HNW Investors, Their Changing Expectations, and How Financial Advisors Can Cater to Them

High-net-worth (HNW) investors are typically well-equipped financially and often possess extensive knowledge of investment opportunities and market dynamics. Given their financial acumen, one might wonder: Why do HNW investors still require financial advisors? In today's landscape, digitalization is transforming the financial industry, challenging traditional advisory roles. Therefore, it’s crucial to reassess how investor expectations are evolving and how advisors can align their services to meet these changing demands.

A recent survey by Wealth Management sheds light on these evolving dynamics. The survey revealed that 76% of HNW investors rated their financial knowledge as “good” or higher, suggesting they are highly informed about the industry. Consequently, financial advisors need to deliver more than just standard services. However, the same survey found that 22% of respondents rated their advisors' tech expertise as “poor.” This highlights the importance for traditional advisors to embrace technology not as a disruption, but as a tool for innovation and client engagement.

Retirement Remains a Major Concern

While the survey confirmed that HNW investors generally maintain strong financial habits—73% reported saving 10% or more of their annual income—it also revealed that 57% of investors were concerned about not having enough money for retirement. This presents a significant opportunity for financial advisors to re-engage HNW clients by initiating discussions about retirement, estate, tax, and legacy planning.

Retirement typically marks a shift from wealth accumulation to wealth decumulation. HNW investors, in particular, seek to create passive income streams or secure annuities for the future. Given their diversified portfolios and estate holdings, they are especially cautious about taxes, inheritance laws across different markets, and the potential for economic downturns during retirement—concerns exacerbated by current economic uncertainties.

How Financial Advisors Can Help

Financial advisors should deepen their knowledge of the tax liabilities that HNW investors may face in retirement. This includes analyzing portfolios to maximize tax-adjusted returns and developing strategies to minimize taxes related to wealth transfer, inheritance, gifts, and generation-skipping. One of the most effective strategies to mitigate these tax burdens is through life insurance—specifically high-value life insurance (HVLI) products designed for HNW individuals.

HVLI products, much like standard whole-life insurance, include a cash-value component but offer significantly higher payouts, making them attractive to HNW investors. Often structured as offshore investments through global reinsurers, these products provide geographical diversification. HVLI payouts can cover various taxes and help beneficiaries maintain their lifestyle. Additionally, HNW investors can surrender their policies for an instant liquidity boost, an appealing option for those with highly leveraged businesses.

Some newer HVLI products offer even more sophisticated features. For instance, SunJoy, an offshore participating insurance product from Sun Life, provides long-term wealth creation with exposure to ESG-linked funds. With short payment periods, guaranteed cash values, free accident protection, easy withdrawals, and policy-splitting options, SunJoy stands out as a highly attractive investment option for HNW clients.

Building a Lasting Legacy

Ultimately, the predictability of costs and guaranteed cash values make HVLI products a strategic element in broader retirement planning. For HNW investors, such insurance products are typically written into trusts, with beneficiaries named as trustees, which helps exempt the payout from individual taxes while giving beneficiaries access to capital. These strategies are essential for preserving generational wealth and providing long-term security.

Today, HNW investors are looking for financial advisors who go beyond traditional advisory services to take a vested interest in their family’s future. By offering high-quality, diversified services, financial advisors can help their clients build and safeguard wealth for generations to come. All it requires is a willingness to push the boundaries of service and innovation.