High Net Worth Financial Planning: What it Is and Tips to Do It Right

Financial planning can seem daunting, especially if you’re a high-net-worth individual (HNWI). When you have significant assets to manage, you have more at stake and face unique challenges. That can make high net worth estate planning, high net worth tax planning, and similar tasks especially complex.

However, some strategies and approaches can help make financial planning for HNWIs easier.

In this article, we’ll share:

• Facts about HNWIs and UHNWIs (ultra-high-net-worth individuals)
• Ten financial planning tips for high-net-worth individuals and ultra-high-net-worth individuals
• Seven financial planning tips for ultra-high net worth individuals

Ready to learn more about high net worth planning strategies? Let’s go!

Who are HNWIs and UHNWIs?

There is no uniform definition or legal criteria for qualifying as a high-net-worth individual or ultra-high-net-worth individual. Generally speaking, though, high-net-worth individuals are considered people who have investable assets of at least $1 million. Investable assets include cash and investments but exclude primary residences and collectibles.

Ultra-high net worth individuals (UHNWIs) are — again, generally speaking — those with investable assets of at least $30 million. Keep in mind that all UHNWIs are also HNWIs, but the opposite isn’t true.

UHNWIs typically have significant wealth allocated across numerous assets. Examples include property, corporations, stocks, and bonds. 

Their wealth provides them access to unique opportunities and, consequently, risks. That’s why it’s so important to work with an advisor that has experience helping high-net-worth and ultra-high-net-worth individuals.

Facts about HNWIs

• US households with a net worth between $1m and $5m rose 5.5% between 2020 and 2021.
• The number of HNWIs has steadily grown over the past decade, from 10.87m in 2010 to 20.83m in 2020. The following chart allows you to review the growth by region.

Facts about UHNWIs

• As of Sept. 18, 2023, Elon Musk tops the Forbes Real-Time Billionaires list with a net worth of $264 Billion .
• The population of ultra-high-net-worth individuals increased 9.3% in 2021.
• The combined wealth of UHNWIs is approximately $26.8 trillion.

While the definition of an HNWI and UHNWIs may seem straightforward, there is a lot of diversity within these groups.

Both have a significant amount of wealth. They both also typically have a high degree of financial literacy, and enjoy access to sophisticated investment products. This influences everything from short-term financial planning to long-term retirement planning for high-net-worth individuals.

HNWIs need to take special care to protect their assets and ensure that their financial affairs are in order. Here are a few financial planning tips for HNWIs.

10 Financial Planning Tips for High-Net-Worth Individuals (HNWIs)

Financial planning is essential for high-net-worth individuals to actively work toward managing and growing their wealth over time. There are a few key considerations for HNWIs regarding financial planning.

1. Create a Plan. HNWIs should create a comprehensive financial plan that considers their goals, risk tolerance, and investment portfolio. This plan will be the road map for their financial future and help them make informed decisions about their money.
2. Diversification. How do high-net-worth individuals invest? It often makes sense to diversify investments. Diversification means investing in various asset classes, such as stocks, bonds, and real estate. By diversifying their investments, HNWIs can mitigate the risks associated with any particular asset class.
3. Create Clear Goals. HNWIs should clearly understand their financial goals. What are they looking to achieve? Do they want to grow their wealth over time or generate income from their investments? Once they have a clear understanding of their goals, they can develop an investment plan to help them achieve them.
4. Tax Planning. HNWIs need to be aware of the tax implications of their investment decisions. In many cases, HNWIs can minimize their tax liability by investing in certain types of assets or making specific — and timely — financial maneuvers. They should work with qualified tax advisors and financial advisors for high net worth individuals to ensure that they take advantage of all the tax breaks and incentives available.
5. Estate Planning. HNWIs should consider estate planning. This is an essential consideration for anyone with significant wealth, as it can help to ensure that their assets are passed on to their heirs in the most efficient and tax-advantaged way possible.
6. Risk Management. HNWIs need to be aware of the risks associated with their investments. This includes both the risks of losing money on an investment as well as any potential insurance needs that leave them exposed. HNWIs should work with a qualified high-net-worth financial planner to develop a risk management strategy that is appropriate for their unique circumstances.
7. Retirement Planning. High-net-worth retirement strategies require special considerations significant assets are involved and there is a high income to replace. Special considerations include saving enough money to cover their living expenses and planning for how they will generate adequate income in retirement.
8. Create generational wealth. HNWIs can create generational wealth. This means passing their wealth on to their heirs to help them maintain their lifestyle and financial security. Financial planning for high-net-worth individuals is full of unique strategies and considerations. HNWIs should work with a qualified financial advisor to develop a plan for how they will transfer their wealth to their heirs.
9. Explore testamentary trusts. A testamentary trust is a type of trust created upon the settlor’s death. This can be an effective way for HNWIs to pass on their assets to their heirs in a tax-efficient manner.
10. Impart financial literacy. Individuals with a high net worth should take the time to impart financial knowledge to their heirs. This will help to ensure that the next generation is prepared to manage their wealth responsibly and effectively.

By following these financial planning tips, HNWIs can actively support personal wealth that is well-protected and grows over time.

7 Financial Planning Tips for Ultra-High-Net-Worth Individuals

Financial planning is even more important for ultra-high-net-worth individuals. They have a more significant amount of wealth to manage and may have more complex financial goals. UHNWIs should consider the following financial planning tips:

1. Consolidate your assets with one trusted financial advisor. When you have a large amount of wealth, it can be challenging to keep track of all your assets and overall performance. UHNWIs stand to benefit significantly by consolidating assets with one trusted financial advisor. By working with one advisor, you can better handle your overall financial picture and can make more informed investment decisions.
2. Split your family income to reduce your tax burden. UHNWIs can often reduce their overall tax burden by splitting their family income. This is a crucial part of ultra-high-net-worth tax planning. It means that different family members will pay taxes on a portion of the total income, rather than all of it being calculated and taxed as income earned by a single individual. This financial planning tip for UHNWIs can be especially beneficial for those who have children or other dependents.
3. Put surplus assets into tax-saving investments and charities. UHNWIs often have a surplus of assets. One UHNWI financial planning tip is to invest in tax-saving investments or give to charity. Both of these options can help you reduce your overall tax liability while also supporting causes that are meaningful to you.
4. Plan for business succession. 49% of UHNWIs attribute their wealth to owning their own businesses. For these individuals, it’s important to have a plan in place for business succession. This ensures that their businesses will continue to run smoothly and be successful even after they are no longer involved. A well-designed business succession plan can minimize taxes and maximize wealth transfer. A proper business succession plan can often be the cornerstone of financial planning for ultra-high-net-worth individuals.
5. Pass on your vacation property to your children through inter-vivos family trusts. An inter-vivos trust, or a living trust, is a trust you create while you’re alive. Upon your passing, your listed beneficiaries receive whatever property or assets you’ve designated in the trust. Many UHNWIs own vacation properties. A vacation property can be passed along to your children through a living trust to provide asset protection and tax advantages for ultra-high-net-worth families.
6. Hire Your Children. If you are a UHNWI with children and a business, you can consider hiring your children so that they can earn income and open a Roth IRA for kids. Any money they earn while working for your business can be contributed to the child’s Roth IRA, up to $6,500 per year in 2023. This is a great way to help your children save for their future and gain financial education while also getting some tax benefits for yourself as a business owner. Check out our comprehensive guide to establishing a Roth IRA for kids.
7. Comprehensive Financial Planning. As your wealth grows, so too does the complexity of your financial life. UHNWIs should work with a financial planner experienced in high-net-worth financial planning strategies to ensure that all aspects of their finances are considered. Unique strategies for high-net-worth financial planning are present for everything from investment management and estate planning to insurance and philanthropy. A comprehensive financial plan will help you make informed decisions about your finances to protect and preserve your wealth for yourself and your future heirs.

Why Do HNWIs and UHNWIs Need a Financial Advisor?

HNWIs and UHNWIs have unique financial needs that require specialized knowledge and expertise. A financial advisor can help create a customized plan that considers the client’s specific goals and objectives.

The advisor can also guide investment strategies, asset allocation, and risk management. Retirement planning for high-net-worth individuals is another key need that a capable advisor can address. In addition, a financial advisor can help to navigate complex tax laws and regulations.

If you are a high-net-worth individual or ultra-high-net-worth individual, contact us today to learn more about how we can help you reach your financial goals. Our team provides comprehensive financial planning and investment management services catered to your unique needs and circumstances.

7 Benefits Of High-Net-Worth Financial Planning

For HNWIs and UHNWIs, working with a financial advisor is an essential step in ensuring their financial success. Here are a few essential benefits afforded by working with a qualified financial advisor:

1. Keeping it simple. Life is hectic. We always seem to be busier than ever, juggling full schedules with a few too many balls to keep in the air. Financial planning is complex, especially for people with a high net worth. A good high-net-worth financial advisor will work with you to simplify high-net-worth financial planning and help you make informed decisions about your money.
2. Protecting Your Assets And Limiting Exposure To Creditors. One of the main concerns of HNWIs is asset protection. A financial advisor can help to create a plan that aims to protect your assets from inflation and navigating market downturns.
3. Maintaining Lifestyle After Retirement. High-net-worth retirement planning is not just about having enough money to cover expenses. It also includes the goal of maintaining the same standard of living that they’re accustomed to. A financial advisor can help create a retirement plan that will allow you to maintain your current lifestyle and make the most of your assets.
4. Minimizing Your Tax Burden. Tax optimization strategies are top of mind for HNWIs and UHNWIs. A high-net-worth financial planner can help to identify strategies that will minimize your taxes and maximize your wealth.
5. Maximizing Your Investments. A financial advisor can help you make informed decisions about where to invest your money. They will consider your risk tolerance, time horizon, and investment goals to create a personalized high-net-worth investment plan designed to help you reach your financial objectives.
6. Passing Wealth Down To Your Heirs. One of the primary goals of most HNWIs is to ensure that they pass their wealth down to their heirs in the most efficient manner possible. A financial advisor can help you create a comprehensive estate plan that considers your unique circumstances and objectives. They’ll also consider the opportunities afforded by your personal circumstances to create the right strategy for you and your legacy.
7. Fulfilling Your Charitable Wishes. HNWIs and UHNWIs often desire to give back and make a difference through philanthropic causes. An experienced advisor can help you create a charitable giving plan to fulfill your charitable goals while finding tax deductions.

Working with a financial advisor is essential in the high-net-worth financial planning process. The right advisor can help to simplify your finances, protect your assets, and minimize your tax burden. Ultimately, it means a better strategy for securing and leveraging your wealth as an individual, and for your family.

In Summary

Financial planning is an important process for anyone with significant assets, but it is especially important for high-net-worth and ultra-high-net-worth individuals. Protecting the larger amount and broader variety of assets held by these individuals requires specialized knowledge and experience.

The team at Dechtman Wealth Management provides comprehensive financial planning and investment management services catered to your unique needs and circumstances.

Contact us today to learn more about how we can help you reach your financial goals.