| It isn’t easy to find a financial advisor who is sufficiently qualified and experienced to both look after your wealth portfolio and care about your risk-mitigation portfolio but they are inextricably linked. Why is important to look at your wealth holistically? Essentially, your wealth is an ecosystem.  No, I am not using that term lightly, and with a BSC Hons in Science I know what ecosystems are, how they work and why they break. Ecology is much more fun to talk about and is much more relatable than good old financial planning which is why I use the one to explain the other (without putting you to sleep). Like every ecosystem, wealth ecosystems start out small and take a long time to gain a foothold. New ecosystems just do not have the resilience of older systems, and a small drought, hungry hippo or mini flash flood can destroy it before it starts – but just like with younger humans with a bit of tenacity – they can start again. Once roots have stabilised the soil, beneficial bacteria, fungi and animal life have established themselves, then biodiversity can take place – each with different resiliencies so that one event won’t wipe out the entire system. This is the same with wealth portfolios. Resilience to risks and shocks has to be put in place and there needs to be asset diversity to increase that flexibility and allow it to grow, even if it is in fits and starts. Seasons and cycles occur everywhere – in financial markets, economies and ecosystems.  |
| Insurance/Assurance protect those risks – for example, dying prematurely and leaving dependents, being unable to earn an income due to disability, losing your job and having no fallback position, theft/destruction of high-value items necessary for your job or basic standard of living or unexpected medical emergency. Not all of those have to be in place all of your life – and a decent financial advisor/planner will point those out. Whether you manage your wealth ecosystem it on your own or with the help of someone else – you need to understand the basics of the system (and know when you’ve hit the limits of your expertise). I think most of us know intuitively that we cannot put all our wealth in a vault, insure everything to the limit and expect it to grow (and enjoy life in the interim). In an ecosystem, a plant cannot just decide it’s not going to let any animals or insects near it and eat its leaves (aka tax or fees) even though some may try. Take giraffes for example, and their food of choice, Acacia. Over the centuries Acacia have developed nasty thorns to deter the giraffe (who have, in turn, evolved very robust mouth and tongues) but acacias also start releasing bitter tannins as they are being eaten to make the giraffe move on from the buffet and send out chemical signals to surrounding trees to start releasing those tannins early.  Animals and insects are often part of the pollination or seed dispersal cycle and part of the system, and yes, sometimes they go rogue and kill the plant in the process. Paying fees and taxes on your investments are like that – you are getting some built-in advice and protection – sometimes from yourself. (I have written a blog on the value of a financial advisor here: https://www.moneyweb.co.za/financial-advisor-views/top-nine-reasons-why-financial-advisors-are-more-valuable-than-you-think/) The nicest part of building up your wealth ecosystem is watching it grow – and eventually reaping the rewards by taking your harvest from it. You are still the caregiver, but instead of watering and weeding you’re now carefully consuming enough not to hurt the ecosystem so that it can sustain you for the rest of your life (and, well managed, provide a ready-made ecosystem for others).  So, in summary then – as early as possible in your career (and it is NEVER too late) get a good understanding of what you want your wealth ecosystem to look like. No planner can do this for you. You can start by asking yourself the basics – who, what, when, where and how. Who? Just you, you and a spouse, you, spouse and x number of progeny, you, spouse/s, extended family, your progeny and theirs and their hangers-on? What? In broad brush strokes what does your future look like – but be realistic. If you put all your effort into shooting for the moon but your trajectory will only take you into your neighbour’s yard, at least make sure it’s a better yard than the one you’re in now, and don’t use up all your provisions in that failed moon shot. It is never too late to tweak an ecosystem. You can weed out the parasites (fee-sapping structures), get rid of the pretty but poisonous invaders (by correcting the asset allocations or embedded assets with huge CGT that are going nowhere) and prune rampant undergrowth and letting the sun in on new growth (assets that have had their day and new ideas need room – and capital). When. Whether you like it or not, we all have a shelf life – and a best-before date. Increased longevity is a reality but unless you absolutely love what you do (like me) then you’re probably going to want to start gathering and consuming that harvest (called retirement) before you physically become part of the larger ecosystem at the very basic level. When is one of the most important variables in your wealth ecosystem – in any ecosystem actually. If you need your harvest in 2 years then you don’t grow an avocado from a pip which can take 10 years to start producing fruit. If you plan far enough in ahead you can play with the different scenarios and determine what you need to do to make the ‘when’ earlier – or later. Where is always an important consideration in this increasingly mobile world we live in. South Africa, like other countries around the world, and especially here in Africa, has had periods of mass migration – some forced (Ugandan Indians in 1972 s and Zimbabwean farmers in the 2000s) but many for economic reasons. Not only does it make sense to invest offshore to get exposure to different growth opportunities in your wealth portfolio, but if your ‘where’ is not here in the future, plan for it well in advance. The How is where your Wealth Ecosystem Manager can really help. They will know all the technical aspects of getting your ecosystem from an apparently barren termite mound (Actually incredibly fertile soil) to a flourishing savannah.  In short, stop putting the various aspects of your wealth ecosystem into silos with different managers and a ‘pick me’ mentality. They should all work together – and they will all have their day in the sun. This is not to say that specialists can’t be involved in the different sub-systems, but someone needs to have oversight of the final plan and the ability to divert resources when needed without a vested interest. Articles and Blogs: Why do I need a financial advisor ? NEW Costs Fees and Commissions The NHI and what do do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |