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Succession Planning

By: Corey Butler, Wealth Advisor

Meriam Webster’s definition of succession:

“The order in which or the conditions under which one person after another succeeds to a property, dignity, title, or throne.”

The next 10 years will be the largest period of succession for business owners like never before. Aging demographics are highlighting this exposure for business owners. Who, what, and how will one take over the business practice. Biz owners of all walks of life have the same trait of control hardwired in them. Control is what has allowed him/her to make those hard decisions. Control has offered a sense of freedom with direction and outcome. For most the thought of succession equals loss of control, purpose and the end of the chapter.

The reality is something much different with a well thought out and executed succession plan the business owner can have their cake and eat it too. How is that possible? Share structure and tax planning are the key ingredients to make this happen. The buy/sell agreement that has not seen the light of day since inception must have the I’s dotted and T’s crossed so revisiting and reviewing is so ever important. To ensure you have a successful passing of the torch you really need to make sure you and your buyer are not just on the same page but same paragraph and better yet same sentence. Having a trusted advisory team representing all parties will ensure that all parties are happy with the result.  Everyone may not get exactly what they want as everyone may have to give a little, this is where your advisory team is key.

Too much time is spent on making sure everything is perfect with a succession plan when the reality is that success can only be achieved when all parties are willing and able to come back to the table anytime there are challenges. Life is never dull, and the grind is real in business. Stuff always happens and to be successful one must accept that stuff will happen.

A succession plan starts by planning from “Right to Left”. You know where you want to be but how do you get there? Creating a succession plan pending complexity can take anywhere from 6-18 months. As you know the days and weeks pass by quickly, and with every year we continue to age, so completing a plan that will provide for 20-25 years of income certainly will take a considerable investment of one’s time. Let alone the sheer fact that business keeps happening each and every day. No one solution but a combination of solutions will equal success.

Ecivda Financial Planning Group is trusted advisory team with over 50 years of experience helping business owners pass their torch! We have recently completed our own in-house succession plan and can so relate to your concerns and challenges. If this resonates then you know what to do next!

Future Outlook

By: Corey Butler, Wealth Advisor

2022 is in our rear-view mirror and 2023 is now staring us in the face with a sea of uncertainty. Inflation, supply chain, Covid, China, Ukraine war, stagflation, interest rates… it never ends. This is where you come to the realization that you can only control your own day to day decisions and life. The world has, and will always have, issues. As far back as we can look, there is always civil unrest, famine, war, and natural disasters. So why do we react with such negative assumptions when we know history always repeats itself? Markets go up and markets go down. Buyers and sellers get to make their decision on what something is worth and whether there is upside or downside.

If we look at real estate which is under pressure as of late with massive interest rate increases by both the Bank of Canada and Federal Reserve. Market values have certainly retreated as of late, offering a lower entry point for buyers, but with interest rates at current levels, we essentially end up in the same place with monthly payments vs 2021 pricing. The exposed variable rate debt has gotten much more expensive but when compared to the 5-year fixed rate, the variable is still cheaper option. We need to accept that these rates are going to stay much higher than what we experienced throughout the pandemic. Historical Prime Rate Average has been 5-6%.  If you look out over the next 20-25 years at a modest 5% growth rate on real estate, you still have more than doubled the home value.  It is an incredible asset class.

There are so many conflicting outlooks across all sectors which result in complete paralysis in making decisions or taking a stance. A well-diversified investment portfolio is truly the key to your success during turbulent times. “The trend is your friend until it’s not, and trying to catch a falling knife hurts a lot.” These are wise words bestowed on me from mentors that I have had the pleasure to work beside.

An Investment Policy Statement “IPS” is one of the best ways to keep yourself on the straight and narrow to not get tactical during turbulent times. An IPS becomes your compass to help you find the North Star. It should be reviewed annually with your wealth advisor to ensure risk, goals, and behaviour are on track. If you currently have not created an IPS roadmap, please feel free to reach out and we can grab a coffee to discuss.