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The risk inverse: Why - despite what you might think - more money means more planning


You might assume that risk goes down as wealth goes up. Logically, having the means should mean less danger, more confidence, fewer worries. But risk likes to do the last thing you expect.

Risk becomes increasingly labyrinthine as wealth grows, snaking into areas of your life and finances you probably never thought you’d find it. The hospital bill after a loose acquaintance takes a spill during a party at your summer home. The legal counsel you have to retain when you decide to chair a volunteer board.

For high-net-worth individuals, planning for uncommon sources of risk is a critical piece of financial planning. However, studies have shown that even for those with more awareness of risk’s ripple effect, there’s a preparedness gap.

Closing that gap starts with taking the time to consider the unexpected facets of your life it could touch:

Your status

Maybe you aren’t a celebrity, maybe you don’t even have a public-facing career, but substantial wealth often means an elevated profile. Which means risks to that profile. From targeted identity theft and cybersecurity threats to reputational risk and lawsuits to the remote possibility of a ransom demand, wealth invites attention that can turn costly. While asset protection is critical, in general, it’s particularly important in terms of limiting access to assets that could be targeted based on people knowing who you are and that you’re wealthy.

Your social calendar

Playing host is a perk of success, opening your home for a fundraiser, organizing a destination event, funding a foreign tour. With the means to entertain en masse, however, comes a multitude of what-ifs. What happens when you’re hosting a reception at your home and someone slips and falls? Or when you hire a yacht for an event and a guest loses jewelry or has a pricey device damaged? As potential risk exposures multiply, so should your plans to protect against them.

Your staff

If you have a nanny, a housekeeper, gardeners, security personnel or any other domestic employees, you are essentially the CEO of your home, with a staff whose salaries and employment benefits you need to consider. But alongside the usual work of attracting and retaining the best talent, you need to factor the more personal nature of these relationships. That proximity could heighten the possibility for conflict and retaliation and require legal agreements like NDAs.

Your teenager

As children venture further out into the world – especially in vehicles – the burden of any reckless pre-18 decisions still falls on mom and dad. And it’s a burden parents need to keep in mind for even the best-behaved kids. For instance, should a teen driver been found at fault in a serious accident, how would you contend with a sizable payout or possible legal verdict? Traditional insurance has limitations, so having the proper amount of coverage and planning that goes beyond typical sources is imperative.

Your social media activity

Social media platforms are powerful amplifiers – of good, of bad, of risk. Our “virtual” words invite many of the same potential consequences as any other public statement, just with infinitely more ease. But there’s more to it than that. While you need to consider what social media could cost you in terms of reputational risk and legal liability, you also want to think about the money social media makes you. If you’ve built a following and wealth via monetization on these platforms, you need to think about protection and contingency strategies should something disrupt that income.

Your passions

Being able to afford the luxuries that captivate your imagination is another luxury of wealth. But what does maintenance for a mini-fleet of classic cars or a sculpture garden look like? When it comes to prized possessions – jewelry, timepieces, cars, art – planning often revolves around safeguarding the places these things are kept. Collectors need to consider property insurance, security systems, climate control and also climate change – accounting for things like flood or smoke damage.

The weather

The likelihood of having more than one home increases as wealth does, and when it comes to protecting those homes, climate change has become one of the most critical factors. Second, third, fourth homes are often selected for location – locations increasingly vulnerable to the impact of extreme weather like coastlines, mountains prone to wildfires and overlooks primed for mudslides. Planning is about taking stock and right-sizing things like insurance protection and also considering each home’s size and structure. Does it have the right security systems? Does it need fire sprinklers?

Despite the comfort and confidence it makes possible, wealth has a positive correlation with risk – for every issue it solves, it could potentially magnify others. And that relationship is one people need to not only be aware of, but to prepare for.

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