Why should wealth managers put their clients' exit strategy on the agenda?
According to Statistics Canada, there are 1.2 million businesses across Canada — 98% small businesses, about 21,000 medium-sized businesses and 3,000 larger enterprises. As Canadian business ownership undergoes the biggest generational shift in its history, wealth managers have a pivotal role to play in their senior clients' exit strategies.
The biggest shift in society many baby boomers will have pivoted, and many more wills over the next decade, from active business owners to retired entrepreneurs, part of an estimated $10 trillion global wealth transfer. The Government of Canada estimates that 83% of these company owners are more than 50 years old.
The stakes most owners' wealth is locked in their privately owned businesses, yet the Exit Planning Institute reports that over the past five years only one in five companies sold successfully, leaving a staggering 80% unsold. Educating ageing entrepreneurs on exit strategies can create a brighter retirement and reduce that gloomy statistic.
Better outcomes wealth managers can show clients how to optimize business value and monetize an illiquid private company into a larger, diversified, liquid portfolio that sustains the family's lifestyle. Among an owner's advisors — lawyers, accountants, executive coaches, only the wealth manager plans for long- and medium-term goals, making regular exit-planning sessions essential to protecting a client's legacy.
The larger opportunity owners typically save or invest only about 6% to 8% of their overall wealth; only after a successful sale and the monetization of sweat equity does the wealth manager gain the chance to manage 60% to 80% of the family's newly freed wealth.
Collaboration includes exit-strategy conversations on the annual agenda and arrange an education session with a competent M&A advisor to keep you and your client aligned on the transition process, current market values and positioning. A better outcome starts early, with a thoughtful plan executed alongside an M&A advisor and other experts.
Key facts: putting exit strategy on the wealth manager's agenda
Canada has 1.2 million businesses (98% small); 83% of owners are more than 50 years old
An estimated $10 trillion global wealth transfer is underway as boomers retire
Only about one in five businesses sell successfully; 80% go unsold (Exit Planning Institute)
After a sale, wealth managers can manage 60% to 80% of the family's freed wealth, up from 6% to 8%
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax or financial advice. Consult qualified advisors regarding your specific circumstances.
