One of the most fascinating planning areas in the spectrum of market niches is exit planning. Often times, in this area the advisor’s client will be the owner or owners of a closely held or family business. As he, she, or they look to exit the business, there are typically a tremendous number of issues to consider, and the dynamics of each business owner’s situation are almost always unique.
To look at the range of considerations when working in this market, I turned to two of the finest advisors in exit planning to talk about their businesses and how they operate. I spoke with James J. Tyrpak, MSFS, CLU, ChFC, AEP, (pictured at right) of Williamsville, N.Y., and Michael L. Weintraub, CLU, (pictured below) of Walnut Creek, Calif., for their perspectives.
If you assume that these top advisors somehow woke up one day and found themselves in this somewhat specialized market, you’d be wrong. Mr. Tyrpak told me, “This was a specific strategy. We have been involved in retirement planning since we started, and we focus on creating long-term strategies for business succession planning. That naturally leads to exit planning.”
For Mr. Weintraub, exit planning is a natural and important offshoot of his primary market of business owners. “My core business is working with business owners in developing and implementing their retirement plan strategies,” he explained. “That helps form a trusting relationship for all the serious financial advice the client needs, as long as the trusted relationship continues. I also sold my own company and our clients knew that had happened. So when they were ready to have a liquidity event, they asked how my deal went, and we were off on that discussion.”
Starting the conversation
Effective prospecting is a key to success in any market, and exit planning is no different. On that subject, Mr. Weintraub said, “Since we are dealing with business owners who all want to stop working at some time, it’s easy to bring up the topic by asking, ‘What will you do with the business when you want to retire?’ We can then start exploring options what make sense to them, and actually help them find a company, competitor, or perhaps an employee or family member who is interested in taking a look at buying the business.”
Mr. Tyrpak talked about the importance centers of influence. “We are probably generalists in that we have clients in very many diverse types of businesses,” he said. “We have prospected for years through centers of influence and community involvement. We like to work with these businesses throughout their ownership cycle and ideally with the next generation of ownership. We like to deal with owners who are about five to 10 years from selling but will work with companies at any stage if they are considering the importance of creating and working with a plan.”
Working with a team
In getting to know a lot of advisors over my career in this business, I’ve heard many times about the challenges of working with a client’s financial advisory team – that is, his attorney, accountant, etc. The exit planning market is most definitely one of the markets where such a team is an unavoidable factor in doing proper planning. I asked about how these two advisors have learned to navigate the pitfalls of those complex advisory teams.
Mr. Tyrpak told me, “Since we will usually have a long relationship with a client, we have generally earned their trust by providing advice and service for some time. It’s important to work with the client’s other trusted advisors because documents will be needed from the attorney and most major plans have impact on the taxation not only of the company but the client’s personal taxes as well. So coordinating strategies with the other advisors is important to executing a plan.”
Mr. Weintraub added, “The most important thing to do when dealing with other advisors is to have each work within their specialties. I had a meeting last week with the owner of a very large auto body shop who is selling to a competitor. We met with his CPA to discuss the tax implications of the deal as well as whether or not the deal should be done for all cash or cash and some portion in an installment note and some stock in the acquiring company. The CPA answered the tax questions and told the client he doesn't deal with investments, so he suggested I handle that part. The client also asked for a referral to a lawyer who could handle the deal, and I referred him to a good friend who did my acquisition. The CPA knew the lawyer too, and said the recommendation was good and that he would be delighted to work with the lawyer. Everyone respects each other and provides advice that is always in the best interest of the client.”
Coming next week in Part II:
• Why the life insurance advisor is crucial to the process
• The best and worst things about the exit planning market
• Advice for advisors interested in exit planning
About the experts:
James J. Tyrpak, MSFS, CLU, ChFC, AEP, is a 21-year Qualifying & Life member of the Million Dollar Round Table (MDRT), with two Top of the Table Honors. He is past chairman of the Foundation for the Society of Financial Service Professionals and past president of the Society of Financial Service Professionals itself. He has received numerous industry and company awards. (Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Tyrpak Financial Associates and Cambridge are not affiliated.)
Michael L. Weintraub, CLU, is a 39-year Million Dollar Round Table (MDRT) member with 19 Top of the Table qualifications. Mike is also a past-chair of the Top of the Table. He is president of the retirement division of Ascension Benefits & Insurance Solutions in Walnut Creek, Calif., and past-chair for the LIFE Foundation’s board of directors.
Charles K. Hirsch, CLU, is contributing editor of Insurance Forums. He is also the president of Hirsch Communications Consulting, LLC, a communications consulting operation in Florissant, Missouri. For many years, Chuck was the editor and publisher of Life Insurance Selling magazine and wrote the monthly column, What’s Going On in the Life Insurance Business. From 1999 to 2008, he was the publisher of several of the leading industry magazines in the life insurance, property/casualty insurance, and mortgage markets. These days, Chuck’s firm specializes in the development and execution of many kinds of communication strategies, particularly in the financial services business.
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