Legacy Planning: How HNIs manage their wealth through timely estate planning

November 18, 2021 12:53 PM

One of the big shifts that is happening is that the investors are seeking estate planning services early in their life.

Legacy Planning, estate planning, financial planning, wealth management, will writing, Covid-19 pandemic, HNIsEstate planning is one the fastest growing service offerings in the wealth management industry.

By Asheesh Chanda, Founder and CEO, Kristal.AI

Estate planning is one the fastest growing service offerings in the wealth management industry. The growth is driven by an increase in the number of HNI clients in India. As per industry reports, HNI population in India is expected to grow by 60-70 per cent over the next 5 years. But beyond the increase in numbers, there is also a change in consumer behavior. Here let’s look at some trends that are shaping the estate planning industry.

Start early

One of the big shifts that is happening is that the investors are seeking estate planning services early in their life. Instead of waiting for their 60s, customers are planning their wealth transfer in their early 40’s. The pandemic has been one of the key factors behind this shift. A sense of uncertainty of life has triggered many customers to put legacy planning in action. While the pandemic may have triggered this change, it has made many clients aware of the merits of legacy planning.

Inclusive decision making

While the signatory to the will is still the male member, the decision as to who gets what is taken with active concurrence of the spouse. Women in younger HNI families are also asserting their opinions more equally in the wealth decisions of the family. They are emerging as the key influencers in the decision making process.

When it comes to portfolio management decisions, the new age investors are involving their kids too. They are getting their college going kids to participate in the investment discussions with their advisors and wealth managers. They seek their opinions around new age companies & sectors. While they still retain the final decision with themselves, they do encourage their successors to get familiar with the portfolio and the advisor.

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Avoidance of regulatory risk

Contrary to popular belief, most investors don’t want to take any regulatory risk. They prefer to be on the right side of the law, especially when their international investing is in the picture. Given that the government has been very active in checking the money flow internationally, investors want to avoid investing through tax havens like the Cayman Islands. They are choosing safe destinations like Singapore to set up their family offices. Since wealth planning involves significant tax planning, investors prefer to opt for simpler ownership structures which are easier to declare tax liabilities and also avoid any scrutiny by the tax agencies.

Risk optimisation taking priority over return maximisation

When it comes to investments decisions, affluent investors have come to realise the merit of risk management and hence asset allocation. Most investors spend a considerable amount of time understanding the inherent risks of each investment. They seek investments that can preserve their capital. However they do seek alpha generating opportunities like alternative funds, unlisted stocks and structured products.

Offshore family office

Many investors are preferring to consolidate their wealth & investments in offshore destinations. They have kids who are either studying or settled overseas, hence they prefer to park their wealth in USD denominated accounts to avoid the rupee impact. Singapore with its Variable Capital Company offering is attracting many global HNIs to open their family offices in Singapore.

Legacy planning provides security over inheritance and should be effectively executed by HNIs. Portfolio optimisation along with striking a balance between being stable and tactical would help in the long term. Sustaining multi-generational wealth through smart estate planning is going to assure a hassle free future for all the generations to come.

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