Take a holistic approach to wealth management for optimum outcome

When it comes to wealth management, business owners often spend so much time managing their business that their personal affairs get overlooked or become stale.

“They don’t have a personal CFO to nudge them to keep everything up to date and to seek the best returns as they do on the business side,” says Denise M. Penz, executive director of wealth management at Home Savings Bank. “This is where having an advisor who knows both sides of the equation for the individual can be a huge benefit.”

Conversely, she says sometimes owners are very good at working with an advisor to keep their personal funds invested, but they have large balances of business assets not being advised, which means no one is working to ensure those assets are yielding an appropriate return for the business.

“Both sides need to be equal priorities to be well balanced and maximize value,” she says.

Smart Business spoke with Penz about the intersection of personal and business wealth management, and what business owners tend to overlook.

What should business owners do to capitalize on their financial position today to ensure a strong financial future when they exit their business?

Working with an advisor who knows the owner’s goal for the business and how that matches with the owner’s personal goals and time frame is imperative.

In order to maximize the value of the business, and do so within a time frame that enables the owner to pass the business to a successor or sell the business before retirement, goals must be set and business and personal funds must be appropriately invested. If a business owner does not work to keep both invested and in sync with their goals, they can find themselves not prepared for their endgame.

What are some strategies or wealth management products that business owners should consider?

Maximizing wealth is as much about the advisory services as it is the product. Of course, retirement plans are essential, using either individual or qualified plans (or a combination), as well as portfolio management that looks broadly to identify opportunities, risks and returns.

It’s important to give an advisor full view of the investor’s assets and finances. Even those who are using multiple investment professionals are best served when one is the ‘quarterback’ who ensures that the rest of the advisory team is using their strengths to maximize return. So many investors believe that diversification is only about having multiple advisors. However, many times that leads to overlap, with team members buying many of the same securities. True diversification, then, is not being achieved.

In what ways can a bank help a business owner maximize his or her wealth and prepare for a secure financial future?

Banks are able to be holistic in their approach, offering deposit products, loans, investment vehicles and expertise. This enables the advisor to monitor the business and personal balance sheets, and take advantage of the markets when possible.

Having an eye on both balance sheets and income statements is a must, and working with an advisor is the best way to accomplish this. At the same time, an advisor can only be effective if he or she has a full understanding of the business owner’s goals.

Business owners should take a moment to decide who their quarterback is and then empower that person by sharing goals, time horizons, business strategies and needs, as well as their personal risk tolerance. The advisor can then craft the ever-evolving plan that is needed to achieve success in the business owner’s business and personal financial future.

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