Joe, a 45-year-old professional, has decided to go into business with Jim, a 37-year-old, and Marie, 31. They are opening their business and expect $2 MM in revenue in the first year based on their previous employed work for another company. They feel working together they will be able to grow quickly and achieve their goals. Joe, Jim and Marie are worried about costs, losing income if something were to happen, but also they are worried about doing more work than the other if something happens as they have seen other issues hurt companies in the past. They asked, Rodney, what they should do. Rodney worked with their lawyer to get a Buy sell plan in place. However, to fund it they decided insurance made the best sense. Jim has a couple issues that make it difficult to underwrite plus they do not have any actual financials. Rodney, was able to use Mass Mutual’s starting professionals program to get coverage for all three at the rate the business needs, but he was also able to use Jim’s policy from 2 years ago before his blood pressure got higher to get a policy issued without going through underwriting, and was able to use the Modified Guaranteed Issue program to get all three individual disability policies based on their W2 income. In addition, Rodney, got them each a buy/sell disability policy owned by the business and also business overhead expense policies in case of a disability. All this for A TOTAL COST OF $2,500 A MONTH, AND EVERYONE IS COVERED.
Supplemental Disability Case
Jean is a school teacher making $65,000 a year. She has great benefits and a strong retirement. She is 34 and she recently saw her principal at the age of 50 get breast cancer and lose her house because the disability benefits at the school were not as great as she thought. So she went to her advisor. Her advisor explained to her that she was limited in what she could get but her advisor explained the possibility of a supplemental policy. This policy allowed her to get an additional $1,400 a month for only a $100 a month extra to her budget. While she was not able to completely replace her income she is not at almost 70% of her overall gross income.
Pass the Legacy
Marie and Clarence, 75 and 80, are very interested in making sure their grandchildren are set up and taken care of. They have plenty of money for their monthly expenses. They have over $4MM in assets that they do not touch, and they are taking over $100,000 a year from their IRA’s combined for minimum distributions and for travel, but with their pensions, and other income, most of this money just gets reinvested causing tax problems each year. Thus since they are concerned about their grandchildren, ages 4, 5, 7, 8, 9 they have decided to follow their advisor’s suggestions of depositing 10,000 each a year into a 10 pay whole life policy while their grandchildren are healthy. In ten years each grandchild will be covered for life and will have money to pay for education, a down payment, and even potentially their own retirement.
Life Insurance as an Asset Class
Gary, is the top Indexed Life Insurance seller in the country. In January of 2016, Gary started to look at his portfolio for all his clients and got extremely nervous regarding how the money would last and what was needed for the policies to stay equal and continue growing. Rodney, his neighborhood financial strategist, suggested that while there are some things to worry about, that the IUL is a great product, and continuing to pay premiums right now will help his clients in the long run. However, like any good advisor he should diversify, so that when the market has corrections, his clients have an opportunity to draw dollars from other areas. Gary does a great job diversifying his client’s retirement and non-qualified accounts, so Rodney suggested he sell 10 and 20 pay whole life’s to his clients to create more streamlined and fixed products that allow a little more certainty and security potentially and to place the long term care access rider as well. Gary likes this idea as he still gets to sell IUL, but now he is securing his portfolio with some whole life contracts to further diversify.
Our client, from Texas, was looking to expand. They had expanded before and it failed miserably. They contracted with us under the Financial Select program. We analyzed their financial operations, looked at different expansion models, and came up with recommendations. Not only did we create expansion plans that led to revenue increases of 300% and 500% in the two markets we expanded we were able to minimize cost increases with only a 5% increase in overall costs. At the same time we were able to create costs efficiencies increasing overall net income by 62% in the first year.
As part of the financial select program we reviewed benefit information. We identified that there was an issue with the 401(k), executive compensation, and group benefits. Through our analysis we found more efficient ways, increasing overall 401(k) performance and contributions, and reducing benefit cost but increasing benefit offerings. This helped attract top talent that led to 165% first year net income growth
A $2MM annual revenue client. Had $500,000 in cash assets and $4MM in other assets associated with the business? They had a carrying cost of $250,000 a year. Through the Financial Select program, we were able to reduce the carrying cost by strategically placing assets down to $100,000. In addition, the company needed to carry a $1MM bond and had assets tied to that they were unable to use. Through some innovative solutions we were able to switch the collateralization to an asset source that was more flexible but still provided the needed support the bond company was looking for which helped the carry cost reduction.
Rodney Mogen, is the president of solveurpuzzles, a business focused company. Solve ur puzzles helps three groups: Small Businesses, Financial Advisors/Agents, and Local Government Entities. Rodney is also a small business advisor focused on developing financial strategies for small business owners and helping them develop their own strategy and ideas to grow, sell, develop the way they want. He is focused on creating proper financial strategies for Advisors and business owners to assist them in their day to day duties by solving their financial puzzles. Rodney is also the Director of Financial Strategy for The Evans Group. Check out more information at www.solvurpuzzles.com.