top strategies for attracting and keeping women business...

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Annual Meeting Proceedings | 2011©Million Dollar Round Table

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Top.Strategies.for.Attracting.and.Keeping.Women.Business.Owners.as.Clients

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Alphil Jay Guilaran Guilaran is a four-year MDRT member. He is the co-founder and executive director of the Financial Lit-eracy Counsel Inc., which began in 1999 as a university student association and today develops finan-cial education programs for families, corporations, academic schools and government institutions. The Financial Literacy Council is a financial counseling practice that serves more than 600 clients, 80 percent of which are women professionals. Guilaran is a lecturer and instructor for high schools, universities, corporations and governmental organizations on topics related to financial literacy for women, personal finance, business succession planning and wealth preservation.

Financial Literacy Counsel Inc. 19th Floor-1500 West Georgia, Vancouver, BC V6G 2Z6, Canada phone: 604.687.7773 email: [email protected]

Introduction Hello, my name is Alphil Guilaran of the Financial Literacy Counsel, a financial education, counseling, and family office based in Vancouver, Canada I cofounded with Bobby Ning. It is an honor to be here today addressing my colleagues at MDRT.

The purpose of this session is single focused. Specifically, I will assist you in becoming a more effective financial pro-fessional in the women business owners market. Today you will learn three strategies that we have used for the past ten years with much success for attracting and keeping women business owner clients. I will address how to effectively market and present your financial services to women, in-cluding entrepreneurs, business owners, and incorporated professionals.

Let me begin my formal comments by saying when it comes to financial services, women continue to be a mar-ginalized group around the world. Especially when it comes to integrated financial advice, women are on the sidelines in terms of professionals taking the time to clearly explain their financial, legal, and tax planning options. Women have also been an underserved population for financial, insurance, investment, and business succession planning. In our work we have found that there is a real tangible need to provide financial services solutions unique to the needs and expecta-tions of women as they achieve higher levels of influence, income, and affluence.

Note these comments: • Janice, age 46, upper middle class, married with children:

“First and foremost, many financial planners talk down to me. I ask a lot of questions because I want to under-stand their investment strategies.”

• Liz, age 29, single: “As a single woman, I often feel that financial services institutions aren’t looking for my busi-ness. They want people who are preparing for kids. While I’d love to have kids, I don’t want another reminder that kids aren’t in my near term future.”

• Mariana, age 28, middle class, single: “I hate being ste-reotyped because of my gender and age, and I don’t ap-preciate being talked to like an infant.” As MDRT members, let us consider the following reali-

ties and opportunities set before us: 1. One billion women participate in the global work-

force; 1.2 billion will over the next five years. 2. More married women are joining millions of single-

parent women and becoming the financial head of the household.

3. In the United States, one-third of working married women make more money than their husbands do.

4. In the United States, 57 percent of undergraduates are wom-en, and 59 percent of graduate school students are women.

5. Worldwide, women hold 47 percent of university places. 6. More women are inheriting wealth because of their

longevity and demographic patterns. 7. Women under the age of 50 are likely to prefer to do

their banking online whenever possible, primarily because they feel their financial advisors don’t under-stand their needs and it takes too much time to get the service and information they require.

8. Of all the industries that affect women’s daily lives, women around the world have identified the financial services industry as the one they are most dissatisfied with on both a service and product level.

Top Strategies for Attracting and Keeping Women Business Owners as ClientsAlphil.Jay.Guilaran

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Annual Meeting Proceedings | 2011 ©Million Dollar Round Table

Focus Sessions: Sales Ideas

I entered the financial services industry in 2000 as a port-folio manager assistant with a large global asset management firm that catered to advising high-net-worth accounts over $250,000. Much to my surprise, during my training I was encouraged not to have female clients. My manager told me they were high maintenance, needy, and always calling for a market update. The name of the game was assets under ad-ministration and transactions. Having to deal with client ser-vicing was deemed to be non-revenue-producing work best left to assistants to take care of. Women in particular kept voicing their concerns about not understanding what went on in the meetings and whether or not they would be ready to inherit family wealth. Moreover, women were concerned about not only their preparedness but also that of their chil-dren, especially those living in high-net-worth environments.

More importantly, what I realized was they were simply looking for the ability to make an informed decision.

Through that experience, it became clear that the reason women were being robbed of making informed decisions is due to how transactional the financial services industry truly is. The financial industry is transactional because it is under-pinned by providing maximum shareholder value to owners and stakeholders. Think about it: You go to a lawyer for a will; an accountant for your taxes; a banking professional, who will sell you loans and mortgages; and your financial advisor, who offers you insurance and investment products. The root problem becomes clear: Who is coordinating work to make sure they are all on the same page serving your best interests? Actually, shortly after you pass away, they get in touch with one another because of the ensuing transactions that result.

As a result of the transactional nature of the financial in-dustry, women are left defenseless and illiterate as to what is going on. This problem is further magnified when women pursue higher levels of education and enter into professional work environments wherein they are focused on their re-sponsibilities and have limited time to concentrate on proper financial and tax planning.

In the time I have been given today, I will share with you how to serve women in your client base effectively as well as how to attract female clients to utilize your services. Due to the broad nature of the subject, MDRT has asked me to nar-row my focus. Therefore, to be more specific, I will focus my comments on the life cycle financial services needs of self-em-ployed female professionals and business owners. Currently, 80 percent of our valued clients are in that space, and we build relational bridges through resources and solutions starting

from high school all the way to retirement through our in-tegrated financial literacy and financial counseling platform.

I will share with you three integrated strategies and tools. We use these strategies and tools when serving women cli-ents. When they are used together, they will increase your confidence and relevance. Moreover, they will position you as an educator and a trusted advisor and open the way for you to build long-term relationships that will encompass fe-male clients as well as those who love them.

Strategy 1: Help Her Manage the Home FrontA trait I truly respect about women is their innate ability to nurture and build relationships in the communities they find themselves in. Whether it is their own family, their ex-tended family relationships, workplace settings, or the com-munity organizations they serve, women carry a lot on their shoulders. They are looking for trusted people to help guide them and help them carry the load.

Now, when it comes to women business owners, they have the further weight of being relevant and competent at home and in their business. Moreover, they juggle the finan-cial responsibilities of both. Often, their frustration is in not knowing the basics and where every financial product fits into their overall planning.

As fellow MDRT member Bhupinder Anand so elo-quently stated during his main platform presentation three years ago, “People buy financial furniture with no idea where it is supposed to go.” His comments reaffirmed to me and my team the importance of using analogies that people can easily relate to when discussing finances with women, espe-cially with women who own businesses or are professionally incorporated.

Therefore, to help them deal with the home front, it is im-perative you have in your toolbox a picture people can relate to. In our case, the first tool I will present to you is a blueprint simi-lar to that of a house. We use this blueprint very effectively with prospective women clients to begin the relationship process.

The purpose of the Financial House diagram is threefold when presenting it to women:

1. Begin to understand her beliefs and disbeliefs about money.

2. Brand yourself as a trustworthy professional. 3. Become a resource center for her and her loved ones.

Begin to Understand Her Beliefs About MoneyThe subject of money is heavily laden with emotion. The Financial House focuses and harnesses emotion around money

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toward five key areas. These key areas are (a) roles and re-sponsibilities, (b) spending habits, (c) saving and investing, (d) borrowing money, and (e) giving money away. Understanding these key areas is vital in establishing and nurturing a long-term relationship. Money may mean security, freedom, and choices, or it may be the means to create a legacy.

The other dynamic at play is not only a woman’s belief about money but also her potential unbelief about money. For many people their understanding of the value, power, and uses of money is rooted in the environment they grew up in and how money was discussed, feared, used, or misused in their family. Often, I find I need to highlight that money is amoral, meaning it is neither good nor evil, but simply a tool. Money is not the root of all evil; rather it is the love of money that is at the root. We have the ability to choose how to earn, spend, and save money. A discussion about her beliefs and even uncover-ing potential areas of unbelief around money is an important dialogue that signals you care about her as a person.

Brand Yourself as a Values-Based Financial Professional Guiding women through important financial decisions re-quires that we as financial professionals display solid values rooted in character and competence. When character and competence work together, they naturally complement one another to build the most valuable component in defining and delivering your services. That vital component, which makes up the underpinning of all successful financial advi-sory practices, is trust. And trust is reinforced when you con-sistently display and serve with character and competence.

Competence can be learned through experience and courses; however, your character will determine your long-term effectiveness and your legacy in our industry. Give some thought to the men and women at the helm of some of the failed corporations in the past decade. Their lack of character and integrity were ultimately responsible for their own undoing and downfall.

When dealing with women business owners, your charac-ter will speak louder than your competence. Habits such as keeping your word and doing what you promised will go be-yond your level of technical competence and how well laid out your brochures are. In this market women want to know what your core values are, what your communication plan is, how you arrive at making decisions that are in her best interest, and how transparent you are in terms of her account and the fees.

The Financial House solidifies your values-based proposi-tion and communicates that you have the character and com-petence to oversee multiple facets of her financial planning

and lead discussions about the accumulation, preserve, and transfer of wealth.

Become a Resource Center One size or a template-based solution does not fit all. One of the highlights of using the Financial House is the ability to open up a discussion around the Whole Person Concept. For women business owners, the discussion of aging parents and estate, inheritance, and succession planning have been coming to the forefront.

You can position yourself to be relevant throughout every stage of her life by being a resource center to her and to un-derstand her situation, needs, and priorities. Going through the Financial House gives you the insight to identify needs she probably doesn’t even know she has.

Let’s explore the Financial House together.

We designed the Financial House to help make sense of where all the financial furniture fits into women’s financial planning. We came to realize that no one is actually coming alongside Canadians to walk them through the proper struc-turing of an architectural plan from foundation to the roof. Rather what happens is people purchase financial furniture with no idea where it fits. The sad truth is hindsight is 20/20; therefore, by the time they figured out they had other op-tions and alternatives, it is much too late to course-correct.

We use a bottom-up approach with seven phases, starting with building the soil to a solid foundation, and build up from there.

The Soil: Cash Flow and Expense Planning“Income” Versus “If Come”

The health and stability of the home front is predicated by how your clients manage their incomes. Do they live within their means, or are they spending borrowed money? One of

The Financial House Blueprint

Figure 1

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the sicknesses we are not immune to in North America is the desire to keep up with others and fake it until we make it. The consequence of that is living on borrowed money or “if come.”

We utilize suggested budgeting ratios to drive home the point of cash-flow planning.

We also highlight the importance of correlating your roles and responsibilities with financial responsibilities in order to prioritize the importance of primary relationships. In my work advising up to four generations in one family, I receive specific insight into family dynamics within higher net worth families. Over the past eight years, when we have taught at Ivy League preparatory schools, we’ve noticed that many children growing up in high-net-worth environments, wherein their parents own financially profitable and suc-cessful companies, are resentful that they receive “presents” rather than “presence.” This means they value having the presence of their mothers or fathers more than receiving lux-ury goods as presents. There exist misaligned priorities in the lives of people who think making more money is more im-portant than spending quality time with their children. The social costs are significant, and there also exists the potential reality that when adult children receive their inheritances they become resentful, as the money cannot ever replace the presence of a mother or father.

I truly believe that as MDRT members we can be a stra-tegic ally in helping our clients and their families balance the responsibilities of their businesses and their life at work. And it all begins with how they currently manage their cash flow.

As it relates specifically to women business leaders, we need to realize and acknowledge that women are more cog-nizant that if one area of life is misaligned it is just a mat-ter of time before it affects other areas of life. Men tend to be more like waffles and compartmentalize aspects of their lives. I clearly remember that a few years ago Mark Gungor shared on an MDRT platform the differences between men and women, and he drove home the realities of the differ-ences. A book written by Bill and Pam Farrel called Men Are Like Waffles—Women Are Like Spaghetti also presents research similar to Mark Gungor’s.

Foundation: Estate/Inheritance/Excecutor Planning“Begin with the End in Mind”

Stephen Covey, in his book The 7 Habits of Highly Effective People, cites an important habit to adopt in our daily lives: “Begin with the end in mind.” It is vital to communicate to our clients the importance of making estate, inheritance, and executor planning a foundational priority when taking care of

the home front, more so with women business owners, since a significant portion of their wealth is tied into a business or businesses. Each business poses its own unique planning challenges from the standpoint of valuation, solvency in the event that she is not able to work, and succession planning. Moreover, a large proportion of women-owned businesses are not owned individually but rather set up as a partnership or a corporation with multiple shareholders.

Estate, inheritance, and executor planning is the second item we cover in the Financial House because no one has the ability to predict her own expiration date. It is a wise strategy to ally yourself with a trusted legal professional who has a specialization in wills and estate planning law. The lawyers we work with appreciate the Financial House as an all-encompassing planning tool that not only provides transparency and direction for the clients, but also provides a layer of liability protection for us, the advisors, because when we reinforce the Financial House, we are showing clients all of their options and mention the insurance product options that are available to them from an income protection and estate planning perspective.

We break down the estate, inheritance, and execu-tor planning component of the Financial House in the following way:

1. The pitfalls of relying solely on a will-based plan 2. The importance of a power of attorney and health

directive 3. Creating a family mission statement and charitable

giving plan 4. Using insurance as a complement or alternative 5. The roles of an executor

Foundation: Income Protection1. Life insurance 2. Disability insurance 3. Critical illness 4. Employee/executive benefit plan We use charts to explain the different options in in-

come protection, and we distinguish between income and asset protection based on the type of insurance prod-ucts. We created these charts to be simple and easy to use because our curriculum is taught to children start-ing from age 12 all the way to seniors past age 80. When we do family meetings, it becomes helpful to have simple and easy-to-understand slides in order to have maximum impact across the generations and ensure everyone is on the same page.

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For this component of the Financial House, it is impor-tant to highlight the need to put away emergency savings of three to six months of expenses in case some unforeseen events occur in your clients’ lives. Work with them to com-mit a savings strategy to build up personal savings in the event of an emergency or even an opportunity.

Foundation: Debt ReductionIf debt exists on the home front, we strongly advocate help-ing clients put together a strategy to pay it off.

Introducing the Snowball Strategy of Debt Reduction

Paying down the highest interest rate first is not always the best plan. Try paying down the lowest balance and then “snowball” the savings by applying that amount to the next lowest debt; continue until all are paid down. The assump-tion is that you are not incurring new debt.

We use the following case study, called $ C O V E R A G E (see Figures 2 and 3).

Step 1: List out total debt burden of $38,676, with a minimum monthly payment obligation of $907 per month.

The do-nothing approach will result in $14,282.25 and 90 months to pay it off (see Figure 4).

Step 2: We work with the client on her cash-flow plan-ning and find whether an extra $293 in payments can be saved and commit that amount to paying down debts.

Step 3: We pick one debt to focus on. The HBC balance is $800, and the minimum payment is $24. So we set the new payment at $24 + $293 = $317, and the client ends up paying it off in three months versus 66 months.

Step 4: Once the HBC is paid off, apply $317 ($293 + $24) to the next debt to focus on (see Figure 5).

The end result is $7,307.73 of interest saved and 39 months rather than 90 months to pay it off, all without hav-ing to even renegotiate interest rates.

Room: Tax PlanningBefore entering the realm of saving and investing, which includes retirement planning, education savings, and non-registered investing, you need to know what you are dealing with in terms of a client’s exposure to taxes.

Total Debt $38,676 Total Minimum Monthly Payment $907

Proven Strategy: No Snowball Effect VS Snowball Effect

Step 1: List all outstanding debt amounts, minimum payments and interest rates. - Example: $907/ month

Step 2: Decide how much you can add to the total minimum payments each month.

- Example: $907 + 293 = $1,200/ month

Debt Reduc%on Strategies

No Snowball With Snowball

$14,282.25 $6,974.52

90 VS 39 months to pay off

Total Interest Saved $7,307.73

Figure 2

Figure 3

Figure 4

Figure 5

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This room in the Financial House gives you, the advisor, the opportunity to uncover how she has structured herself in terms of paying government income taxes. When you speak to her, tell her she can be either a sole proprietor or an em-ployee of a corporation that she owns or has incorporated, drawing out dividends. This discussion opens a myriad of doors in terms of accelerating wealth accumulation and set-ting up the appropriate structures for capital preservation.

Room: Retirement Planning, Education Savings, and Nonregistered InvestmentsIn order to present the topic of savings and retirement income planning using the Financial House, we use the diagram and analogy of a three-legged stool. The first leg deals with government-sponsored retirement pensions that are involun-tary savings programs and that you contribute to during your working years. In Canada we highlight the three programs Canadians are entitled to for retirement income needs. In the women business owner market, it is important to ascertain if she is relying on government-sponsored retirement programs to make up either a significant part of her retirement income or none at all. Pay close attention to the means-tested govern-ment programs and clawbacks. For example, in Canada there exists a program called the Old Age Security Program that is available for all Canadian citizens over the age of 65. When retirees reach age 65, they are entitled to an amount every month, which is adjusted to inflation. However, the amount is clawed back if their income exceeds $65,000 from all de-clared sources. I am always surprised to see women business owners in Canada fight tooth and nail to make sure they are not clawed back. Moreover, it is important to have this dis-cussion because it will help you determine how she foresees earning money from her business and whether she plans to be an incorporated professional or stay a sole proprietor, or perhaps there is an opportunity to develop a holding compa-ny and multicompany structure to manage her cash flow and wealth preservation strategies. Lastly, this area also provides a great opportunity to discuss how she sees the retirement planning of her employees and get a sense as to whether or not she will commit to the setting up of employee benefits and employee/group savings plans. This is our segue to the second leg we bring to light.

The second leg we look at deals with employer-sponsored programs, namely defined benefit pensions and defined contribution plans. We highlight the continuing shift from defined benefit plans to defined contribution plans due to legacy and employer liability costs. Women business owners

may have worked for previous employers prior to starting their own business and currently have a pension plan or plans in existence. It is in your best interest to take the ini-tiative to review the makeup, terms, conditions, and details of the contract. I’ve found that this topic is one that advisors neglect, and they end up losing a client because a competitor simply asked to review the client’s past pension statements. This leg of the stool also helps you to have a discussion about reviewing what she currently has for her employees and do a study as to whether or not setting up an employee savings plan would help attract and retain key talent.

The last leg of the stool is the catchall leg and correlates to the Financial House as encompassing the rest of the home front in terms of savings, investment, and cash-flow vehicles because it includes personal and spousal retirement income planning, education savings for children’s education, and also personal and family investments in real estate, art, or collectibles. But most importantly, it covers her most vital cash-flow generating vehicle, which is her business, and serves as an ideal segue to the second strategy for attracting and retaining women business owner clients. As you pre-pare to enter the next strategy, we reinforce the discussion on this subject by using a version of the efficiency frontier that plots essentials, lifestyle, and legacy. As you discuss her business as well as other assets you are helping her manage, help her to see the big picture. For example, what about her government pension? Is it to cover her essential expenses? Take her voluntary retirement savings program, for example, an RRSP in Canada or a 401(k) in the United States. Is it to cover lifestyle expenses, or will it serve double duty to deal with essential and lifestyle expenses? This is where it is ideal to talk about creditor protected investments and sav-ings programs for women business owners. In Canada the popularity and adoption rates of segregated funds/variable annuities are rising. In recent years guaranteed minimum withdrawal plans and strategies have been in the forefront of retirement planning for business owners. Make it a point to bring up valuable variable annuity strategies at this stage of your discussion with her. These are a definite asset when planning for her essential expenses in retirement. We also highlight the legacy advantages of using segregated funds/variable annuities by showing a simple slide about the differ-ences between mutual funds and segregated funds from the perspective of disposition and taxes. Moreover, we present a slide of how a segregated fund/variable annuity is ideal for blended families to ensure creditor protection and reduce tension on family dynamics and harmony.

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What about insurance policies and the cash values inside any permanent plans? Will it be for legacy purposes? Last, but absolutely not least, discuss the business you are help-ing her build. Will the cash flow, retained earnings, perhaps the sale of that business or the succession of that business to children and grandchildren be her legacy? I would suggest to you that her business has the potential to serve triple duty as a source for cash flow for essentials, lifestyle, and legacy.

So let’s take a look at the second strategy.

Strategy 2: Deal with the BusinessI have taught thousands of people in Canada financial lit-eracy skills related to the life cycle of a business from incep-tion to succession using the following tool called the “Inter-generational Business Planning Framework” (see Figure 6). Whether I’m teaching high school students, accountants, lawyers, or business owners nearing the succession planning stage of their business life cycle, this framework puts all the mission critical pieces of financial, insurance, tax, and legal planning on one easy-to-comprehend page.

The bulk of the work we do in our financial counseling division is for women business owners, specifically small- to medium-sized businesses in the form of incorporated profes-sionals, women who are in a partnership, or women who are significant shareholders in a business employing fewer than 100 people.

According to Chiswick Consulting Limited, men’s major motivation for starting a business is financial gain; women, on the other hand, say that flexibility, freedom from cor-porate structures and politics, and then financial gain are the main reasons for starting their businesses. Holly Sargent, senior associate dean for advancement and senior director for University Women’s Studies at Harvard University, says

that when a woman starts a business her reasons for doing so are not only for generating wealth. “The businesses are more likely to be family orientated, less commercial and more so-cially or more ‘gap in the market based’…. A lot of innova-tive products are created around female-oriented gaps in the market.” We find this to be true because the bulk of clients and women we educate have sustainable business practices or their businesses have bent toward social entrepreneurship, community building, and leaving a legacy.

So first and foremost, when introducing the Inter-generational Business Planning Framework, communicate that regardless of all the work you help her with in the four outlying circles of the framework, it all goes to waste unless you have the succession circle in place in the middle of the framework. Again, begin with the end in mind. Women busi-ness owners have distinct and unique reasons for taking the risks associated with owning a business. There are also unique instances in which women don’t even know that the profes-sion they have chosen will inevitably put them in a position to own and manage a business. When we teach in medical, den-tal, and healthcare-related school settings, it is eye opening to see how many students (for example, medical and dental students) are not aware that the profession they have chosen will put them in the role of a business owner. A big part of that is because there are limited resources in equipping fu-ture doctors, dentists, physiotherapists, and alternative health specialists with business skills and basics. My cousin, who is a pediatrician in Chicago, once told me, “If I only knew that being a pediatrician meant that I had to be a business owner, I would have reconsidered my choice of profession.”

The Inter-generational Business Planning Framework will help you with the following:

1. Have valuable and productive discussions and fact-finding interviews

2. Have a follow-up system to build a long-term relationship 3. Build and preserve the value of the business with an

eye toward succession planning 4. Have a system for getting accountants, lawyers, bank-

ers, and business stakeholders on the same page

First Circle: Cash Flow and Business PlanningThe first circle in Figure 6 deals with cash-flow planning; this is where we, as financial professionals, can add tremendous value in helping women business owners determine the profitability and viability of their business. It is here you need to ask key questions about why she started the business in the first place and answer the key questions she may have about her business.

Figure 6

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Over the years, we’ve discovered there are two questions that linger in the minds of women business owners:

1. Is my business profitable or going to be profitable? 2. How will I pay myself? At this point of the discussion, it is of utmost importance

to determine the breakeven between income and expenses. Let me walk you through a simple exercise you can do on a napkin or piece of paper to communicate how much she needs to earn to break even. From there we can determine how profitable her business is. This exercise is ideal for ser-vice-based businesses.

First, ask her to share what her household expenses are or her share of the household expenses if she is in a relationship wherein there are shared responsibilities for paying certain household bills. Come up with an annual figure using a household budget template.

Second, help her come up with a yearly expense figure for her business, which should include fixed and variable expenses.

Third, ask her how many hours she can bill her services out for a given year. Begin with a weekly number and multi-ply it by how many weeks she can work a year. For example, 2,000 would be the number if she can bill 40 hours a week and work 50 weeks of the year.

Number of billable hours in a work year = 2,000 hours (40 hrs/week x 50 weeks)

Billing Calculation Formula:Household expenses + Overhead expenses

÷ 2,000 hours x _____%

So if we take the example of Audrey, a web designer:

$48,000 of yearly personal/family household expenses $14,000 of yearly business expenses 1,000 hours a year of billings Her break-even point for billing will be $62/hour when you

add $48,000 plus $14,000 and divide the sum by 1,000. Once we’ve established the number, she has the peace of mind of knowing that her household expenses are taken care of and her business obligations are paid. More importantly, she now has a base to work from in terms of pricing her services. So if she charges more than $62 an hour, she will be in profitable territory.

Example:

$48,000 + $14,000 = $62/hr2,000 hours x 50% = 1,000 hours

This formula gives you a baseline to work with. Your cli-ent is buying value and results. The client may have an hourly

rate in mind. The value of service diminishes the longer you wait to invoice the client.

The other topic to consider for discussion is the existence or establishment of passive income sources. Are there differ-ent agreements, such as licensing, franchising opportunities, or leveraging the work of other professionals for her business concept and revenue stream?

The second prevalent question women have about their businesses is “How will I pay myself?” Based on your juris-diction, this will differ, but it is important to have a working knowledge of the different ways business owners can draw money out of their businesses to cover household expenses and the tax consequences of each method. Knowing this in-formation will give you a working baseline to deal with any income protection needs and determine if there is an oppor-tunity to review or recommend disability insurance policies, employee benefits, business overhead expense coverage, or buy-sell funding insurance coverage.

Second Circle: Business Structure and Tax PlanningOne of the biggest lead generators for attracting women busi-ness owners is the ability to interpret what their accountants are telling them. For many women, accounting is not their first language. One of our most popular courses is Finance for Non-Finance Professionals. Simply put, there is tremen-dous illiteracy when it comes to being able to read financial statements, even among C-level executives. If you are able to help them read financial statements, it will go a very long way to positioning yourself as a trusted advisor. Your com-petence in explaining ways to save on taxes will open the door for you to recommend strategies for what to do with the money you help them save. Moreover, it will establish you in the accounting community as a competent advisor they can call on in the future. I am not saying you need to be the ex-pert; what I am saying is to become familiar with the basics and simple strategies available to women business owners in order to add value to the role you have as a financial advisor.

Again, the tax rules around sole proprietor, incorporated professional, multicorporations, holding companies, and go-ing public differ, so it would be in your best interest to have key relationships with tax advisory professionals.

Third Circle: Business ContinuationFor many of you interested in the women business owners market, the third circle can potentially be very rewarding and can become a profit center for your practice. This is where your services and expertise can be highlighted.

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In the business continuation circle, focus on cash flow and business valuation protection. The key areas to uncover are these:

1. Replace income while alive, and buy out shareholders/partners while alive.a. Critical illness insurance b. Disability insurance c. Business overhead insurance

2. Preserve valuation of the business.a. Key man insurance b. Critical illness insurance on managers c. General insurance policies

3. Buy out shareholders/partners upon death a. Term insurance planning b. Permanent insurance planning

Fourth Circle: Savings and Investments What do you do with profits?

There is nothing more rewarding when you’ve helped a client through the first three circles at the beginning of your relationship than to find out during a review that their busi-ness achieved a profit. The fourth circle is designed to help you discuss the options for when there is profit sitting in their operating account and retained earnings.

Your role at this point is to provide tax efficient invest-ment strategies or perhaps begin the discussion of purchasing commercial real estate or even help them restructure their business for incorporation. If they are already incorporated, perhaps it is time to open a discussion about potentially set-ting up a holding company to protect profits.

Fifth Circle: Succession CircleReinforcing the “Begin with the end in mind” theme, the succession circle brings to the forefront topics of discussion that are needed in order to ensure the sustainability of the business. Many times the subject matter is uncomfortable but necessary to reinforce the value proposition you bring to the table. It is here that you take a stand that says you are willing to get your hands dirty and walk alongside her and those who care about the success of her business. Advisors who are transactional in nature need not apply; advisors who are not committed to the Whole Person Concept which we subscribe to at MDRT are best to bow out gracefully. This is where the rubber meets the road, and the soft issues related to family dynamics and emotions come into play.

In the succession circle, your role is to listen. She will tell you a story about how she would ideally envision the succession of her business. Always remember that a business

is an extension of the person’s character and the person’s competence. At times, the business has become part of her identity, which cannot be measured, quantified, or put into a formula. As MDRT members serving women business own-ers, we have a crucial role in documenting and providing answers on how to ultimately help her write her life story. The arrows in our quiver and the tools in our toolkit will help her story unfold, and we will have the honor of serving her and the generations that come after her.

The succession circle will challenge you and bring you to the point of questioning your own career and purpose in this wonderful industry. Are you in it to serve and add value to people’s lives, or are you a product pusher or peddler of financial products and services?

Now this brings me to our last strategy, which blends the first two strategies in a written and usable form in order to communicate to the client as well as to help you execute strategies. If you work in a joint work team setting, this checklist will also help you “divisionalize” and delegate roles and responsibilities.

Strategy 3: Use a Checklist!In our practice, we send our clients “financial prescriptions” based on charting and notes we collected during the meet-ings we had with them.

In closing, I will share a very effective chart-based tool we use to document meetings and task out responsibilities to associates and team members. The charting system docu-ments both the Financial House and the Inter-generational Business Planning Framework (see Figures 7, 8, 9, and 10 on pages 386–388).

When using or adapting our version, make sure she has a copy in front of her as well.

Step 1: Document the top three reasons why she is meet-ing with you.

Step 2: Document how she got to where she is today. Step 3: Explain in short detail the Financial House

diagram. The following steps deal directly with the components of

the Financial House diagram.Step 4: Discuss the cash flow and expense reality she is

facing, and make appropriate notes. Step 5: Estate/inheritance/executor planningStep 6: Emergency fund/debt eliminationStep 7: Income protection and lifestyleStep 8: Tax planning/tax reductionStep 9: Savings and retirement planning

386



CloseI began my comments today with how there is tremendous growth in the underserved women business owners market and how we have found that there is a real tangible need to provide financial services solutions unique to the needs and expectations of women as they achieve higher levels of influ-ence, income, and affluence.

I want to encourage you to continue exploring and uncovering new truths about the women business owners market. In fact, there is tremendous opportunity in serving women markets in general.

In closing, I truly believe that if we as MDRT members can become servant leaders and come alongside women to increase their financial literacy rates and at the same time provide services and solutions, it will help them throughout their life cycle, and we will be catalysts for stronger families, viable economies, and financially literate generations.

CHECKLIST/Review Yearly Midyear

Counselor: Alphil _______________

Financial Literacy Counsel Inc. 2010 Page 1

Prepared for:

Meeting Date:

Contact Information/ Update(s)

Name: DOB:

Email: Phone:

Address:

The Financial House Blueprint

Summary: Tasking Instructions(For Counselor, Specialists and Administrator)

Milestones Today

Figure 7

387






Prepared for:

Meeting Date:

Discussed To Do/ Deadline Revisit/ When Complete Declined ACTION LIST Estate/ Inheritance/ Executor Planning Current Will/ Enduring Power of Attorney / / Setup a Family / Spousal/ Alter Ego Trust / / Health Care Agreement/ Living Will / / Shareholder/ Buy Sell Agreement for Business / /

Discussed To Do/ Deadline Revisit/ When Payment Owing ACTION LIST Emergency Fund/ Debt Elimination Tax Free Savings Account / / Savings Accounts/ GIC’s/ Term Deposit / / Student Loans / / Lines of Credit/ Loans / / Mortgage / / Credit Card(s) / /

Discussed To Do/ When Current Coverage Payment Change To ACTION LIST Income Protection/ Lifestyle Protection Life Insurance / Critical Illness Insurance / Disability Insurance /

Protecting Income + Lifestyle

Critical Illness Insurance

Disability Insurance Life Insurance

LUMP SUM AMOUNT upon diagnosis.

PERCENTAGE of income only.Approx 70%

FOR SOMEONE ELSE.

30 day waiting period. 30, 60, 90, 120 day waiting period.Check contract.

Beneficiary receives cheque in 2 weeks.Bypass will + probate

Upon diagnosis from a doctor.

Definition Based(Own, Reg, or Any)

Proof of death.

Full return of premium available.

Partial return of premium available.

Term VS Permanent

Figure out what your next steps are.

Take care of monthly expenses.

Help others pick up where you left off.

Term VS Permanent Insurance

PERMANENT INSURANCE

$COVERAGE

TIME

PERMANENT INSURANCE BASE PLAN FOR LIFETIME PROTECTION

20 yearsTODAY

TERM INSURANCETOP UP FOR SEASON OF HIGHER RISKS

Mortgage Kids under age 18Business LoanReplace breadwinner’s incomeReplace breadwinner’s savings

Legacy GiftPrepay Estate TaxesPay for Probate Fees




Prepared for:

Meeting Date:

Discussed To Do/ Deadline Revisit/ When Complete Declined ACTION LIST

Cash Flow and Expense Planning Prepare/ Review Current Budget / / Personal/Family Net Worth Statement / / Business/ Practice Cash Flow Statement / / Prepare a Business/ Practice Balance Sheet / /

Current $

Combined Net $

Donations/ Tithing

Savings/TFSA

Mortgage/ Rent

Strata Fee/ Pty Tax

Heating/ Electricity

Cable/ Internet

Cell Phone

Life/Health Insurance

Medications

Grooming/ Makeup

Memberships

Personal Gifts

Personal/ Household Monthly Spending

Current $

Retirement Savings

Car Loan/ Lease

Auto Insurance

Fuel

Public Transit Pass

Parking

Dining Out

Groceries

Entertainment

Vacations

Clothing

Pet Care

Tax Installments

Debt Monthly/Owing

Creditline

Credit Card

Loan

Total Owing $

Total Income

$

Total Expenses

$

Available for further savings

$

Business Income Current $

Sales, commissions, fees, billings

Professional Income

Cost of Goods Sold Current $

Subcontracts

Direct Wages

Raw Materials

Expenses Current $

Advertising

Meals/Entertainment

Bad Debts

Insurance

Interest

GST/ HST/ PST

Business/ Practice Monthly ExpensesSelf Employed Incorporated

Debt Monthly/Owing

Creditline

Credit Card

Business Loan

Total Owing $

Total Income

$

Total Expenses

$

Available for Savings

$

Rent

Licenses, Dues

Office Expenses

Office Supplies

Legal, Acct, Prof Fees

Salaries & Benefits

Travel/Hotels

Telephone & Utilities

Motor Vehicles

Use of Home

Heat/ Electricity

Insurance

Mortgage Interest

Property Taxes

Capital Cost Allowance

Owners Salary/Dividends

$

$

$

$

Important Notes:

Figure 9

Figure 8

388






Prepared for:

Meeting Date:

Discussed To Do/ Deadline Revisit/ When Payment Owing ACTION LIST Tax Planning/ Tax Reduction Complete Review Personal Tax Return / / Complete Review Corporate Tax Return / / Incorporation of a Business/ Practice / /

Personal 20100 – 10,382 NIL

10,383 – 35,859 0 + 20.06

35,860 – 40,970 $5,110 + 22.70%

40,971 – 71,719 $6,270 + 29.70%

71,720 – 81,941 $15,402 + 32.50%

81,942 - 82,342 $18,724 + 36.50%

82,343 - 99,987 $18,870 + 38.29%

99,988 - 127,021 $25,626 + 40.70%

over 127,021 $36,628 + 43.70%

Corporate 13.5% <$500K

Income $250,000

Expenses (25,000)

Wage (100,000)

Corp taxable income

$125,000

Personal tax $29,000

Corporate taxes $17,000

Total taxes $46,000

Income $250,000

Expenses (25,000)

Taxable income 225,000

Total tax $82,500

Personal VS Corporate Tax Rates

TAX SAVINGS $36,500

Incorporated

Not Incorporated

Case Study:Business/Practice$250K/ yr

Savings + Investments + Retirement

Canadian GovernmentCPP = $884.58OAS = $516.96GIS = $447.58

Employer Sponsored:

Defined Benefit Plans- Employee Pension

Defined Contribution- Group RRSP

Personal & FamilyRRSP’s, TFSA’s

RESP’sRDSP’s

Non Registered

Your BusinessYour Practice

•• • • • •

Created by: Financial Literacy Counsel Inc. 2003

Discussed To Do/ Deadline Revisit/ When Monthly Total ACTION LIST Savings & Retirement Planning RRSP Plan(s) Review Consolidate / /

RRIF Plan(s) Review Consolidate / /

Review Current Employer Pension Plans / /

Review CPP, OAS, GIS / /

Update Risk Tolerance Test / /

Update Investment Policy Statement / / Corporate Savings Review Consolidate / / RESP Plan(s) Review Consolidate / /

Non Registered Review Consolidate / /

Real Estate Investments Review / /

NEXT MEETING DATE:__________________ TOPICS TO COVER AT NEXT MEETING:_____________________________________________________________________

Client Name(s)____________________________ Client Signature(s)_____________________ Counselor Signature:__________________ Date:____________

Figure 10

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