There are unique combinations of traits and talents it takes to be a successful entrepreneur. Words and phrases that are frequently used to describe these dynamos of business include: innovative, passionate, committed and risk taking. Less spoken about, but no less important for entrepreneurs who achieve a legacy, are planning and pragmatism.
South Africa has a proud history of impressive entrepreneurs who have defied the odds and those individuals have paved the way for subsequent generation of entrepreneurs; equally passionate businesspeople navigating a challenging and changing global world.
Many of these individuals are FNB Private Wealth clients, who seek our advice not only for their businesses but also for their personal and family investments. Over the years we’ve observed that successful entrepreneurs are those who invest not only extensively in their business, but also outside the business in order to ensure that their wealth is sustained in the down times and that their family’s lifestyle remains unaffected in the event of any economic uncertainties.
In our experience, entrepreneurs are positive; they see the upside, they spot opportunities and they are quick to adapt when the need arises. They are also extremely pragmatic, which is why we guide our clients towards a careful balance of individual and business risk and work hard to find ways in which to sustain their wealth for both themselves and their family.
Step one, is doing your homework. Work with your Wealth Manager to consider all the factors and options at hand before committing your hard-earned money to any form of investment. Then ensure that your investment trajectory fits your current circumstances and that the future prospects align with your requirements and objectives.
For the entrepreneur, this means analysing not only your current business situation and trajectory, in the context of the local and global economy, but also the status of your personal investments. In other words, financially speaking, where are you now and where would you like to be?
Once you have determined how much you can commit towards your investment strategy, you need to quantify the period over which you intend to invest. Investing for less than two years is considered short term, while a period of between three and five years is regarded as medium term. Long-term investing is anything in excess of five years.
Determining these needs and the right investment selection comes down to a specific approach which takes into account both the entrepreneur’s business interests and their personal needs and wants. This ties in closely with the level of risk to be incorporated into the investment plan, or the risk or return profile.
As an investor you are ultimately compensated in terms of returns based on the amount of risk you take on. For example, equities are considered to be one of the riskiest assets but there is also a high probability of high returns. Conversely, keeping your money in a bank account is considered less risky, but the potential for making high returns is low. As an investor, you need to select investments that best suit your risk tolerance.
As an entrepreneur, for example, you might consider the easy access to equity investments to be more favourable than tied-in, long-term investments. Or, your portfolio needs to make provision for a balance of both. For example, if your business runs into a lean patch, there is the possibility that you may need to access some of these funds immediately. Speak to your Private Banker about putting in layers of access in for the form of liquidity enhancers which recognise the nature of entrepreneurship and the possibility of needing access to easy cash.
That said, it is vital to ensure the security of your family and individual investments. A balanced portfolio offers the best combination of assets – from equities to bonds, property or cash – to ensure steady and stable growth, without jeopardising the future of your family’s financial wellbeing.
A good example of this is the Ashburton Houseview Solution. This is a direct share portfolio which comprises shares, listed properties, bonds and hedge funds, both locally and offshore. The portfolio aims to maximise investors’ returns at moderate levels of risk. Most investment houses have different versions of this type of investment, which you can access both directly and on a unit trust basis.
Ultimately, the best advice is just a phone call away. Your Private Banker together with your Wealth Manager can weigh up your business demands and family obligations and recommend the most favourable solution for the long term.
Writer : Gugu Sidaki