The article “Real-life cases show benefits of ‘quarterback’ planning for business owners” was originally published in Canadian Family Offices on March 4, 2024.

These individuals are prone to suffer financially when well-intended advice comes solely from siloed advisors, writes Nancy Grouni.

As a Certified Financial Planner who specializes in working with business owners, I’ve observed that they have more complex financial needs and, as a result, are at a greater risk to suffer financially due to a lack of planning integration.

For example, there tends to be a fine line drawn between business and personal assets and planning, whereas integrating the two would maximize outcomes. I think this happens organically rather than intentionally.

Two main factors are at play.

First, the financial industry is still mainly set up on a piecemeal basis so that each advisor (from tax accountant to insurance advisor to investment advisor) is primarily focused on one particular aspect of a client’s finances. Financial planning may be generally offered to high-net-worth clients only, and even then, the advice/plan may be biased given the sale of product/acceptance of resulting referral fees.

Secondly, business owners may be so wrapped up in the day-to-day running of their business that they neglect other aspects of their financial plan and fail see the big picture. They have good intentions but too little time to research, develop and never mind implement a plan.

As a CFP and financial quarterback, I’ve observed that the result is stressed out business owners who feel they are falling behind and not where they thought they’d be financially.

Here are a few of my real life case studies highlighting the benefits of holistic, integrated business planning for business owners.

Annual corporate compensation

Business owners can pay themselves either salary or dividends. Which is best? And how much should be paid out?

One of my clients inherited a large sum of money but had been planning to pay herself a massive bonus from her company as well. With all the stress of losing a loved one, she hadn’t thought about the tax implications.

In consultation with her tax accountant, we recommended that she use personal taxable assets to fund living expenses in that year, thereby keeping her personal tax rate down (due to lower taxable investment income) and readjusting annual corporate compensation downward to reduce tax.

Premiums for whole life/universal life insurance

Permanent life insurance may be used as an estate-planning strategy for business owners. However, large policies are often sold to clients who then must pay large annual premiums when they simply don’t have the cash flow. A financial plan can help identify how much insurance, if any, is needed, along with sustainable annual premium payment amounts.

One couple came to me feeling overwhelmed with their insurance holdings. They were paying $200,000 per year into policies they simply couldn’t afford. By liaising with the insurance advisor, we were able to redesign a policy with lower payments that better suited their needs. They now feel at ease and in control of their business cash flow and overall financial plan.

Gifting pitfalls

Parents may wish to give significant funds to their children. But how much can they give without compromising their own retirement? When and how should they give the funds? How should this impact their investment strategy across their various accounts? Which account should the gift be funded from – personal assets, corporate assets or a combination?

My clients decided to give $500,000 to their son over the next couple of years. Meanwhile, their portfolio was virtually all in equities. What would happen if the stock market was down when they wanted to give?

In collaboration with their tax accountant, we determined that triggering capital gains in the corporation would allow for tax-free capital dividends to be paid. Next, in consultation with their investment advisor, their corporate asset mix was adjusted to reflect a more balanced mandate.

The benefits of an unbiased financial quarterback

You can have good individual professionals advising you – investment advisor, lawyer, accountant, insurance agent – but if they’re working in silos, you will likely have gaps. We’ve seen cases where the advice even ends up being contradictory and requires further consultation to iron out.

Holistic, integrated planning for business owners means having an unbiased financial quarterback in your corner, coordinating with your professionals on a regular basis. The tangible results can be substantial in terms of annual savings and overall net worth.

Non-tangible results are hard to quantify, but at least equally beneficial. After all, how do you put a price tag on reduced stress and increased peace of mind knowing that your integrated financial plan is in place, being regularly reviewed, and your business and family looked after?

Nancy Grouni, a Certified Financial Planner and Personal Financial Planner with Objective Financial Partners Inc., specializes in financial, tax and estate planning for business owners and professionals. She is based in Markham, Ont.