Savvy clients know there are key questions you should be asking. And business owners have specific needs. Here are 10 questions to ask:
What are you trying to do with your portfolio?
By knowing what specific life goals they’re trying to achieve—retire to Maui at age 60, leave an endowment to a hospital, buy another company—you can build a portfolio that works to meet them.
Give me an idea of your investment experience. Have you ever managed your assets yourself? How did that work out?
Is the client a relative newcomer to financial markets, or a savvy veteran? Encourage her to give a real answer, not one that jibes with her self image.
Explain that her experience—and the results she achieved—will determine what kinds of assets you should recommend. If she did mentions some do-it-yourself investing, find out if it went south. This will help you understand her investing mindset.
How are you currently investing? Do you have assets aside from the business? What are they?
Diversification is likely one of your primary goals. Explain that by telling prospective managers how far a client has diversified herself, she will help you better understand what has to happen next.
What other assets (outside your business and investment portfolio) do you own?
The client’s home, vacation property, rare stamp collection—all of these can have a significant impact on how you allocate the portfolio.
How much income do you need from your portfolio right now? In the future?
The need for income can make a big difference to portfolio allocation: a lower income requirement means a longer time horizon to achieve needed returns and gives you more opportunity to be aggressive and invest for growth, and vice versa.
How did you react during the 2008 downturn?
Understanding how the client responded to the worst recession in more than 80 years will tell you how much risk you can handle, and how she’s likely to react when the market takes a turn for the worse.
What’s your exit strategy? How do you expect to transition out of your business?
If you client plans to sell, you will be a key player in helping prepare for that liquidity event by implementing specific investment strategies designed to diversify holdings and save tax. If she plans to remain involved in the business (and draw a salary from it), you can steer the portfolio toward growth opportunities rather than income.
What have you done to safeguard personal and business assets from creditors?
This is a critical question. The answer helps determine the exact structure of the portfolio. If protection is needed, you might specifically creditor-proof assets or allocate them to offshore accounts. If creditor protection isn’t a significant concern, or if the issue has already been addressed, joint ownership with a spouse, a family member, or business partner might be a better strategy because of its inherent tax and estate planning advantages.
What are you doing to organize your business and personal assets in a tax-efficient manner?
Tax minimization is an important goal for all investors, and even more so for wealthy high-net-worth business owners. If the client is currently utilizing advanced tax strategies (holding companies, trust structures, multiple wills, etc.), you need to know. If not, you will want to investigate and start setting them up.
What have you done to split income, dividends, or company ownership with a spouse or life partner?
The answers show how proactive the client has been in creating tax efficiencies in her personal finances. They also indicate where there may be overlap between her business and household finances so any problem areas can be cleaned up before they catch the attention of Revenue Canada.
This article was originally published on capitalmagazine.ca.