Using their rich experience in senior leadership positions, many people towards the later years of their career choose to seek non-executive directorship opportunities.
Typically, there are two areas to address in preparing yourself financially for a career as a professional non-executive director. The first one is financial, which includes asset protection and asset structuring for cashflow. The second is building your skills and relationships so you can build a portfolio of interesting and rewarding board positions.
George, one of Equitas Partners’ clients, is 57 years old and married with three grown-up children for whom he no longer pays private school fees. His house mortgage is very modest and his living expenses are much lower than they were 15 years ago.
George is the Chief Operating Officer of a well-known professional services business based in Sydney for which he sits on the board as an Executive Director. Defined benefit super and insurance are tied to the company and, as an officer, he carries commercial risk associated with the company. George has no other insurance. He is also Chair of the industry association and sits on two arts boards (unpaid). George has been offered the option of taking a voluntary redundancy as part of an ongoing period of ‘right sizing’ across the Asia Pacific regional head office.
George saw this as an opportunity to pursue a career as a professional non-executive director and together with Equitas Partners, set about putting in place this financial strategy which would provide him with sufficient time and breathing space to build his portfolio of directorships:
- Established a personal super fund, with all key insurances funded by the super fund
- Created an offset account on the mortgage so that if a redundancy occurred the funds could be put into the offset account
- Established an equity access loan of $100k for any future capital needs, but left it undrawn
- Plans to draw a pension from the super fund to provide income needs until the board career pays a salary
- Put a number of assets in his wife’s name.
The benefits of this strategy
- The super is established and invested so if George changes job, this strategy does not change. This is done while George is still employed to better the chances of getting his insurance underwritten.
- Interest only mortgage means the principal is not being paid off therefore reducing the actual cashflow needed to meet the repayments.
- Drawing an income from superannuation provides an alternative cashflow source during the establishment phase of his board career.
- Key assets are protected as part of an overall risk mitigation strategy.
Over the following six months, George invested in developing his skills by undertaking a number of Australian Institute of Company Directors short courses, attending networking functions and industry briefings and updating his profile on LinkedIn. He cheerfully accepted a redundancy package and now has a growing board career. In essence, George took control prior to the event and therefore had no disruption to his long-term wealth creation strategy.