Press coverage

Newspaper stories abound about the inability of many big lottery winnders to cope with their change in fortunes, underlining just what's at stake. Serious wealth is a big responsibility, especially when you want to do the right thing by familiy, too.

In the South West, there is a notably high proportion of owner-managers, any many will achieve wealth either through selling their business or in the process of making it successful. While many directors will have a headstart in understanding financial issues, the risk is that you become so involved with the interests of the company that you fail to plan personal fincances. And if you sell and make a lot more the challenge is greater.

"The newly liquid entrepreneur has suddenly become the chief executive of a new company, My Wealth Inc, a job for which they have no training," as Charlotte Deyer, founder of US-based membership group the Institute of Private Investors, neatly puts it.

Andrew Sandiford, head of the Bath office of an accountancy and business advisory firm Target, says planning needs to start early, whether you have a sale in your sights or whether you wish to derive greater financial benefit from business without a sale.

"Many owner-managers are unaware of just how much of their wealth is concentrated in the company," says Sandiford. "If these were liquid assets, they would not dream of putting them all in one place; they would spread them out to reduce the risk.

"The issue is amplified because during the downturn many owner-managers have seen it as essential to plough money back into the business. But, in personal terms, this is often a short-term approach that can create problems two or three years down the line."

There are ways to take assets out of the business without risking damage to the company. For example, there may be a property that needs to be used but not owned by the company. This could form part of an individual's pension strategy, with the company leasing the building back.

Having managed to amass a decent amount of money, the trick is to make it grow even more, but with intrest rates at rock bottom, it's not as easy as it once was.

"Wealthy individuals are having to review their finances in response to changes in the investment landscape," says Rob Jones. South West area director with Barcleys Wealth, "In particular, the drop in intrest rates has made mroe traditional bank accounts considerably less attractive, so clients are more willing to consider a higher level of risk to generate better returns.

"That doesn't mean anybody is getting more careless with their cash, though. In the wake of shocks such as the collapse of Insurance giant AIG, people are taking more intrest in the financial security of the companies looking after their investments."

But even with a greater appetite for risk, the essential rule is still to spread the money around. "The key is a diversified portfolio with different asset types that will respond to market events in different ways," says Pamela Reif, head of Bristol office with investment management group Quilter. "However, any strategy depends on an individual's financial aims, and getting an accurate picture of this is more art than science, This in turn means a strong relationship between the client and their investment manager, and effective communications so the individual has a plan that suits their personal goals."

Tony Locke, a senior consultant with Target Financial Management in Bath, adds: "We use a detailed questionnaire to assess the level of each client's appetite for risk. This results in a much more accurate appraisal of an individual's risk profile.

"An effective portfolio will take in a broad range of equities, fixed-intrest securities and cash, with diversifications such as commercial property and commodities making up the balance. The key to success is then using effective tax planning and, with investment planning, focusing on saving tax through initiatives such as the Enterprise Investment scheme and venture capital trusts."

Of course, some individuals may believe they can do a better job themselves, without advice from an investment management professional. For Jones of Barclays Wealth, the level of an individual's condidence in the skills of the investment management industry forms part of the financial personality assessment before coming up with a strategy.

"While we can offer a holistic approach to investment management, some people like to invest independently in UK shares as well, perhaps as a hobby," he says. "That's perfectly reasonable, but the enthusiasm can wane when someone realises the time and care required for successful equity investing."

Whatever the final approach, it pays to get help early. "Get plently of advice early from all relevant sources - such as accountants, solicitors, corporate finance experts and wealth management specialists," says Jones.