Family wealth creation | Private Client Services by Mercer

The recent turmoil in the financial markets shows that managing wealth today can be challenging. Whilst clients are faced with uncertainties in the market, our clients’ objectives are to Accumulate, Preserve and eventually Distribute their wealth to the next generation. Hence, it is important for families to put in place a conservative wealth management plan to ring-fence their assets to preserve their legacy.

Why life insurance?

Life Insurance is a very effective tool for financial protection and portfolio diversification. Over the years, many High Net Worth individuals use Life Insurance not merely as a way to protect against the uncertainties of life but as a Wealth Creation tool. The key purpose of Life Insurance is for Income Replacement and Liability Protection, i.e. needs based approach.

Potential scenario

Mr X, age 50, is a successful businessman who had set aside some of his wealth for his family
During the Crisis, his portfolio value depreciated from USD30M to USD15M, i.e. 50%
Possible consequence: The inheritance meant for his family could be much less than what he intended

Proposed solution

Solution 1:

Mr. X purchased a Life Insurance of Sum Assured USD40M with Premium $14M
He took premium of USD10M
The immediate estate created by the Life Insurance policy, net off the bank loan, is USD56M

Solution 2:

Mr. X's estate is well protected
Regardless how his portfolio is affected by the Crisis, his estate will be well-protected and guaranteed to remain at least USD30M

Advantages

Creates immediate estate of USD56M
Peace of mind for the client and beneficiaries knowing that a wealth distribution plan is in place
Preserves estate value despite market volatility
Leverages on low borrowing cost through premium financing

insights Family wealth creation