THE IMPORTANCE OF BUSINESS PROTECTION

A coach once said to me, “find the clients whom you want to work with, truly understand what they want and become a specialist” writes Anthony Richards, Chartered Financial Planner.

At Punter Southall Wealth, this has led me into working predominantly with business owners, who are generally seeking an exit at some point in the future. We have helped plan for a sale, with questions posed such as:

• How much is enough?

• Can I take care of my loved ones and live the lifestyle that I desire?

• How will a potential sale of my business change my tax position?

However, a more immediate need has often arisen, this being protecting the value of the business and the employees.

If you Fail to Plan, you are Planning to Fail

The temptation can be to focus exclusively on the end goal, be that a subsequent venture for a serial entrepreneur, passing a thriving business on to the next generation, or simply funding a comfortable retirement.

My role, therefore, is not simply to look at the long term, but also plan for the unexpected along the way. A robust financial plan needs to be capable of dealing with disruption. What would be the effects of the death or serious illness of a business owner on the family; the value and running of the business and future plans and liabilities? What kind of decisions may you be forced to make? Fundamentally, what would you like to happen?

Although this is a sensitive subject, it’s crucial that we have those conversations and ask them “what would happen if…?” We assist our clients in positively addressing potential needs which they may not have previously considered.

I can’t overstate how important protection can be to provide peace of mind for clients and their families whilst giving them confidence and time to focus on areas which will ultimately drive their business value. If a protection plan has been claimed, this has provided a significant amount of financial and emotional support, often in the form of a cash sum paid to the business to allow continued profitable trading, recruit replacements, repay borrowing or a lump sum payable to the beneficiaries of a deceased or critically ill shareholder allowing the remaining owners to retain control and focus on their future plans.

Know Your Customer

Before we do anything else we spend a great deal of time understanding what our clients want to achieve for themselves and their families.

Our team will look at the business ownership structure, the partnership/ shareholder agreements, and any existing business protection, reviewing these to ensure accuracy, cost and how they work in combination with trusts and/ or cross option agreements. By working with our clients’ solicitor and accountant we will also ensure that everything is structured in a manner that reflects their future plans and objectives, with our eventual solutions being researched from the ‘whole of the market.’

Cost vs Value?

For most business owners, we are concerned with maximising and protecting value for them and their families. I’ve lost count of the number of times I have come across business owners who have life assurance at nolonger-competitive premiums, or who have cover on a personal basis, paid for out of after-tax income. Protection can often be arranged in the name of the company as an allowable business expense resulting in a significantly lower net cost.

Similarly, I have come across business owners who have arranged a Death in Service scheme. This may not be the best option for senior employees with large pension funds as Death in Service policies are generally written under pension rules. If there is a claim, their value is aggregated with pension monies and then tested against the Lifetime Allowance. This could result in a significant tax charge, significantly reducing the amount inherited. For many individuals such protection can and should be restructured.

Our Approach

For business owners in order to receive maximum value, we will initially perform a general health check, working alongside their other professional advisers. As highlighted above, this will also address the protection needs of a business, a subject which is often overlooked.

Bottom line, find time to discuss, review, align and maximise.

For further information on how, working collaboratively with solicitors and other specialists, Punter Southall Wealth can help business owners achieve their desired lifestyle after sale, contact us on 020 3327 5340 or email business.owners@ puntersouthallwealth.com

The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money that they invest. Past performance is not a guide to future performance. We do not provide legal or tax advice. Please consult any appointed advisers on the possible tax, legal and other consequences of you holding any of the investments contained in this article. Unless indicated otherwise, comment and opinion in this article is based on HMRC’s tax regulations for 2022/23 tax year and tax treatment depends on the individual’s circumstances and may be subject to change in the future.

Punter Southall Wealth is a trading name of Punter Southall Wealth Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales No. 5374633. FCA Registration No. 478840. Registered office: 11 Strand, London WC2N 5HR. A Punter Southall company.