High net worth (HNW) clients are fascinating to work with, but complicated to work for, as they have varied backgrounds and specific needs. This complexity creates challenges when looking after them, particularly when it comes to property and property finance.
For a start, HNW clients’ property transactions are not straightforward; it is rarely as simple as selling the family home and buying another. It is therefore essential to understand why they are buying property and what they intend to use it for, as this will affect the financing of the asset.
Many international clients want a second residential property in London to be used as a base, or even for their children to live in while studying, for example. However, many lenders are cautious about financing a property the client is not demonstrably going to live in, as it could be used for rental income. It is therefore necessary for HNW mortgage brokers to have relationships with lenders who can take a view on a client’s personal circumstances.
In addition to buying unusual property, HNW clients often have unconventional income structures. Many assume wealthy clients have little reason to take out a mortgage and that those who do will be able to secure property finance with ease. This is wrong on both counts. HNW clients generally like to maintain their liquidity instead of tying up their wealth in a single asset. Furthermore, the wealthier a client is, the more complex their finances are, making it harder to arrange finance.
- HNW clients can be fascinating, but complicated.
- Many of them have unconventional income structures.
- Forging links with a trusted network of partners is a vital part of looking after HNW clients.
Like any buyers, HNW clients need to arrange loans based on their incomes – and these incomes, while high, are rarely as simple as a set salary of X amount a year. HNW clients often receive extensive income from dividends, vested stocks, shares and so on. Alternatively, they may have no income at all, but simply be cash rich.
Those dealing with HNW clients therefore need to be able to find bespoke solutions. For mortgage brokers, this means forging relationships with a wide range of flexible lenders who can provide tailored solutions. It is also imperative to have a thorough understanding of the unusual finance solutions available to wealthy borrowers, such as lombard lending.
Lombard lending, which generally requires a minimum loan size of at least £1m, is a suitable route for clients who are cash rich, but have limited income, as lombard loans are secured against marketable assets such as shares. We recently arranged a lombard loan for a client buying a £3m property, who had sold his business and was technically unemployed, meaning he could not secure a normal mortgage. This sort of creative approach is essential for successfully dealing with HNW clients.
Another challenge in looking after HNW clients is the ability to work on a worldwide scale. This is technically challenging, especially in regard to property, because transactions are understandably much simpler when the client is living, working and paying tax in one location.