Strategic planning helps ensure business sustainability, family harmony
By Lori Bamber, Managing Editor
When the wife of one of Yvonne Chan’s clients was diagnosed with cancer, he reached out for reassurance – would the plans they’d put in place allow him to immediately step away from his business in order to focus on caring for his family?
Fortunately – thanks to his foresight and a team of expert advisers who had addressed everything from business risks to the family’s retirement and estate plans – the answer was yes.
It’s a surprisingly common scenario: Privately owned businesses continue to be the primary engine of Canada’s economy, and their owners are often indispensible to the operation of the business. When life events make it impossible for them to fulfill their role, the sustainability of the business and the financial security of the family depend on having an effective plan in place.
“We always try to prepare for the unexpected,” says Ms. Chan, a vice president and wealth adviser with RBC Wealth Management, RBC Dominion Securities Inc.
As part of her process, she explains, a financial planning specialist works with business owners to ensure they are on track to meet their goals and protect their family if they need to wind down their business unexpectedly.
Given the complexities inherent in planning for an effective business succession, the family’s financial well-being and the owner’s retirement security and legacy goals, a team of expert specialists is essential to ensure that all relevant issues are addressed, says Ms. Chan.
For example, she notes, “The estate plan includes strategies to protect the client’s assets and transfer wealth to beneficiaries in a tax-efficient manner. It may also include discussions involving guardians for minor children, the appointment of an estate trustee and issues such as living arrangements for adult children with disabilities.”
Often, the business owner hasn’t “sat down and really thought about these things until they meet with our will and estate consultant,” she adds. “Once we understand what’s important to them, both their financial and non-financial concerns, then we can structure a tailored plan and bring in our experts to deal with the more complex issues.”
The key to the plan’s success is helping clients think about and understand the risks they face, and then recommending strategies and solutions to manage those risks, says Gerald D’Souza, an estate planning specialist with RBC Wealth Management Financial Services. “We focus on pension and estate maximization, using insurance solutions to enable them to accumulate wealth and provide money for their retirement as tax-effectively as possible.
“We may set up a solution to make it easier for someone to buy the business, whether it’s their children or a third party, so that the business is sustainable and the owner has enough retirement income,” he says.
An expert team approach can also ensure that family issues involved with business succession and legacy planning are addressed and incorporated into the plan, says family business consultant Ruth Steverlynck, co-founder of Your Family Enterprise. “Families are complex – planning with the family rather than for the family makes all the difference to successful continuity of the business and the family.”
Without the involvement of all family members who will be affected in the planning process, she explains, unmet expectations can become a source of long-lasting conflict. In addition, family members may not be adequately prepared for the responsibility the plan may require of them, such as collaborating to co-own a significant asset.
Getting it right requires dialogue, she says. “Conversation is the key. We facilitate a process that includes all the people who will be impacted by the planning, ideally in the very early stages, and create clear guidelines around how the dialogue is going to happen.”
Through the process, the concerns and hopes of all family members are heard, and then agreements are reached that work for the family, the business and the future ownership. “These agreements are captured in policies that anticipate and allow for all the potential risks,” she says. “They are moral understandings between family members that are abided by because everyone who is held to the agreement was part of its creation.”
Relationship issues and past resentments invariably will emerge during the planning process, so Ms. Steverlynck’s consulting team includes a skilled family therapist. “The appropriate help is there to support those involved in dealing with these issues in a controlled environment, and to put clear processes in place to address future issues as they arise,” she stresses.
RBC Wealth Management series published Sept. 24, 2014
For more information, visit rbcwealthmanagement.com/canada.