Unlocking wealth through global positioning

Roger Schärges
Senor Onboarding Consultant

 

 

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Unlocking wealth through global positioning.  How professional advice is needed by an international investor

Some older GTC clients will remember the days of the complex and restrictive Commercial and Financial Rand… all of which came to an end shortly after South Africa’s first democratic elections (they were unified in March 1995).  Since then a progressive relaxing of a South African investor’s ability to invest outside of South Africa has evolved.

South African investors are no longer confined to their domestic market when building and preserving their wealth.  The realisation that the world is their oyster has opened up an array of investment opportunities and strategies that were once out of reach.  However, navigating the complexities of international wealth management requires specialised expertise, where the role of a professionally trained and experienced advisor becomes paramount.

At GTC, we understand that the modern sophisticated investor seeks more than just investment performance – they require a comprehensive approach that addresses the multifaceted aspects of their financial well-being.  Beyond the pursuit of returns, factors such as tax implications, costs, and estate planning become critical considerations impacting the overall value of their wealth.

Identifying the hidden drains on investment returns

One of the primary responsibilities of an advisor to these internationally savvy investors is to identify and mitigate the various factors that can detract from investment returns, beyond just portfolio performance, which always include:

Income Tax:  South African residents are subject to income tax on their worldwide income, including interest, dividends, and rental income.  Proper tax planning and the utilisation of available deductions and exemptions can help minimise the impact of this levy.

Capital Gains Tax (CGT):  The disposal of capital assets, such as shares or fixed property will trigger CGT.  Astute financial advisors understand the nuances of CGT and can guide clients on strategies to manage their tax liability, such as the prudent structuring of their investments.

Estate duty:  Upon the death of a South African investor, their estate will be subject to estate duty, which at a rate of 25 % over R30 million, will significantly erode the value of their wealth.  Effective estate planning, including the use of trusts and other vehicles, can help ensure a smooth and tax-efficient transfer of assets to the next generation.  Trusts can inadvertently see investors paying more in taxes if inappropriately structured.  Professional counsel is called for.

Donations Tax:  The gifting of assets, whether during one’s lifetime or as part of an estate plan, will ordinarily trigger donations tax.  Experienced advisors can advise on the most efficient ways to make such transfers while minimising the tax impact.

Company Tax:  It is often difficult to differentiate – particularly for a high-net-worth-client (HNWC) – their personal assets as compared with those housed in corporate structures.  The impact of corporate taxation on their overall wealth must be carefully considered.  HNWC advisors can recommend strategies to optimise the tax efficiency of these business structures.

Administrative and management costs:  The selection of an appropriate Special Purpose Vehicle (SPV) to house an investor’s investments can have a significant impact on the overall costs associated with managing and administering one’s wealth.  HNWC advisors can help clients navigate this landscape to ensure that these expenses are kept to a minimum, and that the investments are as protected as possible from all forms of performance-eroding costs.

Planning for global diversification

South African investors are no longer restricted to their domestic market, with a world of opportunities.  This reality, often not fully embraced by South African investors has also introduced a new layer of complexity.  HNW clients can now diversify their portfolios globally, accessing a broader range of asset classes, currencies, and economic conditions.  However, this endeavor requires a strategic and well-executed plan to ensure that the benefits of international diversification are fully realised.

The HNWC advisor’s comprehensive approach

At GTC, our HNWC advisory practice takes a holistic approach to wealth management, assuming responsibility for various key functions:

Asset management:  Our team of experienced investment professionals carefully selects and monitors the asset managers entrusted with the HNWC’s portfolio, ensuring that their investment objectives are aligned with the client’s risk profile and long-term goals.

Asset structuring:  We work closely with our clients to identify the most appropriate investment vehicle, which might include dedicated SPVs, to hold and manage their assets.  Considerations in this regard include considering the tax implications, regulatory requirements, and administrative considerations to optimise the structure.

Conduit management:  We assume responsibility for the ongoing management and administration of the chosen investment vehicle, handling tasks such as compliance, reporting, and oversight of the various service providers involved.

Financial advisory:  While our HNWC advisory practice oversees the asset management and structuring components, our financial advisors focus on the holistic planning and advisory aspects.

By separating these functions, we ensure that clients benefit from the specialised expertise of both our asset management and financial advisory teams, working in a coordinated and streamlined manner to safeguard and grow their wealth.

GTC’s long standing in the South African financial planning landscape together with our  strategic alliance with international wealth management platforms allows us to leverage global reach and expertise, giving our HNW clients the ability to seamlessly diversify their investments across borders. Similarly, our collaboration with renowned tax and legal advisors ensures that the structuring and management of our clients’ assets are optimised from a regulatory and compliance perspective.