The need for financial planning is pressing for most people, but for businesses owners it’s critical as they make decisions regarding compensation, taxes and succession planning.
Enter the financial quarterback, who can coordinate advice from investment, accounting and legal experts and weave it into an overall strategy.
For Nancy Grouni, a Toronto financial planner who performs the role, this kind of oversight is crucial for business owners to avoid costly mistakes that can come from attempting to integrate their complex financial needs and their personal affairs.
Grouni’s early career included financial planning and investment planning roles on wealth-management teams at BMO Nesbitt Burns and ScotiaMcLeod. She became a Certified Financial Planner and Professional Financial Planner and came to appreciate the value of unbiased, comprehensive financial planning advice for clients.
In 2013, she joined Objective Financial Planners, a fee-only, advice-only firm based in Markham, Ont., where team members work remotely and offer financial and estate planning, tax preparation and other services.
Grouni specializes in corporate financial planning for business owners and professionals such as doctors, dentists, lawyers and other specialists. She also works with single people, seniors and families at all planning stages.
She spoke with Canadian Family Offices about who needs quarterback-style planning, some of the top financial concerns of wealthy entrepreneurs and what strategies businesses owners are—or should be—using to manage their finances and enterprises.
What is your main focus as a financial planner?
I specialize in supporting business owner professionals with their unique financial planning needs. Whether they’re in the wealth accumulation phase or in the wealth decumulation phase, quite a bit of planning and coordination between professionals is required.
Why do these entrepreneurs need specialists like you?
The financial industry is set up very much on a piecemeal basis, so that each advisor is just really looking at their piece of the pie. The portfolio manager is often only considering the investment portfolio, the tax accountant typically focuses on tax return preparation, and the insurance professional is just looking at the insurance policies.
So clients end up being confused, and it’s not uncommon for them to receive contradictory advice, and that prompts them to reach out to us.
So you pull it all together?
Right. I’m the financial quarterback, someone who looks at the many moving parts of a client’s financial life to understand how these elements work together.
In a financial plan—or a life plan, as I like to call it—we’re looking to map out the rest of the client’s life: income, expenses, assets, liabilities. We’re looking for a trajectory of the personal assets as well as a trajectory of the corporate assets, and to understand questions such as: When can a client afford to retire? How much can they afford to spend now? How much should they be saving? To which accounts and when?
Are you finding a demand for this type of holistic knowledge?
For sure, because professionals tend to work in their own silos with little, if any, integration. The financial quarterback brings everybody together.
Is it helpful to have someone who’s totally objective in this role?
Yes, we’re on the same side of the fence, so we’re really starting from a place of trust, which is very different from situations where clients are working with professionals who are compensated based on products sold.
You take a huge tax hit to draw funds from the corporation, so planning is critical.
If I’m getting paid for the strategies that you pursue, then it’s going to be tough for me to give you unbiased advice. If I introduce you to professionals where I’m getting a referral fee, then you’re left wondering if I’m introducing you to this person because they’re in your best interest, or is it because I’m getting a kickback?
That’s the way the whole industry is set up. It’s based on the sale of product and it’s based on referral fees.
Tell me about the evolution of your field.
In the last decade, we’ve seen more and more advice-only financial planners. But just to provide some context in the financial planning landscape in Canada, we only have about 150 to 200 fee-only financial planners—and that’s individuals, not companies. By contrast, there are about 18,000 certified financial planners. Beyond that, there are 90,000 financial advisors.
What are the biggest financial planning mistakes you see among business owners?
At No. 1 is the failure to save for retirement and recognize the fact that they are their own pension fund.
Don’t entrepreneurs just say, ‘Oh well, I have money in the business that I can use when I retire’?
Right, but how much should they be saving every year? Sometimes that’s something that gets away from them, because they’re looking to fund life here and now. They’re looking to buy a home or they’re looking to upsize or renovate their home. Where’s that money going to come from? Usually it’s coming from the corporation.
What’s the second mistake business owners make?
The second area is lack of compensation planning and tax planning. Cash flow management is huge for a lot of business owners. Even professionals making large amounts of money may fall into the trap of thinking, ‘Well, I made a half a million or a million dollars in my corporation, surely I can afford anything. I can buy a bigger home, or we can do this massive home renovation.’
But that’s not always the case. You take a huge tax hit to draw funds from the corporation, so planning is critical, and the solution dovetails back to having a plan in place and having a compensation strategy mapped out.
Withdrawals from the corporation tend to be ad hoc rather than planned, which can spiral into cash flow and tax issues, even resulting in the use of debt as a Band-Aid fix.
And what’s the third mistake?
The third one is lack of a succession plan or an exit strategy. Advanced tax planning is really important, especially for a business owner who is able to sell the business.
We’re very much talking about the intertwining of living life and running a business. I guess we can’t separate these two things?
Running a business and taking care of your financial plan, portfolio and retirement planning needs are different skill sets. What I do is provide support in taking care of the latter so that the business owner can focus on what they do best, the former. Having a holistic plan that not only looks at corporate assets but also looks at a client’s personal assets and how the two integrate is key.
You see a lot of people who run significant corporations. Are some in a position where they should have a family office?
I do work with families who are at that stage, and it’s really a function of their net worth and the complexity of their situation. There are typically multiple corporations involved, as well as rental properties, commercial properties, etc. They have adult children who are sometimes part of these structures, or who are working for the business as well, and who need to receive comprehensive planning advice.
In order to weigh in on those types of issues, you need a team of professionals where you have a person acting as a financial quarterback, but where you also have a tax professional or tax strategist, in addition to the tax preparer, the portfolio manager, and perhaps even an estate planning lawyer and a tax lawyer as well. So you have a team of professionals weighing in on these complex matters and meeting together once or twice a year.
Is there a magic point where that becomes a family office?
It’s a gradual process. You’re working with a planner all along, then net worth accumulates and the complexity increases—maybe there’s an estate freeze in the mix and there’s now a family trust, there’s a holding company and there are rental properties and other moving parts, and family members need to be taken care of. Having a holistic financial planner allows families in those situations to build, and then we just add on professionals as needed.
Anything else to mention about corporate financial planning?
One other point is that a lot of clients feel like planning is a one-and-done kind of exercise. They say, ‘I have my financial plan. Now I’m good for the next decade.’ But it doesn’t work like that. We see planning as an ongoing process. Most of our clients check in with me to some extent every year.
Responses have been lightly edited for clarity and length.
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