By Grant Alexander, Director at Private Client Holdings

Most investors understand the idea of building wealth. Still, less attention tends to be paid to the equally important discipline of preserving it, particularly once accumulated assets begin to play a greater role than earned income. For some families, this goes beyond whether there is enough capital for retirement, and includes how capital is structured, invested, protected, and transferred across generations.

There is a clear distinction between the wealth creation and wealth preservation phases

In the wealth creation phase, we generally start our journeys with enthusiasm and ambition, but sadly no investments. We apply our human capital to furthering our careers or businesses and start the savings process. That is the accumulation phase.

At some point, those investments exceed our human capital, and we need to start drawing from our investments to supplement any earnings that we might still have. This may include consulting back to a company or industry after stepping away from a formal executive role. This is typically the decumulation or wealth preservation phase, and there are different risks to solve for.

The risks are not limited to market performance. Inflation and volatility remain central, but there are also tensions and trade-offs when families transition from one phase to the next. The investment objective changes from maximising growth to ensuring that capital remains resilient, liquid where necessary, appropriately diversified and aligned to the family's longer-term goals.

During the creation stage, a more growth-focused approach is generally appropriate

In theory, investors have time on their side and can tolerate greater exposure to growth assets. In practice, however, this still needs to be handled sensibly. From a purely asset allocation point of view, investors are typically steered towards growth assets, property and equities, while making sure there is sufficient offshore allocation. For some families, depending on the size of the asset base, there may also be a place for private equity, venture capital and other opportunities that aim for higher growth.

Compounding remains essential in this phase. Whatever income is generated inside the investment structure should typically be reinvested, usually into higher growth assets, with much lower exposure to cash and fixed income than would be appropriate later. This is where patient capital, discipline and time can do much of the heavy lifting.

The transition to preservation is often thought of as a single retirement date

For many business owners, executives and professionals, the transition from wealth creation to wealth preservation is more gradual than a single date when one phase starts as the other ends. People may reduce formal responsibilities, remain involved on boards or consulting, or continue to earn income from operating businesses. This makes planning more nuanced, because portfolios must often support both ongoing growth and increasing liquidity needs.

Longevity makes this even more important. There is a high probability that at least one person in a couple currently aged around 60 will live to a much older age, which means preservation is still a long-term investment period rather than a short final chapter. International actuarial tools such as the Actuaries Longevity Illustrator also highlight why planning for couples needs to consider the probability that one spouse or partner may live well beyond average life expectancy.

Preservation doesn't mean growth should be abandoned

This longer horizon means portfolios still need to deliver over time. The preservation phase is not about abandoning growth altogether. It is about managing the balance between future liabilities, income needs, currency exposure, tax efficiency and the family's broader legacy objectives.

Currency is a good example. If a family expects to live in South Africa and meet a meaningful portion of its expenses in rand, the portfolio should reflect that reality. From a wealth management perspective, we would typically look at the present value of future liabilities, identify the capital sum required and invest it sensibly. Any excess capital would typically go offshore.

For different investors, the look-through asset allocation will differ depending on the asset base. A family with substantial surplus capital can usually afford a more globally diversified structure. A family whose future spending is largely South African needs to be more careful about currency mismatches, particularly when the rand strengthens.

Estate planning and tax efficiency must start during wealth accumulation phase

As wealth moves from creation to preservation, estate planning and tax implications become even more important, and shouldn't be left until late in life. With business owners, planning for generational transfer and estate planning often happens too late. For businesses that are growing, this needs to be solved earlier rather than later.

If you only wake up to this issue when you are maximising the value in your business, the fees, capital gains tax and other costs can be onerous if you are then trying to transition assets into a trust or other structure. The right approach depends on the asset base, but the principle is clear: estate and succession planning should form part of the wealth strategy while value is still being created, not only once it has already been realised.

Wealth preservation is therefore not a defensive exercise

It is a deliberate strategy for sustaining capital, supporting future generations and ensuring that a family's affairs remain aligned with its objectives. Creating wealth takes ambition and risk. Preserving it requires structure, discipline and the willingness to plan well before the transition is already underway.

‍