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As the head of your family and business venture, you are being looked up to as the leader of your family and also the companies you are managing. As a business leader, planning well for the future is something that is expected of you and your management team. As the head of your family, you are expected to exercise the same standard when you plan for your personal wealth transfer as well as your business succession.

When we talk about business estate planning, there is a popular Chinese saying that you may have heard before. It says that a family’s wealth will not last beyond three generations!

Interestingly, the Americans also have a similar expression, “Shirtsleeves to shirtsleeves in three generations”.

Backed By Research

A ground-breaking study conducted by a wealth consultancy firm The Williams Group which involves 3,200 families over a 20-year period, found that 70% of the families tend to lose their fortune by the second generation, while nine in ten families lose it by the third generation!

The popular explanation behind this phenomenon is that, the first generation works hard to accumulate the wealth. The second generation while growing up, sees their parents’ struggles and have a good understanding of the value of sacrifice and hard work. They appreciate the frugal aspects of their lives growing up and will more likely hold on to their parents’ wealth.

However, the third generation do not appreciate the struggles and sacrifices of the previous generations. Therefore, they are more carefree and more likely to spend the wealth easily and may end up squandering the inherited wealth.

Learn From Example

There is a shining example that comes to mind when we talk about planning for your business succession and holding on to your accumulated wealth to benefit the future generations. He is IKEA’s founder, Ingvar Kamprad. When this highly respected business leader died in 2018 at the age of 91, he was ranked No. 8 on the Bloomberg Billionaires Index.

This is thanks to his control of IKEA’s global retail empire that was valued at US$58.7 billion. Interestingly, his wealth will not be dissipated because of a carefully designed and well-thought through wealth preservation strategy that he had put in place to secure the longterm survival of the IKEA business empire.

According to a media report, most IKEA stores are owned by the Stichting Ingka Foundation, a Dutch entity with the purpose of
donating to charity and supporting innovation in design, according to its founding statute. Meanwhile IKEA’s trademarks, brand and concept were placed under the ultimate control of Vaduz, a Liechtenstein-based Interogo Foundation whose subsidiary, Inter
Ikea, is the global IKEA franchisor. “Interogo Foundation is managed by a Foundation Council, consisting of at least two members and a Supervisory Council, as a principle consisting of seven members.”

This was disclosed by Anders Bylund, Interogo’s head of communications. He was also quoted as saying, “The Kamprad family members in the supervisory councils have been and shall always be in minority.”

Meanwhile, Stichting Ingka Foundation, is only partly philanthropic. Its statutes allow for profits to be reinvested in the company, according to Per Heggenes, the chief executive of the IKEA Foundation.

This smartly designed strategy put in place by Kamprad was designed to ensure that IKEA, is not in the hands of his family members, and thus would long outlive its founder. Trust experts say that the set-up ensures IKEA’s business continuity by making it impossible for any individual, whether a manager or heir, to assume control after Kamprad’s death.

It Can Be Done

You can also be the real king or queen of your family’s wealth kingdom just like Ingvar Kamprad, once you have come up with your very own comprehensive personal and business estate planning.

With an intelligently designed estate plan, your wealth can be fortified with a “legal castle” to shield your wealth from all creditors and vultures, as well as to avoid the probable ugly family feuds and disputes, which will tear up and destroy your family’s wealth kingdom. Your legal fort can be watertight against all types of claims and risks, including director’s or professional liabilities.

By utilising well established and advanced legal means and structures to hold the ownership of the bulk of your wealth, you will be able to perpetuate your family’s wealth kingdom, and escape the curse of family wealth being dissipated by the third generation!

You will also be able to protect the interest and well-beings of your beneficiaries and descendants. You get to enjoy serenity and inner peace knowing that when the time comes, your family’s wealth kingdom is intact and it serves the needs of your loved ones.

Let them thrive from the blessings of your wealth kingdom, rather than suffer from the curse of inadequate planning. Your descendants will come to admire and respect your vision and the decisiveness in getting a comprehensive family’s wealth
succession plan, just like the late Mr Ingvar Kamprad.

About the Author

Lee Khee Chuan holds a B.A. from National University of Singapore and a chartered financial consultant (ChFC), chartered life underwriter (CLU), CFP professional, and Fellow, Life Management Institute (FLMI) USA. He is also a licensed financial adviser representative with more than 25 years’ experience in estate planning. He shares a lot more valuable insights at www.estateplanningmalaysia.com

Many people do not see the importance of insurance until they need it, or until it is too late for them to do anything with it, and what’s worse, many considers it an unnecessary expense. In reality, however, insurance is more than that – it is a useful financial tool that forms part of our wealth management planning.

Starting Out

Our financial needs, income and liabilities vary at different stage of our life, as shown above. Those who are young and single who have just started their working life in their 20s are only interested in investment to grow whatever little money that they have.

Although it is good to have the desire to start accumulating wealth early, many of them are unaware that the risk of falling ill can happen any time while accumulating wealth.

Thus, at that particular age, they should also look into wealth protection. If they are still single, they should at least have healthcare planning. 

What is healthcare planning?  Is it just a medical card?  When someone is sick and have to be admitted to the hospital, do they stay for a longer period of time, or do they recuperate at home?

For instance, a cancer patient who is undergoing treatment at the hospital might be required to stay at the hospital for a certain period of time. Even after being discharged, they will still be required to go for follow-up treatments, and all in all, the recovery period could take up to a year or more.

There is a possibility that they might not be able to work like before, and thus, their income will be affected. In cases of major illnesses, besides medical expenses, many will find themselves having to spend their money on daily sustenance, alternative therapies, supplements, and sometimes they might even require a caretaker.

A complete healthcare plan should include a medical card and critical illness coverage. Do remember that a medical card solely pays for hospital expenses while critical illness insurance pays a lump sum when one is diagnosed with any of the critical illnesses listed.

A patient can use this lumpsum amount to cover their daily needs resulting from the loss of income as well as for alternative treatments.

Having a Family

Thirties is the age where many people choose to start a family. At this phase of life, having children will also mean creating an education fund and protecting the family income and assets.

This is the period when you need to look into family income protection to take care of your most important responsibility – your loved ones. Should anything unfortunate happen to you, you can rest easy knowing that they will be well taken care of.

That being said, their financial needs – including their daily expenses and funds for their education – need to be calculated. The amount required might be several million ringgit, and most people in their 30s do not have such a large amount of money available.

In this instance, the cheapest tool is to purchase an insurance for the required sum, which will provide a peace of mind with the knowledge that in case of any tragedy, your loved ones will be protected.

Take this case study as an example. Mr Tan, 33, is married with two children aged two and five; his wife is a homemaker. Mr Tan, whose monthly disposable income is RM5,000, is the sole breadwinner of the family, and since this is the case, he is worried about his family’s wellbeing should anything happen to him.

He has estimated that his family needs RM60,000 a year, and wants to ensure that his family is provided for until his youngest child is 22 years old. To achieve this, he would therefore require 20 years’ worth of funds amounting to RM1.2 mil.

At 33, Mr Tan does not have that much savings. His house may be worth RM1.2 mil, but his family will still need to live in it. Therefore, having a life insurance coverage of RM1.2 mil to cover this risk would be the most effective financial tool.

Bear in mind that we should review our insurance policies every 5-10 years as our financial status and priorities change. 40-50s is the prime time where we have more assets and liabilities, as well as changes to our lifestyle as we move into our retirement years.

It is also the time when our income is more stable and we have excess funds to prepare for our golden years.

Preparing for Golden Years

We would want to enjoy our retirement days without worrying about whether there is sufficient money to tide us through the years. If we prepare well in our 40s or even earlier, we would not need to worry about risks or expenses that might take away our retirement funds.

Someone once asked, “What and how to prepare financially in order to enjoy the golden years?” Well, there are three types of expenses that we need to prepare for post-retirement, namely

• Daily living expenses (which can be from our EPF fund that many of us have accumulated during our working years);
• Maintenance or medical expenses; and
• Happy fund.

Advancements in science has led to an extended life expectancy rate, but while people are now living longer, many are still unaware that older medical plans only insure a person up to the age of 70. Medical hospitalisation is becoming very costly, and therefore, we need to ensure that our healthcare insurance plan covers us until are 80, at the very least.

Furthermore, as we age, there will be an increased risk of developing health problems such as high blood pressure, diabetes and high cholesterol. Such health conditions require daily medication which is not covered by medical cards and will eat into our retirement funds.

On top of the daily medications, there will also be other supplements and nutritional needs required to promote better health. These are the maintenance expenses that need to be taken into consideration as well.

To enjoy our retirement years to the fullest, we need to have a certain amount of money to do the ‘fun’ stuff like travelling and indulging in hobbies. We should start accumulating our lifestyle or ‘happy’ fund as early as possible by growing our wealth through unit trusts, shares and saving plans.

How we choose from the different wealth accumulation tools will depend on our risk appetite and duration of investment.

Financial planning at different stages of life is important. Insurance is one of the cheapest tools to manage risk and is only one of the many financial planning tools out there today.

In addition to protecting your wealth, there are other financial tools in the market, each with its own purpose such as accumulating and growing wealth through savings and investments; and wealth distribution though estate planning.

About the Author

Andrea Siew is an Approved Financial Adviser with Harveston Wealth Management Sdn Bhd.

My wife and I are both accountants. We have two children, one of them is a child with special needs. I’ve always known the importance of getting our family’s financial planning done, but never quite came around to it due to our busy schedule.

We were lucky to have met Pauline, our Financial Planner. She was interested in finding out our goals and how she could help us to achieve them. After taking the time to understand us, she helped us in assessing where we are now and what actions we need to do in order to achieve our goals. She helped us to come up with our financial plan.

I’m very happy that we engaged Pauline for her services. Truth be told, it is actually a tedious process to get the plan done. It requires perseverance and knowing how to go through each of the steps. Luckily, with Pauline’s help, she guided us through it and gave us the options and suggestions which helped us a lot during our financial planning journey.

Once we have completed our financial plan, we now know our financial standing, and what our spending is like. When we first saw our cash flow, we were surprised that we have been running a deficit. Within a month, Pauline helped us to identify the key areas which can be improved.

Through financial planning, we also realized that some of our insurance plans did not match with our family’s needs. Pauline was non-biased and was very objective in her advice to us. She helped us to streamline and optimize our current policies to meet our objectives. With this, we are able to save a substantial amount of money on insurance premiums alone.

Pauline also helped us with our estate planning. We initially had our Wills and Trust drawn up. After reviewing it, we realized there were many areas that were left hanging and no longer matched our needs. Pauline highlighted the areas which we never considered before and it was extremely helpful for my wife and me to consider restructuring our Will and Trust.

This was especially true for our special needs child. This area has always been a major concern for us as we want to ensure that both our children are taken care of, in the event something happens to us.

I’m glad we did our financial plan with Pauline. Once you are her client, she puts your interest first and lets you know the best way to manage your finances even if it means she’s not going to get anything out of the recommendation.

This is what I call “professional” and doing her business with “passion” and “from the heart”. She is also very detailed and tactful on how best to resolve the issues by giving us options for us to consider.

The best thing about getting my family’s financial planning, is that me and my wife are clear on what our needs are and how much we need to save to achieve our goals. We no longer need to second guess like before. After going through this process, I feel that having a financial plan is very important. Especially if you have a family to take care of, or if you are unsure whether you are saving enough for the future.

About the Author

Pauline Teoh loves to coach busy professionals to achieve their financial independence. She is a Licensed Financial Planner, Childpreneur Coach and is an expert in Risk Management, Investment Planning and Estate Planning

“Losing your loved ones is tough, but having a financial planner in your life does help”

I am Monica, a widow aged 52 years old. I came from a poor family and didn’t know anything about finance or money management when I was growing up. I have been working hard with my late husband Andy, in the trading business for the past 20 years and we managed to grow our assets along the way.

Initially we thought that buying a simple life insurance is all there is to financial planning. That was until I was introduced to Stanley back in 2013.

We were skeptical and delayed our meeting with him as we thought he is another salesman coming over to sell financial products. I am a person who does not believe in investment and financial planning. Instead I believed that holding cash is the right thing to do.

Stanley spent many hours meeting us and patiently listening to our financial concerns. He is then able to understand and identify our life and financial goals. Stanley shows the financial pitfalls that we are facing and help us to visualize our cash flow and net worth at that time, while being able to identify our financial gap and estate planning concerns on multiple different scenarios.

After his careful review, he restructured our existing insurance portfolio and managed to increase my late husband’s insurance coverage substantially from what we have based on our limited cash flow. His integrity and process-oriented independent review, and ability to access all types of financial products in the market really impressed us.

Stanley also advised us to set up a complete testamentary trust in our will for resource preservation. Using resource liquidation strategy, we are able to avoid estate shrinkage and potential resource squandering by anybody who is not good at financial management. I am fortunate to follow the advice from Stanley which makes the estate execution process very efficient.

My husband was diagnosed with terminal cancer in 2017 and passed away a year later. Stanley did a good job with timely and efficient claims process. I was able to sail through the difficult period smoothly. He even visited my late husband almost every week in the hospital and accompany us until his last breath. Some of the big insurance policies that we bought a few months before the diagnosis date, Stanley is able to help us claim the insurance payout within a short period of time.

Our family benefited a lot from the insurance payouts. We managed to pay off our mortgages and ensure that our children’s tertiary education is fully funded. Our life and dignity is improved by using the resource optimisation strategy recommended by Stanley on a conservative money management. I am holding a well-diversified investment portfolio and received timely fixed payment to cover our living expenses. We are also being updated regularly on the market’s movement.

I am glad that Stanley is also able to provide my children with solid financial knowledge. Now all my children have graduated and they are back at my company to help me run the business. Stanley also provided my children with tips on business resource optimisation strategy to weather the pandemic and it has helped us tremendously.

I am comfortable knowing that we have a financial peace of mind under Stanley’s good hands. We are very much on track to achieve our family’s financial goals!

About the Author

Stanley Hon is Practice Group Director at FA Advisory Sdn Bhd. He is a Licensed Financial Adviser, MDRT & Speaker, Will & Trust Specialist.