TAMIM Director Darren Katz takes a look at the importance of succession planning with respect to your investment portfolio and ensuring that your family can comfortably assume the portfolio responsibilities when you are no longer able to.
Could your better half take over the management of the family portfolio?
We’ve discussed this issue many times throughout our careers in the investment management industry. It becomes ever-pertinent as couples arrange their financial affairs for the unforeseen but inevitable day when spouses are left alone to fend for themselves.
The most common answer we have heard to this question is, “no but, my kids or family member will help.” More often than not, grieving spouses and their loved ones are inadequately prepared to take on the stressful responsibility of knowing good securities from bad and recognising when to buy or sell. Most of them aren’t interested in doing so. So while updating the will, and obtaining powers of attorney, perhaps some additional thought should be given to how your spouse will assume the portfolio responsibilities. Like updating your will, it’s what you do with your portfolio today that makes the difference.
The first step: look at how the family portfolio is being managed today
Is there an investment mandate or similar process to guide the new decision maker? Is it easy to figure out why certain investments were bought and when they should be sold? Just for a moment imagine your grieving spouse having that conversation with a financial advisor. The result will likely be one of two things – overwhelming or a blind acceptance of the advisor’s recommendation. Not ideal!
What can you do to ease the burden during this difficult time?
An Individually Managed Account (IMA) established and managed for you and your spouse allows an easy transition from one decision-maker to the next. While the passing of a spouse may require some adjustments to the portfolio asset mix, for the most part, it will continue to be suitable for the remaining spouse. An IMA approach to portfolio management shifts the bulk of the decisions about individual securities to the portfolio manager. Your spouse will thank you.
Your investment manager owes you a fiduciary duty to act in your best interests. This represents the highest ethical standard on par with other professionals such as doctors, lawyers, and accountants. If you are going to leave your inexperienced spouse to work with a portfolio manager why not choose one that is held to the highest standards?
Consolidating the investments is key
If you have multiple investments scattered among various financial institutions you are compounding the problem. Visiting each firm and advisor to try and understand what needs to be done is stressful. Consolidate your portfolio to a single, trusted firm, and develop a discretionary family portfolio strategy with regular reporting make it easier for a spouse to take over.
Choose an investment firm offering regular portfolio reporting that gives both spouses a feeling of “command and control” over the family nest-egg. A document showing the asset mix, the holdings, as well as a fee report and a single rate of return after fees provides a surviving spouse an established and continuous portfolio reporting process.
Do your spouse a favour and put together an easy-to-manage portfolio today. Just like updating your will, it’s what you do with your portfolio before the unforeseen but inevitable day that makes the difference.
How can TAMIM Asset Management help?
With over to 50 years of combined investment experience, TAMIM Asset Management is a leading provider of Individually Managed Accounts (IMAs) and investment solutions. We partner with the best in class investment managers from Australia and abroad. We have learnt that no single investment strategy will work in all market conditions so, by offering a wide and complete range of investment solutions via the TAMIM Platform, you can rest assured the family portfolio is in great hands.
The TAMIM Platform of Individually Managed Accounts offers self-managed super funds and individual investors a flexible, tax-efficient and transparent private investment solution. Investing in an IMA allows our clients to have complete visibility around the investments in their portfolio, what transactions impact their portfolio and what fees are charged to manage the portfolio.
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At TAMIM we are committed to educating investors on how best to manage their retirement futures.
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.