Category: business

The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is entirely coincidental and unintentional. It is to manage a business, let alone a family business.

Running a good business is one thing, but having a thriving family business is totally different. Steven was a very successful entrepreneur in the packaging business. He has a wife, Mary, and two sons, John and Wilson, who used to be close to each other. The packaging business has grown large and was listed five years ago.

By then, Steven was 59 and had intended to hand the throne to his two sons when he was 65. Both of them were bright sparks who had graduated with honours.

Going Into The Family Business

However, John, the older boy by one year, was not interested in getting involved in his father’s business and preferred to pursue a career as a professional accountant. He started his accounting practise and got married shortly after to a woman his father disliked. He considered her a conniving woman with shallow thinking.

Conversely, Wilson was happy to get into the business and became in charge of sales and marketing. The father hoped that John would eventually get into his business as the financial man, which would have been ideal for him—two trusted lieutenants, one overseeing the frontline and the other running the operations.

Try as he might, he could not persuade John, who would not budge. Over the years, Steven had passed on a fifth of his shareholding in the holding company to each of his two sons.

He was sad to note, though, that John had, in recent years, been picking quarrels with Wilson at family gatherings until both of the sons were no longer on speaking terms.

Read: Fall of Family Business Empire, Why Family Business Fail?

One day, Steven called me to meet him about his succession plan for the business in case he passed away. Over a private dinner, he confided in me that he was, while at the pinnacle of his business venture, very unhappy about his two sons’ relationship with each other.

He was very concerned that their distribution could end in business breakup and means the end for their family business. I told him I would talk to both of them as it may be difficult for them to open up to their old man.

After talking to John and Wilson separately, it became clear that Wilson had no problems with John, whom he still respected and looked up to as his taiko, but John had doubts about Wilson. It turned out that John didn’t like Wilson because his wife, who was always suspicious of her brother-in-law, made him feel that way.

Raising questions like why Wilson was ‘abusing’ the company’s resources by frequently using its high-end cars, buying expensive corporate gifts, and enjoying lavish entertainment at fancy restaurants and nightclubs.

At my next meeting, I told Steven about the underlying cause and suggested that he bring John on the board of the holding company of the listed company. I also asked him to call for monthly meetings where he and Wilson could brief the family on business developments, financial performance and issues confronting the business. He bright-eyedly accepted the idea.

Two years later, I bumped into Steven, and he thanked me profusely for helping his family business. He told me that over this period, John became familiar with the father’s business strategies and understood why his brother did what he did.

The packaging business was highly dependent on several large Japanese clients whose head office visitors expected to be entertained extensively and in a rather plush manner. Over time, John began to take an interest in the business, and the father felt that John would be ready to take over as the number one by the time he retired.

It is good that this case had a happy ending simply because of transparency and getting buy-in from the outsider son to help the family business.

Read: Hard Facts About The Executor Of A Will In Malaysia

About Rockwills International Group

Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and hold more than RM25 billion in assets under trust.

The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is entirely coincidental and unintentional. Hope that we better understand the importance of having estate planning documents set up as soon as possible.

Ted was a close friend of mine. He had always struck me as a kind of bon vivant, enjoying life through fine foods and adventurous travels with a small group of friends.

One day, out of the blue, he called me to meet up with him urgently. At a café in Damansara, he told me that he had just taken a health check that indicated heart palpitations, and he was due for a full heart check-up the following week.

As such, he said he wanted to do a Will and a Trust, which he wanted to be done through me personally. I told him I was happy to oblige and started with a run-through of what he owned and owed.

He had just moved into a large bungalow in an affluent area, and apart from various objets d’art and jewellery and four luxury cars, his biggest asset was his investment in Hong Kong.

This was a trading company in which Ted had a 50% share, with a local Chinese who was his old schoolmate and partner for some twenty years. The company did very well in its contracts with China. The investment was significant because he could draw a salary of USD 50,000 monthly from the business and had been doing so for the last two years.

However, the shareholding was in his partner’s name to fulfil local bidding requirements. He did not have any documentation to show his share of interest because they had both started the business based on trust.

I told Ted that, apart from setting up a will and naming his distribution wishes, he had to, as a matter of urgency, set up a trust that his partner should sign, acknowledging his beneficial interest. He agreed and named his wife and two daughters as beneficiaries. He asked me to proceed with the estate planning documents as soon as possible.

The estate planning documents were ready for him within a week, and we were to meet on a Sunday for him to sign. He, however, postponed the meeting to the following weekend and the weekend after that because of some ‘urgent business’ in Hong Kong he had to attend to.

He said he would take the opportunity then to inform his partner of the trust deed to be executed. Unfortunately, he died of cardiac arrest on the eve of the day he was due to sign his documents.

Just A Tad Late On The Estate Planning Documents

All of us were in shock. The family and I gathered shortly after the funeral to review his files and estate planning documents.

He had a rather messy record, but after painstaking work, it transpired that Ted had living parents and a sizeable debt – several million ringgit in the form of the house mortgage, a million ringgit in unsettled hire purchase, several hundred thousand ringgit in tax and about a hundred thousand ringgit incurred through ten credit cards.

So, sadly for the family, they had to apply for letters of administration because of the lack of a will, and a quarter of Ted’s estate had to be shared with his parents.

The most tragic part was that the so-called trusted friend and business partner in Hong Kong denied that Ted had any beneficial interest in the company shares (which were estimated to be worth USD 5 million for Ted’s 50% holding).

In consequence, not only was the distribution of the estate considerably delayed, but the net value of the estate left for the family was drastically reduced, and the house they had just moved into had to be sold to pay for the debts in a moribund property market.

It would have made a difference if Ted had signed his estate planning documents on time!

About Rockwills International Group

Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and hold more than RM25 billion in assets under trust.

How would you 𝗳𝗲𝗲𝗹 when you are in this situation of…..

❗Total RM 382,000 𝗼𝘄𝗶𝗻𝗴𝘀 in credit card & personal loan

❗Have a 𝗱𝗲𝗳𝗶𝗰𝗶𝘁 of RM 5,328/month, of which RM 13,500/month is into servicing debt instalments

❗𝗡𝗲𝗴𝗮𝘁𝗶𝘃𝗲 net worth due to faster growth of loan interest than the growth of his assets

To feel 𝗰𝗼𝗻𝗳𝗶𝗱𝗲𝗻𝘁 & 𝗳𝗿𝗲𝗲 like this……

✔️𝗥𝗲𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 his personal loan & Credit card outstanding to only RM 131,000 from RM 382,000

✔️𝗦𝗮𝘃𝗶𝗻𝗴𝘀 of RM 7,851/month by restructuring his commitments from RM 13,500/month to RM 5,649/month

✔️𝗜𝗺𝗽𝗿𝗼𝘃𝗲 his wealth to RM 565,000 after we help him restructure his debts, giving him 𝗰𝗼𝗻𝗳𝗶𝗱𝗲𝗻𝗰𝗲 to buy two properties worth almost RM 1 Million

So this is what happened to Raymond, who is an IT professional, working for a famous Multinational company. Single & available, he is very friendly & has a very good relation with his friends & colleagues.

Not settling for mediocrity, he always dreams of doing his own business. That is how he started partnering with a long-time friend in the chicken-rearing business. His friend was a veterinarian, and chicken is a staple food in Malaysia.

So he put in his share of RM 225,000 in investment from his side, while his friend put in RM 75,000 to purchase live stocks and stock feeds. The condition was that his friend would run and manage the company’s operations.

But within six months, the business couldn’t generate enough sales, struggled to stay afloat, and accumulated a debt of RM 120,000. He went from having good cash flow with monthly savings to having a deficit of RM 5,328/month by using his credit cards to finance the losses of the business.

When we dive deeper into his situation, we see that his problem compounded because, over the years, he did not pick ‘G.O.O.D’ assets, despite earning a high income. Simply put, his assets were not growing as fast as his loans. We discovered that he also placed a large amount of his savings into insurance policies—21, to be exact.

So while most individuals are right about having a mix of high-risk investment vs low-risk investment in their portfolio to generate good returns, Raymond was right on the big picture but struggled to see that insurance does not generate healthy returns.

So here is two things we did to help Raymond:

1. Restructure his debt of RM 382,000, which is causing him to have a negative cash flow of RM 5,328/month, by using Debt Replacement
2. Freeing up RM 27k/year cash flow by restructuring his insurance using PMR rate and maximising his low coverage up to 5x

You have heard a lot about Debt Restructuring, but what is PMR?

You might be wondering, what actually is this PMR tool? Is it some kind of magic?

PMR stands for Policy Maximisation Rate and is used to measure “Is your insurance coverage maximized with the lowest possible premium?”

For example, a PMR rate of 125 means that for every Ringgit premium paid, you are getting coverage of RM125.

One of the first things we did was to list down all his insurance policies and premiums and run them through my proprietary PMR tool to identify Raymond’s under-optimised policies and correct them.

To his surprise, Raymond was undercovered despite paying for so many policies.

Raymond: “But, Ka Hoe, all the savings plans are good. At least the premiums are not burned, and I will get a lump sum back?”

“Well, it depends,” I answered. After calculating the rate of returns of the savings plans, we found that Raymond is getting about 2% per year. His money will earn better interest if deposited in FD.

Next, we calculated how much Raymond needs to cover so he won’t be under-covered or over-insured.

Raymond is not alone. Most people buy insurance based on what they think they need without calculating their actual needs and end up paying too much and covering too little.

So, what is a good PMR, then? Based on my experience in the past 14 years, after reviewing thousands of policies, a PMR of less than 100 is normally under-optimised.

If your PMR rate is between 100 and 200, it’s somewhat optimised, but it can be better. A PMR rate over 200 is well optimised, but you must ensure each component of your insurance needs is covered.

You can learn more about the PMR tool here. (short video of my previous sharing on KCLau’s webinar)

Interested to find out what is your PMR?  Are you currently under or over-insured or simply paying too much in premium?

Then, I would like to invite you to our first “How to Free Up RM2k/month Without Sacrificing Your Lifestyle” webinar in 2023.

This webinar has assisted many of my students in lowering their insurance premiums and increasing their coverage, allowing them to start working twice as hard and possibly retiring five to ten years earlier.

During the webinar, I will not only go through with you the exact steps I did with Raymond with my proprietary PMR tool but also:

1) How to identify under-optimized policies and correct them

2) Calculate how much you need to cover so you won’t be under-covered or over-insured.

3) Better prepare you for the future and prevent potential time bombs from blowing up during retirement

4) Go through real-world case studies with proven results on how to free up your cash flow so that you can work your money 2x harder.

Click here to learn more about how Raymond and the rest free up their cash flow up to 3x and maximize their coverage up to 5x. Use this promo code SIGUEST to get it at 9.87 (80% off the retail ticket of RM 47, the webinar is valued at RM 1,997)

Ka Hoe is a Licensed Financial Planner having a “Financial Adviser Representative” (FAR) with Bank Negara and “Capital Market Service Representative License (CMSRL) – Financial Planner” with the Securities Commission. He is also the Founder of J Advisory, a Personal Finance Academy that helps struggling Malaysians elevate their financial well-being with proven tools, systems and strategies.

Disclaimer: All strategies listed here are neither recommendations nor advise. The article is written purely for education and journaling only. The content of this article is an expression of my opinion and should not be taken as professional advise. If you are seeking professional advise, please consult me personally. When dealing with debt, you should conduct research and seek expert advice.

With gyms all over town teeming again with fitness junkies, almost everyone is playing catch-up with their fitness goals after a long hiatus from the gym. Whether it’s building muscles, improving stamina, or just getting healthy, all of us can benefit from a good old sweat session.

But what about our financial fitness?

If you’ve been putting off your financial goals for some time, now is a great time to rebuild and reposition yourself to get back on track as we usher in a new year.

Here’s an 8-step wealth workout plan to ease yourself back into it and get financially fit.

Wealth Workout Plan #1: Reassess Your Position

Before you jump right back into your routine, it’s important to first evaluate your current financial position and understand what has changed. Maybe there was a new family addition, or you had to take out a new personal
loan. In both instances, your tolerance for risk may be lower and you are more susceptible to ‘pain’ in markets.

Like any fitness routine, a financial plan needs to be specifically tailored to your needs. Work together with your wealth trainer to craft a financial plan with short- and long-term goals. Remember to be realistic in your plan, otherwise, you won’t feel motivated to stick to it.

Read: 5 Investing Mistakes to Avoid During a Downturn

Wealth Workout Plan #2: Crunch Those Figures

With a destination in mind, it’s now time to do some number-crunching.

How much do you typically spend every month? What percentage of your salary are you setting aside for saving and investing? Taking inflation into account, are you putting away enough to reach your dream retirement in 30 years?

Commit to your goals and take responsibility for your financial situation, whatever it may be. Don’t be dissuaded easily or quit before you even start going. The path ahead could be painful with many short-term setbacks, but the glory belongs to those with the grit and determination to push through.

Wealth Workout Plan #3: Build Your Financial Core

Having strong core muscles is important to keep from getting hurt because they support your spine. In the same way, a solid core is the base of any financial plan. This will help you get through bad market cycles and accidents.

That’s where an emergency fund comes in to ensure you have a safety net to fall back on. Ensure you have built an
adequate financial buffer of at least six months in living expenses which can help tide you over when times get rough.

Keeping an emergency fund also prevents you from being forced to sell your investments during a downturn and crystallising your losses, thereby allowing you to stay invested.

Read: Follow These 5 Steps For An Effective Asset Allocation In Your Investment

Wealth Workout Plan #4: Warm Up And Gradually Progress

Nobody should start deadlifting 100kg on their first visit to the gym. As an investor, you should not be piling everything you have into a single investment to generate returns. Take small steps to build your wealth and invest at levels you are comfortable with.

Once you’ve become more confident, you can gradually increase the amount you invest every month to build your ideal portfolio. With a better grasp of the market, you could also load up on more tactical positions to amplify returns by taking advantage of current market conditions or mispricing opportunities.

Wealth Workout Plan #5: Ice That Pain & Spending

Pain management is also a critical element of a wealth workout plan. Investors would inevitably face some ‘pain’ in their portfolio as markets go through different cycles.

But investors can manage this by stacking up on some fixed income and safe haven assets like gold which offers capital preservation by cushioning losses during a downturn given its low correlation.

If you can’t get your budget to balance, consider also freezing some of your worst financial habits by going on a spending diet. Sweet caramel macchiatos and night-outs are nice but learn to resist financial temptations to
lower your cash burn.

Read: ESG Investing And The 3 Steps To Build An ESG Portfolio

Wealth Workout Plan #6: Stick To The Schedule

As any fitness guru will say, it is far more important to stay consistent, rather than to focus on the intensity. This applies to investing too, which gets easier over time as you compound your gains and accumulate wealth.

Much like fitness, investing is really a long-term game that won’t give you immediate results even if you put in all your energy or resources overnight. A shredded body can take months, if not years of consistent training.

Similarly, building wealth also takes time and lots of patience. Legendary investor Warren Buffet only made over 90% of his wealth after he turned 65 years old. A great way to maintain consistency is to practice dollar-cost averaging by investing equal amounts at fixed intervals to ensure that it becomes habitual.

Wealth Workout Plan #7: Target All Areas

Gym bros who focus on chest exercises but skip leg days usually end up with an unbalanced physique. Similarly, you don’t want a portfolio that is lopsided because it is heavily tilted towards a particular ‘hot’ asset class or sector that has made strong gains in the past.

It might look good on the surface, but chances are it might crumble under pressure once the euphoria runs past its peak. Thus, any fitness programme should be all-encompassing by targeting all areas of your body to maximise resilience.

This applies to your portfolio too by ensuring that you have a good mix of different asset classes, sectors, and country exposure so that you stay on top of your game and can endure market drawdowns.

Read: Are Malaysian Millennials Really That Bad At Managing Money?

Wealth Workout Plan #8: Enjoy The Process

Lastly, take the time to savour the moment and just enjoy your wealth and fitness journey. You may find yourself hitting a plateau and feeling like you’re not moving ahead.

But investing is a lifelong pursuit, where your success should be measured across years if not decades. The ride could be riddled with short-term volatility, but that’s just part and parcel of investing.

So, keep your eyes on the prize and keep a long-term perspective in your quest towards building wealth.

With this wealth workout plan in place, you should be able to weather any conditions.

About the Author

Lee Sheung Un is an assistant manager of communications & content at AHAM Capital. A millennial, he is still finding that balance between wealth, freedom, and purpose. Views expressed are his own.

It is not uncommon to see or hear people we know to make life decisions based on our relationship with money. Even when one is unhappy with their environment, they may not have the courage to make any moves or changes because they fear the impact on their financial well-being.

We enjoy seeing our investments grow but lose many nights of sleep when the opposite occurs. If we find our lives saddled with debt or see our peers living a more lavish life, we may feel that we are not enough.

Money has a huge role in our quest to feel enough or be happy. The reason I want to talk about this is that we must not use money as the measurement of our progress in life. It should not be the reason we feel inadequate or terrible.

Read: Can Money Buy Happiness?

Our Relationship With Money

People seek belonging, acceptance, and validation from the people around them. We want to feel that we belong to something, to a certain group or culture. When it comes to our relationship with money, the same pattern and need to be seen as ‘normal’ can also be easily observed.

When we see others around us dress well and drive expensive cars, we tend to assign them to the ‘successful group’ and think ‘they are doing well in life’. But statistics have told us that people who earn a high income can also deal with money issues and seek debt management programs from AKPK (Agensi Kaunseling & Pengurusan Kredit). On the other hand, not all middle- or low-income earners are terrible money managers.

Comparing what we have to what others have can lead us to an endless chase of happiness based on what other people are doing. It takes away our focus on how well we are doing.

Have you been telling yourself: “If I have X amount of income, I will be able to do this or feel happier”?

Read: 4 Money Personality, Find Out Yours

This thinking puts money in the driver’s seat behind every decision we make and that money is the only enabler for us to do anything.

When we give more power to money, it will take it and eventually become the lens through which we make most, if not all, of our life decisions. We must break this pattern and take back control. It starts with redefining the relationship we have with our money.

Doing this early is important. If we do not confront this relationship with money early, it may cause us to tie our self-worth to our net worth, which means if you don’t feel you are as rich as me, you will convince yourself to believe that you are not as good as me, and this may blind you from seeing your true potential.

Money is not unimportant. Don’t get me wrong. It is important, but it should not be more important than our sense of self or cause us to lose our sense of self.

Money shouldn’t be why we cannot prioritise caring for others or stop us from feeling happy. Money is the car that gets us to our desired destination; it is not the driver itself. You are.

To regain control, the driver must know where he or she wants to go. But many times, we don’t have a clear idea of what our goal is. You don’t have to feel bad or guilty if this is you.

We haven’t been taught how to think about our goals. I think we need to first find out what we value most.

Understanding what we treasure the most can help us discover what we want to make happen. If your core value is your family, you may find ways to use your money to help your family live a better life or protect your family’s financial security.

If your core value is health, you can learn how to use your money to help you live healthier. I think it makes little sense to use our money on things we don’t value as much because this will deprive us of our life satisfaction. They may give us a short boost in happiness, but they may not be as sustainable as when we use our money on things that truly matter more to us.

Determining our core values and things we hold dear will help us shift the steering wheel into our own hands and help us focus on how to utilize our money to live the type of life we want.

Read: How Can You Save Money Without Even Realising It?

Those Who Fail To Plan, Plan To Fail

This will help us find out how to manage our money accordingly and create a spending plan to help us keep our money in the right place. This financial plan would have had a say in where we wanted our money to go and what we wanted it to do for us, not the other way around.

Also, in our quest to have a constructive relationship with money, we must first determine what kind of relationship we have with it now. What would a mutually supportive relationship look like?

It makes sense to conduct an initial assessment to determine how much money we need to live the best life we want. From there, we can then find out what things would need some tweaking to create the kind of future we’d love to have.

When our relationship with money is healthy, our financial well-being can improve. We will be more at peace with ourselves and our money.

We can live better today. Wishing you a great 2023 by starting with a refresh on your relationship with money.

Read: Are Malaysian Millennials Really That Bad At Managing Money?

About the Author

Kevin Neoh works with people to transform their relationship with money and support them to use their money to live a meaningful life. He is a CFP professional and a certified member of Financial Planning Association Malaysia (FPAM). Kevin can be contacted at www.kevinneoh.my.