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Taking Control of your Wealth

Friday, 26 May 2017 11:06 AM | FINANCE

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Giving up control on personal wealth and leaving it to the experts

Business owners scale by trusting people with expertise they don’t have, whether it’s their team or their advisers. When it comes to their personal wealth, it’s much harder for entrepreneurs to give up control even when they know they aren’t experts.

It’s not surprising then that 96% of business owners prefer self-directed education about wealth planning and 51% turn to family for advice, according to a new Wealth Transfer Report from RBC Wealth Management and Scorpio Partnership. To gauge attitudes to wealth planning and advice, RBC took an in-depth look at the preparedness of 384 high net worth business owners, worth US$6.4 million on average, across Canada, the UK, and US.

Business owners tend to be good at addressing the elements of wealth transfer that relate most closely to their businesses and, as a result, are good at handling things like structuring the share ownership of the company. Where they tend to be less focused is on important elements of their own personal affairs. This is highlighted by the fact that only 51% have a will.

Rob Douglas, Relationship Manager; Business Owners & Entrepreneurs team, RBC Wealth Management

The Survey found that 40% plan to transfer wealth to their children while they’re living. “Many business owners like the idea that their business achievements can go on to benefit others during their lifetime,” says Rob. “Giving while living is a growing feature of how successful business owners approach their wealth and their legacies.”

The consensus amongst members of The Supper Club is that children need to be educated about money as it’s often the third generation that squanders it. One member holds a family meeting every 6 months to talk about 'Health, Wealth and Happiness', discuss what they have achieved, or pitch to the whole family if they want more money. Many wealth management firms run a seminar for children to teach them about the value of money in context of economics, business, and investments.

“As wealth increases, some business owners find themselves so fully engaged with running their business that they tend to defer much of the wealth management advice to professionals,” adds Rob. “However, some very wealthy business owners have become wealthy because they take a hands-on approach and are in control of decision making, therefore they tend to rely less on third-party advice.”

For more insights, read the full report from RBC  Business owners and wealth transfer’

Advice on advisers

Members of The Supper Club have a wealth of advice on how to choose and use wealth managers; here are five tips worth noting:

Recommendations: Endorsements from friends, family and members are still the most powerful

Track-record: What is the background of your adviser, what qualifies them to offer advice, what is their track-record on advice and investments, and what are their personal incentives to manage your wealth effectively?

Diversity: How bespoke is the service and how diverse is their portfolio of advice and investments? Do they also advise on passion assets and alternative investments?

Fees: Actively managed portfolios up to £2m will typically cost around 1%+ in management fees, inclusive of trades. On bigger portfolios, you can negotiate fee structures that exclude cash

Total expense ratio: Final performance is always measured net of fees (ie to get you 6% annually, they need to grow the portfolio by 7.5%).

For more insights into wealth planning from RBC and three members of The Supper Club, come to our Speaker Boutique on ‘Planning for sale and beyond’ on 28th June.

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