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Alleviating Investor Anxiety Through a Comprehensive Financial Plan

A holistic approach eases HNW investors' concerns to allow them to take more risks in pursuit of higher returns.

There’s a split among high-net-worth investors today 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 uneasy. 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 surrounded by these divergent long-term outlooks.

Financial Anxieties 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 because of 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 the markets have largely sustained their momentum, there certainly have been moments of volatility and headwinds to consider—like inflation, supply chain disruptions and investor sentiment about today’s record-high stock valuations. Accounting for their concerns, many investors want to feel empowered to accept more risk in their portfolio, including asset classes like alternative investments. More than a third (34%) of the respondents we surveyed said they were considering alternative investments, and among that group, 23% were HNW investors and 59% were ultra-high-net-worth investors. 

Unsurprisingly, UHNW investors are also the most worried about the impacts of emerging tax policies. New taxes on income, wealth transfers, realized and even unrealized capital gains that are being discussed within the halls of Congress could affect the net worth of UHNW Americans in the years ahead. Overall, a majority of wealthy investors (51%) see this as one of their leading concerns, and they’re looking to their advisor to help address it. 

HNW investors’ concerns are certainly not bound to the ebbs and flows of the market today. In fact, nearly half (49%) are also concerned about leaving a financial legacy for their loved ones. That anxiety even exists among UHNW investors—20% of whom are concerned about providing an inheritance. Interestingly, almost half of all HNW Americans expressed a lack of confidence in their heirs’ preparation to receive an inheritance, presenting an opportunity for intergenerational financial counsel.

 Opportunities to Create More Certainty

So, what does this all mean? In this environment, advisors have an opportunity to help alleviate their clients’ anxiety. To help clients manage these worries, every financial plan should first be rooted in the unique circumstances of each investor’s life, including their long-term vision, values and evolving goals—and include the sound counsel of a financial expert. It’s clear that financial advisors can and should be part of the solution. In fact, our study found that 40% of HNW Americans who had an advisor experienced asset growth during the pandemic while only 27% of those without an advisor could report the same results. Those with advisors also reported feeling far more prepared to transfer wealth to heirs than those who do not work with a financial expert (64% vs. 45%, respectively, say they have a plan for wealth transfer).

Importantly, this bespoke financial plan should also combine the right blend of life insurance for protection and investments for growth—a combination that can help eliminate worries around the “what ifs” and empower clients to realize “what can be,” allowing them to live the life they want today and in the future. In any financial season, but especially in this particularly uncertain environment, investors’ concerns cannot be resolved through investments alone. Instead, confidence is built by developing a financial plan that can thrive through a wide variety of economic scenarios. Regularly talk with clients about planning strategies, including both insurance and investments to manage their financial future—with a particular eye toward key factors: timing, risk tolerance, inflation, longevity, health care costs, taxes and legacy. 

One recent analysis illustrates why this approach is so beneficial. The study looked at one couple, both of whom are 35 years old, comparing a sample portfolio that included investments plus whole life insurance and an annuity product versus a model that involves buying term insurance and investing the difference. The results: after 30 years, a comprehensive financial plan yielded 5% larger overall portfolio values, 16% higher retirement income and 27% higher legacy value at age 95. 

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


Aditi Javeri Gokhale is chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual.

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