REGARDLESS OF THE PATHWAY CHOSEN, YOU NEED TO WORK WITH FINANCIAL ADVISERS TO BUILD ENDURING WEALTH

CONVERSATION WITH MY BILLIONAIRE FRIEND

(SESSION 12)

No matter how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team – Reid Hoffman

I can do things you cannot, and you can do things I cannot; together, we can do great things – Mother Teresa

Alone we can do so little. Together we can do so much – Helen Keller

Two are better than one because they have a good return for their labour: If either of them falls down, one can help the other up. But pity anyone who falls and has no one to help them up. Also, if two lie down together, they will keep warm. But how can one keep warm alone? – Ecclesiastes 4: 9-11

I was at my Billionaire Friend’s place as usual. This time, our conversation paddled around Financial Intelligence – how investors who are not willing to pay for quality financial advice hold the bad end of the sticks in terms of their expectations.

In retrospect, there was an experience a friend of mine, the CEO of a stockbroking firm in the days of the stock market boom (2008), shared with me. Back then, everyone, even taxi drivers, became emergency stock analysts. Without sharing the full details of his action with his wife, there was a particular man who invested the savings running into millions of naira from their school business in the stock market on the strength of the investment tips he got from some of those unqualified stock advisers. This man was told he could double the amount in less than six months. Things went very bad. He lost virtually everything, which led to marital complications when his wife eventually got to know about the true situation.

We generally talked about why anyone who truly wants to build wealth should surround himself or herself with quality advisers.

My Billionaire Friend chipped his views. “My boss, this subject is quite tricky. What happens when an adviser you have engaged with turns out to be fake? You can also lose out. A typical example is my investment in properties outside Nigeria. I engaged the services of a professional estate surveyor, who had an office in several parts of the USA that spiked my interest. He ended up purchasing some properties on my behalf through a sub-agent. Unfortunately, his sub-agent also used part of my purchase funds to gamble in Las Vegas and sent us fake title documents. My surveyor, in good faith, relied on the authenticity of the title documents provided to me, by his sub-agent. The point I am making is that getting qualified advisers around you on your wealth-building path could be a bit tricky. However, with some care, one can still win, largely.”

After the preliminaries, we settled on the subject for the week:

REGARDLESS OF THE PATHWAY CHOSEN, YOU NEED TO WORK WITH SMART ADVISERS TO BUILD ENDURING WEALTH.

The conversation with my Friend was based on the following questions:

1. Why do you think a wealth builder should be willing to pay to hire quality advisers?

2. Who are the key advisers a wealth builder needs to consider engaging? Stockbrokers? Lawyers? Financial Planners? Real estate agents? Financial coaches? What are the quality alternatives?

3. What happens when a wealth builder chooses to go alone or, worse, engage cheap and incompetent advisers?

4. What qualities should one look for in engaging advisers?

5. In your case, you chose to acquire the relevant skills personally. Do you still engage the services of a professional? If you do, why? Why not rely on your acquired knowledge?

6. How have you engaged the services of the experts in your wealth acquisition process?

7. Has there been situations where quality advice saved you from embarrassment. Explain a few, if any?

Below are the responses of my Friend:

WHY SHOULD A WEALTH BUILDER HIRE QUALITY ADVISERS?

“On the question of why you think wealth builders should be willing to hire quality advisers, the straightforward answer is that if a wealth builder prefers to be self-dependent, he would be heading for failure in his quest. Humans’ successes are best achieved through the utilisation and coordination of the expert inputs of others to optimally achieve set goals. Nobody should think he is a master of all; only God almighty is the master of all. – the omnipotent, omniscient, omnipresent. Therefore wealth builders must seek the prized expertise of professionals of all spheres, in their wealth building endeavours, to optimise the expected outcomes of their search for wealth.

“Somewhere in our conversation, we had discussed the need for wealth builders to have some basic understanding and knowledge to help them appreciate and better utilise the advice of professional experts as it pertains to their wealth building endeavours. With such basic literacy and understanding, it would thus be easier for wealth builders to make informed judgments and take appropriate decisions to successfully catapult their wealth-building goals”.

“Being solely self-dependent and assuming knowledge, especially with intricate issues that would arise from time to time, could be self-destructive. Wealth builders should engage professionals for their input concerning intricate decision-making issues, promising investments, returns, compliance with existential laws and regulations, and prevention. Wealth builders in consulting and regularly paying for the quality advice of professional experts stand to gain in multiple returns of wealth, business buoyancy, enviable business reputation and the attraction of quality personnel”.

“Generally, wealth-builders stand to gain innumerable benefits in getting the best obtainable business results for their business investments and succeeding in building an enviable generational lasting successful brand.” 

WHAT KEY PROFESSIONAL ADVISERS SHOULD WEALTH BUILDERS CONSIDER ENGAGING?

“This varies with the different businesses and investment goals of wealth builders. For instance, lawyers are key for advising wealth builders about their best suitable incorporations. Incorporations could be formed to insulate wealth builders against possible losses of their wealth in cases of future avoidable liquidations. Yes, lawyers are best qualified to advise wealth builders in this area of expertise. Wealth builders generally have the option to choose after obtaining legal advice, to form sole proprietorship enterprises, partnerships or private limited liability, or public limited liability companies or companies limited by guarantee. With private limited company arrangements, a minimum of two directors are required to be registered with Nigeria’s Corporate Affairs Commission. Wealth builders with such registration would be insulated against the bearing further liabilities above their company’s registered capital, which may occur in building their wealth”.

“However, this immunisation is subject to the absence of illegality of operations by such registered wealth builders’ companies. Again, wealth-builders would only be so immune if they do not engage in the business of fraudulent activities and do not trade with enemy countries in their wealth-building activities”.

“Financial planners are also important for successful wealth building because financial planning is the blood of wealth building. Without proper financial planning, wealth-builders would inevitably head for insolvency. Therefore, financial planning is key for wealth building, as this has been severally stated in our previous series. Financial planning includes good budgeting, forecasting, monitoring the cash flow of wealth builders’ entities, optimising returns on assets, proper management of company liabilities, and good investment planning”.

“Wealth-builders must always keep their eyes on the going concern status of their wealth-building entities. Once the going concern positions of their wealth-building entities are threatened, adequate measures must promptly be taken to get accounting and auditing experts to arrest the going concern threat and keep such entities afloat and healthily operating”.

“Real estate valuers and planners are needed when investing in properties. These experts are needed to select the best location for wealth-builders to optimise the return of their investments. Location is the prime factor in wealth-building exercises for optimal returns. Poor locations give poor results. In essence, wealth hunters need experts during the process of wealth building. As wealth builders encounter intricate issues and have to make informed decisions, wealth-builders should seek the opinion of experts, including financial planners, lawyers, stockbrokers in terms of investing in company equities, financial planners, accountants, e.t.c. Depending on the areas of engagement of wealth builders, these are necessary”.

“More importantly, wealth-builders must seek tax consultants. Tax consultants help to determine tax liabilities for wealth builders and look at areas by which wealth builders can gain capital allowances and tax exemptions to avoid undue tax liabilities and take advantage of the provision of tax laws for optimisation of the returns on investment by wealth builders. These experts are all important in their different ways depending on the wealth-building engagement of wealth builders”.

“The number of experts required is unlimited and cannot be pre-discussed. It all depends on the wealth builders’ journey in building their wealth. Wealth-builders should not be miserly in not wanting to pay for the services of experts, as may be necessary for wealth building. To do so would be termed foolish. Successful wealth-builders like Bill gates, Prince Yemisi Shyllon, Aigboje Aig Imoukhuede, and industrialist Prince Adedoyin would attest to the importance of financial and other professional advisers in their wealth-building journey.”

WHAT HAPPENS WHEN A WEALTH BUILDER CHOOSES TO GO INTO IT ALONE?

“This depends on the wealth-builders plan. A wealth-builder who decides to be a sole proprietor can go into it alone. A sole proprietorship offers wealth for builders who desire to do it alone. And in doing that, you can register ordinary business enterprises. But, they will not be protected against legal consequences against such sole proprietorship, thus endangering their wealth. The sole proprietorship is not a recommended model for successful wealth-builders in terms of its limitations for raising needed large capital funds and protecting wealth builders from personal liabilities if their businesses were to fail”.

 “Successful wealth builders generally build wealth using investment vehicles such as private or public limited liability companies (LLC). And this gives them the opportunity of raising funds through capital investors( with private limited liability companies-LLC)-or long term equity funds from the capital market, through the stock exchange, with public limited liability companies (PLLC), for zero-interest capital equity funds for their wealth-building goals. To go it alone is to achieve it alone and die alone.”

“Whereas to form wealth-building entities in companies of PLLC’s or LLC’s, are the best options available to wealth builders who aim to grow big corporate entities and achieve long-term successes. However, the process of building wealth through LLCs and PLLC makes wealth builders lose some degree of ownership control of their businesses in various possible degrees. The laws guiding private limited companies(LLC), for instance, do not allow single ownership. The ownership of LLCs must be shared between a minimum of two people. You thus cannot run sole proprietorship under a private limited liability company arrangement. Therefore you will need to lose some element of control over other company shareholders. However, wealth-builders can arrange their wealth-building vehicles, whether private or public limited liability entities- such that their articles of association and percentage of equity holdings can allow them some varying degree of voting controls at board meetings. And this is by ensuring that they continue to control their entities along with other shareholders of their companies.”

“The issue about obtaining cheap, incompetent advisors would only lead to obtaining poor consistent results and ultimately result in insolvencies and bankruptcies. Wealth builders that run their businesses by being unduly miserly in using incompetent professional advisers would eventually have themselves to blame.”

“Another investment structure that can be used by wealth-builders outside private and public limited liability vehicles is a partnership. Partnerships can be ordinary or limited. However, partnerships do not immunise or protect partners against personal liability in case of business failures and collapse. For partnership, once the business goes into bankruptcy, the partners will be personally liable for all the losses that may have been accumulated. This same personal liability goes with a sole proprietorship.”

ON QUALITIES TO LOOK OUT FOR IN ENGAGING PROFESSIONAL ADVISERS?

“Wealth-builders must use professional consultants for quality advisers. Quality advisers can be obtained from the professional associations of different professions. For instance, wealth-builders that need the services of engineers should get the Nigerian Society of Engineers, and other technical advisory consultancy organisations, to give them a select list of experienced and proven engineering experts to pick from. The same applies to accounting experts from ICAN, expert issuing houses from the Chartered Institute of Stock Brokers and the Stock Exchange.”

“The qualities of professional expertise to look out for are; proven competence, the size of projects that such advisers have handled, the length of service provided by such advisers, the quality and size of the entities that have been advised, and the quality of the financial position of such professional advisers.

“In my case, even though I took the trouble to be professionally versatile, I still engage the services of professional advisers to better achieve my wealth-building projects. I cannot claim to be an expert in all the skills I have utilised in my wealth-building journey. Even with my professional competence in some areas, I still have to use professionals to help me wade through the various challenges I have and am facing. Experts in different professions who are more experienced than I have had to be consulted. However, my competence and knowledge levels in different professions have helped me to relate to and quickly understand the inputs of various professional experts with whom I have. I am still relating in my life wealth-building journey. It has also allowed me to cross the t’s and dot the i’s faster and better than those wealth builders without professional versatility”.

“Therefore, I would not recommend that wealth builders assume that their knowledge is adequate for their building of wealth. In general, wealth-builders must engage the services of professional advisers, whether or not they have some level of understanding and knowledge in the areas in which they require expert advice. To be dependent on self-knowledge in the intricate decision-making journey of building wealth would be suicidal.”

“But let me be very clear: no successful wealth builder can truthfully claim to always make good decisions or not to have been wrongly advised in the past. Past failures come with every success. The issue is not about whether or not some money was lost from utilising bad advice but how well you successfully recovered and progressed thereafter. I have shared my experience in international real estate with you.

“What I did was to learn from that experience that it is generally better to invest in environments where you have good control to personally monitor and manage your investment. This has made me eventually disengage from property investments outside areas of my control. Thus, I sold out some properties to focus on those property investments within areas where I could better control the outcomes”.

HAVE THERE BEEN SITUATIONS WHERE QUALITY ADVICE SAVED YOU FROM EMBARRASSMENT?

“Generally, there have been many instances in which quality advice has saved me from embarrassment. Especiallywith property investments. Property investments require the expert advice of realtors and estate valuers”.

“So, if I were to give general advice on this subject, it would be that; not only should a wealth hunter engage quality advisers in his wealth-building endeavours, but he should also acquire some basic financial literacy to be able to interpret the advice being given”.

We both decided it was time to end the conversation. I bade my Billionaire Friend bye, and we agreed to move to the next phase of our conversation can’t wait to catch up with you next week.

Yours money wisely

ayo.arowolo@thisdaylive.com

Tel: 08086447494

QUOTE 1

Without sharing the full details of his action with his wife, there was a particular man who invested the savings running into millions of naira from their school business in the stock market on the strength of the investment tips he got from some of those unqualified stock advisers. This man was told he could double the amount in less than six months. Things went very bad. He lost virtually everything, which led to marital complications when his wife eventually got to know the true situation.

QUOTE

So, if I were to give general advice on this subject, it would be that; not only should a wealth hunter engage quality advisers in his wealth-building endeavours, but he should also acquire some basic financial literacy to be able to interpret the advice being given.