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Alleviating investor anxiety through a comprehensive financial plan

Today there is a divide between high net worth investors when it comes to the economy and their financial future. While a small majority are feeling optimistic, more than four in 10 are uncertain and uncomfortable. In recent research, we explored this gap to understand why people are feeling this way, as well as what advisors can do to help their clients who are beset by these different long-term perspectives.

Financial concerns among America’s affluent

As we sought to understand these investors, our research found that a quarter of HNW investors are concerned about their long-term financial security due to the pandemic and the economic disruption left in its wake. Nearly half (48%) of HNW investors are concerned with managing market performance, risk and volatility. While markets have largely maintained their momentum, there have certainly been moments of volatility and headwinds to consider — such as investor sentiment regarding inflation, supply chain disruptions and today’s record-high stock valuations. Considering their concerns, many investors want to feel empowered to accept more risk in their portfolios, which include asset classes such as alternative investments. More than a third (34%) of the respondents we surveyed said they were considering alternative investments, and of that group, 23% were HNW investors and 59% were ultra-high-net-worth investors. .

Unsurprisingly, UHNW investors are also most concerned about the effects of emerging tax policies. The new taxes on income, money transfers, realized and even unrealized capital gains that are being discussed in the halls of Congress could affect the net worth of UHNW Americans for years to come. Overall, the majority of wealthy investors (51%) see this as one of their major concerns, and they are looking for their advisor to help address it.

HNW investors’ concerns are certainly not tied to market volatility today. In fact, nearly half (49%) are even concerned about leaving a financial legacy for their loved ones. This concern is also present among UHNW investors—20% of whom are concerned about providing an inheritance. Interestingly, nearly half of all HNW Americans expressed a lack of confidence in their heirs’ preparedness to receive an inheritance, presenting an opportunity for an inter-generational financial counselor.

opportunities to create more certainty

So what does this all mean? In this environment, consultants have the opportunity to help ease their clients’ anxiety. To help clients manage these concerns, each financial plan must first be rooted in the unique circumstances of each investor’s life, including their long-term vision, values, and developed goals—and include the soundness of a financial expert. Join counseling. It is clear that financial advisors can and should be part of the solution. In fact, our study found that 40% of HNW Americans who had a mentor experienced an increase in wealth during the pandemic, while only 27% of those without a mentor could report similar results. Advisors also reported that they felt more prepared to transfer money to heirs than those who did not work with a financial expert (64% versus 45%, respectively, say they have a plan to transfer funds). .

Importantly, this bespoke financial plan should also have the right mix of life insurance for protection and investment for growth – a combination that can help allay concerns around “what ifs” and clients. empowers them to realize what could be”, allowing them to live. The life they want today and in the future. In any financial season, but especially in this uncertain environment, investors’ concerns cannot be resolved through investments alone. Instead, confidence is built by developing a financial plan that can thrive through a variety of economic scenarios. Speak regularly with clients about planning strategies, including both insurance and investments, to manage their financial future—with a specific eye toward key factors: timing, risk tolerance, inflation, longevity, healthcare costs, Taxes and inheritance.

a recent Analysis Shows why this approach is so beneficial. The study looked at a couple, both of whom are 35, comparing a sample portfolio that included investments as well as whole life insurance and an annuity product versus a model that included buying term insurance and investing the difference. Is. Result: After 30 years, a comprehensive financial plan yielded 5% larger overall portfolio value, 16% higher retirement income, and 27% higher inheritance value at age 95.

With greater certainty created through a comprehensive financial plan, HNW investors can more comfortably take risks in their investment portfolio in pursuit of higher returns. As advisors engage with their clients, it will be important to explain why this holistic approach can be a path to reduced anxiety and greater chances of success and financial security.

Aditi Zaveri Gokhale, President of Investment Products and Services, Northwestern Mutual

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