WEALTH MANAGER; IS YOUR CLIENTS EXIT STRATEGY ON THE AGENDA?

According to Statistics Canada there are 1.2 million businesses across Canada. Ninety-eight percent are small businesses, twenty-one thousand medium size businesses and three thousand larger enterprises. So let's talk Exit Strategy.

Biggest Shift in Society

As a Wealth Manager, have you experienced amongst your senior business owner clients a “Monetization Movement”? Watched a trend to transition? A direction towards downsizing and divestiture? Did you know that many of your aging clients have entered an era of exit? A transformational time? And for some of the less fortunate, a bleaker future?

Canadian business ownership has and will continue to go through their biggest shift in our history. Many baby boomers have, and many will, over the next decade, pivot from active business owners to the role of a retired entrepreneur. Some estimates put this at a $10 Trillion global wealth transfer.

Ownership Transition

What will happen to all these business owners and their family’s lifestyle, given most of their wealth is in their privately-owned businesses? The Government of Canada estimates that 83% of these companies’ owners are more than 50 years old.

According to the Exit Planning Institute, in the past 5 years, only one out of five companies were sold and a staggering 80% of companies were not successfully sold. The glooming dark cloud that engulfed this 80% could continue over the next decade. As professionals, we can help educate the aging entrepreneurs on exit strategies to create a brighter retirement and reduce this gloomy statistic.

Better Outcomes

You, as a Wealth Manager, can educate your clients on how to optimize their business’ value, how to monetize their illiquid private company investment into a larger diversified liquid investment portfolio while enabling your client’s and their heirs to continue enjoying their lifestyle.

The most successful Entrepreneurs have assembled a team of professional advisors such as: Lawyers, Accountants, Executive Coaches, and the like; but amongst those professional advisors, only their Wealth Manager plans for their long and medium-term goals. Great Wealth Managers proactively focus, through regularly business exit planning sessions on their client’s legacy. In their annual planning sessions Agenda, they talk about how to protect and grow their client’s assets (which include their privately-owned businesses), how to manage their personal exposure, as well as how to ensure their retirement income and potential philanthropic goals can be realized.

Entrepreneurs invested their all, grew over time and envisioned an eventual monetization event. As their Wealth Manager, you are the best person to coach and mentor your entrepreneur clients towards that brighter future.

Larger Opportunities

As Wealth Managers your business owner clients are saving and or investing, however that is usually about 6 to 8% of the entrepreneur’s overall wealth. Only after the successful sale of the entrepreneur’s business and the monetization of the entrepreneurs sweat equity does the Wealth Manager have an opportunity to manage 60% to 80% of the entrepreneur’s family’s newly freed wealth.

Collaboration

It's incumbent upon the Wealth Manager as the trusted adviser of a client’s wealth to regularly include the “exit strategy” conversations on their agenda. If your entrepreneurial clients plan to exit their business, its important you arrange an education session with a competent merger and acquisition advisor to ensure you and your client remain aligned and educated on the transition process, current market values for the business and how the entrepreneur can best position themselves and their business for an eventual exit.

As a Wealth Manager there has never been a better time and opportunity to collaborate with a competent mergers and acquisitions advisor should your entrepreneurial business owners like to learn more.

What we can learn from the past is that your entrepreneurial client's outcomes aren’t guaranteed. They could face liquidating their business and potentially struggling financially in their retirement. A much better outcome starts early, involves a thoughtfully conceived plan executed in tandem with a mergers and acquisitions advisor and other experts so that over the next decades the entrepreneur can be assured of their family’s future lifestyle and long-term financial security.