"Growing rich is hard, staying rich is harder," says Rahul Jain of Nuvama Wealth

We preserve what we value. Life is a chief example of this. More so, we take extra care if what we value is earned by us. This is amply reflected in matters related to wealth. In the world of investments, the journey does not end with creation of wealth. Creation of wealth is a penultimate step to the most critical of all rules of investing: preserving what we have earned. This is the reason there exists the adage: Growing rich is tough and staying rich is even tougher. Today, increasingly many High-Networth Individuals (HNIs) in India are facing the challenge of preserving their wealth.

In the past few years, many HNIs have accumulated wealth by investing across asset classes – especially using new financial investments offering exposure to stocks, bonds, commodities and alternatives. However, an average HNI is now contemplating ways to protect the wealth accumulated and inter-generational transfer. A World Wealth Report conducted by Capgemini in 2024 found that 67% of High Net-Worth Individuals (HNWIs) prioritised wealth preservation as a critical objective, shifting wealth goals to preservation from growth.

Before getting into the new trend of preferring protection to growth of wealth, it makes sense to understand why this shift has taken place. Digitisation has been a key enabler for the middle class and the neo-rich segment of the economy. It has offered access to a large gamut of financial instruments. Listed stocks, unlisted equities, bonds, commodities have emerged as a preferred investments through financial vehicles such as mutual funds, portfolio management services, alternate investment funds, pushing fixed deposits and real estate down on the list of investments. Rising financialisation of assets and growing investors’ participation have ensured that prices of new-age assets remained buoyant and rewarded investors. Many HNIs have accumulated wealth at a fast pace.

However, time and again, volatility arising out of domestic and global developments have impacted the quantum of the wealth pool of Indian HNIs. To add to their worries, the next generation is bringing in a newer set of challenges. In some cases, the new generation may not be as passionate about growing their wealth by taking charge of their businesses. The new generation also has different sets of life-goals leading to disputes with the previous generation as well as within the members of the new generation. Rising wealth has further triggered an increased number of disputes and demands for providing right share by way of family settlements.

Consequently, HNIs are reducing risks and taking adequate measures to preserve their wealth. Many HNIs are ring-fencing their wealth by identifying, designing and putting in place the right structure – be it a corporate structure, a family trust, a Will or estate planning. In this manner, HNIs are preserving their wealth in systematic ways.

But merely preserving wealth is not enough. Wealth must generate a reasonable rate of return to keep pace with inflation and provide for the needs of all stakeholders. This calls for professional insights and necessitates the role for wealth managers. Due to their well-established credentials and performance record, wealth managers understand these intricacies. One of the most effective strategies managers follow is implementing asset allocation. This strategy helps largely protect a portfolio’s downside. In addition, it ensures that the portfolio benefits from the appreciation in the price of an asset which is a part of the portfolio.

Wealth managers can effectively offer investment products that strike a balance between preservation and growth at the portfolio level. They can also cater to the specific needs such as impact-driven investing or supporting charitable causes by generating cash flows from wealth pools using sophisticated investment strategies. Without taking undue risks, wealth managers can use the wealth of HNIs in a tax-efficient and cost-effective manner. This approach provides the much-needed and the much sought-after element in the life of an HNI—peace of mind. Therefore, it is paramount to prepare in advance the journey of preservation of wealth. Because just as it takes time and a disciplined approach to create wealth, preserving wealth also requires time and a disciplined approach.

The author is Rahul Jain, President and Head at Nuvama Wealth.