Advisors know that business owners, entrepreneurs and founders are in need of and are receptive to financial advice and when they act on the need, the stage is set for potentially fruitful, long-lasting relationships with advisors.
On a related note, a demographic that often goes overlooked in the advisor/business owner equation are recent sellers of businesses. It’s an interesting state of affairs when considering those that recently divested businesses may have experienced financial windfalls, implying they’re ripe for professional financial guidance.
Indeed, forming advisor/business seller relationships can be a matter of who makes the first move. From the perspective of business sellers, Morgan Stanley outlines some compelling reasons why folks in that boat should consider working with wealth managers.
“Your finances will likely look different after you sell your business. Such a significant windfall means you may have more cash at your disposal to invest,” notes the bank. “Additionally, you may have continued personal financial exposure to your business, such as receiving payments based on the company’s future performance or investing some proceeds back into the business.”
Risk Management, Wealth Preservation
Anyone experiencing a sudden financial windfall, former business owner or otherwise, probably wants to know about risk management and wealth preservation strategies. The former can include altering and identifying appropriate insurance coverage – certainly something holistic advisors can help with.
Getting a fresh set of eyes on insurance policies, particularly those of the life and property variety, is important for other reasons, including the fact that those moves can mitigate potential legal problems and other disasters.
“Additionally, as you experience a significant potential increase in your liquid net worth, you and your family could become targets for lawsuits,” adds Morgan Stanley. “A well-qualified personal risk advisor can work with your Private Wealth Advisor on strategies to help mitigate new risks, such as acquiring an umbrella insurance policy and strategically organizing your assets. For example, folding assets into a trust could make them off-limits to future creditors.”
Generosity Planning
Many former business owners that are now flush with cash want to share the spoils of that wealth with loved ones, but the smart ones it’s not easy as simply cutting checks. That’s where advisors come in, helping clients and gift recipients operate within the confines of federal gift tax laws.
The former business owner that wants to “spoil” loved ones with their new found financial largess is also ripe for another conversation: Estate planning. It’s safe to assume that not all ex-business owners are former accountants, advisors or lawyers, meaning they’re not going to be experts in the ins and outs of establishing power of attorney and drafting wills and trusts. Those are more reasons why this demographic should consider working with wealth managers and not delaying on that.
“It may be a difficult topic to think about, but planning for what happens after you’re gone is an important step in protecting your legacy, ensuring that your wishes are respected and minimizing future stress placed on your family,” concludes Morgan Stanley. “Now that you’ve sold your business and may be reaping a windfall, consider creating or updating your estate plan.”
Related: Charitable Giving Provides a Boost to Advisor/Client Relationships