[PB Notebook] Strategic Wealth Management and Risk Control for High-Net-Worth Individuals in the Second Half of 2025

Strategies for Wealth Management Amid Heightened Market Volatility in 2025
Diversification, Tailored Risk Management, and Trusts
Securing Future Value Through ESG and Global Innovation Investments

Eunmi Lee KB GOLD&WISE the FIRST Banpo Center PB Manager

The second half of 2025 marks a turning point in the structure of the global economy. With inflationary pressures not yet fully resolved and the Trump administration's aggressive tariff policies adding to the mix, market volatility has become much higher than in previous years. In this environment, it is crucial for high-net-worth individuals, such as private banking clients, to carefully consider what wealth management strategies are required.

The first principle of wealth management for affluent individuals is diversification of asset allocation. By spreading investments across stocks, bonds, real estate, alternative assets, and cash equivalents, one can minimize the impact that underperformance in any single asset class has on the overall portfolio.

Historically, even during extreme crises such as the 2008 global financial crisis or the 2020 COVID-19 pandemic, diversified portfolios have exhibited much milder volatility and provided downside protection compared to portfolios concentrated in a single asset. For example, when the stock market plunged, bonds, cash equivalents, and alternative assets offered a certain degree of defense.

The true power of a diversified portfolio lies not only in downside protection but also in maximizing the effects of compounding. By limiting the extent of portfolio declines, the difference in cumulative returns through compounding during a market recovery widens. For example, if assets fall by 50%, a 100% return is needed to recover the principal. However, if losses are limited to 15% through diversification, only a 17.6% return is required to break even. This effect becomes a key driver of wealth accumulation during the recovery phase that follows a downturn.

In particular, 2025 is expected to be a period of heightened volatility for traditional assets due to changes in monetary policy in the United States and Europe. As a result, increasing the proportion of alternative assets such as hedge funds, private equity funds, infrastructure funds, and gold is becoming increasingly important.

The next principle is tailored risk management. For high-net-worth individuals, risk management is just as important as maximizing returns. To prepare for various emergencies such as real estate price fluctuations, changes in tax laws, or sudden drops in global stock markets, it is essential to establish pre-emptive simulations and hedging strategies. In particular, understanding and utilizing the structure and potential risks of various financial products is at the core of risk management. It is also crucial to regularly rebalance the portfolio in response to changing market conditions. Regular reviews and adjustments are the foundation for ensuring portfolio stability and achieving long-term wealth growth.

Trusts for tax, inheritance, and business succession are no longer exclusive to advanced economies. The scope of wealth management now extends beyond investments to include comprehensive asset management, such as tax planning, inheritance, and business succession. In advanced economies, trusts are actively used to facilitate efficient and flexible inheritance and asset succession.

Among trusts, insurance claim trusts and testamentary trusts are representative examples. An insurance claim trust allows the trust company to manage the receipt and distribution of insurance proceeds after death, enabling the preparation of inheritance tax funds, minimizing legal disputes, and ensuring swift transfer of funds. A testamentary trust serves as a substitute for a will, allowing for asset distribution, support for minor or disabled family members, and medical expense support, all tailored to specific purposes.

These trust systems are rapidly spreading among high-net-worth individuals in Korea as well. When combined with prior gifting or business succession, they can significantly reduce the uncertainty of inheritance. However, as tax law changes can alter the tax risks associated with different asset types, it is necessary to consult with experts to adjust asset allocation and design a customized trust structure.

Finally, it is important to secure future value through investments in ESG (environmental, social, and governance) and global innovation themes. Recently, affluent investors have shown great interest in ESG investments and global innovation themes such as artificial intelligence, biotechnology, and renewable energy. These areas are directly linked to corporate competitiveness and sustainability in the long term. However, as these thematic investments offer high growth potential, they also carry higher risks. Therefore, it is important not to follow trends blindly, but to carefully examine the sustainability and risks of each company and fund.

The second half of 2025 is a time when acquiring information, thorough risk management, and customized asset management strategies with a long-term perspective are more important than ever. Now is the time to work with financial partners to respond flexibly to market volatility and to review comprehensive asset strategies that consider future value for the next generation.

Eunmi Lee KB GOLD&WISE the FIRST Banpo Center Private Banker Manager