Rising affluence is a growing trend in Singapore. Singaporeans rank as the world’s sixth richest population, with the average Singaporean possessing approximately US$300,000 to their name. Despite this upward shift in wealth, a recent study suggests that the majority of affluent Singaporeans have yet to make plans to transfer their wealth and assets to family members, and only 40% intend to do so in the next five to ten years.

Our Chief Investment Officer (CIO), David Chua, shares his insights on estate planning and why it is critical to have a proper wealth transfer plan in place. With over 18 years of experience in asset management, David plays a vital role in the overall investment strategy and performance delivery at Prudential. Here he addresses some of the most frequently asked questions about wealth transfer and private wealth management.

Why is it important to have a wealth transfer plan in place?

A regular and disciplined wealth transfer plan can make a huge difference in the long run. There is the magic of compounding which often results in better wealth creation and asset transfer to your next generation. Early succession planning also provides the greatest possibility of achieving your business, family and personal goals. For instance, designating roles and responsibilities after stepping down from managing your family business is often a difficult but necessary conversation in order to minimise friction and conflict between all parties in the long term.

What does a comprehensive wealth transfer plan entail?

A good wealth transfer plan always starts with an understanding of your needs and what you wish to achieve – now and in the future. It’s more than an asset transfer as it involves thinking about equitable distribution, wealth preservation and structuring, tax considerations and even how you would like your beneficiaries to spend your wealth. For example, when there are conflicting ambitions and desires in the family, these factors will clearly need to be considered in your wealth transfer plan.

How does being “asset rich, but cash poor” impact the transfer process?

Most people assume that wealth transfer has to be made with liquid assets. In fact, an effective wealth transfer plan should allow for frictionless transfer, regardless of asset types or market timing. This is where our financial planners can help recommend solutions to ensure liquidity and avoid selling assets at the wrong time.

Can one have enough for retirement while enacting an effective succession plan?

Retirement can be a daunting topic for most. When you layer on the additional concerns of wealth transfer, you may wonder if you have enough to sustain your own retirement while passing on wealth to the next generation. This is where you need to plan early to better prepare for a host of risks at every life stage, such as cash flow needs, life events, medical emergencies, financial asset volatility and other contingencies.

What are some key barriers to getting started on a wealth transfer plan?

There are often many barriers and considerations, but I’ll just elaborate on a few here. First, a lack of information and impetus to get started. Often, Singaporeans do not think about legacy planning unless there are external triggers. Second, a reluctance to consider tough decisions such as business continuity issues, conflicts within the family or with business partners.

Another barrier is assuming that intergenerational wealth transfer does not matter or that you do not have much to leave behind. A well thought-out wealth transfer plan can significantly shape the lives of family members or charities you support, and hence, affect their lives positively for years to come.

Any closing thoughts?

Wealth transfer planning can be a fraught affair, particularly when there is a lack of awareness of the available tools to help ensure wealth sustainability for the next generation. This is where our financial planners can assist with their advice and service to help you design a transfer plan. Besides providing comprehensive advice, they can also aid you in assembling third-party specialists in tax and trust advisory.