Informed financial planning is essential when it comes to investments. Investment managers should be well informed of tax rules so that no errors are made. Michael Pagliari explains further in this business TV show.

Informed financial planning and investments

There are different categories of planning, so for resident domicile UK clients the principles are pretty well-established, there are certain types of securities that should and can sit perfectly well in portfolios and there are other types of securities that shouldn’t. So, to give an example, there are some tax efficiencies through using fixed income securities which trade at which trade at discounts, there’s advantages in using OECs but there are some other instruments which effectively take a capital gains tax charge and transform it into an income tax charge at, you know, a much higher rate. And then if you move on to the sort of res non-dom world, that’s a very sort of … a much more complicated area with much more potential for error. So for example it’s very important that income and capital are separated, managed in separate buckets; if those are mixed there can be very severe tax consequences. So it’s really basic housekeeping-type issues but extremely important that the investment manager has a good handle on them. Investment does involve risk. The value of investments can go down as well as up. This video contains information believed to be reliable but no guarantee is given. See Video for full disclaimer.

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When embarking on merger and acquisition deals, it is worth seeking the best advice you can. In this TV show John Paleomylites discusses lessons won from selling to the market leader, twice.

Negotiating merger and acquisition deals

The most important lesson I think that the entrepreneur really needs to learn and understand is to negotiate the best deal that you can possibly get. There is always the temptation to accept what you are offered and to accept terms that you are offered. BeatThatQuote management together with our lawyers, really negotiated the best deal that we could possibly get. But you need to look at what you have, the value of what you have to the acquirer. Not necessarily the value of what you have to you. Look to see what else is in the market and what else that they could acquire if they wanted to, or what it would cost them to develop what we have developed, both in terms of direct costs as well as opportunity cost, and the time that it would take to get them there. When you factor all of those things in, you kind of get somewhere to a price that makes sense, and to terms that would make sense. As I say, getting an experienced M&A firm with a great lawyer to represent you is extraordinarily useful. I think one key lesson is not to loo to skimp on the advisors. If you get bad advisors, you will get bad advice. You get good advisors you get good advice. I think getting the right legal advice is essential to maximising the value of you business.

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High net worth families want a good relationship with their advisors as Frank Akers-Douglas explains in this TV show.

High net worth families' survey

One was that most of the interviewees that we surveyed and spoke to felt that their professional advisors needed to work closely together and in particularly they would have a lead advisor who would coordinate the various professional advisors that they used in their team and I find that interesting because that’s something that we’ve tried to concentrate on here at Smith & Williamson and it shows the importance of that relationship creation. The second point I would think was to do with the handing on of money and the really quite diverse answers we got from the families that we interviewed as to when was the right time, how to involve children, whether to involve them at all, and that is probably one of the most thorny issues facing a family with money is when to involve future generations. I think it tends to be the older, the older the older generation is the less comfortable they feel about involving the younger generation.

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Informed financial planning advisors pass on their wisdom to clients. If a company fails they will naturally look at back at this advice. In this TV show Doug Hall discuses throwing the spotlight on professional advice.

Informed financial planning advisors

For example auditors, we are dealing with a number of cases, where a company has failed, and if the company had not failed there wouldn’t be an issue. But in the company going into administration for example, major creditors had lost and they may say that they have relied for example on audited accounts to make decisions, to lend money or to support the company and in the cold light of day the company having failed, that’s an example where you may go back and look at what the auditor said in earlier years.  So we have situations arising from insolvent companies where the spotlight is thrown onto a whole range of professional advice that they were given before the company failed. Which never would have come under that spotlight if the company hadn’t gone into administration for example.  It's not an area that we get involved in but valuers have seen a big increase in the number of actions against them very simple because the banks relied on valuations of properties for example, and then when the company has gone into administration and the bank has lost out, they then go back and look again at the professional opinions that they relied upon, in making their original lending decisions.

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Business assets that are allocated correctly can potentially contribute 90% return to a portfolio, as Michael Pagliari discusses in this TV show.

Spending time allocating business assets

One of my pet hates is seeing, you know, proposals sent out to clients that are very deterministic in nature, in other words coming up with a particular solution to a client’s investment problems. I think, you know, it’s much more complex than that and really the whole question about risk and asset allocation is absolutely key, and I think there have been plenty of studies which have been done which show that asset allocation, good asset allocation, contributes about 90% of the total return to a portfolio.  So it’s really, really important that a lot of time is spent at the beginning and during the course of a relationship focusing on getting that asset allocation as good as you possibly can.

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High net worth families may have high profile lives. Research by Smith & Williamson shows that wherever possible they will try resolve conflict within the family, as Frank Akers-Douglas explains in this TV show.

Conflict in high net worth families

I was very surprised that virtually all of the respondents have said ‘We don’t have family disputes’. You only have to read the press to read about some pretty high profile family disputes and if those are in the press imagine all the ones that aren’t. So I think there is more conflict than people probably care to admit to and it can start from something simple or it can be quite a complex and diverse issue. Again it’s trying to get involved, or perhaps I should go just back a step in that again in the survey most families said that where there was a dispute they would want to deal with it internally, i.e. within the family. Again I found that quite a strange answer because by definition if there is a dispute there is a dispute within the family and are they really best equipped to deal with it. So I think the answer is to get somebody, an external trusted advisor involved at an early stage just to try and talk to the party, if it’s a relatively straightforward dispute that should be simple to resolve. The more complex and the more sort of aggravational disputes are much more difficult and there I do think professional, whatever the right word is, counselling, is needed. For more insight in to advice and issues for high net worth families take a look at our briefing on family business.

Business assets that are being bought or sold should only be valuated by a professional. Ignoring this may lead to huge losses or even liability. In this TV show John Rugman discusses getting the right valuation advice.

Getting professional advice for business assets valuations

It’s important to get some professional help. The area is quite technical, there’s a lot of judgement involved and it’s important that the end number is sound, it can be cross checked against experience of valuations and other assets and companies. There’s something around the expertise in this area, because it’s an area where quite often people have a go. So there’s quite a lot of unprofessionalism if you like, people have a go at doing a valuation, anyone can calculate a number, yeah that’s the easy bit. So I think there is something around specialists who do evaluation work all day every day, I think there’s something around the fact that I’ve seen people get it really badly wrong and get sued, so. So there are a variety of different sources from where you can see a valuation. I think the key thing to note is there is usually a lot of money at stake and the discipline itself is quite subjective. So it’s important to go to specialists who are familiar with the circumstance, used to doing valuations, understand the methodologies, so they can reach a conclusion which is right.

Inside Finance will continue to share comments on areas of risk for business and business assets. There are more TV shows to come from John Rugman.

Evidence of financial impact must be shown in court to win a breach of contract case. Doug Hall of Smith & Williamson explains further in this TV show.

Good experts prove financial impact

The adage is something like a good expert may not win you the case but a bad expert can certainly lose you the case. So if you take the sort of work I do where there is some sort of contractual breach, there’s two hurdles broadly to get over before let’s say the claimant gets a good result, firstly it’s to demonstrate liability, that there’s a case to answer. And once you’ve cleared that hurdle it’s pretty pointless if you can’t actually demonstrate that you’ve suffered a loss from it and you can have that loss awarded by the court. So the second limb is quantum, which is what I do. So okay there’s been a breach, liability is established, what’s it worth and therefore what does the claimant get awarded, and similarly from the other side acting for defendants, obviously hopefully to bring down the level of damages that are awarded against them.

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Informed financial planning with trustworthy advice means that entrepreneurs can make appropriate, realistic, investments. Michael Pagliari explains in this TV show.

Informed financial planning and bottom lines

Lots of entrepreneurs sort of start with double digit return expectations and in an era of financial repression with interest rates at zero that is ambitious and I think it’s very important that you don’t play along with the client and say ‘okay, fine, let’s do that’, I mean you have to actually explain to him that to get to 10% there’s going to be some significant risks in the portfolio. Personally what I’ve found is that most clients actually have a fairly modest sort of bottom line expected return and it’s really in case they’re in the concept of protecting against inflation and perhaps adding something at the margin. So whilst tens might be ambitious, in this kind of environment five might be a more realistic sort of bottom line target for many of the portfolios that I manage. Investment does involve risk. The value of investments can go down as well as up. This video contains information believed to be reliable but no guarantee is given. See Video for full disclaimer.

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The legal sector now has less resources to pursue action for business disputes, as Doug Hall discusses in this TV show.

Legal Sector changes

So basically this whole arena that the commercial world changed overnight caused tension and caused a whole range of drivers for more commercial disputes.  However in more difficult times, parties or potential parties to commercial disputes were wary about committing funds to pursuing them.  So that’s the irony, that there were more disputes but less resources to pursue them and what we saw for a number of years is that cases would start and be settled very early, they’d be front end loaded and it required a different sort of input from forensic accountants for example and for the lawyers, that they would do a much more high level exercise to establish damages for example early on and then go for an early settlement.  I had a few years where I went to more mediations than I went to trials and we had to produce a different sort of report for a mediation to what we produce for a trail, a different purpose.  One really gives a less balanced view, a report, a WP report for a mediation, an experts repot for a trial needs to be very balanced and because an expert has a duty to the court. So the symptom we saw was there was definitely an increase in those sort of disputes for those sorts of reasons, but less of them actually went through towards the trial, which is really to do with cash flow and to do with companies under pressure and litigation was not a priority.  And this is the sort of picture that we had from all the lawyers we know, because we spend quite a lot of time talking to litigators, they’re the people we work with.

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