Take a step-by-step approach to understand and planning for the various considerations to help make it achievable.
When South Africans are not looking for means to provide for themselves and their families, they are looking for means to create generational wealth to ensure a brighter future for their children and grandchildren.
However, it can become overwhelming for one to figure out how to create generational wealth that will sustain future generations.
Haydn Johns, head of PSG Life, PSG Invest and PSG Wealth gives tips on how South Africans can create generational wealth.
He says one must take a step-by-step approach to understand and plan for the various considerations to help make it achievable.
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Start with a plan to create wealth
Creating intergenerational wealth starts with a thorough and robust financial plan, says Johns.
He says asset allocation planning can ensure your asset classes and allocations match your risk tolerance and long-term goals. The plan must include retirement income planning, as this will 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.”
Another important thing to consider is estate planning, this is to 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.
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The right products for your generational wealth 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.”
Johns says that it is important to consider a range of investment funds that will offer consistent performance and help achieve your savings goals.
He advises people to choose investment funds that provide benefits such as greater diversification across asset classes, regions and investment styles; reduced risk because of the diversification; a bigger team of dedicated asset allocation experts managing your funds; and access to a broader investment universe.
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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.”
Johns adds that one also needs to consider 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.”
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