The Business of Success: How to Manage Your Wealth for Generations

Canada’s top executives and entrepreneurs know that building wealth is one challenge, which they’ve accomplished. The next, greater challenge is preserving it.

From navigating concentrated holdings in their own companies to spotting the next big sector poised for growth, today’s CEOs and entrepreneurs are rethinking how they structure, protect, and grow their money in a way that is tax efficient, works hard for them and creates a legacy for future generations.

“Everybody needs help with their money, but make sure you have that trusted relationship in place with someone who’s humble.”

Terry Wright, wealth advisor and portfolio manager at LT Wealth Management/Raymond James.

What strategies could be considered to shape executive portfolios, the innovations worth watching, and the financial moves that separate the merely successful from the truly enduring?

Terry Wright, wealth advisor and portfolio manager at LT Wealth Management/Raymond James says there are several concerns, mostly around protection of wealth. “One is from an investment perspective, ensuring that the value of your wealth is maintained, not just on a nominal basis, but net of taxes, net of inflation and the wealth is still growing.”

Other concerns include protecting wealth from malicious players. Wright says that the more wealth someone has, the higher the risk of liability. “If someone wants to take a run at you for some sort of frivolous reason, knowing that you have all of this wealth, then how are you structured?” he says.

“This could be ensuring that if your children or grandchildren marry the wrong person, you know their inheritance or future inheritance, or even potentially current wealth is protected in case of separation. Or, your kid or grandkid starts a business that isn’t well structured and creditors are calling for more than what the business has available.”

Then there is the general management of wealth as the higher the net worth, the more complexity there seems to be with how wealth is managed.

““People get rich for their own reasons, and managing money is probably not one of them.”

Terry Wright

Wright says if your assets are in your name, one of the first things to do is to consider other ways to manage your wealth. One option could be a family trust. The benefits of having a family trust is that it reduces your personal tax burden and the family trust can’t be sued the way the individual could be.

Then there’s having an insurance strategy. Having a life insurance policy means your beneficiaries can receive that money tax-free. If you have life insurance that’s owned by your business, not only are the premiums paid for by the business, the funds can be used to support growth, provide cash for a buyout for your business partners, and help with succession planning. The money can be used to support the business during a transitionary period.

“A number of strategies that insurance agents have come up with over the decades, are entirely based on one kind of core simple rule, and that is the benefit or the proceeds of life insurance benefits are effectively tax free,” Wright says. “In a lot of cases they save clients thousands, if not millions, of dollars.”

When it comes to building a team, “Having some sort of management company could be considered, setting it up so that however you’re able to receive growth of stock, or whatever asset is inside the management company, which itself is a separate entity,” he says. “And itself provides additional layers of protection, as well as potential income tax splitting benefits.”

Wright emphasizes having an advisor and personal chief financial officer. “People get rich for their own reasons, and managing money is probably not one of them,” he says. “Everybody needs help with their money, but make sure you have that trusted relationship in place with someone who’s humble, so that they can be the one that can help you with your options for what your complexities will be.”

They can advise you on how to protect and diversify your wealth. If you’re interested in alternatives like AI, green technology, and infrastructure investments, they can guide you on whether that makes sense for your portfolio, though Wright advises that if you don’t understand it, it may not be the best investment.

If you prefer not to be involved in the day-to-day running of your portfolio, the CFO can manage that for you and can correspond with the insurance people, with the estate planning lawyers, with the private bankers, with the accountants and with the management consultants.

Another person to have on your team could be a PR expert. They can make the difference between a routine diversification move being seen as strategic or being misinterpreted as a red flag, says Wright. One example is when a company buys back their stock. It may be a good or bad idea for the company itself but the media perception could be negative, as seen with the Air Canada stock buyback. Having a strong PR voice ensures your financial moves are understood in the right light.

While we’ve talked about having a trusted team around you, there’s no immediate need to create or join a family office. Start with a trusted wealth advisor and grow from there. From there, consider your net worth. “[A family office] can be very expensive, but it can also provide a lot of cost savings if the value is there,” he says.

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