Our origins are as a mini-family office for entrepreneurs. We understand capital efficiency as a principle embracing both sides of the balance sheet. We think holistically, combining corporate and private. We see investment as primarily risk management. We value optionality.
A service for people like us
Fowler Drew is founder Stuart Fowler’s third start-up since leaving a mainstream bank in 1987. It was this entrepreneurial context that mainly informed the Fowler Drew vision of appropriate financial advice and management for private capital, as a service to like-minded family members and others whose wealth origins were business.
- Our portfolio management function was designed to be just one part of a holistic financial management service embracing insurable risks, business risk, taxation, pensions and family objectives
- Portfolio management could not be offered outside the context of all assets and all liabilities, both actual and contingent, both in and outside a business
- We won’t manage money without a financial plan as its foundation
- We act as a family’s sole investment adviser: the role of planner is not divisible, even if it only involves ‘holding the ring’ for a number of expert advisers in different fields.
Though most of our clients are now not entrepreneurs, the same principles of capital efficiency and holistic risk management are being applied to the professionals in many walks of life that are now the majority. But some clients who have built up capital through professional earnings do also have entrepreneurial investments, typically in private equity and property. Most at some point have contingent assets in their mix, like inheritance. Some continue to employ leverage, even when they could easily repay debt. All value optionality: being in with a chance, at the right price. These are all concepts derived from business capital efficiency.
Examples of scope for business owners
Goal planning with business assets as contingent resources: some typical issues
- Investment time horizons given by personal spending or by liquidity for entrepreneurial opportunities?
- Should risk and diversification approach for non-business assets take account of specific business risk exposures?
- How as a contingent asset (or option) should possible sale of a business affect the risk approach for non-business capital at all stages before sale?
- How should planning of a spending goal (eg post retirement) take account of expected dividends from the business, both before and after expected retirement?
Managing the proceeds of sale of a business expected to be applied to spending
- In Fowler Drew modelling, this is a spending goal or a ‘drawdown’ portfolio. Living off capital proceeds started for some Fowler Drew clients as young as their mid-40s and for others only in their 70s. It’s the same goal.
- A key feature of the goal planning is that the risk approach emerges from collaborative planning of an internally consistent balance of resources; the required and desired spending outcomes; the time horizons (including any preferences for the real spending profile by age). The optimal risk approach is the one that leads to a balance of these variables that can deliver most satisfaction. The approach or attitude to risk is constant but the risk level changes dynamically with the shortening time horizons of the spending plan.
- Outcomes-driven planning, requiring the owner to react to numbers generated by the model, may challenge preconceived notions of risk preferences. This is particularly likely where businessmen see their personal responsibility for the risks taken as affecting the scale of the risk, leading to a very risk-averse attitude with the sale proceeds once invested in public markets where their control is weak.
- Planning a drawdown goal will also reveal resources surplus to spending needs. This invites a different approach to their investment depending on who is likely to benefit and when.
Personal pensions advice
- Business owners may be members of a Defined Benefit occupational scheme, a SSAS or the business may be making contributions to a personal pension, such as a SIPP. For all of these, they face the choices and traps inherent in over-complex pension tax law. We will review the existing position for new clients and advise on these options.
- We devise optimal tax strategies using the framework of mainstream opportunities not specialist tax-driven products. Pension tax is a key driver of: where we choose to hold different asset types; where we draw from, and when, to fund spending; maximising after-tax estate values.
- We advise business owners on all insurable risks, whether a liability of the business or personal
- Though we are authorised to arrange general insurance, we prefer to refer to a specialist broker familiar with the needs of high net worth individuals, including valuable collections
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