Local knowledge and global expertise
Background
Our clients are a successful female business owner and professional investor in her 60s as well as her son in his 30s. The matriarch has substantial onshore cash reserves, and limited offshore liquidity.
The son currently manages some aspects of their family business and is on the succession plan to take over the entire company in the next few years. He is married and has a baby daughter with his wife. The young family is finding their high-net-worth lifestyle increasingly costly, both due to the current inflationary environment and added complexities and needs.
Prior to working with PCS by Mercer, the family was largely tactical in their wealth planning practices, including owning several minor onshore savings plans through different channels.
They were keen to find an insurance broker with both local expertise as well as global access to a wide range of solutions; an organisation with the knowledge and experience to help with their on- and offshore wealth planning.
Key considerations
Due to personal reasons and wish to incept asap for a peace of mind, the clients are uncertain about having medical checks, but they do have significant cash reserves and the need for expert wealth planning support.
They have distinct on- and offshore requirements that must be met with the right solutions.
Offshore
- Projecting into the future, the second and third generations are likely to spend some time overseas living and studying, so our clients wanted to make provisions for offshore life protection coverage. They estimate they will need around USD 10M in coverage to safeguard their lifestyle and interests.
- To enable potential emigration in the future, they also need a dependable offshore wealth transfer solution.
- The clients have been looking for ways to balance the volatility in equities markets and see appropriate life insurance solutions as an integral part of achieving that balance and diversification.
Onshore
- The family has very significant onshore cash reserves that need to be quickly, but strategically capitalized, especially considering the low onshore interest rates on deposits.
- Wealth appreciation and passive investment management solutions are also part of the clients’ complex requirements.
- Specific to the mother: Provide stable cash flow after five years to act as a steady retirement income stream as well as provision for any potential inheritance taxes that the son might have.
- Specific to the son: Provide stable and increasing cash flow over his lifetime to meet ever increasing expenses.
PCS by Mercer Solution
We worked closely with our clients and found the on- and offshore solutions to serve their unique circumstances. As the clients would like to commence as soon as possible, we were able to expedite the process from application to payment in three days.
Offshore: We note the family is looking for solutions totalling USD 10M and are working with them on additional customized solutions to achieve that goal. In the meantime, they have selected the solution below in the event of an unforeseen emergency.
Current solution: A customized Whole of Life solution that will pay directly to the son offshore.
Total sum assured: USD 2M death benefit.
Premium: USD 600,000
Onshore
Mother:
Solution: Participating Life Insurance Fund (PAR) + Universal Life (UL) Account
Benefits: Annual payouts from the 5th policy year till age 104, plus dividends. This specific solution is a fixed term annuity and offers 5 X expected death benefit at age 100 if no prior withdrawals are made. No medical checkup is required for the PAR. There is the flexibility to withdraw from the UL account if required.
Premium: USD 1.38M equiv,
Son:
Solution: Participating Lifetime Annuity Fund + Universal Life Account
Benefits: Increasing lifetime annuity with no medical checkup. Increasing annual payouts from the 5th policy year for the son’s entire lifetime, plus dividends. This specific solution offers 12.5 X expected death benefit at age 100 if no prior withdrawals are made. There is the flexibility to withdraw from the UL account if required.
Premium: USD 2.76M equiv,
Key takeaways
- The cash value and accumulated dividends of life protection policies can balance portfolio risk and provide some stability, peace of mind, and certainty for the future.
- PCS by Mercer provides a one-stop insurance inception and management service for our clients’ on- and offshore needs.
- In addition to being a safeguard, life insurance policies can be considered as a reliable source of liquidity.
- Off-the-shelf solutions can’t meet the complex requirements of high net worth lives, and customization is key to finding the right solutions.
- Access to a depth and breadth of possible solutions is crucial to customization. PCS by Mercer have a global network of expert colleagues to help customize the right on- and offshore solutions for your wealth planning needs.