Insurance Authority
Insurance is vital to successful business transition
In the field of financial services, Insurance is one of the most important services anyone can provide an individual. In the case of business transition, it often is the difference between removing the barriers to a successful transition or putting the entire process at risk. Sounds over dramatized, doesn’t it. But read on and you’ll see why insurance is so vital to successful business transition.
Properly structured, insurance has resulted in the happiness and well being of countless people and saved businesses from financial disaster.
Our objective is to leverage your expertise, and knowledge of your client, to provide the best possible transition solutions. You become a key member of the transition team. If required, we would be willing to sign a non-competitive agreement.
How ROCG works with you
ROCG is not an insurance expert. Nor are we a financial planner. We orchestrate a successful business transition plan for our clients. We assemble a team of trusted advisors (which includes you, the insurance expert). The team works in harmony to achieve the client’s vision. That vision is what the client wants to accomplish: to whom the business should be sold; when the exit should occur; structure the transition that family issues are resolved; and so on.
With your experience, you've seen the potential for explosive family conflict. ROCG has the experience to work with families, often designing solutions that avoid family disputes and result in satisfying agreements all around.
Insurance removes the barriers
The solutions to transitioning a business that insurance provides are:
- Insurance funds the purchasers and the estate in the event of the death of the owner.
- If the owner dies before the business has been transitioned, insurance allows the corporation to finance the transaction, stabilize the business and provide the new owners with the cash on hand to pay for the business.
- In other situations, in the event of the owner’s early death, the corporation can carry on looking for a new owner.
- Insurance solves many challenges in transferring wealth out of the company and between generations. It is an important component to any risk management strategy.
- Insurance provides for the owner’s children who are outside of the business – allowing them to benefit financially without laying claims to the business and thereby placing great strain on family interpersonal relationships.
Your role is not window dressing
As a vital member of the planning and transition team, you would gain access, with the client’s approval, to all the client records and documents of the planning process through a shared document storage system. Being a core member of the ROCG planning and transition team is not a platitude. And at the completion of the plan, your name is included with the rest of the team professionals in the client’s final business transition report.
Just as important, your input will help shape solutions for your client that puts him/her in a preferential position. That is why you should get ROCG involved at the ground floor.
When should you introduce your client to ROCG?
You may see what your client cannot see: that he/she should sell the business or prepare the business for sale or transition it to their family members. But how do you plan for it and how do you manage the process for your client?
You do it through bringing in ROCG – the Business Transition Specialists. Because in business transition, there are no second chances.
When you bring your client to ROCG, you are part of the core team. You will be kept in the loop throughout the process. Your input at the early planning stage is invaluable in outlining the need for insurance and removing roadblocks to the transition.
As ROCG identifies challenges in the transition process your product knowledge will provide the solutions. As a member of the transition team you will be introduced to other shareholders, family members and stakeholders who may need your services.
When things go wrong
Originally insurance was sold to the individual shareholders. In an earlier corporate reorganization, the shareholders inserted a holding company and the policies were not updated. The beneficiary remained as the individuals, not the corporation. Now the corporation was liable for all the income tax and capital gains tax with no means of paying for it. The insurance needs of the incoming family members (the new owners) could not be met. Had the insurance agent worked with ROCG this disaster could have been avoided. The client and all concerned would have had a successful transition. Instead, years of hard work and the hope of transferring a business to family members was terribly marred.
When my client, a business owner, passed away, he had life insurance for his family, but they had no interest in taking over the business. The management team had agreed to take over the business but ultimately had difficulty arranging the financing to do so. With ROCG, I would have known about this in advance and could have suggested a way to finance the succession with an additional insurance policy.
