Wealth Management & Investments

Wealth Management & Investments

Curemed took part in a Wealth management webinar along with our friends at The Beancounter. The Webinar focused on supporting our clients to better understand the importance of a wealth management plan.In case you missed the opportunity to register for this educational webinar on wealth management, here it is again.Waldo Oosthuizen, CEO of The Beancounter hosted the webinar and invited Hagop Jaghlassian, senior CFP and Co-Owner at Curemed Health and Wealth Consultants & Mariska Henning, CFO at The Beancounter to join him.

Q1: Waldo asks Hagop to start the webinar with a quick introduction of what exactly wealth management is.

A1: Hagop:

“Wealth management and financial planning in general, is basically asking yourself the question, how do I make my money work for me and not me working for my money? Ill break that up into two aspects, which is wealth generation, accumulating income and wealth preservation, once I have assets, what do I do to preserve that legacy and especially if you have dependents, you want to give them the best chance going forward. Do I have some vehicles in place to mitigate the risk if something must go wrong with my wealth? Wealth management/planning should start for anyone earning an income, even those earning pocket money, you should ask yourself what I should be doing to build on and to start achieving my goals in the future.”

Q2: Waldo: “What are some of the aspects or elements that we should start considering before we have a look at wealth management?”

A2: Hagop:

“When it comes to wealth generation, it’s a mindset. Us as financial planners need to coach our clients to change their mindsets to be so that they want to be more financially independent sometime in the future and I want to set myself some goals and targets and I want to achieve those goals and targets. So, when I’m earning an income its not to say that let me spend my money on clothing, and all the other expenses I want to spend my money on and then what I have left I will then save. It should be the other way around to say, I have set these goals for myself, and this is what I want to save a month and after I have done that, to see what I do have left and that is what I am going to consume, and it’s a mindset shift. Similarly for a business owner, one should not take your full monthly profit and use it as dividends, you must always think how you can reinvest those profits to improve your business or increase revenue. In terms of the wealth preservation, you must remember that you yourself is your biggest asset. You are producing income and if you are injured or disabled, or ill and now unable to produce an income, you should have protection for that. So, things like income protectors, disability, do I have an emergency fund in place. For a business one should be asking questions like, if a key individual or a CEO was to get injured or passes away, what is that financial impact or the cash flow to the company and do I have key man policies in place? Or what happens if you’re in a partnership, do you have a continuation plan? Do you have buy and sell agreements in place and are they priced right? Those are some of the important aspects from a wealth generation and wealth preservation point of view. Of course, you should always be educating yourself, I believe you should always have a grasp of the macro environments so that when you are presented with potential opportunities you can make informed decisions. It’s a Habit that needs to be developed and worked on consistently. Just like physical fitness you need to become financially fit and it’s something that you consciously have to work on.”

Q3: Waldo: “As a financial planning company, what is the relevance of Curemed and the role that you actually fulfil in this whole process?”

A3: Hagop:

“When a client approaches us, normally first for medical aid we have a holistic approach. We will firstly identify the client’s needs; we will get to know our client and our client will get to know us and we will give them advise under the certain categories. We will look at investment vehicles- tools and give advice on estate planning, life cover, the tax implications thereof, and accounting aspects. Based on their needs we will formulate some strategies and tools that we have under our disposal and recommend it to the client and obviously implement ongoing monitor and that’s how we will approach it.”

Q4: Waldo: “What investment vehicles can one use to achieve their investment goals?”

A4: Hagop:

“Everyone’s needs are unique, and every client is complex but if I have to say the general vehicles that everyone should have in their portfolio in terms of their investments and savings, I will definitely recommend a Tax-free savings account which is regularly available at your bank or even through your financial adviser, depending on the underlining asset allocation that you would like to be invested in. Tax free savings account has limitations which I think Mariska will be better equipped to explain to us as SARS has put some fail safes in place.”Mariska: “A Tax-free savings account is in the essence of the word just that, everything you invest in that you earn returns there on is not taxable. However, there are limitations that SARS has implemented and at this point the annual total that you can put in a Tax-free savings account is R36 000,00 per annum and it is important to note that every year this limit goes up, which is also beneficial. At any stage you can withdraw money from your Tax-free savings account this will then not be taxable, but it is always safe to ensure that you do not withdraw too much and try to put too much back and end up going over those limits as SARS will penalise you on that. Another thing to bear in mind with a Tax-free savings account, is that it is not available to companies or trusts or any other vehicles other than individuals.”Hagop: “The flexibility of such a financial vehicle, is something that everybody should have in their arsenal, yes there are those limitations but it’s a good emergency fund to have. The other one that I think is applicable to everyone is your retirement annuity because sooner or later you are going to have to make sure that your money is supporting you, and you do have to save for your retirement. This is either through your business; pension fund set up or if you’re an individual you would go through a retirement annuity and again this comes with various Tax breaks and benefits for both businesses and individuals. Mariska if you could please just touch on that for us?”Mariska: “For all the business owners out there, it is important to note that you can contribute to your employees provident fund or pension fund, giving them that benefit from the company. This full benefit you are giving them will be deductible in their personal income Tax. It is something to really look at as an employer/employee relationship, it’s also money that you can deduct as a company expensive as part of your employee costs and looking at it from that point, its money that is being expensed but it is not money that is being paid over to SARS as Tax. From a personal perspective, the retirement contributions are Tax deductible in your personal capacity up to certain limits. The growth within the fund is Tax-free, but once you access these funds, whether it be on retirement or prior to retirement there will be a Tax liability payable. Just bear in mind that if you do withdraw from this account before retirement the Tax deductible will be higher. The deduction limit that is available is either 27,5% taxable income within a year or R350 000. Should you contribute more than this limit it is carried forward into the future and you will then not lose out on the deductions of these contributions. It is important to note that in South Africa we have a very progressive Tax regime, meaning that the burden of income Tax is heavier on those who can afford it, the high-income earners. If you are lucky enough to be one of these high-income earners, earning above the highest Tax bracket of 45%, you will save 45% in Tax on any extra rand that you save in a retirement fund, whether it be now or in the future.Hagop: “Your endowment is the other vehicle that I would recommend, that’s more of a minimum 5-year fixed term. This would be for clients that has long term goals like, children’s education that you know if coming up. It does have certain Tax implications and is not as flexible as a Tax-free savings account. You can nominate beneficiaries too, which is one nice thing about it. Mariska, will you kindly advise how an Endowment gets Taxed? “Mariska: “I think it is important to note that an endowment isn’t really something for a company to be looking at, when investing. The flat rate that an endowment is Taxed within is at 30%. Where a company’s Tax Rate is at this stage a flat rate of 28%. So, for companies that’s not necessarily the road to invest in. For individuals, especially if you are a sole proprietor, your invested funds are income earned, being it capital gains or interest and is Taxed within the endowment. Meaning that the pay out that you receive after 5 years will thus be Tax-free within your hands, so the money you will be receiving won’t be Taxed additionally in your tax bracket. Looking at it from this perspective it is extremely beneficial for individuals for individuals that are on a Tax bracket of 30 % plus, in other words the funds that you have invested and that you are earning returns on now. The Tax will be paid behind the scenes and after 5 years you receive this money there won’t be any additional Tax. Like Hagop said if you nominate a beneficiary, should you pass away, the money will be paid to the beneficiary and no extra estate duty will be imposed upon yourself. “

Q5: Waldo: “Waldo: How Do financial Advisors play a role?”

A5: Hagop:

“Using a financial Advisor is not to say you will now be wealthy, but more that you will have control and understanding over your financial affairs. A financial advisor also has a positive psychological effect on clients during turbulent times. In General, a person consulting a financial advisor will have better outcomes in achieving their goals and lifestyle aspirations than those going it alone. I believe one must consult an independent financial advisor with the set of skills and personality to match your own.”Waldo: “From our side here at The Beancounter we would like to thank Hagop and Curemed for their time today and for Mariska, for your Tax planning and Tax advice, and to you our visitors we hope you found some value to this. This was the first of many webinars to come and we look forward to all of you joining us in the future. “Should you need any advice or assistance with wealth management kindly contact us at 0800 287 633 or marketing@curemed.co.zaTo get in contact with The Beancounter for any accounting related queries please contact Waldo Oosthuizen at 081 590 2961 or hello@thebeancounter.co.za