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Man vs machine? The future of financial advice

We tend to think of wealth management

as a relatively modern concept. However, great historical figures as far back as Augustus Caesar had trusted advisors who’d manage their estates. 

Even knights engaged in the Crusades left their assets in the safe keeping of trusted people. In the 19th century, wealthy merchants would travel for months at a time, with their wealth in the hands of people they hired to ensure their families were provided for. 

Following the industrial revolution, wealth management truly came into its own as industrialists like Rockefeller were making their fortunes and then hiring people to organise and invest them. 

This was when the concept of a family office first emerged. A family office is a full-service, private wealth management firm that is dedicated to caring for all aspects of a family’s wealth — not only the investments, but also providing fiduciary, tax, accounting, legal advice and more, often across multiple jurisdictions. 

They became more common in the 1980s as the ranks of the super-rich grew but — due to the high cost needed to employ people across all those spheres of expertise — they’ve remained the preserve of the few.

The role of the robot

The world has undergone another revolution since then — the technological one — and a new sphere of financial advice has emerged. 

Software has been developed that can optimize a client’s assets using algorithms and the rules of mathematics. These “robo-advisors” are particularly popular with do-it-yourself types as well population segments that have always been underserved. But these robo-advisors are asset allocators, not advisors. They can’t put together financial plans, help a client balance competing goals or deal with the financial and emotional impacts of life events such as death or divorce. Or something as dramatic as Covid-19.

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This period of Covid-19 is probably the first bear market that investors using robo-advice have had to experience. How did they feel during the crisis, when they had no assistance outside of a toll-free number or online chat bot? 

And here we come to the part of financial advice that cannot be replaced by a robot; the planning, the relationship, someone who can answer your questions, reassure you and understand your big picture financial plans.  

The need for multi-disciplinary advice

In today’s increasingly complex world, there are many facets of the advice process that get lost in the search for returns. These are often where the true value of advice can be found – in the relationship between the advisor and the individuals and families they’re assisting; in a thorough understanding of the family’s unique context and needs, in those things that the advisor does on the periphery that may not be immediately obvious.

A global perspective requires global strategy that takes factors like cross-border taxation, estate planning and emigration options for family members into account. 

As an example, something as simple as a distribution from a South African family trust to a beneficiary abroad has different tax implications for that beneficiary depending on where they are resident. What structure is best served for someone looking to invest abroad who is considering emigration? What are the likely future tax liabilities? Where is an individual who regularly moves between countries tax resident? What are their tax and reporting obligations in these countries? These factors, and many more, all need to be considered.

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There is an increasing need among the affluent for multi-level advice similar to the family office model – a wealth advisory firm that has a wide range of knowledge and skills, that can handle everything the family requires, not just asset allocation. 

Sable International’s Wealth division is in a unique position to offer regulated advice in many jurisdictions and across a number of disciplines. We’re part of a company that offers cross-border expertise including nationality, immigration, tax, accounting and forex; that has offices in SA, the UK, Australia and Portugal. Our company is in essence a multi-disciplinary business that is geared specifically to the international movement of people and capital.

In many ways, we are like a modern version of the original family offices — a team of trusted experts with a variety of expertise, dedicated to protecting and growing your wealth.  

Get in touch with our wealth advisors by calling +44 (0) 20 7759 7519 (UK) or +27 (0) 21 657 154 (SA). Alternatively, you can send us an email at wealth@sableinternational.com and we’ll get back to you.

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