QUESTION: I run a small but thriving business. With the current ‘credit crunch’ and so much focus on climate change and rocketing fuel prices, I am concerned about what the future might have in store for business owners such as myself. How can I plan for the future?
Alan Branagh, Northern Ireland chairman of the Academy For Chief Executives, replies:
This nervousness that you are feeling is understandable, but with careful planning, your business will be poised to survive and thrive, no matter what the future might bring.
The good news is that there are many ways in which to plan effectively, and advice on how to do so is readily available.
You might consider doing some scenario planning for your business, and playing out — the “what if” process.
Scenarios are powerful planning tools that can prepare your business for the future in a time of rapid change.
They are neither predictions nor strategies but rather more like hypotheses of different futures, specifically designed in order to get creative about your future and highlight the risks and opportunities that changes could bring for your business.
In composing a scenario, you should particularly consider your own depth of knowledge of your industry and that of your key employees and senior team.
Throw in other factors like demographics, geography, political and industrial information, social, economic, environmental and educational factors that could impact on your business and its environment.
The objective is to create a depth of dialogue within your business that identifies the changes in these dynamics
and to understand how these changes could affect your business.
You can then construct a scenario of possible futures, which can be used to plan and prepare for what could happen.
This will also help you define how you make your business decisions. For example, you may wish to expand and buy new premises.
Before doing so though, you should think carefully about the outcome of these actions if the economy was to stay the same, grow rapidly, or decline and the consequences that these outcomes could have upon your business financially.
You may suffer significant losses if you purchase the property and the economy suddenly declines. On the other hand, the economy could see a sudden growth and failure to purchase the property would simply be a missed opportunity.
You should then play out the most in
teresting scenarios, thus allowing you to test gain feedback and therefore prioritise any actions and decisions based around the potential outcomes.
It is important to take time out of the business to work on your business as so many businesses get bogged down and hide behind the day-to-day work and don’t get creative about their future.
Scenario planning will ensure that you are prepared and at least thinking about a number of possible outcomes, whatever changes may come along, enabling you to be proactive, rather than reactive. It is what great leaders and great companies do.
QUESTION: I pay fees to a corporate adviser to provide ongoing reviews and advice on my existing staff employee benefits arrangements. However, I am having to closely watch costs and so was wondering if it may
be cheaper to allow my adviser to take commissions from the products he recommends rather than writing him a cheque?
Bob Fraser, wealth adviser at Towry Law, replies:
This is not an uncommon question. Employers usually recognise the need to take professional advice regarding their employee benefits arrangements and there can be a perception that it is more cost effective to pay their corporate adviser by commissions from the products they buy rather than physically writing a cheque to their adviser.
However, it is important to understand that commission-based advice is not free advice. Your adviser will still need to get paid and so you need to recognise how much he gets paid, who pays for it and the impact it can have on
the advice and service you receive.
If your corporate adviser is paid by commission then they need to sell you a product that generates commission in order to be paid.
This could be, for example, a group life assurance contract or group pension arrangement.
If a commission-based adviser is reviewing your existing arrangements then they will get paid if they recommend you move from your existing provider to a new provider that pays commissions, but they will not get paid if they recommend you retain your existing arrangements.
This means that, while you will not need to write out a cheque, a commission-based adviser has a financial incentive in making you move from one product provider to another.
While supposedly being paid by the provider, commission charges usually come from two groups of people, the employer and the employees.
For example, a group pension where commission is taken may have 150% higher charges than a product without commission. Your employees will pay these additional charges every year and this will impact on the returns they get from their pension.
You should also realise that if you move from fees to commissions, the charges your employees are currently paying will be seen to rise, which could have a negative impact on their perception of the benefits you provide.
By contrast, a fee-based adviser should have no financial incentive other than working in your best interests and providing a high level of service so you will see the value in paying their fees in the future. So, while commission-based advice may give the perception of being better value, the reality is likely to be otherwise.