Good morning, everybody. I'm Rob Barnes with Integrated Insurance Consulting. Today's topic is Counseling Your Clients from Business to Retirement. And I just wanted to give a little bit of how this presentation was developed and so forth. Last year, in 2018, I presented at a NAPFA regional meeting in St. Louis, and I was presenting a program that is titled The Importance of Business Continuity Planning. And sitting in that audience was Dan Danford. And Dan had come up afterwards, and he said he liked the presentation and really liked that I used real-world examples and was able to put some meat on the bone, if you will, for the presentation. And he said, I have somebody you have to meet. And that happened to be Kyle Danner. Kyle's a business consultant. And as we started talking, I go, gee, I wish I had Kyle on this one case that I spoke about in this presentation, because we really needed him to get inside this owner's head, if you will. So it wasn't long after that we spawned the idea of taking one of the case studies from that program and kind of doing a deeper dive from three different perspectives. Dan is a longtime NAPFA member, comprehensive planner, a lot of experience with business owners. Kyle is a business consultant, and that's all he does. And I'm in insurance and have an extensive background in business and estate planning uses of insurance. And so we hope that we present today the importance of collaboration with other professionals to get the job done and do the best job for your clients. So with that, we do have a kit of information and some tools and key questions and so forth for you to take today forward and use it within your practice for your business owners. And with that, I'm going to introduce our group here. Kyle Danner is a family business advisor and founder of his firm in Kansas City, Missouri. He's a former co-owner of a family business and wanted to escape that to go off on his own. And he's a certified professional entrepreneurial operating system implementer, a certified exit planning advisor, oh, and he has a master's in counseling. So Dan Danford is CEO and founder of the Family Investment Center, also in Kansas City, Missouri. He's a longtime NAPFA member, been advising clients since 1987, and has a lot of experience with business owners as well. He's an author of hundreds of articles, a podcaster, and written three books, his latest with Stuck in the Middle there. And he is both a perpetual student and professor. I myself, I would just tell you, I've been helping advisors and their clients for 25 plus years, and we work in the insurance arena with life and long-term care and so forth. And we're also a NAPFA resource partner. So with that, I'm going to turn it over to Dan, and I'll be back to visit you a little bit more with the story later. Hi, welcome, everybody. Thank you, Rob, for the introduction. So this goes back probably 35 years for me. I was a young trust officer in a bank, and my area of expertise, if you will, was retirement plans. And so as a retirement plan trust officer, I started, I was very young, had an MBA, but didn't know too much about investing, didn't know too much about anything. My feet were really wet, and I was really learning. One of the things I noticed, though, was that the most successful people in town were the people I was working with. I mean, as it turned out, the people who had retirement plans, now back in that day, we had pension, and we had money purchase pension, profit sharing, defined benefit pension. The 401k was on the horizon, but was not yet there. And what I noticed were the people I was working with were the most successful people there. And Dan kind of got this, you know, question mark or exclamation point or something in my head that basically said, the people who have the most financial success are the people who own businesses. And that was sort of the beginning thought of my entrepreneurial spirit. And since then, I've started two companies. This one back in 1998, which is a SEC-registered RIA, but back in 1998, it was a Missouri State RIA, and we've just grown to what we are today. So the idea behind this whole topic today for us is that advisors are uniquely situated to help business owners through some of these issues, okay? So what we're going to try to do is we're going to try to plant some ideas that will be helpful for you in talking to people who have businesses. So this slide basically just gives you an idea. This is what, I mean, I own a business, probably many of you in this room own a business, you work with business people, these are some of the characteristics that make those people receptive to the message we're talking about. And the message we're talking about is you need to prepare for that day you're going to retire, okay? So generally speaking, most people who own businesses are passionate, they're resilient, they're creative, they're confident and self-reliant, focused and flexible, and they're financial and quantitative. Well, why does that matter? Because you can go to them and you can say, okay, you have this unique problem. That unique problem is that you're 50 years old, someday you're not going to want this business or someday you're going to want to do something with this business, and I can help you sort through those issues to figure out what's the right thing. And these are the very reasons why those people will be interested in that conversation with you, because it is something that is in everybody's head who owns a business. So the takeaway from this slide is that even with the best of intentions, most businesses don't go on past the original owner. That's the truth. And you get down to three generations, fewer than 3% make it three generations. We actually have a company in St. Joseph, Missouri, which is north of Kansas City, where they're in the sixth generation of the family in the company. It's an international company, and it is wholly unique that they have made it that far. I can tell you one of the reasons they've made it that far is because they've been so careful about how they handle these succession issues. But it is very unusual. But when you talk to most business owners, they kind of like for the business to continue in some fashion. So they'd like for it to, but it doesn't. And that's part of the answer that we're going to talk about a little bit. So anybody who owns a business thinks about this day when they're going to retire, or at least they aren't going to be working in the business full time. I look at me. I love my business. I love what I'm doing. I'm getting to the point where I'm starting to think there may be a day when I'd rather be working three days a week than five days a week. So that is part of the program, is how do we achieve that? How does that work? So the two big questions I ask people when it comes to this is, have you set a date? Almost nobody has. Everybody's kind of got this vague idea that they would like to retire someday, and I'll know when that day comes, but they aren't doing much to get there. And then, what are you going to do with the business? That's a really big question. I mean, I think we also have this vague idea that we'll sell out, but I don't know that anybody takes it much further than that. I know when I started my business back in 98, I thought I'd build it and then sell it. Well, not only have I not done that, I'm not sure I'm going to do it now. My perspective has changed some, but these questions help us figure out what to do next. So the issue of retirement. So what we've broken it down is we've kind of gotten some ideas from all three of us on each one of these big questions. So on the counseling thing, Kyle says to the business owner, me, what are you going to do when you're retired and it's raining outside? Because a lot of people, when you ask them, what do you want to do in retirement, they say, I want to play golf. Okay, well, what are you going to do when you can't play golf? And truthfully, that's one of those focus questions that makes you think, you know, what is it that I do want to do? How is that going to work? From my perspective as the financial advisor, your perspective as the financial advisor, the key question is, how are you going to pay for what you want to do? I mean, maybe what you want to do is move to an island someplace, but you still have to buy groceries, right? So how are you, what's going to provide the income to allow you to do that? And then what Rob pointed out is, you know, do you want to guarantee some of that income? Do you want to, you know, annuitize some of it somehow so that you don't have to be counting on dividends from stocks that may be high, low, or otherwise, but it gives you an opportunity to think about, you know, could I lock in some money at some value that then would provide income as I go forward? Okay, so basically, this is MBA 101. There's really three options for what you can do with a business. Basically, you can either liquidate the business, which means basically sell the assets. You can sell the business as an ongoing concern, or you can gift the business in some fashion. Now, this goes back to what I said earlier, is that everybody knows that there's a day coming, and everybody knows that there's something they're going to do, but mostly what they think of are variations on this and somehow. Well, where advisors can help them is help them kind of focus on which ones of these make the most sense. So if you decide you're going to liquidate, there are both pros and cons to that. Some businesses are more liquidatable than others. If you have a retail store, okay, it's pretty easy to put a going out of business sale on the front door and sell all the inventory, right? Okay, so it's an easy solution for some people. It's very clean cut, you know, going out of business from December 25th to December 31st. January 1, you're done. That's appealing for some people. And of the various options, it's really the simplest option, which is you put up some signs, you sell out your inventory, and you're over. If you're in a manufacturing business, say, maybe you sell some machinery. Maybe you sell some raw materials. But whatever it is, when it's done, it's done. Doesn't have any further concerns. Now, from a pro standpoint, or from a con standpoint, I'm sorry, probably going to get the lowest value for your business by liquidating it. If it has ongoing business value, then you're going to get more from some other choice. And the other thing that, and Kyle will talk about this a little more than I am, but it also, you know, if you liquidate the business, you've kind of ended your relationship with your clients and your employees and, you know, any other vendors, that kind of thing. So one of the cons is it's all over and done, and you walk away clean. That's also a pro. Now, if you decide to sell to an outsider in some fashion, that's probably the most profitable option. Okay? Because you can probably get the highest price selling it as an ongoing concern. You also get to maintain employees and customers. They aren't interrupted, you know, because somebody else bought the business. And then the legacy of the business is continuing. Kyle talks about this at more length later, but it is true. I have an enormous amount of ego in having started the company that I've started. If people ask what I do, I say, hey, I started Family Investment Center, and we manage money for people. Well, one of the issues if you liquidate the business is, you know, I started Family Investment Center, and the further you go on, the less that means to people. So one of the issues is if the business goes on, I can still have some ego attached to it. If the business doesn't go on, I don't have ego attached to it. From the con side, selling a business takes a lot of work. It's not like, you know, selling a game in a retail store where somebody comes in and just writes you a check and walks away. We're talking if you're going to sell a business, it's going to take several years to prep that business for sale. It's going to take several years to acquire a good customer for that business. It's not an easy thing. It's hard work in order to prep a business for sale. But again, oh, and the other big con, very little control over when it will happen. Even if I do everything right, we may not attract a buyer for six or eight or ten years. So my goal may be I'd like to sell the business at age 65, but you may not get to sell it at 65. The opposite is true as well. Somebody may come along in the next year or two and say they want to buy your business, and you weren't ready to leave in the next year or two. Again, these are all things where we can help people figure out what they need to do. Oh, wait, I want to go back one more. Gift to the family. I'm sorry. Maybe I was showing you the wrong. It doesn't matter. We're in the right place now. Gift to family. Most rewarding. You talk to people. A lot of people say, hey, I would like for my family to take over the business. I speak from my own experience. I don't have family who's interested in the business. I have grown kids. They all have their own professions and things, so they aren't interested in that. If you keep the family or if you keep the business in the family, there's less disruption to the family, especially if they're people who are working in the business. They're still going to go to work in the business. You can go still hang out in the business if you want to, and you're still in touch with the business. Now, the con of that, sometimes those family relationships are not easy, so sometimes the idea of selling the family doesn't work out as well as you want. The other thing, or a gift to a family. I'm sorry, I'm saying sell, but I mean a gift to a family because usually it's a mix of the two, to be honest. Price compression. Oftentimes when you sell or gift the family, the business to the family, you don't get the same price that you would if you were to sell it to an outsider. It's kind of like the discount that pro players give when they decide to stay in the hometown instead of going someplace else as a free agent. You expect them to pay, you expect them to earn less for doing that. Same thing if you're gifting or selling the business to your family. You wouldn't charge them probably as much as you would otherwise. Then the other big issue there is whether it makes sense to start gifting parts of the business now on an ongoing basis in anticipation of leaving, or whether it makes sense for the business to pass in an estate planning way when you're gone. Again, these are questions that people don't know on their own, but they're questions that an advisor can bring to the table and that a team can help address. Okay, so if liquidation is what you're wanting to do, then there's some pretty simple steps to it. First of all, you set a date. It's December 31st. Is it December 31st this year or next year or the year after? Then you have to look at things, and you have to look at things like if you're leasing a building, when will the lease end? One of the things that happens when you're liquidating is that typically you start trying to cut costs, right? You say, okay, I'm going to liquidate this business in five years. I want to get as much out of it as I possibly can in that five years. So maybe you stop some kinds of insurance coverage. Maybe you stop updating your technology as you go along because you're going to be closing up anyway. You start saving money so that you can enhance your financial situation. And then the other thing, you know, if you know that you're going to close in three years but you have contracts with either suppliers, vendors, or with customers, then you need to figure out how you're going to handle those contracts, right? So there are some things that need to be done if you're going to liquidate, even though it's the simplest of the three options. Kyle says you need to deal with the family and you need to look at the emotional concerns of closing the business. I mean, you see this all the time when people, I know on social media, I see somebody announces that a business is closing and there'll be 50 people who will write on there about, oh my gosh, this is my favorite place to go, I hate to see them leave, that kind of thing. So you would probably want to address that in some fashion if you're going to. Probably want to let those people know in advance that this is kind of your plan. So if I knew that I was closing a business in five years and I was reducing costs in order to make more money, I'd also be looking at ways to enhance the money I set aside for myself, right? So I'd be looking at retirement plans and can I sock more money away tax-free because I know when this is going to end, right? I don't know what the solution is there, but as an advisor, we can be helping those people decide what it is they need to do. And then Rob points out some of the insurance issues, you know, do you need to keep all the insurance coverage current, do you need to make changes, whatever. Okay. Sell to an outsider. Same thing. If we're going to sell to somebody, what are the issues there? Well, Kyle points out very accurately, and this is one of the takeaways we want you to have from this, assemble your advisory team. Ideally, if you're going to sell your business, you're going to want to involve your CPA, you're going to want to involve your lawyer, you're going to want to involve maybe an insurance professional, possibly an advisor. What we would suggest and what you should suggest is that you be the quarterback of that team for this client, right? So we know where we're going now, let's put it together. There may be some bookkeeping changes that you want to make. Depending on what you're going to do with those contracts and things, you may need to make some adjustments with the CPA and the lawyer. If estate planning is going to be part of the issue, you'll definitely want the lawyer. But where the advisor has an opportunity is they can be the quarterback. And then one of the things that most buyers want is they will want to keep your good employees and probably get rid of your bad employees. That's the way people think. Well, your business is going to be more valuable if you've already put a retention plan in place for your good employees. They're going to want to know the things. So that's an excellent point that Rob makes, is that you can plan how to do this to make your company more valuable. And then if you're going to do a gift to a family, now it sounds so easy to say, well, I want my kids to take over the business. But there are issues there. Number one is the business has a lot of value. And if you gift it all in one year, well, there's tax implications there, clearly, right? So that's one issue. Another issue is if you gift the whole business to your kids, unless you're in a situation where you already have enough outside assets, how are you going to continue to get any income off of that? I mean, maybe if you sell the business on an installment plan or something, you'll get payments for a period of time. But if you just gift it to your kids or whatever without some kind of agreement or plan, how are you going to continue to make income in retirement, which is a key point? And then the decision of whether to gift on an ongoing basis or whether to gift as part of an estate plan, of course, is a big one. So gift to family, strategic planning, determine how to prepare the next generation, big issue. Even if your kids or nephew want the business, they may not be prepared to run the business, especially if you're an entrepreneur, because entrepreneurs don't give up power easily. So maybe I even have relatives working in the company, but they probably don't have experience running the company. So if I'm going to do that, then part of my plan ought to be how do I prep them for taking over? And then the other issue, and I see this all the time, I had a client where this was exactly the case, she, her father and brothers operated a major farm, it was worth millions, but she wasn't involved in the farm at all. And ultimately, it's really interesting, she went to her father and said, hey, my brothers are getting income off the farm now, and they're going to inherit a chunk of the farm later on, because you've already said you want them to do that. Let's see if we can't work out something right now that's fair to everybody. And they did, actually, he gifted her quite a bit of money in anticipation of that. But that's a big issue, because kids have expectations too, and maybe one kid is involved in the business and the other kids aren't involved in the business. And so, how are we going to handle that issue when we do this succession plan? If you do it in the estate plan, oftentimes everybody inherits equally kind of thing. Well, maybe we should rethink that before we get there, which is where we can add some value. I always suggest, where is your retirement income going to come from? Because it's a huge issue. And then, like Rob points out, what protection will be needed? And they're going to talk a little bit more about that in the case study here in a minute. If there's me, my spouse, kids, their spouse, how are we going to protect all the interests in this business as people basically grow old and die? OK, so I'm going to kind of wrap up by retouching this again. The reason why all this is so important to advisors is because we're the ones that have some general knowledge that can be helpful here, right? I mean, lawyers have specific knowledge, CPAs have specific knowledge, insurance people have specific knowledge. But we're the people who can sit down with the business owner, and we're the ones that can say, hey, you're 55 years old. This is going to be an issue for you as time comes forward, and I can help you resolve some of these issues. I can help you figure out what it is you want to do. I can help you build a team to do what you want to do. And then I can help you implement whatever it is you want to do. And I went back to this slide because I just want to touch again. These are the reasons that owner is receptive to that message. These are the reasons why that owner is sitting there thinking, hey, nobody's ever offered to help me with this before, and it's really important. And so I'm going to sit down with Dan, and we're going to figure out what to do next. All right. Now I'm going to hand back off to Mr. Robb. Thank you. There you go. So Dan had mentioned the statistics of the survival rate of family businesses earlier that only 30% make them to the second generation, 12% to the third, and a mere 4% to the fourth family generation. The primary three reasons are on the board. Tax exposure, failure to plan, which is where we come in, and family conflict. And our story involves all three of them. It starts seven years ago with a franchisee who owned 20 locations of a major fast food restaurant that we all know. And I was brought in by their advisor because they were just starting to transition some ownership to Junior. They had just given Junior 5% of the company, and he's heir apparent. But there are some situations here. We have a founder who is remarried. Now he's been remarried for a lot of years, so his current wife is the wife. The old wife is out of the picture. But there's three other kids from the first wife, along with Junior, that's going to take over. So we're going to have some family issues and dynamics to deal with. And the bottom line was we had to start educating, asking key questions, getting in the head of the business owner and giving him some direction, and start building his team, quite frankly. He wrestled with the fair versus equal issue. I know that I want the bulk of the family business to go to my son, but what do I do with my wife? What do I do with my other kids? The pie in this case, I'm big into drawing circles and looking at how much is the business and how much is personal. In this case, you can say that about 90% of the wealth is in the family business here. So when you try to break out a pie of we want that to go to the son and we've got to pay estate taxes, he's exposed to both federal and state estate taxes in his situation. He needs to leave money for his wife. He needs to leave money to the other kids. And it just doesn't equalize out. And so what he needs is to inject capital in this situation down the road when he gets his plan together. He wrestled with giving up control versus ownership. He wasn't ready to give up control, but he at least knew that he wanted to start putting some ownership in Junior's hands because Junior's been around helping the business grow. And since we started, they bought 10 more locations. So now they own 30 locations and they're still in growth mode from that fashion. So only complicating the issue further of how to break this out. We looked at, I've been in insurance a long time and I'm well aware that people don't like to buy insurance and they'll try to do anything they can do to avoid buying insurance. And we had to tell him that if you die tomorrow, insurance is the absolute best vehicle you could have to inject that capital into the situation and try and keep everything running versus having a fire sale price on all your locations because you have to pay the tax man and spread the money around. So keeping the business together because of the assets, and in the case of a franchise, they often own the building separate in a separate trust or family loan partnerships. They'll often own the real estate itself separate and then the business itself runs out of there. So part of the initial plan was, let's give all the real estate to the wife and let's give the business to the son. Well now you might raise more family conflict because his stepmom for junior is now his landlord and they kind of don't have mutually aligned future expectations. Mom wants the rent to be as high as possible and junior doesn't. And so it's always best if we can try and move everything together if possible. And we're still struggling to create the plan seven years later, if you will. And keeping ownership with active owners, we discussed you don't have to give equal to the kids. In fact, you likely can't. And we probably don't want to make them passive owners in the business and have junior answering to his brothers and sisters at the family gatherings and so forth. So as you know, and what we do is advising people, we're really modifiers of behavior, right? And we have to get inside of people's head and try to see how they tick and see things through their eyes and try to find the hidden objections or where they're stuck and so forth. And a while back I penned an article dealing with DIPs. And DIPs is an acronym I use that talks about denial, ignorance, procrastination, stuck or stubborn or some other Ss you might think of in situations with clients. And we had some resistance, no doubt, here. When you try to plan at this extent, you just can't do it overnight. But the owner was a little bit in denial to needing and or wanting as much insurance as we might have recommended. And at the end of the day, I can tell you he bought a $10 million, 10-year term policy. So he really put a Band-Aid on the situation because if this is a permanent problem, you need to measure it with or answer it with a permanent solution. And so we're seven years into that 10-year term. He was in denial thinking that he needed anything longer because he was going to wave his wand and fix all these problems. And yet he went out and bought 10 more locations and complicated the problem further. And so that's where he's at with the denial start. The ignorance of not having, he did not have a living trust even, let alone a buy-sell plan. He had a few little things, articles and incorporation. And so we did purchase some key person insurance on the sun and some disability on the sun. These were all gaps. People are either going to live, die, or become disabled. And you have to look at them all three categories here. And he didn't, we were kind of, his procrastination was probably all the prior years. We haven't really procrastinated here. But there was a part of the situation where it's real hard. He had a local attorney that he was working with. And again, my advisor had a very strong relationship with him. And I was newer but gained trust quickly. And he was using a local attorney that we didn't think was capable of pulling off this kind of a thing. Maybe the guy writes a good living trust, but you need a buy-sell plan. You need some other stuff. You need the heavy, really advanced attorneys here. And three years ago, he finally did that. He did some work with the original attorney against our advice. We tried getting him the good attorney, the better attorneys early on. And his attorney also had cancer at the time, I might add, that we're like, why are you doing it with a local guy that's not necessarily sophisticated enough to handle this? But later on, he did, and we ended up, the reason why I was involved in three years ago is we told him not to own the policy where he wanted to own it at that time. And now he saw the light and we had to move the policy from outside of the estate, which was an original recommendation, again, not followed. But you do the best you can to guide them to do better planning. And today, actually, I'm involved in this case for a third time in the last seven years because he's about to transfer some more ownership and sell some shares to Junior and line up financing for Junior. And so we're adding more key person insurance on Junior today to bring it up to the level because if Junior dies, then his retirement plan and family business plan all falls apart if Junior's not there to run it, and he's going to lose some money for it. So that's where we're at in the case today, and I'll just sit here and say that I still see the value of the insurance past the next couple of years, and we'll be back to visit them in a few years once we get today's job done to be discussing are we going to try some term again or permanent or what's the plan now because the liquidity is just not there and things will fall apart if he dies suddenly. So back to Kyle here, and he'll get more into the story. Good morning, everyone. Before I dive in the case study, I have to make a comment. I'm always amazed at how life comes full circle. About nine years ago, September 30, 2010, was my last day in my family's business, and it was a printing company. Well, fast forward nine years later, and right around the corner is one of the largest print exhibitions of equipment and services in the world, and my sister, who I own the business with, who is now a majority owner, she's just bought out my brother and another partner. She's going to be speaking about 30 minutes from now. So it's, like I said, I'm always amazed at how life comes full circle. So anyway, Rob and Dan, they kind of shared some big ideas, some concepts. Rob shared a little bit about the case study, about his actual client, and I want to kind of bring that down to the ground now and actually talk about some strategies, some techniques, some questions when you have complicated things like this. And so I'm just going to drive right into it, and our franchisee looks familiar. I'm sure everyone in this room has seen somebody like this. He's 65 years old. He is in good health. You know, as Rob said, he has 30 locations. Now we've taken the case study and we've tweaked it to add a little bit more drama and a little bit more complication in it, because it can never get too difficult. You know, again, second marriage form, and he has four children, three sons, not active in the business. And he is enjoying good health. His key priority in all of this is taking care of his second wife. We're not really sure if he wants to continue working or not or staying active in the business. And so coming from our different perspectives, these are some questions that we would ask. And for me, I really want to know what's his vision, not just for the business but for the family. It's really, you know, business owners, they have a vision. They start a business because they can do it better than anybody else, and they want to see that vision through. In this next phase of his life, I want to ask him, you know, what is he really trying to accomplish, what's it going to cost, and how's the business going to pay for it? And so, and it's not only just for him, but then he has to be able to share it with the rest of the family. And so I'm a big fan, obviously, from my perspective of, you know, well-planned, well-thought-out family meeting. And part of that, the importance of that, is setting expectations now to avoid problems later on. And this is particularly important. I'm a member of the Exit Planning Institute, and we conduct surveys, state of owner readiness surveys in the various markets. And over half of the owners surveyed, when asked have they shared their plans, if they have plans in the first place, have said no, they have not really shared their plans with all of their family, maybe just one or two folks, maybe their spouse. And so really thinking about talking to your clients about having that well-thought-out, well-planned family meeting to be able to set those expectations now. You know, Dan, from a planning perspective, of course, he's concerned, you know, how are you going to pay for life afterwards? What's the source of future income? And the other question here is, what's his role going to be? Rob touched on, and both Dan talked about, the importance that business owners, they are their business. Owning a business gives them, it's their identity. It gives them a sense of purpose. It gives them structure. It gives them connection. It gives them status. It gives them someplace to go. People to see. People to connect with. And they're important. And so, they may focus in on all the financial and the legal aspects, but you cannot downplay the importance of the identity piece. Now, as planners, kind of dealing with a business owner about those abstract concepts like identity and status and that, really being able to bring it down to the ground. Dan mentioned, Rob mentioned about asking him, how are you going to answer the question? So, tell me, what do you do? Standing in the grocery line or standing at the country club having a cocktail and somebody asks you, so what do you do? Well, how are you going to answer that question? The other thing is, what are you going to put on your business card? And it's being very aware of helping them understand that. And I'm actually not a fan of retirement. I've been enough, I've been, somebody's shaking their head back there. I'm not a fan of retirement because personally, I saw what happened when my dad retired. And I've talked to plenty of other business owners about once, everybody has this dream of handing over the keys and going, sitting on a beach or playing golf. But they forget all the things they get from their business. And so, what ends up happening is that health issues can accelerate. You have instances of substance abuse and addiction issues increasing because they've lost their purpose. You could even see marital problems because all of a sudden, the husband is now at home all day long telling the wife how to run the house that she's basically done very well for the past 40 years. So you can imagine how well that conversation goes. And Rob is, of course, concerned about protection. This is a critical time. Yes, he is enjoying good health, but in case there's a medical emergency or anything, making sure that the family is protected in case anything happens. So now, one of the key pieces of this is taking care of his wife. She's 10 years younger than he is. Second marriage, he loves her very much. Her role in the relationship is to take care of the home. She has no involvement in the business whatsoever. But the business owner wants her to become the landlord if he should pass away. So the questions that we have for that is, she's not involved. She has no interest in being involved in the business, and yet we're going to set her up to become a business partner, essentially, with the son, okay? Now if the owner absolutely insists that that's what he wants done because he doesn't want to make the investment life insurance, one of the ways in which to position this is owner education for the wife, okay? Bringing her in, having her meet the other advisors on the team, and each of them educating her. It's not only about educating her, but then it's also everybody else building a relationship with her so she knows who to call when there's a crisis or when she has a question. But it can also be seen as a relationship-building activity with the owner himself. That is, they're doing this thing together, getting ready for the next chapter of their life. And when we think about advisors being able to deliver value, that education piece for other family members can be a way to kind of set yourself apart from the other people, from the other competition. Dan is talking about—I'm sorry, I apologize, I just lost my place. Always be careful of going to a vendor dinner the night before a presentation. The wine flowed a little too freely last night. So Dan asks about the son, is what happens, or what should she do, or what's the plan if something happens to the son or the business? And folks, this doesn't have to be something catastrophic, like the son suddenly dying or getting killed or becoming disabled. The franchise locations, Rob said they're fast food restaurants. Well, there are market changes going on. There are pressures on profits due to increases for minimum wage. There's the challenge of finding and staffing restaurants like this these days, changing eating habits among the American population. So the question is, the son may be a competent business manager, but if he doesn't have the forethought, doesn't have the risk, the entrepreneurial mindset to be able to see that and respond to it, now the numbers may look really good for this type of plan, but because of these business changes, these market changes in 5, 10, 15 years, that could severely impact this entire plan. So it's being able to talk to your clients and think in a very big-picture view, especially when it comes to the business. Do you have a business advisor who has that strategic mindset that can ask those questions so they can plan accordingly? Of course, Rob is concerned, again, protection. If they end up becoming business partners, having key person coverage for the son, because if something does happen to the son that's catastrophic, you don't want the entire plan jeopardized and it all going to a fire sale. I think of all the slides for this case study, this really hits home how complicated this can be because you're having to think about, from a strategic mindset, strategic planning for the business, you're having to think about owner and business education for the wife, you're thinking about having to make sure that everything is protected in case this is how the plan unfolds. But why keep it there? Let's go on and talk about the son. He's 41 years old. He's newly married. He has a young child from a previous relationship. He's been working for dad or with dad, depending on who you ask, for the past 10 years. He has about 5% of the business. Part of this plan is gradually, over time, being able to shift more and more of the business to the son. I think this here is one of the challenges. The next generation, rarely do they ever have the capital to buy the business or to make a significant increase in the business. It's, as I've heard, the bank of mom and dad helping finance the transition. We know it's particularly challenging because business owners have 70 to 90% of their wealth tied up in the business. I'm curious, as planners, as you're talking to business owners, do you have a sense of how much that business is valued to help them in their planning? Is that value that the business owner shares with you, how accurate is it? Business owners are notorious for overvaluing their business until they get that valuation. Some of the questions that we would ask the son is, and this is always a big one. Mom and dad are saying, well, is he going to be ready to take over? The kids are also asking, well, are mom and dad ready to let go? Before you can even ask that is, what does ready look like? One of the things I always tell parents when they're really kind of worked up about whether or not the kids will be ready is, what does ready look like? I said, were you ever ready when you started your business? Were any of us really ready for all the challenges that we have in starting a financial planning practice or what Dan did with his business, what Rob did with his? Are we ever truly ready? It's always kind of checking that fear that parents have. The question is, what do we need to do to prepare them? The other question I have, the other concern I have is the relationship with his stepmother. Is it a good, healthy relationship? Do they communicate well? Do they spend time together? That's something that needs to be given some thought to. What you don't want to have happen is you don't want it to where all the stepmother expects from the son is her check, that all he is is the ATM. What that does is that boxes the son in that in case he hits hard times and needs some flexibility or if he wants to grow the business, being able to sit down and have a really good relationship with his stepmother to talk through and deal with those issues is critical. That relationship building doesn't have to be anything really complicated, just a mutual commitment to maybe meet for lunch or coffee once a month or in the owner education with the stepmom that I mentioned earlier, bringing him in as well so they're all on the same page of what they're talking about with the advisory team. What Dan is concerned about is the son's entrepreneurial capability. He may be a really competent business manager. He can get things done. He can keep things running, but does he have the mindset to reposition the business when those market changes happen? Does he have the intellectual ability to be able to do that as well as the stewardship to think about the business long term? Rob, of course, is always with protection, making sure that everybody is covered, especially the son because if he's the one who's leading it, making sure that he's covered and he's protected in case anything happens to him. We're focusing on the son who's in the business, but there's also other children involved too. There's three other sons, and they're all age 31, 33, and 37, one of whom is married. They have no involvement in the business whatsoever, but what we don't know is what are the expectations the owner has of them, and conversely, what do they expect from their dad? A lot of times in estate planning discussions, there's always this concern. There's always this fear about talking about, well, how much money is there because parents coming or kids coming and talking to their parents about how much money is there is not so much about how am I going to get it, am I going to be able to buy a sports car, but what do you expect me to do with that? If you hand me this gift, and it's substantial or whatever it is, what do you expect me to do with it? They have those discussions, and there's so much fear around those discussions, which I'm sure you all are very well aware of, that they can actually be great ways to build the family in the process. I think setting expectations with them, with those not active in the business, are absolutely critical at this point. Dan and Rob have already talked about what's fair. A lot of times people think, well, we'll just divide up everything equally. Well, is that fair to the son who's in the business working 60 hours a week getting everything going? But conversely, is it fair because maybe the sons, the other sons not involved in this, they can't make a contribution. Maybe they don't have the skills, maybe there's not an opportunity, and so they're locked out of the business. I said at the beginning, having a well-thought-out, well-planned family meeting to set expectations today to avoid problems later on, is making sure that employment guidelines are absolutely clear, that in case they ever want to join the business, that there's a policy in place that says you can only join if there's an opening, you have to have two to five years of relevant work experience. Again, this doesn't have to be anything complicated. Maybe you've had a promotion or two, budgetary control, whatever's going to be a good fit, but outlining that out now. I think the other thing that's important is also that's lost in these discussions are prenuptial agreements, is setting the expectation. Of course, there's two that's already married, the older son and then the one not in the business, but setting the expectation of a prenuptial agreement. When I bring it up to parents and to family members, they always are a little bit insulted by that because you're talking about starting off a marriage, a new relationship, already with the expectation that it's going to fail. It's like when you have a business that benefits the family, it's no longer about that one child in that relationship because that's something that can affect the entire family. It's taking the focus off that one person and making relevant to the entire family. Dan, from a planning perspective, is wanting to make sure because we think about a prenuptial agreement, keeping those financial relationships clear and as easy as possible. Then Rob's talking about buyout the in-laws with insurance for the spouse if possible. Maybe dad gifts money now to the sons. However that may be to make sure the entire plan is protected. These are, when we think about some of the top two questions that we would ask the advisor. I think the big takeaway here is that, as Rob said, as Dan mentioned, is that you need a team. It's not just the financial planner, the CPA and the attorney, but it's other business advisors. It's people who can deal with the family dynamics issues. Being able to think a much bigger picture than typically those three advisors. The big question is, will there be enough to finance the plan? Does he have a clear understanding, the business owner, just how much money he'll need? Again, making sure the entire family is protected. In your materials, we have a business to retirement planning kit. It's things that all of us have contributed to this, and they're things that you can work on or offer to your clients. First of all, there's the ideal life exercise. This is something that I do when I'm first starting to talk to business owners and their families. It's a real simple set of questions, trying to think about the next chapter. It's something you can do with the business owner one-on-one, they can do it by themselves, or the entire family can do it together. The other thing I do in my business, besides doing family meetings and offering EOS implementation, is I help advisors. About a month or so ago, I published my first book. It's the Advisor's Guide, and I happen to have 10 copies here that I'm happy to hand out. If you want to see me afterwards, I'd be happy to give you a copy. I also write and publish. Part of my focus in my blog are helping advisors like yourself, especially around some of those stickier family dynamics issues. Dan's included a couple of articles. He's a prolific writer and podcaster that you'll find helpful. And then Rob is a content genius. He has got several worksheets, checklists, all sorts of things that you can actually sit down and work through with your business-owning clients to really get an idea, as well as he's included three options for family-owned business continuity plans. It's an article he wrote, as well as questions are key for the business owner. Things around vision. Do you even have an exit strategy? How are you going to spend your time? Where's your money going to come from? And then our contact information is there as well. We are like the rest of you all. We're in this business to help people, and if we can help you, please let us know. So does anybody have any questions? Yes? I think you bring up a really good question, and your question is, if you're only talking to one member of the family, you don't have the whole story. And when you're dealing with a transition like this or an estate plan, it really is a good idea to go around and build relationships with everybody in the family for a couple of reasons. One, you find the gaps. So for example, Monday and Tuesday in Ohio, I'm running a family meeting because there's been some conflict in the family. We're going to work through it. And it's absolutely fascinating what you hear, what people share, and they leave out in this. And so if you're working on an estate plan or a financial plan for somebody, is to really talk to as many people in the family as possible, because then you get that bigger picture. I think the other thing, too, is always positioning how... So if Mr. Big absolutely insists, even against her wishes, this is the way it's going to be, and that's not wholly uncommon among business owners, it's then kind of helping her as much as possible, so that she can be that informed advisor, so that she has comfort, that she knows who she can talk to and work with. The other thing, too, is there's a bunch of other people here who need services. The sons need financial planning. The older son needs financial planning. She's going to need financial help. So there's opportunities. There's other business opportunities in this case for everybody as well. Thank you.

counseling clients

business to retirement

franchisee

son's readiness

family meeting

protection

key person insurance

complex issues

transitioning business to retirement