• Michael Hertz, Advisory Partner, Citadel

Why professionals need wealth managers


Professionals such as doctors, lawyers and accountants are generally high salary earners, but have often not been great investors, nor have they planned well for their retirement.


This is for a number of reasons. First, while professionals may save, they tend to also have an expensive lifestyle, thus eating into possibly higher savings.


Second, professionals are extremely busy by nature, as their income is commensurate with the hours they work. As such, they often don’t have the time or inclination to investigate the investment universe properly and thus invest almost exclusively in property and retirement products.


Finally, professionals generally earn well during their working life but, unlike entrepreneurs, do not own a saleable asset at retirement. They are essentially the commodity themselves, and earn a share of the profits only while they are employed.


In other words, professionals often lack a clear financial plan or strategy, and require a clearly defined financial road map to guide them so as to better plan for retirement.


Planning and discipline


The benefit of commencing the financial planning process as early as possible cannot be understated. It is disheartening to discover how many of the professionals we meet have reached retirement age and have unfortunately left it too late to build the wealth needed to generate sufficient income to meet their future expenses.


As a professional, it is therefore crucial to seek the guidance of a well-educated, experienced and professional financial advisor in order to adopt a more disciplined approach to your financial future and make the difficult financial planning decisions that are necessary to achieve financial independence.


The first step is to develop a clear-cut financial and retirement plan which incorporates cashflow analysis, fiduciary and financial planning, as well as risk management.


This plan should also address the professional’s “firewall” which is the amount required to achieve financial independence.


Key deliverables needed


One of the key purposes of a financial advisor that is often overlooked is their role in ensuring that a professional’s portfolio is properly diversified both locally and offshore – an area of particular concern for professionals given the numerous other demands on their time.


It is important to note that retirement funds are limited in terms of the amount that can be invested offshore in compliance with Regulation 28 restrictions, and that investments in physical properties can become burdensome when considering vacancies, unforeseen expenses and upkeep requirements. Diversification in terms of both asset class and geographic allocation therefore remains a priority.


Additionally, tax structuring and estate planning are absolutely critical in financial planning and are often overlooked by professionals. A financial advisor would, for example, be able to advise on the most appropriate mechanism to protect a professional’s assets from creditors, or how to enhance the tax efficiency of their investments by splitting income between spouses, taking advantage of Capital Gains Tax as opposed to income tax, and utilising endowments or offshore retirement vehicles and structures where appropriate. Additionally, a financial advisor is necessary to guide professionals in ensuring that their will is in line with latest legislation and that it remains up to date at all times.


All-in-all, the particular financial circumstances of professionals means that they should seek specialised knowledge and tailored advice from a financial advisor with whom they are prepared to build a lifelong relationship based on trust.


ENDS

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