Many people believe that significant wealth will cure their financial worries. However, the reality is that most high-net-worth individuals (HNWIs) still face considerable complexity—from preserving their wealth to passing it on to future generations.
This article explores key strategies HNWIs can use to manage and grow their wealth. But first, let’s establish exactly why financial planning is so important for these individuals.
What is a High-Net-Worth Individual (HNWI)?
While there is no objective or legal criterion, the finance industry generally uses the following definitions:
- High-Net-Worth Individuals (HNWIs): An individual with at least $1 million in investible assets. Recent reports suggest there are around 5.5 million people who qualify as HNWIs in the U.S.
- Ultra-High-Net-Worth Individuals (UHNWIs): An individual with over $30 million in investible assets. The U.S. is currently home to 282,626 people who qualify as UHNWIs.
Individuals within either category have significant financial opportunities. Compared with the median U.S. household—which owns roughly $26,400 in bonds, stocks, and mutual funds—HNWIs can afford to explore more varied and complex investments.
This is reflected by their rapid accumulation of wealth: global HNWI wealth grew by 4.2% in 2024, which is nearly 2x the rate of overall population wealth. However, increased financial opportunities also carry increased complexity—a fact which many HNWIs and UHNWIs quickly realize.
The Hidden Vulnerabilities of Substantial Wealth
HNWIs must navigate a series of complicated challenges and tradeoffs, including:
1. Managing Complex Portfolios
Most high-value portfolios are diversified, which is vital to mitigate risks. But this also creates a lot of complexity—and many HNWIs may struggle to even stay on top of their full slate of investments.
Complexity also creates risk: with multiple income sources, business ownership stakes, and international holdings, you are exposed to geopolitical shocks, currency volatility, and regulatory changes. From changing tax laws to stock market volatility, larger and more varied portfolios demand more conscious management—and more effective strategies.
2. Navigating Emerging Investment Opportunities
Alternative investments now represent 15% of HNWI portfolios, spanning private equity, real estate, cryptocurrencies, and specialty assets. These can be highly lucrative when managed properly, but they present a few clear challenges:
- Advisory Knowledge: Over 60% of HNWIs say they must go outside of their primary advisory relationship to access the alternative investments they want.
- Unpredictability: Novel assets and investment strategies are generally less reliable and harder to predict across a long time horizon than other investments.
These challenges mean HNWIs must make difficult decisions about their risk tolerance, as well as finding the right advisors who are able to help them navigate complex emerging markets.
3. Balancing Lifestyle with Long-Term Sustainability
Liquidity is essential for any individual who may face sudden, unexpected expenses, but it also limits the volume of your wealth allocated to more lucrative investments. Short-term lifestyle desires may conflict with long-term wealth aspirations—leading many HNWIs to face tough dilemmas.
HNWIs recently increased the share of their assets kept in cash, which makes sense given consistent warnings about the potential for economic turbulence. However, most will likely prefer to find a balance between long-term investment and liquidity, which requires regular recalibration based on personal and market circumstances.
4. Protecting Your Legacy
Accumulating wealth is one thing; passing it on to your loved ones is another. Americans paid roughly $24 billion in estate taxes in 2023 alone—making clear how important strong planning and tax strategy are to protect HNWI’s legacies.
This challenge is compounded by the sheer volume of wealth set to be passed between generations. With an estimated $83.5 trillion in wealth set to transfer to HNWI and UHNWI children by 2048, many HNWIs are particularly concerned about estate and legacy planning.
A comprehensive financial plan can help you navigate all of these challenges, but it must be built around effective and targeted wealth management strategies.
Key Wealth Management Strategies for HNWIs and UHNWIs
1. Advanced Tax Strategies Beyond Basic Deductions
Advanced tax planning can save substantial amounts over time. Research shows tax-loss harvesting alone can add 0.47% to 1.27% in additional annual after-tax returns, potentially worth millions on large portfolios.
Even for sophisticated investors, opportunities often remain untapped—from optimizing asset location to leveraging charitable vehicles. With exemptions and tax laws evolving, proactive planning is critical to preserving more of your gains.
Action Steps:
- Implement tax-loss harvesting to offset gains, even in strong markets. In 2024, 35% of S&P 500 stocks declined despite market gains—representing valuable harvesting opportunities.
- Prioritize tax-efficient investing: use municipal bonds for tax-free income and favor index funds for taxable accounts.
- Apply an asset location strategy—hold REITs, bonds, and other tax-inefficient investments in tax-deferred accounts; keep growth assets in taxable accounts for compounding benefits.
- Use charitable trusts or donor-advised funds to gain deductions, support causes, and reduce your taxable estate.
2. Avoiding Over-Concentration and Illiquidity Risks
Concentration risk is one of the most significant threats to long-term wealth preservation. Research analyzing stocks in the Russell 3000 Index since 1980 found that more than 40% of all companies experienced catastrophic losses, while 66% of stocks underperformed the index, and just 10% were “megawinners.”
HNWIs who hold large positions in a single stock or illiquid assets face exposure to volatility, liquidity constraints, and tax challenges when rebalancing. A diversified, liquidity-aware approach provides greater flexibility and downside protection.
Action Steps:
- Evaluate whether any single stock or asset represents more than 10% of your portfolio.
- Consider exchange funds, options collars, or variable prepaid forwards to diversify or monetize concentrated positions while managing taxes.
- Maintain 2–3 years of liquidity to fund expenses, withstand market downturns, and seize opportunities.
- Reassess private investments and real estate exposure to ensure overall liquidity balance and avoid being “asset rich but cash poor.”
3. Building Multi-Generational Wealth Strategies
Estate and legacy planning require far more than a basic will. Changing tax exemptions and regulatory environments make it essential to formalize how wealth transitions—minimizing taxes while preserving control and family harmony.
Action Steps:
- Establish or update trust structures such as GRATs, FLPs, or dynasty trusts to efficiently transfer appreciating assets.
- Revisit estate and gift tax plans before the 2025 exemption sunset, when thresholds may drop by more than half.
- Integrate philanthropic goals: donor-advised funds provide flexibility and immediate deductions; private foundations allow greater control.
- Involve heirs in the planning process early to align values, governance, and financial literacy across generations.
4. Balancing Growth, Risk, and Legacy
Your portfolio should reflect not only your financial goals but also your personal priorities—whether that’s lifestyle preservation, family support, or philanthropy. However, over 65% of HNWIs acknowledge that emotional or cognitive biases impact their investment decisions during significant life events.
To mitigate these risks and make more informed decisions, it is essential to maintain objectivity and discipline—even if that requires an external partner who can help you think through complex or emotionally-charged decisions.
Action Steps:
- Revisit your risk tolerance after major life events to ensure alignment with your legacy objectives.
- Diversify across traditional and alternative investments: equities for liquidity, private equity for growth, and real estate for income stability.
- Evaluate ESG or impact investments to align wealth with personal values without sacrificing returns.
- Conduct annual strategy reviews with your advisory team to rebalance holdings and confirm that your plan remains aligned with your long-term goals.
Should You Hire a Financial Advisor? Take Our Self-Assessment
For most HNWIs, there comes a time when managing their own wealth is counterproductive. However, it is not always easy to evaluate your current financial situation or evaluate how it will shape your future.
At Marshall Financial Group, we created a Financial Health Self-Assessment to help you solve that problem. By answering a few simple questions, you will get a clear Financial Health Score that will help you gain clarity about your current financial plan—and pinpoint next steps to help secure your future.
