Partners in professional services are often time poor, but know the importance of putting in place a solid financial platform, that guides them through how to grow capital, achieve financial goals and provide for loved ones.
Having a bespoke financial plan that balances priorities for higher earners – taking account of your current lifestyle, short- to medium-term investment planning, long-term goals and risk appetite – is key to help deliver the financial results you need.
We look at some of the key issues for partner-level investors and the benefits of working with an adviser who understands the particular priorities for high earners, to create a plan that is expertly tailored to your requirements, at different stages of your partnership journey.
How to grow captial: Becoming a partner
Congratulations, you have been made a partner, but what does this mean in practical terms? How will you grow your capital? Well, firstly, you will need to make an investment in the company – and this amount may depend on how well your firm is capitalised, rather than its size.
Most new partners will take out a loan for this buy-in amount, and your firm may have arrangements with banks to loan new partners the amount needed. This initial 18 months is therefore a great time to decide how to grow capital, build up cash reserves and liquid investments and maximise your tax options.
Consider creating a financial security plan right at the start of this new phase of your career. This will reflect how profit share and drawings will increase your earnings and enable you to grow capital. It should include investments for the different stages of your life journey, moving into exit planning and provisions for your loved ones.
Providing structure to your savings and investments in the early stages of your partnership, rather than immediately starting to spend large chunks of your earnings, will ensure that cash flow remains fluid – though whether you are a newly established partner or senior, cash flow challenges can still occur periodically.
How to grow capital: During partnership
After the first couple of years of being a partner, and with an increase in units/partnership points, you will feel more confident about purchasing aspirational items, moving more fully into your new lifestyle, diversifying your assets and focusing on how to grow capital. But how do you make the most of your earnings, and ensure you are investing enough to achieve your goals?
There are many different ways to invest and grow capital. Perhaps you want to consider different, interesting investment, that you will enjoy owning. Additionally, many investors are now considering the environmental, social and governance (ESG) of the companies they invest in.
When considering how to grow capital and incorporate investment opportunities into your personal financial plan, consider tax-efficiencies such as prioritising pension contributions, ISAs and making the most of family allowances. In addition, make sure you factor intergenerational wealth and estate planning for the later stages of life and consider how growing capital can best work to pass on your wealth.
Exiting partnership – make sure you have enough
Moving to the final cycle of your career may seem a long way off, but incorporating an exit strategy and retirement planning into your decisions on how to grow capital, will help ensure you have enough money to fund your later years – in the style you want.
Whether your aim is to retire, move into a non-executive director (NED) or advisory role, or to start a new business, there are some things to consider when leaving your partnership.
Think about how to grow capital and assets, moving to a different side of the balance sheet, while paying off any residual partnership loan. Once you leave your firm, your capital is returned, but this is usually one to three years later – so don’t make big plans to spend it immediately.
Typically, in the later stages of your career, or in retirement, three or four strong assets will be sufficient to grow capital and make it work hard for you, to help maintain your lifestyle – building a mix of assets held in products that have tax efficient allowances.
How Morrinson Wealth can help
However, and whatever, you want to invest, Morrinson Wealth can help you plan your investment and create a financial plan that works best for you. This is the service we can provide you in reference to this article.
To find out more about how Morrinson Wealth’s experts can advise you on how to grow capital, get in contact.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.