Helen Morrissey talks to Addidi Wealth Management's Anna Sofat about her work with entrepreneurs
Why have you decided to work with entrepreneurs?
We started off with the Addidi Angel investor group, a female investor group that invests in start-ups and small growth companies. In addition to the wealth planning side of things, we try to connect people with their money and there's an element of financial, social and personal return to this. Typically, financial services talk only about the financial return.
Addidi Angels has been running since 2009 and has invested almost £1m in nine businesses. We have had two groups so far. As we came to a natural end with the first group of investors, we took time to think about what we really wanted to do in future.
We wanted to continue to engage with female entrepreneurs and we were in contact with many of them through Addidi Angels.
Female-run businesses attract less capital, so there are issues around growth plans. We need more female money investing in these businesses. We were also beginning to meet with women who wanted more of a portfolio career.
They may have left the City, for instance, and have valuable skill sets, but they don't want to set up a business themselves. They may prefer to engage with small businesses as a non-executive director, for instance.
There are plenty of female entrepreneurs needing help and guidance, and those wanting to engage with, and invest in, small businesses. This developed into Addidi Enterprise, which enables women to leverage their wealth, talent and engagement for the benefit of small businesses and building more robust boards.
Enterprise officially launched in March, and we currently have 12 members. We have conducted two Angel meetings so far, so it is very early days.
Why are there so few female Angel investors?
I was reading statistics around the projected growth in female wealth. Yet, the number of female Angel investors was miserable: less than 5%. I wanted to improve that figure.
The objective is to try to increase it to 15% to give the market some traction. There is no research into why so few women are Angel investors, but I think it is because women are very early on in the journey of financial independence.
Angel investing is also high risk. It is usually undertaken by men, who have had successful careers, have generated a lot of money but want to be more hands-on with their investments.
In addition, the existing Angel network is very much set up by men for men. They do want to get more women involved, though. Women by and large are interested but didn't want to give up large amounts of their time going through business plans. They also felt they had little in common with the 50+ aged men that they had to deal with on these committees.
With Addidi Angels, we have all put some money in. It is a collective pot, with people putting in enough money to keep them interested without losing sleep over it. The pot is £20,000. Addidi does the legwork in terms of finding the businesses and going through the business plans.
My partner has years of experience dealing with small businesses. He co-ordinates the investment panel and shortlists the businesses. He is key to Addidi Enterprise. This means members can go into as much detail as they wish. I think this is a very collaborative model that suits female investors very well.
There are two key things that we have got out of this. At a philosophical level, if Addidi was going to focus on female wealth, it needs to do something to raise the percentage of female Angel investing.
Small business owners may not have a lot of wealth, so may not be seen as a key target base for advisers. Why have you chosen to do this?
Yes, particularly young entrepreneurs may not have a lot of wealth or personal savings. One lady got in touch with us after reading about us online. Initially, she was quite defensive: "I don't have much money... I have challenges, I have paid advisers before and not gotten value, etc..."
We talked her through her issues and said that if she would let us get to know her business, there might be someone on the talent side who can help her.
This is what she really wanted and needed: an independent person to help her put her plans for the business into place. Many business advisers will put a business plan together, but it needs to be her plan.
I'm an entrepreneur myself, so I know what the issues are. This relationship may not be very remunerative for a long time, and that is the advisory community's dilemma.
They are more interested in working with those business owners who have already achieved some degree of success, whereas I want to grow with these businesses.
It depends on different people, but if you run your own business then you will have empathy with other business owners. Whether you can make it pay or not is another matter.
I've always worked with small businesses in matters such as SIPP and SSAS. I think there is a lot you can really get your teeth into, and that's what I really enjoy about this area.
I see this as an investment. We have acquired clients into Addidi Wealth through this work, so our company is more diverse as a result. It keeps me engaged and motivated, but you do have to balance this with the commercial return of the business.
What skill sets do advisers need if they are going to work with entrepreneurs?
You do need to have a good knowledge of taxation, such as business property reliefs (BPR) and capital gains tax. If you don't have this, you can be taking your client down a route that you think is feasible before realising that it isn't.
The decisions you make can impact upon things such as BPR, for instance. You need to be able to discuss these with accountants, so you need real attention to detail.
My advice to advisers wanting to get into this area is that you have to look at your skillset and interests. You can gain skill sets, but you can't gain interest. So, if you are not interested in small businesses, you won't have the patience to deal with them.
If you are interested, then the chances are that you are already networking in that space. You need to ask yourself whether you are interested in new businesses or more established ones that have already enjoyed some success.
Finally, you need to realise that these efforts will take time to take hold and bear fruit, so you need to be patient. You also have to be prepared to practice what you preach. If you want to get people to invest, then maybe this is something you also need to be doing yourself.
Anna Sofat CV
• Anna Sofat is founder and managing director of Addidi. She has 20 years' experience of advising private clients and managing financial advisory firms.
• Before founding Addidi, Anna was the managing director of Fiona Price & Partners, the first business set up specifically to provide financial advice for women by women.
• Anna is a graduate of Hull University and has a masters degree from the London School of Economics.
• Anna holds both the Chartered Financial Planning and Certified Financial Planner qualifications. In 2012 and 2013, she was nominated one of the Top 100 Advisers by the New Model Adviser magazine.
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