Brendan Bate recently joined the HLB Perth Wealth Management team as a financial adviser. He brings substantial additional experience to the division with over 20 years’ experience in the accounting and financial services industries. Brendan’s focus areas include the legal, medical and family business sectors and, in this short Q&A, we dive into the world of financial planning, exploring Brendan’s approach to assisting clients in fulfilling their unique needs.
Two of your key areas of focus will be assisting clients within the legal and medical professions with their financial planning needs. How do the needs of clients within these sectors differ from clients in other sectors?
The main difference is that medical and legal practitioners are often time poor, and more so than those working in other professions. This means their personal financial affairs could easily become neglected. As potential high-income earners, the need to lay out robust and carefully considered long-term financial planning strategies is crucial to their wellbeing and pathway to financial independence. In an increasingly complicated economic world, I am passionate about taking the financial “worries” away from their day-to-day activity, allowing them to focus on what really matters: the great work they do in our community, and having more precious time to spend doing what they love with family and friends. I also find that medical and legal professionals are compelled to make split second decisions in their work. A big part of my role is coaching them to pause and take a well-considered approach to important personal financial decisions.
Clients within the family business sector are also a key focus area for you – what are the key financial planning issues faced by clients within this sector?
Successful family business owners are often highly skilled and successful in whatever they do because they have an entrepreneurial spirit which I admire. In my experience, successful businesses are often dynamic and resilient, with change happening quickly. My most crucial role is to guide families through assessing and responding to the various personal, financial and tax risks they face. In setting up financial plans for family business owners, my focus is on making strategies flexible to adapt to their changing circumstances. My objective is to provide them with the clarity to measure success and make sure they feel secure and on track in working towards their goals. There is often complexity in family businesses – with relationships and structures. I help business owners cut through the noise and act as a sounding board to help them view their complex financial lives on a single page in a simple, but compelling way.
Can you explain the importance of entity structures and asset protection for professionals in the legal and medical fields, as well as for family businesses?
The unfortunate reality is we live in one of the most litigious countries in the world. Despite best efforts, professionals and family business owners operate in riskier environments with a greater chance of being sued. The threat of litigation could suddenly arise from a disgruntled client, patient, customer, supplier or employee when least expected. It is critical to get your structures right before you start practicing or set up your business. Many might only view structures like Trusts as flexible tax minimisation tools – which is one of their potential benefits. But the main reason to use them is to help protect your family wealth from potential creditors in litigation. A metaphor I often use when working with clients is make yourself a ‘Person of Straw’ (from straw scarecrows, which lack substance) so you lack any financial resources in your own name and are thus not worth suing. The trick is to own nothing, but control everything.
What role does estate and succession planning play in ensuring the long-term financial security of individuals and families in these industries?
I first have a contextual discussion with my clients to understand where they are now, what an ideal life might look like for them in 10 years and, most importantly, the key relationships in their lives. This always includes a discussion about their desire to leave a legacy. Today, we are witnessing the start of the largest transition of wealth our society has ever seen from the Baby Boomer to Millennial generations. The transfer of control of this wealth and facing your own mortality can both be confronting. I think the most important part of this process is to prepare the next generation. As we look 20 years into a family’s future, I encourage some clients to consider creating a Family Board. If we give the next generation a seat at the table, I believe this helps improve their financial literacy which better secures family wealth. Gifting from a “warm” hand rather than a “cold” one is another simpler and rewarding approach.
How do you assess the unique insurance needs of clients in the legal and medical sectors, as well as those involved in family businesses, and what types of personal insurance do you typically recommend?
Our single greatest asset in life is our ability to earn an income stream. Personal risk management strategies for professionals and family business owners typically need tailoring to balance higher income levels with ongoing premium affordability. If legal and medical practitioners find themselves unable to work because of illness or injury, I help them identify a suitable minimum lifestyle budget they are willing to accept which becomes the focus for addressing income protection coverage. Debt, lost earnings and legacy allowances to secure the family’s needs are typically the main drivers for considering life and total and permanent disablement insurance. I typically always recommend a full personal insurance portfolio that also includes trauma cover. The structure of the policies and the ancillary benefits are what I also focus on. For example, for medical practitioners, sufficient needlestick benefits to pay out lump sums if infected by HIV and hepatitis in the workplace is a key consideration.
What is your approach to providing investment and superannuation advice tailored to the specific needs of professionals in the legal and medical fields or family business owners?
The ownership structure of investments is arguably the most important factor I consider for professionals and family business owners. Other than litigation risk management and asset protection issues, tax efficiency is often a key factor for individuals in these areas because of their higher income and marginal tax rates. When clients start investing for the first time, it is easy to overlook the importance of who should own the investments. If a couple are investing for the family, it is often better to put some assets into the name of a non-working spouse. Otherwise, a Discretionary Trust can provide the family with flexible options to manage the future tax consequences of investing. For the legal profession, there are often restrictive investment ownership policies at firms to prevent conflicts and ensure ongoing independence of practitioners from their clients. I am proactive in selecting appropriate investments to help clients navigate through this.
In your experience, what are some of the main financial challenges or concerns that professionals in the legal and medical fields, as well as family business owners, commonly face, and how do you help address them?
Income can often be “lumpy” for legal and medical professionals and for family businesses if operations are cyclical. I provide clarity for my clients with well-considered cash management strategies, allowing adequate cash reserves for tax provisioning and working capital in quieter periods. I work with clients to run their personal cash flow just as they would in business – with an aim to make a profit. This empowers them to direct that profit towards the most appropriate wealth creation strategy. For some, this might be reducing debt and for others it could be building up passive investments in a pathway to financial independence and retirement. As many professionals and business owners are self-employed, I also often find they have neglected to contribute to superannuation. I therefore help them develop superannuation savings strategies in a tax efficient manner. Whatever the goal is, I coach my clients to remain disciplined and accountable to themselves.
How have the needs of clients changed in a post-COVID world, amid higher inflation and increasing interest rates?
For the past 3 years, change has been a more constant theme for many of us. Whether it has been a career change, retirement, or a change in scenery, most of my clients have had to reassess their lives in some way and I have been helping work out what their ‘new normal’ is going to be. Regardless of what this is, a more disciplined approach to personal cash flow and budgeting has become essential in the current economic environment to reduce debt. Maintaining discipline with client investment portfolios has also been crucial with market volatility trending higher. I have been working with clients to increase diversification into alternative assets to manage inflation risk, turn down the ‘noise’ and keep focused on long-term strategies. For the first time in years, increasing interest rates have restored cash as an attractive asset class, especially for establishing defensive reserves for emergencies which is more relevant now than ever before.
Brendan Bate joined HLB Wealth in Perth in May 2023 as a Financial Advisor – he has over 20 years of international and Australian experience in the accounting and financial service industries. Brendan can be contacted via email at bbate@hlbwa.com.au or via telephone at +61 (0)8 9267 3296.
Brendan Bate (ASIC No.1272327) and HLB Wealth Pty Ltd (ASIC No. 428645) are Authorised Representatives of Paragem Pty Ltd ABN 16 108 571 875, AFSL 297276
Disclaimer: The information contained in this article has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned in this article, consult your financial advisor to consider whether that is appropriate having regard to your personal objectives, financial situation and needs.