David Currie, Head of Financial Planning at Belfast’s longest standing investment management firm, Cunningham Coates, advises that in Northern Ireland, where SMEs dominate the commercial landscape, business owners should focus on protecting their business against risk.
“In the Northern Ireland business sector, SMEs are responsible for generating over 75% of employment and private sector income,” explains David: “Now consider the business owners, they are undoubtedly well versed in protecting their company from sales and operational risks – but unforeseen, people-related risk needs to be factored in too. Often SMEs are run by hard working, committed and passionate directors, but what happens to the business if something happens to the individual?”
Cunningham Coates, renowned as one of Belfast’s leading investment management firms has invested in strengthening its financial planning expertise. “It makes perfect sense,” advises David: “We manage risk on behalf of our clients in investment terms, it’s only natural to protect their broader financial plans and goals from risk too.”
“A business’s success often derives from the owner’s or a key employee’s intellectual acumen, network of relationships, drive and hard graft, but what if one of those individuals unexpectedly is taken out of the picture? Think about it – it can and does happen, for a number of reasons - health issues, accident or premature death. Such an occurrence is of course devastating for the individual and their families, but the impact on the business can also be huge, often threatening its very existence. It’s important to prepare for every eventuality. We would advise businesses to take out key person protection to provide a safety net in the event of death or illness. The cushion of the cash lump sum which this form of protection provides can protect a company against the financial consequences and buy crucial time to regroup and reassess its future strategy.
“While these can be difficult and uncomfortable issues to address, it makes perfect business sense to do so. Consider this – if a shareholder or partner in a business dies, his or her shares often pass to next of kin. This, of course, may be what the deceased’s family and surviving shareholders want, but it can be a difficult situation for all concerned. Often, the deceased’s family’s priority will be deriving value from the business to support their future financial wellbeing, while the remaining shareholders will be conscious of retaining control over the business’s future. It’s a dynamic that can have such a significant impact and it merits proper preparation. At Cunningham Coates we can help businesses put appropriate shareholder or partnership protection plans in place. These provide the surviving shareholders with funding to purchase the deceased’s shares – thus protecting both the deceased’s family and the remaining shareholders.”
There are many factors to consider in the realm of business protection and it pays to expect the unexpected. According to David, his team’s role is to help clients protect their business so they can focus on doing what they do best. “We work hard to ensure our clients can continue running their businesses successfully knowing that they have the necessary protection in place. It may even be as simple as providing protection for business debt, as most businesses run effectively with some form of debt, often supported by personal guarantees or charges against personal assets. It simply makes sense to ensure there is a loan protection policy in place.
“It goes back to our planning principles; we review the risk, cover off the challenges and endeavour to put the necessary plans in place. We help with scenario planning to protect the business, the business owner and the immediate family. This may be some of the most important due diligence in which the business has ever engaged.”
Cunningham Coates, which is part of the Smith & Williamson group, currently employs around 40 members of staff in Belfast and has recently strengthened its financial planning offering due to an increase in demand for the team’s expertise. David’s team now includes the experienced Financial Planner Craig Routledge to support company clients.
“It’s about enhancing the services we provide and tailoring our offering to support clients in a rapidly evolving industry landscape,” explains David: “Business owners understand and recognise the difference between wealth creation and wealth protection and increasingly want to be as focused and intentional about their personal financial plans as they are about the strategic direction of their business.This requires specialist advice – which we are geared to deliver.”
Read more in the latest edition of our Director NI magazine