Advisor Today - November/December 2015 - (Page 46)

FiNaNcial plaNNiNg By John Bradberry, CLU, CFP Financial Planning FAQs of Small-Business Owners Here are some questions small-business owners frequently ask-and how to answer them. S mall-business owners will face a variety of challenges over the span of their working years. For many, just keeping the doors open for business requires nearly all of their time and mental capital. As a result, personal financial planning is frequently put off in lieu of more immediate concerns. It's important, however, that these entrepreneurs set aside time to address potential financial pitfalls that can catch even the savviest business owner off guard. Here are some frequently asked questions I receive from smallbusiness owners regarding their personal financial situations, as well as a few that I find aren't asked often enough. Q: "When will I be able to retire? Am I doing everything I need to be doing to reach my retirement goal?" For many, this is the first question that comes to mind and one that often leads them to consulting a financial planner. In many cases, my clients' businesses are their largest assets and their retirement plan. They are typically successful entrepreneurs who recognize that they need some guidance and are looking to retire without having to rely on the sale of their business. The solution: I recommend that small-business clients look into instituting a qualified retirement plan, such as a pension, profit-sharing, defined-benefit or 401(k) plan. Qualified retirement plans not only solve personal retirement needs, they also help attract and retain talented employees. We rely on the MetLife Pension Resource Center, which integrates plan design, administration, compliance, provider evaluation and fiduciary management to ensure each component is working in harmony. 46 ADVISOR TODAY | November/December 2015 Q: "Are my investments properly allocated based on my retirement needs?" Can the client withstand a large correction in the market if he is on the doorstep of retirement? U.S. equities are on a six-year win streak, and bonds are approaching the twilight of a 30-year bull market. With interest rates expected to continue their upward trend and equities trading at all-time highs, it's important that I asses my clients' risk portfolios in relation to their financial plans for the business. The solution: I work with clients to create a fundamental approach to dealing with volatility in today's market. It's important to prepare for potential market corrections and make sure that short-term cash needs are not in volatile or illiquid assets. It's also vital to recognize clients' risk tolerance and make sure they are knowledgeable and comfortable with where their assets are invested, given today's market conditions. Q: "How can I most efficiently pass along my business to my heirs?" When it comes to estate planning, the first thing that most people think of is taxes. The business may not be very liquid upon the owner's death and may need to come up with cash to keep day-to-day operations go ing or pay the estate tax obligation. The next issue that needs to be addressed is divvying up the business interest amongst heirs. In the event of an unexpected death, various open-ended scenarios can arise if there is no preexisting agreement. This can lead to disagreements on who assumes the remaining interest of the business. The solution: An accurate valuation is essential to tax and transfer processes. Not having a current Ultimately, we're not selling products; we're providing solutions. valuation is a common pitfall when it comes to transitioning a business. The IRS will require valuation documentation at the time of transfer, making it important to regularly revalue the business to ensure it hasn't deviated from the client's financial plan. A good practice is to make sure the valuation is documented at least yearly by a thirdparty firm or the client's accounting department. The company's annual meeting is a good time to tackle this. With regard to transferring the business, it is essential to have a buy-sell agreement in place for the business to transition to the client's successor. This helps remove any uncertainty in the event of the owner's unexpected passing and is a proactive way to alleviate potential future legal issues. One possible consideration to satisfy the estate tax is setting up a life insurance trust. This type of trust is designed to cover any forecasted liquidity needs. It doesn't count toward the estate; so, it doesn't get pinged with an additional estate tax. Q: "What happens if I can't cover my business' debt obligations?" Unfortunately, most business owners don't have sufficient insurance to cover debt obligations in the event of disability or death. If the owner is suddenly unable to come to work, that debt doesn't go away. Clients often overlook the fact that their families will be left responsible for meeting those debt payments. The solution: I recommend that my clients regularly revisit their

Table of Contents for the Digital Edition of Advisor Today - November/December 2015

From the Editor
Viewpoint
New Products
In Step with a Winner
Finding Success in the Chinese-American Market
Dealing with Client Confidentiality
Hashtag Your Way to Social Media Relevance
Starting the LTCI Conversation
From Term to Perm
Protecting the Downside with Allocation Adjustment
Jules Gaudreau: A NAIFA Success Story
NAIFA Takes NOLA
Helping Clients Cope with Market Volatility
NAIFA Government Relations
Working with Single Women
Financial Planning FAQs of Small-Business Owners
Three Retirement Conversations to Have with Clients Today
The Advent of Robo-Advisors
Moving into the Retirement Space with 401(k) and 403(b) Plans
Moving the Sales Process Forward
Cultivating the African American Market
The Lighter Side of LIfe
Advertiser Index
Back Page

Advisor Today - November/December 2015

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