Entrepreneurs discussing business over the table

25 Jan 2024

Five wealth planning conversations we’re having with entrepreneurs

When your time and effort is spent growing your business, you may need more support with your personal finances, including wealth planning and investment.

According to research from McKinsey & Co, entrepreneurs are in need of a greater range of financial support from wealth management providers. This is especially the case because personal wealth is a key enabler of business success.

Here are five main considerations for the entrepreneurs we work with. If you’d like more information about your own options, please get in touch.

1. “I want to grow my business”

Many entrepreneurs are building fast-growing companies and need access to specialists who can support with funding and strategy. “We can connect entrepreneurs with our wider networks, including corporate banking specialists who can help with lending facilities and alternative funding options”, explains Senior Wealth Planning Director Andrew Little.

It’s important to consider business and personal finances holistically. “At some point individuals will want to extract value from a business so we work with them in advance to understand their personal objectives and what they want to achieve with the money.”

2. “I want to manage my outgoings and tax liabilities”

When immersed in business development, it can be difficult for entrepreneurs to monitor their personal finances and wealth planning can provide peace of mind. “As financial planners we look at the obligations and aspirations for each life stage and make sure there’s cashflow available for goals such as buying a home and school fees, while aiming to retain as much capital within the business as possible,” says Andrew. “A plan should be regularly reviewed to enable the business builder’s strategy to adapt as their circumstances change.”

In addition, this roadmap is created with tax efficiency in mind – reliefs and allowances such as ISA and pension contributions can be used to reduce deductions where appropriate, alongside other tax-efficient structuring options.

3. “I want to sell my business or retire”

Whether you want to save, invest or explore another venture, it’s never too early to prepare to exit your business. “The key is to identify the lifestyle that is desired after a transaction,” says Andrew. “From there, we use cashflow modelling to show how various decisions could impact the value of your wealth over the long term, given assumptions about inflation, investment returns and other factors. Our modelling can even help you decide on a minimum level of valuation that is required, as well as when and how to extract the capital you need.”

The way in which ownership is structured will also have a big impact on the tax that is due at the time of a sale. “Shares can be held in the name of an individual, family members or via more tax-efficient vehicles such as trusts, for example. This may reduce the amount of Capital Gains (CGT) or Inheritance Tax (IHT) that is due.”  We coordinate the strategy with external tax advisers and solicitors where appropriate and will even help clients find suitable advisers where necessary.

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Our work with entrepreneurs

Every individual has a different risk appetite and wealth management ensures that your investments are viewed in the context of your personal needs.

4. “I want to look after the next generation”

Succession planning can be taboo for many families but if you’ve built your own business, the transition of wealth to the next generation can feel even more personal. We help identify spare assets that can be earmarked for the next generation, with the aim of protecting wealth for the family over the long term, as well as potentially mitigating IHT.

“You may choose to hold some of the business assets outside personal names, using vehicles such as trusts, for example, which may have the effect of reducing tax liabilities whilst enabling you to retain control,” says Andrew.

Surplus capital can also be invested in structures aimed at mitigating tax on growth and the withdrawal of funds. These structures might include Family Investment Companies, Trusts or Offshore Bonds.

5. “I want to invest my money responsibly”

If you have spare capital before or after you have sold your business, you may want to invest it in order to preserve or grow your wealth. Every individual has a different risk appetite and wealth management ensures that your investments are viewed in the context of your personal needs.

“We usually work with entrepreneurs to create discretionary portfolios containing multiple asset classes to balance risk and return,” says Andrew. “Some will want to explore how to unlock value in order to invest in other business opportunities or Enterprise Investment Schemes and we can provide that advice too to help them decide.”

In a world of purpose-driven businesses, investments must also align with personal values. Our work with entrepreneurs and business leaders reflects key priorities,” explains Senior Investment Director Max Richardson. “Firstly, we assess financially material ESG risks with the aim of optimising financial performance. Secondly, we can align an investment portfolio with their values. Thirdly, we are aware of the impact that our investments have on the environment and the natural world and we engage with investee management teams to enhance disclosure with the aim of reducing negative impact.”

Find out more about how Investec Wealth & Investment can help you today.

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Important information

The information contained in this article does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors. Any opinion or estimate expressed in this publication is Investec Wealth & Investment’s current opinion as of the date of this article and is subject to change without notice. The value of investments and any income from them is not guaranteed and may go down as well as up; you may get back less than the amount invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in future. All statements concerning tax treatment are based upon our understanding of current tax law and HMRC practise and can be subject to change.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.