Memo to HNWIs: Crafting a customised plan to meet your needs

Do you need a bespoke portfolio that goes beyond conventional investment management?
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High-net-worth individuals (HNWIs) have unique goals, challenges and ambitions, and often require a customised end-to-end solution that goes above and beyond traditional investment management. This could include anything from global investment portfolio construction to intergenerational wealth planning, cross-geographical tax structuring, equity-backed finance and traditional stockbroking.

Instead of buying into large pooled products such as unit trust funds or collective investment schemes, HNWIs – individuals with at least R1 million of investable assets – often wish to retain ownership of the assets in their global investment portfolios. In addition, they also likely require comprehensive, personal wealth plans structured around their specific needs, objectives and circumstances.

According to Reginald Labuschagne, head of product and strategy at Sanlam Private Wealth, the needs of the HNWI market have become more complex over time, with more regulatory hurdles and investment risks in the paths of those who aspire to create intergenerational wealth.

“This is why it’s so important for these individuals to choose the right wealth manager – one with a solid track record, and the proven expertise to assist clients in both growing and preserving their wealth,” he says.

Sanlam Private Wealth was established around 20 years ago to meet the needs of this market and has since built up assets under management of around R165 billion. The company’s local and global equity and multi-asset portfolios have a strong record of outperformance over the long term. It’s about much more than investments, however – their offering also includes a comprehensive range of specialised services, including wealth management, fiduciary and tax, equity-backed finance, derivatives trading and stockbroking.

“What sets us apart is the personal touch – you have direct access to the investment professional who buys and sells your assets and manages your investments on a day-to-day basis. You won’t have to work through a private banker, relationship manager or call centre agent,” says Labuschagne.

What is a private client investment portfolio and how does it differ from placing money with a fund manager or broker?

Says Labuschagne: “The difference lies in the uniqueness of the approach. Each HNWI has very different needs and objectives, so you need to have a sound investment process and a strong research team, and you have to understand each client’s risks and goals. Are they planning on sending their kids to university overseas in five years’ time? Do they want to emigrate themselves, or do they intend to travel abroad each year, for which they will need cash?

“These are some of the factors that go into crafting a customised solution for each client. There are also nuances in dealing with estate planning, and local and offshore trusts and beneficiaries, and you want to make sure you get the very best advice on these issues.

“In terms of customising a client’s investment portfolio, we start with our house view on global and local markets, and from that we tailor the solution to the client’s objectives and goals. No two solutions will look alike. We are also particularly strong on tax and fiduciary capabilities, which is what you want when maintaining and building global wealth.

“Ultra HNWIs have a larger portion of wealth in post-tax money, and this requires a specialised approach. We’re doing a lot of work on non-correlated alternative assets, such as local hedge funds, offshore real asset portfolios, direct investments in non-listed companies, and private debt and equity – especially offshore.

“Some clients want offshore trusts to create wealth for their beneficiaries, whereas others don’t have beneficiaries. We have all the components needed to tailor the best possible solutions for our clients,” says Labuschagne.

Strong portfolio of alternative assets

Because of economies of scale, clients can enjoy exposure to assets with otherwise high barriers to entry (usually R20 million or more). Sanlam Private Wealth is developing a strong portfolio of alternative assets to soften the correlation to traditional asset classes and to potentially produce outperformance.

“Private debt is one example of an alternative asset class, and this would typically be in a fund structure,” says Labuschagne. “The margins are generally attractive, and this is a space where commercial banks do not generally have exposure.

“Private equity is another example. Here, the investment horizons are quite long, roughly seven to 10 years. It’s crucial in this sector to identify the right sectors, managers and growth opportunities.

“We’re also looking at launching a number of cryptocurrency options following an extensive operational due diligence process. We’re trying to mitigate some of the risks, but there is demand from clients for some exposure to cryptos, which we will be offering. Decentralised finance (DeFi) is making significant inroads into the traditional finance space, and our clients want an element of exposure to this.

“Arbitrage in the crypto space is also interesting, due to the retail nature of the participants and general inefficiencies. Our big challenge has been ensuring we can guarantee the security of the assets through institutional grade custody. This will be a long-term educational process for our firm and our clients, as it is a very nascent space.”

Sanlam Private Wealth is working with Argosy on a Portuguese property fund, for those who want foreign residency and citizenship. Portugal offers an attractive residency option that starts at €350 000 (around R5.93 million) – the country’s Residency for Investment visa programme has low in-country requirements, and grants visa holders five years of residency in Portugal while providing a path to permanent residency or full citizenship.

The volume of enquiries from South Africans seeking to emigrate has jumped in the last two years – a trend that shows no signs of abating. However, there are hazards in picking an offshore residency or citizenship programme. Many South Africans have been enticed into foreign residency schemes that require substantial investment, only to find out about the hidden costs later. Labuschagne says the main goal of Sanlam Private Wealth is to guide clients to a transparent, well-managed and relatively low cost-option and to assist them in making an informed decision.

Equity-backed finance

Sanlam Private Wealth clients are also eligible for equity-backed finance – using their existing equity portfolios as collateral for a loan – to take advantage of special opportunities. This is particularly useful when a client lacks the immediate cash to participate in an investment opportunity and wants to avoid selling other assets.

You can reach Sanlam Private Wealth here.

Brought to you by Sanlam Private Wealth.

Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.

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