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Protecting the legacy of the wealthy

Prudential’s advice-led offering can help high net worth individuals protect and seamlessly transfer their assets to the next generation

OPTION 1 - John Elkovich, Head, High Net Worth Solutions, Prudential Singapore (1).jpg
John Elkovich, Prudential Singapore, head of HNW Solutions: 'By investing in and setting up a high net worth insurance brand, we want to help high net worth families bridge their protection gap and stay adequately prepared to face life’s curveballs.'

As the ranks of Asia’s wealthy swell, a trend has started to emerge amid this rapid rise of affluence. Research shows that Singapore’s 184,000 millionaires are not adequately insured against personal, financial and business risks. 

For instance, only one in five families in this high net worth (HNW) group have a wealth transfer plan for their assets1, reveals John Elkovich, Prudential Singapore’s head of HNW Solutions. “Many high net worth clients are under-insured; we’re looking into how we can close the gap,” he says.

The situation for Singaporeans is exacerbated as they live longer than most other nationalities.2 Many here are unsure of how to financially manage their extending longevity. For instance, over half of the 1,214 Singapore residents surveyed for Prudential’s Ready for 100 research report said they were not ready to live to 100 years of age from a financial or health perspective, while one-fifth said they were uncertain.

“In Singapore, people are living longer, with an average lifespan of 83 years and inching towards 100. Rising longevity means people are going to need a much bigger nest egg for their retirement. Hence, it is important that our solutions are designed to ensure our clients are financially ready to live for longer years and have enough to leave a legacy for their future generations,” explains Mr Elkovich.

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Life insurance solutions

The protection needs of HNWIs are varied, ranging from asset and business protection to wealth transfer. For instance, one important but largely ignored aspect of estate planning involves resolving the possible liabilities that may arise as an estate passes from one generation to the next. 

Many affluent families have their wealth locked up in illiquid assets such as real estate or businesses. An analysis by the U.S. Federal Reserve Board’s Survey of Consumer Finances showed that the wealthier one gets, the larger the business portion of that person’s net worth.3 

As such, beneficiaries of inheritances may not have sufficient liquid assets in the estate to pay off outstanding liabilities; such as personal guarantees, loans or taxes. Such an outcome can adversely impact the value of the estate and disrupt the smooth transfer of assets. 

In recent years, more HNW clients have turned to insurance to provide the liquidity they require to address such protection needs. 

With the instant liquidity that life insurance offers, HNW families can avoid having to sell off assets at below-market prices to satisfy their liabilities. The funds generated by the policy can also be easily distributed to heirs in an equitable manner; avoiding any potential family conflict that may arise over inheritances. 

For instance, in a case where there is a dispute over the estate of a wealthy patriarch after he passes away, an insurance policy naming the children as beneficiaries can satisfy their inheritances without risking the sale of business assets, and avoid straining family ties. 

Some of the more popular products available for this purpose are universal life plans (UL) and whole of life (WOL) policies. The choice of insurance product preferred depends on the number of guarantees a client would like to have. In today’s environment, where HNW families are looking for more certainty, a WOL policy can offer guarantees in the form of guaranteed cash values and guaranteed death benefits.

Getting the right advice

To satisfy the complex needs of the HNW segment, Prudential has built a dedicated high net worth offering that was launched in April last year. Branded as Opus, it offers personalised solutions, dedicated service and advisory that goes beyond insurance. 

Opus Private Wealth Consultants and Prudential staff at a client event. PHOTO: PRUDENTIAL

Prudential has manned Opus with over 65 Private Wealth Consultants and a team of Wealth Planners to help its clients identify their needs and advise them on protection and transfer solutions. This team is further supported by an external panel of subject-matter experts skilled in the areas of legal and estate planning, tax and business advisory, as well as trust and fiduciary services. Underpinning these advisory services are Prudential’s protection, savings and retirement solutions that customers can use to protect and grow their wealth. 

Already, the market has shown that there is demand for such a premium service. In the 11 months since the unveiling of Opus, Prudential’s HNW client base — defined as those with sum insured of at least S$5 million or with a personal net worth of at least S$10 million — has grown by 10 per cent. 

Said Mr Elkovich: “By investing in and setting up a high net worth insurance brand, we want to help high net worth families bridge their protection gap and stay adequately prepared to face life’s curveballs.” 

1. https://www.rbcwealthmanagement.com/_as/static/documents/Asia-pacific-wealth-transfer-report-2017-EN.pdf
2. http://www.bbc.com/travel/story/20170807-living-in-places-where-people-live-the-longest
3. https://www.financialsamurai.com/net-worth-composition-by-levels-of-wealth/