Entrepreneurs are specialists when it comes to running their businesses. They are big earners who know how to create wealth and have in-depth knowledge about the industry they operate in. But when it comes to managing their wealth, many entrepreneurs tend to invest most of their wealth in their businesses.
While it is important for an entrepreneur to plough back into the business, in the current economic environment where business confidence is low and various industries are under pressure this can be a risky move.
This is why business owners need expert advice on how to diversify their wealth to make the most of their hard-earned money. Owning a business is not the only way to grow your wealth – business owners should be looking to responsibly diversify their capital rather than concentrating it solely in their business interests.
Making your money work for you
There is no doubt that entrepreneurs who choose to diversify are better off in the long run. Feedback from Citadel Wealth Management – Mercantile Bank’s wealth partner – shows that business owners need a wealth manager to navigate the complex world of investments while they focus on running and growing their businesses.
Diversification is about more than just moving money offshore – as a business owner you need a comprehensive plan on what to do with your money based on a thorough analysis of your specific financial needs.
Take an objective view on your money
You need a wealth manager or adviser you can trust to give you objective advice. When you meet with an adviser, a good starting point is to ask yourself what you want to achieve with your money.
This will inform your investment decisions and your wealth manager would be best placed to advise you on the type of asset classes to invest in. Important issues to discuss with your adviser include your dreams and aspirations, the monthly capital requirements of your business, and how much you need to sustain your lifestyle.
Even factors such as how often you would like to go on holiday or replace your car can have a bearing on how a financial plan is structured.
Entrepreneurs often neglect succession planning for their businesses, but there comes a time in the life cycle of a business when you have to start thinking about diversifying your wealth away from your business.
Don’t neglect discussing your will with your wealth manager. Business owners often neglect drawing up a will, or they discover that they have a version that is completely out of date. Citadel has found that this is a common trend – even among entrepreneurs that run businesses with turnovers as large as R300 to R400 million. This is prevalent in South Africa as we have a substantial entrepreneurial workforce.
The bottom line is that your wealth diversification plan should be structured in such a way that it caters for your particular risk profile, all the stages in the life of your business as well as your dreams and aspirations.
Keep in mind that wealth can also be created through traditional banking products. Taking out a bond to buy an investment residential or commercial property can be a great investment and can also help with diversification.
As an entrepreneur you need long term peace of mind and managing your wealth is an important step in achieving financial wellness.