dsmWealth September 5, 2019

James Nalley, vice president at BCC Advisers in Des Moines, advises clients on the intricacies of establishing a business success plan.

Got a Plan for the Future of Your Business Without You?

BY STEVE DINNEN

A business can last forever. You won’t, however, so as an owner you may want to consider building an exit plan—a way you can, with minimum hassle, transition your business to the next generation of owners.

Only about 15% of owners actually have a plan. The others have stalled the process, or completely ignored it, because they’re too busy running what they have built, or have too little trust in possible successors, or worry about confidentiality or selling and losing key employees.

"It’s no different from someone who refuses to buy his own burial plot," says James Nalley, vice president at BCC Advisers in Des Moines. Whatever the reason, they need to set that trepidation aside at some point if they wish for there to be an orderly transition of power and ownership.

Crafting an exit plan is a fairly involved process, says Nalley, who has helped to build them as a certified exit planner as designated by the Exit Planning Institute. It will involve a team—trusted financial advisers, value enhancement experts, lawyers, accountants, even some life planning advisers.

Identify your goals. Do you want to eventually sell to the highest bidder? Sell to your management team? Sell to a private equity group, or a competitor? They may not have the same goals as you. Or they may even shut down your production line and roll it into theirs.

These are all factors to consider now. They are not factors to be considered in a rush, when you’ve taken ill, perhaps, and find you can no longer devote your full energies to the business.

"We’d like to be involved three to five years ahead of your exit," Nalley says of the timeline. Once you set it, you should regularly revisit the plan as time goes by.

Drafting an exit plan has an added benefit of presenting you with a rounded picture of what your business is—and should be. You will discover who your key employees are, what compensation is needed to retain them, where competitors are advancing or falling behind you, what markets you serve best and which can be better exploited. Nalley says it also will prompt you to look at your philanthropic interests, and your legacy, and even what hobbies you might take up once that exit has occurred.

In short, an exit plan is your guidebook to stage two of both your business and your life.

Protect Your Assets With a Plan for Natural Disasters

BY STEVE DINNEN

My business partner lives in an area of California that’s forever being menaced by forest fires. The local fire district periodically reminds him about how to prepare an emergency departure bag in case he has to, well, depart in an emergency.

While Iowans do not have forest fires to contend with, or hurricanes such as the one currently battering the eastern seaboard, we do have an occasional tornado, flood or snowstorm. Any and all can lead to a loss of power, so it might be wise to see what we could do to prepare for a weather emergency.

How’s this for starters: flashlights, batteries, rain gear, gloves or mittens, collapsible snow shovel, shelf-stable foods—peanuts, protein bars—and water bottles. You’ll want some small bags containing a day or two of whatever prescription medicines you might be using. And you’ll want power cords for your phone or computer.

You can store this in a closet nearest to the front door. Or perhaps in your car, which I found handy once when snowed in on Interstate 65 outside of Nowheresville, Indiana. I just bundled up and waited for a plow to clear a path.

Oh, and don’t forget a deck of cards.

Rich People Hoarding Cash, Frustrating Wealth Managers

BY ALICE ROSS, for Financial Times

A friend of mine has relatives in Germany who converted some of their not insubstantial family wealth into gold bars and buried them in the woods of Bavaria. This was at a time before negative interest rates so was not a reaction to today’s uncertain global economy, but rather mistrust of the financial system in general. Yet it highlights a propensity on the part of the wealthy to hoard that is increasingly frustrating wealth managers.

High-net-worth individuals (HNWIs)—people with at least $1 million in investable assets—are increasingly shunning equities. In the first quarter of this year, HNWIs held nearly 28% of their portfolios on average in cash, according to the Capgemini World Wealth report. A year previously, that figure was 27.2%.

Overall cash holdings of clients at UBS, the largest wealth manager in the world, are now 26%, according to its quarterly investor sentiment survey—up from 25% at the start of the year. Credit Suisse’s Chief Executive Tidjane Thiam told analysts in July that clients were holding 29% in cash — albeit a slight dip from 30% at the start of 2019. Wealth managers say the uncertain environment for the global economy and the outlook for equities are why clients are keeping their powder dry. More recently, fears over the trade war between the U.S. and China have led some investors to increase their cash holdings: A third of investors in UBS’s quarterly survey thought the skirmishes could last a year or longer, and while 45% thought diversifying their portfolio was the best solution to a prolonged trade war, 37% said holding cash was the answer.
>> Read more

How To Be Rich? Study Reveals 4 Major Paths to Wealth

BY THOMAS C. CORLEY, for Business Insider

I spent five years interviewing millionaires, trying to figure out how they amassed their wealth.

After analyzing my research, I determined there were generally four paths to wealth, which often overlap: the Saver-Investor, the Big Company Senior Executive, the Virtuoso and the Dreamer-Entrepreneur.

Almost anyone can be a Saver-Investor, while becoming a Virtuoso or a Big Company Senior Executive is harder and more risky.

The top 5% of households in America reported $197,651 or more in income in 2016, according to the Tax Foundation. This same top 5% controlled 60% of the nation’s wealth, according to the Federal Reserve Survey of Consumer Finance.

This 5% run big companies, run small companies, employ millions, hire and fire employees, invest in new companies, liquidate old companies, increase or decrease wages, and essentially control the lives of the other 95%. This 5% can, and does, alter our lives, for better or for worse. >> Read more

White Americans' Hold on Wealth Is Nearly Unshakeable

BY BRENTIN MOCK for Microsoft News

It will end up costing the U.S. economy as much as $1 trillion between now and 2028 for the nation to maintain its longstanding black-white racial wealth gap, according to a report released this month from the global consultancy firm McKinsey & Company. That will be roughly 4% of the United States GDP in 2028—just the conservative view, assuming that the wealth growth rates of African Americans will outpace white wealth growth at its current clip of 3% to .8% annually, said McKinsey. If the gap widens, however, with white wealth growing at a faster rate than black wealth instead, it could end up costing the U.S. $1.5 trillion or
6% of GDP according to the firm.

"Despite the progress black families have made in civic and economic life since the passage of the Civil Rights Act of 1964, they face systemic and cumulative barriers on the road to wealth building due to discrimination, poverty, and a shortage of social connections," reads the report, "as both mechanisms and results of racial economic inequity."

Crucial to understanding how to close that gap—such that it can actually be closed—is grappling with how it was created in the first place. The McKinsey report identifies four components that perpetuate this gap—family wealth, family income, family savings, and community context (a community’s collective public and private assets). Black families have not been able to build wealth due to "unmet needs and obstacles" across these four dimensions.. >> Read More