Listen to the podcast
To hear the full episode of Wealth Insights, now part of the Beyond Markets podcast series, please follow the links below to Apple Podcasts or Spotify.

Today I’m joined by Gaetano Petrocelli, Head of Wealth Planning Insurance at Julius Baer, to discuss how you can prepare to make your wealth last, whether you retire at home or abroad. Gaetano, I’m delighted to have you in the studio today. Thank you for coming. First, could you tell us what your role involves at Julius Baer?

Gaetano: As a member of the wealth planning unit, we serve clients and their families along their lifecycle when it comes to accumulating, preserving, and transferring their wealth to the next generation. We provide holistic advice aimed at achieving wealth preservation, succession, and liquidity planning. We support clients by providing advice beyond investment. Together with my team, we focus on succession and liquidity planning, retirement, and income replacement.

And as we’re speaking about retirement today, could you give a basic overview of what this really means for listeners at home?

Gaetano: I’ll try to. It’s a very broad topic. Of course, there are several events that set the beginning of a new stage in someone’s life. Think about getting married, getting your first job, achieving economic independence, starting a family, and so on. All of these stages set different needs, priorities, and even require adjustments in investment. Retirement is the stage in life when someone chooses or has to leave the workforce and live off other sources of income, such as employer pensions and personal savings. It is a time when active work is not necessary.

And so the life stages you’ve listed there, including retirement, they can be very emotional. So on the human side of things, do you ever sense any hesitancy among clients to engage in the topic of retirement? Is there ever a sense of resistance to stepping back or to planning for the future that you’ve come across?

Gaetano: Yes, indeed. There is no common answer to that. Different nuances exist. However, it’s difficult to identify common human factors. Everyone acts differently, and sometimes age or cultural background can influence attitudes towards retirement. One thing is clear, though – people like to think about finally enjoying life during retirement, engaging in activities that make them happy, rather than focusing on retirement planning.

That’s a very positive way to look at it. What are some common factors then that someone should consider for good retirement planning?

Gaetano: I would say that there are certain common factors to consider in retirement planning. These include time horizon, liquidity needs, and liabilities, including taxes. The longer the time horizon, the more risk one can take in investment strategy. As retirement approaches, the investment horizon decreases, leading to a shift towards income strategies. Longevity is also important to consider, as life expectancy has increased globally. It’s essential to anticipate the impact of inflation, mortgage payments, medical expenses, and the desire for travel and hobbies. Unexpected events like pandemics can also affect retirement planning. Liabilities, including taxes, should be taken into account, as they can impact both retirement income and the wealth transferred to the next generation.

So what are some key factors that individuals, and particularly those of high net worth, should consider when planning for their retirement if there’s a global element that we see in many families nowadays?

Gaetano: When dealing with high net worth individuals, additional factors come into play. Relocation and global mobility can complicate retirement planning, as different tax systems and costs of living may apply. High net worth individuals often have income sources beyond salaries, such as businesses and investments, making it more challenging for them to fully retire. Complex family structures, including divorce, remarriage, and children from different marriages living in multiple countries further complicate retirement planning. Additionally, investments and assets may be spread across various countries, requiring careful consideration in retirement planning.

A lot of things to consider. So what are the common ways to optimise retirement plans?

Gaetano: First and foremost, it’s important to recognise that state and employer plans may not be sufficient for retirement planning. Depending on factors like domicile, age, family situation, and target plans, private clients may need additional tailored solutions. Products that provide passive income, liquidity, stable growth, and longevity protection are key. Legacy planning should also be considered to ensure proper wealth preservation and transfer to the next generation.

And I’m sure there are listeners who wonder about insurance and how this may tie in. So what role can insurance play in retirement planning?

Gaetano: Life insurance can play an important role in retirement planning, especially as governments incentivise private savings through tax relief and deductions. Life insurance can combine retirement planning elements, such as access to liquidity, with legacy planning, facilitating the efficient transfer of wealth to the next generation. Our colleagues from the Julius Baer Next Generation research team have provided interesting insights on the use of life insurance in retirement planning.

And what kind of retirement income strategies can ensure a stable and sustainable source of funds? Do you have an example or two of successful strategies that you’ve implemented in the past which listeners might relate to?"

Gaetano: There are various retirement income strategies that can ensure a stable and sustainable source of funds. One example is a balanced portfolio approach, combining different asset classes to manage risk while generating income. This approach aims to provide both growth and income to meet retirement needs. Another example is the use of annuities, which provide a guaranteed income stream for life. Annuities can offer peace of mind and help maintain a stable source of funds throughout retirement. These are just a few examples of retirement income strategies.

I have a couple of examples which might be interesting to look at. But I think what I want to bring here today, it’s a different angle that involves individuals, high-net-worth individuals which we didn’t really touch until now. So we have been talking about retirement planning. However, if you go back to some of the things that I mentioned before, it is true that high net wealth individuals – sometimes they don’t live off their own income stream from an employer, but actually they are the employer. 

Therefore they may look at retirement planning for their own company, for their own key executives. You might have heard about the concept of keyman insurance. So actually here we are not talking about client or retirement planning, but we are talking about business continuity, we are talking about business protection. So what we have been doing sometime in the past was to talk to individuals, especially those they have companies in different jurisdictions, maybe in jurisdictions where state plans or employee plans are not really sufficient or not available. And in this case, these individuals, they might look at a private solution for their companies to build up retirement planning.

And with this solution it’s possible as well, for example, to attract good executives that in a normal circumstance probably would not have moved with their family or joined a company in a different part of the world. It might also serve as income replacement or saving plan for key employees because let’s say for example, the employees sign up to stay with the company until retirement, then such plans can be redeemed and then pay off as fringe benefit to the key employees. So indeed, it’s a very good and interesting solution for key employees. However, for wealthy individuals, as I mentioned before, it’s a very interesting solution for attracting good people, retaining good people, and ensuring the business continues.

And finally, Gaetano, it’s important to give our listeners a couple of clear takeaways on the content we’ve discussed. So do you have any key wealth insights you’d hope that listeners will remember when it comes to retirement planning?

Gaetano: Yes, I would say I have a couple of takeaways here, and it’s very straightforward. The first one is: start planning as soon as possible. Don’t wait. The compound element in the investment is higher, and you have more time to adjust if needed. So start planning soon. 

The second one is: be clear of what your ambitions are. So just sit down, think about what really matters to you, and remember, you have not only financial assets to look at, but you have also intellectual assets and human assets – intellectual assets being your experience and your knowledge that you want to pass on, and human assets can be your loved ones, your family, your hobbies, and so on and so forth. So put all the things together and just be clear of what your ambitions are. 

And very importantly as well, define your strategy and share it with your family – the people that will be with you during retirement. The last point is to get support from a professional. There are several aspects to look at, from legal to regulatory to tax ones, and you want an experienced professional to support you along this journey.