How to maintain wealth: 7 mistakes expats should avoid


Over the years, we have seen many clients make mistakes when building their wealth, particularly when it comes to the professionals they hire. These mistakes are as common with average investors as they are with affluent investors, however, these mistakes seldom occur with the savvy affluent. How do we know this? Many of our clients have built their fortunes and protected their assets by building the right team around them. Teams of investment, tax and insurance professionals.

Before we get into the seven pitfalls of choosing and working with advisors on your financial plans, we first want to touch on private banks. Because so often we meet expats who are not satisfied with the service and performance they are getting from their private bank. The reason? There's arguably far more to professional wealth planning and asset management than a private bank can and should provide. A wealth-owning family typically needs a trusted advisor/steward that is not only able to take charge of asset management in relation to liquid assets, but who is able to help the family with investments in property and anything else the family is interested in. It is not uncommon to see private banking relationship decisions made upon 'tangibles' such as the associated prestige of holding an account and having the 'red-carpet rolled out', without regard to the 'intangibles' such as the potential conflicts of interest, product range, competency, charges, access or terms on offer. For wealthy individuals, there is no choice but to be extremely critical about how many private banks charge and to consider - where one has negotiating power given the level of assets involved - not signing the standard documents that banks put in front of you, but rather to set out your own terms, mandating your advisors to work in a way that makes sense for the wealth-owning family itself.

Now, onto the 7 mistakes to avoid when maintaining your wealth and choosing the right advisors. This could save you a lot of time, money, and aggravation in the long run.

Mistake #1: Choosing professionals because they are local to you

The best available advisors need not be the best available near you. Do you really need to meet your financial planner face-to-face? We help clients from all over the world. A surgeon generally needs to be in the room to do surgery. Financial or legal professionals don't need to be in the room to do what they do. Don't be afraid to enlist the best you can find - even if they are not on your doorstep.

Mistake #2: "If it ain't broke..."

Just because you have worked with the same advisor for 10 or 20 years, doesn't mean you should continue to do so indefinitely. There is a high likelihood that, as you have accumulated wealth, your needs have changed.

You could have outgrown your advisor's capabilities and expertise (or their firm's) and that makes sense. Many clients choose their advisors when they are just starting out. They use the advisor their parents or friends use, or hire a friend or family member. This serves its purpose when there are bigger challenges at hand (like working 20-hour work days to set up your business). It is the path of least resistance. Perhaps, understandably, you chose competency and affordability. Like triage nurses in an emergency room, they don't have to be highly-trained specialists, when all that is needed are some stitches. This comes back to the 'sunk cost fallacy', where you remain committed to something, even when the opportunity cost (what you are giving up) is so high... "We've been together so long, I'd hate to change now." Ask yourself, how did you choose the professional advisors you work with today? How many other professionals did you interview prior to choosing one? Have you periodically interviewed others as your needs have changed?

Mistake #3: Never getting a second opinion

A second opinion is the primary way of identifying planning mistakes or noticeable omissions from your planning. Just as good physicians encourage patients to get second opinions, good advisors should encourage their clients to do the same. This is the only way for you to adequately judge an advisor's performance. It is amazing how little we see this. If your life were in jeopardy, wouldn't you get a second opinion?

Mistake #4: Hiring friends and family

Trust is a huge issue in our profession, and we can't fault the logic of people who choose friends and family as their advisors. However, ask yourself, are you willing to jeopardise the relationship to achieve your financial goals? If not, you should reconsider hiring friends and relatives. There is nothing wrong with being 'friendly' with your advisors (to a point, remember, this is a professional relationship first and foremost), however, when the relationship starts as a friendship, there can often be problems later when you disagree on a course of action or when the advisor makes a mistake. Money is an emotion and one of the most powerful forces in our lives. Adding friends and family to it, complicates it further.

Mistake #5: Not accepting that complexity requires outside experts

If you needed a stent put in your aortic valve, you would not go to a general practitioner. Medicine is highly specialised. Seeking a specialist to help you with your health concerns may be obvious. Your finances are no different. Think investment, tax, estate planning and retirement planning to name but a few.

Mistake #6: Hiring "yes-people"

Our affluent clients have told us that they have enough yes-people in their lives. Interestingly, they cherish the moments when we stand up to them and challenge their decisions. Particularly if we relate these decisions back to potential damage to their plan. Our successful clients realise that they can't be experts at everything (see mistake #5). In some areas, they may have a good level of skill or knowledge but they also realise that it would take many years to achieve that level of expertise. To leverage their time, they choose to hire experts in different disciplines to work for them. They are likely paying someone less per hour than they earn running their businesses, and the advisors are getting it done in less time.

Mistake #7: A lack of coordination

Even if you have a team of highly experienced advisors in the fields of tax, law, insurance, and investments working for you... If they are not working together, your plan (and therefore your future) can still fall apart. We see this all too often. Investment accounts that are managed like they are in a pension, with no regard for taxation, for example. Like the radiologist, surgeon, and anaesthesiologist, your advisor, lawyer, and tax advisers must work together.

Do any of these warning signs seem familiar? There is no use in focusing on accumulating more wealth, only to lose it. This is why you must protect your existing and future wealth. But which advisor should you choose?

Look for professionals who possess appropriate professional qualifications. Ask them how they are regulated. Request that they explain how they intend to manage your money. With a little bit of work, you should be able to find an organisation that can not only guide you on your financial journey but give you a feeling of control, clarity and confidence that you are on track to a bright future.

Now that you are ready to hire a financial advisor, it is time to figure out what that advisor should look like: for more information about the key attributes to look for when choosing a financial advisor.