By Haydn Johns, Head of PSG Life and PSG Invest, PSG Wealth

Creating lasting wealth to pass down for generations to come can seem an overwhelming task. But taking a step-by-step approach to understand and planning for the various considerations holistically helps to make it achievable.

Start with a plan

Creating lasting, intergenerational wealth starts with a thorough and robust financial plan. This includes (but isn’t limited to) the following:

• ‍Asset allocation planning. Ensuring that your asset classes and allocations match your risk tolerance and long-term goals is crucial to creating long-term wealth.‍
• Retirement income planning. You will need to build up a sufficient asset base from which you can draw an income in your retirement years. Being able to receive this income in a tax-efficient way is a crucial consideration.‍
• Estate planning. Contemplate how your assets are protected and how they will be passed down to your beneficiaries in a way that minimises estate costs and tax liabilities.‍
• Tax efficiency. Understand how to use tax legislation to your advantage and minimise your tax liability.

Choosing the right products for your needs

After establishing a financial plan that includes the vital elements discussed above, matching these objectives with the correct product and service offering is essential. Below are some key considerations to weigh up when choosing a provider to help you implement your financial plan.

Investment options

Consider whether your provider offers a range of investment funds that will offer you consistent performance and help you realise your savings goals, taking into account that your needs may change over time.

A range of traditional single manager unit trusts is a useful starting point, but as these funds are managed by a single fund manager (or management team) they may have shortcomings. Funds of funds are different in that they invest in a variety of single-manager unit trust funds. As a result, investing in a fund of funds offers the following benefits:

• Greater diversification across asset classes, regions and investment styles
• Reduced risk because of this diversification
• A bigger team of dedicated asset allocation experts managing your funds
• Access to a broader investment universe

Fees

It is tempting to simply look for the provider that offers the lowest fees, but there are other factors to think about too. For example, some platforms may offer fee structures that can be beneficial if you invest in multiple products. Some may have a fee offering which supports holistic family planning by offering fees based the collective value of your family’s assets, which may result in reduced administrative fees.

Product range

You may wish to add to your product portfolio over time or consider investing in a variety of different products immediately. Check to see whether your provider has a robust enough product offering to cater to your needs as they change over time.

For example, you may want to consider an investment vehicle that can function as an alternative to banking investments if you are just starting your savings journey. However, as time passes, you may also need to invest in a retirement fund and, later still, a living annuity. You may also want to consider whether the provider you choose offers tax-efficient wrappers to limit your tax liability (particularly if you have a high marginal tax rate).

Flexibility

Many providers may offer similar products, but something that is often overlooked is the flexibility of offshore asset allocations allowed within those products. Investigate whether there are limits to offshore asset allocations within products you are considering. While such limits may not be a problem in the short term, markets go through cycles where sentiment towards local and offshore asset allocations change. Limits on offshore asset allocation can reduce an investor’s flexibility to move between local and offshore asset allocations over the long term, which can be important as part of a long-term plan to create intergenerational wealth.

Reach out to a financial adviser

Creating a financial plan that will meet the objective of generating lasting, intergenerational wealth involves many variables and is specific to an individual’s unique circumstances and needs. A financial adviser is best positioned to help you construct such a plan and, more importantly, to stick to it.