Why will a person with high net worth (say 2m) need endowment, annuity or retirement plans?

Hi anon,

Quite simply, because they want certainity.

An annuity provides a guarantee because an insurance comapny is the only entity in the world that can weigh both sides of the coin.

Die too early? You won't lose out, you still get the death benefit. Add that to the income received and it'll be more than what you put in. The insurer doesn't have to worry about paying you income any more.

Live too long? Your premiums may have been used up but the risk pool of other annuity participants will ensure that you can continue to receive your income. The insurer doesn't need to pay you a death benefit any more.

ETFs, REITs, stocks, and the like, are still risk based investments or income assets. They can lose value at the worst possible time, or even halt payouts when you need it the most (just look at HSBC). When half your portfolio is crashing and burning, you will be glad you have a part of your pie unaffected and churning out income that you need to ride out the storm.

If you have 2m, you will become an accredited investor. Who can access to wider range of investment that normal people are not able to access. And with 2m, you should be very savvy in investing, thus, Wont even look at endowment, annuity, retirement plan.

I'd think it depends on the stage of life this person is at.

Usually, the rich will still want to get richer. So I find it may be quite unlikely they will go for dividends paying ETF.

If he/she is still accummulating wealth, then they may invest in high growth companies that could 2x-100x their $2m.

However, if he/she is near retiring or retired, the important thing is capital preservation.

Although dividend-paying ETF may be an attractive way to receive regular income, at their calibre they may have other financial vehicles that could be better suited to preserve wealth.

After all, no man is an island. A high networth person will likely consider estate planning.

Hi Anonymous,

It depends on that someone's financial objectives. Different individuals have different objectives. To some, endowment policies, including annuities, may be a suitable fit. If that someone is unsure of the objectives, he/she may seek advice from a financial advisor.

Disclaimer: PolicyWoke is a traded endowment policies broker.

It depends on how comfortable the person is with specific instruments. ETFs are like stocks, so it presents a higher risk factor. A person may be more risk adverse and choose to invest into endowments, annuities and the like. I've come across HNW individuals doing this before.