The private bank Kleinwort Benson wants to help Greater Birmingham’s successful entrepreneurs plan their future financial security. BQ finds out more.
As the UK’s economic recovery picks up speed, more and more privately-owned businesses are experiencing rapid growth. And this success is happening faster in Greater Birmingham than anywhere else outside of London, according to Kleinwort Benson.
The private bank’s recent research has found that 381 private businesses in the region had annual profits of at least £2m, and of these 32% were growing at more than 50% per
year. As a result, Kleinwort Benson’s own business in the area has grown by 30% in
the last 12 months.
Paul Bentley, head of entrepreneurs at Kleinwort Benson, said: “Greater Birmingham is really showing its mettle as the UK’s second city, and entrepreneurialism is really flourishing there. Because of that, we’re meeting and helping more of the region’s successful entrepreneurs who need advice on what to do with their wealth. And it’s often useful for this relationship to start at an early stage.
“Being an entrepreneur can be a lonely place, as you are the person making day-to-day decisions on virtually everything. And so having conversations with those business leaders while their companies are still growing can be really useful – sitting down and asking them what it is they need.
“That’s when Kleinwort Benson can start to share its experience and ideas with business leaders. We can find out where they are heading with their businesses. And we can ask if they have the right team: do they have the right person giving them legal advice? Do they have the right person giving them corporate finance advice?
“By getting to know entrepreneurs, it might be that we can open our contacts book and give them two or three names, perhaps local to them, people who have experience of working with entrepreneurs, and who might be able to help their business.
“We’re not wanting to trample over existing relationships, but sometimes it’s good for entrepreneurs to have some outside input, even if they end up sticking with the same people.
It’s all about making sure people they have the right teams around them to make the best choices for their growing businesses and their eventual wealth.”
To build its relationships with local entrepreneurs, Kleinwort Benson is organising a series of exclusive dinners in the Greater Birmingham area, each one with an interesting speaker. Paul Faulkner, the former chief executive at Aston Villa and Nottingham Forest football clubs, was the speaker at Kleinwort Benson’s dinner in October, held at Hotel du Vin, in Birmingham. He told guests about his time on the business management side of football, and contrasted it with his new career as chief executive of Greater Birmingham Chamber of Commerce.
Bentley said: “Paul Faulkner was a really impressive, eloquent speaker. We had around 15 guests attending the dinner who were entrepreneurs – successful owner-managers – and they were able to listen to his experiences and find out how things had gone in Paul’s professional life.
“We find that having a private dinner, with Chatham House rules, is a really good way of introducing ourselves to entrepreneurs. People are relaxed and find it useful both listening and sharing their own experiences, learning from each other. It’s amazing how receptive people are. It also gives Kleinwort Benson the chance to find out about people. It’s not about saying: ‘We’re Kleinwort Benson and we have something to sell you.’ Instead, it’s very much about saying: ‘What is it that you might need help or advice with?’
“The time when we’re actually going to start working with these entrepreneurs is during their approach to sell the business, helping them to manage their wealth afterwards. Even then, we don’t expect to be the only call people make when they sell their business. But we do want to be the first call they make. And we’re aiming to be the first by helping them at an earlier stage when they’re building their business – helping them to make connections, and getting involved by sharing experiences
Bentley explained that it’s once entrepreneurs are at a ‘post-exit’ stage that he and Kleinwort Benson can really start assisting, by talking people through what they need to consider.
He said: “Selling a business might, for example, result in proceeds of £20m. That’s all well and good, but it’s also a huge amount of responsibility for someone to suddenly have. Until that stage, they would often have been used to receiving dividends and a salary – whereas now they have a large amount of money in the bank and need to do something with it.
“That’s when we take them through a step-by-step approach. Step one is to take a deep breath, and to let the dust settle, especially when a business has been such a large part of their life for a long time. So many people have loads of plans only for those to change entirely over the next six months, so it’s important to take things steadily.
“Then they need to use their money to secure both their own and their family’s future. What we often explain is that for every pound of annual income they want, they are going to need £30 of capital to secure that. This tends to give them an idea of what they need to do to secure their futures.
“Then they can start enjoying themselves. They might want to buy a boat, a smart car or a luxury holiday, and having secured the family’s future that’s when they can start having fun. And finally, for many people, there will still be money left over. That’s when we can start talking about how to give the money away, perhaps via charitable organisations, or by providing finance for their children.
“But at all times at Kleinwort Benson we apply a logical way to deal with this process. Over the years we have advised a large number of people who have sold their businesses, and our guidance starts by sharing experiences with other entrepreneurs.”
Bentley entered the industry after studying a finance degree at university, initially working at Prudential and then as a consultant at Mercer, before moving to Kleinwort Benson in 2003. He has always believed in and acted upon the principle of never giving financial advice that he himself wouldn’t act upon.
He said: “Working with businesses as they grow is a fascinating part of my work. I particularly enjoy guiding them when selling their businesses, but am also pleased if I can accompany them through the early stages, providing instructions around funding and working as a team with their lawyers and other advisers.
“Another rewarding aspect is the close work with families. It is the very nature of a private banker’s role to work closely with a family. I get a lot out of knowing that I have had an impact on the security of future generations, or calming the sort of financial worries that we all go through from time to time.”
According to Bentley, entrepreneurs often differ from other clients because they are often what might be called “the first generation of wealth”, in that their financial success is self-made as a result of their businesses.
He said: “Funny though it sounds, this period of life which is essentially the first time a person or family has had a significant amount of money poses its own problems. It’s a huge responsibility to take on. Having worked 24-hours a day, seven days a week to realise this situation, once the ultimate goal has been achieved, it can often take a bit of adjustment.
“There’s the impression that entrepreneurs are born risk-takers who, if they sell the business, are going to want to be as aggressive in their financial affairs as they have had to be in building their businesses.
“In my experience, the opposite is true: having worked so hard to build and realise the value of their business, entrepreneurs are often very conscious of the importance of conserving their wealth. In many cases, rather than putting aside money for the next venture as you might expect, the bulk of their capital is used to provide them and their families with financial security for the rest of their lives.”
Bentley said that another difference with entrepreneurs is their initial wariness at handing over the responsibility for their wealth to a financial advisor.
“An entrepreneur has invested so much of their time creating their own business, which includes running a team,” he said. “So handing over the responsibility to a financial adviser does not feel like the natural thing to do.
“By working closely with my clients for many years before they sell their business, I have found that I am able to build up the sort of rapport and trust that is required for them to have that confidence in me and my team.”
Whatever the challenges, Bentley said his overarching emphasis is to put the client first: “Being a private banker requires you to be one step ahead of your client at every point: think ahead, second guess the future, and, above all, never give advice that you yourself would not act upon with your own money.”
Kleinwort Benson is planning more private dinners in Greater Birmingham in 2016, because it wants to continue to get to know more of the region’s successful entrepreneurs.
Bentley added: “I’m really keen to get to meet those entrepreneurs – both when they’re ready to sell but also at earlier stages so that we can get to know and understand them and their businesses.
“Kleinwort Benson has a wealth of knowledge and experience in providing the advice and direction which enables individuals to meet their new financial goals. The steps to achieving this involves the securing the cash proceeds, timely disposal of vested stock, establishing tax efficient vehicles and the maintenance of a regular and consistent income to replace salary.
“We have guided numerous entrepreneurs and business owners in this way through the sale of their businesses, helping them to plan the next phase of their lives. And I hope we can continue doing the same for more and more successful entrepreneurs across Greater Birmingham.”