When Your Net Worth Reaches This Number In Liquid Assets, It's Time To Upgrade Your Financial Planning

Working with a financial planner has a number of benefits, regardless of whether you're looking to invest for retirement or reach other financial goals. Some people may find it sensible to hire a financial planner once their savings reach $50,000. However, as investments and net worth grow, individuals will likely need more personalized advice and may need to upgrade their financial planning. Once an individual reaches high-net-worth individual (HNWI) status, they may benefit from advisors who specialize in serving affluent clients.

A high-net-worth individual is generally defined as someone with more than $1 million in liquid assets after accounting for debts and other liabilities. Their retirement may also resemble those of top net-worth individuals, who average about $605,000 in retirement savings. HNWI status distinguishes those whose wealth is largely held in cash, stocks, or securities from those whose wealth is tied up in non-liquid assets such as business interests or a primary residence. Even though both individuals have considerable amounts of wealth, HNWIs have a large concentration of liquid assets and can face more complex tax situations and risk-management decisions. As a result, high-net-worth individuals could benefit from financial planning services tailored for their level of wealth.

For someone with above-average finances, including emergency funds, savings goals, and investments, planning often centers on budgeting and investing. A standard financial planner may assess your income, assets, liabilities, and goals to create a plan for short or long-term financial goals. However, high-net-worth individuals have more at stake because of their substantial wealth and need financial planning that revolves around wealth optimization and preservation. High-net-worth financial planning may involve tax-loss harvesting, a strategy that involves selling securities at a loss to offset capital gains and reduce tax liability. Planners may also design custom diversification strategies that include private equity, real estate, hedge funds, or other alternative investments that require active oversight.

Legacy planning is also a major part of high-net-worth financial planning. With millions in assets, high-net-worth individuals may want to leave inheritance for their loved ones. High-net-worth planners can ensure individuals choose the right type of trust for their situation and can find a way to minimize tax liabilities through charity donations or life insurance plans. High-net-worth planners can also assist with philanthropic planning. In fact, a Bank of America study found that philanthropy is common among affluent individuals, who similarly have high levels of wealth. The study found that 81% of affluent households donated to charity in 2024. A specialized financial planner can structure those contributions to maximize potential tax benefits.