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Warren Buffet reputedly said that it takes twenty years to build a reputation and five minutes to lose it. The same could be said of wealth: it takes time to build but it can be lost in an instant. Your overarching principle should be to protect what you have built in order that it can grow and continue to enrich your life and that of your children.
Taking steps to protect your wealth requires two things: first, a financial plan and second, a regular and frequent review of those plans. Sure, we know that making money is sexier than making plans for your money. However, even if you acknowledge that the best laid plans of mice and men can go awry, not having a plan will mean your wealth is endangered. Recognise this and you can begin to build in the protections that will ensure your wealth remains intact, grows, and benefits your children and theirs.
The first protection is to select a financial adviser that will work with you to create a bespoke solution to suit your needs. You may have lots in common with others but you are unique in that you would have had your own life experiences, you will entertain different expectations, and you have individual financial needs.
Second, your financial adviser should be part of a team that understands how to structure the ownership of your assets, the complex tax structuring, the history and behaviour of financial markets, and how best to relate these to your requirements.
Carrick Wealth Management prides itself on the depth of its professional experience in multiple jurisdictions and on our independence in protecting our clients’ interests, now, and for generations to come. In addition, to maintain our reputation of having our investment portfolios consistently beat the industry benchmarks our investment committee meets regularly to ensure all the underlying managers are still operating within their mandates and that their risk-adjusted returns are in line with our expectations.
We also insist on reviewing your financial plan quarterly to ensure you realize your goals. After all, a lot can happen in three months, from political uncertainty to unexpected legislative changes to unforeseen global events that can and will affect your wealth.
Third, you need to know what you are getting. Like our transparent fee structure our financial reviews are precise, clear, and jargon-free and are designed to provide you with the necessary information to assess your results and to make sound financial judgements. These regular reviews provide you with viable options and feasible alternatives so that at all times you remain in control of your investment decisions.
Finally, don’t rely on legislation to protect your wealth. You owe it to your children — and theirs — to adopt a rational and analytical approach to multi-generational wealth management. Politicians, depending on the election cycle, will make all sorts of promises regarding inheritance tax (IHT) or offshore investments in order to garner additional votes or once in power, change legislation to fill up their tax coffers.
The UK is this month discussing the Finance Bill, which, for example, will have a direct impact on non-UK domiciles who have resided in the country for more than 15 of the past 20 tax years. They will now be deemed UK-domiciled — even if they have maintained a domicile overseas — and their worldwide assets will become subject to UK inheritance tax. In addition, the non-domicile status will be removed for those UK citizens who return to the UK but have a permanent home abroad. Another example is the proposed income tax amendment to scrap the offshore earnings tax exemption contained in section 10(1)(o) of the income tax act.
National Treasury’s plan to do away with the 183-day tax exemption rule for South African residents and citizens who work overseas may necessitate SA expats to make major life adjustments possibly putting their nest egg at risk.