Ian Dembinski, Head of the Rathbone Private Office, provides some insights into the challenges faced by business owners.

 

It’s scary losing control

The transition from being a successful entrepreneur to selling your business and moving on to the next stage of life presents a number of challenges. When you run a business, you are in control of your financial future. When you sell a business, and need to manage the resulting wealth, it can be an uneasy feeling to delegate the wealth to an investment manager as you now rely on others to safeguard the hard-earned proceeds created over possibly decades of sweat and tears.

 

And am I equipped to make these financial decisions?

Entrepreneurs may be very commercially astute but many consider themselves less familiar with how investment markets work, the role of investment managers, and the costs involved. You may ask yourself ‘am I equipped to make these financial decisions?’ Education may be required to raise financial awareness and provide guidance on how to structure your growing wealth.

It is also fairly common for entrepreneurs to be eager to invest in other entrepreneurs and start-ups, so potentially earning a return of 2 or 3% over inflation from an investment portfolio may not always grab your imagination. You may also retain a stake in the business you founded and have extensive additional interests making you time poor. These are just a few factors that make getting some professional help important to successfully manage your affairs.

 

So how do I go about organising my wealth?

The first step is to select a high quality wealth adviser to assess the starting objectives for your wealth. Your chosen adviser will begin the process by understanding your objectives and circumstances, your return requirements, any income needs, your appetite for risk, capacity for loss and your investment time horizon, plus any known future capital commitments. From this, and if appropriate, based on the client’s individual circumstances, they will generate a suggested investment portfolio, which diversifies risk across different assets and will aim to provide you with your target returns and some protection from market reversals.  Consideration should also be given, if appropriate, to ways you could benefit from available government approved tax-efficient vehicles to maximise after tax returns.

If you have considerable wealth to manage, it may be necessary to diversify across a number of investment managers to avoid all your eggs being in one basket. If this is the case for you, consideration should be given to having a wealth adviser who is independent of any investment manager and can help you to select the best combination of managers.

 

How do I get a clear view on my wealth?

Your adviser should also provide a consolidated valuation report detailing the performance of your portfolios across all the managers, alerting you to any concentration risks. A pot of entrepreneurial assets can also be catered for by allocating funds to tax-efficient strategies, which can be incorporated into the consolidated report. Depending on your personal circumstances and requirements, additional services such as debt facilities and mortgages may also be a useful addition in the planning process with reporting to give you a net worth position.

 

We are here to help

Many entrepreneurs feel that they are very expert in their chosen area of commercial activity but less familiar with the workings of financial markets, which are laden with technical terms and acronyms that are sometimes baffling to the uninitiated.  We can help to cut through the jargon with our bespoke financial awareness course to build confidence in your decision-making. It covers the basic building blocks of creating an investment portfolio and how to understand the potential risks and rewards of investing in public markets.

 

Our team of seasoned investment professionals can help entrepreneurs to navigate these financial issues and much more. We provide objective advice and transparency across the full spectrum of a client’s wealth, via our consolidated reporting tool, and we welcome the opportunity to help you get the best out of your wealth.

Please note that this article does not provide personal advice based on your circumstances. The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments before you invest.

 

For further information, please visit our website: rathboneprivateoffice.com