It is a privilege to own assets. To most of the world they represent power; and one of the most important powers they endow on those who own them is freedom. Freedom to buy things, to go places, to treat yourself, to live in a better area, to give your children better schools, freedom to buy the best medical and health services and even freedom from some of the activities (like 8 – 10 hours’ work each day) which occupy most peoples’ time.
Few people, if they spoke honestly, would prefer not to have a comfortable cushion of wealth safely tucked away in addition to the funds to meet their daily needs. Some of these people will go to great lengths to grasp them from those who they think have them.
In this article I will outline some of the dangers or threats which wealth attracts – each of which I have either experienced or witnessed in 22 years as a personal international financial planner. I will also offer suggestions as to how to counter these threats.
1. Theft and burglary.
Traditionally this was focused on break-ins to private property. Alarm systems, fearsome dogs, together with supportive and observant neighbours and security patrols, tend to mitigate this threat. I grew up as a friend to one of the daughters of the de Rothschild family. I still remember a childrens’ party where the private beach venue was protected by visible patrols of countless security guards. This was the era of kidnapping, when no family of substance could have confidence that their children were safe.
Today the stories are more of credit card fraud, and of internet theft. No internet security expert will deny that threats do exist in online commercial transactions – even in ATM cash machines. A friend of mine in Oman told me only last month how the use of their credit card in France caused a fraudster to take regular withdrawals for several days, several times a day, from a variety of banks in Rumania. Apparently the fraudster can install a gismo into the card slot of the machine which copies all the card details; and a camera or person behind you in the queue can watch you type in your pin code.
- Make sure your physical property is appropriately protected, as above. As regards card and internet fraud:
- Check how your bank will refund you should this happen. Leading international banks invest in highly sophisticated systems to protect their cards and cardholders – and to protect themselves against potential liability.
- Be discreet inserting your PIN number!
- A separate card for internet shopping, and / or for ATMs, is advisable – with tight credit limits.
2. Extortion – mild and extreme.
I find this, maybe curiously, to be the most threatening of the dangers addressed in this article. It increasingly arises in relation to people who have assets, or who are successful.
What form does this take? In one way or another, a threat is made which leaves the victim fearful: and money is demanded for the withdrawal of the threat.
The problem here is the following. Under the banner of freedom, our modern age supports instant open global communication. Through the media and the internet, this is available instantaneously, 24/7, at minimal or zero cost, all over the world. This is to be welcomed ! The issue is that, when it is abused, no satisfactory recourse is available to the victim who may have been wrongfully slandered, accused or destroyed through these media.
Try suing someone for internet defamation. Even in countries where legal process is relatively speedy, this is a gruelling experience.
- The first obstacle you face is – what jurisdiction should you sue under?
- Next you will find ‘burden of proof’ problems – anyone can express their opinion about you or your business and it may be impossible to prove that these are ill founded.
- Then you will experience the cost: and defamation and libel are notoriously expensive to pursue through the legal process.
This ‘media extortion’ appears to be the most common contemporary form of extortion. Kidnapping, or threats of injury or worse, take more organization and skill and tend today to be confined to globally renowned figures with global scale wealth. People of my generation will remember the severing of John Paul Getty’s ear… this form of extortion is fortunately not usually applied to us lesser mortals.
- Counter publicity – maybe opening a website which carefully and undefensively counters or dismissing the allegations made elsewhere.
- Positive marketing: maybe countering the negative vibes with positive: such as opening a website to promote the very person or business being attacked.
- Search engine domination: so that anyone searching finds your own version of events rather than your defamer’s version. To sustain this requires constant attention – or paying someone else to sustain your site’s domination.
Above all else: don’t let it get you down. Stay angry. To give in emotionally is exactly what our adversary is hoping for. Keep pioneering your future ! And be grateful that you have better things to do than throw mud at other people !
3. Taxation !
This may seem irrelevant to people in Oman. But beware ! Assets such as real estate are subject to heavy taxes in most jurisdictions – including the UK and the US. Rental income is usually nowhere near as serious a cost as inheritance taxes; although fortunately solutions can be arranged if financial planning advice is sought at an early enough stage.
- Seek financial planning advice from a qualified financial planner or a professional tax advisor in the appropriate jurisdiction/s.
- Do this as early as possible: and act on the advice without undue delay.
4. Adverse legal action.
Legal action against you does not mean that you are guilty of anything. But this can be hard to remember as you are thrown on the defensive to protect yourself. Anyone who has experienced a court case against a family member or friend will know how the sheer process can turn you emotionally inside out, and for months or years on end.
No wonder that this method is also used often by extortioners! The largest proportion of cases are settled out of court – and too often because the defendant simply wants out from the pressure it puts on him, his family and his associates.
Legal actions have been called “the games of the rich”. They are best avoided unless the budget available to carry them through is very large. In one case I know of, three civil cases were filed by the plaintiff, an ex partner of the defendents. They responded with three criminal cases and an additional 7 civil cases. Eventually it was the plaintiffs who were warn down, and a settlement was made. The biggest beneficiaries however were, as usual, the lawyers. The emotional fallout on both sides was enormous.
Be vigilant with your ongoing relationships – business and otherwise. Do not underestimate the value of spending the time to talk through issues with colleagues, family members and associates.
These legal battles are usually the external sign of a breakdown of relationships, and there are usually one or more opportunities to restore them before it is too late.
Assets require time. They also take management. Where someone manages your property, your business or your portfolio then they still need monitoring – and, from time to time, they need challenging. Laws change, taxes change, opportunities change – and, most importantly, you change. As your life moves forward your financial situation changes, as do your financial requirements: and it is of fundamental importance that as your life moves on your assets and investment strategies are adjusted accordingly.
So why not leave the assets in cash in a vault?
Because one of the greatest threats to your capital is inflation. With inflation at just 7.5% your R.O.1000 today will be able in 10 years’ time to buy goods worth only R.O. 500 today – its real value will halve. To stay still in its purchasing power, money has to be put to work earning more money!
- Allocate time to your assets on a regular basis.
- Choose sound professional advisors on whom you feel you can truly depend. Be aware that this trust can take years to build.
- Be aware that leaving your money idle without any plan to make it grow is not an advisable strategy.
It remains a joy and a privilege to own assets ! With them however come responsibilities. We are ‘stewards’ of our assets, caring for them on behalf of ourselves, our families, our friends, our communities and our planet. We must remain vigilant, and look objectively at the hazards on the road ahead. This demands that we be engaged – and take appropriate measures to anticipate and counter threats to their value. In many situations a trust or foundation or even a company can be a good protective vehicle, shielding key assets from any forms of attack on you or your business. These will be addressed in my next article in Oman Business Today.
The author is a fully qualified international financial planner, practising since 1984. He is an independent agent of ISGAM, a private Swiss asset management company which manages many of his clients’ assets.