Foreign nationals doing business in the United States are a growing clientele in the financial services industry. As the global economy continues to grow, and as wealth holders in foreign countries continue to find promising opportunities in the U.S., foreign nationals will require more knowledgeable advice on how to navigate the unique and sometimes complicated rules that govern their assets.
Most foreign nationals, however, are unaware of the tax liabilities that they are exposed to on account of their residency status in the U.S. As such, it is crucial that foreign nationals and their advisors carefully review their estates in order to uncover potential tax issues. More importantly, advisors should look early on for solutions to these issues in order to protect their clients’ assets.
In this article, we will discuss the intricate estate tax liabilities that foreign nationals are subject to, as well as strategies for managing them. Specifically, we will talk about how life insurance can be a valuable tool for maintaining liquidity while meeting U.S. tax requirements.
Residents vs. True Foreign Nationals
United States tax code makes two important distinctions when it comes to foreign nationals: Resident Aliens and Non-Resident Aliens (also referred to as True Foreign Nationals, or TFNs). The difference primarily comes down to how much time an individual spends in the country, though TFNs will typically also have fewer assets in the U.S. It’s an important distinction, however, because the two groups are subject to dramatically different tax liabilities (which we’ll discuss later in detail). Moreover, the Internal Revenue Service has its own set of requirements for residency apart from other legal requirements. In many cases, an individual might not even be aware that they are considered a resident for tax purposes, because for other legal matters they are not.
The IRS has two tests for whether an individual meets residency status for tax purposes. Those requirements are as follows:
The Green Card Test
If an individual has applied for and been granted an Alien Registration Card, known familiarly as a “green card,” they will be considered a resident. This requirement seems pretty straightforward, but it can offer surprises. For example, an individual might decide that they no longer want U.S. residency and choose to surrender their green card, thereby relinquishing American residency. There are multiple bureaus, however, that have to process this action; and if it’s improperly submitted, an individual might still be subject to resident requirements, even if they believe they have given up residency.
The Substantial Presence Test
Even if a foreign national does not hold a green card, they may still be subject to resident liability if they meet what the IRS calls the “substantial presence test.” The details of this test can become rather complicated, but essentially it states that if a foreign national spends a certain amount of days in the U.S. during a given period of time, they will automatically be considered a resident for tax purposes.
Because of the complicated nature of the substantial presence test—and because it goes into effect automatically, regardless of whether an individual meets other legal requirements for residency—many wealth holders might not even be aware that they’re subject to resident tax status. It’s important, then, to be clear on an individual’s residency status with the IRS and to plan accordingly.
Tax Liabilities of Residents and TFNs
Why are these IRS distinctions so critical? Because, as we mentioned, residents and TFNs are subject to substantially different tax policies, which require different planning strategies. These policies most crucially apply to estate taxes, which assess such assets as real estate, valuables (such as jewelry, antiques, or artwork), stock shares, and certain bank deposits, among other things.
- True Foreign Nationals, or Non-Resident Aliens, receive a $60,000 exemption to taxes on their estate, and are taxed at 40% on their U.S. assets only, without benefits or deductions.
- Resident Aliens receive a much larger exemption—about $11.2 million—but they are taxed at 40% on their worldwide assets. This exemption is a provision of the 2018 tax reform bill, and will likely return to its previous amount of $6 million when that bill expires in 2026.
To put that in context, a TFN with $1 million in U.S. assets will pay about $376,000 in estate taxes ($1,000,000 – $60,000 = $940,000 x 40%). A Resident Alien with $15 million in assets held anywhere in the world will pay upwards of $1.5 million ($15,000,000 – $11,180,00 = $3,820,000 x 40%).
For a family that is unaware of their U.S. tax exposure, these figures can come as a huge surprise. If unprepared, they may be forced to sell off valuable assets in order to meet their tax obligations. This is why it is crucial for foreign nationals to seek knowledgeable advice about their tax status in the U.S. and how to plan for it. It’s also why advisors should consider life insurance as a solid option for managing estate tax liabilities.
How Life Insurance Can Help Foreign Nationals Plan for Estate Taxes
Once a foreign national’s long-term tax status has been determined, advisors can begin to plan for how to manage the transfer of their estate to the next generation, including how to cover estate taxes. For a number of reasons, life insurance can be an extremely useful tool in this process. Here’s why:
- Liquidity Means Choice
The most important benefit of having a life insurance policy is that it will immediately provide a source of cash to manage expenses once a wealth holder has passed away. Life insurance, naturally, has always been a valuable tool for covering various costs relating to estate management—the estate tax is perhaps the most considerable of those costs. With this cash on hand, heirs can comfortably meet their tax obligation without having to liquidate valuable assets, which gives them more choices for how to manage the estate.
- Dollar-Denominated Contracts
Because a U.S. life insurance policy dictates a particular U.S. dollar amount to be paid upon the policy holder’s death, it is safe from the vagaries of exchange-rate fluctuation to which overseas holdings and policies are subject. Beneficiaries know well ahead of time what they will receive.
- It Is Often Easier than Negotiating a Will
Having a simple cash payout upon an estate-holder’s death gets rid of the need to designate which assets will be meted out to which heirs, and how much of them will need to be designated to estate settlement costs, including taxes. Simplifying estate settlement in this way can head off family conflicts and preserve assets for the next generation.
Having a U.S. life insurance policy can be especially helpful for wealth holders with heirs living in the U.S., since the insurance payout is not subject to foreign estate laws, such as forced-heir policies.
- U.S. Life Insurance Policies Are Secure and Confidential
Many foreign nationals may be reluctant to purchase life insurance policies in their country of citizenship, because corruption and lax regulation can subject their private information—including details of their assets and net worth—to exposure and exploitation. Life insurance in the U.S. is secure, confidential, and tightly regulated, and wealth holders can rest assured that their private information is protected.
- Customized Solutions Can Meet the Needs of Any Estate
There is no one-size-fits-all solution to estate management. Each wealth holder faces different obstacles and has unique needs. Fortunately, there is a multitude of products and services in U.S. life insurance that can provide a customized solution to the demands of any estate.
Resident and Non-Resident Aliens in the U.S. are subject to a complicated system of tax rules that can make settling their estates difficult if they’re not adequately prepared. Many foreign national wealth holders are not aware of their tax exposure. For this reason, it is crucial for their advisors to examine their estate closely and carefully plan for its eventual transfer. Life insurance can play an important and beneficial role in this planning, and allow for the smooth and efficient transfer of an estate from one generation to the next.
CONTACT OUR TEAM ABOUT HOW WE CAN HELP YOU PREPARE FOR THE FUTURE
When affluent multigenerational families contemplate the transfer of their assets across generations, they find themselves caught in complex legal structures that unavoidably intertwine ownership and control. While these structures may help maximize and protect value, they also create “shared risks.” Recognizing and managing shared risks becomes critical to retaining, growing, and transferring wealth within families and between generations.
Risk management involves the active management of unknowns. In a family context, shared risks could include: unexpected and irresolvable disagreements; an unintended and disruptive divorce; an unforeseeable and alarming disability; as well as known or unavoidable events such as death. As families increase in size and diversity, the importance of managing shared risks also grows. Unknowns cannot be left to chance. Knowns have to be shared with understanding and transparency.
- Imagine the confusion among heirs when an estate owner becomes incapacitated or dies, having never completed a will or the essential ancillary documents.
- Consider the opportunities for misunderstandings if family members are unaware of changes in tax law that could impact shared ownership of assets.
- What if family members make estate planning decisions based on family information that has become incomplete, inconsistent, or outdated?
- How could the estate plan be executed if the liquidity required to fund buy-sell agreements, replace access to wealth for a non-family spouse, and pay transfer taxes hasn’t been accounted for and communicated?
- What happens to the transfer of assets if time horizons are inappropriate or out of sync among beneficiaries?
The belated recognition of shared risks can bring planning to a standstill and undermine family harmony. Why families fail to complete their planning can be explained with three words. From our experience, estate planning obstacles and missed opportunities are tied to the absence of clarity, confidence, and coordination.
- Clarity starts with agreed upon goals and objectives and thrives on communication and transparency.
- Confidence comes from informed decision-making aided by the knowledge and insight of advisors.
- Coordination depends on a comprehensive process without loose ends, uninformed and uninvolved family members, or confusion among advisors.
Maximizing, protecting, and transferring family wealth includes the active management of shared risks. We have developed specific tools and processes to achieve clarity, confidence and coordination, so that shared risks can be identified, prioritized, and then mitigated by applying appropriate strategies. The need for this planning prior to real-life triggering events cannot be overstated.
If you would like more information on this topic or other life insurance planning topics, please contact Carolyn Smith:
Carolyn J. Smith
Texas Financial Partners, Senior Director
The Origin of Our Client Continuity Merger
When Texas Financial Partners came together in 2015, we came up with a model that emphasized continuity of service. We called it a client continuity merger, and as far as we know, it’s never been done before.
When I entered the life insurance business nearly four decades ago, for the first year I was an agent representing an insurance company. The company valued me for selling their products, but my clients valued my knowledge and experience. They trusted my ability to hear their concerns and develop effective life insurance solutions. I preferred sitting on my clients’ side of the table—and many colleagues across the industry had the same feeling.
That change in values led away from the agency model and gave rise to an independent business owner model. This new model allowed our firms to develop customized resources and services, delivered with objectivity, integrity, and professionalism. However, it also meant that clients were dependent on one service provider to look after their needs.
Even though I still love this business and don’t plan to leave it, the one hitch with independence is: what happens to clients when you do leave—voluntarily or involuntarily? We don’t want our clients to have any doubts about their access to advice and service. Texas Financial Partners is a significant development because it helps solve that problem.
Commitment to Continuity of Service
Many experienced and knowledgeable life insurance advisors are facing the challenge of preparing their clients for when they leave the business. They expected to bring in a talented younger partner to take over, but that takes time and attention. Suddenly it’s too late. Selling firms to other like firms or to outside buyers rarely works out. We can’t just close our doors and walk away, but those were the choices until now.
Our client continuity merger brings together prominent life insurance advisory firms that agree to preserve high standards of client service when transitions occur and to develop younger directors who can extend our client relationship commitments for generations. We’ve been pleased to see a wave of strong positive reactions among clients and advisors. It shows how big a concern the inevitable departure of trusted advisors becomes, and our strategy takes that weight off client shoulders.
How A Continuity Merger Maintains Client Services, Even When Advisors Leave
Nothing says advisors have to prepare for their exit from the industry, some just lock the doors and walk away. Without a client continuity plan insurance companies redistribute the client information among younger agents—not for client service but to create sales opportunities. Client concerns go to voicemail.
That may work in some market segments, but not the top tier where complex multigenerational estate plans, family business plans and philanthropic plans rely on life insurance funding. We don’t simply work with our clients, but we maintain long-term relationships with family advisors, attorneys, CPAs, family business managers and so forth. Our clients expect and trust us to always be on top of what needs to be done. When my partners and I took those entrepreneurial steps decades ago, we accepted that responsibility. Now our intentions have to become reality. That’s Texas Financial Partners’ motivation.
Family Stewardship over Generations
Continuity of service translates to stewardship across the generations. For example, I began working with a Texas family enterprise years ago that is now a large successful company involving three generations. We worked closely with all three and became the bridge between them. Our next-generation advisors can keep extending the bridge.
To understand the importance of multigenerational stewardship, I like to think of our work as that of a football coach. The first generation [or G1] wealth holder is like the quarterback, hoping to pass wealth down through the generations, just like the quarterback passes the ball to his receivers. But if the coach is only coaching the quarterback, there’s no guarantee that the receivers will be able to stick to the game plan. The ball might fail to advance, or be lost altogether.
It’s easy for G1 advisors to only coach the quarterback, and not the receivers. It can be hard for them to relate to G2 or G3 family members, or to maintain a consistent financial strategy after wealth has been passed along from the G1 wealth holder. In order for effective decisions to be made, there must be clarity of goals and objectives. If the goals and intentions of G1 are lost, they are hard to recreate. G1’s solid plan can fracture, dissolving family harmony.
TFP has a unique process to support family stewardship over generations. More than a philosophy or psychology, it supports effective decision-making and execution. That’s where our continuous attention and advice pays off.
Texas Financial Partners’ client continuity merger represents a dynamic shift toward long-term service stability in family financial planning. Our model of collaborative expertise provides careful service to its clients now, and into the future. Even as things change over time, families can count on TFP to provide the same depth of service.
To contact Todd:
Caption: Malinda Perryman and Jamie Langenbrunner
Texas Financial Partners staff member Malinda Perryman is an avid hockey fan and a Dallas Stars season ticket holder since 1996. In September of last year, she signed up for a group meet and greet with her favorite player, Jamie Langenbrunner, a retired member of the Dallas Stars and former Olympic team captain. In January, however, Malinda was diagnosed with cancer, and she chose to schedule her chemotherapy sessions around the meet and greet. In appreciation of her commitment as a fan, the Dallas Stars arranged for a private meeting between Langenbrunner and Malinda before a Stars match at American Airlines Center.
Caption: Perryman and Langenbrunner embrace in a welcoming hug.
Caption: Perryman with Langenburnner (left) and hall-of-famer Joe Nieuwendyk in the Dallas Stars alumn suite.
At the meeting, Malinda was able to talk to Langenbrunner about her ongoing treatment and their shared love of hockey. Langenbrunner cheerfully autographed a Dallas Stars jersey for her, as well as a banner of himself that previously hung in Reunion Arena, which Malinda purchased at a silent auction when the stars moved to American Airlines Center. The moment was captured on video and shared by the Dallas Stars. After the meeting, Malinda watched the game with Langenbrunner and other former Stars players in the alumni suite at American Airlines Center.
Caption: A Langenbrunner signed jersey for Perryman
Caption: Perryman poses with Langenbrunner, who signed a banner of himself that Perryman had bought at auction.
The meeting was made possible in part by the NHL’s Hockey Fights Cancer initiative, which supports fans and families who are living with and moving past cancer.
After the meeting, Malinda reflected on how much it meant to talk to a genuine hero of the ice in person. “Jamie Langenbrunner has been my favorite player since he was a rookie with the Stars. His dedication to the team was evident in the way he was willing to play whatever position the coach asked of him. He gave up personal goals for the good of the team. I also see this same attitude in my fellow staff members with Texas Financial Partners.”
Late last year, Texas Financial Partners was pleased to host a private meeting with United States Senator John Cornyn, the senior senator from Texas. Among those in attendance were Todd S. Healy, Carolyn J. Smith, AALU team members, and other members from the life insurance community.
We were fortunate to speak with Senator Cornyn, who sits on the Senate Finance Committee, just before the passage of the most recent tax reform bill. His insights into the bill’s provisions, as well as the process behind crafting it, will help TFP to guide our clients through this major tax policy overhaul.
New Tax Bill Presents Element of Uncertainty
One area of concern about the tax bill was its potential to create uncertainty.
“When Senator Cornyn recently visited our office, he had some very insightful comments for us,” noted Todd Healy. “One major point was the fact that all significant tax bills, that have survived the passage of time, were done on a bipartisan basis. That gave both parties an interest in making the changes work. This recent bill, as we all know, was done without any Democratic support, and will, in all likelihood, be subject to a unilateral change when the Democrats get back in control. That is something for all of us to keep in mind as we try to anticipate and plan for the future.”
This uncertainty does not merely affect individual wealth holders. Many of TFP’s clients who will be impacted by the bill also run family-held businesses, and any changes to their financial planning will have a ripple effect on their employees, partners, and anyone else who is financially connected to them.
Uncertainty in policy could be a hindrance to families who are trying to make thoughtful decisions for their financial future, and it could affect anyone who does business with them.
Pictured: Todd S. Healy, Carolyn J. Smith, and Senator John Cornyn
Senator Cornyn Heard Our Concerns
TFP’s meeting with Senator Cornyn presented a unique opportunity to represent our clients’ concerns to a top-level policy maker. Moreover, coming as it did on the cusp of the bill’s passing, the conversation offered important insights into public policy changes as they were being negotiated.
“What impressed me most was how engaged he was,” said Carolyn Smith, TFP director, who was in attendance. “It was clear that our concerns resonated with him, and he assured us he would take them back [to Washington] with him.”
For Todd Healy, this was the second time talking with Senator Cornyn. Todd spoke with the senator last year, during an exclusive meeting at Cornyn’s Washington, D.C. office. He described the meeting as an incredible honor, and was impressed by Senator Cornyn’s consistency and commitment to helping business owners. It was clear there was a sense of mutual respect between them.
Meeting at TFP with Senator Cornyn, Carolyn Smith, Todd Healy, ALU team members, and other members from the life insurance community
TFP Strives for Stability in an Uncertain Environment
The new tax bill makes substantial changes to financial policy in the U.S., and more changes are likely to come. Though uncertainty in policy can affect planning at every level, Texas Financial Partners will continue to represent our clients’ interests to policy makers. Additionally, we will continue to anticipate future policy changes, and to help our clients plan for them.
Why Study Groups and Why We Participate
Our industry is constantly facing changes: new tax plans; fiduciary regulations; technology and healthcare advancements; and product changes are some of the things that impact how we continue to serve our clients. At Texas Financial Partners (TFP), one of the ways we keep ahead of the curve is having staff members participate in national industry study groups.
These invitation-only groups facilitate collaboration among staff members from similar firms across the country. We attend two in-person meetings per year, as well as monthly calls, to share and exchange ideas and compare practices. Members share the responsibility of planning and developing program content for our calls and in-person meetings. Study groups increase our knowledge and help us maintain a leadership role in the industry. As a group, we work to develop standards and best practices to maximize effectiveness at our jobs.
We encourage personal and professional development because this allows us to provide the highest quality service to our clients and their advisors. Industry study groups are another way we are investing in developing the best staff possible.
The Chartered Advisor in Philanthropy® designation, or CAP®, is administered by The American College in Bryn Mawr, PA, as a graduate-level program. Founded in 1927, The American College is the nation’s leading educator of professionals in the insurance and financial services industry.
The required course of study includes charitable tax strategies, tools and techniques, charitable plans within the context of estate and financial planning, and the management of gift plans in a nonprofit context.
Texas Financial Partners’ Support of CAP®
TFP Principal, Todd S. Healy, and Director, Carolyn J. Smith, both hold the CAP® designation. Philanthropic giving is an important part of many of our clients’ plans, and this designation gives us an added level of insight and knowledge into maximizing the benefit of philanthropy to all parties.
Todd has been involved with the CAP® program for a number of years. We believe in the importance of this knowledge to the industry and our clients, and to help promote it, in 2010 TFP, organized annual study groups in Texas to help participants in the program maximize their learning and expand their professional network.
While it remains a self-study program at its core, members of our study groups benefit from bi-weekly discussions with the group to go over the material and how it can be applied to current client situations.
Participation in our larger industry and its advancement ultimately allows us to better serve our clients and thus it is key to TFP’s values.
What a CAP® Designee Can Do for You
A CAP® (Chartered Advisor in Philanthropy®) is qualified to help you, as a successful and caring person, create a gift plan within your overall financial or estate plan. Your plan will embody your ideals, as well as your traditional goals and objectives. The plan will have a positive impact on your family and the causes you care about, as well as be effective and efficient financially.
For more information about the program, please visit The American College’s website.
Todd S. Healy and Phil Cubeta
The American College Alumni Association named Todd S. Healy, co-founder and principal of Texas Financial Partners, Alumnus of the Month for August 2017.
“Having served in the profession since 1977, he is a leading wealth counselor coordinating the business and estate planning process for high net worth clients. He specializes in assisting individuals, family groups, and public and closely held business owners with their insurance and estate planning, business succession planning, executive benefits, and charitable giving strategies. Todd also is the creator of The Values Perpetuator Process© that enables individuals to identify and pass on to future generations those personal financial values that have been most important to them.”
The American College Alumni Association serves over 60,000 members by continuing the College’s tradition of improving education through shared knowledge and experience. Dedicated to rewarding professional success, increasing industry awareness and promoting the achievements of their graduates, the Association has named an Alumnus of the Month since 2010.
Read the full article on The American College Alumni Association website here.
To contact Todd:
We’ve got the Traditionalists, the Baby Boomers, Generation X, and the Millennials — four generations all in adulthood. And there’s a start-up generation ten years old called Generation Z that is yet to be defined. For the first time in history, five very different points of view are bumping up against each other with different preferences, different motivations, different aspirations, different values, and different reactions to change.
The challenge to affluent families and family business founders who are making multigenerational financial decisions today is how to sustain a family heritage across all these boundaries?
One place to start is to learn what separates each generation—how we think, what we need and want, why we choose this over that. Once we level the generational landscape, we can explore individual personalities and relationships and discover the common ground we share. Here are some factors that show each generation’s unique impact on multigenerational planning.
The Generations Defined*
Centennials or Gen Z: Born 1995 – 2010
Millennials or Gen Y: Born 1980 -1994
Generation X: Born 1965 – 1979
Baby Boomers: Born 1946 – 1964
Traditionalists: Born 1928 -1945
*McCrindle Research 2012 – View entire Generations Defined chart by McCrindle Research here.
Named the Silent Generation, because all they were asked to endure, they so seldom complained.
- 55 million Americans age 70+
- Values based on realism, stoicism, patience, perseverance, personal duty
- Cultural messages from the Great Depression, WWII, Cold War, communist menace, corporatization, suburbanization
- Concerns for retirement lifestyle, surviving spouse security, family harmony, charity
The WWII generation loves saving, abhors waste, expects sacrifice, and respects tradition and structure. However, because the male provider and female nurturer roles are so ingrained for this generation, many surviving female spouses are not sure how and when to work with a financial advisor. With the prosperity of five generations potentially at stake, continuity of advice and service becomes critical to this generation.
Called the Baby Boom Generation, because big happy families gave their postwar parents a way to put world war behind them.
- 75 million Americans age 50 to 70
- Cultural messages of childhood stability, 60’s rebellion, Viet Nam War, racial and gender unrest, television addiction, entrepreneurism
- Values based on idealism, individualism, resilience, empiricism, personal conviction
- Concerns for financial independence, confiscatory taxation, unearned inheritance, and effective use of their social capital
Contrary to their reputation as rebels and change agents, Boomers now appreciate the value of planning to gain control of financial independence. Their history of career changes, marital splits, and blended families makes planning complex, so they want advice and guidance. However, their history of self-assurance can make the decision-making process more difficult.
Labeled Generation X, because feeling left out made them turn inward and enjoy being hard to figure.
- 65 million Americans age 30 to 50
- Cultural memes of latchkey childhood, lowered expectations, Sesame Street, video arcades, AIDS, personal computers, Internet
- Values based on skepticism, pluralism, autonomy, competency, personal commitment
- Concerns for financial self-reliance, retirement funding, education expenses, lifestyle compromises
GenXers learned to exercise caution and seek predictability in financial planning. They are careful contingency planners with strong distrust of institutional thinking. Reliance on committed and trusted personal advisors is matched by a prove-it attitude and down-to-earth decision-making.
Tagged the Millennials, because of their ease in embracing 21st Century change without glancing back.
- 83 million Americans age 10 to 30
- Cultural messages that said everyone is special, anything is possible, and showing up is as good as winning versus the threats of unrelenting terrorism and permanent economic problems. The certainty they totally own is that technology can solve nearly everything.
- Values based on pragmatism, antiauthoritarianism, activism, collaboration, personal freedom
- Concerns about the decline of prosperity, the burden of debt, untrustworthy institutions, and failure to stay in front of change
In spite of witnessing incredible overnight success by young start-up heroes and entertainment superstars, Millennials diligently calculate and control their own financial progress. They trust research and ratings more than advice. They have reinvented human interaction from talking to emailing to texting to messaging to whatever is next.
Maybe one generation always finds itself at odds with the one ahead and nervous about the one behind. Old school multigenerational planning used to look at two generations—one making decisions while making it hard for the other to change anything.
In the past several decades, the concept of legacy has made affluent families pay more attention to the role all the generations have in the stewardship of family wealth. It’s time to clear the generational fog and begin collaborating to not only sustain the heritage but expand it generation by generation by embracing the differences.
Additional input from Terry White, IdeaTransfer
To contact Carolyn:
This Consume & Converse event covered two important topics:
Communication Techniques Across the Ages with Dave Gunby
In our business, ensuring that communication has taken place is critical. Without it, family fortunes can be gained or lost! George Bernard Shaw said, “The single biggest problem in communication is the illusion that it has taken place.” Working with Millennials presents specific challenges which can be overcome with excellent communication. In this discussion we learned to customize our communication for success with any generation.
We discussed using critical motivators for different generations; crafting your message for maximum impact; using intentional body language to increase your persuasiveness; capitalizing on your voice; and creating visuals to drive your points home.
Dealing with Millennials from a Millennial’s Perspective with Rogers Healy
A Millennial himself, Rogers Healy provided insight into communication & negotiation with Millennials based on his successful track record selling to others of his generation. He shared that his experience has been that Millennials rely on internet searches far more than face-to-face communication for gathering information.
Rogers has years of success working with this generation and offered helpful tips and strategies for fostering better communication to work more effectively with this new generation of clients.
Dave Gunby has coached and trained thousands to be more creative, learn faster, lead more effectively and present more powerfully and persuasively. He is the owner of Mindimensions, a leadership training and facilitation company dedicated to assisting others to use their leadership abilities to their fullest.
Dave has helped thousands develop leadership skills in the areas of presentation skills, creativity, accelerated learning, Idea Mapping (an organizing and memory tool), facilitation techniques, and problem solving. He pairs his sense of humor with deep expertise to deliver powerful and enjoyable learning experiences.
Rogers Healy is one of Dallas Fort-Worth’s most influential real estate professionals. Starting his career while he was still in college, he rapidly progressed to the upper echelons of his profession. In 2009, Healy was named one of the Top 30 Realtors® under the age of 30 in the country by Realtor® magazine. The following year the Dallas Business Journal named his company, Rogers Healy and Associates (RHA), one of the “Best Places to Work.” Both Healy and his businesses achieve widespread recognition for their success and quality work on a regular basis.
View the presentation notes: Communication Techniques Across the Ages
To contact our guest speakers:
At our February Consume & Converse, Dr. Otis Baskin shared his experience on management and governance/decision-making issues in family businesses. Otis has worked with family-owned businesses in the United States and around the world for the past 20 years.
Joining Otis was Rory Siefer, owner of Epic Bound, and Greg Vaughn, founder of The Video Biography Company. Rory creates visually stunning coffee-table books that combine fascinating history with jaw-dropping artwork to make the past come alive! Greg is an Emmy Award Winning producer who bridges generations with his amazing video biographies.
Dr. Otis Baskin is a consultant with The Family Business Consulting Group. He has served as an advisor to senior management, owners, and boards for public and private organizations in the United States, Asia, Europe, Latin America, and the Middle East. His primary expertise is in helping business-owning families develop plans for leadership succession (continuity), strategies for growth, and family ownership/governance structures.
Otis is Emeritus Professor of Management at The George L. Graziadio School of Business and Management at Pepperdine University, where he served as dean from 1995 to 2001. His academic career spans more than 25 years, including positions as dean of the Fogelman College of Business and Economics at The University of Memphis; director of the School of Management at Arizona State University, West Campus; coordinator of the management faculty at the University of Houston – Clear Lake; visiting scholar in Family Business at Oxford University, England, and visiting professor for Family Business at ITESM (Monterrey Tech), Mexico.
He has authored seven books, including Effective Leadership in Family Business, co-authored with Craig Aronoff, in addition to numerous academic articles and published papers in the areas of organizational communication and family business.
View the presentation: Family Values Drive Enterprising Families
To contact our guest speakers:
This Consume & Converse event discussed Protecting Your Assets – People and Property. Speaker Kevin Mellott* covered three specific security topics:
- Vetting – Kevin discussed the difference between a background check and a background investigation, including five key points that you must know about valid and reliable investigations before you make your decision on hiring personnel or investing in a business.
- Cybersecurity – Three direct attacks that compromise the majority of significant business losses (Business Email Compromise, Ransomware, and Man in the Middle Attacks).
- Personal Safety Threats – Responding to a violent attack against you or your family in a direct confrontation from a violent person and during a home invasion.
Kevin Mellott has been protecting people and their property from loss for over 40 years. His career history spans both working in public safety agencies and in the private sector.
Kevin has served as a firefighter/paramedic, law enforcement officer, investigator, special rescue operations instructor and responder, and as an intelligence analyst. His firm, ERASE Enterprises, has been providing security and safety services to High and Ultra-High Net Worth clients for over 27 years. ERASE works in both the domestic and international environments and specializes in personal protection, investigations, cybersecurity, consulting, and site services.
Kevin is a regular contributor for Fox News, ABC News, CBS News, Clear Channel, and iHeart Radio for issues ranging from terrorism to global security concerns.
View the presentation: Protecting Your Assets – People and Property
Kevin D. Mellott*
ERASE Enterprises, President
*Unfortunately, since this presentation was posted, Mr. Mellot unexpectedly passed away.
At this exclusive event, Phil Cubeta helped us think through the dynamics associated with Philanthropic Planning for Closely Held Business Owners in Transition from Success to Significance.
In our facilitated peer to peer conversation we discussed a particular case study we called, “Meet the Rileys” How would you plan for the Rileys, age 70 and 69 with an S-Corporation, worth $18MM, who say to you that they want to leave 25% of their $20MM estate to charity, 75% to heirs, and zero to the IRS? What are the estate tax, income tax, business exit, and family issues that would come to your mind? What skill sets other than your own might be required? What role would you play in convening a team? Who do you know like the Rileys? Do you see opportunities to do more with them in their legacy planning?
These questions and more spurred an informative and dynamic discussion of the factors to consider in properly advising a family such as the Rileys.
Philip Cubeta, MSFS, CLU®, ChFC®, CAP®, is the Sallie B. and William B. Wallace Chair in Philanthropy at The American College of Financial Services where he directs and teaches the Chartered Advisor in Philanthropy® (CAP®) curriculum.
Essays by Professor Cubeta on philanthropy have appeared in Nonprofit Quarterly; Tracy Gary’s Inspired Legacies (Wiley and Sons: 2008); H. Peter Karoff, The World We Want: New Dimensions in Philanthropy and Social Change (Altimira Press: 2007); and Amy Kass, Doing Well Doing Good: Readings for Thoughtful Philanthropists (Indiana University Press: 2008). He has been quoted in, or been the subject of, articles in The New York Times, The Journal of Gift Planning, Lifestyles Magazine, Financial Planning, and the Financial Times.
To contact our guest speaker:
Philip Cubeta, MSFS, CLU, ChFC, CAP
The American College of Financial Services, Sallie B. and William B. Wallace Chair in Philanthropy
This informative event featured a good friend and trusted resource to TFP, Kristin O. Bulat, as well as former TFP Director, Hector M. Frietze, as we discussed two main topics:
- Premium Financing of Life Insurance – Strategies and Vocabulary for the High Net Worth and Ultra High Net Worth Client – Kristin lead this discussion drawing on her vast expertise.
- Risk Management Planning for the International Marketplace – both Kristin and Hector lead this discussion.
Kristin O. Bulat is the SVP of Strategic Resources at National Financial Partners. With over a decade of legal experience working in the business and estate planning with a specialty in life insurance product development she brought a unique perspective to our discussion around premium financing.
Prior to joining the Insurance Product Development Group at John Hancock, Kristin worked as an Advanced Markets Attorney, providing tax analysis and sophisticated case design to brokers, producers, underwritings, and legal advisors. Kristin has particular expertise in the areas of split dollar agreements, long-term care insurance, and the use of life insurance in sophisticated estate planning and wealth transfer. Using this expertise, Kristin has frequently been published and has been asked to speak at many different venues.
Hector M. Frietze is a former TFP Director and Certified Public Accountant. He has experience working as a corporate and international tax advisor, estate tax advisor, international executive and expatriate advisor, and was formerly manager, International Tax Services Mexico City. His depth of expertise and deeply collaborative approach to advising bring great value to the TFP team.
To contact our guest speakers:
Hector M. Frietze, CPA
Texas Financial Partners, Director
PartnersFinancial was founded in 1987 by an elite group of farsighted life insurance advisors, including two principals of Texas Financial Partners, Todd Healy and myself. The goal was to unite a national client-focused community of select, independent life insurance members dedicated to exceptionally high client relationship standards and premiere client service. As Chairman of the Board through PartnersFinancial’s formative years 1994-2001, we attempted to achieve that goal.
PartnersFinancial links core carriers and independent financial advisors through its national network, creating a connection that benefits everyone involved—members, their clients and advisors, and insurance companies. Its unique culture encourages idea-sharing, collaboration, innovation, leverage and objectivity.
- PartnersFinancial participates in each core carrier’s product development process, as well as advisory councils composed exclusively of PartnersFinancial members.
- PartnersFinancial enjoys the commitment of dedicated underwriting and service teams from its core carriers for negotiating the best pricing and resources for clients.
- The organization provides best-of-breed tools to help members increase their staff efficiency to support deeper client relationships and more efficient delivery of solutions.
- PartnersFinancial members share the ideas and innovation of the best and brightest in the industry, sharing this intellectual capital of its members freely among members through its study groups, regional, and national meetings.
Members gain access to a wider spectrum of products, services and support, all resulting in wider choice and informed objectivity that clients deserve. They have the added advantage of infrastructure and intellectual capital to help expand their competitive position and enhance their ability to better serve clients.
Most important, this institutional advantage does not diminish the advantages of our entrepreneurial independence.
To contact Buddy:
IdeaTransfer interviews Buddy Dike on the evolution of the insurance industry, client service in the future and moving forward with Texas Financial Partners.
Founder, Texas Financial Partners
Founder, The Dike Company
IT. Buddy, your perspective on the insurance industry covers nearly six decades of change. Describe the most important turning points for your business.
Buddy. My first clients were my contemporaries. We were eagerly developing our own businesses with all the excitement that comes start-ups. As we grew I wanted to be able to fill all their risk management and employee benefit needs, but big eastern mutual life insurance companies weren’t supportive the diversified firm I envisioned. I was forced into independence, and that was a great turning point.
It led to working with public companies and then being acquired by one of the largest international consulting firms. But I had no intention of retiring. I wanted to work with affluent families and the businesses they owned, helping them protect their wealth and preserve their businesses for future generations. And they appreciated the boutique approach and the commitment to a higher standard of personal service.
IT. Describe the industry concerns about how to sustain that client service in the future.
Buddy. Not enough concern to solve the problem until now. I was talking with a banker and longtime friend. Many of his clients have become my clients and vice versa. I told him I sometimes think about hanging it up in a few years, and he told me, No, you can’t! He knew what that could mean to our mutual clients.
My firm plays a critical role tracking our clients’ policies, so that the complex planning decisions they made remain secure. Very few agents could match our analysis resources and our experience. And while insurance companies send our clients reports, we interpret the data so they can make informed decisions. Accountants and trustees may be able to analyze the data, but the ability to identify, compare, and implement alternative strategies is outside their field. And who helps the next generation once they take over? Fortunately, we are confident we have solved that problem.
IT. I’m guessing this is the next turning point for you—founding Texas Financial Partners?
Buddy. That’s right. We call Texas Financial Partners a client continuity merger. The merger is designed to fill the gaps proactively for the continuity of our client relationships.
Our partners are all seasoned life insurance advisors in the state of Texas. We know each other well. We have the same kinds of clients. We are merging our knowledge and experience of sophisticated life insurance planning and our service capabilities to support them for the long term. Three different generations are represented in Texas Financial Partners, so the longevity of the firm will always surpass the longevity of the partners.
IT. Texas Financial Partners and client continuity merger are new concepts. How have clients and advisors reacted so far?
It’s not that new to us. We already have two emeritus partners in the firm, so the transfer of service responsibility has been tested with enthusiastic responses from clients and advisors. It comes down to a single goal that no one has effectively addressed.
The estate and business planning process can be complex and emotional, and when clients make their decisions they feel a sense of confidence about financial security and family harmony. However, the planning process doesn’t end. There will always be more decisions over time and among the generations.
All the advisors who contribute to the planning process know the value of their roles and are committed to ongoing service. But a “forever” commitment only works if all the contingencies are resolved. We believe Texas Financial Partners is a great answer to that concern.
IdeaTransfer is an independent firm with three decades of experience consulting with advisors, advisors groups, and financial institutions.
To contact Buddy:
IdeaTransfer interviews Gary Stallard on the relationship between client and advisor, the importance of objectivity and the reaction to Texas Financial Partners.
Founder, Texas Financial Partners
Founder, Stallard Financial Services
IT. Clients often describe relationships with trusted advisors in terms of peace of mind. What does the relationship mean from your side?
Gary. Client relationships come in all shapes and sizes. I am fortunate to have very long and very personal relationships with many of my clients. I get see the impact my work has on their business, family, and philanthropic goals. We all appreciate they are doing the right thing today and for generations to come.
I am also engaged by client advisors on behalf of their clients to analyze problems and create solutions. I might engage personally with the family or the business, but satisfaction comes from bringing a fresh perspective and alternatives to a team of brilliant advisors. We all appreciate increasing client benefits, lowering costs, and achieving a higher internal rate of return.
IT. If you could name one defining component you bring to the table for clients and advisors, what would choose?
Gary. No question the most important element I offer is objectivity. Objectivity means I won’t hesitate to challenge assumptions or conclusions and that my advice will always be sound and reliable. And by the way, objectivity means I don’t feel I need or want to sell a life insurance policy to have a successful client relationship. It is too common in this industry for agents to analyze policies and find reasons to replace them with “more efficient” alternatives.
Client may want to save money today, but they don’t realize that they may lose valuable guarantees. They see the new proposal projecting whatever they give up today will be earned again in a few years. Meanwhile the agent enjoys a commission from the sale that didn’t have to occur. Objectivity requires that you first try to achieve efficiencies by working with the current insurer on the client’s behalf. There is no monetary reward for that, only the reward that your integrity is intact.
IT. Life insurance solutions are uniquely long term, addressing events that may not occur for decades. Can peace of mind last that long?
Gary. Here’s why Texas Financial Partners is so important to clients and advisors. The planning process we go through for affluent families and the businesses they own can be very complex. At the end clients experience a sense of relief—now they have clarity, they feel confidence, they see a coordinated solution for the future.
However, after a few years pass they won’t be able to articulate how their life insurance policies apply to specific components of the plan. That’s OK because they know I’m monitoring the policies and the plan, and I make sure the plan responds to change.
But what happens if for any reason—planned or unplanned—I can’t continue to work for decades? And what happens when the next generation takes ownership of this multigenerational plan—will it adapt or fall apart? Texas Financial Partners answers that challenge with our client continuity merger. It’s provides a systematic way to seamlessly meet each partner’s commitment to clients when these transitions happen.
IT. You have introduced Texas Financial Partners’ client continuity strategy to many advisor colleagues and clients. What is the reaction?
Gary. Clients are relieved to get this issue resolved, because it has been given lip service for years. Advisors take particular interest in Texas Financial Partners, because we are all in the same boat. We can’t claim to advise our clients how to plan for uncertainties and leave our own longevity is one of the uncertainties. Our client continuity merger is simply doing for ourselves what we do for our clients.
IdeaTransfer is an independent firm with three decades of experience consulting with advisors, advisors groups, and financial institutions.
To contact Gary:
Part One. Why should these survey results lead us to conclude that family-owned businesses are in trouble?
- According to a 2010 research report on family business issued by the University of Vermont Business School, the average lifespan of a US family-owned business is 24 years.
- Business Week reported a year later that 40% of family-owned businesses become second-generation businesses, while 13% pass to a third generation and 3% to a fourth.
- In the Jan-2012 Harvard Business Review the journal reported 70% of family-owned businesses fail or are sold before the second generation gets a chance to take over, while 10% remain privately held companies for the third generation to lead.
First, the 24-year average business lifespan actually sounds impressive, given the acceleration of change business owners have had to deal with over the past several decades. Say the founders were age 25-35, twenty-four years is about when they could seriously consider their children taking over the business, and according to these stats 40% achieve that goal.
Are we supposed to conclude the other 60% missed the family business boat? Maybe they sold their companies to outsiders for admirable multiples and started something new. Maybe they sold to the management team with a note that is funding their retirement. Maybe their kids found successful careers on their own while the founders were financially successful enough outside the business to retire comfortably.
Similarly, are the 87% that failed to make it to the third generation evidence of second generation failure? Maybe G2 developed the business so successfully they sold to the highest bidder. Maybe they went public. Finally, what can we make of this number 70%—family businesses that failed to give the second generation a chance?
Sure, many might have folded in the first few years, but from the other data we know 20% of those businesses survived beyond the average 24 years giving them plenty of time to consider family ownership transfer.
Statistics that downgrade the success of American privately owned businesses sound slick at best—self-serving if they come from consulting institutions who have a stake in solving the “problem”. Here’s an idea. Compare the founder longevity statistics to public company CEOs, whose average tenure is six years! Now that’s failure.
Part Two. Who really cares why so few so few business reach G4?
Keep your attention getting your business ready for G2. Here are some ideas.
1. Give Newton’s First Law of Motion a business twist.
Let’s say Isaac Newton concluded that, “A business at rest will remain at rest unless acted on by an unbalanced force. A business in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force.”
Don’t you feel surrounded by “unbalanced forces”—not just acting on you but relentlessly forcing you to adapt. New technologies, new marketing strategies, new distribution models, new regulatory pressures, consumer trends, employee trends, compensation trends, global competition trends—unbalanced forces never leave you alone.
How does this law affect founders bringing successors into the business? The founder-successor is a game-changer force and totally unbalanced. Welcome it, because without unbalanced forces, business physics says you either stay at rest (death) or forever move in the same direction at the same speed (dying). When you bring G2 into your business, you bring fresh eyes and an adaptor mindset.
Most owners choose between two training models—sink-or-swim versus when-I-say-you’re-ready. Both are bad. Do you really want a clone who repeats your mistakes? Do you really want a dependent you do all the thinking for?
You want someone who understands the why-how-what that got the business to where it is today, someone who respects the customer desires that drive the company’s mission and the people and knowledge and skills that execute that mission, and most of all someone always thinking what-if. Not an entrepreneur necessarily—but someone who can master and even break Newton’s law.
2. Founder and Successor are not job titles.
“Founder” is historical. It already happened. It can’t happen twice in the same company. It’s great to have the title because it starts the story of the company from the garage to the corner office, from a few loyal employees to a large employee family to a thriving company culture, and from a few willing customers to international markets.
But the ending of the story requires a different description. Most CEOs would be thrilled to wind down their careers working half time at full salary and perks. They want to do everything they love about the job but pass along all the monotony and grief. Sounds well-deserved, but it’s just not productive or fair. The company needs more CEO energy not less to prepare for the future.
The right role is Ambassador, building profitable relationships and networks, promoting the company brand and enhancing its reputation. That may be full time work, but it qualifies as what most CEOs like about being CEOs. It is also a role critical to the launch of next-generation ownership.
Meanwhile, “Successor” hardly describes the expectations for next-generation ownership on either side. It implies someone who will placidly continue the policies of past leaders or someone eager to put his own stamp on everything. Companies run by clones or rebels are throwing away a great opportunity. Not should company founders even wish for entrepreneurial passion from successors. The passion to value is adaptability—recognizing and responding to the challenges presented by an evolving business world. Successors should be Developers building on the strengths of the company and the shortcomings of competitors. They honor the past by creating the future.
3. Developers and Ambassadors have to meet on bridges.
Sometimes bridges are solid and easy to cross. Other sway over a chasm in the wind. It’s easy to pass each other by on the solid bridge. It’s hard to get together on the flimsy one. But you have to meet half way, one bridge at a time. Here are three.
Developers have to master the products, services, and processes that made the business successful. There are no shortcuts. The first generation spends most of a lifetime converting ideas into action and creating things people want to buy. The second generation has an urge to innovate out of old school ways. Both sides have to appreciate the other’s thinking and respect equally past results and future potential.
Ambassadors have to share control long before turning over control. Leadership is teachable, but hard to impart without experiencing it directly, so give Developers projects that call for the real thing. Developers must develop soft eyes keeping keen awareness on the surrounding context of every issue while examining the facts right in front of them. The need to understand the shortcomings of fear and loyalty as motivators and dig deeper to achieve persuasion. They need to take small but significant risks, with resolve but without having to explain along the way.
Developers and Ambassadors alike are required to surrender their baggage before stepping on the bridge. Of course there will be misunderstandings and conflicts throughout the transition. Only, make sure they aren’t simply kneejerk reactions from family issues that need closure. And not misguided assumptions and preconceptions of two generations getting in the way of one-to-one communication.
To contact W. P.:
IdeaTransfer interviews Gray Mills on founding and growing his firm, learning the life insurance business and his future with Texas Financial Partners.
Founder, Texas Financial Partners
Founder, Mills Financial Group
IT. Tell us how you founded and grew your firm. Over the years, what do you think your clients have appreciated most from your work?
Gray. I was just out of college—no family business and no capital to feed my entrepreneurial ambition. However, I was interested in learning the life insurance business, thinking it would give me independence and build a business from nothing more than my own motivation and education. I found it very rewarding work, which in turn challenged me to steadily grow my business by finding ambitious and committed people who wanted to grow together.
I shouldn’t presume to know what it has meant to my clients, but many of my relationships go back decades. I hear the words trust and confidence a lot, and I am happy to have contributed to those feelings. I guess trust has to be a big factor—trust that the recommendations I make are in their best interests and the financial products I provide them pass the tests of objectivity and suitability.
IT. You talk of learning the life insurance business. How demanding was it to achieve your expertise in estate and business planning?
Gray. If you go back to the early days of my firm, the knowledge I needed was how to survive in a very competitive environment. But at the same time the life insurance industry is populated by knowledgeable and dedicated people who share with their colleagues. I was fortunate to know and learn from them, continually adding new knowledge as the industry evolved. I also earned my CLU designation from the American College.
Also there are numerous associations dedicated to spreading new ideas that I have been part of year after year. PartnersFinancial is a membership company I am part of—a subsidiary of National Financial Partners. My access to experts, analysts, institutions, and products is hard to match.
IT. Your planning process also integrates client advisors in numerous professions. How does that collaboration work?
Gray. Collaboration is absolutely necessary for our clients planning decisions. There are legal, tax, accounting, trust, and financial components to every sophisticated estate plan. All the representatives from these disciplines have to respect each other’s expertise and trust each other’s judgment. It comes down to credibility. If another professional advisor brings me into a client matter, I regard him as a partner. He knows I will be straight up with his client. The planning process is a gentleman’s calling in the best sense of the word.
IT. Where does Texas Financial Partners fit into your history and your future?
Gray. Life insurance industry is a service-based industry, and life insurance policies are designed to be serviced over several decades and across generations. There is a financial impact on the next generation of course but also a stewardship impact. Sadly, the traditional level of personal service offered by life insurance institutions has given way to technology and efficiencies, and I’m concerned about that direction.
Estate and business planning involve difficult personal and family decisions. Clients want to come away with that comfort and confidence I spoke of. Plus they want it to extend surviving spouses, children, grandchildren, and philanthropic interests. Texas Financial Partners is a merger on behalf of client continuity to preserve that higher standard of client care.
The relationships that come out of that process can be very personal, and I want to know a personal relationship will outlive me. That’s where Texas Financial Partners is focused. As partners we will share that permanent commitment to provide the services and advice our clients require.
IdeaTransfer is an independent firm with three decades of experience consulting with advisors, advisors groups, and financial institutions.
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IdeaTransfer interviews W. P. Richardson on family run businesses, generational conflict and the expectations of Texas Financial Partners.
Founder, Texas Financial Partners
Whitley Penn Financial Services
IT. Most of your clients are privately owned businesses. What led you to focus in that area?
WP. I came from a third generation family business. My grandfather started the company and eventually shared ownership with my mother and father. I assumed after graduating from TCU, I would take my place in the business. However, I quickly learned that problems come in two forms in a family business—business problems and family problems. We had both.
Our business problem was new competition with a better and well-capitalized model. But ahead of that were unsolvable family conflicts between G1 owning 51% and G2 at 49%. I opted out after one year for the life insurance industry, where I gained the planning knowledge and experience to actually solve these kinds of problems.
IT. Grim statistics of family business survival may be driven by external competition and internal conflicts, but is there more to plan for?
WP. Ironically, success creates its own set of problems. Many thriving businesses won’t have liquidity to survive the tax impact of ownership transfer. Lack of liquidity plagues Texas family businesses where wealth may be tied up in land, leaving the business as the only asset with a market for provide estate tax liquidity.
Even founders who sell outside the family seldom realize the financial and tax impact of the transaction. Owners have to plan well in advance for any transition, and heirs have to stay with the plan after they inherit to realize the full value. Unfortunately, founders get caught up working in the business and delay working on the business as a family asset.
An example of the power of working on the business came up recently when circumstances allowed the founder to take advantage of a lowered valuation on the company. Losing value my not be good news in a business. However, reduced stock value meant the owner could gift more stock to trusts established for the next generation. By removing these assets from the estate and purchasing life insurance to meet the tax liability, the business can be preserved and the full value pass to the next generations.
IT. Go back to generational conflict—how can G2 earn a voice in G1’s planning process?
WP. Parents like equality for their children. In mature family businesses the next generation is already settled in careers and lifestyles, and equality doesn’t apply. For example, children who are active in the business look forward to reinvesting profits for growth, while the inactive owners want to see some income from the asset. Sustaining family harmony across generations can be hard enough while parents are alive, so it’s discouraging to watch plans unravel after they are gone.
Strategies to equalize the value of inheritance without conflict are integral to the plan, so I favor family meetings during the planning process and continuing when assets pass across generations. The next generation may not know what the transfer of the business and family assets can mean to them, because wealthy parents often avoid financial disclosure for security and psychological reasons. But equally important, a multigenerational plan is effective only if the next generation adheres to it, and the meetings help align everyone’s intentions and expectations.
IT. Isn’t it Texas Financial Partners intention and expectation to assure that multigenerational harmony?
WP. Exactly, because the planning process and the financial strategies to fund tax liabilities and asset equalization create a long term commitment to provide clients advice and service. We refer to Texas Financial Partners as a client continuity merger dedicated to preserving the quality of that advice and service across generations.
To contact W. P.:
The Distinguished Achievement Award was created by Preston Hotchkis, who was a member of Pacific Life’s Board of Directors from 1945 to 1970. The annual award recognizes the life insurance producer who best personifies Pacific Life’s standard of excellence through high sales production, dedication to the community, and overall achievement. Get to know the winner of Pacific Life’s 2015 Preston Hotchkis Distinguished Achievement Award.
A.R. “Buddy” Dike believes in teamwork, service, and good old-fashioned sweat equity. The roots of his beliefs were evident in high school, where his talents on the football field led to multiple scholarship offers.
After his father’s career in the meatpacking industry moved the family from Chicago, Illinois to San Antonio, Texas, Dike accepted an offer from Texas Christian University (TCU) in Fort Worth, Texas, where he played both fullback and linebacker. The athlete formed many indelible memories at TCU, including meeting his wife Sara and helping the school’s Horned Frogs defeat the Syracuse University Orangemen in the 1957 Cotton Bowl Classic. Dike remembers the game fondly both for his team’s 28-27 victory and for shattering his facemask tackling future Pro Football Hall of Famer Jim Brown.
Top to bottom: Marshall & Ben Dike, grandsons; Michael & Stephanie Dike, son & daughter-in-law; Jason & Susanne Dial, son-in-law & daughter; Ethan Dial & Sara Dial, grandchildren; David & Beth Dike, son & daughter-in-law; Ellen Dike & Taylor Dike, granddaughters; Buddy & Sara Dike; Audrey Dike, granddaughter.
LAUNCHING A CAREER
After graduating from TCU, Dike settled in Fort Worth where the tenacity he displayed in tackling challenges on the field served him well as he launched his career.
“Football taught me about perseverance,” Dike says. “You get knocked down, and you have to get right back up. You have to learn how to stay with it.”
This lesson served him well as he launched his career in life insurance with Connecticut Mutual Life Insurance Company, which had an office in Fort Worth. “My first year was tough. It was hard to get people to talk about life insurance,” Dike recalls. “They wanted to talk about football. But, I tried to make a game out of it, challenging myself to make more calls and more sales.”
Fortunately, Dike was able to use the topic of football to break the ice with potential customers and apply the sales concepts he learned from Connecticut Mutual to start building relationships and closing more deals.
Dike wanted to help the owners of small-to-medium-sized businesses by offering the protection of life insurance as well as property and casualty insurance. His entrepreneurial spirit led him to form The Dike Company in 1966. His commitment to client needs and expertise in the field helped the new business prosper.
“You treat people with respect and over time word gets out that you aren’t just selling policies to make money,” Dike explains. “You are selling policies to help people meet their goals.”
By 1985, Dike recognized the potential benefits of partnering with fellow insurance professionals and merged with other firms to form The Insurance Alliance. Their combined expertise and access to major insurance carriers helped the company succeed. Insurance Alliance was sold to Willis North America in 1991. Dike is also one of the founding members of National Financial Partners, which was taken public by Apollo, a private equity firm in 2003.
WORKING WITH PACIFIC LIFE
Dike’s relationship with Pacific Life began 27 years ago. “I started doing business with Pacific Life around 1988, and Pacific Life has been an exceptional company over that time,” says Dike. “As part of National Financial Partners, we have access to the top carriers in the country, but three things make Pacific Life stand out: its people, equitable treatment of existing policyowners, and innovative products.”
“The tax system is complex,” he says, “and as long as I can keep providing strategies to help my clients pass on what they’ve worked a lifetime to achieve, I’ll keep coming to the office.”
Left to right: Jason & Susanne Dial, daughter & son-in-law; David & Beth Dike, son & daughter-in-law; Stephanie & Michael Dike, daughter-in-law & son; Sara & Buddy Dike.
COMMITMENT TO SERVICE
Buddy and Sara have 3 children and nine grandchildren who call Fort Worth home. Over the years, Dike has devoted himself to numerous causes, serving on the boards of the Davey O’Brien Foundation, Cotton Bowl Athletic Association, and TCU, and contributing to numerous worthy charitable causes.
When he is not working or volunteering, Dike enjoys spending time with his family, playing golf, and watching his beloved Horned Frogs take the field.
In addition to his charitable work, providing stewardship for the life insurance industry has been a point of emphasis for Dike. He served as President of the Fort Worth Association of Life Underwriters, Society of Financial Service Professionals, and Fort Worth Business and Estate Council. He was also a charter member and board member of the Top of the Table.
As the recipient of the 2015 Preston Hotchkis Distinguished Achievement Award, Dike receives a $5,000 gift to be donated to the charities of his choice. The award winner wants the gift split between two beloved organizations he treasures: Cook Children’s Health Foundation, which is dedicated to improving the health of children in the Dallas-Fort Worth region, and the WARM Place, which helps children and their families who are suffering from grief.
“Buddy’s commitment to his clients’ success and to the community of Fort Worth embodies the ideals that the Preston Hotchkis Distinguished Achievement Award represents,” says Rick Schindler, the executive vice president for the Life Insurance Division of Pacific Life. “We are honored to welcome him to the fraternity of honorees.”