Welcome to the third installment in our series on the benefits of partnering with financial planners for business owners. Our second blog of the series covers mitigating financial risk.
At our firm, we specialise in delivering comprehensive financial planning advice, seamlessly integrating our services with our Corporate team to offer significant advantages to our clients.
From our experience, business owners are often deeply immersed in the intricate details of their company’s operations and have a clear vision for their business’s future. However, when it comes to their personal financial plans or the specifics of their policies and investments, they frequently lack clarity. Many assume that selling their business will suffice for a comfortable retirement, without fully understanding what that retirement might entail or its associated costs.
While their passion for their business and drive to succeed are crucial for success, we can help turn this success into a tangible future for owners and their families, while minimising or managing many of the risks along the way. This series aims to demonstrate how collaborating with financial planners like us can help business owners align their business objectives with their personal financial goals. Please contact us to discuss your situation and see how we might be able to assist you.
In part 3 of our series, we consider risk – key people
For many business owners, especially in the early years, the future of the business is completely reliant on them or a small group of key employees. The current income for the family and future financial security may be completely reliant on the business and many people haven’t considered the full implications of things not going to plan through ill health. As businesses grow protections are often put in place as a condition of finance or after a sale to cover key individuals but getting this in place for your own benefit should be a priority.
There are a variety of different options available to protect yourself in the event of ill health or your family in the event of your death.
Income protection is one option and could provide income if you are too unwell to work, so it might work in some circumstances. However simply replacing your own income won’t help the business operations continue without you and may lead to serious issues, loss in value, and eventual failure of the entity that was planned to be the source of funding for your longer-term future.
Key Person Insurance will pay the business a lump sum to be able to fill the hole left by your absence, whether this is to hire a replacement, cover cash flow shortfalls, or whatever is required by the business. This can enable operations to continue even in your absence and maintain the value of the business for you and/or your family providing security for the future.
Shareholder protection is designed to pay a lump sum to enable the business to give your family the value of their shareholding without putting the business in trouble and enable your family to get a quick pay out rather than become shareholders and have to look for a willing buyer to release the value. Careful legal protection needs to be put in place, alongside the life insurance contract to ensure everything works as planned in what can be a very difficult situation for all involved.
This is a very important area that can often be overlooked with all the other pressures on business owners, with both financial planners and corporate lawyers we are in a great position to assist in this area so please get in touch if you would like to discuss your requirements.
How can Nelsons help
Sam Cawley and Nathan Richardson are Investment Directors and Chartered Financial Planners in our specialist Investment Management team.
Our expert advisors can not only help you calculate what you need but help you develop a comprehensive plan of how to get there, working alongside our colleagues in the Corporate team and partners in corporate finance and accountancy to deliver a truly holistic solution. There is no need to wait until you have sold your business to engage with a financial advisor, if you would like to discuss how we might be able to assist you please get in touch for a no-obligation initial chat on 0800 024 1976 or via our online enquiry form.
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This article is for information only and does not constitute legal/financial advice. Please contact us for advice tailored to your specific position. Some of the content presented on our website has been generated with the assistance of Artificial Intelligence (AI). We ensure that all AI-generated content meets our high standards for accuracy and relevance.
