My name is Jamie Waldren and I am Managing Director – Investments with Wells Fargo Advisors in Columbia Maryland. I’ve been a financial advisor for 29 years.
I believe retirement planning usually focuses on setting expectations about a retiree’s future lifestyle and working backward to determine how much money should be invested in various asset categories now to help provide for that retirement lifestyle.
Many business owners expect that when they are ready to retire, they will sell the firm and the proceeds from that sale will provide a significant part of the resources that will support them in retirement.
A windfall from the sale of a business can present investment management problems that must be addressed. Estate planning can become a big issue if you sell your business for a lot of money. Assets also should be protected post-sale.
Effective wealth management should be an important aspect of all stages of your career. That’s because wealth management is designed to coordinate a broad range of components of your financial life over time—from investments to estate planning, asset protection planning and charitable giving—around your needs and wants. It’s also designed to coordinate a team of experts to help deliver the financial outcomes you seek.
That said, wealth management may be at its most powerful and beneficial when it comes time to sell your business. One reason is that the sale of your company is likely to be the biggest financial transaction of your entire life. As such, it will likely impact nearly all of your post-sale options and decisions.
Consider the role wealth management can play going into a sale. Advanced wealth planning in areas such as taxes and wealth transfer can potentially enable you to create a situation in which you walk away from a sale with more money in your wallet for you and your family.
For example: Prior to a sale, a high-quality wealth manager may be able to stress-test the legal and financial strategies you’ve implemented thus far—in order to assess whether your planning has been effective and is likely to enable you to achieve your goals.
Stress testing often reveals opportunities to refine and improve upon existing strategies and actions— which can result in better, more profitable outcomes. Unfortunately, we see that most business owners are not paying much attention to pre-sale wealth management opportunities.
For lots of entrepreneurs, creating a successful company is a lifetime endeavor. As a business becomes more successful, it often creates enough corporate wealth for the owner to start to amass significant personal wealth. In this type of situation, a business owner tends to find and work with financial advisors and other professionals to help find and implement the most appropriate wealth management strategies.
The great majority of business owners expect a financial windfall with the sale of their companies. They anticipate selling for a good price and turning “tied-up” nonfinancial wealth into liquid financial wealth. Some important issues to consider once that expected windfall becomes real include how the assets will be invested and managed as well as advanced wealth planning concerns.
I believe that investment decisions about the money from a sale can be often overlooked because entrepreneurs are focused so intensely on getting the transaction done. According to the Small Business Administration less than a fifth of the entrepreneurs who expect a windfall have thoughtfully considered how to manage it a huge influx of liquid wealth can be problematic.
From my experience, if not handled knowledgeably there is the possibility of serious problems, such as: Outliving the wealth due to ineffective investment management. Paying legally avoidable taxes because of failing to integrate investment management with broader wealth planning strategies making serious financial and legal mistakes that can be problematic economically and personally.
CAR # 1221-03500