With the move to planned benefits taking the industry by storm, a new report suggests advisors are leaving a lot of money on the table
U.S. insurer MassMutual released a report earlier this week that finds small business owners are woefully unprepared in the case of unforeseen or unexpected circumstances including death.
“We found that business owners are spending the majority of their time working in their businesses instead of on their businesses,” said Tara Reynolds, corporate vice president, Life Company Marketing, MassMutual. “It’s never easy to think about death or disability, but in order to raise awareness about these longer-term issues, business owners need to be confronted directly with the potential risk and damage of unexpected events.”
While many advisors focus on planned benefits including the marketing of group benefits to small business owners, they’re forgetting about a more important sale that could seriously affect the viability of those business clients.
MassMutual surveyed 801 business owners in March and there were some very interesting findings not the least of which is the fact that only 44% of those surveyed had buy/sell agreements in place leaving many businesses unprotected.
Earlier this year CIBC came out with similar findings when it comes to business owners here in Canada. According to the poll only 20% of business owners have a formal succession plan in place and most have no idea how they will finance a buy/sell agreement.
“It reminds me of the Seinfeld episode of taking your reservation,” said Jorge Ramos, senior estate planning consultant at The McClelland Financial Group at Assante Capital Management Ltd. “People are able to take your reservation but keeping your reservation is the most important part. The buy-sell agreement is just like a reservation. The insurance, that’s keeping the reservation. That ensures you will fulfill the buy sell agreement.”
MassMutual’s report is a reminder to advisors what a buy/sell agreement is meant to do and that’s to protect against death, disability, divorce, departure and disqualification.
“A buy-sell agreement must also be properly funded. Funding buy-sell agreements with insurance products, specifically life insurance and disability buy-out insurance, is often the most effective method,” MassMutual’s report states. “These products make it possible for the remaining owner to purchase the business interest of the departing owner, or his/her family, without liquidating business assets or taking cash out of the business.”
Advisors with clients who are business owners absolutely should have the buy/sell agreement discussion, sooner rather than later.
They’ll be glad you did.
See more: Life insurance riding to rescue of buy/sell agreements
“We found that business owners are spending the majority of their time working in their businesses instead of on their businesses,” said Tara Reynolds, corporate vice president, Life Company Marketing, MassMutual. “It’s never easy to think about death or disability, but in order to raise awareness about these longer-term issues, business owners need to be confronted directly with the potential risk and damage of unexpected events.”
While many advisors focus on planned benefits including the marketing of group benefits to small business owners, they’re forgetting about a more important sale that could seriously affect the viability of those business clients.
MassMutual surveyed 801 business owners in March and there were some very interesting findings not the least of which is the fact that only 44% of those surveyed had buy/sell agreements in place leaving many businesses unprotected.
Earlier this year CIBC came out with similar findings when it comes to business owners here in Canada. According to the poll only 20% of business owners have a formal succession plan in place and most have no idea how they will finance a buy/sell agreement.
“It reminds me of the Seinfeld episode of taking your reservation,” said Jorge Ramos, senior estate planning consultant at The McClelland Financial Group at Assante Capital Management Ltd. “People are able to take your reservation but keeping your reservation is the most important part. The buy-sell agreement is just like a reservation. The insurance, that’s keeping the reservation. That ensures you will fulfill the buy sell agreement.”
MassMutual’s report is a reminder to advisors what a buy/sell agreement is meant to do and that’s to protect against death, disability, divorce, departure and disqualification.
“A buy-sell agreement must also be properly funded. Funding buy-sell agreements with insurance products, specifically life insurance and disability buy-out insurance, is often the most effective method,” MassMutual’s report states. “These products make it possible for the remaining owner to purchase the business interest of the departing owner, or his/her family, without liquidating business assets or taking cash out of the business.”
Advisors with clients who are business owners absolutely should have the buy/sell agreement discussion, sooner rather than later.
They’ll be glad you did.
See more: Life insurance riding to rescue of buy/sell agreements
