Archive for the 'Business' Category

Life Insurance FAQ

Over the past few weeks of talking with people about financial planning, I have received two types of questions.  The first is always about my take on the stock market and the economy in the near term.  The answer is…I’m not quite sure.

However, regardless of your opinion of the market in the next 6 months, 12 months, 3 years, 10 years, etc., you should be building your financial plan according to your age, income, needs, and goals.  If you’re young and looking to save for 30-40 years before retirement, it doesn’t really matter what happens in the next 6 months.  If you’re near retirement, hopefully your financial planned advised you to put your retirement savings in very low risk investments, and you haven’t been hurt too badly.  If you’re just starting out with a spouse and family, you might want to make certain you have certain items taken care of before worrying about investing.

As I stated in an earlier post, an amount of money invested each month in a life or disability insurance policy goes much farther should the unfortunate need arise, than does that same amount in the stock market.

That leads to the next set of questions I receive.  They usually cover life insurance.  I’ll try to highlight some of them here, and some answers.

Q.  I’m single with no kids, why do I need life insurance?

A.  This is a very common question.  I can give a few thoughts on why you might want to consider a policy.  First, if you own a home, you might want to make sure you have a policy that would cover your mortgage if you should die prematurely.  You don’t want your parents to have to cover the mortgage in that case.  Even if you don’t own a home, there are some costs associated with death – funeral expenses, estate taxes, debt payment.  You don’t want parents or siblings to have to cover these costs.

Another good reason is that you will never be as young as you are today.  Insurance is used to protect you against the unforeseen.  You never know if something will happen in the next year to make your potential premiums go up, or worse, make you uninsurable.  If you plan to have a family at some point, it might be a good idea to already have some life insurance in place so you know you’ll have it to protect your family.

Q.  I’ve heard I don’t need Whole Life Insurance, just buy Term Life Insurance and invest the difference.

A.  OK…that wasn’t really a question.  I’ll explain anyway.  Whole Life Insurance will be more expensive than Term.  However, it is an asset that will most likely build in value at a relatively steady rate over time.  Therefore, you get the comfort of having the death benefit the entire time you own the policy, along with a relatively stable investment.  It won’t match the S&P over the long term, but it won’t lose value either.  If the year you need to borrow from your cash value happens to be a year in which the market is down 40%, you’ll feel good about your choice.

Term is great also for the death benefit.  The great part about buying Term, especially if you’re single, or just starting your family and can’t quite afford the Whole Life premiums, is that you can convert it to Whole Life later, and usually won’t have to take another medical exam.  If you own a Term Life policy, and later contract a heart disease, or cancer, you can convert the Term to the same amount of death benefit.

Either way you go, just make sure you at least have some protection to cover unforeseen events.

Q.  How much insurance do I need?

A.  That is different for each situation.  A good rule of thumb is 7-13 times annual salary.  Of course, it depends on items like mortgages, family size, age, etc.  Your financial planner can help you determine the right amount for you.

Q.  What if I can’t afford all the insurance I need?

A.  There are certain ways you can get started with life insurance to make certain there is some coverage.  You can put certain items in place so that you can buy more insurance in the future, and reduce the risk that you become uninsurable later.  Your financial planner can help you work this out.

Q.  Are you telling us all this just to sell us insurance?

A.  Absolutely not!  As I mentioned in previous posts, there are probably some people unscrupulously attempting to just sell.  However, I’ve learned that a vast majority of financial planners genuinely care about their clients.  Insurance is part of a good financial plan, and our job is to build the plan including life insurance.  Your financial planner should explain how life insurance, disability insurance, retirement plans, college savings plans, asset allocation, wills, trusts, long term care insurance are all part of a good financial plan, and how that plan will change over time based on your age, income, family situation, etc.


A week in the field

I had a full week of meetings to talk about my new products and services.  I had several appointments, all with friends.  I must admit, it was awkward.  Not only was I conscious of the fact that I was, in essence, trying to sell insurance, but I was asking friends to divulge some information about their personal finances.

I don’t feel like I pushed the insurance on them at all.  I told them why I chose this career, and why I chose the firm I did.  I then went into a description of building a financial plan.  I think I sufficiently explained why life and disability insurance are the basis, or foundation, for a financial plan.

The logic is that, if you have $500 to invest each month (you certainly don’t need that much to get coverage.  Also, do know this amount is NOT meant to be a quote for anyone in particular), you can either put it into an investment account and hope it appreciates, and hope, if you need it, the market doesn’t happen to be down 40% that year.  Or you can make sure you have enough life and disability income insurance to cover your home, family, income, debt, funeral costs, etc., should you die or become disabled prematurely.  If something bad were to happen, you get more bang for your buck with life and disability income insurance than you do in an investment account.  When you start making more money, you can start investing because your family is taken care of in the event of death or disability.

I even explained the difference between whole and term life insurance to some of my friends, and they were grateful for the education.

I definitely felt myself getting a little pushy.  However, I know it was not due to my desire for commissions.  I’m sure in the past the stigma of the pushy insurance salesman has been deserved because the agents un-ethically tried to sell products that were not best for the clients, but were best for the agent’s wallet.  This week, though, I felt my pushiness came from a desire to help.  The building of the plan made perfect sense to me, so why wouldn’t it make sense to my friends.  Why would they be adamant about wanting to keep finding good value stocks rather than protecting their families?

I got the “give me a few months and then we’ll take a look” responses.  What if something were to happen in those few months?  I know that seems like a sales ploy to try to get you to buy now.  However, it is exactly what these products are designed for…unforeseen circumstances.  If you know you need life or disability insurance, and you have the money to buy some (any is better than none at all), you should get it now.  It has nothing to do with my commissions…it just makes sense.

We can build the retirement planning, college planning, and investment accounts also, but let’s make sure we have your family, house, and ability to earn income covered first.

Am I wrong here?  Am I being too pushy?  Please let me know.

Many more appointments scheduled next week.  I’ll be back with more updates.

Learning the business

I’ve spent the last couple weeks learning the business of financial advising/financial planning.  The best part is that I am certain I made the right career choice.  This is definitely the way I would like to help people.

The main thing I’ve learned about so far is insurance – life, disability, long-term care – and how it fits into a financial plan.  I’m shocked at how easy it can be to protect your family, home, income, etc. from catastrophic circumstances, and how relatively inexpensive it can be.  If I’m a professional making $125,000 per year, why wouldn’t I want to spend a little every month to know that, if I were no longer able to work for some extended period of time, I would still receive an income.  However, most people look to put this money into an investment account first even though it will take decades to have enough in investments to provide the same protection as they would have from day one.

It was also a little sad to hear about long term care insurance, and to think of my grandparents.  My grandmother is now in a wheelchair, and can no longer bathe her self, get around, get dressed.  My grandfather has a nurse come to their house every day from the time she wakes up until she goes to bed.  If he had purchased long term care insurance, he would be receiving money every month to pay for the nurse, instead of depleting his savings.  I will be purchasing LTC for both my parents so my brother and I will be able to give them the best possible care if the time comes that they need full time assistance.

Making a Career Change

The career change starts today.  I’m going from the IT industry to the financial services industry.  Many people are asking why I would make the change, and, especially, why go into financial services now.

First, why leave IT.  To be honest, I was never a true “techie.”  I went to work for a startup application development company in 2000 when it was cool to do so.  From there I started a software company because I thought that software application would be a good one.  We migrated that company from IT management software to IT services because the business model was better.  I never learned programming, I didn’t learn how to configure a router or install a server.  I was the running attempting to run the business.  I was determining strategy, marketing, business development, partners, service offerings, employees, benefits, etc.

I decided to get out of the business partly because it was not my calling – I liked the business model, but I was never crazy about running a business where I knew I would never fully understand the services we offered.

I took quite a while to find a new profession, job, career, place to work.  I first thought I would be a small business consultant.  However, between the falling economy and the hurricane in Texas, spending on small business consulting seems to have fallen.

I decided to take a look at what I liked and did not like about running my business.  I loved the business development aspect more than anything.  I enjoyed getting to network, meet new people, identify issues they might have with their business that I can help.  I enjoyed the opportunity to build trust by finding someone in my network that might be able to provide some assistance also.

In the midst of all this soul searching, the economy was hurting and the market falling.  I had just purchased a house, and was going threw some financial budgeting issues while attempting to reconcile the credit cards, insurance, bank accounts, savings accounts, investment accounts, etc. that my wife and I both maintained.

I realized I could really use someone to help me make sense of my financial future.  I wanted to know how much to save, invest, and spend.  How much life and disability insurance I should have?  How do certain accounts affect my taxes?

Admittedly, I always a skeptical view of the industry.  There were life insurance salesmen, whom I would avoid at all costs.  Then there were stock brokers who were trying to get me to make more trades.

However, the more I talked to people I TRUSTED in the business, the more I realized they were doing the same things that I ENJOYED about my business.  They were meeting new people, and providing much needed solutions, advice, and guidance that impact people’s lives immensely.  I even have a financial background – it was my major in college, and I spent my first 4 years in financial roles.  Why wasn’t I pursuing this career?

So I started trying to find my way in, even during a downturn in the market.  I interviewed with several companies.  Some I liked, some liked me.  I decided on a place to call home based on the people on my team, the management, the perception of the organization, and the mix of products and services available. I will probably steer more toward investments than insurance, but I know insurance is a HUGE part of managing and protecting one’s family and wealth.

I am excited to start, not only a new job, but a new career.  I am looking forward to helping without being pushy.  I want to make certain my clients know I am always being mindful of their best interests.  I can’t wait to learn the ins and outs of the products and services.  Any advice will be welcome.

I’ll be attempting to document my growth, as regulations allow.  If you’d like to talk, email, meet, chat, etc., please feel free to contact me.

So You Want to be More Mobile?

With the power of laptops and the proclivity of wireless Internet access, more companies are trying to “go mobile.”  However, being more mobile means different things to different people, and each companies will have their own reasons and their own challenges.  Following are some things to contemplate before jumping into a large laptop purchase.
Why do you want to be more mobile?
• Are you looking to do more work from your client sites? 
• Do you think it your employees will be more productive? 
• Are you trying to cut down on the need to commute? 
• Do you need to travel?

This is an important question because the answer has an impact on the technology you choose.  If the idea is to always be on the move, you will need to think about very mobile laptops with long battery lives.  They will also have to be a little more able to handle the shock of being thrown into bags, in and out of the car, and possibly even make it through some spills. 
What do you need to do your work?
• Do you have certain applications you need to access? 
• Are they on a server or on your PC? 
• How vital is email?
This question will determine the need for a server.  It will also help determine which laptops to purchase, and the need for a firewall and/or router.  If there is a server-based application (i.e. timekeeping software) you use, you will need to make certain the server is configured to allow access to the application from outside the firewall.  The speed of your internet connection will also partially determine the speed at which users can access the application.  If email is vital to your work, you will need to have multiple manners of accessing email.
How technologically capable are your users?
• Are your users comfortable using laptops? 
• Are they computer literate enough to have multiple log-ins? 
• Will they have the ability to be supported remotely?

Countless hours of productivity are lost when users cannot access their network because they can’t use a VPN.  Also, if they are the types of users that require someone to physically fix issues, mobility is not an efficient option.  Mobile users have to be comfortable and creative enough to get work done even if there is some issue.
What security requirements do you have?
• Do you have regulatory requirements governing your IT security? 
• Do you keep vital client information on laptops?

In answering this question you determine the level of management needed on each laptop, and on the network access.  Keep in mind every laptop is an entry point into your network.  If someone can hack into a laptop, or even steals one, they may gain entry into the network.  Also, a lost, stolen, or hacked laptop can put sensitive client or company information at risk. 
How will your users access the Internet?

This question is somewhat answered by the answers to the previous questions.  Using free wi-fi hotspots is not necessarily the safest option.  Operators of hotspots are making their networks open, which is inviting to hackers.  They can sit in a coffee shop and access other laptops on the network.  Also, wi-fi hotspots are not always reliable.  If one of your employees absolutely has to get online, and the local coffee shop’s Internet connection is down, you are out of luck.  A mobile broadband card and plan from your mobile provider might be a safer, more reliable option.
New technology has afforded us the ability to be more mobile, and more efficient.  However, a mobile workforce is not a situation to jump into blindly.  It requires an investment of capital and time to make certain it is the right move for you.

What to do

I have now officially sold my clients to one of my employees.  It just made more sense for the company to be headquartered in Baton Rouge, since that is where most of our clients were.  However, I was not about to move to Baton Rouge. 

So now what?

For a while I thought “I just want a job.  I want to go to work, do my job, and come home.”  Now I’m not so sure.  I think I have something to offer smaller, growing companies.  I think I would like to be a consultant.  I feel my experience can help small companies not only with strategy and obtaining finance, but with the really difficult factors in acually running a business.  I feel I can provide expertise and advice in the operations.  I want my clients to be able to continue to run the business from the friends and family round, to the angel round, to the 2nd and 3rd rounds of funding. 

I’m not sure just yet if my work will be on a consulting or a contract basis, or if I will end up working full time for a small company. 

So now I’m out there.  I’m filling my days with coffee and lunch meetings to try to meet as many people as I can.  I’m keeping my options open for the time being, because that’s the only way I’m going to recognize when the right opportunity (ies) comes along.

Finally, someone gets it!

I met with a prospect yesterday that actually gets it.  They are an older company – 55 years old – but have recently had an ownership change.  The new owner has already made changes, and is growing the business.  They are actually looking for a technology partner to help advise them for their growth projections, rather than just to fix stuff, and order new PC’s when they get a new employee.

I’m not by any means a “technologist.”  I don’t think new technology will change the world, and I don’t think all companies need their own email server and the latest and greatest CRM and ERP tools.  I do, however, know that the technology currently available can make businesses more efficient, and more profitable.  The key to making technology a valuable tool instead of a necessary evil is planning. 

When companies have their technology infrastructure coincide with their business plan, it becomes a tool to lower costs, increase revenue, and grow value. 

A company that is planning to double in size needs to plan ahead.  This will give them to opportunity to buy PC’s at a better price.  It will also allow their new employees to get into their job and start helping the company faster.  It’s never good to spend the money and time to hire someone, only to have them sit at an empty desk for 2 weeks, and to not have email for a month. 

Technology planning can also help manage this growth by digitzing and streamlining processes.  Company growth leads to beaurocracy within the company, and the proper technology plan can help mitigate the time spent closing sales, processing invoices, paying vendors, and communicating with clients. 

I know this seems very obvious.  Much like having architectural plans prior to building, or remodeling, a house.  However, many businesses get very focused on the day to day, and forget to plan.