Using cash flow planning to demonstrate the viability of making certain decisions

A business owner, who sold his business for a significant sum, but had extremely high ongoing annual expenditure, was reassured following a cash flow planning exercise.

We were able to both demonstrate the sustainability of the expenditure pattern and show that our client could consider gifting to help his children acquire properties.

Background

Our client aged 49, married with three children. Recently sold a very successful business generating a considerable capital sum albeit at the cost of losing the large ongoing income this generated.

Assets

UK Homes £1,000,000
Cash £200,000
Investments £1,000,000
Pension Funds £1,000,000
Holiday Homes £1,000,000
Sale of business c£4,000,000

Challenges Faced

1.    Sale of business – Loss of income

Having sold the business the client was no longer in receipt of a regular income.
However expenditure pattern is very significant and client questions if this is sustainable.

2.    Then what?

Unsure what to do with the proceeds of the business sale – should it be invested, spent or gifted?

3.    Gifting ?

The clients children are either at or approaching further education age and he is keen to support this as far as he possibly can and also wishes to consider if he can purchase a property for each of them.

What we did

We undertook a comprehensive lifetime cash flow modelling exercise for the client and were able to demonstrate that, with sensible investment, the clients high quality lifestyle could easily be maintained .
Having established the above we then worked with the client to ascertain his true risk profiles and build a bespoke investment strategy for him, utilising investment specialists for the more ‘adventurous’ aspects of his portfolio.
The client was then able to use some of the business proceeds to place funds in trust that in turn could then be used to purchase properties for his children.

The Result

In reality this client’s main concern was that as a ‘self-made man’, his new found ‘super wealth’ would not be able to maintain the lifestyle he had adopted.  The thought of having to work / start again was also a very real concern for him. By undertaking cash flow modelling we were able to demonstrate emphatically to the client that he and his immediate family were very financially secure. This then enabled an investment portfolio to be created that could meet his growth requirements and still leave him with a substantial amount of capital. This capital has been used to make immediate gifts to his children (via trusts). Furthermore, as a businessman, it has provided him with capital for more speculative investing. Speculation, safe in the knowledge that his family finances are covered by the main investment portfolio.