Risk tolerance, time horizon (the period between now and when you actually retire) and asset allocation – you’ve dealt with these factors for a good part of your life, but now, in the face of retirement, they take on a more urgent and significant role.  These factors – particularly tactical asset allocation – are vital to maximise your assets before retirement.

A different take on risk tolerance and time horizon

As your time horizon shrinks rapidly while you progress towards your retirement, your risk tolerance lowers accordingly.  These two factors dictate not only your plans for each asset you own, but also your portfolio in general.  Use risk tolerance and time horizon as principal factors to readdress your portfolio because it’s time to tip the balance.

Leverage tactical asset allocation

It’s time to ramp up percentages of income generating assets and minimise the number of growth inducing ones.

Let’s say you have five years to retirement; income generating assets can be maximised during this time horizon by assessing short term investment opportunities and tactically investing heavily in assets that are sure to be influenced by macro and micro economic factors.

Now is also the time to reassess which of your growth assets you should retain beyond retirement. Retirement will ideally afford you more time to enjoy life’s pleasures, like playing golf and travelling, so you’ll want to make sure you’re financially set up to actually afford them.  You probably want to be a lot less busy in your retirement than you were when you were working.  Choosing only a couple of your best growth investments allows you to do just that.  This move allows for more income investments and tactical asset allocation to maximise the time horizon you have remaining.

Going from strategic to tactical is a shift of long term planning to short term thinking – what economic or financial factors during your time horizon would affect which assets?  Invest more heavily in them while you still have time.  Free up more long term assets to focus on the short term time horizon and re-balance your portfolio after retirement.  If the generated return of each tactical allocation increases by a favourable percentage, you’ll have a more prosperous retirement to look forward to.

Gearing up for the tactical shift

Tactical asset allocation requires a semi-active approach, especially when your time horizon shortens.  A passive style of strategic portfolio management protects itself from market shifts by gaining justifiable long-term returns instead of tolerating more risk, which might result in more loss a decade or two down the line.

When shifting to an active style of portfolio management as you approach retirement, changing your passive, strategic mindset may prove more taxing than you imagined.

Even for successful professionals, the notion of finality that retirement brings can be daunting.  You wind up wondering if you have enough in your portfolio, if you’ve done enough with your investment strategy and whether you need to do more.  Tactical asset allocation is a savvy move if you want to maximise your assets just before retirement and, best of all, it requires only a change of mindset and investing patterns.

If you want help in assessing your retirement plans and maximise your assets before retirement, talk to us today.  Our team of accountants at BSN & Co can help you achieve your goals.

Prepare an exit strategy in Perth

Minimise risk by having an exit strategy in mind

Research has repeatedly shown that businesses which are prepared for the owner’s exit are significantly more likely to succeed in the future than those which have not.  These guidelines on how to prepare an exit strategy in Perth can help your business legacy live on and give you a satisfactory result.

1. Preparation delivers the best results

The key message is this:  it pays to prepare an exit strategy in Perth now – don’t wait until it’s nearly time to go.  Life is full of unexpected turns and you may not have the time to do what’s needed to get the best results.

2. The main barrier

The chief impediment to a successful exit strategy is procrastination.  It’s all too easy to convince yourself that you’re too busy at the moment, that you’ll start the process next year or whatever future date you rationalise as being reasonable.

All sorts of issues could underlie this procrastination.  One is the dislike of facing up to the future; another is a reluctance to delegate responsibility to others.  Like many business owners, you may have persuaded yourself that no one can do it as well as you.

3. Develop a succession team

There are advisors out there, such as accountants, who have helped other business owners formulate and help you prepare an exit strategy in Perth.  Find them and tap into their knowledge.  There’s no point in reinventing the wheel on your own.

4. Make the business affordable

If you intend to pass on the business to family, or perhaps to a management team, one major issue can be making your business more affordable.  You may need to make some structural changes such as separating the business into two parts:  one company owning the operating part and a second company owning the assets such as your premises or your equipment.  Retaining the asset owning part and leasing the assets to the operating part could give you a tidy retirement income, but these structural changes can take time to bed down.  So again, don’t delay, start now!

5. Decisions and training

If family or management are your desired successors, you will likely face issues around fairness to everyone while retaining the skills of key staff.  These issues will require careful thought and, again, you will benefit from the experience of your succession team.  Their impartiality can help take the heat out of potential conflicts.

The next step is to start training your successor(s) – again, a process that takes time.  One major hurdle business owners must often clear is learning to delegate.

6. Improve the business

If there’s no one suitable or interested in your family or management team, an outside buyer will be your next target.  This is when your accountant can add value by helping you prepare the business for maximum sale value.  Any recommended changes could range from better business systems with, say, an updated customer database, to tighter money management through key performance indicator monitoring.  You’ll want to show the buyer they are gaining a well run business with efficient systems that will make the transition as painless as possible.  Of course, all this is worth doing at any stage.

If your business is presently based largely around you, you’ll also want to show that it can stand on its own without you.  Making these changes can take time.  Did we mention that it pays to prepare your exit strategy now?

Make sure your business has a positive future.  Speak to us today to discuss a succession plan for your business and its future we can help you prepare an exit strategy in Perth