Reasons for High-Net-Worth Financial Planning

by Victoria Duff

The Phoenix Life Insurance Company does an annual survey to determine financial planning trends and behaviors among high-net-worth individuals. One key question asked whether the respondents' wealth was "extremely secure" or "very secure" for the long term. In 2007, 45 percent of the respondents agreed that their wealth was secure. In 2008, the survey found a decline in confidence to 41 percent. By 2009, only 28 percent of respondents felt their wealth was secure for the long term.

Economic Crisis

The global economic crisis that began in 2008 resulted in significantly lower real estate values, stock market losses and business failures. Hedge funds went out of business, losing large amounts of their investors' money, and state and local governments teetered on the brink of financial collapse. The crisis showed in the 2009 Phoenix survey, as 51 percent of the respondents cited “The risk that poor investment performance will diminish my assets” as the primary retirement risk concern, up from 39 percent in 2008 and 33 percent in 2007.


As government fact-finding committees and economic experts recommended raising taxes and altering social services such as Social Security and Medicare, high-net-worth individuals faced new challenges in tax planning and health care. Although the financial crisis of 2008 and beyond was particularly severe, these changes in asset value, taxation and lifestyle services happen in smaller increments many times over a person's lifespan. These changes can cause serious damage to a family's wealth and lifestyle without careful financial planning for preservation of asset values and protection against unforeseen events.

Estate Planning

Tax strategies are particularly important for estate planning, without which a large estate might be severely diminished by estate taxes. These strategies must be reviewed annually to ensure they are adequate with respect to any new tax law changes. Giving money to family members is one way of protecting estate assets from tax, but the money transferred in such a manner must be carefully managed.


The greatest problem in financial planning for high-net-worth individuals — particularly those who suddenly find themselves in possession of unaccustomed wealth through the sale of a business or an inheritance — is the confusion surrounding which advisers to hire, which protective services are necessary and which decisions must take priority. For this reason, financial planning should start as early as possible and expand to fit the changing circumstances and needs of the individual over time. Establishing a long-term relationship with a reputable insurance company, financial services company or financial planner may alleviate much of this confusion and result in a more cohesive financial plan.

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