This month’s newsletter tells a story about a young woman who moved to a city she loves (which happens to be a mile or so above sea level) and who purchased a flower shop. Only six months after having earned her college degree, this budding entrepreneur learned the ins-and-outs of the new city while delivering flowers and becoming acquainted with her clients and employees. Born and raised in southern California, she even rejected the dark side of professional sports loyalties and became a big-time Bronco fan. What could be better?

As many of my business-owner clients also know, the young woman quickly learned that business school didn’t teach her how to run a business. “It’s different when you’re actually living it,” she says. “What you learn from school is just a lot of theory. Nobody teaches you how to deal with customer service or anticipate cash flow needs in the real world.” She also learned that every business decision directly affected her personal life – both her schedule and her finances.

Joanne Llaury-Marks, founder of LLJ Group, LLC, owned her flower shop for two years and credits the experience – and enduring the stress of tight finances – with setting her on the trajectory toward opening LLJ Group and offering virtual controller and accounting department services. “It imposes a heavy burden on your personal life when your business finances aren’t straight,” she says. “I’m blessed to have experienced this life-lesson early.”

In addition to her flower-pushing experience, Joanne has served in professional services firms and publicly traded corporations. She has earned two more degrees. While her family was growing, Joanne also grew her consulting business and her passion of helping small businesses grow and prosper. “It’s personal,” she says of this crusade. “I’ve seen how destructive the stress of coping with financial difficulties can be to a person’s life.”

LLJ Group has been in business since 2012, but Joanne has been consulting with clients in varying capacities since 1999. A “virtual accounting department”, LLJ Group can help with everything except annual income taxes. They fill the void for companies that don’t need or can’t handle an in-house accounting department.  They also support clients by helping find insurance, investment, and estate planning consultants. Getting to know clients on an intimate, personal level and solving their business and personal financial problems sets LLJ Group apart.

Most clients start working with Joanne and her team to resolve cash-flow issues. Clients often don’t know where to start to gain control of their company’s finances. Joanne and her team kick things off with a thorough assessment, and then they create a plan using the “Profit First” system. The assessment and implementation of the plan help clients anticipate their needs, accumulate funds in advance, and satisfy their cash requirements. This gives the client a chance to “catch their breath.”

Breathing normally may seem like a cure, but the work’s not done just because the client’s face has returned to a healthy color. After the initial clean-up phase, Joanne and her team perform a profitability assessment and develop a follow-up plan for the next six months to a year.

In one case, the clean-up work revealed that the client’s biggest expense was payroll – no real surprise there – but a large part of this client’s payroll expense went to payroll processing. Joanne’s team saw that the client was overpaying for payroll processing and helped find a better solution that was priced about 75 % less. In addition, the replacement payroll provider’s system is more automated and tracks employee hours, paid time off requests and use, and other payroll administrative functions without extra charge. This client says that if Joanne and her team had done nothing else, their engagement would still have been more than worthwhile.

Another client, who is perhaps a too familiar example to a lot of readers, left a full-time, salaried position as an engineer and enjoyed success offering consulting services. However, not long after the start of his second year in business he was surprised to learn that he had to write a check to the IRS for his entire income tax bill in one lump sum. He had grown accustomed to having his employer withhold taxes and to receiving a refund check from the IRS. The “rookie” self-employed consultant didn’t know how to anticipate or plan for his tax liabilities when he was on his own.

Joanne’s team came to the rescue and created a system to calculate the consultant’s tax liability on an ongoing basis and, more importantly, to routinely set aside funds to pay the tax. No more surprise tax bills! Even though this client has doubled his income every year, he has never again had to worry about how to pay his tax bill. Instead, because Joanne helped him create the systems to take care of taxes and set aside funds for other interests, he uses his energy planning where to vacation every year.

When he’s not vacationing, this client calls Joanne and her team frequently to check in and get feedback. Much of this client’s success is based on his willingness to take Joanne’s recommendations and to do his part to implement the recommendations. As clients become familiar with Joanne’s work, they often expand the relationship to include most aspects of both their business and personal finances.

Joanne actively looks for clients who are not afraid to call her or to be involved in the process. “I tell all of our clients we’re here as much or as little as they want us to be,” says Joanne. “No question is too small. I would rather give a client advice they didn’t need rather than have them regret not asking. We’re their partner, not just their accounting department.”

The system Joanne’s team implements is behavior-based, rhythmic, and systematized. “When I needed help, I asked friends who they would use and then read their client reviews.” Joanne recommends looking for a provider who offers a live person as your point of contact and who will support you with a team. You don’t want to be stranded if the person who is assigned to your account happens to move on. You should also ask the consultant how often you can contact them and how often you should expect to hear from them. “Business owners need somebody who’s going to respond,” she says. “All our clients have my cell number, and I call back the same day.”

When looking for help, many people first find the Profit First book, and the book leads them to Joanne. “Read the book,”, she recommends. “Learn from the mistakes of others,” she quipped, “because you won’t live long enough to make them all yourself.” Other books she recommends are The Toilet Paper Entrepreneur and Clockwork.

Joanne is passionate about helping business owners succeed. She welcomes the chance to discuss the basics of business and personal finance and to let others “pick her brain.” If you’d like to learn more about Joanne and her team’s services, please call or email me. I’d be honored to connect you.

If you’ve tuned-in to any form of business media, chances are that the report or article was about Amazon, Google, Apple, or some other huge company. More than likely, too, all the “investment bankers” who were interviewed or were discussing all the exciting aspects of these deals were identified with names like Goldman Sachs, JP Morgan Chase, or Morgan Stanley. It’s all very impressive, but it’s not the world in which most of us operate.

If you’re running one of the 27,500,000 or so “small businesses” (defined as having fewer than 500 employees) estimated to be in the United States, would your company ever be on the radar of an investment banker? Do investment bankers ever emerge from their corporate jets and talk with the folks who are checking the tires and gassing them up?

My friend, Keith Wegen, is President and a founder of Flatirons Capital Advisors, LLC who brings “big company” investment banking experience to “small business” deals. Keith has devoted his entire career to investment banking and finance, and he’s spent countless hours out in the field in awe of the ingenuity and entrepreneurial spirit of small business owners.

Like most parts of our economy, technology has changed the way investment banking services are delivered. Virtual officing and data rooms, video conferencing, and lightening-speed connectivity and data transfer allow Keith and his firm to bring “big-deal” expertise and service to “real-world” deals. Deploying technology also allows Keith to immerse himself with his favorite clients, the owners of the small businesses that keep our economy chugging ahead day-in and day-out.

In many engagements, Keith’s primary job is to help his client sell a business when the client is looking to retire. Keith oversees the entire transaction – from preparing to go to market to closing the sale – using a strategic process that keeps things on track. Keith is all about simplicity. He prefers to list tasks with bullet points. He prefers to gather data in stages. Simplicity and defining tasks with narrow scope helps Keith prevent the process from becoming overwhelming.

Keith is highly selective about the buyer prospects he’ll introduce to his clients. “My goal is to insulate our clients from the noise during a sales process,” he says. He works hard to identify the right prospects, vetting them to make sure they’re qualified, strategic, and a good match, and getting information about the business to the right person at each prospect from the start. These extra efforts filter out stuff that wastes the client’s time and allow Keith’s client to remain focused on running the business and keeping it attractive to prospects.

An example of the benefit of his strategic and aggressive buyer identification strategy involves a small business Keith marketed to a large resort conglomerate. Most big businesses usually do not consider acquiring a small business. Keith identified the one person, among the hundreds employed by the publicly-traded prospect, who would understand the value of the deal.

The client owned the business for over 25 years and was looking to retire. The deal terms, including an advantageous and on-going financial relationship between the seller and the buyer, were untraditional and required special communication and negotiation between the parties. Not only did Keith and his company have the energy and expertise to find and communicate with the right person, they also had the flexibility and creativity needed to help the buyer and the client explore alternatives and find the best result.

Keith especially enjoys learning about his client’s business. “I love all the stuff people make,” he says. “I’ve seen all sorts of cool stuff. I love the ingenuity. I love the drive. I love the creativity that individual business owners have. Small businesses are doing some of the coolest stuff in the world.” He also loves getting to know the owner and learning what drives them, what makes them happy, and what makes them crazy.

Keith founded his company primarily to help business owners harvest their retirement nest egg. Forming an intimate relationship with his client is important to his process and its success. Keith’s intimate knowledge of his client and his strategic focus on identifying the right prospects allowed Keith and his team to quickly close a recent deal for a client who was making a major life-style change. As part of the sale, the client also wanted to limit the duration of her commitment to help the buyer during the transition after the sale. Keith and his team helped the client negotiate a post-closing employment agreement that lasted only six months, and they closed the transaction quickly. Within a year after hiring Keith, the client was finalizing plans to sail around the world, and Keith now follows the client’s adventures on her travel blog.

One of Keith’s favorite transactions was one where things did not go according to plan. After introducing a prospect to the seller and starting down the path toward a sale, Keith noticed some red flags in the prospect’s latest financial statements. Keith advised the client against striking a deal with the prospect. Even though Keith’s company would have been paid its fee, Keith was happy with his advice when, six months later, the buyer prospect filed for bankruptcy. Had Keith not advised the client against selling to the prospect, the seller would probably have lost a large part of the sale proceeds that were to be paid out over time.

The fun wasn’t over after this initial set-back though. After negotiating a subsequent deal with the right buyer and after the new buyer announced the transaction, a hurricane washed-away about $2 million of the client’s inventory. Simple insurance claim, right? Not in this case because the inventory was designed for underwater installation and the client didn’t ever imagine a need for flood insurance covering this kind of inventory. Keith and his team worked with the client and buyer and collectively they recovered about 80% of the displaced inventory. Keith says he was proud of his team and his client for closing the transaction. “I look at all the things we went through, including that last-minute curve ball,” he says. “It was a great deal. The buyer was an awesome, publicly-traded company, and we all worked as a team to figure it out and get it done.”

Not all business sales involve a retiring seller. In one transaction, Keith’s client really loved selling products to her clients, but she didn’t enjoy running her business. Processing payroll, hiring employees, working with vendors – it all killed the fun of doing business. Keith identified a buyer who saw the value of retaining the seller as a salesperson. Today, Keith’s client is focused on what she loves – selling, traveling, and making the world a better place through her company’s products – free from the distractions that kept her from enjoying being in business.

Keith’s clients engage him when they have concluded that they need the help of a professional to navigate the journey to a sale. If you’re thinking about such a journey, Keith advises finding a person who you like personally and who you trust absolutely. “It’s a full-on marriage when you go through this process,” he says. “You’re calling each other at all hours, going through things. If you don’t enjoy being around each other, it’s a mess.” Some professionals say they don’t care if the client loves or hates them so long as the deal gets done. The relationship with the client is most important to Keith. “If the rest of your life is all about relationships, why shouldn’t your professional life be too?”

Getting ready to sell? Keith’s advice is twofold. First, make sure your financial statements are solid. You need to have the system and people in place to quickly produce quality financial reports. These are the tools you will use to show a prospect what’s going on in your business. Further, if your “small” business is closer to the 500 employee-size, audited financial statements go a long way and are probably worth the expense.

Second piece of advice: Have reasonable expectations. Think ahead and be prepared! Unless your company’s stock is publicly traded, you can’t simply decide to sell all your shares and be finished. Expect to devote another five years to the sales process if you haven’t already started actively planning. Do some research about sales of similar businesses in your industry so that you’ll have a realistic idea about the value your business is likely bring and how long the process may take. Talk to your professional advisors, like your wealth planner, your accountant, and (unabashed self-promotion here) your attorney, about your future and your needs.

Most of Keith’s clients are geographically-based in what Keith calls the “Rodeo Region” – the Midwest and Rocky Mountain states, and of course he’s happy to talk with any business owner regardless of the location.

If you’d like to learn more about Keith and his services, please reach out to me. I’d be honored to connect you.

Colorado’s real estate market has treated property owners well during the last decade, and many people are considering harvesting significant increases in value. One unfortunate drawback of selling investment and business real estate is that you’ll have to pay your partner – Uncle Sam – a hefty portion of any gain. Even if a property has doubled in value, it may feel as if you’re barely breaking-even after you’ve taken the tax-hit into account. If, on the other hand, you’re able to keep all or most of the proceeds, where and how might you best re-invest them?

You may have heard of a “tax-free” – or more accurately a “tax-deferred” – exchange but may have thought that it’s something cooked-up by hedge fund managers and their hired-gun tax gurus. You may be surprised to learn that these kinds of exchanges take place every day, and most of the people doing the exchanging are not hedge-fund managers or investment bankers but everyday working and investing Americans.

My friend, Ken Palmen, a Regional Development Director with Exchange Resource Group, LLC (“ERG”) has helped lots of clients exchange real estate. “We assist clients of all shapes and sizes successfully complete Section 1031 exchanges (that’s IRS talk for tax-deferred exchanges, which are also called “Starker” exchanges, and “like-kind” exchanges). The law that allows and sets the rules for these exchanges is Section 1031 of the Internal Revenue Code, and that’s why these transactions are usually referred to as “1031 exchanges.”

The rules, while more technical than most of us usually deal with and, in some instances, unforgiving, are pretty simple in concept. If you’ve owned investment real estate or real estate used in a trade or business for more than a year, you can “trade” your property for one or more different properties that you’ll hold for investment or for use in your trade or business without paying tax at the time of the trade. Essentially, you give the IRS an “IOU” for the tax that would have been due if you’d sold the property, and, with some exceptions, you’ll pay the IOU when you sell your new property. Putting off the tax payment may not sound like it’s worth spending any effort, much less money, to accomplish but the benefit you can create by delaying the payment may be surprisingly substantial!

Let’s say you work as a mechanic for a major airline and you’ve saved and invested in a single-family house that you’ve rented for several years. The house is worth about $300,000, and after considering the costs of sale and all the money you spent to buy the house and keep it in good shape, you’ll pocket about $100,000. However, when you talk with your tax preparer, you find out that you’ll have to pay about $60,000 of your profits to Uncle Sam. Your tax advisor used lots of unfamiliar words, like capital gains tax, depreciation recapture, net investment income, and state piggy-back.

In this true story, Ken showed his client how he could keep nearly all the sale proceeds working for him by exchanging his single-family rental property for a multi-unit investment property. The $60,000 that would otherwise have gone to Uncle Sam forever helped to finance the larger property by being available as a down payment. When the client retires in another ten or twelve years that $60,000 could, depending on interest rates and other variables, turn into over $200,000 in equity in the new, larger property. By the way, the new property also generates more rent than the old property. Finally, here’s a third benefit, if you’re into post-mortem scenarios. If the client’s kids inherit the replacement property from the client, they’ll get something called a “step-up” in basis that will effectively mean that nobody pays that deferred $60,000 tax bill.

Ken has helped a wide spectrum of clients, including large companies looking to expand from their current complex to a larger one, wealthy families with holdings all over the country, and blue-collar tradespeople investing in rental property with an eye on retirement. ERG has handled transactions in all of our 50 United States, in Guam and in the U.S. Virgin Islands. (They’re hoping to complete the U.S states, territories, and possessions with the rare property in the Northern Mariana Islands.) On average, Ken estimates that his clients typically defer tax of about 30% of the total gain on their properties.

What may seem to the owner like a small tax savings may still warrant looking into a 1031 exchange. It’s likely that any sale of real estate will kick the owner into the 15% capital gains bracket, if not the 20% bracket. With state income tax, net investment income tax, and depreciation recapture, most clients end up paying tax at a 30 % or greater rate. In one relatively “small” example where the total gain was only $58,000, Ken helped his client defer about $7,500 in taxes that would otherwise have been payable immediately. Most of the transactions Ken works on involve deferring taxes of $10,000 or more, but as long as the client comes out ahead, no exchange is too small.

Ken has helped his clients exchange vacant land, individual condominium units, and small houses all the way up to multi-million dollar residential, industrial, and commercial properties. Ken says that his favorite part of working with clients is helping them, especially if the client wasn’t aware of Section 1031 and how they could benefit from it. As Ken put it, “To help someone further their retirement goals or their life planning goals is very rewarding.”

Property is in high demand in many parts of the country, and you may be forced to buy the property that suits your needs before you’ve sold the property you already own. Will you have to pay the tax when you eventually sell your current property? Ken can explain that he and the other 1031 experts have figured out how to “back into” the exchange using what they call a “reverse exchange.” So long as you jump through all the hoops in the way Ken and his colleagues instruct, the IRS has agreed that you can buy first, sell later, and still defer the tax on the sale of the old property. Ken can also explain how to improve a property as part of an exchange and other techniques for exchanging property in special situations.

Ken and the ERG team have over 90 years’ experience with Section 1031 exchanges. They take great care to apply their experience for the benefit of their clients and will undoubtedly make sure that the “i’s have been dotted and the “t’s” crossed. Ken also strives to help his clients and their advisors feel comfortable by helping them understand the process and the high levels of security his company uses to safeguard their money.

Ken will tell you that there are a lot of rules to comply with to accomplish a successful exchange, and his role is to make sure that clients know all the rules. However, there’s one requirement that clients frequently fail to meet and that no advisor, even one as talented as Ken, can help the client recover from. If the owner has closed the sale without seeking Ken or any qualified intermediary’s help, it’s too late to do a tax-deferred exchange. If the seller touches the proceeds from the sale of the property, no 1031 exchange can be made. With some very limited, fact-dependent exceptions, the IRS doesn’t allow a “Mulligan” or a “do-over.”

Ken’s not a tax or legal advisor. He is a “qualified intermediary” who holds the proceeds from the sale of the old property on behalf of the client and then pays them to the seller of the new property. IRS rules prohibit an exchanger’s direct relatives, associates, employees, lawyers, brokers, and accountants from serving as the qualified intermediary. Those rules also prohibit the exchanger from leaving the proceeds in the closing or title company’s escrow account until buying the replacement property. Ken performs other functions in the transaction, but because these IRS rules limit the role of the qualified intermediary, Ken recommends that his clients rely on their tax advisors and (unpaid promotional placement) legal advisors.

If he was hiring a 1031 exchange professional, Ken would look for the provider who devotes their personal attention to the transaction,  being both accessible and knowledgeable. Since lots of real estate owners include their family members and advisors in discussions about their transactions, the qualified intermediary should be open to discussing the transaction with those parties to ensure that they, too, have an understanding and a comfort level with everything that’s happening.

Ken’s firm offers safeguards such as dedicated, triple-signature-required qualified escrow accounts to provide the protection their clients should expect. Even though qualified intermediaries are permitted to co-mingle client funds, Ken’s firm keeps client funds in separate accounts. This gives the client assurance that a banking or other mistake with another client’s funds won’t spill over and affect – or delay – their transaction, or even cause them the headache of worrying about it.

Ken’s firm educates clients, real estate and business brokers, lenders, tax and legal professionals, and wealth advisors regarding the intricacies of Section 1031 exchanges. Ken will be pleased to help you and your advisors learn how to successfully complete a tax-deferred exchange.

If you might like to meet Ken or introduce him to your team of advisors, I’ll be pleased to connect you. Please feel free to call me at 303-861-1411.

For most purposes, the value of your business is measured by what a willing buyer with sufficient information would offer and what you, with sufficient information, would accept. Trouble is, unless you’re actively selling your business, there aren’t many willing buyers with sufficient information hanging around at the times when you might want to ask them what they might offer.

There are many circumstances that call for a valuation. Exercising rights under a buy-sell agreement, making gifts to descendants or to charity, rights vesting under incentive agreements, complying with loan covenants, and sale transactions may require a valuation. Some not-so-pleasant reasons for a valuation include divorce, disagreement between partners, and audit. Chances are that you will experience one or more of these events. If that happens where might you turn for help?

It may not surprise you that valuation experts are often engaged by lawyers, not by their business-owner clients. You may be surprised to learn that valuation experts are real people. My real friend, Adam Newman, is one of those (not-mythical) experts and a Business Valuation Specialist at Crowe LLP.

Crowe is a top-ten audit, tax, and accounting firm, and Adam has been a real-life Business Valuation Specialist for 15 years. He is also a CPA and has been for 25 years, but he’s always been a real person.

Most of Adam’s client work is directly or indirectly related to financial reporting, including these kinds of engagements:Purchase Price Allocation – It’s important to allocate the purchase price in asset purchase and sale transactions between such things as goodwill, customer lists, trade names, equipment, inventory, and covenants not to compete.

• Purchase Price Allocation – It’s important to allocate the purchase price in asset purchase and sale transactions between such things as goodwill, customer lists, trade names, equipment, inventory, and covenants not to compete.

• Stock-Based Compensation – The value of equity-based instruments like shares or options is required for financial statements and for employee tax reporting.

• Estate Tax Reporting – What might it take to convince an IRS auditor about the value of a business when no transaction with a third-party purchaser takes place? Adam knows the answer to this question and provides convincing answers based on the facts and circumstances of the business and its owners.

In addition to the tasks that are primarily needed for financial and tax reporting, Adam also prepares valuations in these situations:

• Buy-Sell Agreements – Perhaps the most immediately meaningful valuations are performed on an annual or other regular basis and allow the parties to a buy-sell agreement to maintain realistic expectations before a buy-sell transaction is triggered, anticipate their funding needs, and make arrangements if a transaction is triggered under their agreement.

• Marital Dissolution – If the prospect of an audit isn’t bad enough, what might it take to convince a judge that a business isn’t worth the outrageous value a soon-to-be ex-spouse’s lawyer says the business is worth (the proceeds of which may go to pay his or her fee) when no transaction with a third-party purchaser takes place? Adam comes to the rescue in these sad circumstances, and he has testified about his independent and objective expert opinion of value often.

Before meeting Adam, clients usually have not had valuation on their radar. When a sale or merger transaction occurs or when an owner is granting equity to an employee as compensation or as an incentive, clients are rarely focused on how the valuation may affect their financial or tax reports. Most of Adam’s clients are rightly focused on the transaction and its effects, such as whether employees’ jobs may disappear, whether operations will change, and what lies in store for them after the transaction closing. Some of Adam’s clients have been focused on improving employee retention, others on grieving for a lost loved one. Adam is often engaged after a transaction has closed because the need for a valuation didn’t hit the client’s radar until the client was told by their auditors that a one is needed.

Especially when the valuation is being performed after a transaction has been completed, Adam points out that the client should be concerned with the valuation expert’s credentials and experience. “As a client, you’ll want to make sure that whoever is doing these purchase price allocations is going to pass muster with your auditors and tax preparers,” he said. “It’s not just a matter of us completing a valuation, signing a report, and being done with it,” he warned, “our report is always going to be scrutinized by auditors or tax specialists to make sure it’s going to hold water.” If you don’t start with a qualified and experienced valuation expert, this can be an expensive and time-consuming saga.

Adam observes, admitting to retaining bitter-sweet memories because of the clients’ circumstances, that he has lots of experience working with ‘business divorces.” When owners aren’t getting along, Adam’s team puts together convincing valuations to help the warring parties split-up the company or negotiate a buyout. “Usually, not everyone’s going to be happy,” he quipped, “but if everyone is equally unhappy, we’ve done our job well.” Adam’s goal in most of these circumstances is providing an accurate value, not building a case favoring one side.

Valuation can also be a disruptive and stressful process for the business and its employees, especially if it’s taking place during a period of change like during or after a merger or partner separation. Adam and his team are particularly focused on minimizing disruption and stress. They handle the complicated stuff and stay out of the way to let the business’ owners and employees focus on the business and weather change. Adam and his team know the things clients typically ask for and what auditors and tax preparers look for, and his team delivers valuation reports to satisfy both.

In the somewhat rare case when Adam is engaged with enough lead time, he helps determine how the proposed transaction will affect earnings. He helps the client answer the bottom-line question, “Should we complete this transaction?” He also helps figure out whether and, if so, how deal terms may need to change. Once those decisions are made, he helps analyze the impact the transaction will have on the financial and tax reports, how to prepare for the impact, and how to report it.

Adam recommends looking for a valuation provider with a combination of relevant experience and credentials. For example, if the valuation will be scrutinized by your auditor, look for someone with experience in dealing with auditors. If the value will be the subject of litigation, hire only an expert with experience with the court process and giving testimony. Adam, of course, has both. He says, “It’s a specialized world, and most clients need a specialist – not a jack of all trades.” A dedicated, full-time valuation specialist who’s not mixing in tax and other consulting work will usually lead to better results.

Adam says likes helping companies in complex matters for which they’re not equipped to handle internally. He says, “What we do is very much a blending of art and science – judgment coupled with technical expertise. We take complicated subjects and make them understandable.” Sounds just like a real person.

If you’d like to learn more or meet Adam, please reach out to me. I’d be honored to connect you.

Perhaps you’ve heard advertisements for NerdWallet.com, a website that promises to find, among other things, the best credit card offers based on spending habits and credit ratings. The website starts its offer with the following statements:

“Finding the best credit card is part art, part science. No single credit card is better than all others in all categories – or for all people.”

These same lines could have been written about my friend, Bart Snyder, of Churchley Financial Group. Bart is an independent life, long term care, and disability insurance broker sporting the cherished and exciting CLU (Chartered Life Underwriter) designation, Long-Term Care certification, and Series 6, 7, 63, and 65 certifications. He was also a much-sought after holiday party guest.

Bart will be among the first to tell you that insurance isn’t usually bought – it’s sold. Since people aren’t lining up outside his office to buy insurance, Bart focusses on helping financial advisors offer better service to their clients. Bart has built his highly successful consulting business not by selling insurance, but by helping trusted advisors and their clients navigate the complex insurance markets and finding policies that fit the client’s needs and plans.

Most people don’t know that insurance can be crafted to fit our individual needs. Bart alone has access to more than 60 carriers, and each of these companies offers a half-dozen or more policies. “That gives us access to lots of customization,” he says. Bart starts by asking lots of questions, focusing on the client’s unique circumstances. He also helps the client complete one of three risk questionnaires, the selection of which depends on the client’s risk factors (this is life-insurance speak for “health”). “When I meet a new client,” Bart says, “I show up with a blank pad of paper. I don’t start offering ideas until I know the client and their situation.”

About 3 of every 4 clients have a risk factor. Did you know that your parent’s health affects whether you can buy an insurance policy and how much you’ll pay for it? Bart shared that we all tend to think that our circumstances are common. But all of us have unique things, including genetics, that might not mean visits to the doctor for us but are important to insurance underwriters.

If a client’s health or family history presents risk factors, Bart’s team reviews their medical records and prepares a written explanation to help the insurance company’s underwriters understand the client’s health and wellness. This means Bart needs to learn as much as he can about the client’s health. Bart won’t even introduce a client to a company that’s not going to treat them well. In some situations, Bart will arrange for a private medical exam, and he will use the exam results to anonymously shop carriers and find the best offers. Bart’s office is the only one in the state with the ability to do this.

In most cases, Bart gets several offers from different carriers. Finding these options allows him and the client to choose a policy that fits the client’s needs. Even when Bart has found multiple carriers offering suitable policies, there’s still plenty left for Bart to accomplish for the client. Like NerdWallet’s observations about finding the best credit card, underwriting insurance is part science, part art. No two carriers underwrite policies the same. One company may give great weight to CT scans, and another may not give them a second thought.

Since Bart is independent, can arrange for clients to buy all the products insurance companies offer, and has printed all the desirable letters after his name on his business cards, he can find the right policy to suit the client. Even better, Bart knows the insurance landscape. He nurtures relationships with the people who work for the companies and has usually worked with them in the past. Having these relationships lets Bart advocate for his client, and in cases where an insurance company might pass because the underwriter sees risk, Bart can negotiate policies and premiums that work for both the company and the client. NerdWallet is a useful tool, but it’s somewhat lacking when service like Bart offers is needed.

Most of us don’t give our policies another thought after we’ve bought them. I admit that I haven’t even opened the envelopes some of my policies were delivered in. But that thing inside the unopened envelope, buried under copies of tax returns and car titles, probably has lots of moving parts.

Bart helps clients who, like most of us, don’t know how important it is to monitor and update the policies we’ve been sold . . . I mean bought. Some policies – called variable universal life products – change in value based on the ups and downs of the stock market. These policies are so much like stock that an insurance salesperson has to hold a Series 7 stockbroker’s license to even sell them. If you own one of these, you’ve invested in the stock market and you should monitor your policy just like you watch the price of stock you own.

In one case, Bart’s client owned a universal life policy that was originally written to pay a death benefit of $5 million. The annual premium was $107,000 and the policy was supposed to be paid up after seven annual premium payments.  A combination of poor market performance and increasing insurance costs left the policy under-funded, and the company billed for an additional premium in the 8^th year. That’s when the client engaged Bart’s help. Bart negotiated with the company to waive some of the fees and make some other changes to the policy. The client still paid an additional premium, but it was much lower than the amount the company first billed. Equally important, though, is the resulting cash value accumulation that occurs at a higher rate because of the changes Bart negotiated.

Bart’s firm uses an independent company to review each of his client’s policies every year. This annual review helps Bart know if a policy is working as planned and if it continues to meet the client’s needs. Even if the policy is working, a regular conversation with the client helps Bart continue to give the client value. “Even if everything’s looking good, we love to get together and hear what’s going on and see if there are any updates,” he says. “Lots of things change from year to year that require a change of beneficiaries or policy limits or even new coverage.”

Policy reviews don’t always mean that the client will be buying a new policy, even when there’s the need for a change. For example, one client’s eight-year old life insurance policy was performing exactly as it was supposed to work.  The policy was even guaranteed for the client’s lifetime. But Bart noted that when the policy was issued the client was experiencing problems controlling her blood pressure. Bart learned that during the intervening 8 years the client and her doctors had resolved her health problems. Bart arranged for a medical exam, applied his knowledge and understanding of changes in the underwriting process that had also occurred during the intervening years, and negotiated a new, preferred premium for the client’s existing policy. Bart could have earned a commission by selling the client a replacement policy, but the client was better served by keeping the existing policy and paying a lower premium.

In some cases, a new policy is a better solution. Before being introduced to Bart, one client had amassed four separate disability policies under the belief that, between all of the policies, he’d receive $15,000 per month if he became disabled. Bart showed the client that only one of those four policies would pay if the client was still able to work in any occupation. Between the four policies, if the client could earn any income after he became disabled, he would only receive $4,000. Three of the client’s policies are called “mandatory re-employment policies,” and they say that if a disabled person is capable of doing any work at all the policy doesn’t pay. Bart found a single policy with coverage, called “own occupation,” that pays if the disability prevents the insured person from performing their own occupation. The policy had other benefits too, like better premiums, benefits, and pay-out period.

What would Bart look for if he needed help finding life, disability, or long-term care insurance? He would ask himself “Do I trust this person to give me honest advice?” Finding someone who doesn’t have ties to a single company and who can shop independently will give you some assurance that the person can be objective. Even if you’re only working on one piece of your overall wealth plan, look for someone who will take the time to understand how what you’re looking for fits in the whole picture. If you think you will have problems getting a policy at a reasonable price, look for a provider that has personal relationships with underwriters at multiple companies.

Bart says all his cases are interesting, but some are more fun than others. His ideal client understands the power of delegating tasks. They typically use experts to help them manage their property and their lives. I was surprised to learn that Bart’s ideal client already has insurance when Bart first meets them.

Bart explains that most of us, understandably, are mainly worried about price. Bart also makes sure that the insurance company is likely to be able to pay, which also sounds important, and that the policy has other terms, beside the premium, that fit the client’s plans. Whether they work with him or not, Bart makes the same recommendation to everyone: review your policy if it hasn’t been reviewed in the last 3 years. Some carriers aren’t even in business anymore, and you may not be notified if your coverage lapses or changes. See if your advisor reviews your policies every year.

If you’d like to meet Bart, or if you’d like some ideas about candidates with these skills to serve on your advisory team, please feel free to call me at 303-831-1411.