Articles for April 2014

Is now the time to sell your business?

The baby boomers have made quite a splash on society throughout their lives. As babies, they impacted diaper and baby food sales. In early childhood they wanted Hula Hoops, Tinker Toys and Superballs. When teenage years hit, they put McDonalds and Kentucky Fried Chicken on the map. The sheer number of boomers led to massive increases in roads, housing, schools (including colleges and universities) and social programs. And since there weren’t jobs for all of them once they hit working age, millions of them started their own companies.
Now they are close to retirement. Economist and demographic expert Robert Avery of Cornell University predicts baby boomers will transfer $10 trillion to later generations, and the vast majority of this wealth is held as stock in privately-owned businesses. During the next 10-15 years, he estimates that more than 70 percent of these companies will change hands.
Are they ready to sell? The 2013 State of Owners Readiness Survey sponsored by the Exit Planning Institute (of which I’m a member) found that 83% of owners surveyed have no written transition plan. Two-thirds are not familiar with all of their exit options. While 56% felt they had a good idea of the business value, only 18% had done a formal valuation. Sadly, 49% of the owners of these privately-held businesses had done no transition planning at all.
That probably explains why 70% of Merger and Acquisition (M&A) professionals said business owners are minimally or not prepared to sell or transfer, according to a study conducted by the Alliance of Mergers and Acquisitions Advisors. As a result, many businesses do not sell as a going concern. Rather, the assets are sold and the business ceases to exist.
So if you are a boomer, you are close to retiring and you’ve done no exit planning preparation, now might NOT be the best time to sell. However, it’s a GOOD time to get your transition plan started. Because of the large number of businesses that will be on the market in the coming years, buyers will have ample choice in which businesses look attractive to them. What makes a business attractive to a buyer? Key on that list would be a stable management team (there’s little value in a business that can’t operate if the key person retires), audited financials (doing the books yourself may save you some money, but a potential buyer wants verification from a reputable outsider), written policies and procedures that help ensure consistency and reliability within the business, a diversified customer base, an attractive facility, profits with a strong and growing cash flow, and a good long-term growth strategy.
So a little planning on the front end could mean substantially more value at transition time. Since no single professional can be an expert in all areas, a team approach usually works best. That team often includes an attorney, a CPA, a Financial Advisor and/or Estate Planner, possibly an Investment Banker, and an insurance professional. A specially-trained exit planner with a designation such as a CEPA (Certified Exit Planning Advisor) may also have one of the above-mentioned credentials and would be a good individual to start the process, coordinate the other team members and start the initial fact-finding process. Often, the goal is to start early enough before transition (3-5 years) so that the business has time to improve on those items that add the most to a company’s value for when the owner is ready to ride off into the sunset.
Michael Moffitt may be reached at phone:(641)-782-5577 or e-mail: mikem@cfgiowa.com website: cfgiowa.com
Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Guarding Against Identity Theft

Take steps so criminals won’t take vital information from you.
America is enduring a data breach epidemic. As 2013 ended, the federal Bureau of Justice Statistics released its 2012 Victims of Identity Theft report. Its statistics were sobering. About one in 14 Americans aged 16 or older had been defrauded or preyed upon in the past 12 months, more than 16.6 million people.1

Just 8% of those taken advantage of had detected identity theft through their own vigilance. More commonly, victims were notified by financial institutions (45%), alerts from non-financial companies or agencies (21%), or notices of unpaid bills (13%). While 86% of victims cleared up the resulting credit and financial problems in a day or less, 10% of victims had to struggle with them for a month or more. 1

Consumers took significant financial hits from all this. The median direct loss from cyberthieves exploiting personal information in 2012 was $1,900, and the median direct loss from a case of credit card fraud was $200. While much of the monetary damage is wiped away for the typical victim, that isn’t always the case.1

Tax time is prime time for identity thieves. They would love to get their hands on your return, and they would also love to claim a phony refund using your personal information. In 2013, the IRS investigated 1,492 identity theft-linked crimes – a 66% increase from 2012 and a 441% increase from 2011.2

E-filing of tax returns is becoming increasingly popular (just make sure you use a secure Internet connection). When you e-file, you aren’t putting your Social Security number, address and income information through the mail. You aren’t leaving Form 1040 on your desk at home (or work) while you get up and get some coffee or go out for a walk. If you just can’t bring yourself to e-file, then think about sending your returns via Certified Mail. Those rough drafts of your returns where you ran the numbers and checked your work? Shred them. Use a cross-cut shredder, not just a simple straight-line shredder (if you saw Argo, you know why).

The IRS doesn’t use unsolicited emails to request information from taxpayers. If you get an email claiming to be from the IRS asking for your personal or financial information, report it to your email provider as spam.2

Use secure Wi-Fi. Avoid “coffee housing” your personal information away – never risk disclosing financial information over a public Wi-Fi network. (Broadband is susceptible, too.) It takes little sophistication to do this – just a little freeware.
Sure, a public Wi-Fi network at an airport or coffee house is password-protected – but if the password is posted on a wall or readily disclosed, how protected is it? A favorite hacker trick is to sit idly at a coffee house, library or airport and set up a Wi-Fi hotspot with a name similar to the legitimate one. Inevitably, people will fall for the ruse and log on and get hacked.

Look for the “https” & the padlock icon when you visit a website. Not just http, https. When you see that added “s” at the start of the website address, you are looking at a website with active SSL encryption, and you want that. A padlock icon in the address bar confirms an active SSL connection. For really solid security when you browse, you could opt for a VPN (virtual private network) service which encrypts 100% of your browsing traffic; it may cost you $10 a month or even less.3

Make those passwords obscure. Choose passwords that are really esoteric, preferably with numbers as well as letters. Passwords that have a person, place and time (PatrickRussia1956) can be tougher to hack.4

Check your credit report.
Remember, you are entitled to one free credit report per year from each of the big three agencies (Experian, TransUnion, Equifax). You could also monitor your credit score – Credit.com has a feature called Credit Report Card, which updates you on your credit score and the factors influencing it, such as payments and other behaviors.1

Don’t talk to strangers. Broadly speaking, that is very good advice in this era of identity theft. If you get a call or email from someone you don’t recognize – it could tell you that you’ve won a prize, it could claim to be someone from the county clerk’s office, a pension fund or a public utility – be skeptical. Financially, you could be doing yourself a great favor.

Michael Moffitt may be reached at phone# (641)-782-5577 or email: mikem@cfgiowa.com.
website: www.cfgiowa.com
Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – dailyfinance.com/2013/12/31/scariest-identity-theft-statistics/ [12/31/13]
2 – csmonitor.com/Business/Saving-Money/2014/0317/Tax-filing-online-Seven-tips-to-avoid-identity-theft.-video [3/17/14]
3 – forbes.com/sites/amadoudiallo/2014/03/04/hackers-love-public-wi-fi-but-you-can-make-it-safe/ [3/4/14]
4 – articles.philly.com/2014-03-18/business/48301317_1_id-theft-coverage-identity-theft-adam-levin [3/18/14]

Which Financial Documents Should You Keep On File? … and for how long?

You might be surprised how many people have financial documents scattered all over the house – on the kitchen table, underneath old newspapers, in the hall closet, in the basement. If this describes your financial “filing system”, you may have a tough time keeping tabs on your financial life.
Organization will help you, your advisors … and even your heirs. If you’ve got a meeting scheduled with an accountant, financial consultant, mortgage lender or insurance agent, spare yourself a last-minute scavenger hunt. Take an hour or two to put things in good order. If nothing else, do it for your heirs. When you pass, they will be contending with emotions and won’t want to search through your house for this or that piece of paper.
One large file cabinet may suffice. You might prefer a few storage boxes, or stackable units sold at your local big-box retailer. Whatever you choose, here is what should go inside:
Investment statements. Organize them by type: IRA statements, 401(k) statements, mutual fund statements. The annual statements are the ones that really matter; you may decide to forego filing the quarterlies or monthlies.
When it comes to your IRA or 401(k), is it wise to retain your Form 8606s (which report nondeductible contributions to traditional IRAs), your Form 5498s (the “Fair Market Value Information” statements that your IRA custodian sends you each May), and your Form 1099-Rs (which report IRA income distributions).1
In addition, you will want to retain any record of your original investment in a fund or a stock. (This will help you determine capital gains or losses. Your annual statement will show you the dividend or capital gains distribution.)
Bank statements. If you have any fear of being audited, keep the last three years’ worth of them on file. You may question whether the paper trail has to be that long, but under certain circumstances (lawsuit, divorce, past debts) it may be wise to keep more than three years of statements on file.
Credit card statements. These are less necessary to have around than many people think, but you might want to keep any statements detailing tax-related purchases for up to seven years.
Mortgage documents, mortgage statements and HELOC statements. As a rule, keep mortgage statements for the ownership period of the property plus seven years. As for your mortgage documents, you may wish to keep them for the ownership period of the property plus ten years (though your county recorder’s office likely has copies).

Your annual Social Security benefits statement. Keep the most recent one, as it shows your earnings record from the day you started working. Please note, however: if you see an error, you will want to have your W-2 or tax return for the particular year on hand to help Social Security correct it.2
Federal and state tax returns. The IRS wants you to hang onto your returns until the period of limitations runs out – that is, the time frame in which you can claim a credit or refund. The standard IRS audit looks at your past three years of federal tax records. So you need to keep three years of federal (and state) tax records on hand, and up to seven years to be really safe. Tax records pertaining to real property or “real assets” should be kept for as long as you own the asset (and for at least seven years after you sell, exchange or liquidate it).3
Payroll statements. What if you own a business or are self-employed? Retain your payroll statements for seven years or longer, just in case the IRS comes knocking.
Employee benefits statements. Does your company issue these to you annually or quarterly? Keep at least the most recent year-end statement on file.
Insurances. Life, disability, health, auto, home … you want the policies on file, and you want policy information on hand for the life of the policy plus three years.
Medical records and health insurance. The consensus says you should keep these documents around for five years after the surgery or the end of treatment. If you think you can claim medical expenses on your federal return, keep them for seven years.
Warranties. You only need them until they expire. When they expire, toss them.
Utility bills. Do you need to keep these around for more than a month? No, you really don’t. Check last month’s statement against this month’s, then get rid of last month’s bill.
If this seems like too much paper to file, buy a sheet-fed scanner. If you want to get really sophisticated, you can buy one of these and use it to put financial records on your computer. You might want to have the hard copies on file just in case your hard drive and/or your flash drive go awry.

Michael Moffitt may be reached at 641-782-5577 or email: mikem@cfgiowa.com.
website:  cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – blog.oregonlive.com/finance/2011/05/why_you_might_want_to_save_for.html [5/21/11]
2 – ssa.gov/pubs/10081.html [10/12/12]
3 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-long-should-I-keep-records%3F [12/31/12]

Is this the direction we want to go?

My job as a financial advisor, as I see it, is to help my clients negotiate successfully through their financial life and work toward their goals along the way. But I’ve always felt that for them to be successful, most of the burden falls on them. Just like the old adage says, “if it is to be, it’s up to me.”
I offer what I think is my best advise based on their circumstances and based on what else I see going on in the world that could impact them, either directly or indirectly. As general trends go in our country today, it’s hard to see that we, collectively, are going in a path that will lead us in a positive direction. In my own clients, I see some good savers that are ready for the future but many more that may be scaling back their retirement plans because the money just isn’t there.
Maybe we’ve had it too good the last few decades and so we just didn’t try as hard as our parents. That’s tough for anyone to admit. Do we want to be better? A full 43% of Baby Boomers surveyed by AARP in November 2013 described their present financial situation as “worse than expected.” Craig L. Israelsen suggested in a July 2011 article on the Horsesmouth.com website that U.S workers aren’t saving enough and because of that are pretending that “building a better investment portfolio” will solve their lack-of-saving problem. He correctly states that contributions are largely controllable by the investor, while performance, particularly in the short run, is not. It’s easier to blame bad markets for a lack of investment savings than it is to blame a lack of saving, period.
Sometimes not saving is not income-related….you have a good job but simply spend beyond your means. I have little sympathy for those folks. Sometimes people just don’t earn very much or they just can’t find a job. In those cases it is easy to blame tough luck but sometimes that bad luck might be the result of our decisions as well—decisions that could go all the way back to high school or college days!
The National Center for Education Statistics shows that the number of college students graduating in 2012 with a “Mathematics and Statistics” degree was 18,842. It was 24,800 graduates in 1971. A 24% decrease. Conversely, there were 38,993 graduates with “Parks, Recreation, Leisure, and Fitness Studies” degrees in 2012, while only 1,621 such graduates in 1971. That’s an increase of over 2300%! Careers that use a lot of math typically pay more than careers in parks and rec. From that metric it appears we’re going the wrong way. Why is that? Are students choosing the easier majors or are colleges creating an easier degree path to lower paying jobs?
Are we as a society just looking for the easier path? In 2000 there were 8,471,453 people on Federal Income Supplement Program (disability), according to the Social Security Administration. Today there are 14,285,956. Is our workplace really 68% more dangerous than 14 years ago? The USDA says food stamp recipients in 2000 were 17,472,535, today they number 46,548,000. That’s 15 out of every 100 people, versus 6 out of every 100 just 14 years ago. The US Census Bureau says today there’s roughly 37 million more people in the U.S. than in 2000 and there’s 29 million more on food stamps. Really?
I have no doubt that many people, through no fault of their own or through true misfortune, need this government assistance. They should get it. I also have no doubt that even more people are abusing the system because they can. It’s much easier to let someone else carry the load if they will. (See: http://www.worthytoshare.com/pretty-girl-seeking-rich-husband-reply-got-banker-priceless# )
But eventually it may break the back of our country.