45% of business Owners will go broke in retirement states a recent newspaper article.
It takes a lot to really irritate me these days but when the authors of the report state that businesses who use their pension funds to make loans are putting themselves at risk, one must question why the report focuses on this issue. Is it perhaps because the authors of the report offer an alternative means of funding?
Surely this is a bit like asking the tobacco industry to draft a report on the positive aspects of smoking?
Any report that persuades business owners to act, would normally get the OK by me, but this report is rather self–serving and designed to attract clients to the authors of the report.
Part of the problem is that business owners tend to rely upon their accountants for advice, sadly most accountants don’t understand how you can use a pension as a dynamic tool that will both assist the business and increase wealth.
One deal before retirement
If you structure your pension properly, you can use your pension to do your “one deal before retirement” and set yourself up for life by doing so.
We often look at a business owner’s business planning and their pensions combined. Often business owners have fixed opinions about what the future of the business and they are not looking to increase their pension funding or use it to buy a commercial property.
One of our clients informed us that there was “no way they intended to buy a commercial property”, “not on the horizon”. We persuaded them to increase the funding of their pension and restructure it (just in case).
Six months later came the call, “Do we have enough in our pension to buy an office?”
Their pension fund now owns two commercial properties!
Pensions & Investing
The present stance of the investment industry is the focus on charges and Risk. The pressure is on advisers to provide advice so that their clients are invested in a range of low-cost funds, and irrationally to have often using Discretionary Fund managers who add a further tier of charges.
I do not believe that this stance is necessarily correct, the constant pressure on advisers to dumb down investment advice only means for their clients that they will end up with less volatility and lesser returns. Of course, some advisers prefer to keep their clients dumb.
We haven’t mentioned the “elephant in the room”, that is investment trusts, we are led to believe that this type of investment “adds a further layer of risk” and typically these investments are simply ignored or a token one or two are included in a large portfolio.
More fool them, investment trusts invariably out – perform their unit trust counterparts.
If you are unfamiliar with investment trusts, initially they are difficult to comprehend, which is why we believe that rather than dumb investment advice down, it is far better to educate clients on investment.
Many business owners have emotional links to pension funds with high charges and poor performance. They are often too busy running their business to research or manage their funds effectively but many are delusional and believe that they can!
A second opinion from a knowledgeable source could prove to be your “wake up and smell the coffee moment”.
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Or contact us, coffee’s FREE.
