Modern Approaches in Wealth Planning

While building meaningful wealth may be challenging in the first place, those who are able to face another significant challenge: how to manage it. After all, without effective wealth management, it becomes more difficult to reach certain goals and achieve a secure financial future.

That’s where professional wealth planning comes into play. Although wealth planning has been around for many decades, it continues to evolve as people’s needs change in step with a rapidly changing world.

Today’s modern wealth planning covers the gamut of all things financial, from saving, spending and budgeting to investments, insurance, tax and estate issues, retirement planning, pensions, and more. It starts with having open and detailed discussions between client and wealth planner. The planner’s job is to listen intently and ask probing questions to learn everything about their client’s finances, including their family situation, income and expenses, risk tolerance, time horizon and financial objectives. As they articulate their objectives, the planner helps a client prioritise them to gain a clearer picture of what matters to them most, and which financial strategies and frameworks may best help achieve their goals.

The family office

One structure that’s proven to be effective for many highly affluent clients with complex wealth management needs is the family office. In general terms, a family office provides integrated wealth management that goes beyond traditional planning services to more sophisticated areas like tailored advice for business founders and entrepreneurs, comprehensive financial education for family members across generations, and management of governance issues.

Quite often, a family office will engage different professionals – such as a wealth adviser, tax and estate specialist, accountant, lawyer and business consultant – working as a team to offer complete and coordinated services to meet all of a family’s wealth management needs. This breadth of trusted professionals is critical for ultra-high-net worth families as they encounter complicated situations such as business purchases or divestments, succession planning, inheritances, property transactions, divorce and remarriage, the need to engage future generations, legacy wishes, disability/critical illness and death.

One key benefit of having an experienced family office team is that they are likely to have encountered a wide array of life issues, equipping them well to offer sound wealth advice, solutions and strategies customised to a client’s specific circumstances.

Wealth planning in action

Let’s take a look at a few examples of scenarios that high-net-worth individuals and families may encounter, and how modern wealth planning can help them.

1. Managing CEO compensation 

Since CEOs commonly earn significant income, they need a strong wealth plan that can invest this income tax-efficiently and for growth potential. A large percentage of a CEO’s compensation is also typically linked to incentives that are tied to the company’s stock. Wealth planning includes managing the vesting/exercising of these various share incentives to mitigate the potential tax consequences and put that income to work for long-term wealth building.

Furthermore, given that many CEOs have worked in senior roles at other organisations, it is likely that they have multiple pension plans (potentially different types, and with significant assets in each) to consider and integrate into a comprehensive wealth plan.

2. Working with founders 

Many high-net-worth individuals have built up their wealth through starting businesses. The sooner they can work with a wealth planner with experience of supporting founders and other entrepreneurs, the better the outcome is likely to be. Ideally, a founder will consult with their wealth planner before they start negotiations for selling a business, so the planner may advise them on how best to value their business and implement a sound succession plan (or engage specialists who can assist with this process).

At the same time, strategic plans can begin regarding how best to allocate the proceeds of the business sale based on the founder’s specific objectives and circumstances. In our experience, founders who wait too long after their business exit before working with the appropriate professionals run the risk of having no sensible post-transaction plan regarding the sale proceeds or the next steps in their career progression.

3. Navigating divorce

Divorce is one of the most impactful events in a person's life, often leaving them extremely vulnerable. In some ways, it’s similar to the founders we discussed above who suddenly face a new chapter in their life – one that can be both liberating and anxiety-provoking as they find themselves out of their comfort zone with many question marks ahead. In such situations, the wealth planner’s job is to provide practical support regarding their client’s finances, but also a degree of emotional support in this difficult time.

Long before the divorce proceedings conclude, the planner will proactively assess how the client’s finances will likely change. For many people, that will mean adapting to living on one income versus two, often resulting in a revamped budget as income and expenses shift.

Pensions and other assets may also need to be transferred as part of the divorce settlement. In addition, other major issues may need solutions, including real estate/living arrangements, alimony and/or child support, and revised retirement plans. The planner will need to consider their client’s overall financial picture and possibly adjust their saving and investing strategies, as well as their insurance cover, to reflect their new reality.

4. Explaining cash flow modelling

Adequate cash flow is important at any stage of life, particularly in retirement when income is often greatly reduced but expenses must be covered potentially for decades. With cash flow modelling, the wealth planner will take everything they know about their client (e.g. assets, liabilities, potential inheritances, business sale proceeds) and plug it into a sophisticated software programme. They’ll also consider day-to-day expenses and typical major expenditures for ‘irregular’ things like buying a new car, helping the children purchase a home, and other large capital events that may arise. This modelling can help the planner gain a strong sense of whether or not the client is on track to be financially independent.

The planner may also incorporate ‘what if’ scenarios, such as buying or selling properties, retiring sooner than originally anticipated, and covering long-term care expenses. How might these events affect a client’s wealth and long-term financial independence? The planner will consider putting structures and strategies in place to optimise their client’s finances, such as setting up a trust or gifting assets tax efficiently to the next generation or for philanthropic purposes.

Cash flow modelling helps the planner determine how much the client can allocate to those structures and strategies, while still leaving more than enough for their own wants and needs. This helps clients be more organised and confident in their financial decisions, taking greater control of their life and path towards the future.

The power of a wealth plan

Of course, wealth planning offers much more value than what we’ve discussed, but those above are examples of what the planning process entails. The bottom line is that clients work with wealth planners because they want a sense of comfort and safety when it comes to their finances – and those sentiments also extend to their family members and other loved ones.

That genuine peace of mind can have more impact on a client than many other important actions taken by a wealth planner, such as dealing with daily market fluctuations or keeping on top of inflation and taxes. Basically, the client is seeking an experienced long-term partner, an expert in looking after families with complex wealth needs and challenges. That includes educating family members on critical financial matters in order that they too can achieve long-term wealth-building success. That’s the essence of a modern, productive wealth planning process.

Contact a Corient Client Relationship Manager today if you’re interested in benefiting from your own personalised wealth plan.

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