Planners must help SMEs target wealth creation

SMALL and medium business owners tend to be too focused on sales and turnover and need guidance on how to derive personal wealth, according to Westpac Banking Corporation’s director, structured investments, Stuart Donaldson.

Donaldson told theFPAConvention in Adelaide that owners of small to medium-sized businesses tend to play to their strengths in sales, marketing or technical proficiency rather than focusing on those elements of their businesses that could enhance wealth.

Speaking on the topic “Beyond Survival — Your Roadmap to a Bigger Bottom Line”, Donaldson says there are strategies that planners can utilise to help clients falling into this category.

He says owners of small to medium-sized businesses represent a particular challenge for financial planners because their level of income and ultimate wealth is determined by the success or failure of their businesses.

Not unnaturally, these people are focused on the day-to-day running of their businesses rather than the bigger picture, Donaldson says.

“Essentially, you find there is a heavy emphasis on day-to-day management to the exclusion of wealth management and this presents particular challenges for financial planners,” he says.

Donaldson says there are a range of strategies planners can put in place to help clients in this situation, not least looking at their balance sheets and suggesting ways in which they can generate higher levels of cash flow.

“What you find with many small to medium-sized business owners is that they look at their balance sheets in terms of what the bank manager or theAustralian Taxation Officewants to see rather than in terms of enhancing cash flows in their own interest,” he says.

“The challenge for the financial adviser is to become familiar with the client’s balance sheet and then open their eyes to ways in which they can improve their bottom line and ultimately the amount of income they can direct towards the development of their personal wealth,” Donaldson says.

“Our job is to look at the way these people are running their businesses, identify weaknesses and then turn them into strengths,” he says.

“It’s a way of saying here’s something you can do to generate better business outcomes.”