FINANCIAL PLANNING FOR HNIs
Most HNIs do not realize that they are in dire need for Financial Planning.
I am in control.
Most HNI families we meet feel they have enough wealth to handle anything that life can throw at them. This wealth is usually spread across their business, a slew of properties both residential and commercial, PPF accounts across all the family member’s names, bonds, stocks, mutual funds, FDs, structured products, PMS, etc.
They are comfortable and content that there is a continuous source of income which will take them through all expenses and their lavish lifestyle - house, shopping, travel, entertainment etc. on a regular basis. They rarely feel the need to save from this income, because they never think about the impact of unexpected eventualities.
What they are basically relying on is a continuous flow of income all through the future to handle their expenses and their lifestyle. They feel the assets they have accumulated over years, either by way of inheritance from parents/in-laws or by way of impulsive purchases will see them through the future. As an HNI, you can probably relate to this.
But risk is not in your control
The biggest risk you take is your dependency on continuous income. Can you ever estimate the quantum of risk? What if your business goes through a rough patch? What if a medical emergency hits you hard? How can you then handle monthly expenses and your life plans? Will you allow your lifestyle to take a hit? If your answer is yes, we ask why? If your answer is no, read on.
The financial plan
The first and most important step in financial planning is to assess all aspects of RISK’s that you and your family are exposed to. Some of them include:
A contingency reserve of at least 6 months to a year to be set aside in a mix of liquid plus arbitrage funds to cater to such emergencies. Some people prefer to keep FDs for the same too.
The need for capital infusion into your business to handle sudden working capital requirements or for some urgent mega expansion plans. Since growth is not usually linear; there is always a trough followed by a peak.
The foundation of the business must be rock solid and there should be enough assets invested outside of the business to dip into in-case of rough weather. The risk of economy or bad business deals are to be seriously considered.
Evaluating and getting the right health cover is an absolute must. It is important to first assess the risk cover needs and then ensure adequate medical cover, accidental cover, critical illness cover for HNI families.
Apart from medical cover, a good life cover goes a long way in ensuring security of family goals and independence for the spouse, retaining her standing in the society, irrespective of wealth accumulated. Making a WILL is also an important action plan.
Risk exposure to every family is different. We at MFA will help you take control of your finances by giving you adequate cover or be ready with enough to be able to absorb the risk yourself. Once you have covered all your risks, you can be rest assured and happily take strides forward both in your business and in your life.