In our last issue, we interviewed long-term Hong Kong resident HOWARD CLARK-BURTON about his career in financial planning and wealth management, including as CEO of BMP Wealth since 2018. This time, he outlines how to to grow your nest egg and achieve the lifestyle of your dreams while reducing your financial risk. Plus how to start building wealth in just three steps!
If you look at some of the world’s most successful businesspeople, such as Richard Branson, Oprah Winfrey, and Li Ka-shing, you might wonder how they’ve got to where they are. Do they have a secret formula for creating wealth, or are they just lucky?
Successful entrepreneurs typically have a clear vision and a strategic plan for achieving it. And when you start to consistently work a plan, luck often plays a part.
Wherever you are in your journey, you could benefit from a similar approach. Our aim at BMP Wealth is to blend financial planning and wealth management to help people build, manage and preserve their wealth by identifying life goals, translating those into financial goals, and then developing a financial plan to achieve them.
There’s often a tendency in financial planning to focus on the second and third steps in this process – managing and preserving. Here, I’ll take a closer look at the initial building stage.
Step 1: Identify your financial goals
A crucial first step towards building the wealth you need now and in the future is to understand your life’s major goals – we can then work out the cost of these goals and therefore plan to achieve the lifestyle you want.
You might find it helpful to consider the following life stages:
Past
Understanding your past will help you understand your “money mindset”. This is a crucial step to take as it most likely helped to shape your attitude to financial matters today. This could potentially be preventing you from achieving your financial goals. For example, someone brought up experiencing a regular lack of money who could be naturally quite risk adverse will have a totally different “financial mindset” to someone who experienced a more luxurious upbringing.
Present
Reviewing your current situation in life and your personal balance sheet, reflecting on what you’re enjoying the most, and assessing how much disposable income you have could help you set meaningful goals.
Future
Thinking about where your career is going, how you see your life unfolding, and what you want for yourself and your family could help you align your financial plan with your broader life goals, such as funding your children’s education, property purchases or achieving a certain retirement lifestyle.
Once you have a clear understanding of your current circumstances and you’re settled on realisable life goals, you can start putting the right strategies in place to build your wealth and achieve a comfortable future for you and your family.
Step 2: Consider your short, medium and long-term investment and wealth management
Creating a list of all the assets you own, including property, collectibles, cash, fixed interest and equities, along with your liabilities – your balance sheet – will help you to understand your current financial situation and therefore provides a good starting point to create an investment strategy for achieving your financial goals (your future lifestyle).
Building your wealth means boosting your personal balance sheet by increasing your assets and decreasing your liabilities. You may choose to hold some cash to cater to your short term needs and to ensure that you’re prepared for unexpected costs or a period of loss of income.
However, before deciding where to invest the remainder of your disposable income, you might want to consider how much money you need to set aside to cover any existing short term financial commitments, such as tax bills.
Indeed, aligning your short-, medium- and longer term investment needs with the goals you identified in Step 1 could help you determine the best way to build your balance sheet. That is, how much you want to hold in property, cash and savings, and how much is needed to build up in your longer-term pots, like your children’s education fees, retirement and similar.
A financial planner generally considers your attitude to financial risk and your needs to help you allocate your balance sheet; they can use cashflow forecasting software to assess if you’re on track to achieve your goals based on your current balance sheet.
At BMP Wealth, we adopt a holistic approach that combines financial planning and wealth management. Putting cashflow planning first allows us to suggest changes to your balance sheet or the use of your disposable income, and by deploying a range of model portfolios as the engine that drives these plans, you’ll have the best chance of achieving your lifestyle goals.
Step 3: Mitigate potential financial risks
While reviewing your investment needs, you also need to consider potential risks that could affect your long-term financial plan. Do you have a strategy in place to provide for you and your family if you become ill and unable to work or meet an untimely passing? Could you maintain your financial plan if you suffered a drop in income or if that income stops altogether? An important part of building your wealth is protecting the financial plan for you and your family.
Those who have yet to build a substantial balance sheet might include taking out adequate insurance to provide for themselves and their family; or, if you’re a business owner, to ensure that your business could continue to operate if you or a key member of your team is unable to work.
While you may never need to draw upon the protection you put in place to mitigate financial risks such as ill health and a loss of income, including these in your plan may provide invaluable peace of mind.
Also, although it might not be pleasant to think about, planning how your wealth will be passed on after you’re gone is a fundamental consideration when building, managing and preserving your wealth. A carefully considered estate plan could ensure that your wishes are fulfilled and that your wealth is passed on as quickly and as tax-efficiently as possible.
Having said that, estate planning can be complex, especially for expatriates who hold assets internationally. So, if you’re in this situation, you might benefit from speaking to a financial planner who has expertise in this area.
Want to know how to start building wealth? Email info@bmpwealth.com or call 2905 9041. bmpwealth.com to discuss how BMP can help you reduce financial risk and achieve your dream lifestyle through successful wealth management.
This article about how to start building wealth first appeared in the Summer 2024 issue of Expat Living magazine. Subscribe now so you never miss an issue.
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