Up until very recently, I used to serve two right-fit client categories: The High Net Worth (HNW) Entrepreneur and the High-Income Executive.
The High-Income Executive group comprised individuals who were in C-suite positions with the powerhouse companies – the Fortune 500s, the big airlines, the energy giants. These executives typically earn an income between US$ 500,000 to US$ 1.5 million in some cases.
While I’ve always been extremely selective of the clients I work with, over time, we started working with fewer C-suite executives, focusing much more on the HNW entrepreneur segment.
Today, there are a few C-suite executives on my existing client lists who I continue to serve and a very select few more for whom I would break the rules, just because they tick all the other boxes on our Right-Fit Client checklist.
Now here’s what I noticed: What high-income executives with large corporates wanted in place as a financial safety net was vastly different from what the HNW entrepreneur wanted.
I always wondered why, especially when some of these people were such a close match in terms of their net worth and annual income. So, I started to dig for some answers, and here’s what I found:
The typical successful, high-income executive had a hefty benefits package from their organization. Business or first-class travel everywhere, top-tier medical insurance, a good Group Life Insurance policy, house rent, school fees – all covered. So, the salary that they took home after was all net savings or ‘lifestyle income.’ These executives and their families got used to the best of everything as a part of this benefit package.
With the entrepreneur, however, the scene looked a little different. They might still travel business class, but they’d typically find ways to get more resourceful about it. Their medical insurance would be quality coverage but not the highest tier. They may or may not have group insurance in place for the company. And remember, that all of these ‘benefits’ are being paid for out of the entrepreneur’s pocket directly, or out of the bottom line of his company.
When it comes to Life Insurance cover and financial structures to ensure succession planning and wealth transfer – the HNW entrepreneur is typically way ahead of the high–income HNW executive.
I believe it’s because the high-income executive is not typically thinking about succession planning, legacy, transferring their wealth, or their estate to the next generation.
While some of them do have investments and property portfolios and the like, their concern when they are thinking about securing the future is income replacement so that their families can continue to live comfortably.
Even some of the highest-earning executives that we have worked with opt for US$ 3-4 million of Life Cover, as opposed to entrepreneurs who might have a smaller annual income but will still have $10-20 million or more of Life Cover in place.
You see, the HNW entrepreneur is thinking about replacing the entire wealth-generation engine that is his business, whereas the executive wants to build a safety net to replace a salary.
The C-Suite Dilemma
Let me tell you where the problem arises for the C-suite executive. The problem arises when that job and benefits package is no more. They might lose their job, choose to step out and pursue a different opportunity or start a business.
In all of these scenarios, there is typically a period of transition that proves extremely turbulent. It might be a period of unemployment or if the executive decides to start a business, then it might take a while before the business is profitable.
Both of those windows will require said executive to dip into savings, their rainy-day fund, and burn through their cash reserves.
During this phase, they’re also largely unprotected in terms of Insurance cover: The top-tier medical insurance for them and their family, as well as their group Life Insurance policies, are now invalid, leaving them vulnerable should catastrophe strike in that window.
Furthermore, if they tried to secure the same medical insurance privately, it’s likely going to cost them an arm and a leg.
As for Life Insurance, some of these high-income executives have spent so long in their corporate careers that procuring Life Insurance could become extremely expensive, or worse, impossible because they are rendered uninsurable.
My Word of Advice
It’s hard to think about what happens when things go wrong, or what happens beyond this job, especially when you’re in a deeply invested leadership role in the corporate world. Corporate careers can be fast and exciting and leave you with little time to think about what happens beyond this job.
Here’s my advice: Fix the roof while the sun is shining.
When you’re comfortable in your corporate job, get all the right Life Insurance policies in place, and preferably even pay for a private medical insurance policy while you can.
Take advantage of the various financial tools, the might, and the credibility of the corporation you work with, and get your personal support system in place.
Getting the right amount of Life Insurance cover, Critical Illness and Medical Insurance might seem like unexciting prospects – but they serve you if and when the worst happens.
These safety nets break the fall when you need them most.