4 Biggest Risks Facing High Net Worth Individuals

If you’re like most high-net-worth individuals, you’ve worked hard to get to where you are. Accumulating wealth rarely happens overnight, and you’re probably growing toward an even more abundant future. As you continue on that path, it’s important to look out for the unexpected. While it’s impossible to predict every obstacle that might come your way, planning ahead can help you mitigate risks that could threaten your wealth and your legacy. At Opal Wealth Advisors, that’s not something we take lightly.

We understand that high-net-worth individuals may not be aware of all the risks they face. Tuning into them is the first step toward protecting your wealth. That’s why we encourage our clients to take a thoughtful approach to determine what their risks are, how to navigate them, what needs protecting, and who these risks could impact. When seen through this lens, it becomes clear that risk management goes well beyond insurance policies and investment portfolios.

Risk Areas for High-Net-Worth Individuals

For affluent individuals and families, there are four main areas to protect.

1. Property

What are the assets in your life that you’d like to protect? Your home will likely come to mind first, which makes sense. It’s probably your most valuable asset and might also be where you spend most of your time. This presents some unique property risks like fires, floods, earthquakes, hurricanes, theft and more. That’s on top of general property damage that may be caused by regular wear and tear or an actual incident. If it’s been a while since you’ve reviewed your homeowners insurance policy, now might be a good time to reevaluate things. Here are some important questions to ask yourself regarding property protection:

  • Are you at an increased risk for natural disasters? If so, does your policy provide adequate coverage?
  • Has your home undergone a risk assessment? If so, have you taken the appropriate measures to minimize risks?
  • Is your home up to date with smoke detectors, security systems and so on?
  • Is there property within your home that isn’t covered by your homeowners insurance policy? That may include collectibles, antiques, sporting equipment and more. These may require separate insurance.

2. Liability

Your home, and the property within and around it, aren’t the only things at risk. You also want to think about the possibility of someone getting hurt on your property. This is especially true for folks who like to entertain or have service providers or domestic workers who visit their property regularly. Take a look at your homeowners insurance policy to see how much liability coverage you have. Depending on your lifestyle, your financial advisor might suggest dialing up your coverage. Some things to think about include:

  • Do you employ staff at home?
  • When service providers come to your property, do you check if they have appropriate insurance coverage?
  • Do you have a pool, trampoline or anything else that increases your liability exposure?
  • Do you operate a business out of your home?

3. Income

Would your family be financially secure if you were laid off? Or if you had to stop working due to an illness? No one likes thinking about these things, but it’s important to plan for your family’s income needs if the unexpected were to happen. That’s where the following resources come in. They can help ensure that your spouse and loved ones would be taken care of in the face of an emergency.

  • Emergency fund: Having cash reserves in a liquid account is critical. Saving three to six months’ worth of expenses is a common benchmark. If you run into an unexpected drop in income, that money can help see you through until things stabilize.
  • Disability insurance: If you become disabled due to an illness or injury that prevents you from working, disability insurance will provide a percentage of your income. You can opt for short-term coverage or more robust long-term coverage.
  • Life insurance: This can provide your loved ones with a death benefit if you pass away while your policy is active. Term life insurance expires after so many years, while permanent life insurance may last a lifetime. Some permanent policies accumulate a cash value that can draw on at any time, though this will likely reduce your death benefit.
  • Health insurance: The right health plan will cover preventative care and screenings, as well as interventions for medical issues. If you don’t have access to an employer-sponsored health plan, you can purchase a plan on your own through Healthcare.gov. Health insurance is especially important for folks who are retiring before age 65 and aren’t yet eligible for Medicare. 
  • Continuous learning: The most important investment is the one we make in ourselves. Taking advantage of professional development opportunities and trainings can expand your knowledge base and help widen your network.

4. Financial Plans


Every investor has their own risk tolerance. Your age and financial goals will also affect your asset allocation. Generally speaking, your portfolio should aim to go lighter on equities and heavier on bonds as you get closer and closer to retirement. When you’re younger, you have more time to bounce back from periods of market volatility.

However, it’s important to maintain some exposure to risk even when you’re retired. It can help you grow your wealth and keep up with inflation. At Opal Wealth Advisors, we run different scenarios and model projections to assess risk. From there, you can land on a diversified asset allocation that feels right for you. We also like to plan ahead and protect risks to retirement income. Annuities, for example, can help offset investment losses and provide guaranteed income.


Life evolves, and we can’t anticipate everything that will happen—but we can review and revise financial plans if your expenses are rising faster than expected. That might be due to inflation, an illness, or any other life change that increases your spending. What matters most is being proactive as you move through different stages of life.


People are living longer, which means you may be at risk of outliving your money. You can hedge that by being conservative with your financial planning assumptions, waiting until age 70 to begin taking Social Security, and adding annuities into the mix. Needing long-term care down the line could also translate to a major expense that drains your retirement nest egg. Investing in long-term care insurance may be well worth it.

Ways to Manage Risk

Once you’ve identified your main risks, you can manage them in the following ways:

  • Avoid: Eliminate the risk altogether. To do away with the risk of an auto accident, for example, you might avoid driving whenever possible. Of course, avoidance isn’t always realistic.
  • Reduce: Mitigate the risk. If you’re hosting a kids’ pool party at your house, you might hire a lifeguard.
  • Transfer: Outsource the risk to an insurance company. If you’re worried about potential flood damage to your home, you could purchase a separate policy.
  • Retain: Accept the risk while monitoring and managing it. That might mean letting your warranty on your TV expire. Just be sure not to forgo necessary coverage to save money in the short term.

Risk is everywhere. It’s impossible to avoid it entirely, but planning ahead can help protect your wealth and financial security if the unexpected happens. At Opal Wealth Advisors, we specialize in helping high-net-worth individuals and families manage risk effectively. Get in touch today to start building the right risk management plan for you.

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