In Africa and most third world countries, poverty indices have been on a steady rise. The indices are characterized by a dearth in infrastructure, technology, social amenities and basic needs such as food, shelter and clean water. “According to the World Poverty Clock, created by Vienna-based World Data Lab, over 91.16 million Nigerians were living below a dollar a day as of February 13, 2019. In June 2018, the Brookings Institution projected that Nigeria had overtaken India, as the poverty capital of the world, with 86.9 million extremely poor people. This was further confirmed by the British Prime Minister Theresa May, who said Nigeria had become home to the largest number of very poor people in the world, putting the figures at 87 million” as reported in the Vanguard Newspaper on February 16, 2019.
Nonetheless, amid these demeaning statistics, some have defied the odds and created wealth for themselves. Nigeria can still boast of having one of the richest men in Africa and the World alongside other successful moguls cutting across generations. Small and medium scale Enterprises known as SMEs in economic terms have flooded the country in the agricultural, Import -Export, manufacturing, entertainment and sports sectors. However, they are saddled with the uphill task of maintaining, preserving and maximizing their wealth. Also important is the need to ensure the seamless transfer of wealth to the next generation?
To maximize and preserve wealth, innovation, financial planning and Wealth management is key. In a world largely driven by technology, information, and automation, refusal to innovate services and products is one step closer to obscurity and obsolescence as newer ways are consistently been developed. On financial planning, the principles of savings, investments, budgeting, risk management are well established. However, a more detailed personal financial planning would consider the three stages of wealth management viz: Wealth Protection, Accumulation and Wealth distribution. At the wealth protection stage between the age of 12-26 years, an individual is mostly concerned with protecting the little wealth they have to cater to basic needs like college fee and upkeeps.
The Accumulation stage is the most important stage as this is when one must make all the best financial decision of investing, savings, acquiring assets, starting a family and cater to their needs, start and consolidate businesses, etc. This is the most active part of an individual’s life and career.
Finally, the wealth distribution stage also known as the decumulation stage is when one is expected to start considering retirement, health, estate planning and succession (both business and personal). A major highlight of this stage is the need for proper estate planning both for one’s business and personal wealth. This point becomes very instructive in the need for a seamless wealth transfer across generations. Successful Nigerian and Africans in general, are mostly repulsive to the idea of estate planning as the subject comes out as rather morbid due to the contemplation of death. But can anyone live forever? Moreover, a proper understanding of estate planning would unveil its numerous benefits to both the living and the dead. Estate Planning is defined as “the process of organizing the control of your assets during your lifetime, should you become incapacitated, as well as making the decisions on how your assets will be distributed upon your death”. There are different types of “Estate Plans” ranging Private Living Trusts to Will or even insurance, Power of Attorney, Holding Company, Family Office Services, Joint Ownership and Business Settlement Trusts.
A well-structured estate plan over the years has been the difference between family wealth which has gone on to several generations and those that did not or business/conglomerate that has outlived the patriarchs and those that did not. More so a well-structured estate plan would ensure wealth is preserved within a family in the most efficient manner and seamlessly transferred to the next generation without the chaos, hassles, delay, financial cost as well as an emotional drain which are usually associated with the succession process.
So, what did you not know about financial planning?
You didn’t know that financial planning does not end with you, it goes beyond planning for the bills and the expenses and the trips the good life generally, it extends to planning for your loved ones ensuring the next generation is well catered for, that they do not have to start the whole wealth accumulation cycle again.
Imagine what happens where a business or corporation is run aground because the visionary, pioneer or patriarch failed to make plans beyond themselves, the effects are enormous as it ripples beyond the immediate heirs, it spreads as far as the employees and their families and their dreams, the service providers etc…the list is endless. A simple estate plan could save a whole generation. The lesson is;
Financial planning is not complete without Estate Planning.
Author:
Oritsegbemi Agbajor
Head, Private Trusts
Coronation Trustees Limited
