The term ‘wealth structuring’ refers to the proper planning procedures for the long-term management of wealth, including control, preservation and succession. Without proper wealth structuring, misuse or waste of funds – or even family conflict – can arise. Wealth structuring includes planning for retirement, diversifying investment portfolios to minimise risk, and preparing for eventual wealth transfer appropriately.
Dr Edgar Paltzer is an attorney-at-law based in Switzerland, who cites wealth structuring as one of his preferred areas of practice alongside estate planning and management. More information about estate planning can be found in the PDF attachment to this post.
The specialist knowledge of wealth management experts can help individuals grow more wealth by adopting a goal-based, personalised financial plan.
Planning for Retirement
Part of wealth structuring includes planning for one’s own retirement. This goes above and beyond a simple pension plan. Those that wish to be able to continue living the lifestyle they have enjoyed as successful entrepreneurs will want to consider ways of ensuring that, when they do decide to retire, their retirement is more than comfortable.
By structuring assets in the most beneficial way, people may find that they have more finances available to them upon retirement than they might have previously anticipated. Making the most of a portfolio of assets can be a complex procedure, exploring the benefits of a variety of arrangements such as pension plans, salary, bonus packages, life insurance, share schemes, medical plans and complex deferred compensation schemes, among others.
Many entrepreneurial business owners neglect to establish their own personal pension, instead focusing on the assets of the business and assuming this will provide for them upon retirement. While a pension may only be a small part of a comprehensive wealth package for retirement, it makes sense to cover all bases and have something to fall back on should things not go according to plan.
Every entrepreneur should take advantage of every available allowance and wrapper they can, which includes a pension and Individual Savings Accounts. The infographic looks at some of the best free retirement planning tools.
Portfolio Diversification
Taking the time to regularly review an investment portfolio and diversify to minimise risk can help ensure that these investments do not end up losing money as a package. Entrepreneurial business owners often have a large percentage of their funds tied up in one single asset, which makes it more important than ever to ensure that the rest of the portfolio is highly diversified.
While the business will likely be the primary source of income for many years, having a portfolio of diversified assets can act as a safety net in times of financial difficulty, or as an investment in the future. Highly concentrated investments bring with them a lot of challenges; adding some alternatives to the portfolio that can help mitigate risk reduces the scope of those challenges.
A definition of portfolio diversification can be seen in the embedded short video.
Wealth Transfer Preparation
Wealth transfer, as in passing money and assets on, can be a complex business. Most entrepreneurs have an emotional attachment to their company and have invested significant amounts of time, energy and money into the business.
Passing over the reins can therefore be a challenge even when the entrepreneur knows it is time to take a step back. More than anyone else, entrepreneurs benefit from having a full wealth transfer plan in place, as they are the most likely to have large percentages of their wealth tied up in concentrated, illiquid assets.
Beginning plans for wealth transfer as early as possible and seeking the advice of professional financial advisers is vital for those that want to eventually take a step back.