John Younger, managing director of the business owners and entrepreneurs client segment at RBC Wealth Management – International, explains why entrepreneurs are among the most interesting and dynamic clients that wealth managers can work with. Younger says some entrepreneurs are highly engaging and others can be highly demanding, but what links all of them is that each is successful in their own right
Achieving that success frequently means their sole focus in life has been on their business ventures rather than their personal finances. This is where we come in.
Our role as a wealth manager goes beyond simply providing investment advice; we educate our clients and help to safeguard their wealth for the future. Sometimes this means sticking our head above the parapet and discussing challenging, sensitive topics.
When someone is managing a business, it can become their primary focus in life; success often comes from working long hours and taking big risks. By the time they come to us for advice, they have usually already made big returns.
Business owners with most or all of their wealth tied up in their business may not be aware of their potential exposure to concentration risk.
Someone whose investments are focused on a single asset may benefit from diversifying their wealth to help reduce this exposure.
We help these clients secure their wealth for the future through diversification, even though it may clash with how they have gone about life before.
Business owners are often so subsumed in their business that they are comfortable with taking big risks in order to achieve large gains. Many have seen this pay off as their own businesses have doubled, tripled or even quadrupled in value as a result.
By comparison, a balanced portfolio of equities and bonds that could deliver high single-digit returns year in, year out, might not seem exciting to a business owner.
Indeed, some might even ask why they would invest in something that they do not understand and that delivers lower returns than their business.
So, whilst portfolio values will of course fluctuate in line with market performance, it is our job to have at heart-to-heart discussion and demonstrate that diversifying their wealth is important in order to preserve it for the future.
It is important that we gain a deep understanding of their objectives and provide a solution that suits their specific financial and personal needs.
Leaving behind a legacy can be an important issue for many clients. There are a number of ways that business owners and entrepreneurs want to leave their mark on the world. For some, their hope is that their children will take over the business.
Others may simply wish to leave their wealth to their children, while still more may be thinking of philanthropy.
That is why many of our clients need different wealth solutions for each of their distinct needs, rather than an off-the shelf collective investment.
Choosing a discretionary investment portfolio that can cater to the specific needs and risk profile of the individual is one potential option.
For example, if a client is looking to establish a legacy for their children, they might select a growth-orientated equity-focused portfolio.
Whereas a client with an elderly relative, for whom they want to provide a secure income, might select a conservative portfolio with a focus on income-producing investments, such as bonds and dividend-paying equities.
But whatever their industry, there is one thing business owners never want to hear: that their own business may not be as successful in the future as it has been in the past. So it is crucial that we discuss this and explain why it is in their interest, and those of their beneficiaries, to tuck away a nest egg.
Our entrepreneurial clients have already shown their mettle when it comes to making wealth and have focused their capabilities on building their companies. As a wealth manager, helping clients safeguard their hard-earned wealth by diversifying beyond the businesses they have built is where we can make a difference.