Financial Planning for Business Owners

A Case Study

Laura Lewis is 35 years old and runs her own Paraplanning Practice in Cardiff. She has been married to her husband, Brian, for 8 years and they have been together for 18. They live on the outskirts of Cardiff, along with their three children Tom (6), Dick (4) and Harry (9 months).

Laura came to us as she was desperate to put a secure financial plan in place in order to achieve a better work/life balance and relieve some of the uncertainty she was currently feeling.

When we met, the first thing we asked Laura was what her ideal financial scenario would be and what key objectives she wanted to fulfil for her family, personally and for her business.

Her ideal scenario is to be able to retire at 55, lead a comfortable life financially and for her and Brian to spend their retirement travelling around the world.

In the shorter term, Laura is keen to get into a position where she could cut her working hours down to enable her to spend much more time with her young family.

Following our first meeting, we got to work on the development of a financial plan to help Laura understand what could be done to achieve her objectives…

For the couple to reach their aim of having an income of £3,500 a month at the age of 55 so that they can retire, the Paraplanning Practice would have to be valued at £600,000. A valuation that Laura agreed was achievable.

With retirement already at the forefront of our discussions, we then talked about the family’s pension arrangements. Both Laura and Brian take their pension provision seriously and will be in good stead when they do reach retirement. Brian will accrue Fire Service pension benefits on top of a personal pension that is currently valued at £36,000, while Laura has a personal pension worth £48,000, which the business makes a monthly contribution to. The couple’s potential retirement income figures will contribute massively to the income figures they are aiming for.

Next, we considered the couple’s insurance position. We quickly identified that they were both underinsured on the assumption that the value of the business would be lost without Laura. We arranged a relevant life insurance policy to protect their young family and ensure their standard of living could be maintained if anything was to happen. Laura was insured for around £1 million, while Brian was insured for £400,000.

On top of this, we also arranged an Income Protection insurance policy. Should Laura not be able to continue her work because of illness or injury, this policy will cover 60% of her income, and not impact on the couple’s business value as she can appoint someone else to do the work. These policies pay out a tax free income should you not be able to do your job due to accident or illness.

One of the most important things we did was to put the life insurance and pension death benefits (the personal pensions they have pay a return of fund – the value of the pension) into a series of family trusts.

Trusts are an excellent way of protecting family assets and should anything happen to either Laura or Brian, their money can be controlled on behalf of their children, allowing them to have the lifestyle the couple want for them, including the cost for someone else to raise them, Laura’s sister Jess. It will also protect the money from potentially exiting the family should the surviving partner go on to remarry, as well as protecting it from inheritance tax too.

Since we originally met, Laura has been able to get her working week down to four days and is on track to keep this up. This has included putting staff in place to carry out some of the administration work while she focuses on growing the business, so she and Brian can achieve their final goal of retiring at 55.

Regular reviews will be important for the family’s financial planning to ensure everything remains on track towards their goal of retirement, especially as they get closer to 55.

This example clearly demonstrated the importance of putting a financial plan in place if you are a business owner.


*Please note that the names in this case stdy have been altered for confidentiality purposes

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