A young client has approx £2.5m in his limited company. So not a millionaire himself but has been hugely successful and is growing.
He is concerned about having so much in one bank account, however he also does not seem to have a financial adviser. I know plenty but have no idea what he should be looking for. He doesnt have cash to invest himself so please can anyone let me know where he starts for assistance with managing money for his business. I guess you dont just call your bank manager.
For example, who do celebs use?
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I would have thought an IFA could help. Not sure they are restricted to having individuals as clients.
Presumably not ideal having so much wealth tied up in the company.
Despite usually castigating people for not distinguishing between two separate entities (the individual and 'their' company) ... the first thing that springs to mind is:
- Is the company in reality entirely a vehicle for your client (the individual)?
If so, he probably needs someone who can look at *his* finances (including the suitability or not of the company and how it is set up) in the round;
whereas if the company is not fully dependent on the individual, then the directors and shareholders may need guidance in establishing their objectives (growth or exit, and so on).
I'm deliberately keeping this rather vague since I presume you won't want to disclose more about your client's business ... but hope that gives you a slight steer for starters.
The title was just clickbait ;). The money is in the company. He doesnt have any money personally.
He owns all the company, it has grown really fast, he just needs help. Why would a company not be the right vehicle?
Thanks for the steer but where does he look for this help?
I worked at three organisations, all of which had money to invest. In one case it was five million, another ten million and lastly hundred million ‘parcels’ The difference was in the first & second case we used an IFA, in the third we had investment managers, overseen by an investment advisor. The big difference was the rates the investment cost, with the greater investment costing only a fraction of the other two in percentage terms. Your young businessman needs an IFA. Done properly he will shop around before deciding who to go with. You also need to be aware there are sharks about. Take care.
Thanks well maybe I will just advise to get an IFA (I thought they were for private wealth though?) so I am not involved.
Your client appears to be privately wealthy if they own a business worth £2.5m. They should be thinking about pensions, life insurance, maybe inheritance planning and a good IFA should be able to help with those (keeping their accountant involved along the way)
Flagstone - look it up.
Platform allows clients to spread cash among multiple banks and get market leading interest rates. Allows Ltd company clients.
Sign up as an introducer so as to get a commission.
have a couple of corporate clients with a few million and they use flagstone and are happy
Thanks so much, my client will love this, do you receive a commission? I don’t think we would want to get so involved with a client’s money.
You get a 15% cut of the platform fee, which the client will be paying to Flagstone anyway.
You get a 15% cut of the platform fee, which the client will be paying to Flagstone anyway.
This is clearly an advert for this organisation.
Be *extremely* carefully in both recommending any sort of financial service, and *doubly* so accepting any sort of commision for doing so. If you are ICAEW there are all sort of rules about this.
Its not an advert. I have clients that have used the platform for years and they have only said good things about it.
Its not an advert. I have clients that have used the platform for years and they have only said good things about it.
Well apologies are due then if you are a genuine member in practice. It looks very much like an advert given this was your only posting promoting a specific company, and then knowing it commission structure. We get lots of that sort of a thing. Genuine members and contributors are of course warmly welcomed, despite the sometimes robust nature of comments on here. Most of mine are done whilst on the phone.
Admin Team wrote:
Its not an advert. I have clients that have used the platform for years and they have only said good things about it.
Well apologies are due then if you are a genuine member in practice. It looks very much like an advert given this was your only posting promoting a specific company, and then knowing it commission structure. We get lots of that sort of a thing. Genuine members and contributors are of course warmly welcomed, despite the sometimes robust nature of comments on here. Most of mine are done whilst on the phone.
No need to apologise. I'm a long time lurker and so am well aware of chancers and promotors that appear on these pages!
Agree. New member this month, no other postings. Odd choice of profile name, looks like a member of the aweb team, but isnt.
Although having a comment from a trusted member lightened the frown a bit. Perhaps the frown can be turned upside down so if others add theirs. ;-/
Agreed on the choice of username. It should have occurred to me that it may cause a bit of confusion. Looks like I cant change it, will set up a new account with a more generic one. Thanks
You can ask AccountingWeb to change it for you. TomHerbert is on staff or you could email the address at the end of the Terms and Conditions page.Agreed on the choice of username. It should have occurred to me that it may cause a bit of confusion. Looks like I cant change it, will set up a new account with a more generic one. Thanks
Yh I am aware that any commission would have to be disclosed, I dont think it would make up for our risk so would probably just be a link with a disclaimer.
I use Flagstone personally. A minimum of £50k then applies.
A client uses it for his company then a minimum of £250k applies.
Its good, legit and it has St James Partnership involved (A Billion+ investment firm).
I got onto this via an IFA.
Early success is very common these days with techie businesses. All it needs is successful App!
You may try:
https://www.sjp.co.uk/
Many banks also have wealth and portfolio management divisions offering investment advice and help.
I am not a huge fan of St James Place I have a few clients who have their pension pots with them and their charges seem quite high
Last one of theirs I came across had a beautiful £75K car. Very desirable except that the MOT is 6 months overdue.
Thanks but we have stopped recommending such advisers, they aren’t independent.
I don’t understand how an IFA could help my client if it isn’t private wealth. I can advise him to use his full £60k pension relief.
He has some online bank, yes it is tech and has happened really fast.
For example, who do celebs use?
My suggestion was in response to this.
I don’t understand how an IFA could help
My guess is that these kind of set ups have a large army of advisers to refer to.
I think the client will need to think about either corporate wealth management or personal wealth. If it’s about extraction the only silver bullet I can think of is relocating to and living in Dubai… etc for more than 5 years!
We do it in house (well I do)but slightly lower at £1.5m, funds tend to be placed on varying term deposits, so say £350k on 3 months, £350k on 1 month plus various perms (95 day notice rolling is another useful term)
Catch is anticipating future needs re locking the funds away, as soon as I tie money up I just know we will find something we want to buy (Though our bank (we do not bother splitting multiple banks) will if push comes to shove lend short term against the term deposits is a property we want comes across our horizon at short notice)
I would first assess and plot the cashflow of the business with a view to understanding when cash is likely to be needed and look at future cash spending, expansion activities, projections, dividend payment, monthly cash burn and the like. Depending on the outcome I would probably want to look to keep a couple of months money as easy access and then think about keeping money as reoccurring fixes (i.e. say as 1 month, 2 month and 6 monthly fixes as appropriate) to maximize the interest rate vs accessibility. I know that you can get close to 4.75% for fixes at large UK national banks at the moment and despite your reservations my clients Business Bank Manager would be my first point of call for this - in fact I'm surprised that they haven't been in contact already!!! I would structure the fixes to ensure that your client would have some to access to a few months extra money at any point if needed. Beyond this timescale I would recommend your client speaks to an IFA who will not only have some suggestions for how the money could be best invested but also be able to ascertain your clients appetite for risk.
On 10th July (last rate sheet I have to hand ) on £250k-£499k deposit we were offered, call deposit 1.4, 1 month 3.49, 6 month 4.7, 9 month 4.85,12 month 5.31, 15 month 4.56, 18 month 4.39 and 24 month 4.28 (95 day revolving 3.45)
I have this morning asked for an up to date sheet as by chance we have some matured deposits I need to flip back from call deposit to term deposit.
The only thing with an IFA here is ensuring he does not steer company into something that might put in doubt say BADR re its shares or BPR re same, if an IFA is used an accountant ought to be advising the tax implications of anything beyond placing excess funds on deposit.
I've got a few clients with largeish cash balances in their companies (not £2.5 million, but much more than they need as working capital). Our practice works with a number of IFAs and one in particular is good at coming up with proposals for these higher-wealth clients (that is higher-wealth compared to my average client). The IFA has recently met with one client with large company cash balances and come up with proposals for the company. The IFA had no problem with the fact that it was a company.
Reading the OP, if the worry is specifically too much cash in one bank accoubnt then Flagstone would tick the box of reducing banking risk and raise the amount of investment income without needing to tie up the cash for too long. but agree with other comments about the need to look more strategically at plans for the business, future working capital needs etc. An IFA can look at the best way to protect the shareholder (s) but where is the business heading?
Going slightly off piste here but wouldn’t a cash rich company like this potentially benefit from a holding company / trading company split before getting into investments?
Depends upon the investments- cash deposits are passive other things might be considered active investments thus maybe giving rise to issues.
Not sure how holding company works here as company sitting below with investments might still give rise to same issue re how the holding co shares are viewed.
Splitting co in two might work but if surplus cash comes from trading then same issue will arise in future even if can split company, and splitting companies/demergers etc are not cheap.