Financial planners must protect earnings — Focus

An economic lull is no time for business owners and key employees to get complacent about their financial planning, nationally known Certified Financial Planner Sheryl Garrett says.

She leads Shawnee Mission, Kan.-based Garrett Planning Network and is the author of several books. She spoke to business groups and college students in southwest Idaho in March. The Wall Street Journal and other national media organizations have taken note of her approach characterized by, among other things, charging an hourly or project-based fee instead of commissions or an annual percentage of account value.
Garrett’s first piece of advice to business owners and key employees often has little to do with the financial markets, she said in an interview.
“Your single biggest asset is your ability to earn money,” she said. She recommends “staying cutting-edge with your skill set, for yourself and key personnel. Invest in your people.”
Such investments could include providing employees with incentives, or simply the time, to continue their education, she said.
Business owners and managers should pay high-quality employees well, and give them what they need to be successful, Garrett said. “With the market tumultuous now, the key is keeping good employees. In most parts of the U.S., the big challenge is finding qualified people.”
An economic downturn provides “a good reminder of the business principles we should use,” she said. “Watch every expenditure. Get creative about new revenue streams. Search out market opportunities.”
Keeping an eye on spending, and debt loads, becomes critical during an economic lull, Garrett said. “Anything that can be postponed, postpone it.”
Business managers should assume an “ownership” mentality, and business owners should act like owners, she said.
Many owners of small and midsized businesses “want to connect with clients or do the work themselves,” Garrett said. “If you are the business owner, you have another job.”
Business owners can’t afford to write a business plan only to put it on a shelf, Garrett said.
A good business plan specifies performance measures, deadlines and the roles of key employees, she said. It should define performance indicators and give details about how they will be measured. It should describe how marketing expenses will be tracked and financially justified.
“Your business is part of your personal financial plan,” Garrett said. Mistakes are magnified because substantial money is involved, she said.
She recommends investing in tools and infrastructure that employees need, as long as proficiency timetables and “learning curves” are considered.
Employee benefits plans – with elements such as retirement plans, flexible spending accounts and disability insurance – can be important in attracting and retaining good staff, Garrett said.
“We can now do a Roth 401(k),” she said. These retirement plans allow employees to make contributions using pre-tax or post-tax dollars, significant in that tax liability at retirement can be controlled to an extent, she said.
Outsourcing payroll and benefits administration adds convenience for the business owner while reducing the risk of a government non-compliance penalty, Garrett said.
She recommends organizing financially themed events for employees.
“Have a financial educator, unaffiliated with your provider, come in and provide a workshop including one-on-one counseling sessions,” Garrett said. “It’s just as valuable as health insurance, but costs less.”
Employee participants in the workshops should pay part of the cost so that they have a vested interest, Garrett said.
At one workshop for employees, “almost no one asked about 401(k)s,” she said. Topics ranged from home refinancing to whether an unmarried couple should own property together.
Investors should allocate their investment assets based on their goals, Garrett said.
 Asset-allocation models won’t change a lot on short-term trends in the market, although a trend might spark certain categories to be over-weighted or under-weighted for a time, she said.