By Andró Griessel

Disaster awaits if the one who manages the money alone, dies.

There is a saying in aviation that goes: It’s better to be on the ground wishing you were the air, than in the air wishing you were on the ground.

One of my dreams as a boy was to become a fighter pilot.

In std. 6 (gr. 8 they call it these days), when I started wearing glasses that were almost as thick as the bottom of a Coke bottle, I realized that I would have to abandon this dream. However, several years later, I would get the opportunity to learn to fly as a private pilot.

On 17 January 2009, after about 48 hours of training and completely oblivious, I undertook a solo flight in a Cessna 172 that would turn out to be the longest two hours of my life, and had it not been for a large dose of luck (or guardian angels) and a little concentration, it could have easily been my last day on earth.

We will have to save the details of the story for another day, but I think it’s safe to say that being in an airplane alone is one of the loneliest and most nerve-racking experiences when things start to go south thousands of meters up in the air.

The only thing worse than this is if you are a passenger in such a plane and the pilot dies of a massive heart attack and you have no idea how to fly. This nauseating thought brings me to today’s article.

I often come across the “head of the house” who has the family’s financial reins tightly in hand. These are mostly very successful men who also fairly successfully manage the family’s financial affairs.

In many cases, the mother of the house is not involved in the family’s financial decision making, often does not even know the content of the will, gets a monthly allowance and does not attend meetings with the financial planner (if one is made use of) or the auditors.

These patriarchs are usually not irresponsible towards their spouses and often leave behind more than enough in the form of a bequest to the surviving spouse or a trust that looks after them.

The mother of the house is often also a trustee of the so-called trust, but despite the provisions about the obligations of trustees and that decisions should not only be made by the founder of the trust, the mothers are usually completely illiterate about what goes on in the financial matters of the family.

This system works very well . . . until the proverbial pilot has a heart attack at 8,000 feet. What happens then is that the control of the aircraft (some of which are following an even trajectory and others already in an uncontrolled stall) is handed over to the oblivious passenger (the wife) – often with a catastrophic outcome.

The biggest problems I see in practice, and which you should think about if this scenario sounds a lot like your own, are the following:

• It makes little sense to gather assets in your own name, when there are barely any in your wife’s name but then you bequeath everything to her the day you die. Think about it. What you are basically saying is: “I do not trust you with the assets while I am still here to monitor them and guide your decisions, but you can do as you please with the family wealth once I am no longer here”. It is simply not logical.
• By not having assets in your spouse’s name (in the absence of a trust), you lose out on significant tax benefits.
• In situations where the patriarch, for example, manages the family wealth on his own while the spouse has no interest or knowledge of investments, there is usually an imbalance between the person who inherits all the assets’ appetite for risk and the way the assets are put together in practice. In the absence of knowledgeable people with good intentions, the situation usually leads to problems with investor behaviour (usually fear, but sometimes also greed) leading to large losses.
• Ask any widow whose husband recently passed away. The first few months are blurry. Her ability to make rational decisions during this time is significantly lower and these women are usually prey for people with bad intentions. It is of cardinal importance that the wife has a circle of trustworthy and knowledgeable people around her, whom she knows and already trusts. The lack of an existing trust-relationship that can simply continue as is, is usually the largest downside when people are doing their own financial planning.
• Many of the patriarchs who manage their own investments are fairly capable to do so as they have developed a healthy interest over many years and were able to come up with a recipe of what generally works well through lessons learnt in the process. There is however (almost without exception) a predisposition to overestimate their ability in the area of portfolio construction and investment management as they do not have a proper benchmark against which they can measure their performance, which might prove the opposite. However, the biggest shortcoming comes with the more complex elements of financial planning, such as the organisation of structures, the avoidance of taxes (income, capital gains, estate and even dividend) as well as proper inheritance.

Even if you are a good pilot and you are in control of your family’s plane, make sure that you have a co-pilot on board that will be able to land the plane safely if you are not in control of things anymore.

Andró Griessel is a certified financial planner and director of ProVérte Wealth and Risk Management. Contact him at info@temp.sg-build.co.za.

Although all possible care was taken in the drafting of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone planning on taking any financial action based on this document, is strongly advised to first consult with their personal financial advisor. ProVérte Wealth & Risk Management is an authorised financial service provider with FSP no. 5966.