Old Mutual


spotlight on financial planning

Just as you should go to your doctor for an annual routine health check, your financial planning should be reviewed on a regular basis by an expert who will adopt a holistic approach, taking into account every aspect. Your objectives for the business and your family should be considered in the process and adjustments made where necessary.


Making it simple

A logical framework could be a useful tool to determine the financial planning needs covering the various aspects of your life and business. Consider factors that could impact your business, factors that determine your lifestyle, how assets can be built outside of the business in order to protect you lifestyle and how your plan should be structured to determine your legacy.

1. Protecting your business assets

Questions to be asked here in terms of protection against business risks are, for example:

  • What type of business entity is used for the operation and what are the planning implications?
  •  Has provision been made for loss of or damage to business assets, theft and potential liabilities?
  • Do you have business assurance for key employees and to fund a buyback of shares or a stake in the business?
  • What employee benefits are offered?
  • Are the current arrangements still the most effective and appropriate solutions?

2. Lifestyle

Consider the options to protect your and your family’s lifestyle. First determine current lifestyle costs and the costs of housing, vehicles, education, holidays and sundries, and whether these are sustainable.

  • What kind of risk protection is in place to protect personal property against damage and theft?
  • Have you set up a plan that makes provision for essential lifestyle adjustments following severe illness or injury suffered by a member of the family?
  • What will happen if your or your wife is unable to continue with the business or performing the day-to-day tasks due to disability?

3. Investment assets (protecting your lifestyle)

Building assets outside of the business operation is not only a sound diversification strategy, but also essential to protect your lifestyle.

  • How much (investment) capital is required to enable you to independently maintain your lifestyle?
  • Which asset classes are the most appropriate to invest in and what investment strategies should be followed, considering your risk profile?
  • What if the owner dies without having accumulated enough assets? Will the family be able to maintain their lifestyle?
  • Do you have sufficient diversification beyond the local economy?

4. Legacy

The potential survival of the (family) business is at stake and various aspects require thorough consideration.

  • Does succession planning form part of the long-term business plan and are the family members aware of the plan?
  • Has/Have the successor/s been identified early? Is a contingency plan in place should something happen to the successor/s or if the original plan cannot be realised?
  • Are successors being acquainted with banks, clients, suppliers, etc?
  • Is there a timeline for the current owner to step down and the successor/s to take over?
  • Does the financial planning documentation give effect to the plan? (Review the will, trust deed/s and agreements to ensure alignment with the objectives.)

A simple test

Call everyone together, breaking the news that (hypothetically) you were in a fatal car accident. Ask them to describe what will happen next. How the discussion evolves is a good indication of the thoroughness of your planning. Using this framework and asking the right questions will assist you in identifying potential gaps and appropriate corrective actions to address these. An accredited financial adviser can play a very valuable role in this process.

Barbeque or boardroom?

Time is always an important factor in running a business, but set time aside to review the financial plan giving it the priority attention it deserves. Neglect may have a severe impact and has led to the demise of many businesses in the past.

Unfortunately, well-meant advice at the braai is not a substitute for professional financial advice. An accredited financial adviser is authorised to provide financial advice based on a thorough analysis of a business owner’s unique circumstances, ideally performed in close cooperation with the business owner’s s accountant or auditor.

At best, being an entrepreneur is a risky business involving a lot of variables you cannot control. However, a well-designed financial plan is within everyone's reach, to assist in ensuring security for the business, the owner and his family, as well as their future.

If you would like to chat to an adviser about your financial plans click here



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