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A Gut Wrenching New Year’s Resolution

By Karen Schaeffer, CFP

Along with year-end investment reports, we typically send a letter to clients encouraging them to add some financial planning “housekeeping” to their list of resolutions. One year, we gave them a check list for getting and keeping paperwork organized. Another time, we focused on habits for raising children with good money skills. Other years, we’ve gone through insurance and estate planning issues.

So, what New Year’s resolution are we imposing on ourselves this year?  It’s time to update our not-so-fun-to-think-about plan:  What if serious illness or death struck someone at our firm?

A few years back we had a real scare that pushed us to do a quick version of this “what-if” drill.  A healthy 50 year old, close friend and sole proprietor of an investment advisory company, had a massive heart attack and wasn’t expected to live. That was shock number one.  Shock number two?  Let’s just say his emergency plan was lacking.


It’s not that he had done zero planning. He actually had named an advisory committee to step in if he was incapacitated and I happened to be one of the people named.  But it became very clear, very quickly that no one on the committee really understood his business, his family was totally out of the loop and his estate planning documents were woefully inadequate.  Not good under any circumstances, lie-awake-at-night-gut-wrenching-feeling when he’s in day three of a medically induced coma and the prognosis is bleak.

It didn’t take long to realize we had two choices if he didn’t survive or recover sufficiently to return to running his business: sell the business to an outsider or sell it to the key employees. Selling to an outsider would likely bring the most value for the family since the key employees were relatively new to the firm and they would have to buy it, over time, with future revenues (no buy/sell agreement in place, of course).  But, selling it to an outsider would likely mean most of the employees would lose their jobs. And who really had the authority to make these decisions?  His grief-stricken wife was in no shape and the key employees certainly had a huge conflict of issue.

Good news: disaster averted.  After a few more sleepless nights, we got the word that he would survive, and against all odds had made a full recovery. And, I’m really happy to report, he now has a plan that both his family and key employees not only understand but are confident they can implement if another crisis occurs.

 It’s Impossible to Be Over Prepared

 The whole process taught us that it’s impossible to be over prepared.  It’s simply not enough to count on smart employees or family members to step up and do the right thing. What does that mean?  What needs to get done?  Who needs to know what and when do they need to know it?  What can be done in advance?  What needs to be avoided?  Who has authority to act?  What resources will they need?  You get the gist of the exercise.

So we’ve scheduled our planning session with our key employees.  We’ll map our tasks, pull together check lists, write sample client communications, review documents, and chat with the family.  We’ll also hope that we don’t ever have to put the plan to the test.  That would make for a very happy New Year!

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