I watched last week a video from the wealth channel in America and it was an army veteran who is now a financial advisor and he does much of his work with other war veterans. The reason why is that he understands their needs and their problems and basically he was saying that it is really natural to do business with people with similar interests and backgrounds.
And so it is with me. I come from a family business environment. Our old family business Dwyer & Co was started by my great great grandfather James Dwyer in Cork in 1821. His son Walter worked there as did my Grandfather George and my dad John and my brother George.
When the family business closed after 160 years in 1981 it was a most traumatic time as there were probably seven or eight hundred good people still working in the business who all lost their jobs. That was my first experience of poor or indeed no succession planning and the resultant business closure that can often be the consequence.
When I started City Life in 1971 with a little bank overdraft, I knew nothing about running a business and I had no one to learn from except perhaps other financial advisors who were doing what I was doing. After a while I joined the LIA (Life Insurance association) which was started in Cork around that time and subsequently in 1981 I joined the MDRT, a worldwide association of financial planners which gave me a great networking opportunity with many successful business people from many parts of the world who were always willing to share ideas so that we could all learn from each other and grow together.
Without doubt the most important bit of advice that I have ever received came at my first MDRT meeting in New York. It was; if you want to talk to anyone about Life insurance cover, retirement planning, saving for college education for children, serious illness insurance, key person insurance…..make sure that your own house is in order!
Ben Feldman put it very well. If you are suggesting to someone that they should have life insurance cover of a million in place and you have only put a value on your own life of €500,000 then you will not be advising from a position of strength and your customer will know it. On the other hand if you have 2 million of cover and you are suggesting cover of a million your customer will instinctively know they should act on your advice.
By chance rather than design I started to do business with other company owners as I could communicate with them. We had similar challenges, similar problems.
Perhaps they had an overdraft facility from the bank, well so had I… First question “Should anything happen to you who will pay off the overdraft? Second question, how will your company survive without you?
Naturally this would also have been a major problem for my little company. It was something that I had thought about and had put in place Key person Life insurance and serious illness cover on my own life, paid for by my company. It was natural therefore for me to arrange these covers for my customers who also ran limited companies. It was always easier too to use the company cheque book rather than the personal one! The cheques tended to be larger as well.
Because I had a company retirement plan in place I gently explained to these company owners what I had done and why. I tried to simplify the process as much as I could. I used to say that if they wanted an income in retirement of €50,000 a year, then they needed to have close to a million in their fund at that time. I always advised them that I wasn’t suggesting that they would have to retire at that time but I did want them to have financial independence outside of their business in case they had a son or daughter working in the business with them at that time.
I did the figures to see what they had in their retirement plans and showed them what they needed to put in each year or each month to make their retirement plans a reality
Lets say the monthly investment required was too much for their company to pay at that time I might say “well why don’t we do it in stages, perhaps we will start with 25% of what needs to be done now and each year I will come back to see how your business is doing and we will increase the payments if the company can afford it”. They liked that way of doing business. Now the company owner had a track to run on and importantly so had I. They also had peace of mind as they knew from where their income in retirement was going to come from.
I had also created future business opportunities for down the road.
Similarly with college fee funding. When each of our four children was born I took out a little college savings plan for them. These proved very useful as all of them ended up doing degrees in college. Two of them Oonagh and Owen did further degrees which were quite expensive to fund as they went to college in Limerick and Dublin. Were those little savings plans useful in helping to fund their education? You bet they were!
Back then I was protecting my clients and their families and their companies and helping them build their retirement plans. Whilst we still do all of those things many of our long standing customers have got to the age of what I call pay back time.
Many of these customers over the last few years have reached their nominated retirement age. Whilst many are continuing to work alongside their sons and daughters in their family businesses, they can like me reduce their salaries to allow their businesses to support more fully the next generation. Having retirement funds in place to pay us some income as we continue to work with them is very very important.
The final part of the business story cycle is often succession planning and whether the business should be sold or passed on to a son or daughter naturally depends on whether or not we are lucky enough to have a son or daughter competent and interested in joining us in our family business.
In our case my son Eamon joined us some 10 years ago and he has transformed our business process and is now the boss. As a consequence we have been working through succession issues for the last few years and have bought back some shares from other directors so that the bulk of the shares are now owned by the two of us.
The difficulties with my old family firm Dwyer & Company was that they had too many family members working in the business. The succession problems were compounded because the company shares were owned by many family members working in the business and indeed by many family members not working in the business. As a result I have always felt that the best thing for us is that the shares should ultimately pass just to Eamon who already owns close to half the shares in the company.
The future of the company will be in his hands and will succeed or fail with him. Our other three children not working in the business will be looked after in other ways. I am not saying that there is a right or wrong way as every situation is different. In a family business situation however my view is that the business has to be given every chance to succeed and the best way for this to happen is that family members not involved in the day to day running should not have any shareholding interest.
Many will disagree with me and I have no problem with that!
Ted Dwyer Family Business