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Business Succession Planning and Integrating Your Financial Goals – Webinar Recording


 

In this webinar, you will learn how the Value Acceleration model focuses on value growth to align business, personal, and financial goals and how a quality exit plan asks and answers questions about these goals, including the legal and tax questions involved in transitioning a privately owned business. Also discussed are wealth management strategies that can assist business owners in reaching both personal and business financial goals.

The following is a text version of the recorded webinar presented by Windes on September 23, 2020.

Host & Moderator

Craig Ima, MBA is the Chief Marketing Officer at Windes. He has more than 30 years of marketing, business management, product, strategy, database, business development, and sales experience.

Presenters

Robert Henderson, CPA, MST, CEPA is a Partner in the firm’s Tax department. He specializes in providing tax advisory, accounting, and compliance services to middle market businesses, and their owners with emphasis on assisting clients to plan for and manage their income tax liabilities. Rob works with closely held and startup business owners to maximize their companies’ value, advising and assisting business owners on how to ensure that their companies are transition-ready, and prepared for exit.

Christina Henderson, CFP®, CPFA is a Vice President and Wealth Management Advisor with the Henderson Clemmer Group at Merrill Lynch, a leading wealth management practice in the region. Christina has 17 years of experience in the wealth advisory profession and is a Certified Financial Planner and holds the Certified Plan Fiduciary Advisor designation.

DISCLAIMER: The information presented in this webinar is intended as general information and does not constitute tax or legal advice. You should always consult your tax, legal, or financial advisor for direction regarding your specific situation.

Please contact Windes for more information or questions regarding your particular situation at 844.4WINDES (844.494.6337) or via email at advisory@windes.com.


Craig Ima, Windes Chief Marketing Officer:

Welcome to our presentation on Business Succession Planning and Integrating Your Financial Goals. I am Craig Ima, the Chief Marketing Officer of Windes, and I will be moderating today’s presentation.

Today you will hear from Rob Henderson, a partner at Windes, who will discuss exit planning, explain value acceleration, and how the two concepts tie into exit planning. The second part of the presentation will be conducted by Christina Henderson, a wealth management advisor with the Henderson Clemmer Group at Merrill Lynch, a leading wealth management practice. Christina will discuss how to structure your financial goals by balancing business and personal priorities.

Learn more about Windes

Our first presenter is Rob Henderson. Rob is a partner at Windes and leads our Value Acceleration and Exit Planning Practice. Rob is a 20-year veteran in the tax and accounting sector and services middle-market businesses and their owners, along with startups, in various industries. In addition to having his CPA and Master’s in Taxation, Rob has his designation as a Certified Exit Planning Advisor. With that, I will turn it over to Rob.

Rob Henderson, Windes Tax Partner:

Thank you for the introduction, Craig. I am excited to present on the topic of exit planning, value acceleration, and exit planning as a business strategy. This is an area that continues to receive a lot of attention, but still remains a problem for business owners.

While studying to become a Certified Exit Planning Advisor, I was introduced to the Value Acceleration Model, which provides a conceptual framework for business owners and value advisors. By subscribing to the Value Acceleration Model, I am helping business owners successfully create transferable value and exit their businesses.

I am also excited to co-present with Christina because wealth management and retirement planning is an important tool that is used at the beginning of a solid exit plan. Her presentation on integrating goals and balancing business and personal priorities will provide useful information to business owners looking to exit during COVID-19 and beyond. Thank you, Christina, for agreeing to do this presentation with Windes.

Before I jump into the slides I prepared for today’s discussion, I think it is critical to share with the audience one of the reasons why value advisors, business coaches, CPAs, wealth managers, attorneys, and business valuation experts are spending a large amount of time with business owners to discuss exit planning and value acceleration as a business strategy.

The answer is Baby Boomers. Baby Boomers are one of the primary causes in this shift. Baby Boomers are the generation of business owners that were born between 1945 and 1965. In 2012, the first Baby Boomers reached retirement age. In 2031, all Baby Boomers will be over the age of 65.

So why is this relevant? Baby Boomers account for six million closely held businesses and $10 trillion in wealth. That is about 63% of the private businesses in the United States. Furthermore, a recent study done by the Exit Planning Institute confirms that 76% of Baby Boomer businesses plan to transition over the next 10 years, and 48% plan to transition in the next five years.

A common characteristic of Baby Boomer business owners is that 80% to 90% of their total wealth is tied up in their businesses. This presents a problem because business owners looking to retire need to cash in on their lifetime of work to harvest and manage their wealth.

Now that we understand why Baby Boomer business owners are relevant, what are some of the challenges preventing Baby Boomers from creating a plan to exit or transfer their business, or complete successful exits from their business? Let’s discuss the challenges they face.

Challenge number one: Boomers do not want to exit their businesses. Their business is their baby and there is personal attachment preventing the owner from building a fulfilling life outside of the business. Additionally, owners often time lack a plan or future vision post-exit.

Challenge number two: 50% of exits are not voluntary. We call these the five Ds, death, disability, divorce, distress, and disagreement. Now we could argue there is a sixth D for disease caused by the COVID-19 pandemic.

Business owners are bogged down by the day-to-day tasks to run a successful business. Oftentimes, exit planning is not top of mind because it is an event that will occur in the future. However, if half the exits are not voluntary because of unforeseen circumstances like the five Ds, why would business owners not allocate more time to exit planning strategies?

Well, my goal as a value advisor is to shift the paradigm and sell business owners on the importance of being prepared. A business that is prepared to exit can exit at any time, regardless of the causes.

Challenge number three: owners are leaving money on the table because they are focused on income generation and not enterprise value, which I will explain in more detail on the next slide.

There are two types of business owner styles. There are lifestyle business owners and there are value-creation business owners. Lifestyle businesses are set up and run by its founders, and the primary goal is sustaining income and nothing more. They want to maintain a particular lifestyle.

Value-creator businesses are on a mission to create value for customers, employees, their owners, and investors. All of them are linked together to maximize value and focus on using capital and talent on the most profitable opportunities.

Now that I have shared the three challenges preventing Baby Boomers from exiting their businesses, I think it is important to share a few more statistics, which tie back to my initial call to action and purpose for today’s discussion.

Surveys and research tell us that 12 months after selling their business, three out of four business owners regret the decision. Many business owners fail to have life-after-business plans or goals, they feel they left money on the table because they were not prepared to exit, or they had to abruptly exit for less value than they thought the business was worth.

Nearly 80% of businesses put on the market do not sell. Again, many businesses are not prepared to sell, or the owner tries to market the business for more than it is worth because they have unreasonable expectations of their business’s value.

Only 30% of family-owned businesses survive into the second generation. Perhaps the kids have different interests or the family did not prepare them to take over.

Remember the statistic I shared earlier. Baby Boomers account for six million businesses and $10 trillion in wealth that needs to transition over the next 10 years. If 80% to 90% of their total wealth is tied up in the businesses, Baby Boomer business owners should be alarmed by the low success rate of selling their business or transferring it to the next generation. We address this with exit planning.

According to the Exit Planning Institute, two-thirds of business owners do not know all of their exit options, 78% of business owners have no transition team, 83% of business owners have no written transition plan, and 49 % have no plan at all.

I understand those are a lot of statistics to absorb, but I want to drive home the point that exit planning that is implemented three, to five, to seven years in advance, will help increase the chances of successful exits and maximize value.

The remainder of today’s discussion is going to focus on what exit planning is, what value acceleration is, how to prepare your business to exit, and then I will wrap up my portion of the discussion with some questions from Craig.

A solid exit planning strategy is going to focus on four core concepts. Later in the presentation, I am going to take a deeper dive into the Value Acceleration Model, but for now, the following four concepts lay the groundwork for a master exit plan.

The four core concepts are the fictional three legs of a stool, five stages of value maturity, the four Cs, and relentless execution. Over the next four slides, I am going to explain each concept and provide some color on how they come together to form a master plan.

The imaginary stool has three legs, and each one has a specific role in the master plan. The first leg focuses on maximizing transferable business value. Stated differently, a business owner works with a value advisor to implement a plan that focuses directly on the business. Over a period of time, again optimally three, to five, to seven years, prior to an exit or transfer, the business owner and the value advisor work with a board of advisors to prepare for exit.

The next leg focuses on personal financial wealth to ensure the owner is financially prepared to exit. Typically, with the assistance of a certified financial planner, like Christina, who is going to present later, the owner prepares a personal financial statement and completes a series of retirement planning models to determine the net-of-tax proceeds needed to exit and accomplish the owner’s goals.

Here, the owner could also determine if there is a value gap. If a value gap exists, the business owner may need to reassess his or her strategy because the net-of-tax proceeds are not enough to accomplish their financial goals.

The final leg of the stool focuses on the owner’s personal readiness to exit the business. As I mentioned before, three out of four business owners regret the decision to sell their business one year after they exit. By focusing on the third leg of the stool, owners can work with business coaches, family counselors, and therapists to consider the practical and emotional factors that can lead to disappointment after an exit.

Also, as I previously stated, only 30% of family-owned businesses survive into the second generation. The third leg will focus on family disputes and preparing children to take over the family business.

The next concept is the value maturity index. The value maturity index focuses on five stages: identify, protect, build, harvest, and manage business and personal wealth. Stage one is identify. Here, we discover through a series of attractiveness and readiness assessments, and financial planning, the business owner’s current wealth. As I mentioned in the introduction, here is where wealth management comes into play because, oftentimes, we need to address the business owner’s expectations.

Stage two and three are protect and build. Here we de-risk the business and owner to protect the value and wealth discovered in stage one. A couple of examples of de-risking would be buy/sell agreements and estate planning. After we de-risk, then we build additional enterprise value by focusing on the deficiencies that were identified in the readiness and attractiveness assessments.

State four is harvest. Here, we gather the business and personal wealth that we have accumulated, so that it can be managed in stage five, to ensure economic continuity.

The next concept is the four Cs, which focuses on building value through human, structural, customer, and social capital. To be more specific, human capital is your employees. Structural capital is your infrastructure, your IP, and your intangible assets. Customer capital is your customers and ability to generate revenue through strong reoccurring relationships. The last one, social capital, or the network of relationships that you have built over time.

The final concept is relentless execution. Here is where the value advisor is critical. Oftentimes we are called the Chief Accountability Officer. The value advisor is going to follow up, hold the board of advisors accountable, and promote collaboration by creating a vision, aligning the three legs of the stool, holding all stakeholders involved accountable, and having rhythm. With relentless execution, the value advisor can make sure the business owner stays on track to implement the master plan.

Throughout the four core concepts slides, I have mentioned the terms “three legs of the stool” and “master plan.” At the beginning of the presentation, I introduced the term Value Acceleration Model. Over the next three slides, I am going to discuss how the Value Acceleration Model provides a conceptual framework that integrates the three legs of the stool into one master plan.

Value acceleration is a proven process that focuses on value-growth and aligning business, personal, and financial goals. It is grounded in action, promotes the use of teams in an engaging process, creates a roadmap to success, and a leap in value. Exit planning is the key concept, whereas value acceleration is the process.

Value acceleration measures the value of your intangible assets, which are the direct drivers of business attractiveness. Remember, the previous slides that discussed the four Cs? Value acceleration focuses on the multiple piece of a business valuation.

I am not saying that income, or what we call recasted EBITDA, or seller discretionary earnings is not important, but significant increases in value are going to come from increases in multiple, which have a direct effect on EBITDA. Combined, there is an exponential increase in value because improvements in the business that focus on intangibles will naturally increase the bottom line EBITDA.

Here is the Exit Planning Institute’s Value Acceleration Model. I could spend eight hours discussing the model, but today I am going to keep it limited to the three gates. The three gates are discover, prepare, and decide.

During the discovery gate, or what we call the triggering event, business owners are asked to complete a business valuation, a personal financial plan, and a series of readiness and attractiveness assessments. The results are compiled and the value advisor helps the owner prepare a prioritized action plan. This is the first stage of the value maturity index that we call discover.

During the prepare gate, through relentless execution, which was core concept number four, we de-risk and improve the business by focusing on the four Cs or core concept number three. The business owner works with their wealth manager, estate planning attorney, and other advisors to make sure the personal financial and personal legs of the stool are covered, which were core concept number one.

Again, collaboration with the value advisor is key because many parts of the exit plan overlap and it is important to have the same message. This is also the second and third stages of the value maturity index, which are called protect and build.

Finally, during the last gate, it is time to decide what to do. At this point, the business owner is much more educated and prepared to exit. If they decide to keep the business, then the value creation process starts over. If they decide to sell or transfer the business, then the selected transition process begins. This is also the fourth and fifth stages of the value maturity index, which we call harvest and manage.

Before I move on to how Windes can help prepare your business for exit, there are not enough words to describe how important it is to have a conceptual framework to follow. The Value Acceleration Model is my chosen model to help business owners successfully exit their businesses for maximum value.

Preparing your business for exit. Back on the challenge number two slide that discussed the five Ds, I mention that my goal as a value advisor was to shift the paradigm and sell business owners on the importance of being prepared. A business that is prepared to exit can exit at any time and has contingency plans against unforeseen circumstances. What I am saying is that exit planning is a business strategy, and business owners should not be reactive, or wait until the last minute.

Business value is all about transferability. Can a business exist without the business owner? Post-exit, what would happen once the business owner moves on? Can a buyer offer less because they understand key revenue streams or contracts would not exist without the current owner? These are just a few examples that illustrate how value and owner dependency are connected, and forces the business owner to think about these issues.

How would the business perform if the business owner is unexpectedly unable to perform for a period of time? Windes has the capabilities to assist business owners looking to implement procedures or controls that help businesses become less dependent on the owner.

Christina is going to speak on wealth management shortly, however, Windes has the internal expertise to assist business owners with the following tasks: attractiveness and readiness assessments, value enhancement, strategic planning, audit, exit options and analysis, contingency planning, charitable gift planning, tax planning, estate planning, preliminary due diligence, and net proceeds analysis.

I want to make a comment that I think is important for the audience to hear. Windes is a full-service public accounting firm that has traditionally focused on tax and audit services. However, we are evolving with the times and developing advisory practices that offer business owners a wide range of services. For purposes of this presentation, many of the services I just mentioned can be seen on this slide.

Back in the introductory slides, I mentioned that three out of four business owners do not know their exit options. I have provided a few internal and external options on this slide, but my job as a value advisor is to make sure business owners know all their options and are well equipped to make the right decision. Referring back to the Value Acceleration Model, during the prepare stage, the business owner’s board of advisors will provide options that fit the circumstances.

Finally, to close my piece of the presentation, I want to reiterate one more time that the value acceleration process works best when there is a group of collaborative, like-minded professional advisors with common goals to grow, preserve, and transition wealth for the business owner, whether it is business valuation, estate planning, tax planning, wealth management, family conflict, or accounting, there needs to be one consistent message.

With that, I am going to ask Craig to spend a few minutes on questions. Thank you for viewing my presentation on exit planning and value acceleration.

Craig Ima, Windes Chief Marketing Officer:

Question: What if you already have business and professional advisors that you view as your board of advisors? How would you fit into the mix and help with an owner’s exit plan?

Rob Henderson, Windes Tax Partner:

Answer: That is a great question. I would be the value advisor or the person responsible for making sure the board of advisors is completing their milestones and the process is moving along timely. As I mentioned in the presentation, a Chief Accountability Officer, if you will. In addition to being a value advisor, Windes, or myself, could complete various tax and insurance projects if the business owner needed a CPA to help them.

Craig Ima, Windes Chief Marketing Officer:

Question: What if you do not plan to sell or exit your business for many years, if ever? You plan to work until your final days. Why should a business owner be concerned with an exit plan when they are already too busy running the business?

Rob Henderson, Windes Tax Partner:

Answer: In the presentation, I described that most business exits are involuntary or unforeseen, especially right now with the pandemic. It is a perfect example of the five Ds. A business that is always prepared to exit, that can de-risk itself against the five Ds, is going to be ready to exit regardless of what the time frame is. Therefore, a business owner that is focusing on enterprise value or value creation will always be prepared.

Craig Ima, Windes Chief Marketing Officer:

Question: What if a business owner has no idea how much the business is worth? What role does the business need to play in order to achieve financial freedom?

Rob Henderson, Windes Tax Partner:

Answer: We recommend that business owners complete a business valuation or a less formal option, such as a broker’s estimated value. Even a CPA-prepared recasted EBITDA would work. Oftentimes, as I mentioned, a business owner’s wealth is concentrated in the business. Therefore, without knowing how much the business is worth, or what it can sell for net-of-tax, accountants, CFPs, and wealth managers are not going to have all the tools they need to properly advise their client on the personal financial leg of a successful exit plan.

Additionally, business owners’ expectations of value are often overstated. Without a starting point, a value advisor like myself cannot calculate the increase in value attributable to a value acceleration project.

Craig Ima, Windes Chief Marketing Officer:

Question: Thoughts on who will take over a business and how can a business owner make sure it will survive once they are gone?

Rob Henderson, Windes Tax Partner:

Answer: The key here is making sure the business is transferable, whether a third-party buyer, management, or the family takes over the business. A well-executed exit plan will make sure that the business continues.

Craig Ima, Windes Chief Marketing Officer:

Question: The pandemic has hurt a business. While the business owner thought an exit was in the near future, things have changed because the value of the company has decreased, and the business owner cannot make enough money to maintain a nice lifestyle. How can you help the business owner reassess the situation?

Rob Henderson, Windes Tax Partner:

Answer: We can help the business owner by completing a value acceleration project. We determine where the business is deficient, or has been mostly impacted by the pandemic, and determine if it makes sense to rebuild or to pivot into a more profitable area.

The pandemic has given business owners an opportunity rebrand, to think about what the future looks like, to potentially cut some expenses, and/or refocus on intangible property, which is a driver of value. The economic outlook is likely going to turn around, so a business owner should look at this as an opportunity to come out of a downward cycle, prepare to grow quickly, and get back on track with their exit plan.

Craig Ima, Windes Chief Marketing Officer:

Great information. Thank you very much, Rob. Now we will move on to the second part of our presentation.

You will hear from Christina Henderson from Merrill Lynch. Christina Henderson will cover developing your financial goals with balancing your business and personal priorities based on the life stage that you are in.

As most of you know, Merrill Lynch is a premier wealth management firm, and their advisors are continually ranked high in various publications and listings. Christina and her team work with select families, closely held business owners, executives, and single women. Teamwork, value, and tailored service are the foundation on which they construct a financial framework for each of their clients, their families, and their businesses.

Christina is a 17-year veteran in the wealth advisory profession. The Henderson Clemmer Group of Merrill is relied upon by esteemed professionals throughout the region. Christina is a Certified Financial Planner and holds the Certified Plan Fiduciary Advisor designation.

She is passionate about giving back to the community and enjoys volunteering with the United Way, the Women Helping Women organization, and the National Association of Women Business Owners in Orange County. She is also the president of the Orange County Chapter of the Merrill Women’s Exchange. With that, I will turn it over to Christina.

Christina Henderson, VP, Wealth Management Advisor, Henderson Clemmer Group of Merrill Lynch:

Thank you, Craig and Rob. I appreciate the opportunity to share why financial planning is such an important part of a business owner’s exit strategy. You and Windes have really been a valuable resource for our clients who have been selling their businesses.

I hope in today’s webinar I can help business owners think about their financial needs in the context of both their businesses and their personal life and understand the importance of working with an advisor who could help them develop and execute a financial strategy unique to them and their goals. Here are some disclosures. I will give you a minute to read all of those.

Like investors, every business experiences distinct life stages and different needs at each stage. In the getting started phase, a business needs startup capital and the ability to fund expenses and advance in the steady revenue stream.

In the growth phase, businesses need to borrow money to add facilities and staff. We will be mostly talking about the next two phases for business owners, which are the growth and transition phases.

In the growth phase, businesses need to borrow to add facilities and staff, and in the maturity phase of a business lifecycle, the company is thriving and the owner’s wealth has grown along with it.

For owners of mature businesses, a financial advisor can offer a sophisticated approach to wealth management that considers your priorities, and where you want to be.

During the transition phase, an owner begins to think about an eventual exit from the business. An advisory team with succession planning resources can be useful for businesses in transition, whether you are considering outside management or evaluating potential buyers.

Your goals are multifaceted and interrelated. That is why you need an integrated approach to managing your wealth and pursuing both your personal and your business goals. Your financial advisor can work with you to define and prioritize your objectives.

Together, you will create a strategy that is compatible with your unique investment personality and circumstances, one that considers an efficient use of your resources. Once everything is in place, your financial advisor can help you regularly review any progress you have made towards your goals.

As part of your business’s long-range plan, you will want to start thinking about a transition, well before you are ready to step down. As Rob mentioned, implementing a transition plan can take several years, and the details of the plan will likely change over time.

A few key steps to consider include carefully assessing your options, considering the pros and cons of strategies, such as selling your business or passing a business on to your children. Optimizing the potential value of your business is what Rob talked about in value acceleration – where you are going to tighten up operations, processes, and due diligence.

Developing your wealth-structuring plan. You are going to meet with your advisor, as well as your trust and estate experts, for specialized assistance. Implementing strategies that can reduce the potential tax implications of a sale must begin well in advance.

You are going to want to update the plan as circumstances change. For example, as your children grow, you may no longer need interim management, but you may identify the next generation of leadership. Industry trends and business developments will also affect your transition plans.

Your financial advisor will work alongside you, and the rest of your advisory team, every step of the way. First, with your advisor, no matter where you are in the lifecycle of your business, is to develop a financial plan that is unique to you.

The process for creating a financial analysis begins with a discussion. This discussion is centered on your goals, your current finances, and your tolerance for risk. From there, your advisor can design a personalized strategy to map out your financial journey. When it is complete, you will get a report, including cash flow modeling, to show your progress to your goals and ways you could change course, if needed, to increase the likelihood of achieving your goals.

When you are articulating your goals, it is helpful to know the chronological order, but also the priority of each goal. For example, your retirement lifestyle or the amount of income you need to live in retirement is an essential or, as I like to call them, a must-tap-in goal.

You may want to purchase a retirement home, probably not at the expense of living comfortably with your income, so we may say that is an important, or a would-love-to-do goal, but not necessarily essential. There may also be travel and leisure or philanthropic goals that you have that are still very important to you, but your retirement income goal and possibly the retirement home may be more important, so we may classify those goals as aspirational, or would-be-nice-to-do, goals.

Categorizing your goals by priority is helpful, especially if there is a need to make some adjustments, because there maybe there are not enough assets to accomplish all of your goals. I am showing an example of how we articulate these goals at Merrill. If you are working with another advisor, they will probably have a similar approach to make sure your goals are properly prioritized.

Now we will talk about your financial picture, which is the foundation on which your plan is built. You will want to share all of your financial information with your advisor, so they can build you an accurate net-worth statement. This statement will show all of your assets, including your investments, real estate, business interests, etc., and any debt you may have, including mortgages, lines of credit, or other types of loans.

The more accurate you are with your net-worth statement, the better the rest of the data and your plan will be. There is a saying about data analytics: junk in, junk out. So you definitely want to spend some time to be as accurate as possible here.

Once you have clearly articulated your goals and have a solid net worth statement in place, you and your advisor can look at your current asset allocation or mix of stocks, bonds, alternative investments, and cash to see if your portfolios are currently in line with your goals.

Why does this matter? Each investor has a unique rate of return that they need to accomplish in order to achieve their goals. Your advisor can look at historical rates of return for your asset allocation to determine if your portfolio is in line with your unique rate of return you need for your goals.

You can use this analysis to help make any adjustment to your portfolio that you may need to increase the success of you achieving your goals. You are also going to look at how much you have saved, are saving, or plan to save, to see how close you are to funding your goals right now.

In my opinion, the most helpful piece of information you receive from financial planning is your cash flow analysis. This is an analysis that looks at future years’ planned savings in taxable or retirement accounts, future large purchases you may make, taxes you would pay, and the retirement lifestyle withdrawals you plan on making, to see how it impacts your overall net worth. This is where we get that net-of-tax number you need to retire, or to sell your business for, that Rob talked about.

How it works is that we take your current liquid net worth and back-test it through various market cycles to see how it performed. Then we look at the savings, the withdrawals you plan on making, as well as what you think you may be able to sell your business for to see how it impacts your net worth.

For some business owners, we see the net worth continue to grow, which allows them to make additional decisions for plans for gifting beneficiaries, such as family or philanthropy. For others, we see it going down. In some cases, we see it hit a point where it turns negative before their average life expectancy has ended, meaning they are at risk of running out of money in retirement.

We can use this data to go back to their goals and make adjustments. Maybe it means spending less or not buying a retirement home, or maybe working a little longer and accelerating that value of your company a little more. We can look at those scenarios so you could decide what, if any, adjustments you would like to make to increase your likelihood of achieving your goals without running out of money.

When we are talking about those adjustments, we will look at them in scenario comparisons. These let you look at how those changes you are considering making will impact your goals side-by-side. Then you can see the impact at each change to determine which path is best for you.

As part of the planning process, you will also review a personalized investment plan that is tailored to meet your specific rate-of-return needs to achieve your goals. You will want to have detailed information about the investment strategy, including what types of investments are being proposed, the cost, including any expense ratios of funds, the risk, and while not a predictor of future performance, you will still want to look at performance history to get an idea of how the portfolio reacted in different market environments. If you are comfortable with the investments being proposed, you will want to work closely with your advisor to execute and monitor them periodically.

As you think about putting a strategy in place, it is important to focus on what is important to you, your goals, and what you want to do with your wealth. We encourage you to think about your goals in the six categories that you see here and think about what you want to achieve in each. As we have talked about, those big goals become the basis of your approach.

As you are considering your goals, you may want to consult with your family, or your spouse, and think about what do you want to achieve for yourself? What do you want to achieve for your family and your legacy? How do you want to prioritize your goals to understand their relative importance when compared with each other?

When you are focused on your goals, you are better able to focus on your portfolio and how you might need to rebalance, or adjust, based on changing conditions of the market and the emotional toll they can take. Regardless of how far away your goals are, the markets will have their ups-and-downs along the way. This is why we encourage you to take a long-term approach to investing for each of your goals.

It is also why we measure success, not based on last quarter’s performance, but dependent on your time horizon and how well you are progressing towards achieving your goals. An approach that balances risk and reward will help you make steady progress to goals you have set and will help you stay on track for long-term success.

In times of uncertainty, such as now, with COVID, it is only human for emotions to take over. With uncertainty in the economy and large swings in the stock market, some of you may have been thinking that you need to get out of the market or sell your investments. Others may be uncertain about what to do. These emotional reactions are normal, but can also be dangerous.

For the same reason that feelings of euphoria can result in heightened financial risk and an upward-trending market, feelings of despondency are just as risky in a downward-trending market. The risk in both cases is making decisions based on emotions, instead of fundamentals, and deviating from a disciplined investment approach.

While your advisor can help you make disciplined investment choices and provide you insights and advice to help you focus on the long-term, the foundation of a disciplined approach is having that action or financial plan in place.

Implementing your strategy will likely draw on a mix of financial solutions, each supporting a different goal. The right mix will depend on your action plan and the evaluation steps we discussed. To help you make your plan happen, I recommend working with an advisor whose licenses allow them to offer you a wide range of investing and banking products and a deep network of other trusted advisors they work in partnership with, to help you achieve your goals.

If you have additional questions, I am happy to start a conversation. My contact details are right there on the screen. I have said a lot, so I am going to stop here and see if Craig has any questions for me.

Craig Ima, Windes Chief Marketing Officer:

Question: What are some of the qualifications and services someone should look for when trying to find a financial advisor?

Christina Henderson, VP, Wealth Management Advisor, Henderson Clemmer Group of Merrill Lynch:

Answer: I think working with an advisor who has someone on his or her team who has a designation specifically focused on financial planning is really important. The CFP, or Certified Financial Planning designation, and the CPWA, or Certified Private Wealth Advisor, are probably the two most popular designations. Having these designations just shows that the advisor has taken the time to study financial planning and passed the top exam to prove their proficiency in planning.

I recommend looking an advisor who has helped other business owners through the planning process, as well as exiting a company. In my opinion, that advisor should be licensed to recommend investments and also be able to execute those trades for you. I think you want an advisor who has enough investment and insurance licenses to sell a broad range of investment products. That way their license, or lack thereof, is not what is dictating what they recommend to you.

Craig Ima, Windes Chief Marketing Officer:

Question: What is the difference between a private bank, a wirehouse, an RIA, etc., and which one is better than the other?

Christina Henderson, VP, Wealth Management Advisor, Henderson Clemmer Group of Merrill Lynch:

Answer: We are asked this question a lot. An advisor with a private bank is going to serve as a fiduciary in a fee-based account. They will be equipped with a deep bench of resources to assist you with financial planning and investing.

A wirehouse advisor can serve as a fiduciary in a fee-based account, but they can also serve as a non-fiduciary acting in your best interest in a non-fee-based or a transactional account. Depending on the team, they are also going to have deep resources. Some wirehouses like Merrill, have a private bank, as well as the ability to serve as a non-fiduciary. So I think that is a great resource.

An RIA is going to be an independent advisor, and it will depend on who they clear their trades through, and their licenses, what type of services they can offer. Since they are independently owned, I think you will want to do a little extra due diligence on their products and services to make sure they have the depth of resources that you need.

I do not necessarily think one is better than the other. I think each investor is unique and needs to work with the advisor whose service model fits them best.

Craig Ima, Windes Chief Marketing Officer:

Question: What are some of the biggest mistakes you have seen business owners make over the years that are preventable?

Christina Henderson, VP, Wealth Management Advisor, Henderson Clemmer Group of Merrill Lynch:

Answer: The biggest mistake I see is either failing to plan or not planning early enough. We have had clients who come to us with offers on the table and they have not even done any due diligence. They have not done an appraisal on their company. They do not even know if these offers are fair.

Another big mistake I see clients making is they do not have their CPA, financial advisor, attorney, and other resources and advisors working together. Sometimes we will have clients tell us they think that it is going to be too expensive, that they are going to have all of these advisors on the clock working on this, when in reality, opening up those lines of communication, that collaboration, can save the business owner a lot of money, or even make them money. Whether it is accelerating the value of their business a little bit more or saving them money on taxes, it really ends up being beneficial to the client to get everybody on the same page and do as much planning as possible.

Craig Ima, Windes Chief Marketing Officer:

Thank you very much, Christina, and thank you, Rob, for the insightful presentations regarding what businesses should be doing in order to increase value and maximize the use of resources that can help them in successful transitions. This concludes our presentation. Thank you.

Please contact Windes for more information or questions regarding your particular situation at 844.4WINDES (844.494.6337) or via email at advisory@windes.com.