Steven E. Tenney, a senior vice president of wealth management and a senior portfolio manager for UBS Financial Services Inc. in Portland, spends his days urging clients (and prospective clients) to tackle the issue early. He is also an expert in succession planning.
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Wealth management is often associated with an older client, a retiree or someone close to retirement.
Yet Steven E. Tenney, a senior vice president of wealth management and a senior portfolio manager for UBS Financial Services Inc. in Portland, spends his days urging clients (and prospective clients) to tackle the issue early. He is also an expert in succession planning. In a day and age where baby boomers are looking to exit their businesses, owners often face choices like turning a business over to relatives or children, selling to a third party or selling to employees through such vehicles as a tax-deferred Employee Stock Ownership Plan.
Mainebiz sat down with Tenney at his office in One City Center to discuss wealth management strategies and some possible avenues business owners might want to consider. An edited transcript follows.
Mainebiz: Can you offer any guidance on how a business can get started with retirement planning?
Steven Tenney: One of the most important things a business owner can do is to keep personal finances separate from company finances. That way, if a business runs into trouble, their personal assets will be separate from that. There will be a wall between the two. The business can also sponsor a retirement plan. All the individuals can contribute, including the owners. One of the greatest wealth building techniques is putting as much money as you can every year in a qualified retirement plan. If you do that for year after year it builds a very nice nest egg.
MB: When you're choosing an investment adviser, you hear a lot about fees. How do you wade through that discussion about fees?
ST: If you're going to have a company sponsored plan, it really helps to work with someone who is intimately involved in that part of the industry. Retirement plans are very technical, rules keep changing. It's important to be in compliance. Cost is certainly an issue. You have two costs: the cost of investments and the cost of administration. The administration tends to be fixed, a function of the number of the employees. Most retirement plans use mutual funds. Keeping expenses low is very important. Many companies these days are going to a bundled approach, so you can go to a single provider. For more customized plans, you might need a third-party administrator.
MB: Is it ever too early to discuss succession planning?
ST: It's never too early to plan. It's the prudent thing to do. Unfortunately, most business owners just don't do it. There are a number of reasons they don't. They're too busy running their shop — that's a big reason. They want to avoid conflict within management or the family. If some of their kids are working there and some are not, it can create different expectations. There are also parents who don't want to hand over the business — they don't want their kids to have the same struggles they had. It's hard running a business. Having said that, it's critical that owners go through the planning process. It can be very advanced, but taken one step at a time it's very doable. Sometimes life throws you a curveball: there's a health issue, an owner or partner dies or leaves the company. Or you go through a tough time with the economy. Those are easier to weather if you have a plan. Other side of it, sometimes it's a hanging curveball that you can hit out of the ballpark. For instance, you get an unsolicited offer for your business. You want to be able to make a prudent decision. Plans are best done when things are going well, not when you're in crisis. A plan can take multiple years, especially if you plan to gift shares.
MB: Should the plan be treated like a will, where you need to file it with your attorney?
ST: There are different documents needed, each with a varying degree of complexity. You might need a shareholder agreement spelling out what happens with a change in ownership. You may have one or more trusts involved. There's succession planning, retirement planning, financial planning. They're interrelated. You might need a corporate attorney, an estate planning attorney, a CPA, a wealth manager. You might have an insurance expert and a valuation expert. If your business is worth more than $2 million, another important adviser could be an investment banker.
MB: How to you work with a team of this size?
ST: It's critical for everyone to sit down at the same time, so communication is clear. That way everyone knows about one another's business. You can politely challenge one another. The second critical thing is you need a quarterback — one of those experts needs to be your advocate, the interpreter, the coordinator who helps execute the plan.
MB. Now for the question on everyone's mind. Donald Trump or Hillary Clinton: Who would be better for investors?
ST: It doesn't matter. The factors affecting the capital markets are so much larger than the person sitting at 1600 Pennsylvania Ave. You have currencies, large economies like China, global interest rates, oil prices. All of these factors influence capital markets, for better or for worse. The person sitting at the White House has minimal impact. Now, some candidates may have designs that would affect certain sectors, pharmaceuticals or financials. There they would have an impact. But for the markets overall, it's not a big difference.
