Wealth Management - How to Invest €6M - Where to Get Advice

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Always Learning

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Hi All,
I'm completely new here so I'm not familiar with the forums but I think I'm in the right section for this post.
I have recently sold a business, from this sale I will end up with €5 - €6M net to invest after setting aside a little pot for immediate purchases / gifts. I want to make an annual yield of 10% on this. I intend to draw down around €200K per annum from the investment as a wage and allow the rest to build up for further investment. I have borthers who are not involved but who I would like to pay some kind of dividend / wage to over the years also.

I have a few questions

- Has anybody used wealth management services before, do you have any company you would recommend, can you elaborate on the process.
- Is there any reason not to invest all this is commercial & residential property to let out and simply live off the return. Seems to me like this is the obvious choice to achieve a gross yield of 10%.
- Are there any large scale / professional landlords here that I could speak with privately who may be able to save me making the same mistakes they did when they were starting out.
- Has any body else here experience in dealing with a fund like this? Again, I'd love to pick your brain and would appreciate the benefit of your experience to avoid making obvious mistakes.
- Are there other obvious investments with a good return I'm ignoring aside from property that could provide the return I'm looking for.

I understand this seems like a naïve question for someone who has such a large fund available, surely I know by now how to make money with money you say, so I will give you a small bit of background. I'm early 30's, I am not new to business but still have a lot to learn. However, my expertise over the years has been concentrated 100% on the industry I was in. As part of the sale, I can no longer operate in that industry. So I can no longer use my expertise to earn. Therefore, I'm left researching alternative avenues on how to use this money in order to set myself and my immediate family up. The reason I'm thinking property is the way forward is because I already 3 properties which I let out and the gross return on these is above 10%, it's not too much hassle to look after and so it seems like expanding in that sector could be the way forward, especially considering I won't have to borrow for any property I purchase.

I know it's a long post, thanks for reading and I appreciate anyone taking the time to give some advice.
 
Generally speaking if you go to a wealth management company they will sell you their products and charge you 1% a year for offering very little value.

You should only go to an advisor who charges a fee and doesn't try to sell you products.
There are two Certified Financial Planners who contribute regularly to Askaboutmoney and you can assess the quality of their contributions by reading some of their posts.

@Marc

@Steven Barrett

Brendan
 
Always Learning said:
I have borthers who are not involved but who I would like to pay some kind of dividend / wage to over the years also.
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Any kind of dividend or wage would be subject to Income Tax. You can give them gifts which would be subject to Capital Acquisitions Tax which would be taxed at 33%.

Did you take tax advice on how to structure the sale of the business? It might have been more efficient to address this issue before the sale.
 
Always Learning said:
I want to make an annual yield of 10% on this
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This should not be your objective.

With a fund of €6m, your objective should be to preserve your wealth and not to maximise it.

You should diversify your portfolio and have shares and property.

In fact, I would say that you should have the majority of your money in shares as they are easy to turn into cash.

You have already set up one successful business. When the non-compete term is finished, you may well want to start a new business. If you need capital, having 12 properties worth €500k each won't be much good to you.

If you have a portfolio of shares, you can cash all or part of them as you need funds. That way you will own your new business and won't need outside investors.

Brendan
 
Always Learning said:
I already 3 properties which I let out
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Another reason for not buying more property.
If you have mortgages on these, the first thing to do is to clear these mortgages.
If the mortgages are cheap trackers, you might choose not to pay them off.

But your objective should be the long-term preservation of your wealth, and risk-management is a key part of that, so clearing any borrowing, even cheap borrowing, is the first step.

Brendan
 
Brendan Burgess said:
Did you take tax advice on how to structure the sale of the business? It might have been more efficient to address this issue before the sale.
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@brendan thank you for the recommendation.

Just one observation on your comment. I’ve been a financial planner for the last 3 decades and I can count on the fingers of one hand the number of times someone in this position has been referred to me by their accountant or solicitor as part of the process of selling their business.

99/100 a client will contact us like this and my first thought, with my head in my hands, is didn’t anyone think to suggest taking some advice prior to signing on the dotted line.

I’d say of the last 10 liquidity events like this that we have consulted upon, not one had been structured with the needs of the investor/their family in mind.

Fair enough if it’s a tag along as part of a trade sale but if it’s your own business one should really expect a higher standard of care. Just my tuppence-worth on an all too familiar situation.

@alwayslearning Happy to have a chat

My last firm in the U.K. was on the panel of advisers to lottery winners. You are in many respects like someone who has won the lottery. You have a life changing amount of money and you are looking for things to do with it.
What you need to do is take a step back and ask yourself what you want to do in life and bend your money to that rather than focus in investing for the sake of making money.

Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie
 
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Thanks for the responses.

@ Brendan - why would I simply want to preserve my wealth and not maximise it? I suppose I should let you know of my goals so you have an idea of where I want to get to. That will obviously impact the advice being given. I have no interest in setting up another business, I had around 200 employees in the business that has been sold. While that can be enjoyable, it brings a lot of headaches. My goal now is to use the money I have in order to create a revenue stream that will set up my self and my family for the rest of our lives... without having to dedicate all the hours under the sun to running it. I intend to draw down a wage, but also to keep some aside to allow build and make further future investments.

I will look into investing in shares, but I thought that was more of a medium to long term game to allow your wealth accumulate over a longer stretch of time. I want to achieve a relatively quick return although I'm not in a mad rush, I have set aside €2M to allow me and family live and enjoy some celebrations etc. etc. and I will study my various options and do the research. But once I do invest, I want to start to use the return on investment almost immediately as a wage for myself and I will give a small wage to my brothers also. I'm aware of the tax implications on this and I'm getting advice on splitting the investments between buying personally and using a ltd company.

I have one of the better known large consultancies dealing with my tax affairs, I have done very well on that front so I'm well looked after there.

The reason I'm on this board is that I'm hoping to meet people who have been in a similar position from whose experience I could benefit. To get your opinions on whether there is a better option out there other than property and to see if what I'm expecting from this is realistic. Also, as I mentioned, to get advice on who to speak to regarding wealth management. I only just now learned that there was a difference between a financial planner and wealth management advisors, so I've already benefitted a bit! Of course, I am going to continue to engage my tax experts and get advice from other professionals also. I'm not relying on an internet forum to base such big decisions! But I find soaking up the knowledge from as many avenues as possible is always a good thing.
 
Always Learning said:
why would I simply want to preserve my wealth and not maximise it?
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A very good question.

€6m + your home and three properties makes you very wealthy. So you do not need to take risks. A diversified portfolio will grow over time. A concentrated property portfolio could easily crash due to an economic crash or political changes.

To illustrate. If you want to maximise your income, then borrow another €6m and buy €12m worth of property. That is the best way to maximise your wealth . But a 50% fall in property prices would wipe you out.

Don't laugh. A lot of very wealthy people did this during the boom and became bankrupt. If you go to a wealth manager attached to one of the banks, they will probably propose lending you money to leverage up your investments.

Always Learning said:
I have no interest in setting up another business,
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But your interests might change. You might not want to set up your own business with all the heartache that comes with it. But you might want to invest in someone else's business. Even if you decide to invest in property, you should keep at least €2m in liquid investments in case you need it.

Brendan
 
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Always Learning said:
My goal now is to use the money I have in order to create a revenue stream
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I think you are looking at this wrong.

If you have plenty of wealth, the distinction between income and capital growth is not very relevant.

It won't matter too much if your €6m turns into €7m after a year with no income or €6.5m with .5m of income. (Except that income is taxed at a higher rate.)

Lots of people think "I will live off the interest" or "I will live off the rent". That is the wrong approach to take.

Brendan
 
Always Learning said:
I'm aware of the tax implications on this and I'm getting advice on splitting the investments between buying personally and using a ltd company.
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In the extremely unlikely event that your tax advisors come back with a proposal to invest via a company, please post that here. You will find plenty of threads on askaboutmoney "How do I get property out of a limited company into my own name?"

It's not the way to go for investments although it is usually right for a trading business.

But some accountants say "Corporation Tax is lower than Income Tax so set up a company."
 
Always Learning said:
The reason I'm on this board is that I'm hoping to meet people who have been in a similar position from whose experience I could benefit.
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I think it's unlikely that someone will contact you to say that they sold a business or inherited €5m and tell you how they got on. In fact, if someone contacts you privately to say that they did, I would be very wary that it's not someone trying to scam you or sell you their services or sell a friend's services.

But you should get plenty of ideas and different opinions on askaboutmoney which is where you will get the most benefit.

Brendan
 
It might be beneficial to people if you or other contributors could expand on why this is the wrong approach and what is the right way to see things.
 
IS IT POSSIBLE TO LIVE OFF NATURAL YIELD?

In the 1989 Oscar nominated movie Field of Dreams, Kevin Costner’s character reconnects with the spirit of his baseball fan father by building a baseball diamond in his Iowa cornfield. However, while heeding the voice in his head saying: “If you build it, he will come”, worked out for Costner’s character, investors might well wonder if a happy ending awaits if they build a portfolio for yield.

The challenges for those trying to live off the bond coupons, share dividends and interest from their portfolio are a mixture of the obvious, and the fiendishly subtle.

On the one hand, yields are currently very low, which makes generating a decent income from an investment portfolio very hard. Call it a fastball of a problem thrown at your average investor: straightforward, but nonetheless very difficult to deal with.

On the other hand, there are also the curve-balls of the natural yield investing world. These are the problems that are difficult to see upfront and only become completely obvious after the fact. It turns out that dividend and interest income isn’t nearly as reliable as most assume. Moreover, increasing the income of a portfolio tends to increase its risk.

So, what to do about this predicament? Well, it turns out that focusing solely on income is like going out to face a pitch with only half a bat.

Being cognisant of the capital growth available in many assets, as well as their income potential, gives investors more of a fighting chance. This total return mindset doesn’t eliminate the challenges of the market and can’t guarantee a home run, but in terms of meeting longterm financial objectives it does greatly increase investors’ chances of making it successfully back to home plate.

investment portfolios generally have two forms of return: a capital return that comes from growth of the assets over time and a natural yield which is received from those assets in the form of coupons, dividends and interest.

Natural yield investing, sometimes also referred to as income investing or an income-only approach, is a popular approach used by many retirees, trusts and charities that rely on investments to meet their cash-flow needs. In this approach, a portfolio is constructed to target a specific yield and only the
income physically produced by the portfolio is withdrawn on a regular basis.

The alternative to natural yield investing is usually referred to as total return investing. Here a broadly diversified portfolio is constructed to achieve the
highest possible combination of both natural yield and capital growth. Where regular withdrawals are made, these consist of a combination of the income physically produced by the portfolio and
some capital growth, realised through asset sales.

Unfortunately, portfolios are not like Hollywood surrealist baseball movies. Building them for natural yield doesn’t necessarily lead to a happy ending.

The challenges of low current yields, income being unstable over the life of a portfolio and the risk introduced by chasing higher yielding assets are just too great for natural yield investing to give the best chance of achieving good outcomes for investors.

Investors need to resist using a natural yield approach just because that’s what used to be prescribed by custom, or regulation/legislation that has been
subsequently updated.

It is in the face of these challenges a total return framework can help in building portfolios that are better diversified, more tax efficient and which
are likely to result in higher and more predictable income for investors over the course of a long-term investment period.
 
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Brendan, in my opinion investing in shares is not aligned to your first sentence of preserving your wealth. Equities as an asset class is risky and more aligned to those wanting to maximise their wealth rather than preserve it.

@Always Learning you should discuss with financial planners as well as some wealth managers in the local market. I think the challenge that you will run into is that no Bank / Wealth Manager wants to hold large cash deposits at the minute as it costs them and doesn't make them money so you may be pushed more to investment products. Or if you simply just want to park your cash you may find you are charged for it.
 
Dublinbay12 said:
Brendan, in my opinion investing in shares is not aligned to your first sentence of preserving your wealth. Equities as an asset class is risky and more aligned to those wanting to maximise their wealth rather than preserve it.
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What?

There is no risk-free asset class. Deposits are riskier in the long-term due to the chances of default or the real value being eroded by inflation.

Investing the full portfolio in property is risky as, even with €6m , that is about 18 properties.

It's actually a subjective call, but a diversified investment in the stockmarket is probably the least risky option and one most likely to lead to wealth preservation. As it happens, it's also the one which is most likely to lead to wealth maximisation.
 
Dublinbay12 said:
Brendan, in my opinion investing in shares is not aligned to your first sentence of preserving your wealth. Equities as an asset class is risky and more aligned to those wanting to maximise their wealth rather than preserve it.
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This is a classic mistake made by well meaning people trying to give guidance from their own perspective. The investor is in their 30s with a very significant amount of cash and a very long time horizon of some 6 or maybe even 7 decades. They need to formulate an investment strategy similar to that of an institutional investor ( like a Charity or an University) with a lot of money and a long time horizon.

Looked at over a one year time period, yes there is a lot of uncertaintly in the market but over decades investors are much more likely to earn the average return

Data from the USA from 1926 to 2019





The response to which is often, yes but if you had invested in say 2000 just before the tech wreck how would you have done? To which the answer is always, let's have a look shall we?

 
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There is no risk-free asset class, true, but cash deposits are not riskier than equities. The chances of default of a Bank is generally less than that of other Industries.



Marc, I agree with this approach given the investors own variables (age etc). My comment simply was meant to highlight that preserving wealth does not always equate to investing in Equities, and posting one size fits all portfolio theory can be misleading. I have always stated on this forum that when it comes to investing an individuals own circumstances (age, risk tolerance, goals, current wealth etc) must always be considered and that there is no one fits all solution.

That was the objective of my comment, rather than meaning to preserve wealth you should never invest in Equities. For example, I think Brendans comments should have been rooted in the age, as I am sure he would not be giving the same advice if the poster was in their 60s.
 
Dublinbay12 said:
cash deposits are not riskier than equities. The chances of default of a Bank is generally less than that of other Industries.
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Hi Dublin Bay

They most certainly are riskier that equities over the longer term. Default chances may be low but they are not zero. But the big one is that there is a much greater risk that deposits will lose their real value than equities.

And, by the way, I would give the same advice to a 60 year old.

Brendan
 
Here is another way of looking at @Brendan Burgess point

You invest €5m 20 years ago and take an annual income of 4%pa (€200,000) starting income and you invest in cash, Irish property, bonds or equities.

How did you do over the last 20 years?

In equities a little over €9m whereas Irish Property and cash are barely able to keep up with inflation

 
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