Transfer of Wealth – Greg Fok Advisory

Blessed Jan 2025 and welcome to the new year!

January 5, 2025January 5, 2025
by Gregory Fok

If you are having a goal to set your finances in order for 2025, go to this list!

1) Review your overall financial plan.

2) Refinance your mortgage, especially if you are able to find ways to reduce interest rates.

3) Plan for your taxes and find ways to reallocate them appropriately.

4) Review your insurance policies.

5) Find ways to plan around your kids education.

6) Stop predicting what is going to happen in the investment markets.

7) Seek a 2nd opinion on your investments, and find ways to reduce risks, reduce costs, increase returns systemically (without timing market or picking stocks) and simplify your rebalancing.

8) How close or far are you to your retirement number?

9) Set aside money for emergency funds.

10) Review your business exit plans.

11) Review your estate distribution plan.

12) Buy time back for yourself!

13) Have a giving goal!

14) Create a fun and splurge budget!

If there is someone who would like to plan early in advance and would like sound advice, we will be happy to connect with your 3 best friends/colleagues/family!

The unspoken considerations for wealth transfer

March 21, 2024
by Gregory Fok

When it comes to wealth transfer, all parents plan with the best of intentions. However, when we hear it from the beneficiaries, it may not be viewed in that manner.

💣 There was a couple who had 2 properties. One is a HDB and the other is a private property. And they have a business and some other parts in investments and cash. They still have outstanding loans for the property and have taken a loan for the business, with a personal guarantee. They have 3 children and 1 of them is in the family business.

🔥 The above scenario is quite typical for an affluent family. However, you can just imagine the time bomb that they are sitting on, waiting to be passed on to the children.

When I speak to the child, he says it just seems like a recipe waiting for disaster to blow up. Who will take over the HDB? Who will take over the private property? What is the implication to them to take over the property? Is it going to be split 3 ways? How about the business? What is going to happen to the value of the business? And who will be the specific beneficiary to be settling the outstanding loans?

☀️You have taken a whole life of a few decades to build your wealth. Wouldn’t it make sense to spend just half an hour to understand what the implications are and how you can potentially prevent problems down the road? Most people have no solutions but we can bring in our 19yrs of experience to help.

We walk through a process of ABCD to plan for them. ♥️ Be wise and plan ahead.

We all want to transfer wealth with minimum costs, minimum conflicts and confusion, wouldn’t you?

Why should some doctors and business owners, wealthy families…

February 16, 2023May 17, 2023
by Gregory Fok

For families who are wealthy, their biggest fear is usually loss of assets taken away from them or their family unjustly, especially if there was a way to have mitigated that risk at the beginning.

Some of these risks include…

🔮1) In laws and potential ones

They will provide for their children, their grandchildren and descendants but they will be concerned if the money falls into the hands of the in-laws and future spouses of these in laws who may remarry as well. This is unfortunately true given the state of marriages today.

🔮2) Unwise taxes that can be mitigated.

If a person did not distribute his assets out appropriately, the children and grandchildren might be burdened with the need to pay buyer stamp duties, additional buyer stamp duties for properties in Singapore and estate duties for US shares and other jurisdiction which can be as high as 25-40% of the value of the assets.

We have seen many cases where these taxes could easily have been minimized or eliminated through proper planning. Every case is different.

🔮3) Business owners liability

Most wealthy families run businesses. If you run a business, you never know when and how you might be hit. And most of the time, it is not even your mistake or fault. But you bear significant risks the moment you set up a business on your own. Let us help you to identify the risks and mitigate them so that you can sleep well.

🔮4) Partnerships with others

If you have gone into business or joint ventures with others, their risks can easily become part of your risks. For example, when 2 persons are running a business, when one party is accidentally made bankrupt, the partner could be potentially implicated, even though the cause of the bankruptcy did not arise from your business.

🔮5) Personal guarantees

Pls avoid signing personal guarantees at all costs, if you can help it. If you really cannot do so, protect your family members from unnecessary risks because personal guarantees can sue all the way to the person’s entire assets, even those in their personal name.

🔮6) All assets and loans being under the same bank!

This is the worst allocation of assets because the bank can very quickly take control of ALL assets and freeze it immediately when circumstances change. We had a case where a doctor received payment from a patient (who unknowingly received from an alternative source) and his bank accounts were frozen in the midst of investigation by the police.

We always try to understand your concerns, situation and explore solutions that best fit. Together, we plan ahead to re-allocate your assets and structure to avoid any unforeseen circumstances, which can be varied dependent from person to person, business to business.

If you want to be able to protect your assets, ask us a question so that you can enjoy your life and view.

I will be the next Warren Buffett for Singapore!

November 14, 2022November 14, 2022
by Gregory Fok

That was my dream and goal when I first started my investment journey almost 20 years ago. I am not sure how many of you actually secretly thought the same, just like I did.

Warren Buffet made investing into single stocks sound so easy, and being an engineer by training, I started to find ways to make sure that my dream will become a reality.

I studied many books, theories and concepts of how I could make it all happen. I also spent thousands and thousands of dollars on courses to ensure that I am armed with knowledge. I started to read and study the annual reports of my favourite companies with their cash-flows, balance sheets and profit and loss statements in detail.

I mean, I am a smart guy with a strong heart and am disciplined and patient enough to attempt to get the results I wanted. I will be the next Warren Buffett! I wanted to be in total control of the companies I understood fully and will be comfortable to invest.

This all sounds logical when markets are good and when I have bandwidth to have a sound mind.

However, reality sets in when the market conditions soared and plunged very quickly. Human behavior took over and the emotions and swings of the markets become more than what one normal person can handle. I might have gotten great results 3-5 years in a row, but all it took was one wrong move and it wipes out all prior efforts or missed the next big growth.

After more than a decade of bad investment experience, I had to be humble enough to know that one can never predict nor forecast what is to come in the short term. Anything in the short term is usually luck just like in a casino and does not require skill.

I learnt that investing is more managing emotions than logic. Emotional decision making creates stress and causes more complexity in the outcome because I end up holding suspended stocks with no coherent approach to investing over time.

I still had to find a way to invest to BIG long term goals of retirement which may possibly last decades.

What evolved was a search for not the best product, but a way of life in investing with the right life philosophy with values built in. With that, I used evidence based strategies and data with research of almost 100yrs to identify the highest chance of success, creating the odds in our favour over the longer term. I do not need the highest returns but the highest chance of achieving my goals.

There was a lot of unlearning and relearning a new way of looking at investing, but it is definitely more fulfilling and allowing a better investment experience and a better outcome.

I’m constantly on the search for reviewing what is best for our clients so that we all can have success together, not just in wealth but more importantly, in life as well,

Anyway, clients want peace of mind as a higher priority, do you agree?

Business owners consideration for transfer of assets

June 24, 2022June 24, 2022
by Gregory Fok

When a business owner is young, he uses his blood and sweat in exchange for an income he works hard for.

Once he has built it to a reasonable size, he needs to have the following considerations.

1. Who is going to take over the business and the liabilities when the key person is taken out?

A friend of mine had a strong business and successful one for many years and were thriving. One day, during dinner, the partner choked and died suddenly on the spot. Since the partner was the one with all the connections and loans, when the partner passed, the liabilities were called on by the banks almost immediately. Customers trusted that particular partner but when my friend tried to salvage the business, the customers changed suppliers. Cashflow was very tight and eventually the funds dried up promptly. The business had to be closed and there were even outstanding payments that needs to be settled.

2. Who is going to take care of the family expenses?

As a business owner, your purpose of the business is really to take care of your family. However, when there are outstanding payments to be settled and frozen liquidity, the business dries up all the funds and usually the family might not be left with much.

For example, if your family needs $10,000 a month for expenses and you would like to provide them for a period of 20years, the total provision for the family will work out to be about $2.4mil.

3. Funding

Funding of the above scenarios can come from a variety of ways.

a) One is to keep and hold cash and wait for the sudden need to use the fund. However, it is the most ineffective use of funds.

b) The second is to use discounted dollars from your revenue of the business (This is exactly what Walt Disney did to access funds when no banker was willing to lend).

For example, if your revenue drops by 2-3%, will your business by badly affected? If your revenue grows by 2-3% more, will you call for a big celebration?

But what if we reposition that 2-3% wisely, that can protect the 100% of your revenue. Wouldn’t that make sense? And on top of that, after many years of funding, there can be another mountain of asset that you have created for yourself that is totally available for use for the future. Wouldn’t you like to be smart, just like Walt Disney did?

4. Legal aspect

Now that you have settled the above financial portion of your life, have you written your will and trust to solidify the decision of who will be the next person to take over which asset from you? Every asset class has pros and cons in distributing.

For example, illiquid assets like property and businesses should try to give to more than one party to avoid confusion and conflict.

What we can do for you is to combine the power of the finances and the legal aspects of planning your business so that it can continue to thrive for a very long time!

1+1 = 3 (Only we can do that!)

April 21, 2022April 21, 2022
by Gregory Fok

We all know the formula of “1+1 = 2”. And that is correct mathematically.

But in financial planning, we can have “1+1 = 3”! How is that even possible?

To begin with, in financial planning, there are many strategies we can adopt to be creative in the way we reallocate assets to be smart about it and give yourself and your family a peace of mind to be able to sleep well at night. The above is just one of the many ways we can do it for the families we work with.

It starts with a conversation of what is most important to you, because getting to know you and your dreams and goals are most important to us, to be able to find a solution for you. All families are different and these concepts do not apply to everybody. It only applies for the right types of persons at the right time, with the right priorities.

Intention and goal

We were having a conversation with a family recently and their children have just started working and most of their large financial obligations are over. They started to ask, what can they do better with the wealth that they have accumulated over the years. They know in their mind, that they want to live well in retirement. At the same time, they want to be able to leave a legacy for their children as a token for them to be remembered by.

Current resources

They had a specific bank account of $1mil in cash that was earmarked for their children to be left behind as an inheritance. This was also a backup resource in case they ran out of money many many years down the road. So they do not plan to touch this money as they want it to be protected.

Smart strategies

If that was their intention, I told them that they could reposition half of it out so that when they are not around, there will be a guaranteed $1mil given to the children, on the very next day. With the other half of it, they could either spend more for themselves during their retirement or they could invest it and grow it even further if they do not intend to use it anyway. And if they reach a very very ripe old age and they are still around and might have run out money, they can utilize these money repositioned which would have grown much more than the bank account as well.

And that is how we can have “1+1 = 3”!

The catch

Like I mentioned before, this idea is not for everyone. These smart strategies are generally designed by the wealthy, for the wealthy and for the families to continue to be wealthy. And a person must be generally in good health for this to work.

Enhanced strategy

Rather than just giving this out to the children as a lump sum, you can have this to be a “Family Bank” for the on going needs of the children and even grandchildren when help might be needed. And once again, these assets can continue to have the chance to grow well progressively through proper financial planning. In such scenarios, it could be “1+1=4”!

If you would like to find out more and explore how this can help, we will be happy to have an initial chat to see if there is a fit.

What kind of values do you want to teach…

April 7, 2022April 7, 2022
by Gregory Fok

We were having a conversation with a couple recently and they shared that they are concerned and worried that their children may not be able to manage the wealth that may be going down towards them.

As the first generation who have gotten themselves out of the poverty cycle, this couple had done well in their business and careers they have created. In the early years of growing up, the children were primarily taken care of by grandparents and the parents were hard at work in the business and careers they have set up for themselves.

Now that they are in their late 50s, through the decades of hard work, there is a certainly a sizable amount of wealth, business, property and investments created over time. The couple also knows that what got them to be successful may not necessarily be able to be repeated by their children.

Whatever that the parents had done, the children may not be able to do in the same capacity and the parents are worried for them (just like how all parents are). The couple we have met with would like to transfer the wealth, together with the values that comes alongside with it. This is so that there is some stewardship and responsibility that comes together with the wealth and it will not be frittered away.

What does the world promote?

The world promotes instant gratification. Everything needs to be done and gotten now. There is envy of your neighbour who seems to be doing better than you with the new house and new car. We also want to have that house and car here and now. Due to the envy, there is greed and a constant desire for more and more in whatever that we have. This leads to build-up of lots of emotions which can often lead to anxiety and fear. This usually leads to unfavourable decisions in the heat of the moment and this is something you would like to avoid.

What does engaged faith and values promote?

Faith promotes contentment and being present where we are today, irregardless of our situation. However, it is very hard, because our minds are always in the past or the future. Staying and observing our present to where we are now helps us appreciate our current being. When we can be present, we can then have a plan and move ourselves in the direction we want in a strategic and smart manner. This leads to peace and patience in knowing that it will take some time for us to get from point A to point B. Staying disciplined in our lane to keep us guided is also a virtue and value that faith can promote.

Values based financial planning process

This is where we are different. We listen to what you would hope to see in your children and instill even to the next generations to come. As the saying goes by Spiderman, “With great power, it comes with great responsibility.” Values based financial planning starts with the kind of values you would like to leave behind. Every family has different types of values you would like to practice and transfer to your children, so we want to know where you stand and how you would like that for your family. After we understand your values, we also try to understand how the process of making decision comes in your financial and investment plans. Sometimes, after listening, we notice that it is not aligned with each other. For example, while we want our children to be disciplined in the investment strategies, we continue to make emotional decisions that do not keep us on track to our long term goals. We sometimes go after the highest returns and ignore the risks that can derail our big financial decisions. It usually is not the highest returns that we are after, but to get to our goals with a peace of mind and be able to sleep well at night.

Your financial and investment planning strategies can make a difference not just to your own emotional and personal freedom. It can change lives for your families and the people around you. You have spent a lifetime to build your wealth, wouldn’t it make sense to spend a few moments to protect and preserve it, enhanced with good values.

How do you manage LARGE amounts of wealth

March 25, 2022March 25, 2022
by Gregory Fok

I was having a conversation with a person recently who had come into a rather significant amount of wealth a few years ago.

I asked him what his experience had been holding on this amount of money which came overnight. He shared that he was worried about how he was going to manage it. If done right, he knew that he would be able to live well, and have enough left over for his children as well. However, if there were mistakes made, he knew that he would be the one known to be responsible for the downfall of the asset.

This was when I realized that holding on to significant wealth can be a pretty stressful exercise by itself. And since he did not know better what to do with it, most of it was left in the bank account and he took out a small portion to be invested into stocks that he was familiar with and unfortunately, Singapore Airlines was one of those bought before the covid 19 crisis. He was stopped in his tracks in decision making, for not wanting to make a BIG mistake but he knew he needed help so he was referred to us.

The first key priority was for preservation of wealth. With great power comes great responsibility so we needed to ensure that this cannot go down to zero. Holding on to single equity stocks will not fit this due to the fact that single companies can potentially get delisted or the business can close suddenly without time to react due to unforeseen circumstances and you can have a large allocation to a single company. One of the ways we do this is to diversify into 14,000 companies all across the world. This minimizes our risks to a bare low point. It is almost impossible for all companies to close all at the same time. In fact, in all periods, crisis or not, there will still be some other companies that can be doing extremely well. One example is the some of the technology companies that thrived during the covid 19 crisis.

Focus on what we can control

We will not be able to control markets and the outcome of it but we can control our human behaviour towards the circumstance in front of us. We can also control our asset allocation to the risk appetite that we are comfortable with depending on our time horizon of our goals and milestones that we need the money. We can also control where we position our investments. By tilting towards the evidence-based strategies of having smaller, reasonably priced and higher profit companies, we are able to get a higher outperformance of our investments over time with the opportunity to be able to rebalance it on a regular basis. We also focus on the fact that globally diversified portfolios have given disciplined investors exceptional returns over the almost hundred years of investing. We know that the markets move upwards in a trendline, but we have to expect that there will be unexpected ups and downs in the markets for some of the risk we are taking and it will be within his acceptable temporary risk.

Work with an experienced advisor who understands you and keeps you in check

Staying disciplined in extreme volatile conditions is also a critical component of human behaviour and working with an experienced advisor who has encountered this before to give you specified assurance of your goals and objectives will give you peace of mind.

You can always start by having a conversation to see if there is a fit for who you are looking for and if the financial advisor is a fit together to journey with you. Not all advisors may be right for you and not all clients may right for the advisor. The important thing is that there should be a match.

How do I be smart about transfer of wealth?

November 26, 2021November 26, 2021
by Gregory Fok

There are families we know who want to leave a legacy behind for the next generation or their specific beneficiaries. This can be very useful for families who already have some reasonable amount of wealth and they want to be even smarter. However, this only applies for clients who want to leave behind a legacy with their extra money. Do you know you can be very smart about how you want to design the gifting to them by planning smart?

Use discounted dollars

For example, if you plan to leave $1mil behind for your beneficiaries, do you know that you do not need to park that $1mil in cash just lying in wait? Depending on your age and health, you just need to set aside as little as $200k as a lump sum (if you are younger). This figure that you need to set aside will increase with age, depending on when you start the plan. The earlier you start planning, the lesser you need to fork out and the smarter you become. Or if you pay it out over a period of time, it could even be as little as $2k a month to ensure that the same $1mil goes to your family. Every scenario is different so please have an initial chat with us before you look into the figures. No matter how you do the calculations, it will always be more cost effective than having to set aside that $1mil on your own.

Use the power of compounding effect and growth

Whilst the amount of money is being set aside, it will continue to compound over time as well. Depending on how you structure the plan, the wealth of that $200k will grow over time and you can have some access to it at a much later age. If you be very smart about it, it can have a very significant doubling effect as well.

Guaranteed event

One day, all of us will end up going to heaven, so that $1mil will go down to our beneficiaries. This is an unfortunate event that will happen in ALL our lives for sure. It is just a matter of whether it happens, earlier or later.

To sum up, insurance was designed by the wealthy, for the benefit of the wealthy, for them to continue to be wealthy. If you want to be smart about your wealth and finances, let us have an initial chat to be able to multiply your wealth from all angles!

Plan smart in your business with partners

October 26, 2021October 26, 2021
by Gregory Fok

Do you like to be forced to sell your personal assets at the wrong time to buy over your partner’s shares? I was approached to raise funds for a couple of million dollars for a partnership and they were distressed and were not able to think clearly ahead.

Background

2 partners came together to start a company more than 30 years ago and had built a thriving business together. About a year ago, they were given some advice to do a buy sell agreement in the event of death of either of the partners. However, the outstanding problem was that it was not a “funded agreement”.

When Partner A passed recently, there was an agreement for Partner B to buy back the shares. This allows the family of A not to get involved in the business that they did not understand. Partner B was able to continue the business and they do not need to share the profits of the future business. But the problem was that Partner B had no cash on hand to buy over the shares immediately.

“Having a reluctant partner can be like cancer that grows and potentially creates lots of problems in other parts of the body”.

Action was required immediately. So they are forced to liquidate cash, sell investments and properties almost on an immediate basis. We also know that it takes some time before the money is collected from the sale of the property, if they actually can get a good price.

“This is a costly exercise!”

Even if they are able to raise $2M, would you as Partner B want to pay $2M full in cash for this exercise of transfer of funds when there are other options? What is the alternative? If they had funded their buy sell agreement in advance with discounted dollars, they do not need to come up the full amount. In fact, depending on how you structure it, it could cost as low as 1-3% per year of the $2M and the full amount of cash will be available immediately without the need to sell your best assets at the wrong time.

There are also many other considerations with regards to business planning but this is important if you have a partnership together with another party.

If you are a business owner or know someone who is in partnership with another, I will be happy to have an initial conversation to see if there is a fit on either sides to journey together and be your trusted advisor.