A set of people known as high-net-worth individuals (HNI) require a special kind of financial advice. Chakrivardhan and Chakravarthy, two financial consultants for this sought-after bracket, shed some light on the unique needs of these highly accomplished individuals like doctors, lawyers, or business leaders, who have their basic goals met but their aspirational dreams are yet to be manifested.
“Time is the biggest challenge for an HNI client. Due to lack of time, they cannot find the right person to manage their money and end up relying on suggestions from friends, family, or a bank for their investment. So, it’s all random investment, which does not help with growth.”
The advisers clarify that the management style is slightly different for this clientele. Firstly, it cannot be a one-time transaction with them, for they need several consistent meetings to thoroughly explore and understand their options.
Additionally, HNI clients need to be offered suitable product baskets to help them meet their financial goals. “A product is a financial scheme like a life insurance policy, mutual funds, fixed deposits, and bond funds, through which one can invest. The product should give the person access to move forwards. Ultimately, there is no bad or good product. It comes down to the suitability of the product. You need to look at if that product is aligned to your financial goal.”
Chakri and Chakra outline the differences between why HNI clients’ needs demand special attention. “An ordinary person invests to fulfill Maslow’s hierarchy of needs. But in the case of HNI, many of their needs are already met. Their concerns are different, such as insurance, taxation, and savings after taxes. Capital preservation and managing with the right investment is their biggest worry.”
In the United States, over 15 million seniors are economically insecure, living at or below 200% of the federal poverty line (FPL). It reminds us that people who do not take financial literacy seriously in their younger days may face financial crises later in life.
Vivek explains, “20 years down the lane, wrong financial decisions can truly derail a person’s life, ruin their relationships. The number one reason for divorce across the world is financial discord.”
As he sees it, people come under pressure to meet life’s milestones, such as buying a new house and car even when they may not be ready, steeping them into debt. “They end up borrowing from the bank for a new house they can’t afford. If you borrow for 20 years under a housing loan, that’s 60 lac rupees. With a steady EMI, you could end paying for 20 years up to 1.28 or 1.3 crores, ultimately costing you double your house and giving you nowhere near the same in resale value.”
The psychological impact of financial instability is tremendous. Vivek says, “Financial stress can become cancerous and affect every area of your life – giving you low self-esteem and low competence in life. You end up with extremely limited options, thus working for a paltry salary and putting boundaries on your life.”
One needs to strike the right balance to have a solid financial portfolio while also enjoying the finer things in life. Thus, there is something to take from all generations for some knowledge about money. From our parents’ generation, we can learn how to be frugal, not impulse-driven but driven by absolute necessity, forgoing trendy purchases for savings for a rainy day. From the millennials, we can learn to enjoy the experiences life has to offer, such as a fabulous family vacation once a year and dining out for special occasions. And from the newest generations, we can learn income diversification, a return to minimalism, and a thorough exploration of all the available financial options to make our dream of a debt-free and stress-free future a reality.