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Practice Management > Building Your Business

Diversity training: Asset allocation for business owners

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Merger and Acquisition advisor
Mid Market Capital Inc.

If this recent market meltdown has taught us anything it is to make sure you are diversified over several investments and asset classes. Would you recommend that a client put 80 percent or more of his assets into a single investment? Of course not, but a large percentage of your clients actually have that level of concentration.

Business owners are the single largest affinity group for the financial advisory profession, often eclipsing 50 percent of an advisor’s client and prospect base. Your clients who own businesses likely have 80 percent or more of their family’s net worth tied up in their business. On top of that, privately held businesses are illiquid assets often requiring one to two years to sell.

Business owners are typically not proactive when it comes to exit planning or succession planning in their business because it forces them to embrace their own mortality. If an owner has a sudden debilitating health issue or unexpectedly dies, instead of getting full value for the company, his estate can sell it out of bankruptcy two years later for ten cents on the dollar. This is a punishing financial result for the lack of appropriate planning.

So for your business owner clients, it is time to have some tough discussions about their business exit or business sale. It is time to move your financial advisory practice beyond the scope of a provider of financial products to an advisor on family wealth maximization solutions.


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