Wealth Management Strategies for Business Owners

When talking about wealth management, it is important to understand that each business owner has his or her own unique needs – that require bespoke solutions.

It is true that there are some wealth management strategies that cut across, however, some vary depending on an individual and the type of business they are engaged in.

1. Individual pension plans

Individual pension plans, also known as IPPs are designed for a single person. It is an investment strategy that gives members of the public a chance to accumulate tax-deferred retirement benefits within an investment vehicle.

Some of the benefits of Individual Pension Plans include the following:

• Increase in investment income on a tax deferred-basis

• It offers a chance for your spouse to participate

• You can part with a lump sum contribution upon retirement age

• Funds are protected from creditors

IPPs are good for business owners and business executives with six-figure salaries. The IPPs are usually registered with the Tax ministry. This means that you will be taxed whenever you make a withdrawal.

2. Segregated investment funds

This is another great wealth management strategy for business owners. A segregated fund is basically a mutual fund provided via an insurance carrier. A business owner can take advantage of this investment vehicle to maintain liquidity.

There are several advantages or benefits that come with segregated investment funds. The first one is that a business owner is able to bypass the probate process when it comes to claiming his or her investment.

Another advantage is there’s a guarantee on the death benefits as well as the maturity of the funds. Last but not least, a business owner is also shielded from creditors.

One of the concerns of many businesses is to see that their personal assets are protected from creditors.

With a segregated investment fund, the maturity and death benefits are incorporated. This means that no matter what happens, you will still get 70 to 100 percent of your initial deposit.

Additionally, the funds or assets are directly transferred to your chosen beneficiary, in case you die. The assets won’t be considered as part of your estate.

3. Take advantage of any available tax break

The recent changes in tax regulations have opened an opportunity for many small businesses. Most of them can now qualify for a 20 percent pass-through deduction. It is important to work closely with a tax expert to ensure that your business is paying as little tax as possible, under the new code.

4. Learn to pay yourself first

Develop a habit of paying yourself first. It’s understandable that most business owners would love to reinvest almost everything back to the business, especially at the initial stages. You probably believe that you can generate more money compared to the stock market.

However much that is allowed, it is only a short-term strategy. Avoid investing all your money back in the business. Save at least 10 to 20 percent of your total income. You never know how things will turn out a few years down the line.

5. Virtual banks

This is also a better strategy for managing wealth. Virtual bank accounts are ideal for business owners who would like to make extra income from their money, and at the same time do not wish to have their funds locked in there for a long time.

Virtual bank accounts permit individuals to deposit and withdraw without imposing any conditions. However, the interest charged is very high. The accounts can be accessed from anywhere at any time.

Bottom line

There’s nothing as important for a business owner than planning your finances. Wealth creation and management go hand in hand.

You don’t want to create wealth that will end up disappearing into thin air. That’s why you should consider the above wealth management strategies to be on the safe side.

Alex Hamilton