Do I need a Backup Plan?.. Now is not the time to relax

Jun 14, 2021

Do I need a Backup Plan? This is the question I often hear from potential clients. In response I often use the wildfire analogy. Why do I use a wildfire? Over the past decade every summer the news reports are full of dramaticimages of uncontrolled bush and forest fires. These fires destroy valuable neighbourhoods and even more valuable lives. Of course, no one wants to experience a wildfire. However, if one happens you most definitely want to have an escape plan, route and comprehensive fire insurance for yourself and your families in place.

In these uncertain times in many countries, the same principle applies to high-net-worth individuals. They all should have a Backup plan to protect themselves and their families from economic, political or societal upheavals…that can take many forms… as my HNW clients in Mexico, Hong Kong, India, Brazil and the US to name a few will attest. They all have learned to appreciate the comfort and confidence that comes from having a solid plan in place. Indeed, many see this as an important part of their legacy to their family.

Do I need a Backup Plan? How events trigger action…

What I have also witnessed over my 30 years of practice is a cycle that repeats itself whenever there is uncertainty. First, when the threat is visible and imminent (like after an election of a populist or autocrat), my appointment book fills quickly. But the moment there is any hopeful sign that the fire might not hit them, the optimistic clients back off their planning. Then later…might be a few months, might be a few years…when the threat reappears, they are on the phone asking me to dust off their previously unfinished plan…AS FAST AS POSSIBLE!

Interestingly, my more “pessimistic” clients continue on – because they are wise enough to know that wind directions can change, and wildfires “can hide underground, smoldering through the winter and sprouting back up as a wildfire next spring.[1] They don’t want the bad things to happen, but they know if they do it could be disastrous for them and their families, so they want to be ready to execute the  personalised plan they carefully prepared in calmer times.

I have seen this cycle repeat itself so many times…and sadly have been in the position to inform my once-optimistic clients (many of whom backed off for the smallest of reasons) that they have fewer, less attractive and far more costly options.

Real Life Examples

If you want some real-life examples, just take a look at what’s happening in Mexico and the US. For the past two years I have been very busy helping HNW Mexicans as a direct result of the erratic policies of AMLO. I have also been equally busy helping an increasing number HNW American citizens due to their concern about the threats of changes to the tax policies – increased capital gains rate, imposition of a wealth tax, etc.

However, the moment AMLO seemed to get weaker after not achieving a super-majority government and when it started to look like Biden’s bold agenda might get blocked by a dysfunctional Congress, a few of my “optimistic” clients visibly slowed down their planning.  In both cases they had been looking for a sign…any sign…that the wildfire might pass, and the moment they found one they noticeably started to relax. Of course that is their choice…but for most this is the first time they have considered a Backup Plan…while I have prepared and executed over a thousand!

Do I need a Backup Plan. Prudent clients continue with their planning.

Do I need a Backup Plan. Prudent clients continue with their planning.

On the other hand, my more pessimistic clients continue with their planning…knowing that once everything is in place, they and their families will be able to relax over the long term.

So while the risk level might seem to have declined in some countries, this is most likely only temporary. The reality is that the situation can…and most likely will…change very quickly. So now is an ideal time to calmly move forward on the planning stage of your long-term Backup plan. With the input of your  family members and the help of knowledgeable advisors, now is an ideal time to put all the pieces in place so that when the next wildfire starts to burn, you are protected with a quality plan that meets your needs in a cost-effective and timely manner.

Get in touch if you want to connect with a no obligation, confidential phonecall.

[1] When wildfires hide underground – then rage again.