Lately, I’ve been attempting to meet up with some high net worth clients to share some ideas on estate planning with them. How fortunate to come across this very timely article in The Edge online version. It really helps to hear the views of Johari Low who is the Rockwills Corporation chairman:
Beyond preserving capital and ensuring that wealth gets distributed fairly, estate planning has evolved to cover more complex needs over the years. In his presentation, Estate Planning for Multi-Millionaires, at Rockwills International Sdn Bhd’s first estate planning conference yesterday, its chairman Johari Low said estate planning has now evolved to cover areas such as elderly care, maintaining harmony within the family, incentivisation and succession planning.
On how incentivisation works in estate planning, Low explained: “Some millionaires want their kids to work and strive for success, even though they will be inheriting millions. One way is incentivisation. You can peg income distribution to the condition that they have to get employed. The amount distributed is pegged to how much they earn. So, the harder they work, the higher the distribution of their income.”
Low noted that while the need for wills is acknowledged, people have a tendency to procrastinate. “The estate-planning industry in Malaysia is still very far behind, compared to the insurance and unit trust industries. People don’t do wills as much as they should. High-net-worth individuals (HNWI), especially, think they are invulnerable, and that unfortunate things won’t happen to them,” he said. In Malaysia, HWNI is defined as persons who have investible funds of RM3 million and above.
Driven by their changing lifestyle (especially the younger generation), longer lifespan, higher divorce rates (which require more plans for the family), clients’ increasingly more complex estate planning needs are altering the role of estate planners. “It’s no longer just about giving armchair advice to instruction-taking clients. It’s no longer a case of one-size-fits all. You have to tailor-make your plan to one client,” Low said. “A lot of multi-millionaires don’t know what they want. You need the skill to prompt them and dig it out of them. You need skills to reason out and find a solution that matches their objectives.”
Calling estate planning “the last leg of financial planning”, Low reckoned that financial planners need to consider a few factors when structuring a plan for their wealthy clients. “Find out who your clients’ dependants are, whether their spouses get along with their mothers-in-law and whether their children get along with each other,” he said, adding that planners need to know the client’s financial situation and their character traits. “Are they spendthrifts, or are they careful or conservative?”
In terms of presentation of the plan, estate planners can no longer expect to satisfy clients with a note that is filled with legal jargon, said Low. “HNWI are more demanding. They don’t take your word for it. They want to understand what you’re proposing.”
Going forward, he said, estate planners will play more non-financial roles. “Increasingly, overseas, there are now more moves for estate planners to be mediators,” he noted. “Lots of families have common issues. Multi-millionaires are also concerned about whether their child is marrying a gold digger, squandering all the millions away or is a spendthrift.”
In terms of regulation, laws covering disputes and conflicts of interest need to be clarified, he said. “Rather than going to court all the time, there’s a need for the law to be reviewed, and a need for the process to be more efficient. Now, it’s quite fragmented, where different states have different processes.”