Small Business Owners Need Financial Help

Once they’ve convinced owners that they need to protect the assets they’ve worked so hard to create, advisors gain a huge sales opening, he notes.

The first step in gaining the confidence of the owner, Primmer says, is to ask whether he plans to keep the business in the family or sell it.

Forcing the owner to ponder this crucial question gives the advisor an entr?e to show how life insurance can be used to ease the transition. It has a role to play in family succession, continuing the business under new owners, creating retirement programs, starting nonqualified executive benefits such as split-dollar life insurance or section 162 bonus plans, or to support the owner’s estate planning, Primmer points out.

For instance, if the owner wants to pass on the business to one family member, life insurance can back an irrevocable trust to bequeath wealth to other children, he notes.

Or it can be used to finance a buy-sell agreement so that, following the death of a partner, other partners can use proceeds to buy the deceased’s shares.

Advisors also need to be able to show how business-owned insurance can cover the loss of key employees or provide liquid assets so that the family is not forced to sell the business upon the owner’s death.

Phoenix has adopted a strategy of going after the small business market through financial advisors, offering its products as a way to secure the eventual transfer of a business.

Along with the results of its survey, Phoenix has introduced a program, Business Owner Strategies, designed to support advisors who want to work with closely held and family-owned businesses.

The program offers brochures, CD-ROMs and other educational tools, backed by the company’s 80 outside wholesalers. The wholesalers are trained to appraise the value of a small business, which is an important first step in convincing the owner to protect that value, Primmer explains.