or have owned one or more businesses. Business owners thinking about a future transition of a company need to consider numerous factors and impacts of a business exit on their family, their employees, and their customers, among others. Achieving a successful business exit requires high net worth business owners to partner with an advisor who deeply understands them and their business and can help them develop and execute a comprehensive plan. This plan will include the following:

1. Business Planning
2. Exit Planning
3. Financial Planning
4. Estate Planning
5. Advisory Team Planning 

Learn more in our recent Insights blog, 5 Key Planning Areas for Your Future Successful Business Exit.

Let us help with your wealth planning needs

This guide to high net worth financial planning outlines the distinct and complex financial planning needs of high net worth individuals and families. Capitalizing on the opportunities that exist for high worth individuals and addressing the challenges faced requires guidance from the right wealth manager and a trusted team of experts.  

Your Hancock Whitney team has deep experience working with the complex planning needs of high net worth investors and is here to answer questions, provide insights and guide you on the path to financial freedom.

*Please consult your tax professional.

The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. 

This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation. 

Hancock Whitney Bank offers investment products, which may include asset management accounts, as part of its Wealth Management Services. Hancock Whitney Bank is a wholly owned subsidiary of Hancock Whitney Corporation.

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