5 ‘Life’ Changing Strategies to Win Business Clients he business market is too big T to ignore. These strategies will help you get started. By Kenneth A. Shapiro
oday, the U.S. work force is just about equally divided between large corporations (51 percent) and mid-sized and small businesses (49 percent). For advisors who want to be more active in the business marketplace, these statistics express the magnitude of the opportunity. With mid-size and small businesses employing nearly half the work force, this marketplace is an attractive niche, particularly for specialization. Besides the sheer numbers, the needs are nearly identical, whether a business has five, 50 or 500 employees. For those who own and manage these companies, their primary focus is on making or keeping their enterprises successful rather than on protecting the assets they have created. This is an unusual opening for astute advisors. Here are five strategies that can benefit owners and managers of small- to mid-size businesses:
1 Partnership Protection
Frequently, partnerships start with a handshake and continue over the years the same way they began, with each partner bringing something special that makes the business successful. Yet, over the years, partnerships can falter and cripple a business. The partners may have a falling out or one just wants out. Frequently, it can end with a partner’s death and the consequences that follow – including a loss of customers, a surviving spouse’s expectation of continued income in the face of a revenue crunch or some combination of these. Partnerships can have their own special magic. There’s often the feeling that nothing should be allowed to upset the synergy that created the relationship. To
do so could upset the special trust that exists between the partners. Simply put, if the partnership works, don’t mess with it. The aware advisor can play a role in helping the principals preserve their relationship by recognizing the value of a funded buy-sell agreement. Having such an agreement without a funding mechanism is like buying a car but refusing to put gas in the tank. And that can happen to buy-sell agreements that are drawn up and signed, but never funded due to insufficient capital or the inability to borrow the money when needed. However, with a life insurance policy, funds can be available from its cash values or death benefit to purchase a deceased partner’s share of the business.
InsuranceNewsNet Magazine » March 2013
2 Estate Protection
A split dollar plan is an easy way for owners of successful businesses to reward key employees selectively, as well as themselves, with life insurance at little or no cost to themselves or the company. Split dollar plans are flexible in terms of meeting specific needs of the individuals involved and those of the company. With the endorsement method, the employer owns the policy, but the key executive names the beneficiaries. Quite often, the employer pays the non-deductible premiums, with the key employee receiving a “taxable benefit” and residual death benefits are paid to the company to offset its costs. Finally, the employer owns the cash values, which