Seven Ways Golden Geese self-sabotage their own Back-Up Plans (Part 2)
In almost three decades of assisting Golden Geese (aka High Net Worth individuals) with their Back-Up Plans, I have often observed certain behaviours by the clients themselves that undermine their ability to fully achieve their goals.
This is the second in a series of blogs where I will examine these behaviours and provide some suggestions as to how one can avoid these roadblocks to success.
LESSON THREE: Smart Clients or Advisors cannot reproduce years of focused experience:
HNW individuals, especially those who see the obvious value in a Back-Up Plan, tend to be intelligent and worldly. Unfortunately, this sometimes leads them to falsely believe that developing an effective Back-Up Plan can be a “Do it Yourself” project. Whether the “Yourself” is the actual client or one of their existing advisors is irrelevant.
DIY using the Internet
Those attempting a DIY Back-Up Plan first turn to the internet. This gives rise to three significant problems – quantity of information, bias of the source of information, and the quality of the information.
Immediately the first problem of the sheer volume of information becomes apparent. A Google search of “Second Citizenship” produces almost 110 MILLION hits! How is it possible for a DIYer to separate the wheat from the chaff and feel confident with the result?
A closer look at the first few pages of search results reveals the second problem – most of the information on the internet has been placed there by Golden Visa Residence-by-Investment or Citizenship-by-Investment sales people. Most ads are placed by recent players in the field, who paid for premium search placement. Their sole goal is to sell you the “product” which makes the most money FOR THEM. Whether a certain immigration product is appropriate for the client or potentially a financial time bomb does not enter the salesperson’s mind, pitch or internet content.
And thirdly, there is no assurance the information the DIYer is downloading is correct, up-to-date and supported by law.
An experienced advisor in the area of Back-Up Plans is going to be able to outline all the applicable issues and note all the potential landmines in mapping out a path to success. Furthermore a qualified advisor is constantly examining all the new citizenship/residence and tax planning products that arrive on the market. Their experience allows them to quickly separate what potentially works for each specific and unique client, and what doesn’t.
Just as doctors are very concerned about their patients self-diagnosing on the internet, DIY is not the way to go when designing a Back-up Plan that will impact you and your family for years to come.
DIY using Friends
Another potential source of misinformation is when the DIYer knows a friend or colleague who has set up a Back-Up Plan – and thinks that they can save money by simply piggy-backing on their friend’s experience. Recently it has been reported that increasing numbers of Golden Geese have a Second Citizenship, so the likelihood of this occurring is increasing.
Not surprisingly, relying on what others have done can be dangerous for a number of reasons. The first problem is the underlying assumption that the other person’s Back-Up Plan is actually effective and efficient. Defective planning is never uncovered until a Back-Up Plan is tested and catastrophically fails.
Secondly, the friend’s family history, concerns and goals are not the same as the DIYer’s. Therefore the friend’s Back-up Plan strategy, even if appropriate for them, rarely translates well to the DIYer’s current planning.
One of the truths that I have learned in the almost three decades, since being called to the bar is that immigration, citizenship and tax laws change constantly. As time goes by Golden Visa, Residence-by-Investment and Citizenship-by-Investment programs come and go, and laws relating to lineage and dual citizenship are constantly in flux. The range of choices available today may be completely different from what was available even a year or two ago. And as the expression goes, the devil is in the details…that a DIYer often fails to spot.
LESSON FOUR: Cheap is Expensive:
Unfortunately, I am sometimes retained by a client who has already attempted to put together their own Back-Up Plan and suspected (or “realized”) afterward that their plan has major flaws.
This situation commonly is the product of being talked into a particular residence or citizenship product by a salesperson posing as an advisor. The key giveaway is that unlike qualified and experienced advisors, salespeople did not start their relationship with an examination of the client’s situation, goals and family history.
Purchasing a Citizenship-by-Investment or Residence-by-Investment without this essential first step being properly and fully completed is a recipe for failure. An equivalent would be a frugal client who, wishing to build a family home, makes his/her first step a visit to a construction materials store rather than an architect. When approached in the store, when not handed an architect’s building plan, the salesperson immediately leads the client over to the brick department and suggests they buy a particular brick, “because it’s on sale” or “it’s our bestseller” or “it has some special feature”.
Without an architect first examining the family’s needs, building site situation and budget – and applying local building codes it is impossible to develop a proper design and building plan. And without such a bespoke plan, there is no way to assess whether the product on offer is “value for money”, “appropriate to the client’s needs” or simply the one that pays the highest sales commission to the salesperson.
While the friend-informed DIYer has saved the cost of the architect, there is only a remote chance that he/she will purchase the right product. With costs for even the cheapest “products” beginning in the six figures, the attempt to bypass engaging an experienced architect / Back-up Plan advisor is a classic example of being “penny-wise but pound foolish”.
LESSON FIVE: The Cost of Failure is Higher than the Cost of a Viable Back-Up Plan:
Inevitably HNW clients first consider obtaining Back-Up Plans because they want to avoid significant negative consequences such as massively increased taxation; disintegrating political climate or living conditions in their home country; or an increasing chance of being targeted by governments or others because of their religion, politics or financial success… all very good reasons.
When considering a Back-Up Plan, it is essential that the individual and their advisors understand the real world “costs” of a poorly conceived and/or implemented Back-Up Plan to work properly in times of future crisis. Depending on the individual’s situation, the ultimate cost can range from significant tax payments all the way to complete loss of liberty assets and life.
As HNW individuals and their advisors go through the process of:
i) selecting the best Back-up Plan advisor to help protect them from these dangers;
ii) working with the Back-up Plan advisor to determine their concerns and set their goals;
iii) evaluating the costs and timing of various options suggested for the Back-Up Plan; and
iv) setting up and then maintaining the elements of the final Back-Up Plan,
their decision-making process must always be made through the filter of “What is the cost of failure?” This mindset is critical as there is no money that will repair a catastrophic failure of a poorly conceived Back-Up Plan when tested by a future crisis.