Financial Planning for Entrepreneurs and Business Owners
We work with numerous business owners and entrepreneurs, helping them reduce their taxes, reduce their management fees, and improve their investment risk management. We work closely with them as wealth advisors to create a diversified investment plan to not only achieve their financial goals, but also manage issues they didn’t recognize they had.
Aaron and his wife Linda are clients of ours and in their fifties. Aaron owns and runs a very successful business that he built from the ground up over 15 years ago. It is a source of pride and he is always working to find new ways to build and improve his company.
When he first came to us, Aaron was essentially afraid to invest and only had GICs, preferring to keep his money in his business. In working together, we learned more about his company and compensation structure, and created a plan that maximized his corporate structure. We also put him in contact both an accountant and a lawyer who were capable of implementing such a sophisticated arrangement at almost half the cost of his previous advisors.
Within five years, the tax efficiencies and cash flowing investment results from implementing this new plan increased his portfolio sevenfold and has provided a 6% compounded return, net of fees.
Years later, when it came time to sell his business, Aaron contacted us, letting us know that he had been in negotiations with a buyer and, after speaking with his accountant and securities lawyer, was ready to sign on the dotted line.
We asked to be involved and discovered that Aaron hadn’t consulted a business broker. He was ready to accept a deal that offered him 30% in cash, 70% in stock, and had several restrictions.
After learning more about the situation:
- We put Aaron in contact with a business broker and worked with them and his accountant to revise the deal.
- We provided currency risk solutions to create investment security, because Aaron was being paid in U.S. dollars.
- We planned, implemented, and coordinated Aaron’s exit strategy from his business.
- We utilized a separate corporate account that we created in anticipation of his eventual business sale when Aaron initially became a client.
With our involvement and quarterbacking efforts, Aaron received a seven-figure deal with 65% in cash, 35% in stock, virtually no restrictions, and, as a result of the secondary corporate account we set up years ago, saw the entire transaction be essentially tax free.
Joe and Allison are both in their late 30’s and are relatively new clients. Joe is incorporated with his own successful consulting business and Allison is an artist.
The couple was with a financial advisor who had them in a traditional portfolio of mutual funds. They each had a sizeable RRSP account and a joint non-registered account. Joe’s income was all being paid out as salary from his corporation and what they didn’t need for lifestyle they saved, either in their RRSPs or in the joint non-registered account.
After looking at their situation, we recommended that Joe change his compensation to dividend from salary, leave their savings in the corporate account (instead of RRSPs) and income split with Allison.
To accomplish this, we put Joe and Allison in contact with an experienced lawyer who was able to help with restructuring to include Allison as a shareholder. As a result, Joe saw his taxable income drop from 34% to 13%.
Since Joe is a consultant, we recognized the fact that we would have no eventual business value, so retirement planning was paramount. We created a tax-efficient asset allocation strategy where fixed income investments were inside their RRSP and dividend/capital gains investments inside their non-registered account. These tax efficiencies combined with our cash flow investment approach to provide Joe and Allison with a foundation for solid retirement savings.
Joe and Allison felt like they were on a rollercoaster ride with their previous advisor and their returns were ultimately flat over the past 7 years. In their short time with Nicola Wealth Management, they’ve seen a 16.2% investment return and their portfolio is producing 3.5% of cash flow.
With our competitive fee structure, lower MERs and the tax deductibility of the management fees on their non-registered accounts, they will also save on management fees over what they were doing previously. With these strategies in place, Joe and Allison expressed to us that they feel more at ease with reaching their retirement goals now, instead of ten years from now.