January 11, 2024

Wealth Planning for Founders with Valerie Yang from Oppenheimer

Amid the excitement of finding investors and building businesses, there’s a practical side that often gets overlooked: getting your personal financial planning and asset management right. It's not the most glamorous part of being a business owner, but it’s vital.

Wealth Planning for Founders with Valerie Yang from Oppenheimer
Beyond the Business: The Crucial Role of Wealth Planning for Entrepreneurs

Being an entrepreneur means riding the exciting wave of finding investors and sparking new business ideas.

But amid all this excitement, there’s a practical side that often gets overlooked: getting your personal financial planning and asset management right. It's not the most glamorous part of being a business owner, but it’s vital.

Here we dive into why this should be a priority for every founder, especially when they’re approaching significant liquidity events such as selling your company.

The Oversight in Entrepreneurial Focus

Entrepreneurs, often engrossed in the pursuit of investment opportunities and business collaboration, tend to overlook one critical area: their personal financial health.

While focusing on business development, whether through angel investing or participating in networking events such as SVRN’s in vibrant hubs like Los Angeles, the importance of securing one’s financial future can take a backseat.

Many entrepreneurs tend to focus on pretty high risk investments. When they invest their money, they tend to make investment decisions in the short term. They see something very interesting and go all in. But it’s important to take a step back and look at the overall picture.

The Importance of Early Wealth Planning

Timing is key in financial management, just as it is in securing venture capital or launching a startup.

Ideally, entrepreneurs should begin their wealth planning journey 2-3 years before a potential company sale or liquidity event.

This foresight allows for more strategic decision-making, aligning their investment strategies with personal and family goals.

Building a Financial Team

Successful financial planning for entrepreneurs involves assembling a team of experts. This team should include:

1. Financial Advisors: For holistic guidance on asset allocation, investment strategies, and risk management.

2. Accountants: To navigate tax implications of various investment decisions, especially concerning alternative investments and real estate investing.

3. Legal Professionals: For estate planning, setting up trusts, and ensuring legal compliance in all financial activities.

Insightful Perspectives: Valerie Yang’s Impact in SVRN

SVRN member Valerie Yang, Senior Director and Senior Analytic Associate with The Summa Group of Oppenheimer & Co. Inc. has valuable experience and information to share. Her team specializes in asset allocation and financial planning for wealthy families and individuals, such as musicians, athletes, business owners, or C-suites in large tech firms. She has a unique perspective on liquidity planning.

While Valerie does not provide formal financial advice to SVRN and members, her experiences and understanding of complex financial landscapes may significantly enrich our community knowledge.

Her active participation exemplifies the collaborative spirit of SVRN, underscoring the importance of shared learning and peer insights in navigating the world of entrepreneurship and investment.

“Founders tend to focus solely on their company, their baby. But they often forget about the planning before selling their company. A lot of these companies focus on technology or fashion or healthcare - but they’re not putting a lot of their energy into wealth planning.

However, 2-3 years before their exit these founders should have a team of accountants and attorneys built for them to help them create a solid plan for what happens after their liquidity. Many would be wise to consider family trusts, and what is to allocated among family, children, charity, and legacy planning..”

Balancing Assets: The Key to Rational Investment

For founders, looking at the big picture first and building a balance sheet is essential. Determine the time frame, and that informs how much can be invested.

Creating a balance sheet that categorizes assets into liquid and illiquid investments and compares them against personal income and expenses can lead to more rational and effective investment strategies.

This balance sheet becomes a roadmap to navigate financial choices and assess risk tolerance. Options might range from liquid investments like stocks or bonds to more risky vehicles like private equities, venture capital, or cryptocurrencies, depending on the individual’s life stage and financial goals.

Tailoring Investments to Investment Horizon and Life Events

One should look at their investment portfolio in different buckets: cash or cash alternatives, liquid investments, and illiquid investments:

Cash/cash alternatives: These include money market funds and treasuries. One should have these for emergency funds as they are very liquid and do not present much volatility. If anticipating major expenses like weddings or purchasing a home, prioritizing liquid assets is advisable.

Liquid diversified portfolio: If you don’t have major expenses on the immediate horizon, but would like to have your assets more liquid, selecting a diversified portfolio of stocks, bonds, and alternative assets such as REITs may be suitable. Some portfolios might include municipal bonds which are tax-efficient, and may provide further diversification for those in a high tax bracket.

Less liquid/illiquid investments: If you don’t need to access the capital immediately and have extra assets to invest, you could look into real estate, private equity, and venture capital investments, which usually have a higher return potential, but also represent greater risk.

There are many elements such as age, income level, expected future expenses that will go into retirement planning and one should focus on creating a balance of income-generating and growth-oriented investments.

The Big Picture: Holistic Financial Strategy for Entrepreneurs

The takeaway for every entrepreneur is clear: Business success and personal financial stability are not mutually exclusive but are, in fact, interdependent.

Embracing a holistic approach to finances, one that includes robust planning and strategic asset allocation is essential. This approach helps ensure that the hard work poured into building a business translates into long-term, sustainable wealth.

Joining SVRN: Connect, Learn, and Grow Financially

As entrepreneurs, the journey to success is multifaceted, and securing financial stability is a critical part of that journey.

Understanding the importance of early and strategic wealth planning is paramount. Start planning today, and help ensure that your financial future is as bright and robust as your business.

To connect with a group of like-minded entrepreneurs and gain inspiration from seasoned investment professionals like Valerie, click here to join SVRN.

Required Disclosure:

The statements and opinions of Oppenheimer personnel are derived from what is believed to be reliable sources, and may change at any time without notice, and opinions of such personnel are not necessarily those of the firm. The use of an asset allocation strategy does not guarantee gains or protect against a loss. Oppenheimer & Co. Inc.