An advisor’s job is not to beat the market; rather his job is to understand and help fulfil his client’s financial goals. This is truer in case of HNIs (high net worth individuals). These investors have already built a substantial wealth. It is now important for them to receive regular income from this wealth and to keep the wealth safe for the next generation. Hence, managing HNI wealth requires a slightly different approach. Here is what you need to keep in mind while advising your HNI clients.
Keep the focus on them
While meeting HNIs, you need to focus solely on them. Spend time to build mutual trust so that they freely share information about their finances with you. Only when they completely trust you, will they share information about all their assets and loans with you. This will enable you to develop a better financial plan for them.
Plan keeping their different needs in mind
While most of the middle-income investors invest with a view to generate wealth, HNIs have already accumulated enough wealth to fulfil important financial goals. They need your guidance to ensure capital preservation. Thus, a financial plan for HNI clients must take into account the following aspects:
Many HNIs prefer to earn moderate returns at low risk on their investments. The idea is not to chase returns rather ensure that they are in a position to pass on the wealth to the next generation. While planning for such HNIs it pays to be cautious.
Having a will in place is extremely crucial to ensure a smooth transition of a client’s financial assets to the desired beneficiaries. You need to make sure that your client’s financial assets have a nomination in place. In addition, you need to ensure that your client has a registered will in place to prevent any inheritance related issues post his demise.
- Tax planning:
As HNIs are likely to fall in the highest income bracket, effective tax planning can help your client have substantial tax savings. You need to identify best tax saving strategies (for e.g. in dividend v/s SWP) and investment options (for e.g. 80C, tax free bonds) for your clients.
Build expertise across various fields
While a HNI may not expect you to file his taxes or draft his will, having knowledge of tax and inheritance planning will mean that, your client will take your inputs on all important financial decisions. This helps you build a long-term relationship.
Moreover, you should also be able to connect them with expert CAs and lawyers if required. This is a win-win for both your client and you as down the line these professionals can connect you with other HNI clients.
Diversification is must
Majority of HNIs have built their wealth through business. While running a concentrated strategy that is investing majority of their profits back into the business has helped it grow, when it comes to investments, it is best to spread their savings across different assets and investment options. This reduces portfolio risk and helps them achieve their target of capital preservation.