Question

Cato Boldon 32, CEO and founder of Optimum Athletics, reside in the island of Trinidad and Tobago with his wife and children. The business has been in operation since 2008. He decided to start the business during the financial crisis that hit the world in 2008 due his passion for track and field. The company has been experiencing a loss for the last two years and cash flows are beginning to tighten. A major customer owes the company US$100,000 for almost a year. He gets a salary of 5 million per annum from the business. He has savings of US$ 100,000 and his looking to invest to secure his financial future. He wants to enjoy both safety and capital gains. The government of Trinidad is currently in discussion on whether to grant small business in the manufacturing industry an incentive package. Boldon is considering his options. Should I sell the business or go back to management in a corporate enterprise. His has an Masters of Science Degree in Kinesiology.

His two children are aged 9 and 13 yrs old respectively and his wife is six months pregnant. His wife recently completed her Law Degree and is looking to called to the bar in Trinidad and Tobago in the next six months. Her husband had been contributing to her alumni Scholarship Fund for the last 5 years and wishes to continue. His father 60, is not doing well. He was recently diagnosed with diabetes. Boldon recently found out that his father has limited insurance coverage. Boldon is concerned about his retirement and his ability to finance his children education. He wanted the business to be part of his pension plan as he wanted the company to be listed on the Trinidad Stock Exchange. He had to use the deposit that he had saved for his home ownership to fix the family car that was recently damaged by hurricane Irma.

As Financial Advisors you are to: 1. Prepare an Investment Policy Statement for Mr. Boldon

Answer 1

Personal Profile of Client:

Cato Boldon,

CEO and founder of Optimum Athletics (small business in the manufacturing industry)

Resident of Island of Trinidad and Tobago

Age 32

Married with two children (expecting one more child)

Current Financial Summary:

Current Salary: $ 500,000 per annum

Current Total Saving: $100,000

His company is experiencing losses for the last two years, with a bad debt of US$100,000 for almost a year

Expected Expenses in Near Future: Healthcare expenses on Wife, Kids and Father

Objectives:

Investment Planning: Investment of his saving that gives both safety and capital gains in long term (Moderate Risk taking capability).

Retirement planning with ability to finance his children education

Short term liquidity needs: Expenses on wife's delivery, aging Father's health (with little insurance coverage)

Long term Goal: To get his company listed on the Trinidad Stock Exchange.

Suggestions by Financial Advisor:

As Mr. Boldon is young and has a yearly salary of $500,000, which will be able to manage his short term liquidity needs including his house hold expenses, delivery of his third child (in 3 months) and health care expenses of his aging father.

But since his business in not running in good condition for past two years and is incurring losses, there can be a loss in income by him in coming future. This loss in fixed income can be covered by his change in job or by his wife’s income that might start after her joining to the bar in Trinidad and Tobago (in six months)

His only way to build up wealth for retirement and future is by investing his existing saving in portfolio with asset allocation of 50% in stock assets and 50% in fixed assets.

With moderate Risk Profiling we suggest him to do a strategic allocation in assets which can be reviewed in a years’ time frame.