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Tag: domani wealth

Pandemic fatigue leading more company leaders to choose early retirement

Succession planning may bring to mind aging small business owners eying retirement, but think again. Professionals of all types are asking financial advisers at Domani Wealth if they can retire early this year.

From physicians to C-suite level executives, professionals nearing retirement want to know if they can leave the workforce early and save themselves from the stress of the COVID-19 workforce, said Angie Stephenson, senior wealth adviser and COO of the East Lampeter Township, Lancaster County-based wealth management firm.

Stephenson’s clients are realizing their careers have been forever changed by the pandemic and would rather get out of the workforce, even if it means having less money into retirement. This is bad news for businesses that will need to quickly find a replacement and teach those new hires the nuances of the position, she said.

Employees who made it through the pandemic and learned its lessons are more important than ever. Under these conditions, Stephenson said, businesses should have a succession plan not only for their CEO’s and CFO’s, but their managers, too.

“This is about the leaders. It doesn’t have to be the C-suite,” she said. “It can be your factory manager. Imagine that you have a good manager who understands everything that needs to happen with COVID. They understand all of the HR issues of how to schedule and he is 60 and says he is going to retire.”

Management positions are more important now than they once were, Stephenson said. One of Stephenson’s clients, the CFO for a logistics company, announced in July that their plans to retire because of the pandemic, but was swiftly asked by the company to continue working virtually until they could afford to train a replacement.

“I have had leaders in companies come in and say ‘I am going to retire,’ and now, all of a sudden, you are seeing these businesses scramble,” Stephenson said. “If someone in a key position says that they want to retire by the end of year, to find a good replacement, get them in place and understand all the nuances, it stands to really harm the business.”

Other clients are looking to get out of the ownership of their companies and sell their portion of the organization to stay on as employees.

This year’s crisis has been a difficult one to consult for compared to the financial crisis of 2008 where there was a finite set of issues, according to Stephenson. In 2008, businesses could see that the country was progressing out of the recession thanks to federal bailouts for financial institutions. The pandemic has no such silver lining.

“What do you tell a client during COVID?” she asked. “We are fortunate that we have a vaccination but who will get it? How costly is it to administer and who will take it?”

Domani Wealth is reforecasting personal financial plans not just for businesses but for everyone, according to Stephenson. People are traveling and spending less, she said, and may be happy to retire early and forego the expenses they would have planned to incur. Business owners looking to sell may also sell at a lower price knowing that they won’t be taking that year-long vacation across Europe.

“People are thinking more simplistically,” she said. “When you readjust their plans and show them what they could live on, most of them look at what they spent this year and go, yeah that’s not so bad.”

Political changes, COVID pandemic to influence HR planning in 2021

Here’s what are the “best” companies to work for offering their employees today: paid time off for volunteer work, new hire referral bonuses, fitness facilities, telecommuting options and health care coverage that starts the first day, among other benefits.

These standards, among other human resources-based concerns, were hot topics at Central Penn Business Journal’s 2020 Human Resources Virtual Summit.

According to Peter Burke, president and co-founder of the Best Companies Group, a Harrisburg-based company, paid time off, remote work options, and health care benefits drive employee engagement by giving value to a company’s employees and responding to their modern needs.

Burke’s group surveys more than 700,000 employees at 6,000 workplaces across the U.S. and Canada, to identify and recognize the “best places to work.” Through these surveys, the company has found that the employees value employers who care what employees are thinking. They show this care by surveying their employees and using the results to make positive change, he said.

These companies also define a set of corporate values, Burke said, and communicate to their employees that they are valuable. One of the ways to convey that value to employees is by encouraging employee engagement and feedback, he said.

“Have you asked employees if people like the work that they do lately?” Burke asked. In fact, one of the top drivers of employee engagement is liking the type of work they do, he said. Another is having confidence in the leadership of the organization.

Doug Jones, president of Faulkner Subaru, a car dealership in Harrisburg, encourages employee engagement by offering his employees opportunities to participate in charitable events and help out in their community. This helps create a positive work atmosphere, he said.

“If you want your employees to be engaged,” Jones said, “you have to engage your employees. They will follow your lead.”

Earlier at the symposium, Catherine E. Walters, a partner at Bybel Rutledge, advised HR professionals to “buckle up,” for the ride ahead and the industry changes that will come with the change from the Trump to the Biden administration. Walters believes some changes made by President Trump made to employment regulations will be reversed by the Biden administration.

She also believes the low wages in certain industries, such as day care, retail work and apparel manufacturing, will continue to be a target of concern and possible reform.

Telework will continue to be a “hot topic” for HR managers in 2021 as well, Walters said.

“Telework became par for the course due to COVID,” she said. “It’s a good time to talk through remote workplace considerations…I don’t believe that (the telework) level will continue once COVID abates, but we won’t go back to our pre-COVID levels.”

Steven P. Maher, senior wealth adviser at Domani Wealth, a Pennsylvania-based wealth advisory service, advised employers to consider the generational needs of their employees when it comes to advising them on retirement plans.

Gen Z’s, Gen X’s, millennials and boomer employees, have different financial situations to consider, he said. Younger employees may not know where to go for advice on retirement planning while older employees might feel “stressed out,” not knowing when they can afford to retire.

Maher recommends employers hold meetings to educate employees on their options, with offshoot topics for each generation.

Employers, have you reviewed your retirement plan lately?

Employers who aren’t giving their retirement plans as much attention as their health plans could be missing vital benefits when it comes to finding new employees.

Providing the right health plan to employees is important and scrutinized on every level but when it comes to retirement, employers need to be just as diligent ensuring that benefits grow alongside employees, said Steven Maher, partner and senior wealth adviser at Hanover-based Domani Wealth.

Steve Maher, partner and senior wealth adviser at Domani Wealth. PHOTO PROVIDED

It is not uncommon for clients to visit Maher with plans for retirement, only for him to have to tell them that they will need to work full-time jobs into their 70’s to fund it.

Today, employers have more tools than ever to ensure that their staff save what they need to be ready for the day they retire– it just may take an employer to benchmark their plans and be sure that they are keeping up with the marketplace to do so.

“Employers need to focus both on what they provide today and what that employee’s situation will look like in 20 to 50 years,” he said. “You want your employee looking in the mirror and thanking the organization for providing the tools and resources to have a successful retirement.”

If someone hasn’t updated their retirement benefits in some time, Maher said they may not realize just how many benefits that were once seen as high end offerings for Fortune 500 companies, are now within reach for most employers.

401(k) plan features such as automatic escalation and enrollment allow employers to automatically deduct elective deferrals from wages and increase an employee’s contribution amount to a set percentage every year.

Maher also recommends offering financial wellness programs in concert with financial advisers, opening the workplace up to conversations on savings, saving for college and general holistic financial needs.

“With a lot of the tools available, you can be a small business in central Pennsylvania and have the same bells and whistles as some Fortune 500 companies,” he said.

The financial adviser said that he has yet to see many of his clients need to suspend their 401(k) matches as a result of the COVID-19 pandemic. If an employer is looking at the possibility they cannot continue offering their benefits, he recommends talking to a third-party administrator before making the decision.

“There may be a way to delay or suspend your match and not necessarily completely get rid of it,” he said. “With a 401(k), it can be complex in how you match and there are different ways for you to suspend that match.”

Financial experts talk financial planning and the need for a solid strategy

Thomas Williams, partner, senior wealth advisor and CEO at Domani Wealth. (Photo Provided)

Many new clients of Lancaster-based Domani Wealth looking for help on their financial or retirement plans bring with them what the financial advisement firm’s CEO calls ‘back of the napkin thoughts.’

“It is surprising how many individuals haven’t taken the time to do a retirement or a financial planning model,” said Thomas Williams, partner, senior wealth advisor and CEO at Domani Wealth. “They probably did some thinking on their own but in terms of putting numbers down and thinking through all of the possibilities, it takes time and its most likely time that they haven’t devoted.”

Williams has worked at the firm for 24 years and in that time, he’s seen that most people don’t give formal thought to the kind of money they should be saving.

Domani works with clients to build those plans and identify the risks they may have as they continue to work toward retirement or build savings in case other challenges arise. Risks like not having up to date estate documents and having one spouse in a marriage that is the majority wage owner are hazards that someone at any caliber of income can experience, Williams said.

Plans that are done without help from an adviser can also fail to take something like the possibility of long term care into consideration.

“People look at their financial plan and their accumulation of wealth but they don’t consider what would happen if one of them had to go to a long term care institution or get care at home,” Williams said, adding that many clients also ignore how severely inflation can impact a retirement fund. “Even if you look at inflation at 3% that gets pretty big in 25 years.”

Other financial institutions also make leeway with their clients who have yet to solidify their future plans by acting as financial ‘quarterbacks’ said Kevin Eisenhart of York-based CPA firm Eisenhart & Co.

Eisenhart & Co. leaves investment and retirement planning to other organizations but Eisenhart said that he and his staff are keen on helping their clients get to where they need to be in their planning.

“We can make recommendations about things we’ve seen, talk to our clients about saving retirement and if they are a business owner we may tell them to start saving for retirement,” he said.

If a client does come to Domani with past work from other financial advisers, their estate plan could be 10 or 15 years old, which can also pose a problem if a trustee has passed away or a friend of the family has moved out of the area.

With his clients that are business owners, Williams said owners can be so focused on their business that they ignore the personal side of their finances.

A business owner may not have prepared a power of attorney in case something were to happen that they couldn’t manage the business anymore or a buy/ sell agreement to manage their share of the company if they were to die prematurely.

“We find that there has been a lack of succession planning,” Williams said. “The owner dies or is incapacitated and the question is what now? We find that it is not often that there has been thought given to succession, with the business identifying a person or a team in position to run the business.”

When planning for retirement or for a potential accident, the planning phase is a continuous process and not an event, he said.

The difficulties of family succession planning

 

The decision to leave the family business in the hands of a relative can seem like an obvious solution, but experts warn that it can be complicated, emotional mess if you’re not careful.

For example, the founders of a family owned business are getting older and plan to give the company to their daughter. But that daughter may not love the business like her parents did, and the organization’s staff may not like having someone with less experience than them in charge.

Those possibilities can be avoided with careful estate planning, said Angie Stephenson, senior wealth adviser and COO of Domani Wealth in Lancaster.

When an owner is preparing to hand over the keys to their business, particularly if it’s to a family member, Stephenson suggests seeking external advice by developing a board of directors, or talking to a financial adviser.

“For our business owners, we are their sounding board,” Stephenson said. “We are frequently speaking to business owners about succession plans — where are they? What’s going on? Who’s their successor? How will they get liquidity for the company?”

A business owner’s family member can be involved with the company for years and have the skill necessary to be that organization’s next leader. However, owners need to ask themselves, are we forcing the company on that person? Do they truly want the role?

“When outside advisers interview the family members, what is frequently revealed is perhaps the family member feels obligated and they do not have the same passion to own and lead the business as the current generation may have,” Stephenson said.

The succeeding family member may care about the business and understand its products or services, but struggle as a leader if they weren’t trained properly. That new successor’s leadership can be challenged further by existing team members who may not accept a younger family member becoming their leader, she said.

The best examples of familial succession Stephenson has seen involved relatives who rose up the ranks at another company first, gaining valuable experience along the way, then brought that experience to the family business.

Just because a family member plans to run the future business, doesn’t mean that other members of the family won’t be getting an inheritance.

If a majority of the owner’s estate is the business, getting inheritance to the other family members can be left up to the new owner and create a difficult position for the family.

“If the child in the business has not planned to have the proper liquidity to buy out his or her siblings, it may be that the debt will be to his or her siblings for many years to come,” Stephenson said.

If no family members want to take over, the owner can sell. But selling can be difficult, too, if the buyer does not plan to keep the employees the owner has worked with for years.

Businesses generally sell for less if the owner stipulates in the sale that the employees must be retained by the new owner, said Stephenson. If a business owner hopes to make the most out of the sale, it is best to free the new owner to make the workforce decisions, including whether or not to move the company.

The Internal Revenue Service exempts anyone from paying a federal estate tax during the transfer of assets if their total estate value does not exceed $11.4 million or $22.8 million for a married couple. In 2025, that exemption will decrease to $5 million per person, meaning that anyone currently planning their estate could end up not being exempt from the tax, Stephenson said.