Building a lasting legacy: Why securing your family’s financial future should start sooner rather than later
LEGACY planning is not just for the older generation. Young people are actively engaging in protecting their wealth and this shift is driven by several factors: a growing awareness of legacy planning benefits, a wider range of financial tools and the changing landscape of retirement security.
A recent Quality of Life report by HSBC, which surveyed the affluent from nine different territories around the world, including Singapore, revealed that more people aged between 25 and 40 have created trusts and bought large insurance plans for inheritance purposes compared to those in the Gen X or baby boomer generations.
“Early planning allows you to build a framework for retirement wealth, secure income streams, and prepare for potential health needs,” says Harpreet Bindra, Chief Executive Officer of HSBC Life Singapore. “It also lets you maximise the inheritance value for loved ones through tax-efficient strategies.”
He adds: “Legacy planning isn’t just for established business tycoons with tens of millions of dollars in assets. Young professionals and entrepreneurs with high incomes should start planning to ensure their success benefits future generations or their chosen causes.”
Legacy planning is more than just about building wealth – it is about making the most of the finite time we have. It is about maximising the value of time and using time to not just grow your wealth but to create cherished memories with family and friends, passing on values to the next generation and ensuring that your life’s work continues to make a difference long after you are gone.
“Early planning allows you to build a framework for retirement wealth, secure income streams, and prepare for potential health needs.”
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– Harpreet Bindra, Chief Executive Officer, HSBC Life Singapore
Wealth creation and transfer in Asia
The rise of technology sectors like artificial intelligence (AI), fintech and e-commerce has created a new wave of young, wealthy entrepreneurs globally. In Asia, the growing number of second and third-generation business owners taking over from retiring Baby Boomers are contributing to this population of affluent young people as well.
WealthX estimates that some US$2.5 trillion (S$3.4 trillion) in intergenerational wealth will change hands by 2030.
This rapid wealth creation presents unique opportunities and challenges. Legacy planning becomes even more crucial to ensure this wealth is preserved and used effectively for future generations and philanthropic causes.
“HSBC Life, being part of a global bank that has been investing in strengthening capabilities to support our affluent and international clients, is well-positioned to serve this new generation of high-net-worth individuals,” says Bindra.
“Those whose wealth is concentrated in one company through stocks and options should think seriously about diversification and ring-fencing part of their assets.”
Growing, preserving and transferring wealth with IULs
One solution for affluent individuals is indexed universal life (IUL) insurance policies. IULs offer flexibility, allowing adjustments to premium payments and death benefits. It also enables policyholders to grow their wealth over the long run based on the performance of the index account.
Such policies typically comprise two components: a General Account and an Index Account.
What is Indexed Universal Life (IUL)?
IUL is designed to give you the best of both worlds – lifelong protection and upside growth potential with downside protection. It is similar to other life insurance policies in that it offers a death benefit, but what sets it apart is that it also allows you to grow your money over time by growing your policy value. This helps you build wealth even while giving you protection.
How does it work?
The premium(s) you pay will be allocated to the General Account and Index Account according to your choice. Any insurance charges will be deducted before this.
Flexible premium term: After paying the minimum initial premium, the flexibility is yours to choose paying the remaining premiums over a preferred period or in one lump sum.
Designed around your risk appetite: When it comes to growing your policy value, you are in control. You can allocate funds between the General Account and Index Account to suit your risk appetite as you prefer.
Protection from market loss: Life is rarely a straight line, so it is good to know the crediting rate of your Index Account will not go below a floor rate of 0 per cent, therefore protecting you from market loss.
Buffer against market volatility: You can choose to opt in for the automatic premium spread feature that will dollar cost average your premium amount, spreading out your investment regardless of market fluctuation.
No-lapse guarantee benefit: Enjoy the security of knowing that the specified sum insured is guaranteed until the death of the life insured or for five years, whichever is earlier, with a no-lapse guarantee benefit.
The HSBC Life Diamond Prestige IUL, for instance, lets policyholders divide their premiums between an Index Account, and a General Account that enjoys a guaranteed minimum crediting rate of 2 per cent per annum.
The Index Account grows through a crediting rate linked to the performance of the underlying index such as the S&P 500, capped at 10 per cent per annum. In addition, the Index Account provides downside protection with a floor rate of 0 per cent.
This makes the HSBC Life Diamond Prestige IUL stand out, as the cash value is protected from losses due to the 0 per cent floor rate.
The HSBC Life Diamond Prestige IUL at a glance
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Lifelong protection: Whole life coverage for death and terminal illness provides a safety net for the policyholder’s family. It can also be a means to protect wealth, manage business cash flow and leave a financial inheritance for future generations.
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Empowered flexibility: Choose the premium payment period, change the life insured up to two times (unlimited for corporate-owned policies) and enjoy a no-lapse guarantee benefit for added security.
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Higher growth potential: Opportunity to grow wealth with an Index Account linked to the performance of the underlying index, while also providing stable returns through a General Account with a minimum guaranteed crediting rate.
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Downside protection: The crediting rate in the Index Account will not go below a floor rate of 0 per cent, protecting policyholders from market losses. The plan also offers a guaranteed minimum surrender value. From the 11th policy year onwards, policyholders get extra value with a loyalty bonus.
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Healthy lifestyle benefits: Live a healthy lifestyle with a discount on insurance charges for health improvements and a quit smoking incentive for smokers.
As the landscape of wealth creation and transfer continues to evolve, those who adapt and plan ahead will be best positioned to leave a meaningful legacy that stands the test of time. HSBC Life clients can expect a range of financial planning solutions tailored to their needs, enjoying support at every stage of their wealth journey.
Speak to an HSBC Life Financial Planner or any of its distributors to find out more about its legacy planning solutions and the HSBC Life Diamond Prestige IUL.
Disclaimer:
Terms and conditions apply. Please refer to the HSBC Life Diamond Prestige IUL product summary for more information. Underwritten by HSBC Life (Singapore) Pte. Ltd. (Reg. No. 199903512M). Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore.
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