Wealth And Legacy Planning During A Crisis

Wealth And Legacy Planning During A Crisis

The Covid-19 pandemic has forced many businesses to re-evaluate their future plans. This can also be said for individuals as many take stock of what the future holds. They are forced to work on management strategies to weather financial storms and how it impacts legacies left behind. Angelina Alexander, Head of High Net Worth and Affluent Customer segments at Prudential Insurance Singapore speaks to Rachel Kelly on Prime Time.

Rachel Kelly: How has the current climate changed the conversations that you are having with clients at the moment?

Angeline Alexander: With the Covid-19 pandemic, there has been a lot of uncertainty and unpredictability that has impacted everyone and our customers are no different. This period has raised a lot of greater concerns. What we are seeing in our conversations with customers is that they are increasingly concerned about making sure that their current health and protection plans are suited to what they need. Ironically, this is a good time as well because a lot of our distractions are taken away now. There is no travel and therefore we do have time that can be used to assess where things are. We are seeing an increase in our customers spending time reviewing what their current coverage is looking like.

RK: Why is it important to plan and think about wealth preservation during a time of crisis? Perhaps it is more important now than during, as they call it peace time, when everything is normal.

AA: I think you raise a really good point about peace time versus a crisis. We do encourage our clients to look at their plans, for today and for the future. It is to ensure that you don't get these upheavals. Whatever is happening in the macro climate, a solid plan will help to mitigate some of these risks. So, when we talk about wealth planning with our customers, it goes beyond wealth growth. I think a lot of people tend to think it's all about wealth growth, but with high net worth individuals, it's also about wealth preservation and wealth transfer. It is thinking about what the individual’s intentions are, especially if they have a business, multiple assets and have children to whom they want to pass these onto. It's about thinking how best this can be done in a smooth and seamless way. For some clients, it's about how to create equalisation around the distribution of the assets as well. If I have three children, how do I make sure that it is equally divided so there is no conflict within the family?

There are about 190,000 millionaires in Singapore today, and the research shows that only 1 in five families has a wealth transfer plan. So, what we do is to encourage our customers to start planning early and not wait till when there is a crisis. In fact, when they plan ahead, it helps them to manage the “peace time” as you say, as well as during the stormy periods and unexpected events. It's also about what you can do today that will impact tomorrow, protect you better for tomorrow, and when you have a family and multiple assets. Whether it is real estate or a business, planning ahead always bodes well for the customer in terms of stating their intentions and also identifying the gaps and making sure that the plan is solid.

RK: What is the difference between a wealth transfer plan and how does it differ from a will?

AA: Broadly speaking, they are very similar in the sense that they are both about passing assets to your loved ones or to individuals that you want to transfer your assets to. In legacy planning, our wealth planners and private wealth consultants look at the client’s strategy from a holistic perspective. So, it's about understanding the client's needs and what they want to achieve in the short, medium and long term perspective. What are their intentions in terms of their wealth preservation and transfer of wealth? How do they want to protect their wealth and allocate it to the next generation or their designated heirs?

It is not just about transferring to the next generation when the individual passes on. In Singapore, we are living longer. The average lifespan in Singapore is now about 84 years. So, legacy planning also incorporates elements around the key individual, such as planning for retirement or when they want to start moving away from the business and leave it to the next generation.

Legacy planning is a strategy for high net worth individuals, because they've got multiple assets in different asset classes. It's about taking an integrated look and a holistic approach. And as an insurance provider, we believe that insurance can actually play a critical and holistic role in an integrated plan for high net worth individuals.

RK: What about the legacy that we want to leave behind? Is this something that Prudential also guides their clients, for example, via philanthropic donations?

AA: Absolutely. We are guided by where the clients show interest and desire, and we're starting to see more and more high net worth customers starting to incorporate philanthropy into their legacy plan. The wealth accumulation that's happened in Singapore, a young country, is relatively recent so we're only starting to see second, third generations coming through in terms of wealth transfer. A lot of these customers, whether they are the original business owners or not, want to give back to society because they feel that the community has given them so much and helped them to be successful. They want to give back and pay it forward. Even in the next generation where they may not be so much interested in the family business, but wish to contribute and do something noble to carry on the family's legacy, they are also starting to incorporate philanthropy to actualise a sustainable legacy.

RK: For those of us looking to make those first steps on our wealth planning journey, what should we consider? What should we think about?

AA: As with everything, start with a plan. I think the main thing is to indicate what your intentions are, in the short, medium and long term. What do you want to achieve from a legacy plan and how do you want to start to think about that whole wealth preservation as well as wealth transfer objectives that you want to achieve. Planning and sitting down with a private wealth consultant helps to crystallise that plan and incorporate an integrated approach. So, looking at insurance as being part of that planning process, as well in terms of the solutions that can help you achieve your goal.

The good thing about how we've set up our business is that our approach is very needs-based and advisory-led. While we are the insurance expert, we do acknowledge that customers like the high net worth individuals would require something broader. We have specialists in different fields and trust family offices, tax, and other areas of specialisation that we can bring in to help with those conversations for the customer.

So, it is about planning and planning now. If you don’t have a plan right now, it's never too late to start.

The other point, as I mentioned, is about seeing how insurance can play a role in helping you release that liquidity should you need it. Whether it's in terms of an emergency or whether that liquidity can be released should the key business owner pass on. It can help the family leverage that liquidity in that interim while assets are being allocated.

RK: When you deal with ultra-high net worth individuals, it is often relationship-based. Have you adjusted your offerings given the current environment?

AA: I think precisely because it's relationship-based and our key focus is about actively listening to what the customers want and need, our approach [needs-based and advisory-led] remains largely the same. It’s about identifying what the customers are seeing as potential gaps in their plans and areas that they would like to start to plan and tighten up. So for example, high net worth clients might view that there might not be enough coverage for what they want to achieve further down the road from a protection perspective. So, having those discussions with them and seeing how insurance can help expand their estate, greater coverage is reached, so that they can attain what they want to achieve in terms of dividing up their assets amongst the next generation. So, planning is important.

For those who already have a plan. We do spend a lot of time reviewing those plans and taking into consideration unfortunate global events like the pandemic that we are going through, and seeing whether their current plans can withstand these potential storms in the future.

I cannot stress the importance of planning and reviewing those plans. As I said, because a lot of distractions have been taken away from us now that we don’t travel, I think customers are spending a lot more time with us to start thinking about these elements.

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For more, tune in to Prime Time with Howie Lim, Rachel Kelly & Finance Presenter JP Ong on weekdays from 4PM to 7PM.
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This interview was broadcasted on MONEY FM 89.3 on 4 September 2020.

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