Make 2020 the year you plan your future

There’s no doubt we are living in one of the most turbulent times in modern history. Our planet is burning at one end, melting at the other. The weather’s gone haywire. Technology has taken over. Trade wars. Political chaos. Economic instability. And Brexit!

Around the world, the road ahead has never looked less certain. Perhaps more than ever, we need “the serenity to accept the things we can’t change – and the courage to change the things we can”. One of the things we can change is our approach to financial planning.

Whether you’re a business owner, a senior executive or a retired individual, having a financial plan in place is a fundamental first step to help you deal with uncertainty. Will 2020 be the year you get your financial house in order? Now’s your chance.

Flexibility beats uncertainty

In this fast-moving era, nobody really has a crystal ball. We’re living in the age of disruptive technology. There has been an unprecedented shift to the online world that is having a seismic effect on the way we live and work. We also don’t know – still – what impact Brexit will have, and it’s of particular concern for business owners and exporters.

While the unknown comfortably outweighs the anticipated, there are ways you can protect yourself against swirling uncertainty. On the financial front, a flexible outlook and sound financial advice, with clear ambitions for both personal and business assets, will help you make informed decisions, which in turn will help you achieve your goals.

As we face into a new decade, now would be a good time to dust off your business and personal plans to re-assess and ensure you are on track to meet your short and long-term goals. To help get you started, here are our top tips for business owners, company executives and retired people.

Why is early planning important for business owners?

One of the key issues for company owners is the transition of a business through its next cycle of ownership. Whether that is a trade sale, management buy-out or passing the business to the next generation, it is critical that you have a solid, structured plan that allows the company to continue trading through the ownership transition.

Having worked with countless business owners, we have often found that a lack of early planning makes it much more difficult to structure the company or group in a way that (a) ensures shares pass to the appropriate people in a tax-efficient manner and (b) is compliant with HMRC guidelines.

Putting a holding company in place, having different classes of shares (to allow future growth to pass to individuals, e.g. family or management) or considering international tax planning are complex issues. Considering these as part of a financial planning process over time can ensure a more commercial argument is used to justify any restructuring.

Action

Make an appointment with your financial adviser to create a plan that allows you to coordinate with your legal and tax adviser so that you can make informed, flexible decisions. If appropriate to your ownership model, make sure the wider family is involved to ensure everyone understands the rationale behind your decisions, and that any equalisation issues are tackled head-on.

Taxing issues for senior executives and professionals

Professionals and executives face different issues than business owners as they generally have a fixed number of years to meet the objective of building a pool of capital for retirement. Perhaps you have moved to the UK from abroad, maybe you’re working for an international company, or you’ve reached partner status in a professional practice.

Whatever your situation, making big decisions on career or investment strategies, while considering the optimal tax structure, is not easy. All the more important then that you have an up-to-date financial plan that allows you and your advisers to work together to make informed decisions based on latest advice and information.

Action

Plan to meet your financial adviser in January to analyse your financial information using cash flow projections and scenario analysis that sketch out the optimal solution(s) for you. This will allow you to make early decisions (backed up by financial data) on an ongoing basis that helps to ensure you meet your goals.

Retirement targets

Broadly speaking, retired people – who do not fit into the other categories mentioned here – have two main objectives:

1. Sustaining an income to meet their needs in the future; and
2. Passing assets to the next generation in an orderly manner.

A financial plan will allow you to calculate the exact level of capital required to maintain your desired lifestyle. You can then establish any surplus capital that is potentially available to pass to the next generation  or as part of your estate after lifetime. Some of the structure used to hold these assets include Pension Schemes, Family Partnerships, Investment Companies and Trusts.

Allocating assets to the next generation at the appropriate time, while taking account of the different tax structures and equalisation of the estate among family members, may seem daunting (but it’s really not!). Again, good advice and a plan that is reviewed annually (or as circumstances change) are key to finding the solution that fits your needs.

Action

Make it your New Year resolution to meet your legal and tax advisers to review your financial plan and ensure you have a fully up-to-date Will (to deal with your estate) and an Enduring Power of Attorney (EPA) (to deal with any incapacity during your lifetime) in place. This should facilitate the timely and tax efficient transition of assets to the next generation.

Taking a step-by-step approach to executing these actions will ensure you understand the consequences of any decision you make in advance.

Early action required

There is a lot going on in the ‘outside’ world, but when it comes to financial planning you must look closer to home. Whatever your stage of life or work, the application of some basic principles can bring clarity, certainty and peace of mind to your financial future.

In reverse order, Step 3 is the implementation of a robust, well thought-out financial plan that is tailored to your individual circumstances and needs. Step 2 is a meeting with a qualified adviser(s) who will take a rounded, holistic view of your financial picture. Step 1– arguably the most important of all – is the commitment to actually go and get this done. The sooner you start, the better the outcome.