Building sustainable wealth for high net worth clients

The number of high net worth individuals doubled between 2010 and 2022 in North America, Europe, Asia and the Pacific, according to Statista. This trend is expected to continue. 

The growth of the high net worth market has also seen a significant uptick in wealth management solutions and services as companies step forward to provide this market with strategic support to further their wealth and legacy planning. Considering that North America had an estimated 7.4 million high net worth individuals as of 2022, it makes sense for wealth management to become a commodity. However, the value of the service lies in the expertise behind it.

Managing a wealth portfolio that helps ensure demonstrable growth and optimized value for the HNW individual requires a deep understanding of the market, the regulatory requirements and the individual’s custom needs. Life insurance, for example, can be a strategic and reliable wealth management avenue for HNW individuals in a landscape that is complicated by rising inflation, uncertainty and geopolitical instability. 

Life insurance is a trusted way for HNW individuals to allocate funds across various fields and preserve their wealth potential while mitigating risks. It’s an approach that can help empower affluent individuals to extend their assets while preserving them through different asset protection mechanisms provided by life insurance. 

Life insurance provides HNW individuals with confidence and stability within an investment asset designed to grow with them and with their wealth portfolio. Leveraging this asset class is an intelligent move for HNW individuals who want to expand their diversification parameters while building stable foundations for the future.

Creating long-term value

Life insurance is a powerful tool in estate planning as it can allow the HNW individual to secure the transfer of their wealth to future generations, navigating estate tax obligations while helping to ensure their beneficiaries receive the full value of their estate. It is a strategic move that optimizes tax advantages and safeguards against potential tax increases in the future. Versatile and flexible, life insurance is a smart wealth management strategy that continues the HNW individual’s legacy and helps secure their beneficiaries’ future.

However, there are multiple regulations and laws governing the use of life insurance as a tax avoidance strategy, and HNW individuals should have a trusted wealth management partner to help ensure they remain within ethical boundaries. This means a wealth professional should be on top of the everchanging federal and state tax laws and regulations with an experienced tax professional as part of the team. The latter may be focused on managing all tax-related elements regarding the investments to mitigate any business tax-related risks. Wealth management professionals should also understand everything about a client’s assets, family, goals and challenges before looking at possible structures to help protect these assets. 

A lack of due diligence can lead to obstacles, even decades later. 

Mitigating tax

Life insurance as an asset management strategy can help HNW individuals mitigate estate tax because the life insurance death benefit offers immediate tax-free liquidity when a family member or business partner passes away. However, the presence of a large degree of illiquid assets can create challenges when trying to pay these taxes and other costs associated with the transfer of wealth to heirs. An experienced wealth advisor can help high net worth clients invest in a policy big enough to cover the estate tax and safeguard from a possible forced sale of illiquid assets, or even recommend that the policy be owned by a trust as this can help minimize the risks.

As HNW individuals have various income streams from investments, businesses, real estate holdings and more, it can become complex to navigate asset management. Unforeseen challenges could arise if income streams are not correctly managed, which could then impact the wealth of the HNW client’s family. Mitigating these challenges requires a focused approach that adopts several different strategies. 

The first is tax mitigation strategies such as restructuring business entities, paying for expenses with pretax dollars, generating tax-free income and restructuring current trusts.

The second step is to take a holistic approach tailored to each portfolio as a custom entity. A HNW individual should have a team comprising estate attorneys, tax attorneys and financial advisors to deftly manage assets legally and with optimum results. Gifting assets, developing trusts, making charitable contributions and setting up life insurance — these are some of the intelligent steps HNW individuals can take to significantly reduce their tax on active income, passive income and sale of appreciated assets. They can also keep a high net worth individual’s assets protected from creditors and outside the taxable estate in a form that is fully usable and controllable by the individual.

A trusted wealth advisor

A trusted wealth advisor should be a foundational part of any HNW individual’s estate and asset management strategy. In the short term, the advisor can provide invaluable expertise in navigating complex financial landscapes and offering tailored strategies to optimize wealth preservation and growth. With a deep understanding of market dynamics, risks, investments and regulations, a wealth advisor ensures HNW individuals make informed decisions that align with their financial goals and risk tolerance. In addition, during periods of uncertainty and volatility, a trusted advisor ensures HNW individuals navigate these challenges with confidence.

In the long term, it is the wealth advisor who can play an important role in crafting comprehensive wealth management strategies for future generations. Establishing lasting relationships with HNW individuals and their families, wealth management professionals are an extension of the HNW individual’s specialized needs, aspirations and legacy. These advisors offer strategic planning, tax optimization and estate planning that have longevity and value. The value of a trusted wealth advisor goes beyond the in-depth understanding of markets, finance, wealth and assets, and into a commitment to the financial well-being of their HNW individual clients and helping them achieve their long-term financial goals.

Shawn Goheen, CSA, LUTCF, is a partner at, Goheen Insurance, A Simplicity Company. Contact him at [email protected].