Fiduciary Is Fun!
(a.k.a. I heart taxes)
(a.k.a. I heart taxes)
I really enjoy working with small business owners - individuals who seemingly face incredible odds and yet still find a way to succeed. Helping such individuals is probably one of the most rewarding aspects of my role as a financial advisor.
Small business owners often have a hard time distinguishing between themselves and their business. After all, they have poured their time and sweat into making the business successful and such devotion can often come at a cost to themselves and their families. I have new client that fits this profile.
I was referred to the business owner because he has “30 employees and needs a 401k plan.” This is indeed true as the company is 10 years old, running successfully, has a relatively loyal workforce and has reached the point where a company sponsored retirement plan makes sense. However, there is so much more to the story.
While getting to know this particular business owner as we discussed options for a company retirement plan, it turns out that he has diligently been reinvesting S-Corp profits into the business. He has organically grown the business and as a consequence is currently debt free. And although this sounds great, it has come at a huge cost.
He has no savings to speak of. He has no retirement funds. He does have a wife and two children under 6, but no life insurance. And amazingly, or maybe not, he has no estate planning documents and no idea what would happen if he passed away other than that his wife, who is not active in the business, would get 100% of a business she does not know how to run.
He has been running his business with a singular focus and has not stepped back to realize that his business and his personal life are two very different things and have different needs. When we had our first planning meeting with his wife present, I can assure you that she recognizes the difference!
So, what’s next? In this case we are examining the corporate returns, balance sheet, and cash flow statement to rework how the business is capitalized and to allow him to begin taking some money out so that he and his family stop living like paupers. We are running life insurance illustrations to protect his family should something happen to him. And we are examining buy/sell options should something happen as well. In short, a top to bottom review.
If you are business owner who has not taken the time to consider both your business and your personal life holistically, know that you are not alone. But also know, that help is available! For a comprehensive plan, give me a call at your convenience!
Pete Welsh a/k/a 401Guy
This fall I have conducted a number of Financial Education Meetings at employee worksites. Several of my clients have strong participation in their 401k plans, so traditional enrollment meetings have not been needed. Rather, we have pivoted to putting together financial education meetings that span many fronts.
You might be thinking at this point that the point of this blog post is to stress how important it is to reinforce budgeting, debt management, education planning, emergency funds, comprehensive insurance reviews, etc. And the list goes on. And while all those items are important, critically important, I am not going to discuss them here.
Rather, what has been interesting to me and what I do want to cover is how I have worked with the HR departments at my clients to get a better understanding of their overall benefits programs as I prep for my financial planning meetings. The benefit offerings at an employer can often be a seamless web and to discuss one offering in isolation of the others is to not fully convey the value of all the programs and how they work together.
For example, when I cover the need to review insurance, I like to know what the employer already provides. Is their term life insurance in place? How about some short and/or long term disability coverage? Knowing the answers to these questions allows me to piece together multiple components of the protection story and help the employees understand that their employer has already taken steps to help them out.
Another place I spend time is understanding the Employee Assistance Program. When I discuss the need for employees to have wills, health care directives, and power of attorneys, I often point out that the EAP offered by their employer is available at no cost (generally) to help employees get started on getting these documents in place. These are only a couple of examples. There are many more to be considered.
I generally find that taking a comprehensive approach to the benefit programs leaves the employees feeling more empowered and confident as well as more appreciative of their employer. It is a shame when an employer and their benefits broker put together comprehensive programs that are underappreciated and/or underutilized. Everyone leaves shortchanged in these situations.
If you are an employer looking for an adviser that takes a comprehensive approach to all your benefit programs beyond just the retirement plan, please give me a call. I would love to discuss how we might work together.
Pete Welsh a/k/a 401KGuy