Advising Wealth

Tapping into the Growing, Global High Net Worth Market

Increased mobility, and the blending of global-geographic boundaries, has spawned the ‘international family,’ and opened new and complex planning challenges

by Adam Sandahl

Mr. Sandahl is Executive Vice President, Head of Individual Sales, Lombard International. Visit

As the number of high net worth individuals and families has grown and become more global, insurance providers have developed innovative solutions to meet their unique needs.

The market for these products is expanding around the world. The World Wealth Report projects global high net worth wealth will top $70 trillion by 2017. The United States leads all other countries with $16.2 trillion.

More and more, the high net worth are crossing geographic boundaries to work, marry, raise families, educate their children and retire. These “global citizens” may have jobs that take them to different locations around the world. They are forming international families, with spouses who hail from different countries and children who may have dual citizenship. Their plans may include retiring outside of their home countries or even in several locations.

This mobility poses challenges when it comes to wealth, particularly in the areas of tax and compliance. Across jurisdictions, there are vastly different laws regarding income, investments, retirement plans and charitable giving, among other areas. While international wealth management has always required a high level of expertise, the recent uptick in regulatory and tax-compliance initiatives has raised awareness and added a new level of complexity.

Against this backdrop, high net worth families with multijurisdictional portfolios are looking for ways to protect, preserve and invest in a tax-aware way that is compliant with the laws where they live, work, study and retire. For their part, insurance professionals are finding new ways to appeal to and serve this population.

Insurance-based Solutions for Wealth Management

One major development has been a growing interest in insurance-based solutions for wealth management.

Two of the most prominent are private placement life insurance (PPLI) and private placement variable annuity (PPVA) products. PPLI can be complicated but it is essentially a life insurance policy that is also an investment vehicle. In the U.S, the IRS taxes insurance differently from investments. PPLI appeals to clients because it is customizable, flexible and transparent, and offers a broad range of asset classes and strategies.

Similar to PPLI, PPVA is also customizable and offers tax and wealth-planning advantages. It is also an investment account wrapped in an insurance product. Taxes are deferred on investment gains until withdrawals begin on the annuity. A PPVA is also useful for maximizing charitable giving, offering tax advantages for the foundation or charity that is the beneficiary.

For both product lines, clients have the flexibility to invest with a range of managers and choose among asset classes, including hedge funds. Investment strategies within PPLI and PPVA have a longer time horizon and are therefore better able to weather market cycles. (See accompanying sidebar: What are Private Placement Life Insurance and Private Placement Variable Annuities?)

Strategies for Working with HNW Clients

For insurance advisors who serve wealthy clients, PPLI and PPVA are important resources to help meet clients’ needs. Nonetheless, awareness among insurance professionals is still limited.

Before insurance advisors can advise on specialized products, they need to know what the HNW market expects and how to best meet those needs. The ultimate goal for the advisor is to help clients focus on their wealth-planning needs and not on tax and compliance issues.

The first requirement to working successfully with HNWI is to provide high-touch, personalized service. This means speaking their language, both literally and figuratively. Complex issues need to be explained simply, allowing clients to understand what they are getting and demonstrating the value of the solution. Advisors may also need to make themselves available across time zones.

“High touch” service now also includes sophisticated digital tools that allow HNW clients to access their investment information securely and easily across devices.

A Multidisciplinary Team of Experts

A second key component to serving the HNW market is a team approach. Given the complex nature of mobile wealth holders’ needs, no one professional can meet all of them. It requires a multidisciplinary team that might include insurance professionals, attorneys, tax advisors, investment managers and representatives from family offices.

They are forming international families, with spouses who hail from different countries and children who may have dual citizenship

The objective is to bring the various teams together to craft a broad solution set that meets the individualized needs of the global, mobile HNW family. Among the options, private placement life insurance and private placement variable annuity solutions often emerge as top choices.

There’s no question that building and structuring a PPLI is time-intensive and requires particular knowledge and expertise. Some insurance advisors endeavor to meet the needs of their HNW clients with the resources they have immediately at hand.

Most, however, partner with specialist insurance providers with deep experience in PPLIs and a network of complementary professionals. This allows the advisor to maintain a relationship with his or her client for the long-term (and continue handling the client’s other insurance needs) while bringing the enhanced capabilities of a team of experts.

Seeking a Knowledgeable Partner

When seeking a partner to provide PPLI and other solutions tailored to the HNW, insurance advisors should ensure that the provider meets several key requirements.

  • First, does the provider have a deep understanding and experience working with UHNW individuals and families?
  • Second, is the provider global, with multiple locations around the world? Some key markets include the United States, Latin America, Asia and Europe. Multi-market providers are more adept at understanding the nuances of each jurisdiction, and can also provide the personalized, in-person service HNW families expect.
  • Third, does the provider have a proven track record of providing, structuring and customizing specialized investment and insurance solutions? Finally, is the provider nimble and flexible and able to execute quickly at a high level?

Insurance advisors have become key players in helping their global HNW clients achieve their wealth management goals. This robust and growing market provides substantial opportunity. By being well informed about the options available, including PPLI and PPVA, insurance professionals can add significant value. As part of an integrated team, they can strengthen client loyalty by helping them protect and grow their wealth now and for future generations. ◊


What are Private Placement Life Insurance and Private Placement Variable Annuity Products?

High-net-worth families who live, work and have family in countries around the world often have complex wealth planning needs. They and their advisors must navigate tax and compliance issues in multiple jurisdictions. In recent years, as wealth and the number of “global citizens” have surged, two insurance solutions have become more widely known and popular. They are private placement life insurance (PPLI) and private placement variable annuities (PPVA).
Some of the specific benefits include income tax deferral, asset protection and simplified tax reporting. These products are available only to “qualified investors,” as defined by the IRS.

PPLI is a life insurance policy that is also a tax-efficient investment vehicle.
The IRS taxes life insurance differently from investments, with no income tax or 15 percent capital gains tax when a policy pays out upon the death of the holder.

Clients further like PPLI because it is customizable, offering control over investment choices, and fees are transparent.
PPVA is another popular option that offers tax and wealth planning benefits. During the accumulation period of a properly structured deferred PPVA, premium is allocated among investment choices. Taxes on investment gains are deferred until withdrawals on the annuity begin. One of the key differences from PPLI is that the proceeds attributable to gain are taxable on the death of the PPVA holder.

PPVA is also popular among individuals and families who want to maximize their charitable giving while maintaining control while the policyholder is alive. For the charitable beneficiary organization, all the deferred gains pass tax-free.

For further information and to learn more about how your clients might benefit, you can read these articles: