Our son does not want to continue the family business.

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Hello Shade,
I need your help. My wife and I have worked hard building our business with hopes that our son would one day join the business and eventually own it when we are retired. We sent him to a business school abroad only for him to return with a photography degree. He is our only child but he is not interested in the business we have built and all our plans for him. If he insists on not joining the business, how can we keep the business alive after we are retired or even gone?
Kenneth, Abuja

Hello Kenneth,
I empathise with you regarding the actions of your son. Many parents are increasingly surprised that their children would rather pursue alternative careers other than the ones they desired for them. In many cases however, such children have gone ahead to excel in their chosen careers. Although as parents, we hope that our children follow our directives, we sometimes have to lend our support if they choose to pursue their dreams instead, hoping for the best. While it is yet possible that your son eventually returns to the family business, the best approach to take at this juncture is one that favours both the business and your son.

To ensure that your business survives and continues to run into the foreseeable future, I would recommend that you create a Trust and transfer your shares or other ownership interests in your business to the Trust. The Trustee as owners of the business would run the business by appointing and overseeing the management of your business in the event that you and your wife are retired, become infirm or pass away. You may retain control of your business through the Trustee while you are alive. The income generated by the business would be held by the Trust on your behalf and for the benefit of anyone you may nominate as beneficiary.

You may name your son as a beneficiary and specify that the Trustee may provide for the welfare of your son (or grandchildren) in the Trust. In order to make your son more responsible, you may include “Spendthrift” provisions in the Trust. A Spendthrift provision may state, for example that unless your son is in formal employment, reaches a certain age or has an alternative and verifiable legal source of income, he would not take benefit of the funds or assets in the Trust. Should your son eventually choose to honour your wishes and return to the business, you may make provision for him to do so as well.

I believe this may be in the interest of your child as well as preserve the business. In the words of Warren Buffet, one should leave children with ”enough money so that they would feel they could do anything, but not so much that they could do nothing.” You may also designate alternative persons or entities such as charitable organisations to benefit from the Trust in the event that the assets do not pass on to your son or grandchildren.

Tough Times don’t Last, But Tough People do…

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Are you an investor trying to keep your head above the waters of this economy?

Our smart investment tips are designed to help you make sound investment decisions in this tough economic clime. Please see below;

  1. Borrow less

Think twice about taking on more debt, focus on business opportunities that do not require more capital than you can afford.

  1. Learn Something New

There just might be a more rewarding way to go about your business. Make it a goal to learn something. For instance, you might want to look up the difference between mutual funds and bonds.

  1. Master your emotions

Don’t make your most important decisions under duress. Think about it again and again, be sure it is the wise financial move to make.

  1. Diversify your investments

Spread your risk by investing in different asset classes (equities, property, commodities, bonds and cash)

  1. Reduce operational costs

Reduce your overhead as much as possible. A good way to do this is to consolidate your brokerage accounts so you can negotiate lower management fee.

  1. Get quality Financial advice

Be careful who you are listening to and from whom you are getting investment advice. Get informed quality financial advice from ARM Securities.

  1. Create multiple streams of income

Scarcity and inflation are opportunities in disguise, find that thing you can exchange for value or engage in a passive investment such as a Money Market Fund.

  1. Avoid volatile sectors

A good risk appetite might not favour you at a time like this. Channel your resources to sectors that deal in goods and services that cater to necessities of living.

  1. Build strong relationships

Build relationships that ensure you are in a network of people who challenge your thinking and provide a well of valuable information from which you can tap.

  1. Have an emergency fund

It is important to stay liquid at a time like this. Do not invest all your money, leave something to fall back on.

  1. Invest in income producing assets

This is a good time to build a dividend portfolio. However, not all assets are income producing. Contact ARM Securities for tips on how to build a profitable portfolio.

  1. Creatively solve problems

Not all challenges require money to solve them. Look within before you look without, there just might be an efficient but less expensive way to solve that problem.

Do you require expert financial advice or would like to know more about our investment portfolio management and stockbroking services, talk to us today.

Breaking It Down – The 80/20 rule

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You have probably heard of the 80/20 rule and wondered what it means or how it applies to you. Also called the Pareto law, the 80/20 rule states that across every facet of life, the vital 20% is responsible for and controls the mass 80%. In everyday terms, it means that you wear 20% of your clothes 80% of the time, the vital 20% of your staff are responsible for  80% of the work done, 20% of your clients bring in 80% of the profit you make and 20% of the population are privileged to be in leadership positions, thus controlling the 80% mass.

Think about it, you may have a thousand names in your client database but you know your customers, the ones who buy again and again. They constitute your 20%. No matter how filled your wardrobe is, you most likely have that pair of jeans or shoes you pull out by default. If the amount invested in your wardrobe is calculated, those work clothes or comfortable tees perhaps account for just 20% of the money spent but they do 80% of the work and appear 80% of the time.

Applying this principle demands that we focus on the vital 20% and the 80% will be sorted. This applies to business, work ethic, relationships and investments. Identifying the 20% is pertinent to maximising resources and achieving greater results. Man’s needs are unlimited but again, only 20% of those needs are essential 80% of the time. Such that if physiological and safety needs are met, the other needs can easily appear as wants. Hence the way to build sustainable wealth is to channel 20% of your income towards the future while channelling the remaining 80% to solve the vital 20% of your unlimited needs.

It starts with dissecting your 100. Of all the money you make, only the one you save is yours to keep. The money spent on things goes to the people from whom you buy.   It is therefore wise to pay yourself first before you pay others. Since the 20% is channelled towards your future, the 20% is the money you pay yourself. Thus, in distributing your 100, you must first pay yourself with your 20%. Paying yourself does not imply pampering yourself, no. It implies saving the 20% or investing it to grow and yield more for you. Remember that 20% is supposed to grow into 80% of your wealth.

To meet your needs, you then budget your 80% based on your lifestyle and expenses. Always start from the vital 20%- food, shelter, transportation, health, adequate raiment, your faith and valued relations. Each will get a percentage of your income.

It is essential to measure growth, setting timed goals for the 20% you are paying yourself is paramount. Your goal must be such that will advance you and move you closer to the fulfilment of your dreams.

In subsequent editions, we will discuss maximising your 80% and setting financial goals for your 20%.

Do you have questions about the 80/20 rule? Can you think of other aspects of life this rule applies? Let’s discuss in the comment section.