I recently qualified for an Insurance Agent license in the great State of Texas. Our company has a US office there.
As an African “Efiko”, I scored over 90% in the exam. But this post is about why I got the license in the first place.
My life’s work is helping the honest & hardworking create wealth. Especially, the middle class who toil at their jobs every day, only to sadly get the short end of the investing stick.
So, when our African firm set up a US office, I set out to understand generational wealth in America.
Importance of Financial Literacy
You cannot create sustainable wealth for yourself and others without financial literacy. Everything rises and falls on information, followed by access.
While I had some foundational knowledge of Entrepreneurship, Equities, Real Estate, Trusts and Philanthropy. Insurance was the field I knew nothing about.
Therefore, studying for a license was a disciplined way for me to learn about the sector. And if I was going to spend time reading the material, I wanted something to validate that knowledge.
The Seven Pillars
While studying wealth in America, I discovered 7 main enablers:
1. Entrepreneurship
2. Equities
3. Real Estate
4. Insurance
5. Trusts
6. Philanthropy
7. Credit or Debt
Beneath each pillar is a strong foundation of tax breaks. The wealthy engage professionals to specifically advise them on tax, and to protect their interests.
How the Seven Pillars Play Out
In the US, credit and debt are good, as they are considered tax-efficient ways to unlock capital. Here are some applications:
1. The investment ecosystem rewards deferred wealth. You get tax breaks for life insurance, retirement savings and generational trusts.
If you’ve ever watched a vampire movie, one thing that stands out is their long-term approach. Because these mythical creatures are immortal, they tend to think and plan in centuries.
I have found that same thinking in the richest American families. They actively plan for generations to come. Unfortunately, this is not very common in African communities. Perhaps, because of our economic challenges, we focus on our current personal or family needs. We also dislike conversations about planning for a death that will surely come.
2. Philanthropy not only helps you to support causes, it’s a way the wealthy advance their own vision of the world, while getting tax breaks for doing so.
3. Real estate ownership is great for building long-term equity, but the underappreciated shorter-term investment jewel is real estate development and sales.
4. A Trust is needed to defer immediate taxes and to secure generational wealth.
5. Setting up a business limits personal tax liability, and many legitimate costs can be expensed through a business.
6. Venture Capital funding and stock market IPOs are ways in which entrepreneurs create exponential wealth. They borrow against their stocks and live off the debt.
7. Pooled Investments provide significant leverage – when friends, families or ethnic groups come together to invest in a community. This is often a route to political influence.
Power of Dual Residency
One more thing. Many African immigrants are unaware of the financial advantage of having two passports or residencies. And, the tax breaks that come from investing in Africa.
Although in their lifetime, many Americans will probably only invest in America, Africans have at least two continents to choose from.
They can use local knowledge, exchange rate differentials and certificates of currency importation to create wealth in countries that will reward their remittance dollars.
Thankfully, more African immigrants are beginning to expand their real estate and stock holdings beyond the west. They are also protecting those holdings in Africa via generational Trusts.
This is a good development.
To learn more about investing in Africa, you may book a call with Volition Blue. Link in my bio and comments.
Thank you for reading.