4 Triggering Events of Business Succession & What to Plan for In Each

         We can all agree the worst time to make an important decision is on the spot.  Often times this is when the emotional brain takes over for the rational brain and the best possible decision may not have been considered.  Ideally a business succession plan is constructed when a partnership is formed, but we live in the real world and many businesses may not have realized this at that time.  Businesses often get busy trying to get profitable and never end up coming back to this.  Generally speaking, there are 4 situations to consider succession planning for, each of which may require a unique solution of their own.

Retirement: 

When do you plan to retire?  Do you plan to retire and no longer work or will you retire to move on to a new phase of your work life?  In either situation leaving the remaining business partner with adequate funding so that a rash decision doesn’t have to be made on the spot is the real purpose of a great succession plan.  Seeking and planning for proper retirement funding is critical to assuring cash flow will not be penetrated and the clients are not left with a surprise from the business they’ve come to appreciate and trust.

Death: 

In the event of a business owner’s death a few considerations must be examined and included in the overall business succession plan.  For example, will the partner’s  spouse now become part owner of your company?  Do you or they want that to happen?  Talk to your financial advisor to discuss the best method of funding a buy/sell agreement that would leave both the business and the spouse with adequate funding to perform the arrangement agreed upon.

Disability:

Death is certain and a triggering event most of us will first consider; however, there is a chance that you would suffer an injury or illness that makes it impossible for you to continue running your business prior to retirement.  This disability could be total or partial though in either event it is suggested to consider both situations as possible.  In the event of a partial disability will you still perform certain duties of your role in the business, who will take over the remaining responsibilities and how with that person’s time and compensation be funded?

Early Exit:

This final category is really a catch all for other less common reasons a business may need to enforce a buy/sell agreement.  Some of these triggering events may be divorce, personal insolvency or bankruptcy, criminal conviction, loss of professional license or termination of employment.

When creating your succession plan with your Certified Financial Planner it is important to consider if each triggering event will produce the same reaction.  Example, would divorce and death both provide the same benefits of the buy/sell protection?  One scenario may call for change of beneficiary whereas the later may call for estate tax mitigation.  Again, we can all agree that making a decision at the onset of one of these events may not be the most appropriate time.  Working with your Certified Financial Advisor could fairly make the list of your current short term goals with either a new succession plan or as a review of your current succession plan.

Be sure to follow all of Abel Financial Strategies' social media channels and subscribe to our blog!

Facebook

Twitter

LinkedIn

YouTube

Visit AWAbelFinancial.com fore more information.

Your complete source for personal financial planning.

A Certified Financial Planner ® in good standing that believes whole-heartedly in the Standards of the CFP ® program.

Abel Financial Strategies are not attorneys or accountants. If a need is discovered, we will refer you to attorneys or accountants in your area to work with or work closely with your attorney or accountant to resolve the need.

Securities offered through First Heartland Capital®, Inc. Member FINRA/SIPC   Advisory Services offered through First Heartland Consultants®, Inc.   (Abel Financial Strategies is not affiliated with First Heartland Capital®, Inc.)

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes) and Barron's (S&P 2014 total return); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprices.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment. Securities offered through First Heartland Capital® , Inc. Member FINRA/SIP

Monthly Market Review: February 2015

In order to know where we're going, we must first know where we've been. Here is a look at the market review for February from Abel Financial Strategies. 

The Markets

After a disappointing January, equities rebounded in fine style in February. The S&P 500 and Russell 2000 hit new all-time highs, and the S&P had its strongest month since October 2011. The Nasdaq continued to be the strongest year-to-date performer, while a temporary bailout extension for Greece helped benefit the Global Dow.

Oil prices stabilized around $50 a barrel, which helped boost consumers' spending power. The U.S. dollar gained strength, though not as much as it did in January, while gold fell below $1,200 per ounce before rebounding to roughly $1,212. And as investors regained confidence in equities, the benchmark 10-year Treasury yield rose as prices fell.

The chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

The Month In Review

• U.S. economic growth in Q4 was less robust than initially thought. The Bureau of Economic Analysis revised its estimate of gross domestic product downward from 2.6% to 2.2%, primarily because imports were higher and private inventory investment was less than the previous estimate.
• The U.S. economy added 257,000 jobs in January, and the Bureau of Labor Statistics figures for jobs created in November and December were revised upward substantially. Even more encouraging, average hourly earnings rose 12 cents to $24.75. However, because more jobs drew more workers back into the workforce, the unemployment rate was little changed at 5.7%; it has been within 0.1% of that level since October.
• The eurozone's finance ministers agreed to a four-month extension of Greece's current bailout in exchange for the promises of Greece's newly elected government to reform tax laws, pensions, privatization of key assets, and trade policies. However, the International Monetary Fund and the European Central Bank expressed skepticism about whether Greece would follow through.
• In her semiannual testimony before Congress, Federal Chair Janet Yellen continued to lay the groundwork for a rate increase later this year. Without specifying a time frame, she said that a rate increase would likely not occur until at least June.
• Lower gas prices helped cut consumer inflation by 0.7% in January, according to the Bureau of Labor Statistics. That's the biggest monthly decline since 2008, and left the annual inflation rate for the past 12 months at -0.1%. Meanwhile, falling energy prices also cut wholesale prices 0.8% during the month. That was the single biggest monthly drop since November 2009, and it left the Producer Price Index roughly where it was 12 months ago.
  
• Sales of existing homes in January fell 4.9% to their lowest level in nine months, but the National Association of Realtors® said they were still 3.2% higher than last January. The Commerce Department said new-home sales also slumped 0.2% during the month. Meanwhile, a 0.1% increase in home prices in December contributed to a 4.5% year-over-year gain in the S&P/Case-Shiller 20-City Composite Index. The western half of the country saw the strongest gains, while the Midwest and Northeast lagged. 
• Durable goods orders were up 2.8% in January; according to the Commerce Department, that was the biggest monthly increase since last July. New orders for nondefense capital equipment saw a slight 0.6% gain. And according to the Federal Reserve, industrial production frose 0.2% in January and increased at an annual rate of 4.3% in Q4. However, both the Empire State and Philly Fed manufacturing surveys showed growth slowing slightly in February.
• After a measure of non-manufacturing activity in China showed that growth had virtually flat-lined in January, China's central bank eased its reserve requirements for the country's commercial banks, which should make more money available for lending. The People's Bank of China also cut its benchmark one-year lending and deposit rates by 25 basis points.
• The Federal Communications Commission voted to regulate Internet service as a public utility, much as telephone service is regulated. The decision will enable the commission to enforce so-called "net neutrality" and prevent service providers from charging for priority access or interfering with traffic. However, telecom and cable companies are expected to challenge this decision in court.

Eye on the Month Ahead

The announcement and press conference following the Federal Reserve's March meeting will be a focus for investors, who will watch to see if language about "patience" disappears from the discussion of future interest rate increases. If you would like to talk about investment options for you or your company, contact Abel Financial Strategies.

Be sure to follow all of our social media channels and subscribe to our blog!

Facebook

Twitter

LinkedIn

YouTube

View our website!

Your complete source for personal financial planning.

A Certified Financial Planner ® in good standing that believes whole-heartedly in the Standards of the CFP ® program.

Securities offered through First Heartland Capital®, Inc. Member FINRA/SIPC   Advisory Services offered through First Heartland Consultants®, Inc.   (Abel Financial Strategies is not affiliated with First Heartland Capital®, Inc.)

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes) and Barron's (S&P 2014 total return); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprices.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment. Securities offered through First Heartland Capital® , Inc. Member FINRA/SIP

Initial Public Offerings (IPOs) - the basics

All About IPOs 

Maybe you've heard someone talking about investing in "a hot new IPO" and wondered what all the fuss was about. Or maybe you've heard about a company "going public" and thought about whether you should invest in it. If you're unfamiliar with initial public offerings (IPOs), here's a review of some basics.

What is an IPO?

 

As the name implies, an initial public offering represents the first time a company issues shares of stock that are available for purchase by the public (in other words, when it "goes public"). The sale of the company's stock is typically intended to attract new capital that the company can use to expand. IPOs might be considered the rock stars of the investing world; when the company has generated a lot of interest leading up to its IPO, the initial response from investors can make headlines.

How does an IPO work? 

Once the decision is made to go public, a company hires an investment bank to coordinate underwriting issuance of the IPO shares. The underwriter (or team of underwriters) guarantees it will purchase all of the company's shares on the day the stock is issued. However, underwriters typically do not intend to keep all of those shares, so they market them to other firms and financial institutions in advance of the actual IPO date. Firms that want to subscribe to the IPO indicate their interest in buying a certain number of shares (though they're not bound to follow through on that purchase). This process gives the underwriting firm(s) an idea of how much interest the IPO will generate. If there's a lot of interest and a large number of subscribers, the offering price can rise before the IPO date; if interest is low, the offering price will likely reflect that as well. However, the offering price may be very different from the price at which the stock trades on its first day. That's because once the subscribing firms have begun trading shares they've bought, the price can change dramatically, depending on the overall level of market interest. At that point, as with any stock, shares are sold to the highest bidder. The more limited the supply of shares available, the higher those bids are likely to be. That's why you may sometimes read headlines about the price of an IPO jumping on its first day.

What happens after the IPO? 

Even if an IPO is eagerly awaited, there's no way to know exactly what will happen once the stock starts trading. Yes, an IPO's price can skyrocket, but it can also go nowhere or disappoint--or skyrocket and then disappoint. Facebook's May 18, 2012, IPO was one of the most highly anticipated IPOs in recent years. And yet on its first day of trading, after an initial pop it closed up only 23 cents--roughly .006%--from its offer price; at the close of trading three weeks later, it was down roughly 30% from its offer price (though it subsequently rebounded and as of October 2014 had roughly doubled from the first-day close).* What's behind such volatility? One reason is that after any initial jump in price, the institutional firms that have subscribed to the IPO may want to take any profits quickly. Also, executives at companies that go public often have signed what's called a "lock-up" agreement; for a certain time after the IPO, they're prohibited from selling shares that may have been granted as part of their compensation package. Such agreements are designed to help support the stock's price during the lock-up period, which lasts at least 90 days but can be longer. However, once the lock-up expires, executives are free to trade their stock. If many of them sell simultaneously, the sudden increase in the supply of shares on the market may cause the stock's price to fall.

What if I want to invest in an IPO? 

One challenge with trying to invest in an IPO is simply gaining access to the shares. In the case of a stock that's in high demand, firms typically reserve IPO shares for their largest or most valued clients. For example, a firm might offer its IPO shares only to investors who have a certain level of assets with the firm or a minimum trading volume. If you're a small investor and are being offered IPO shares, it could be because the demand for them is less than expected, which could have implications for your investment in them. Even though past performance is no guarantee of future results, an IPO can be especially difficult to analyze for its long-term potential because it doesn't even have a track record to review. One tool is what's known as a "red herring." This is an initial prospectus that contains pertinent information about the company; it's issued after the Securities and Exchange Commission declares the registration statement effective. However, be aware that though the red herring is subject to SEC reporting regulations, it's part of a sales campaign by the underwriters to try to drum up interest in the IPO. Don't be tempted to invest in an IPO just because it's an IPO; think about whether it fits into your overall investment strategy and tolerance for risk.

*All investing involves risk, including the possible loss of principal, and there can be no guarantee that any investing strategy will be successful.

*Data source: Yahoo! Finance historical prices for Facebook, Inc. (FB) on May 18, 2012; June 8, 2012; and October 7, 2014.

At Abel Financial Strategies, we take a holistic approach in our client relationships and financial plans. As such, we offer comprehensive financial, retirement and estate planning, and professional fee-based investment advisory services.

Be Sure to Follow all of our social media channels and subscribe to our blog!

Facebook

Twitter

LinkedIn

YouTube

View our website!

Your complete source for personal financial planning.

A Certified Financial Planner ® in good standing that believes whole-heartedly in the Standards of the CFP ® program.

Augustus Abel does not provide legal or tax advice.  These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.

Securities offered through First Heartland Capital®, Inc. Member FINRA/SIPC   Advisory Services offered through First Heartland Consultants®, Inc.   (Abel Financial Strategies is not affiliated with First Heartland Capital®, Inc.)

Abel Financial Strategies - working towards your goals and dreams

At Abel Financial Strategies, our focus is on you and your financial needs.  I spend time listening to your goals and dreams and then offer you options to help you work towards reaching them.  After a thorough examination of your position in relation to your goals, I will be able to offer options for working toward closing any gaps that are identified. Those options will be selected from the various products that are available.

Investments

These products are typically associated with a financial plan, and we offer several options including:

• Brokerage Accounts
• Fee Based Managed Accounts
• Stocks – Listed and Unlisted
• Bonds – Government or Corporate
• Mutual Funds
• Exchange Traded Funds (ETF)
• Options
• Unit Investment Trusts
• Fixed, Equity, and Variable Deferred Annuities
• Immediate Annuities
• Real Estate Investment Trusts  

Retirement Plans

Planning for your retirement can be complicated.  My goal is to work with you to identify your retirement goals, survivor goals, estate transfer goals, and to help you with investment management.  Products that can be used to help with this include:

• Individual Retirement Accounts (IRA) – Traditional and Roth
• Simplified Employee Pension (SEP)
• Profit Sharing
• 401 (k)
• 403 (b)
• Single 401 (k)
• Roth 401(k) Plans 

Insurance

An area that I also can help you with is health care planning, both short and long term.  This can be overlooked with financial planning, and I have good experience working with clients to ensure they have peace of mind when it comes to protecting themselves and their families from short term or long term health issues.  Products that can be used to achieve this include:

• Life Insurance
• Medical Insurance
• Medicare Supplement Insurance
• Disability Income Replacement Insurance
• Long-Term Care Insurance

The reason for the success of our business is very simple – We place the highest value on our relationship with our clients and their trust in us. That combined with our experience and education are the reasons clients stay with us and refer their family and friends to us.

Our securities licenses are held by First Heartland Capital, Inc. an independent broker/dealer. Being totally independent, we are not obligated to any one company to recommend certain investment products over others.

Be Sure to Follow all of our social media channels and subscribe to our blog!

Facebook

Twitter

LinkedIn

YouTube

View our website!

Your complete source for personal financial planning.

A Certified Financial Planner ® in good standing that believes whole-heartedly in the Standards of the CFP ® program.

Securities offered through First Heartland Capital®, Inc. Member FINRA/SIPC   Advisory Services offered through First Heartland Consultants®, Inc.   (Abel Financial Strategies is not affiliated with First Heartland Capital®, Inc.)