Stay abreast of COVID-19 information and developments here
Provided by the South African National Department of Health
Sanlam Private Wealth
Jun 15, 2017
Sadly, the Vanderbilts are far from the exception. Being ‘to the manor born’ no longer guarantees lifelong affluence. A global study by The Williams Group among 2 000 wealthy families found that 70% of family fortunes were squandered by the second generation of heirs – and 90% were gone by the third.
Why are so many wealthy families having to trade their Ferraris for Fords? Roy Williams and Vic Preisser, authors of Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, collected data from more than 3 250 families who’d lost their fortune. They found that less than 3% said poor planning and investments caused their misfortune. A total of 25% said heirs were unprepared, and a high 60% said lack of communication and trust in the family had led to their downfall.
Astonished by these findings, Sanlam Private Wealth (SPW) co-opted two self-made wealthy South African families, each with a crop of lively, well-to-do kids, to help them understand first-hand the financial dynamics within these families.
Family One: Patriarch Stanley is a classic example of an entrepreneur who grew his business from scratch and made a success of it. He has three daughters, Chrisley (24), Sheri (22) and Lieneke (14), who aren’t used to hearing the word no. He has yet to share his financial vision with them and believes social media has changed his daughters’ expectations and desires in life.
Family Two: Matriarch Nomfundo is an entrepreneur who’s dedicated her life to growing her wealth to the benefit of her two children. Her boys, Lwazi (18) and Kwanda (13), are living the dream in Jozi, a life of luxury and opulence. Nomfundo has painstakingly built her wealth and provided a comfortable lifestyle for her kids but she’s worried her children don’t value money as she does.
Rather dramatically, the two families agreed to ‘lock’ their young in a bank vault with their full inheritance in R200 banknotes. Rows and rows of banknotes were quickly reduced when the kids followed prompts to take amounts away for taxes, obligated expenses as well as for their dreams.
Kwanda put away stacks of cash for his coveted Bentley, Chrisley realised she’d exhausted her cash without providing a home for herself, and Lwazi found that he’d forgotten to include food in his equations. Within minutes, they were left with a fraction of their inheritance after estate duties, start-up costs for business ventures, buying cars, houses, clothes and travel were accounted for.
Deflated by the prospect of having a far more modest lifestyle, the children were, hopefully, left with a more realistic idea of how to manage their future.
‘When someone builds up a fortune with the hopes of giving his family a better life, there’s often the expectation that the efforts will be noticed and appreciated by the children. However, being born into privilege often inhibits vital values from developing and can leave children uninterested in doing the hard yards,’ says Jamey Lipschitz, Head of Wealth Management at Sanlam Private Wealth.
He says the reality is that estate planning, while a vital process in the transfer of wealth from one generation to another, doesn’t always result in the transfer of values across generations. ‘At the core of this disjuncture is often the reality that family finances remain an unpopular topic of discussion, more so when parents are concerned that family wealth might spoil their children. That said, it remains the responsibility of parents to ensure the correct values are instilled in their children from an early age.’
Angela Hough-Maxwell, a psychologist, says it’s difficult for parents and children to speak about money, for a number of reasons. ‘Often they want to protect their children from the difficulty, anxiety and stress associated with money and work. But it’s important to engage children on such topics.
‘Children of a certain age should be included in family discussions about money, not yet making the decisions, but hearing the discussion. It’s worthwhile taking your child to your place of work. It may also be valuable to engage children in discussions about how you’ve divided wealth and how investments work,’ she adds.
Marteen Michau, Head of Fiduciary and Tax at Sanlam Private Wealth, says the challenge for parents is preparing their children adequately to manage, sustain and grow family wealth. ‘There’s a need for different generations to hold a round-table discussion sharing stories, and agreeing on values and long-term goals in order to create a family manifesto so there’s a clear wealth plan in place.’
Click here to meet Stanley, Nomfundo and their heirs, watch their bank vault experience and use an online tool to track your or your heirs’ own inheritance.
This article has been adapted from a piece by journalist Kabelo Khumalo that appeared in Business Report earlier this week.
Sanlam Private Wealth manages a comprehensive range of multi-asset (balanced) and equity portfolios across different risk categories.
Our team of world-class professionals can design a personalised offshore investment strategy to help diversify your portfolio.
Our customised Shariah portfolios combine our investment expertise with the wisdom of an independent Shariah board comprising senior Ulama.
We collaborate with third-party providers to offer collective investments, private equity, hedge funds and structured products.
navigating the complexities
Sanlam Trustees International
are they a good investment?
The great lockdown:
one year on
Head of Equities
IHG: focus on
quality pays off
Sanlam Active UK Fund
BUDGET 2021: THE RIGHT INTENT,
BUT RISKS ABOUND
Investment Economist at Sanlam Investments
INVESTING IN 2021:
WHAT TO EXPECT
Sanlam Private Wealth
MINING: IS THE
THROUGH THE HYPE
Head of Equities
South AfricaSouth Africa Home Sanlam Investments Sanlam Private Wealth Glacier by Sanlam Sanlam BlueStar
Rest of AfricaSanlam Namibia Sanlam Mozambique Sanlam Tanzania Sanlam Uganda Sanlam Swaziland Sanlam Kenya Sanlam Zambia Sanlam Private Wealth Mauritius
GlobalGlobal Investment Solutions
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.