Monday, November 23, 2015

Here are some secrets about Life Insurance which the Super Rich are not telling you

So as an advisor to several Ultra HNI families and after several discussions with them, I have realized that the way Life Insurance is perceived by some of the SUPER SUPER Wealthy families is very different from the rest of the population. Below I have tried to quickly summarize some of those observations and comments.
The Ultra HNI Clients buy Life Insurance; EVEN IF THEY DON'T NEED IT!!!! WOW... !!
Now why do they buy it then? (The Million Dollar Question)
1. Liquidity! A lot of wealthy families are "Asset Rich" but liquid poor. The Life Insurance policy becomes a quick tool to create liquidity when any key person in the family passes away to ensure Hard Assets are not liquidated in a "Fire Sale". It also protects the reputation of the family
2. Income Replacement: AND I get this question asked a lot... But don't the Super Rich have passive incomes and established businesses?? Well they do, But when the primary breadwinner passes away, these income sources may start to dry up, so the Life Insurance provides a quick buffer to help stabilize the income flow.
3. Wealth Transfer: We all work very hard to build HARD Assets; It is essential that these HARD Assets are transferred to the next generation without loosing value. Taxes, Transfer fees, Probate costs, Lawyers, Trusts, Foundations, the more complex the structure the more fees the estate has to pay. Life Insurance ensures those payments are made without touching any of the assets in the estate. Hence ensuring full Wealth Transfer.
4. Hedge against the Future: But don't the SUPER RICH already have a secured future? Well just like a car, every estate needs to have Shock-Absobers, Seat Belts and Airbags. You may be in a Rolls Royce, but you would still need the essential protections from uncertainity. Life Insurance is the Shock Absober in the Estate Value. It hedges the pot holes on the way. Life is unpredictable and so is your estate value.
5. Life Insurance as an Asset!! Life Insurance is not considered an expense on the Super Rich Income Statement; one of the reasons why a lot of people think the Super Rich don't have it..It is on the Balance Sheet as an Asset. No wonder a lot of people have the Myth that Life Insurance is only for the Poor and not the Rich. Life Insurance is an option (for all the traders and accountants out there) which is always "in - the - Money" which means; it will always have value for an estate even at its worst performance. Its a Liquid Asset/Property on the Balance Sheet of the SUPER RICH
This is a quick summary of the discussions I have had with many families. If you believe you know someone who could benefit from this information. Please share it.

Thursday, November 19, 2015

What financial resolutions should be planned for the new year?

So with the new year round the corner... Bonuses might come through... but more essentially.. What financial resolutions should be planned for the new year?

Some tips when planning (Not a new mantra...just some wisdom and old information which we might have been forgotten or ignored)

1. Preplanning or Re-Planning your Budget: Sometimes we ignore some of the small sources of income and also miss out on the small leaks of expenses in our daily busy lives. Once a year... it would be good to be reflective and just relook at where some of the money just disappeared....Only a small leak is needed to sink a boat... would be good to recheck the small leaks

2. Emergency funds: If you are thinking.."What emergency fund?" ...Well imagine if you did have an emergency? Something as simple as loosing your job! The rule of thumb for emergency funds is 6-9 months of expenses... It's a buffer good to keep a check on...sometimes it gets dried up... best time to top it up is usually when the bonus flows in..

3. Plan for Big Life Changes: Marriage, Children, Starting a business or buying a house, Kids going to University or even retirement... When best to start saving for these potential life events? Answer: The sooner the better... the cost of delay can be very expensive. Time passes by very fast and these commitments will just come knocking on the door...

4. Start paying down your debt: Very essential that you consider the cost of the debt which you may be carrying... Personal Loans and Credit Card debt is one of the most expensive forms of debt.. Try to avoid carrying debt that's not essential... and paying it down is most ensure that other financial commitments can be met in the future. Exactly one of the reasons to ensure your children don't start life with a debt.. plan for their university while you can.. giving them a strong foundation will ensure they get a slight head start at facing life with confidence.

5. Protect your Income: All of the above strategies can go down the drain; if the source of your wealth dries up.. YOUR INCOME... Income Protection is very essential for any budget and financial plan. Your income can be hampered due to two potential reasons... loosing your job or a major recession (Point 2 is what comes handy then) or you if you fall sick and are unable to work; then who continues to pay off the debt or pay off expenses? Insurance companies have in the last 30 years started building income protection products usually called Critical Illness Protection Plans which would provide you a lump sum which would support your family for an additional 3-10 years.

6. Fulfill atleast one dream or desire: Do put aside a small fund to ensure you fulfill your desires as well.. or else regret kicks in or end up taking up unnecessary debt. No point in killing desires... But plan these splurges as well.

If you find it useful.. please share this with your friends and family as well. A lot more tips have been written in my book "28000 - Make Everyday Count" which is available in 3 Languages: English, Hungarian and Bahasa Indonesia

#loveyourfamily #plan #income #retirement #debtmanagement #incomeprotection #financialplanning #budgeting #sanjaytolani #speaker #author #28000

Wednesday, November 18, 2015

Planning your retirement?... you have a lot of work cut out for you....

So this is a slightly long article... but I felt I should write down my thoughts for my friends and family....
1. Longevity: People are living longer than ever before... (not healthier but longer)... very important to think how long will your income last after you retire. Setting up a minimum income guaranteed every month should be the first criteria for your retirement plan.
2. Healthcare Costs: We know we are going to live longer... cost of healthcare is also increasing... how are we going to manage this risk? Health Insurance? Health Care Fund on the side? Critical Illness Insurance for experimental medication? Long Term Care Insurance for nursing homes? Cost of Changing a house in case of disability? WOW... overwhelming isn't it? Even as I type this... I can feel this is something everyone should always have on their radar of planning.
3. Government Support: Never underestimate the power of this support... sometimes its the only thing that might help... but also don't overestimate this support as government policies change and you don't want to be left without any coverage. So plan as if you have to fend for yourself alone... this is an additional support level.
4. Inflation: Yes every financial planner talk about it... how real is it.... very real .... how can it affect your future income...BIG TIME... do not loose sight of this rate... it can creep up real fast and eat into your income pie... make sure your minimum income guaranteed every month is inflation protected... or 20 yrs into your retirement (when you are even more old) you might be struggling to make ends meet... so Watch it very carefully.
5. Investment Risk: Yes we all talk about risk too... Low risk... Low returns... High risk ... high returns... so what happens if we start taking risk with our pension money... well either we have a lot more than we need...or we are gonna be facing a huge challenge to catch up... watch it very carefully as well... take risks early..and reduce it as you grow older..when you cant afford to loose...
6. Legacy: An over rated and over used word... but its something we all can relate to... how do we want to be remembered? the person who was an asset or a liability on the family?? what did you do for the next generation(s) to remember you? Some of us want to be remembered for our deeds... and some of us really don't care... so painting everyone with the same brush is probably unfair.. however... as we grow older... we do want to be recognized and not totally forgotten by society... and especially our grand kids.. so think about it...
If you liked this article... please share this with your friends... I have written a lot more in my book "28000 - Make Everyday Count" which is now available in 3 languages - English, Hungarian & Bahasa Indonesia

Monday, November 16, 2015

Economic Summary for the week ended 15th Nov 2015

The International Energy Agency said stockpiles of oil stand at a record 3 billion barrels. Indeed, oil prices returned to their August lows, losing some 8% as the entire commodity spectrum came under pressure. These are certainly interesting times. Although the USD is the global reserve currency, the US economy is quite insular (exports contribute only around 13% of GDP). As such, the FED is focused on their domestic economy, which is expanding at a reasonable pace, somewhat out of sync with broader global weakness. This could continue to perpetuate USD strength.
Key questions for investors are therefore whether non-USD liquidity (for example from the ECB) can make up for US tightening and whether current exchange rates already fully reflect impending rate hikes.

Sunday, November 1, 2015

Economic Summary for the week ended 20th Oct 2015

One year ago, Germany’s DAX index bottomed. Back then, optimism about German growth had been falling sharply, illustrated by the ZEW survey. A few months later, the DAX rebounded in tandem with a bounce in this survey. This summer, the ZEW figures have again fallen as investor optimism diminished.
However, history could repeat itself in the coming months with a renewal of optimism. We expect a stabilisation in the Chinese growth outlook but German domestic demand, which is far more significant for the economy than exports to China, should support German economic expectations regardless of Chinese demand. Given our expectation that German growth will be close to 2% next year, investors should watch the ZEW survey for signs of an attractive entry point for DAX-listed equities, which appear to have already priced in recent concerns. The other major German survey from the IFO suggests that a pick-up in the ZEW survey may be just around the corner.