Why Even Ultra HNIs Need to Look Beyond Maximizing ROI
Roshan took an active interest in his investments and read articles, watched TV channels on the subject and offered his own analysis. He is a firm believer in being active in investments and even has his financial advisers run with him to make his money grow faster.
Dilip was moaning internally. This is how his calls usually go and they stretch endlessly with Roshan talking the most. It talks about investment themes, products to invest in, exposes trends in the economy, markets, companies, etc.
He invariably came up with new investment products that worked well and seemed to have potential. He had wanted to invest in various PMS, AIF, direct investments in startups, international investments in stocks, ETFs, REITs, etc., direct real estate investments in different countries, cryptos, peer-to-peer lending products, etc.
Wealth growth as a goal in its own right
Dilip tried to figure out if there were any specific goals or objectives that Roshan was working towards. Dilip found nothing of substance. In one of the calls, he even asked Roshan why he wanted to maximize his returns when he already had a huge corpus that will continue to grow.
Roshan was appalled at that moment. “Don’t we all want to maximize our returns? What else is the point of investing when normal goals are achieved?” he asked.
Dilip had replied that controlling risk and preserving capital are goals that need to be considered as Roshan was approaching retirement and wealth was already substantial. Roshan was unimpressed.
Dilip changed course: “What will you do when your wealth doubles? What will change for you then?
Roshan stared blankly at Dilip. The answer was obvious. Nothing would really change. Roshan wanted to increase wealth for herself and it had become the opium that drove him. This is the case for most high net worth individuals (HNI).
High anxiety levels
There is a very curious thing that we, as advisers, have observed. Even those with a large corpus still worry about their future. These are the people who keep asking us if their future is secure and if they are well funded.
We find it incredulous that such people can have anxiety about their finances, especially when it is clear that they have enough money for everything they can think of.
These people want us to take very high medical insurance coverage, which is not really necessary because they can easily pay their bill if it exceeds the normal coverage. It is probably this anxiety that drives them to consider higher and higher yields.
The turn signals are on
Many of these people have been very successful in their careers. They tend to extrapolate their intelligence to all areas, including finances. Many of them are business people who tend to compare the returns of their investments with those of their business.
They believe it is better to invest in their business and if they have to invest elsewhere, it will bring them higher returns. Most of these people overestimate their investment acumen, are overconfident, do not diversify investments, and underestimate the risk taken.
Also, for many people who have built their wealth over time, this is their baby. They won’t ask it. They will not allow another to touch it. Even if they allow it, they will be totally on the spot, dictating what to do.
They miss what’s really important
We all want to succeed and be seen as successful. Many have become ultra-rich through their pursuits, and the wealth they have built has taken on a life of its own. They define their success in terms of their ability to grow their wealth, instead of framing their success and value in other fulfilling ways.
Having earned their money, they could have focused on a happy, exciting, peaceful, and fulfilling life. This may mean pursuing hobbies like music, gardening, etc., participating in social/cultural activities, having a vibrant social life with friends and relatives, traveling to various places, etc.
Some also want a life that has purpose and meaning. This quest can take them in many other directions that they will find rewarding and uplifting. These are the really important activities in life. Someone who has money is able to pursue this much more easily than others who are struggling with financial commitments. And really enjoying what life has to offer. What is true for HNI is largely true for all of us.
Philanthropy and social impact
We are all able to achieve our success and distinction through the help and contribution of various people along the way. We do not succeed in a vacuum and we have to recognize that. Therefore, when we are successful in life, we must keep this in mind and pass it on to others.
Different people do it in different ways. Some teach, coach and pass on their knowledge. Others contribute financially on top of that. Still others do involved philanthropy, where they contribute, manage, monitor and ensure that their donations have the desired social impact. There are many social impact projects in which one can invest. In such projects, returns can be low; but one gets the satisfaction of contributing meaningfully to society. HNIs are in an ideal position to engage in this.
Life is about doing what is appropriate at different stages of life. In Hindu philosophy, there are four asramas in life: Bramhacharya, Gruhasta, Vanaprastha and Sanyasa. The person should adopt behavior appropriate to the asrama.
Likewise, as we move up the wealth slider, we need to shift gears and move on to other fulfilling areas and make life an absolutely delightful and fulfilling experience, in the next phase of life. . We need to reframe what constitutes success for us now.
We must be willing to let go and rediscover ourselves and boldly step forward to embrace life. Unfortunately, clinging to money and fixating on it drains energy and makes life a chore.
Having money should be a liberating experience. We should learn to make money work for us and not be its prisoner. Only we can do it.
Suresh Sadagopan is the Managing Director and Principal of Ladder7 Wealth Planners Pvt. ltd. and the author of the book If God Was Your Financial Planner