High Net Worth Financial Planning – The Art of Sophisticated Personalisation

Creating a financial plan for high net worth individuals requires a sophisticated level of expertise in tax planning, investing, debt management, risk management and legacy planning. It demands deep consideration of the strategies, structures and investments that are already in place, because each will have its own tax implications, investment opportunity and legacy considerations.

In this blog we cover the key elements of High Net Worth Financial planning, including:

1.What constitutes High Net Worth in Australia

2.Asset allocation and diversification;

3.Legacy planning, Tax optimisation & Debt minimisation;

4.International assets;

5.Risk management, including insurance, asset protection and business succession planning; and

6.The role of a High Net Worth Financial Advisor

Welcome to the world of high net worth financial planning, where highly tailored advice and strategies provide confidence and success.

Understanding High Net Worth Financial PlanningWhat Constitutes High Net Worth in Australia?

High net worth individuals, often abbreviated as HNWIs, are those whose wealth surpasses a certain threshold. In Australia, the criteria typically involve assets exceeding $2.5 million, excluding the family home. As the financial landscape evolves, this threshold moves around, but the principles of HNWI financial planning remain constant.

The Importance of High Net Worth Financial Planning:

Wealth accumulation is ongoing throughout your lifetime, but only half the equation. Once you have accumulated an asset base that will provide for your lifestyle, you need to ensure your wealth is preserved and provides liquidity, to securely meet your income needs and lump sum expenses. High net worth financial planning will then help optimise tax efficiency, mitigate risks, and secure the financial legacy for generations to come. In a rapidly changing economic environment, personalised financial planning is the key to success.

Key Elements of High Net Worth Financial PlanningAsset Allocation and Diversification:

HNWIs often possess a diverse range of assets, including real estate, stocks, bonds, private equity, and more. Effective asset allocation and diversification are essential to balance risk and reward, ensuring financial stability.

Asset Allocation: 

The two drivers of investment return are asset allocation and investment selection. Asset allocation delivers the highest consistent return for your portfolio and is therefore pivotal to investment management. Asset allocation refers to the way you have your money split across cash, fixed interest, property, shares and alternative assets.

High net worth financial planning requires a thorough analysis of your portfolio’s asset composition. The objective is to achieve a harmonious equilibrium that matches your risk tolerance and aligns with your long-term financial objectives. The primary focus is on optimising returns while prudently mitigating risk.

Diversification: 

Diversifying your investments across various asset categories and geographic regions serves to reduce risk. This approach guarantees that a decline in one sector of your investment portfolio will not disproportionately affect your overall wealth.

Apart from reducing volatility and improving your risk adjusted return profile, effective diversification increases liquidity and in turn flexibility to have money available when you need it, either for your personal use and lifestyle or another investment opportunity.

We find that for a lot of high net worth investors, they have large concentration in some assets, be it real estate, business interests or stock options as some examples, making diversification advice highly important for high net worth financial planning.

Estate Planning, Tax Optimisation & Debt Minimisation

Preserving wealth for future generations involves comprehensive estate planning. This includes wills, trusts, and other structures that minimise tax liabilities while facilitating a smooth transfer of assets.

Tax-Efficient Wealth Transfer: 

Estate planning goes beyond asset distribution; it involves optimising the transfer of assets with tax efficiency in mind. Well-structured trusts and wills have the potential to lessen the tax responsibilities of your beneficiaries, enabling them to inherit a more significant portion of your wealth.

Strategic Tax Planning: 

HNW financial planning includes ongoing assessment of your tax strategy. This ensures that you take advantage of tax deductions, credits, and exemptions to minimise your tax liabilities, leaving more money for investment and wealth growth. Strategic tax planning involves effective tax structuring, which in Australia, includes superannuation, testamentary trusts, other trust structures like family trusts, companies and personal investment.

International Tax Considerations: 

For HNWIs with international investments, understanding and managing international tax obligations is essential. It involves compliance with various tax jurisdictions, treaty benefits, and foreign tax credits. Financial advisors in Australia will not typically have the inhouse expertise to manage international tax advice, however when they do not, you should expect your financial advisor to pro-actively work with your tax specialists and have a network of their own to support you where needed.

International investments must form part of your financial plan and is often integral to HNW financial planning. It is one way you can easily distinguish between a suitably qualified financial advisor and not.

Debt Minimisation

Debt advice is fundamental to High Net Worth wealth management. It is typical that HNWI’s have a higher than average debt level before retirement, because it is typical that they have a higher income and therefore servicing capacity. Because debt compounds investment upside it is therefore a valuable tool HNWI’s use to grow wealth.

This makes debt structuring vitally important to High Net Worth Financial Planning, because strategies that improve cashflow through tax efficiency, debt reduction and loan structuring, create flexibility in turn to invest in other opportunities.

Risk Management

With great wealth comes great responsibility to protect it. Risk management strategies encompass insurance, asset protection, and contingency plans to safeguard against unforeseen events.

Asset Protection:

HNWIs have valuable assets, making them potential targets for litigation. Asset protection strategies, such as trusts and legal structures, help shield your wealth from potential creditors or legal disputes.

Insurance Planning: 

Adequate insurance coverage is a fundamental part of risk management. It safeguards against unexpected events and ensures that your financial plan remains intact, even in the face of adversity. Life insurances, living and death, provide the risk foundation to flexible outcomes for high net worth financial planning, while in accumulation and should be wound back as part of a transition to retirement plan.

Business Succession Planning: 

If you’re a business owner, a robust business succession plan is essential. It ensures the smooth transition of your business and its assets to the next generation or new ownership, minimising disruptions. For business owners, this can include business succession cover, like buy/sell.

The Role of a High Net Worth Financial Planner – Yield Financial Planning

Navigating high net worth wealth management in Australia requires expertise and experience.  At Yield, we have specialist financial advisors for HNWI’s. The clients we work with most are business owners and professionals, over 40 years of age, wanting to create a robust financial plan that provides real clarity and direction.

As a high net worth individual you probably already feel secure that you are in a good position, however our experience shows that most HNWI’s have not explored on paper, how well off or not they actually are. A financial plan with Yield provides clarity and confidence around the direction you are tracking and then partnership to help manage change to your advantage as things inevitably change and evolve.

At Yield you can expect a close partnership to develop a comprehensive financial strategy that includes key components like optimising asset allocation, effective estate planning, ensuring tax efficiency, and implementing robust risk mitigation measures. We have a deep comprehension of financial planning, and we excel in tailoring our approach to meet your specific financial needs and objectives.

Contact Us Today for Tailored High Net Worth Financial Planning

Realise the potential of your wealth through Yield Financial Planning. Reach out to us today to arrange a consultation with one of our specialist HNW financial advisors and explore how our expertise can aid you in taking your current position to the next level.