Estate planning, next to retirement planning, is an important piece in safeguarding your assets. While the latter focusses on your quality of life after work, the former looks to how your loved ones will survive once you’re gone.
“Of course, people don’t want to think about their mortality, but it’s a fact of life,” explains Richard Cayne of Meyer International. “This is an important eventuality that everyone needs to take care to plan.”
Are you sure all your assets are covered in your will?
You may treasure your bumper sticker collection, but have you taken account all your assets? There are those items of sentimental or emotional value you may want to ensure go to the proper beneficiary. Even these items, along with real estate and other “valuable” assets, should be assessed. But not considering all your assets may impact tax and other exposures for your heirs.
Most people have had more than one job, so it is likely that they have more than one retirement account. And although it seems unlikely, is it possible there is one or more bank accounts you’ve forgotten about?
Furthermore, there is a misconception that certain instruments such as life insurance or retirement accounts are not taxed the same as “regular” assets. Depending on the jurisdiction, this is not the case.
Is all the information about your assets listed properly in your will?
When it comes to something as important as your assets and your family, every little detail does count. Since you will no longer be available to explain or fill in any gaps, you need to make sure that not only are your instructions understandable, but that your assets are identified fully.
You may know that “all my bank accounts” may not be enough information, but have you recorded the exact account information as in the financial institution’s records? This will go a long way to expediting your instructions and easing the process for your heirs.
Get professional advice to avoid problems
There may be some cases where a DIY will is a workable solution, but do you want to take that risk? If you have any concerns, it is best to contact a trusted professional to help you take inventory of your assets and on how best to handle your estate.
Estate planning is a topic that everyone should consider. Unfortunately, many consider it a difficult topic to ponder, let alone act on.
“Often people will leave their wills until it’s too late, or they’ll do it once, quickly, and think it’s all covered,” explains Richard Cayne of Meyer International. “But there are many factors involved that need to be addressed and that need to be revisited to ensure that loved ones are cared for.”
Wills should not be breezed through or forgotten
It is understandable that the thought of our own mortality gives most people pause. But, regardless whether you have an extended family with an extensive list of assets or whether you’re single with very little saved up, you should have a will. Everyone should consider who they are leaving behind and how best to help them after your passing.
Estate planning can be complex, but there are some simple stumbling blocks that you should avoid, which should simplify the process.
Not planning enough almost as bad as not planning at all
Not planning at all: There are so many pitfalls for your loved ones and beneficiaries if you die without your estate being in order. For those with limited assets, you may think that the state may sort it all out for you, but do you want to rely on government regulations? Every jurisdiction has a variation of inheritance laws that will mete your assets out to your family, after taxing them, of course.
Not planning enough: Hand-writing a document, leaving your spouse “everything”, bequeathing your children lump sums, loosely describing your assets – for someone who is reluctant to spend to much time contemplating a will think that these are acceptable alternatives. Often, these half-hearted efforts will not be considered as legally binding, which has the same effect of not having written a will at all.
Find a trusted adviser to make sure your wishes are met
You’ve worked hard to care for yourself and for those whom you love, why not make sure that they are taken care of after you’re gone? A trusted adviser will help you navigate the potentially complex issues when it comes to estate planning.
Many people put thoughts of retirement savings on the back burner, relying on hopes that their national pensions will take care of them in their golden years.
“While many countries do offer national pension benefits, what people ultimately receive once they retire may not be the financial cushion they had hoped for,” explains Richard Cayne of Meyer International.
How well are you covered?
Many nations, developed, newly developed, and developing, have some type of pension system in place. It may seem quite simple – you contribute a certain amount over a certain period, then the government pays you back and sometimes provides additional services like healthcare once you retire.
The problem is that while you are contributing, the government must be paying out to current retirees, often using your money. As life spans increase, the number of retirees compared to those contributing may become unbalanced. This, compounded with the possibility that the government may not be investing pension funds wisely, may result in your benefits not being what you expect.
If you live overseas, or are planning on retiring overseas, there are other issues you need to consider. While living overseas, you probably are not contributing automatically to your pension, so your benefits may be less than you expected, or you may have inadvertently opted out from the system. If you retire overseas, some countries have different pay-outs for their pensioners abroad.
How adequate is your country’s pension regime?
Some countries provide resources for their citizens to check their pension status. For example, the UK offers an online check for people to find out how much they can expect from their state pension and when they would qualify to receive it, along with advice on how to increase the amount. Canada also offers similar online access.
As for the pensions themselves, you may want to see how it ranks. The OECD does a yearly analysis of their members’ pension systems. And there is also the Melbourne Mercer Global Pension Index that compares the adequacy and sustainability of various pension systems.
You will see that no country has a perfect pension system, so you would best be served to make sure you have your own investment portfolio growing to meet your retirement needs. It is always good to get a financial health check with a trusted adviser to make sure that you’ve properly funded your future!
Many articles in this blog discusses various investment options, some more complicated than others. If you’ve achieved a level of success with your portfolio, you may be tempted to expand into more exotic that holds the potential of greater rewards.
What exactly are derivatives?
Derivatives are financial contracts whose value is derived (hence the name) from the value an underlying asset, like a stock, bond, or commodity. Instead of investing in the asset itself, the derivative contract will detail criteria, such as a stock price dropping past a certain level, that will trigger an event, such as an opportunity to exercise an option or a conversion.
Some examples of these contracts are:
Futures contracts – are available through regulated exchanges where the price for the underlying asset is set for a certain point in the future. These are usually used for commodities. Futures contracts have standard quality and quantity definitions that allow them to be traded on the exchange.
Forward contracts – are the same as future contracts, except these are not done through an exchange, but rather is determined and agreed based on the parties involved.
Options – are normally applied to stocks and will give the purchaser the right to buy (call) or sell (put) the underlying security for a specific price on a specific date. These are rights to exercise, not obligations, for the purchaser.
Swaps – are pretty much what they sound like. This is where two parties swap, or exchange, financial instruments. Typically, these revolve around interest rates, where one party will may pay a fixed interest rate to the other party on an amount while the other party pays the first party a varying rate on the same amount. This gets very complicated as to the whys and hows, and normally, retail investors are not involved in these transactions.
Remember the global economic downturn
You may recall that derivatives were what that brought the economy down in 2008 – most notably, mortgage-backed securities. These products bundled mortgages and based their values on the projected repayment. Unfortunately, these bundles, that allegedly received high ratings from credit agencies, contained many mortgages that were at extremely high risks of default. Which is what happened when the property bubble burst. And those mortgage-back securities plummeted in value.
That was a case where unscrupulous traders created questionable products that investors overlooked during boom times. It is, however, a cautionary tale that what may seem like a great idea still needs some research and due diligence.
Exotic and complex doesn’t mean better
But some of these instruments can sound as complex as gymnastics’ moves, and probably require equivalent mental agility to understand. Bloomberg wrote about a retiree who was convinced into purchase a reverse-convertible note with a knock-in put option tied to Merck stock. It was very likely that she was sold on the bond portion, with little explanation that these bonds converted to stock if the shares fell below a certain level, which it did, resulting in her losing much of her investment.
“Derivatives can be absolutely high-risk/high-reward propositions, or they can lower the risk when blended onto certain financial products” Richard emphasises. “You must have a very good understanding of financial instruments before you even consider venturing into derivatives. As with all my other advice, if you don’t fully understand the main drivers and triggers of an investment, you should avoid it or get more experienced advice.”
It’s often headline news, especially among financial outlets. Apparently whether the US Fed will “raise rates” and by how much seems to be under conjecture and discussed at length and with nail biting anticipation. But how does a 25 basis point (0.25%) increase, or any rate change at any central bank, that seems to occur so far away mean to the individual investor?
“Central banks are the regulatory bodies that oversee the monetary policy of their relevant nations,” explains Richard Cayne. “Part of the policy would be to ensure currency stability and economic growth, so what how a central bank interprets and implements a nation’s monetary policy will not only affect that country’s finances, but it would also potentially impact those of any party that has any economic relationship with it.”
This will inevitably have a trickle down affect to your investments and to how they will perform.
While central banks have a range of tools to employ to control their nations economic and financial health such as by buying and selling financial instruments in the open market or by creating money through quantitative easing, a common method is through raising or lowering their country’s official interest rates (such as the Bank of England’s Bank Rate and the US Federal Reserve’s federal funds rate).
Central bank interest rates: the extreme basics
Among the previously mentioned tools are reserve requirements. Most central banks will require banks and certain other financial institutions under their jurisdictions to maintain a certain reserve level. This is meant to guarantee that these entities have enough liquidity to withstand sudden financial shifts, crises, or panics. These official policy rates are applied to the reserves held by the banks, but they will also determine the interest rate for banks that cannot meet the reserve requirements and need to borrow funds, either from the central bank or from another financial institution.
This, in turn, will affect how a financial institution uses its own funds. How much money do they have available to invest in loans and other instruments, what interest rates should be for consumer and corporate loans, from credit cards to major project financing. The idea would be that, the lower the rate, the more attractive it would be for borrowers to pursue loans or to finance purchases of all sorts, instead of just squirrelling their money away in savings, thereby stimulating the economy.
In extreme examples, such as in Sweden and Japan, the rates are in the negative. This means the central bank will charge financial institutions for any money not in circulation, more or less discouraging holding more reserves than necessary.
So, what does this mean for you?
Beyond your credit card rate and the interest on your mortgage, the availability of a specific currency will inform how companies will invest – expanding or contracting as they determine the best reaction to that nation’s monetary policy/interest rate. This can also increase or decrease a currency’s exchange rate, which itself can impact financial markets.
For example, recent rumours about another US Fed rate hike has strengthened the US dollar as people shore up their US dollar assets. A higher US Fed rate means the US dollar will be worth more compared to other currencies that have lower rates from their central banks. And those buying US dollars (and raising their value) are betting that the raised rates, along with other monetary policies, will not increase inflation that would offset any foreign exchange gains.
As you can see just by this short attempt at an explanation, the simple act of raising or lowering a central bank rate has wide spread implications. And no matter the actual impact, there is no denying that, at the least, they do have a psychological impact, affecting how people feel about, and whether they trust, certain markets and currencies.
To learn more about various nations’ central bank’s monetary policies, they do their best to explain, including:
In his work as a financial planning consultant, Richard Cayne of Meyer International occasionally meets people that, despite having a good amount of wealth, say that they don’t have use for the services of a financial planner such as himself. “What is their reasoning?” you might ask. The reason is usually that they consider themselves too “conservative” for investing and feel that it isn’t a safe thing to do with their money.
Though he’s not offended by this, it never fails to surprise him since he thinks that investing your money is the only safe thing you can do with it.
In the past, he has had conversations with people that consider themselves too conservative to invest. They often go something like this:
Conservative Person: “I’m a conservative person, I don’t invest my money.”
Richard Cayne: “So, what you’re saying is that you’d rather have your wealth dwindle away by erosion or inflation than try any investments at all?”
CP: “Well, no, not when you put it that way.”
RC: “Wouldn’t you rather buy some bonds or other low-risk financial products that will at least keep your wealth at the same level it is today?”
CP: “Well, okay, maybe I would.”
The moral of the story is that you can, should and need to be doing a bit more with and for your money that just leaving it in the bank – even if you want to be conservative.
Finances and the word “Conservative”
The funny thing is, according to Richard Cayne, that you’d think a person that considers themselves “conservative” would be doing everything they could to create monetary safety and protective measures for themselves, their family and their wealth. It’s not clear how the word “conservative” came to be associated with people that didn’t want to make provisions for their wealth at all.
A conservative person would certainly never go out and spend ostentatiously or carelessly, but you’d certainly think they’d want to protect what they have in any safe way possible, wouldn’t you?
According to Richard Cayne, “failing to make ample provisions in your financial planning to cover you for, at the very least, the amount that inflation will erode your wealth is not conservative; it is just foolish.”
He went on to note that the idea of being conservative, financially and in any other way, means planning and being prepared and proactive for any eventuality – especially one that is a definite – such as inflation and wealth erosion.
To learn more about low-risk investments, wealth protection and other finance topics, Richard Cayne and Meyer International can be reached at (+66) 02 611 2561.
There are many ways to invest your hard-earned money and each one has it’s advantages and disadvantages. There are traditional investments such as bonds and mutual funds as well as more modern options such as equity crowdfunding. There are offshore jurisdictions and investing in hot new markets. Real estate is an area of investment that always gets people excited and Thailand, in particular, is a place where many people want to invest.
According to financial planning consultant Richard Cayne of Meyer International, they see Bangkok as a bustling metropolis that hosts locals, foreigners, vacationers, expats, business people and retirees from around the globe. The demand for high-quality rental real estate is high.
Investors also see the opportunity to invest in gorgeous villas and luxurious resorts on any number of Thai islands and vacation destinations in the country.
Whichever sector of the Thai real estate rental investment market intrigues you, Richard Cayne can offer advice and expert information for you to consider before you put pen to paper to sign your name on the ownership paperwork.
Before you sign anything, you need to do proper real estate due diligence. If you can’t visit the property in-person, have your lawyer or one of his staff do so. Thoroughly research the developers and other partners, if any. Have your lawyer do a thorough check on the property, title and all of it’s history.
You don’t want any legal surprises after money has changed hands.
Know the Property Laws
Make sure you are informed about local property laws. Your lawyer or financial planner can help you learn what you need to know. For example, did you know that non-Thais can’t own land in Thailand? That’s right. If you aren’t Thai, you may own a condo or any property, but not the land beneath it. If there are Thai partners involved in the project, then you may own up to 49 percent of a project, but not more than that. Condos on the other hand are easier in that a foreigner may hold the condo is his name free and clear as long as that unit is part of the condo’s foreign quota and they all have up to 49% available to foreigners. In other words if you choose to buy condominiums or apartments, remember that only 49 percent of the units in any single building can be foreign owned – and that does not just mean you. That means that, collectively, only 49 percent of the units can be owned by non-Thais.
Ask a financial planner such as Richard Cayne to explain the ins and outs of what you can buy and how.
What to Buy
Now that you know a bit about what you are legally allowed to own, perhaps it has focused your idea of where you would like to invest in the Thai real estate market and what you might like to buy. Investing in property is exciting and the Thai market is one of the world’s hottest. With the right advice from the right team of professionals, you can make a great property investment.
To learn more about real estate investment and other finance topics, Richard Cayne and Meyer International can be reached at (+66) 02 611 2561.
I’m writing this with some trepidation but feel strongly that it must be said. My concern results from what I have witnessed these past three years as the Internet has been bombarded with lies, misinformation and accusations about the man I am writing about. If I were more courageous, I’d not hide behind anonymity and freely communicate my identity. But, I have seen what the criminals who stole our money are willing to do, so I will not reveal my identity – for now.
My wife and I live in Japan and are active investors. We aren’t rich, I’d say we are “comfortable” having invested carefully and methodically since I retired 11 years ago with a solid though not enormous pension.
We met Richard Cayne, in 2006 and were impressed by his attention to detail and conservative, yet forward-thinking advice about investing and planning for the future. At our first meeting with him, he answered our questions, and really listened to us. He didn’t try to sell us on any particular investment and was more interested in completely understanding our particular needs and goals than he was getting our business.
It was over three months before after we first met him that we actually began making investments with his advice. Everything we invested in through Richard Cayne at Meyer Asset Management has given us a solid return on our investment. Most are giving us above-average returns and we are very pleased.
While topics like offshore investments and the real estate market are fun to discuss and exciting to everyone with a little money that they hope to grow, there is one aspect of investing that most people prefer not to discuss or even think about. It’s inflation. Inflation is scary because, no matter how smart, lucky or intelligent your investments are; inflation can eat up the wealth you have worked so hard to build and there is little you can do about it.
That’s what’s so scary about it.
What Richard Cayne of Meyer International says about inflation is this: “No matter how much money you have, you essentially have less money than you think you have. And the more you have, the more you stand to lose, so the more you’re stressed out by inflation.”
“Look, if you only have a few dollars in your pocket and are worried about buying today’s bread and milk, maybe inflation doesn’t matter to you. It’s when you have a lot of money and inflation is constantly eating away at it that it gets scary,” he said.
“Safe is a Loss”
What Richard Cayne is insinuating with this anecdote about literal bread and figurative bread (bread has been, at times in English language history, a well-deserved slang name for money) is that, if you want to build or maintain your wealth, you can’t simply play it super-safe by keeping your money in a savings account.
Even if you rarely spend a dime, inflation eats away at your savings. You need to invest it.
“Learning more about inflation initiates change in people who think they are being conservative by keeping money ‘nice and safe’ in the bank. They start to realize that they can’t do just that. It’s not enough,” said Richard Cayne.
He gave this example: “If you have $10 million and you put it into a savings account where you are earning .5 or 1 percent interest but there is 3 percent inflation, you are losing money every single day without spending a dime. At 1% interest rate next year the purchasing power of the original US$10M is US$9.8M and each year erodes from there”
Instead, he advises clients to make investments at whatever level of risk they feel comfortable.
Think Long-term, not Short-term
Investment might be scary to think about for some people that consider themselves “too conservative to gamble with money.” In these cases, Richard Cayne advises investments with the lowest level of risk possible and that the investors think long-term, not short-term, about their investments.
That might mean that, if it’s too stressful to look at the numbers in your accounts going up or down, you should have your advisor monitor them and just update you periodically. It really doesn’t matter what day to day fluctuations exist but it does matter where the balance on your account is down the road when you need to use that money.
“Don’t look at short-term balances, look at long-term balances,” advises Richard Cayne, “Think about what the balances will be 10 or 20 years down the line, not next year.”
To learn more about investment at any risk level and measures used to stave off inflation’s effect on your wealth, Richard Cayne and Meyer International can be reached at (+66) 02 611 2561.