Wealth Protection

This is not only about protecting the proverbial ‘Goose that lays the golden eggs’ but also about wealth creation. Wealth protection employs life insurance, critical illness insurance and personal accident insurance as risk planning tools. Medical insurance is another form of risk transfer tool. They protect against erosion of wealth should life calamities deal a blow unexpectedly. Wealth protection is like the foundation of a building which maintains the integrity of the building in all weathers.

In the absence of a wealth protection plan or a comprehensive program, many may suffer financial losses which can erode or even wipe out hard earned wealth. At times it can leave dependents financially despondent. On the other hand, protection plans can also create wealth where it does not exist. This will ensure the continuing survival of dependents or even oneself as the case may be in the event of critical illness or permanent disablement. .

Wealth Accumulation

Most people are overly preoccupied with accumulating wealth without sufficient understanding of goals and objectives, risk propensity and financial capability. Many are also ill-equipped with investment knowledge without understanding the inherent risk of each investment instrument. Understandably, building wealth via investments can be exhilarating while at the same time wealth can be lost can be lost through bad investments.

While there are many types of investments, equities and properties are natural favorites for most. Investment in properties may require a large outlay. On the other hand for a small sum of money, investment in equities may be readily available especially via unit trusts. On top of that one can invest in a plethora of equities from all over the world. It pays to understand the various risks such as sector, industry, geographical and political risks. It is also important to understand volatility since investors in equities will experience it no matter how well the portfolio is planned. In the event of an emergency or loss of job, withdrawing the investment may result in a loss.

Before venturing into investment, it is wise to set aside a basket of emergency cash. The common advice is to set aside 3 to 6 months of salary. However if the salary is low, example RM2,000, the emergency fund would only amount to RM12,000. This is far too low to cushion most emergencies. Our advice is to set aside an amount commensurating with individual income and situations. The 3 to 6 months is only a rule of thumb. We reckon to set aside a minimum of RM30,000 or 6 months of salary whichever is higher. One should not eagerly jump into an investment without first solidifying one’s financial foundation.

Wealth Distribution

Without proper wealth distribution planning, much of the hard-earned wealth acquired throughout the years could be squandered. Proper wealth distribution will ensure preservation, timely transfer of wealth and businesses, reduce costs, improve efficiency of ongoing concerns like businesses and investments, ensure continuity and fair distribution as well as prevent or reduce family disputes. In fact wealth distribution is a responsibility to ensure one does not leave behind a legal nightmare.

Commonly, Wills and Trusts are employed while Power of Attorney (PA) and Buy/Sell Agreements may be included. Under Malaysian Law, wealth distribution will fall under the Distribution Act 1958 if one dies intestate. For Muslims, the Syariah Law applies. Clearly the law will apply if one does not make his or her intention known in a Will or Trust. Without them the distribution process would take a longer time and become more complicated.

A well thought out wealth planning model should include all 3 aspects of wealth protection, wealth accumulation and wealth distribution. These 3 aspects are inter-related ensuring successful implementation of any financial plan.

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