Sophisticated strategies and tools are key to safeguarding and growing wealth amid economic uncertainty.
As the world continues to mint new millionaires at a rapid pace, there is rising demand for investment strategies that can help them effectively diversify their investment risk. In 2023, the global population of high-net-worth individuals (HNWIs) and their wealth reached record levels, driven by a rebound in the global economic outlook. According to Capgemini’s World Wealth Report 2024, global HNWI wealth expanded by 4.7% to US$86.8 trillion in 2023, while the HNWI population grew by 5.1% to 22.8 million.
Unlike traditional wealthy individuals who may have inherited their assets, newer HNWIs are typically self-made entrepreneurs who may have concentrated their investments in specific industries or businesses. Without a proper diversification strategy, a downturn in a particular sector can result in substantial losses for them. As such, balancing the potential for growth with effective risk management is key for this group.
“Concentrating wealth in a single industry or region is a risk that many new millionaires cannot afford to take. Diversification, particularly through alternative assets, is a necessity for preserving and growing wealth,” says Thomas Lee, Chief Product Officer, Manulife Singapore.
Amid persistent uncertainty, HWNIs should adopt diversified strategies that mitigate risks while capitalizing on emerging opportunities in different sectors. The rising popularity of alternative assets such as private equity is just one example of the more sophisticated approaches being adopted by investors today to spread the risk of their portfolios.
Getting The Mix Right
To diversify effectively, HNWIs should incorporate a mix of traditional and alternative assets into their portfolios. Traditional assets, such as stocks and bonds, provide liquidity and are commonly used in investment portfolios, but they come with their own risks. Stocks can be volatile, with prices subject to market fluctuations driven by economic changes, company performance, investor sentiment and many other factors. Bonds, while usually less volatile, are susceptible to interest rate risk, where rising rates can lead to a decline in bond prices, and credit risk, where the issuer may default.
On the other hand, alternative assets, including private equity, hedge funds and real estate, offer high growth potential but are generally riskier. For instance, private equity investments are often illiquid and require a long-term commitment, with the possibility of losing capital if the businesses do not perform as expected. Meanwhile, hedge funds can involve complex strategies that may lead to significant losses in adverse market conditions. However, by adopting a range of asset classes, investors can reduce their overall risk and increase their chances of long-term success.
Diversifying across geographies is also important as global markets are affected by varying economic cycles, political climates and regulatory environments. By investing in a variety of regions, investors can further insulate their portfolios from localized risks.
They should also seek investment products designed to balance risk and reward, allowing them to benefit from market gains while minimizing exposure to losses. Such products usually combine the upside potential of equity investments with the lower risk of fixed-income securities.
For instance, indexed universal life insurance products offer the potential for growth linked to market indices, while also providing a guaranteed minimum interest rate to protect against downside risk. These products can also serve as a valuable tool for estate planning, and a means to efficiently transfer wealth to the next generation.
“Products like indexed universal life insurance are becoming essential instruments in the wealth management toolkit of high-net-worth individuals,” says Lee.
Insurance Tool To Achieve Your Goals
Manulife Singapore offers a range of insurance solutions tailored to the needs of both next-generation and established HWNIs. One notable offering is one of the newly-launched Manulife’s Signature solutions, which provides lifetime income1 by leveraging an index account that is tied to the performance of the S&P 500 Index. This offers the flexibility to grow your wealth while protecting it from market fluctuations.
Meanwhile, Manulife’s Signature Indexed Universal Life Select (II) flexible features, such as the automatic premium spread and the option to reallocate2 values between fixed and indexed accounts, offer policyholders significant advantages. These features allow for better financial planning, risk diversification and the potential for enhanced policy performance. By leveraging these options, policyholders can tailor their Indexed Universal Life policies to meet their unique financial goals and risk tolerance3.
Signature Indexed Universal Life Select (II) is designed to adapt to the changing needs of HNWIs, providing both a death benefit4 to protect their legacy and the ability to access funds for opportunities or emergencies, all while ensuring a guaranteed minimum interest rate to shield against market volatility.
Says Lee: “As the financial landscape continues to evolve, these types of innovative, secure indexed universal life insurance policies are essential for HNWIs who have yet to establish a comprehensive diversification strategy for their investment portfolios.”
Important Notes
Signature Indexed Universal Life Select (II) is underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy’s surrender value (if any) may be zero or less than the total premiums paid.
This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details and exclusions for the mentioned insurance product in the policy contract.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).
We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors before making a commitment to purchase a policy.
Information is correct as at October 1, 2024.
This material is intended to provide a general overview of Manulife Singapore’s insurance products. This material is for distribution in Singapore only and shall not be construed as an offer to sell or solicitation to buy or provision of any insurance product outside Singapore.
1Actual monthly income payout will depend on the actual amount, timing and frequency of premium payments, Income Start Year, Net Premium Allocation, actual crediting interest, actual policy value growth, actual charges, selected Automatic Premium Spread option and any policy transactions performed. Payment of monthly income is not guaranteed and the actual monthly income may vary from any illustrations provided from us to you.
2Allowed two years after the date we issue the policy to you and before age 100. Each Account Reallocation request must be at least 2 years apart. You may also change the Net Premium Allocation and/or Index Account Composition, subject to our approval. For more details, please refer to the policy contract.
3You may pay premiums of any amount at any time before age 100, within the maximum limits we set. If you have enough cash value in the policy, you may skip a premium payment or stop paying premiums entirely. You may need to pay extra premiums if the actual interest we pay you is lower than illustrated, if you take a loan, or if you make a withdrawal or the actual policy charges increase. The actual amount and frequency of premium payments will affect the policy value and potentially the death benefit as well as how long the policy is kept in force.
4Death benefit is the face amount of the policy or the policy value at the date of death, whichever is higher, less any outstanding policy debt.
Read the full article here
