Business Financial Planning

Business financial planning is a key part of a Chartered Financial Planner’s work at Matrix Capital, but what is a business financial adviser able to bring to the table and what can a Chartered Financial Planner do for a business that an accountant cannot? Assuming a business financial adviser is able to add value, how does the business financial planner interact with the other advisers to the business such as the accountant, tax adviser and solicitor?

Let’s first of all deal with the key issues that a Chartered Financial Planner/business financial planner would deal with for the corporate client:

Key person and key director protection

  • 81% of businesses have a key person, whose loss would seriously impact the profitability/survival of the business.
  • 67% of these businesses have no insurance to protect the loss of profit that this could result in or the additional cost of replacing that person. In fact, businesses are more likely to insure the photocopier against breakdown (29%) that they are to insure a key person on death (15%) or critical illness (13%).
  • 59% of businesses who do not have key person insurance believe their business would not survive the loss of a key person.

It is not just about setting up a life assurance policy. There are a number of questions that need to be answered beforehand – is there a need for business protection? Who are the key people? What would be the impact of the loss of a key person and how much and what type of cover is required? Who should take the policy out? What are the tax consequences?

This is a vital area of business financial planning.

Co-Shareholder and Partnership Protection

The question here is what happens to the shares/capital account when a shareholder or business partner dies or retires?

This is different to key person protection because this is about making sure that the value and the control of the business passes to the right people upon death or retirement. Without a well-thought out plan, the death or unplanned retirement of a shareholder or a partner has the potential to destroy a business or at least hamper its future growth and profitability.

Corporate Investments

Successful companies build healthy balance sheets.

The directors and partners need to make decisions about what they do with the accumulated assets. Do they use the capital to make investments within the business? Do they use some of the capital to enhance the directors’ pensions or does the business keep the capital on its balance sheet? What are the tax consequences in the short and long term?

A professional business financial adviser will help the business to answer these questions – good business financial planning is often about understanding the options getting the balance right.

Corporation Tax management is invariably a driver in business financial planning; so your business financial advisor will need to have deep understanding of taxation and be able to collaborate with the accountant, auditor and tax advisers.

Directors’ pensions

Advising company directors on their pension arrangements is hugely different from employees; and that is simply because the director needs to manage the interplay between his or her pension scheme and the company.

Small Self-administered Schemes (SSASs) and Self Invested Personal Pensions (SIPPs) are very popular with company directors because they provide the member of the scheme (ie the director) with greater control and flexibility over the way in which the assets in their pension are managed.

For example, may be extremely useful for a business to sell the trading premises to the directors’/partners’ SSAS or SIPP and for the pension scheme to then lease the premises back to the business. This can have significant benefits to some businesses, but will require robust advice and careful planning from you business financial advisor.

Employee Benefit Consultancy

Auto-enrolment started in October 2012, creating a degree of compulsion around the provision of retirement savings for the majority of employees. However, there are many businesses that have recognised that remunerating, recruiting, retaining and rewarding good team members is not simply about salary and bonuses.

Many businesses seek good quality employee benefits consultancy as part of their overall business financial planning; and look to their business financial adviser on areas such as:

  • Group pension schemes.
  • Group life cover and death-in-service schemes.
  • Group critical illness cover.
  • Group income protection and sick-pay arrangements.
  • Group private medical insurance.

Collaboration with other professionals

Clearly there are some areas of business financial planning that can only be undertaken by a business financial adviser who is authorised and regulated by the Financial Conduct Authority (FCA). There are also areas that fall within the scope of practice of the accountant, the tax adviser and the solicitor.

However, we know from past experience that the very best advice is achieved only when the business financial adviser works in collaboration with the other professional advisers to the business.