? Legacy planning.
? Orderly estate distribution.
? Prevention of misspent life insurance dollars.
Some of your clients may need just one or several plans to address these scenarios. A credible, time-tested program from highly respected sources can provide you with a step-by-step process for developing customized plans through a series of structured planning sessions with clients.
However, just becoming a content expert isn’t enough. You also need to learn how to promote your services as a true financial advisor, not an insurance salesperson who is trying to sell a product. The following examples illustrate real-world successful outcomes achieved when a financial advisor develops plans to help business owners plan their transition strategies:
Selling a business is an important financial transaction that requires a well-developed exit strategy. Many owners view their business as more than an asset. They have poured their hearts and souls into it. If they sell the business to an insider, they typically will receive 4 times the cash flow based on the profits for the past 5 years, compared to 5 to 6 times the cash flow from selling to an outside buyer. An inside transaction, however, usually ensures continuation of the company culture that the owner struggled to build.
The owner of a construction company was relieved that his financial advisor helped him develop a plan for an inside sales transaction. His partner became sick, then disabled, and ultimately died. Because the owner had planned for the future, he was able to make an internal transition to 3 key employees and sell his stock in the company. Now he spends time with his grandchildren and plays golf, while his company did not miss a beat during the transition.
Many times business owners don’t consider the financial repercussions of losing key employees. Helping them assess the financial impact can lay the groundwork for establishing effective employee retention programs. Such plans automatically lower turnover and keep the business operating at peak performance. Locking in key management and putting the business into growth mode will attract potential buyers and maximize the amount of cash from the sale.
For example, when an advisor’s client, a hands-on engineering firm, had an unfunded buy-sell agreement and a problem keeping employees, the advisor suggested a plan for funding the agreement and locking in key personnel. A buy-sell agreement creates an opportunity for an owner to sell his interest upon a triggering event, such as death, retirement, sale of the business or termination of the owner’s employment with the business.
For a family-owned business, the buy-sell agreement can be a vital component of the family’s estate plan. In particular, the agreement provides for the fair distribution of a parent’s estate assets when there are children who are active in the business and other children who are not active in the business. The strategies recommended by the financial advisor enabled the principals to work less and increased the value of the company because they were no longer the indispensable rainmakers.
In another instance, a financial advisor recommended that his client, who was plagued with high turnover, develop a bonus plan to give key employees an incentive to stay. Now they are locked in and turnover is almost nonexistent. The owner no longer worries about key employees leaving the company. Best of all, the business is more profitable because it runs more smoothly and consistently.
By helping business owners create contingency plans for dealing with expected and unforeseen events, you will help them enjoy peace of mind, increased clarity and greater confidence, knowing they have done everything possible to protect themselves and their businesses using the most accurate, up-to-date information from the most respected and trustworthy sources. Moreover, you will establish a unique identity in the marketplace, attract more high-quality clients and dramatically increase your income by providing valuable, expanded services.