Filed Under:Health Insurance, Disability

Business Owners Need Our Help

Life is full of decisions. There aren’t enough hours in the day to accomplish everything, and according to research from Franklin Covey, the vast majority of American workers report feeling overwhelmed. Franklin Covey has capitalized on this trend by developing prioritization tools and techniques to help people tackle one item at a time. But what does all of this mean for financial advisors? This same approach can help your business clients create the financial protection plans they so desperately need.

A 2010 study of business owners by Harris Interactive and The Principal shows business owners rank protecting their business and income as their top financial priorities. Yet, the majority of those surveyed don’t have the necessary protection plans in place. And who can blame them? Day in and day out, business owners are worrying about cash flow, the competition, managing employees and successfully growing their businesses. Fortunately, you can help them realize they need to spend more time working on their business, not just in their business.

How you can help

To get their attention, educate business owners on the risk of waiting to establish protection plans compared with the ease in setting them up. You can do this by asking questions, such as:

• How would you make payroll if you became too sick or hurt to work? How would your company survive if you didn’t show up to work?

• Do you have business continuation plans in place, such as a buy-sell agreement? If so, does it cover contingencies like death and disability? And is it properly funded?

• Could your family continue to make ends meet if you could no longer receive a paycheck?

• What would happen if you could no longer provide for your family or run your business because you, a partner or key employee died or became disabled?

• Even if you have made plans in the past, have you reviewed them recently? Has the economy substantially changed the effectiveness of your plans?

The next step is to offer prospects the opportunity to discuss and identify strategies for putting plans in place. Too often, business owners are overwhelmed by what they’re not doing and are paralyzed in making progress toward their goals. It’s important to help them verbalize their financial goals and build a step-by-step strategy to accomplish them. They need your help in prioritizing.

Showing the financial impact of not having protection products is very effective. I often share the story of a producer who was given a second chance to do the right thing with clients. After a particularly startling series of messages from the spouse of a big client, he realized he had neglected the importance of income protection. In this particular case, his client was diagnosed with a severe illness and died before needing to worry about the income protection gap in his financial plan. The producer took this opportunity to become an advocate on the importance of life and disability insurance in personal and business planning.

Even if business owners have considered the effects of these events, it doesn’t always mean they’ve built them into their business plans. If a business is owned by multiple individuals, ask to look at the company’s buy-sell agreement. This document provides a wealth of information about the business and typically leads to discussions about business planning and how best to fund those strategies. It is not uncommon to see a buy-sell agreement that:

• Only addresses the death, but not disability of the owners.

• Addresses disability, but the buyout clause is not properly funded.

• Contains language that does not match the terms of the funding insurance policies.

Another common issue is having an agreement that provides a buyout of another owner at a stated dollar amount that is much higher than today’s valuation of the business. If the agreement hasn’t been reviewed in the past few years, it needs to be reviewed and potentially updated. Current market conditions have left many owners overexposed.

I also share with business owners what I see their competition doing to protect their businesses and employees — especially highly compensated, key employees. Key employees are typically very interested in their benefits and have a high participation in offerings. Plus, business owners are interested in attracting and retaining their top talent. I’ve also found that providing benchmarks helps energize a competitive business owner to prioritize and move forward on the different options we discuss.

Use the right tools

Most large insurance carriers offer prioritization tools and fact finders to help develop business and financial plans. Some provide tools to facilitate conversations with business owners and offer business planning services, such as informal business valuations and buy-sell agreement reviews. These tools are a great way to open doors with business owners and are useful in identifying gaps, needs and priorities.

Targeting business owners can pay off. As of September 2009, small- to medium-size businesses made up 98% of employer firms and employed nearly half of all private-sector workers in the United States, according to the U.S. Small Business Administration.When you establish a relationship with a business owner, there are endless opportunities for protection solutions. Employee benefits and executive benefits, as well as personal and business planning are just some of the needs you can help business owners address.

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