In Asia, Singapore is fast catching up to Hong Kong in terms of the number of high net worth individuals that call the city home. While Hong Kong is still leading the way in the region with about 185,055 such individuals, the wealth held by the segment of the very wealthy in Singapore is growing rapidly.

This wealth grew 51.7 per cent between 2009 and 2013, and is forecast to increase by a further 28.8 per cent to reach US$1.03 trillion (S$1.43 trillion) in 2018, according to a report released earlier this year by research firm WealthInsight.

As the number of wealthy people in Singapore grows and they age, the issue of wealth transfer will become more important. Indeed, safeguarding, building and managing the transition of such wealth for many successive generations must become a priority for this segment of OCBC’s customers, says Mr Michael Tan, Senior Investment Counsellor, Wealth Management Singapore, OCBC.

“To us, wealth transfer is about the smooth transition of wealth through multiple generations. It involves protecting your wealth to ensure that your progeny enjoy what you have worked hard for,” he says.

“It also means guiding successive generations in growing that inheritance to prevent the natural dilution of family wealth as the number of generations grows.”

Addressing top concerns

When banking with OCBC and trusting relationship managers with their wealth transfer and legacy planning, wealthy individuals often also share their concerns and worries.

For example, some of these individuals may be “asset rich, but cash poor”, with much of their wealth locked up in illiquid assets like real estate, collectibles, businesses and even complex financial assets that may take time to unwind.

In such cases, customers may find it difficult to ensure wealth equally is distributed should they die, he says. It may also take their loved ones more time to sell these assets. Under specific circumstances, the customer may want the next generation to hold on to these assets for familial or sentimental reasons instead of liquidating them.

Another issue is that some of these customers may have huge outstanding debts like property loans.

“In these cases, they should not want the next generation to share in their debt burden when they pass on,” Mr Tan advises, adding that it is crucial that their wealth transfer plan also includes ways to address the debt.

Conflicting goals can be another important challenge. For instance, a customer would like to retire comfortably and yet have enough to pass to the next generation. However, to do one may necessarily mean sacrificing the other.

These are just some of the more common problems that the bank has encountered in its decades of experience as the bank of choice for the wealthy.

The good news is: often, most of these concerns can be addressed with an insurance product like universal life, Mr Tan says. The sum assured from the policy may also be distributed sooner to the customer’s beneficiaries to help tide them over while they unwind the deceased’s estate.

“The beauty of universal life is that it can help to create liquid assets to facilitate the distribution of the customer’s estate according to his/her wishes,” he explains.

These plans, however, can be expensive, Mr Tan says. Therefore, from an advisory perspective, before OCBC can draw up an effective wealth transfer plan, its bankers have to understand the full extent of the customer’s financial situation along with his assets and liabilities and gain more insights into his needs and wants.

“We take into account what the customer needs to leave behind, how much more they can afford to leave behind and how the wealth should be distributed,” he adds.

On the other hand, customers with certain pre-existing health conditions may find it difficult to even think about wealth transfer through the use of insurance, considering that they may not pass the medical underwriting.

In such cases, OCBC relationship managers make sure that they know what type of products to recommend to the customer. Certain plans such as PremierLife Generation do not require completion of any medical questionnaire. These are most appropriate for such customers, Mr Tan explains.

Plans are not static

Another very important thing to remember is that wealth transfer plans are never static; circumstances and financial situations change, and plans have to keep up with the changes.

This is where OCBC relationship managers come in. They schedule regular, comprehensive follow-up appointments to ensure that the customers’ plans are on track. They also often remind customers that such wealth transfer plans should be complemented with a carefully considered and planned will.

“As with all our premier customer needs and goals, customisation of a plan is of utmost importance,” Mr Tan says.

“At OCBC, customers will have access to an experienced team of insurance and investment specialists who work very closely with the relationship managers to tailor a plan that is most suited to their financial situation, needs and goals.”