We see wealth planning as the sum of arrangements to grow, preserve, protect, and transfer wealth. It comes along with legal, financial, and tax planning, but in our modest opinion, the human element for everyone involved deserves at least equal recognition.
The entire process around wealth planning strategies is about you and your loved ones' future and should give peace of mind to everyone.
If you are an entrepreneur, business leader, artist, investor, or athlete, you will have a strategy in place to navigate the challenges in your business. And if you invest, you should be familiar with strategic and tactical asset allocation.
But when it comes to wealth planning, all too often, wealth owners do not tackle the topic with individualized wealth planning strategies. And if things become turbulent, you'll be right in the eye of the storm, and events will take over control. So let's have a look at how you can develop your wealth planning strategy in a few steps.
Starting with a clear map of all your assets will help you find the route of wealth planning. Along with the detailed catalog, you can assess which assets you want to allocate to which goal later in the process.
And by thinking in scenarios, you can stress-test if your goals are achievable with the type of assets you own. Initial clarity on which specific assets you want to preserve and where you are flexible to switch or liquidate will enable a focused approach.
It's your wealth, and you're best qualified for this. You can, later on, have your allocation challenged by experts. With the inventory, you also prepare for discussions with the professionals when you're ready.
How to define individualized wealth planning strategies?
This is not rocket science, and there's no standard approach. Start with where you are and assess what's in place and could potentially contribute to your plan.
No plan is also a plan if you are comfortable with letting things happen. However, you should be aware of what it means for you and your successors and heirs in detail.
In all other cases, evaluate which areas you may need to enhance the current situation and where you may need specialist advice.
Get to a conclusion on where you stand regarding your wealth planning strategy: the strengths and weaknesses, implications, and assumed outcomes. Then it's time to discuss your situation with your advisors.
What's essential for you?
You may want to secure your estate, protect your assets, maintain control and flexibility, save taxes, and be ready for moving residence whenever things change.
No matter how many needs you have, make sure you are clear on your three top motivations. This will automatically separate the must-have from the nice-to-have and help you to move forward with purpose.
For example, a strategy can be designed to enable the family to control wealth, preserve it and transfer it to the following generation. These are the strategy's objectives, but your underlying needs could be the family's harmony, well-being, and empowerment.
All existing and future strategy implementations are then challenged against these parameters to ensure alignment and consistency.
By defining objectives without analyzing your needs, you risk missing the sweet spot of the alignment of needs and goals. Thus, the arrangement may not be coherent and fail in essential scenarios.
In this part of the discussion with your professional advisors, consider your values, circumstances, time horizon, and the potential impact on your business and family situation.
You may want to involve your family members for their opinion since they will be the primary beneficiaries of your legacy. Wealth planning is a results game, and heirs and successors will not appreciate the best intention if not delivering positive outcomes.
Let's take the example of a family business with the next generation either too young or not interested in taking over control. If your wealth plan forces them to engage in the company, this is probably not the best starting point for preserving a family business over generations. Educating the next generation about entrepreneurship and the importance of purpose and values in business has the potential for a different outcome.
Thus, looking at things through an objective and human lens will consider such variables and plan accordingly by providing options rather than defaults.
At this stage, there's no need to jump to conclusions regarding the tools or solutions to implement. You want to obtain a clear perspective of your underlying motivations and needs and have your family buy-in on them.
Define your wealth planning strategy's objectives
Your specific circumstances drive these. When do you want to hand over business leadership? Where do you want to live? How should your income stream look like? Who should benefit from your wealth? How should it be distributed? Is your situation merely domestic, or do you have cross-border elements to consider? How flexible do you need to be in your arrangements?
In practice, we see three main pillars around which wealth planning strategies are designed:
Here are some questions to ask in this context: What holds the family together? Are they clear about values and joint mission and vision? How should the family benefit from family wealth? What's the family's purpose of wealth? What's needed to implement the vision and mission? How should the family's purpose of wealth be defined?
Depending on the family size, a governance framework can assist in communication and decision-making. It can also manage expectations and lay down duties. A coherent and inclusive setting will allow individual alignment and commitment.
Life events have a substantial impact on family wealth, and thus a transparent discussion will educate and prepare the younger generation for their future roles and guide them in navigating what life holds for them. Family dynamics are another topic to consider since sometimes family relationships can become complicated.
That's when a discussion forum and framework are most helpful to overcome deadlocks and conflicts. The objective is to create a wealth planning arrangement that enables the family's harmony, well-being, and empowerment, caters to their needs and issues, and prepares them for uncertain future events.
Business and financial planning
In broad terms, here, the focus is on preserving your source of income and planning for your retirement. This includes goal-based financial planning investment strategies, legal and tax planning, and consolidation of assets and activities for a comprehensive overview as a basis for informed decisions.
It would be best to clearly distinguish between business and private wealth and its destiny to avoid disputes and tight liquidity situations in estate scenarios.
Your aim should be controlling and protecting wealth: business risks should not spill over to private wealth or put it at risk. If you run a family business, this requires a specific framework for the structure and governance. In particular, for a family business, the focus is on its envisaged destiny and framing the needed measures to ensure family ownership and success in the long run.
In general, defining the parameters and costs of your and your family's lifestyle and business activities required to maintain it and ensure your retirement expectations should clarify which objectives are crucial.
Success factors, business, and financial aspirations will become tangible and move beyond mere return expectations of financial planning investment strategies.
The smooth transfer of wealth to the next generation is essential for long-term wealth preservation. With the above pillars clarified, the focus will be on roles and responsibilities and legal and tax implications.
Again, including family members in the discussion will eliminate misunderstandings and prepare them for future roles within the family. Wealth transfers mainly fail due to a lack of planning and communication.
Planning covers estate planning tools and correlated legal and tax issues. Your advisors can solve technicalities, but communication is up to you. Clarity and transparency for all involved parties are the targets here.
And the overall objective is an uncomplicated transfer of wealth without unpleased surprises that may trigger conflicts and disputes.
Discuss with an end in mind
The discussion with your advisors needs to have an end in mind. How do the target inheritance planning, financial planning, and wealth structures need to look like?
Consider forced heirship rules, if applicable, tax implications, financial needs, and the nature of your assets. Technical considerations will shape your strategy and clarify feasible objectives within your legal, tax, and economic environment.
Liquidity planning and risk management will contribute to a sound plan.
Furthermore, it would help if you defined what the wealth planning strategy needs to achieve for you during your lifetime and for your successors and heirs after it.
Consider also the what-ifs along the journey as things may change, and that's why you already need to consider alternatives.
The entire exercise prepares for life events systematically, keeping the ability to react and structure wealth for the challenges ahead.
The role of advisors
Experienced multi-disciplinary advisors will add different perspectives to complete the picture and take the edge off complexity.
Empathy for your needs and pressure, the ability to listen, and collaboration skills connect a team to best support you in the journey. They should build genuine relationships with you and your family to foster an environment of ease and trust required to achieve long-lasting solutions and arrangements.
Still, independent advice should not jump to conclusions but let you make the ultimate decisions based on your values and convictions.
Core and satellite wealth planning arrangement
To keep things simple and effective, you should define a core wealth planning arrangement that should remain stable and align with your wants and pressures. For instance, you can then integrate satellite arrangements that allow for more flexibility over time.
You could do this with an irrevocable trust for estate planning and asset protection, ensuring that your loved ones are on the safe side. While core arrangements will usually be irreversible to achieve lasting and robust results, integrating a will for certain jurisdictions in cross-border scenarios, a life insurance policy, and a revocable trust as satellite arrangement allows adapting to changing circumstances.
At this stage of the process, you will benefit from all the initial reflections about your wealth. You'll be aware of your essential needs and have clear objectives that will be met with the available wealth planning tools.
Simple and effective arrangements will best execute your wealth planning strategy and complement each other in a comprehensive solution.
Avoiding complexity allows for efficient execution to provide for your loved ones in a predictable process.
Monitor your wealth plan's performance and adapt
It's crucial to check your wealth planning strategy regularly. Changes in the area of family, assets, and external factors such as regulation and laws can have a substantial impact.
Your core wealth planning strategy should not be affected dramatically if you follow the above-outlined steps, but your satellite arrangements may need adjustment.
Again, discuss the what-ifs with your advisors and test your policy against assumptions. Always take a comprehensive approach to review things.
With that, your wealth planning arrangement should weather life events and changing circumstances.
And if you involve the beneficiaries of your strategy in the discussion, they may also enjoy peace of mind knowing what the future will hold for them.
To sum up on wealth planning strategies
You are in control of the wealth planning process, and delegating it to experts and advisors will not lead to individualized results. Neither will standard products and services.
Look for trusted advisors focusing on your interests and make sure they understand your situation, needs, and objectives and collaborate with each other. By laying the groundwork and following a structured approach, your wealth planning arrangement should weather life events and changing circumstances.
If you involve your family in the discussion, they may also enjoy peace of mind. Wealth planning is also a human process, and a structured approach involving the relevant parties creates an environment of ease and trust.
Technical considerations are essential but should not prevail in wealth planning strategies. Select your advisors carefully, and don't let them jump to conclusions since you are not after quick wins but a reliable result.
When to start all of this? Quite simple: Now it is better than next week.