15/06/2011

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How can wealth management advisors help entrepreneurs?

Chris Kenny, Director, Investment Management, Smith and Williamson:

At Smith and Williamson we recognise that entrepreneurs are used to having a great degree of control over their activities and that a one size fits all off the shelf approach won't necessarily be relevant to their circumstances or to what they're looking for.

How should your investment advisor be seen?

Our strong belief is that entrepreneurs need to learn that there are some areas in which they can look for some help and that a trusted advisor, perhaps even someone viewed as part of their team, a financial director, can really bring an awful lot for the party. That means that they have to take a holistic approach, they need to consider not just the narrow field of investments but to look across all of the entrepreneurs assets and to ensure that an investment strategy is discussed, considered and put in place as part of a partnership rather than a dictat from a large bank which we have found fails to work in the past.

When dealing with your finances, how prepared are you for the two key stages in your business?

Entrepreneurs who are in a growth phase of their business may find they need to put aside some rainy day money, a safety net that can be there to support them when things become difficult. These funds should be liquid, should be easily accessible and should not be taking excessive risk. From our professional point of view, most of the investment risk is being taken in the entrepreneurial company or start up. However, as your business develops and grows, there's a chance to begin to see cash coming out perhaps to a partial disposal, an outright sale, or simply through excess dividends from cash flow. That might mean that you can take more investment risk at your own investments which gives you a chance to diversify. So the investment strategy between a mature business and early stage business should be very different. Therefore your investment strategy and your investment advisor should not be static. They should be flexible, they should be listening and they should be engaging with you as an entrepreneur.

How can Smith and Williamson help me with my business?

Smith and Williamson don't have an investment style except to be flexible, focus on liquid assets and not to take any unnecessary risk. This is appropriate for entrepreneurs as much as anybody else, perhaps even more so. You don't want to be avoiding risk all together but to be risk aware, to understand why our clients will be taking risks in their lives not just in their investment portfolios but in their mortgages, in their businesses and there are many different types of risk. It is only by talking to our clients that we can understand what they mean by risk and how to help them best manage it. It turns out that investment management is risk management many times. That is where we believe we can really add some value for our entrepreneurial clients.

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