Asset management in times of uncertainty

On the other hand, the uncertainty raised by the changes of government and the different reforms that they propose, as well as a global economic crisis that affects not only the country, but also our core business partners, are aggravating the panorama of the operation of companies and the risks to which the assets of entrepreneurs are exposed.

For this reason, questions arise when thinking about heritage protection — is my family’s economic well-being protected? Do we have a fixed income assured for family members of retirement age? What will happen to family assets when we are no longer here? Questions are added about the suitability of the patrimonial protection mechanisms and their functionality.

It is necessary to review the degree of equity exposure and the implementation of strategies to mitigate risks.

Understanding is the key

The wealth management strategy must include fundamental aspects such as:

• Family composition and its complexity.
• The conformation of the patrimony and the different investments.
• The integration of family businesses.

An adequate strategy must start not only from the previous analysis of the current needs of the family group and the risks of patrimonial exposure, but also of the expectations of each of its members and its growth. In this way, the focus of the strategy is centred not only on the conservation of heritage, but also on its increase and strengthening.

Functional strategy

It is essential to establish a balance between the strength of the available protection structures and the different risks of asset exposure:

• Judicial and administrative processes.
• Succession and liquidation of conjugal and marital companies.
• Tax burden and asset transfer expenses.

The functional strategy must be adaptable to changes, both internal and external. For this, it is necessary to have a comprehensive vision of the family composition, the integration of the patrimony, and the legislative and economic changes of the country.

Integration of protection mechanisms

From the simplest mechanisms, such as the affectation of family housing, to the constitution of Offshore companies, they are part of the range of legal tools that can be used in defence of heritage. However, it is important to tailor the asset protection strategy to each family group, integrating the different mechanisms so that they respond according to the degree of risk of exposure.

The most complex integral structures are efficient in shielding assets, but also stony in conducting movements, which translates into a higher cost of asset transfer.

On the other hand, some protection strategies, among the most used in the past, have become obsolete. Due to differences in interpretation in the legislative change, the indefeasibility of fiduciary property in the civil trust falters, and the limited partnerships are limited by the great statutory advantages of the S.A.S, which allow the creation of special actions and the inclusion of policies to protect social participation.

Many times, small actions such as a statutory reform, or the donation of the bare property, can generate substantial changes in the management of equity risk. What allows the definition of strategies for the management and protection of wealth is not an exclusive possibility of entrepreneurs of retirement age or large estates.

Wealth management — beyond shielding

The functionality of the wealth strategy does not only include its adaptability and degree of effectiveness in managing wealth risk. The gradual and harmonious transfer of wealth to subsequent generations, the continuity of business and the profitability and growth of investments must be transversal to the wealth management strategy. For this reason, the agreement on family protocols and the creation of family bodies such as the Family Office that oversee the administration of investments and family assets and the transfer of the legacy, are appropriate.

Are we prepared?

Heritage ensures the well-being of business families and of future generations. In these times of uncertainty, it is extremely important to review the functionality of the implemented wealth management strategies to adapt them to the challenges that lie ahead in the global economy. And for those entrepreneurs who have not started, the invitation is to make the necessary changes to protect their legacy.

At FRG we have a wide range of wealth services, in which our team of professionals accompanies Colombian businesspeople in the processes of wealth protection, strategic property and business succession, and tax and fiscal planning.

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