The Great Wealth Transfer: Risks and Opportunities

The Great Wealth Transfer: Risks and Opportunities

Over the next two decades, an unprecedented $84 trillion in assets will change hands, largely from baby boomers to Generation X, Millennials, and Gen Z. This massive wealth transfer presents both opportunities and significant challenges, including the readiness of heirs, complexities in managing wealth, and potential family disputes. The different attitudes and circumstances of new wealth owners will further influence how this wealth is utilised in a rapidly evolving world.

Risks

Readiness of Heirs:

Many heirs lack the financial literacy and experience needed to manage substantial assets effectively. Without proper preparation, there’s a high risk of mismanaging or squandering the inheritance.

Complexity of Managing Wealth:

Wealth management involves intricate investment strategies, tax implications, and long-term planning. These complexities can overwhelm inexperienced beneficiaries, leading to poor financial decisions.

Family Disputes:

Inheritance often exacerbates family tensions, leading to conflicts over perceived inequalities and differing expectations. Such disputes can result in legal battles and strained relationships.

The Importance of Planning

Financial Literacy and Education:

Equipping heirs with knowledge through educational programs and financial advisors is crucial. Understanding personal finance and investment strategies helps beneficiaries manage their inheritance wisely.

Comprehensive Estate Planning:

Detailed estate planning, including wills, trusts, and tax-efficient strategies, ensures a smooth wealth transfer. Experienced estate planners can help navigate legal and financial complexities, reducing the risk of disputes.

Clear Communication:

Open communication within families about estate plans and expectations fosters unity and understanding. Regular discussions can identify potential issues early, allowing for timely resolutions.

Challenges of Intergenerational Wealth

Differing Attitudes and Values:

Generational differences in money management and investment priorities, such as a focus on social impact by younger generations, require understanding and respect to manage wealth effectively.

Economic and Social Context:

Rapid technological advancements and economic changes influence wealth management strategies. Heirs must adapt to these shifts to maintain financial stability.

Balancing Personal and Family Goals:

Heirs often struggle to balance personal aspirations with family legacies. Professional guidance can help harmonise individual and collective objectives.

Long-term Preservation of Wealth:

Sustaining wealth across generations involves prudent management and fostering a culture of responsibility. Encouraging heirs to view their inheritance as a legacy ensures the family’s financial future.

 

In The End

All of us alive today are part of this massive transfer of wealth, either giving it, or receiving it. We need to understand that careful planning and proactive management will be needed to ensure that this historic transfer can lead to lasting financial stability and positive social impact, to preserve and enhance the legacy of baby boomers for future generations.

Dirk Groeneveld, Certified Financial Plannert. 

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The Great Wealth Transfer: Risks and Opportunities

Regret Risk: Ensuring a Fulfilling Retirement

In financial services, “risk” often centers around investments, but an often-overlooked risk is “regret risk.” This is the regret retirees feel when they realize they haven’t lived as fully as they could have. As a Financial Planner at Client Care, I see this frequently in St Francis Bay, but there are ways to prevent it.

Ensuring a Fulfilling Retirement

  1. Use Cashflow Planning for Clarity

Many clients have never done proper cashflow planning. They focus on investments and returns, which, while important, don’t help them understand how to live well in retirement. Retirement can span 40 years, and assuming spending patterns remain constant is unrealistic. Also, conservative investment returns can deprive retirees of memorable experiences.

Proper cashflow planning helps clients understand if they’re in a good, bad, or okay situation. It answers, “Am I going to be okay?” and allows them to explore options by adjusting various “levers” in their financial plans.

Ensuring a Fulfilling Retirement

  1. Explore Your Passions and Goals

Living a meaningful life hinges on experiences and moments shared with loved ones. To achieve this, retirees must delve into their values and goals. While this might seem daunting, putting these down on paper provides clarity. Everyone is different, so a personalized approach is essential to truly reflect what brings joy and fulfilment.

Ensuring a Fulfilling Retirement

  1. Build a Comprehensive Plan

When meeting new clients, most lack a concrete plan. They may have investments and spreadsheets, but these aren’t plans. Just as building a house without a blueprint is unwise, so is entering retirement without a plan.

Retirement planning should be collaborative, considering input from family and anticipating potential challenges. For instance, when planning a trip to Botswana, I map out the route, accommodations, and activities, anticipating possible problems. Retirement planning should be similarly thorough, ensuring the best possible outcome.

Despite the best planning, unexpected events will occur. When they do, it’s crucial to adapt the plan to stay on track. As the saying goes, failing to plan is planning to fail.

Living a life with few regrets should be everyone’s main goal. Research shows that the most common regret at life’s end is not having the courage to live true to oneself. To avoid this, retirees should plan thoroughly, seek help when needed, and take action to live a fulfilling retirement. Don’t just dream about it—make it happen!

Dirk Groeneveld, Certified Financial Plannert. 

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The Great Wealth Transfer: Risks and Opportunities

The challenges of having a global family – The Human Side Of Money

Having family spread all over the world makes life interesting and challenging in many ways. My wife and I are currently in London as we have children in the UK and I have some clients to visit. Landing at Heathrow I get the normal enquiry on the reason for my visit. The answer is the same every year, family, football and business. I immediately get asked which football side I support and on saying the word “Spurs” I get a wry grin, a sarcastic comment and then a look of pity and waved through.

I know that many St Francis Bay residents have family and friends in the UK who they try to visit regularly, and the biggest shock is always how expensive things are compared to home. A modest 6-person pub lunch cost around 200 Pounds which converts to R4,500. EINA! We are coming home sober and thin!

The tourist challenges of visiting family abroad are real however when it comes to our financial planning there are many things that we need to be aware of if we have beneficiaries living in another country.

The first thing we need to do is make sure that we have a will that deals with all our worldwide assets. In some cases, having a will in a foreign jurisdiction may also be wise or necessary if we have assets outside of SA and failure to do so can lead to significant additional expenses on our passing. Is our will updated and where do our beneficiaries are resident is important to consider as this may influence how long it will take to wind up our estate, and how the process will unfold.

Do our children living abroad have updated wills which consider the succession laws of that country? In South Africa, we have the Intestate Succession Act, 1987 (Act 81 of 1987). In other countries such as Japan, the descendants of the deceased are allowed to discuss the division of inheritance among themselves in order to reach an agreement as to the dissolution of the estate and such agreement will be enforced unless there is a dispute.

Countries which impose Sharia Law require that male descendants receive twice the share of any female descendant, and allow male beneficiaries to override certain claims, rights or even the use of assets after the testator’s death. In Turkey the rights of succession differ from South Africa in that children have first claims to inheritance followed by parents and spouses deemed on the third tier in the rights of succession.

 having a global family

Are your assets in trust? There are so many considerations that one may not be aware of, and which may prevent your assets from being dealt with as per your wishes on death. Getting advice around these issues is vital.

having a global family

The speaker at our Rocking Retirement breakfast at the St Francis Brewery on the 7th June, is Mandy Dix-Peek, Head of Fiduciary at Old Mutual Wealth, and she will be discussing these issues in her talk “The Emergence of the Global Citizen” Be sure to book your spot and prepare any questions you may have.

 

 

 

Dirk Groeneveld, Certified Financial Plannert. 

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The Great Wealth Transfer: Risks and Opportunities

Planning for the Unknowns – The Human Side Of Money

As a practising Financial Planner, I have built hundreds of financial plans for real families. I’m well aware that these are estimates about people’s futures. We all know that “Man plans, and God laughs.”

Planning for the Unknowns

Within these plans, we include all the known knowns, but the “unknowns” are missing. The “unknowns”, by their very nature, cannot be planned for—or can they?

Having seen people’s lives unfold and personally witnessed their investment and life journeys, I’ve concluded that curtailing people’s investment returns because, according to the plan, their money is getting them over the financial finish line is madness. The ‘stock market’ is human ingenuity captured. Human ingenuity (capitalism) is a powerful force and a lucrative one at that.

Knowing that unknown financial shocks hit people out of the blue, I’ve no problem creating wealth for its own sake. We don’t know what financial shocks people (and their families or friends) may face in the future. For instance, one of the biggest ‘unknowns’ I’ve seen is parents supporting adult children in divorce; this ‘trend’ is not going anywhere. Another example is unexpected health issues that require more money than the plan predicted.

Planning for the Unknowns

 

While traditional financial plans aim to meet specific goals, it’s crucial for our clients to understand that events may occur that are beyond their specified goals, and creating additional wealth will only provide them with more freedom and opportunities should the need arise. This will provide security and confidence in the face of the unknown.

It’s essential for us as Financial Planners to educate our clients about the potential challenges they may encounter. By discussing scenarios that we’ve seen other clients encounter, we can help clients develop a more realistic understanding of their financial future. This awareness can motivate our clients to prioritise wealth creation and make proactive choices to prepare in advance, knowing that they have a trusted guide to navigate these challenges with them.

Planning for the Unknowns

At Client Care, our mandate extends beyond mere wealth accumulation; it encompasses cultivating financial preparedness for the unknown, ensuring that our clients are equipped to weather life’s unpredictable storms.

The “unknowns” may never be fully accounted for. Still, by taking a proactive and adaptable approach, we can empower our clients to face whatever challenges come their way, instilling a sense of control and empowerment in their financial journey.

Dirk Groeneveld, Certified Financial Plannert. 

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The Great Wealth Transfer: Risks and Opportunities

The Importance Of A Healthy Retirement Mindset.

Retiring to a place like St Francis Bay or Cape St Francis would tick most boxes for most people. It promises a tranquil backdrop for embarking on a new phase of life. However, amidst the breathtaking beauty of this idyllic setting, the importance of cultivating a healthy retirement mindset cannot be overstated.

Practice Gratitude

In the journey towards retirement, practicing gratitude emerges as a foundational pillar. Transitioning into this new chapter warrants acknowledging the blessings surrounding us, from the stunning vistas of St. Francis Bay to the cherished relationships and newfound freedom from work obligations. Gratitude fosters contentment, infusing our days with a sense of fulfilment and appreciation for life’s simple joys.

Comparison and Contentment

Moreover, as retirees settle into their new rhythm, the temptation to compare oneself to others may arise. Yet, it’s crucial to recognize that someone will always possess more wealth or better health. True fulfilment lies not in comparison, but in embracing our unique circumstances and finding contentment within ourselves.

A Healthy Retirement Mindset

Navigating Uncertainty

The global landscape may present its share of challenges, with protests and unrest unfolding in various corners of the world. In such uncertain times, maintaining perspective becomes paramount. Engaging in proper cash flow planning allows retirees to understand their financial capabilities, empowering them to navigate any economic storms that may arise with confidence and resilience.

Attitude Determines Quality of Life

Fundamentally, our attitude towards life profoundly shapes our retirement experience. By adopting a positive mindset, embracing change, and cultivating resilience, retirees can navigate the complexities of this new chapter with grace and optimism. Staying active, pursuing hobbies, and immersing oneself in the vibrant community of St. Francis Bay can enrich retirement years, infusing them with purpose and fulfilment.

A Healthy Retirement Mindset

Retiring in St. Francis Bay offers not just a picturesque backdrop, but a canvas upon which to paint a fulfilling retirement journey. Through practicing gratitude, making peace with our circumstances, and embracing life’s uncertainties with resilience, retirees can truly savour the beauty of this coastal paradise and embark on a rewarding new chapter with a healthy mindset.

Let’s count our blessings!

 

Dirk Groeneveld, Certified Financial Plannert. 

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Warning signs from SARS- PW Harvey & Co

Warning signs from SARS- PW Harvey & Co

SARS continues to warn taxpayers that they are targeting non-compliant taxpayers, and their information-gathering tools become stronger and stronger each tax period. SARS has recently made headlines with unexpected developments in its crackdown efforts.

Some recent headlines:

“SARS collects an unexpected extra R10bn”

“As SARS crackdowns intensify, SA’s tax take surprises on the upside”

“SARS to target professional enablers’ of organised crime”

“SARS maintains clampdown on rich, as 14 partners at Santon law firm understated tax”

“SARS knows what’s happening in your bank account”

“Celeb Chef Lusizo Mvula Henna weeps as he is handed 10-year sentence for defrauding SARS of R5m”

Intensification Of Crackdowns

Despite the ongoing intensification of crackdowns, SARS has managed to collect a surprising additional R10 billion in tax revenue. This unexpected windfall comes amidst SARS’s focused efforts to target professional enablers of tax evasion and organized crime. The authority has been steadfast in its pursuit of those who aid or engage in illicit financial activities, including professionals in the legal and financial sectors.

Notable Developments

In a notable development, it was revealed that 14 partners at a prominent Sandton law firm had understated their taxes, underscoring SARS’s unwavering stance on holding even the wealthiest accountable for their tax obligations. SARS Commissioner, Edward Kieswetter reported that during targeted audits, they collected R850 million from lifestyle or luxury car audits. Long gone are the days when SARS relied on you, the taxpayer, to provide transparency regarding your financial affairs. With the tightening reporting of third-party information and reporting, it has become easier for SARS to reconcile unreported amounts in tax submissions.

 

 

Warning signs from SARS

 

 

 

 

 

 

Warning signs from SARS

 

 

PW Harvey & Co is committed to keeping taxpayers compliant and up to date at SARS. We urge taxpayers to submit all information to their tax practitioners, as the onus is on the taxpayer to disclose all income. If you are unsure as to what income should be declared or not, feel free to engage with us.

Amidst the crackdowns by SARS, we urge individuals who have not disclosed their income to come forward through the Voluntary Disclosure Programme (VDP) route. This proactive approach provides a chance for non-compliant taxpayers to rectify their tax affairs while mitigating potential penalties.

 

 

 

 

 

As SARS maintains its clampdown on tax evasion and non-disclosure, the message is clear: adherence to tax obligations is non-negotiable, and all individuals and entities must fulfil their responsibilities to avoid facing consequences, which include tax practitioners remaining compliant with their personal affairs.

Please contact the PW Harvey & Co Tax Department should you have any queries regarding this at tax@pwharvey.co.za