Life after exit: Managing your wealth
Following sale, the proceeds from your exit should be invested wisely. We explore the options
Following sale, the proceeds from your exit should be invested wisely. We explore the options.
The business has been sold and the wealth that was once yours on paper has now been turned into hard cash. As the first post-sale bank statement arrives, you’ll probably be asking yourself: “What on earth can I do with all this money?”
The first requirement is investment advice. If you’ve spent anything from a few years to a working lifetime building a business and grooming it for sale, you will want to ensure the money that is now yours to invest will work hard for you. For many, the first port of call will be a private bank or private client wealth manager.
Private banks/wealth management companies come in all shapes and sizes. Some, like the Queen’s banker Coutts, have a high profile and very visible offices. Others are part of investment bank empires, such as UBS or Merrill Lynch, while many are discreet operations hidden behind closed doors in the City. Coming from a different angle, accountancy firms, such as KPMG and Grant Thornton, also offer private client wealth management services. The unifying factor is that they provide investment and money management services aimed at wealthy individuals.
According to Sebastian Dovey, managing partner of wealth management research organisation and think tank the Scorpio Partnership, the industry has a keen appetite for new clients. “That hunger is based on rising revenues and profitability,” he says. “The UK is seen as a key growth market for private banks, because of the sustained wealth creation here.” As such, entrepreneurs are seen as an important customer group.
Private banks offer their clients a bespoke service. They will talk to you, assessing your tolerance for risk and your investment objectives. Then they will invest money in a range of asset classes – shares, property, hedge funds, etc – with the investment mix tailored to your profile. As Nick Gornall, head of private banking and entrepreneurs at Coutts stresses, it is not a rushed process. “It is important that our clients are given the time to think,” he explains. “We will put their money in a liquidity account that offers high returns while we discuss and educate them on their investment options.”
You shouldn’t necessarily wait until your business has been sold to establish a relationship with a private bank or wealth manager. As Jonathan Griffin, head of private client and entrepreneurs at accountancy firm Grant Thornton points out, it can be advantageous to make plans ahead of exit. “A wealth manager can help you plan where the money will land,” he says. “For instance, rather than putting it in your standard bank account, we can help you place it in a high-interest private bank account.”
As a business adviser, Grant Thornton works closely with business owners on a range of issues, and its wealth management practice often enters the relationship when the company has been sold. The same is true at Coutts, which provides banking and corporate finance services for business owners, as well as wealth management for those with £30m plus to invest. However, many private banks are focused mainly on the investment management side, and will be interested in entrepreneurs only when an exit is imminent or complete.
As Jonathan Griffin points out, plain vanilla bank accounts currently offer a 6% return, so private banks and wealth managers must do better to attract customers. “It has to be at least 8% after costs,” he says, “but at the moment, returns of up to 20% are possible.”
In terms of their investment management services, wealth managers will need a minimum sum, which varies. Grant Thornton asks for at least £500,000, while Coutts requires £30m or above.
Some advertise, others engage with customers through referral only, but if you have sufficient cash to invest, you will certainly be able to talk to a range of providers. Before signing up, ask for evidence of performance and check whether their list of services matches your needs.