Business Banking E-Newsletter - March 2011

LPL - Insurance Needs for Every Stage of Life

Who needs life insurance? These days, the answer is, "Almost everyone." That includes:

Young Adults

As you might imagine, parents of minor children are at the top of the list of those who probably need life insurance. If one "breadwinner" were to pass away, life insurance payments could make it possible for the survivor to maintain the family's quality of life, send the children to college, and continue to set aside money for retirement and other long-term goals. But young adults don't necessarily need children to need life insurance. For example, newlyweds might purchase life insurance so that if one were to die, the other could use the proceeds to help repay significant debts, such as a mortgage or car loan. Generally speaking, life insurance is cheaper and more easily obtained at younger ages.

Empty Nesters and Retirees

Even if your children are grown up and financially self-reliant, life insurance may still be an important part of your financial strategy. After all, a widow or widower may still need to pay off a mortgage and other debts as well as continue to plan for a comfortable retirement. Naming grandchildren or adult children as beneficiaries of your life insurance policy may also enable those family members to accomplish important goals long after you're gone. Also, life insurance can help you accomplish a number of estate planning goals.

Business Owners

Offering life insurance as a workplace benefit can help a business owner attract and retain valuable employees. Also, naming the business as the beneficiary of a policy on a key employee can make it financially possible for the business to hire and train someone to replace that individual after his or her death. And life insurance proceeds can also make it possible for surviving partners or family members to eventually purchase a deceased owner's share of the business.

For information on the uses and benefits of life insurance at every stage of life, please contact your registered representative.

*Source: Bureau of Labor Statistics.

**Withdrawals will be taxed at ordinary income tax rates. Early withdrawals may trigger a 10% penalty tax.

***You will receive credit for the withholding when you file your next tax return.

© 2010 Standard & Poor's Financial Communications. All rights reserved.


5 Business Myths to Ditch Now

Letting go to move forward

Feeling a little disillusioned lately? That's not a bad thing if you're an entrepreneur. There's nothing like humbling economic times to force chief executives to let go of the sacred-cow ideas and grandiose illusions they've been harboring and start building on reality. Some of the smartest business owners have fallen for these five myths. Ditch them. It will make your business that much stronger.

  1. Gross margins will grow as you get bigger
    Not so. Research shows that they typically dip. That was a tough lesson for Jennifer Olsen Welding, who owns a 70-employee Salt Lake City casting company. Her tale: Unlimited Designs won a municipal contract to create a precast building façade in 2009. The trouble was, the $5 million company had to lease extra equipment to do the job. Sales increased significantly, and gross margins declined by 3%. "We would have been better off having no revenue than the revenue that was coming in," she says.
  2. Competitors are always unfriendly
    Baloney! When Steven Krane tried to get Wal-Mart to carry Raw Essentials, a line of skin-care products he developed with model Carol Alt, the giant retailer expressed doubts about the marketing muscle of his Boca Raton, Fla., firm. So Krane dared to call the president of Hard Candy, a competitor that had successfully launched its makeup in Wal-Mart, to get advice. It turned out that Hard Candy was interested in discussing some joint ventures. Krane also got some critical tips on building his social-media presence.
  3. You really know your market
    Gathering real data may prove you wrong. Dave McLurg, chief strategy officer and partner at Adaptive Technologies in Scottsdale, was certain that only big companies wanted his firm's software, which helps users predict which clients will be the most profitable. But surprise! After encountering a midsize firm that wanted something like it, he undertook market research that showed that others did too -- only for a lower price -- and launched a new version. "It's turned into a multimillion-dollar division for us that we hadn't anticipated," he says.
  4. One size won't fit all
    John Warrillow took on endless custom projects at Warrillow, a firm that helped big companies market themselves to smaller ones. Revenues didn't grow because Warrillow was the only one with enough experience to write custom proposals. In 2005 he relaunched the firm, offering one-size-fits-all research and events that clients could purchase by subscription. Providing one product was more profitable, he found, than doing custom jobs. "We went from being flat on the top line to growing at a rate of 25% to 30% a year," he says.
  5. As CEO, you know it all
    Despite regular team meetings, Bettina Hein, CEO of Pixability, a Cambridge, Mass., company that helps customers market themselves on video, was the last to find out that an instructional video added to the company's site had saved her team 135 hours of customer-service time, worth $8,000 to $10,000 a month. No one thought to mention it to her. "Only in a casual conversation did it emerge," she says. She's now rushing to create 60 more. Had she known, she would have launched the new ones sooner and saved even more money.

Helping Your Employees Invest For the Long Haul

Great talent is hard to find. It can be even harder to retain your best employees, particularly when the job market heats up. One proven technique to encourage employee longevity is to educate employees about financial planning tools that have their future in mind. This may involve many investment vehicles, but let’s focus on the Roth 401(k).

2010 was considered by many to be the Year of the Roth Conversion, due to substantial beneficial tax rule changes. Lost in all the noise about Roth conversions was the increasing popularity of Roth 401(k)s. These accounts are similar to traditional 401(k)s in that the money grows tax-deferred once inside the accounts.

The crucial differences are:

  1. Employees do not receive an income-tax reduction in the year in which they contribute.
  2. The money is income tax-free at withdrawal, provided certain important requirements are met.
  3. There is no forced age at which distributions must be taken.
  4. Any employer match still goes into a pretax account.

Why is offering a Roth 401(k) important? The nation’s workforce seems to be getting younger. Across all sectors, companies have been laying employees off. The majority of those laid off are older, higher-paid employees. Meanwhile, younger, lesser-paid employees are retained. Given their lower tax bracket, it may be wise for them to forgo a tax-deduction now in favor of receiving potentially tax-free income in retirement, when they may be in a higher tax bracket.

If your business doesn’t yet offer a Roth 401(k) option, consider it as you evaluate your benefits packages. Many companies are adding this feature. Remember that while your employees’ contributions go in after-tax, you can further sweeten the incentive (and increase employee loyalty) through a pretax employer match.

9 Things Successful People Do Differently

Why have you been so successful in reaching some of your goals, but not others? If you aren't sure, you are far from alone in your confusion. It turns out that even brilliant, highly accomplished people are pretty lousy when it comes to understanding why they succeed or fail. The intuitive answer—that you are born predisposed to certain talents and lacking in others—is really just one small piece of the puzzle. In fact, decades of research on achievement suggests that successful people reach their goals not simply because of who they are, but more often because of what they do.

  1. Get specific. When you set yourself a goal, try to be as specific as possible. "Lose 5 pounds" is a better goal than "lose some weight," because it gives you a clear idea of what success looks like. Knowing exactly what you want to achieve keeps you motivated until you get there. Also, think about the specific actions that need to be taken to reach your goal. Just promising you'll "eat less" or "sleep more" is too vague — be clear and precise. "I'll be in bed by 10pm on weeknights" leaves no room for doubt about what you need to do, and whether or not you've actually done it.
  2. Seize the moment to act on your goals. Given how busy most of us are, and how many goals we are juggling at once, it's not surprising that we routinely miss opportunities to act on a goal because we simply fail to notice them. Did you really have no time to work out today? No chance at any point to return that phone call? Achieving your goal means grabbing hold of these opportunities before they slip through your fingers.

    To seize the moment, decide when and where you will take each action you want to take, in advance. Again, be as specific as possible (e.g., "If it's Monday, Wednesday, or Friday, I'll work out for 30 minutes before work.") Studies show that this kind of planning will help your brain to detect and seize the opportunity when it arises, increasing your chances of success by roughly 300%.
  3. Know exactly how far you have left to go. Achieving any goal also requires honest and regular monitoring of your progress—if not by others, then by you yourself. If you don't know how well you are doing, you can't adjust your behavior or your strategies accordingly. Check your progress frequently—weekly, or even daily, depending on the goal.
  4. Be a realistic optimist. When you are setting a goal, by all means engage in lots of positive thinking about how likely you are to achieve it. Believing in your ability to succeed is enormously helpful for creating and sustaining your motivation. But whatever you do, don't underestimate how difficult it will be to reach your goal. Most goals worth achieving require time, planning, effort, and persistence. Studies show that thinking things will come to you easily and effortlessly leaves you ill-prepared for the journey ahead, and significantly increases the odds of failure.
  5. Focus on getting better, rather than being good. Believing you have the ability to reach your goals is important, but so is believing you can get the ability. Many of us believe that our intelligence, our personality, and our physical aptitudes are fixed — that no matter what we do, we won't improve. As a result, we focus on goals that are all about proving ourselves, rather than developing and acquiring new skills.

    Fortunately, decades of research suggest that the belief in fixed ability is completely wrong—abilities of all kinds are profoundly malleable. Embracing the fact that you can change will allow you to make better choices, and reach your fullest potential. People whose goals are about getting better, rather than being good, take difficulty in stride, and appreciate the journey as much as the destination.
  6. Have grit. Grit is a willingness to commit to long-term goals, and to persist in the face of difficulty. Studies show that gritty people obtain more education in their lifetime, and earn higher college GPAs. Grit predicts which cadets will stick out their first grueling year at West Point. In fact, grit even predicts which round contestants will make it to at the Scripps National Spelling Bee.

    The good news is, if you aren't particularly gritty now, there is something you can do about it. People who lack grit more often than not believe that they just don't have the innate abilities successful people have. If that describes your own thinking…well, there's no way to put this nicely: you are wrong. As I mentioned earlier, effort, planning, persistence, and good strategies are what it really takes to succeed. Embracing this knowledge will not only help you see yourself and your goals more accurately, but also do wonders for your grit.
  7. Build your willpower muscle. Your self-control "muscle" is just like the other muscles in your body—when it doesn't get much exercise, it becomes weaker over time. But when you give it regular workouts by putting it to good use, it will grow stronger and stronger, and better able to help you successfully reach your goals.

    To build willpower, take on a challenge that requires you to do something you'd honestly rather not do. Give up high-fat snacks, do 100 sit-ups a day, stand up straight when you catch yourself slouching, try to learn a new skill. When you find yourself wanting to give in, give up, or just not bother—don't. Start with just one activity, and make a plan for how you will deal with troubles when they occur ("If I have a craving for a snack, I will eat one piece of fresh or three pieces of dried fruit.") It will be hard in the beginning, but it will get easier, and that's the whole point. As your strength grows, you can take on more challenges and step-up your self-control workout.
  8. Don't tempt fate. No matter how strong your willpower muscle becomes, it's important to always respect the fact that it is limited, and if you overtax it you will temporarily run out of steam. Don't try to take on two challenging tasks at once, if you can help it (like quitting smoking and dieting at the same time). And don't put yourself in harm's way—many people are overly-confident in their ability to resist temptation, and as a result they put themselves in situations where temptations abound. Successful people know not to make reaching a goal harder than it already is.
  9. Focus on what you will do, not what you won't do. Do you want to successfully lose weight, quit smoking, or put a lid on your bad temper? Then plan how you will replace bad habits with good ones, rather than focusing only on the bad habits themselves. Research on thought suppression has shown that trying to avoid a thought makes it even more active in your mind. The same holds true when it comes to behavior — by trying not to engage in a bad habit, our habits get strengthened rather than broken.

If you want to change your ways, ask yourself, What will I do instead? For example, if you are trying to gain control of your temper and stop flying off the handle, you might make a plan like "If I am starting to feel angry, then I will take three deep breaths to calm down." By using deep breathing as a replacement for giving in to your anger, your bad habit will get worn away over time until it disappears completely.

5 Ways to be a Social Media Authority

Social media is an all-important avenue for all business types since business owners realize its worth. When it was a new trend, not many people thought that it was going to live up to its hype in the world of business but just look at how it evolved from connecting old friends to connecting business contacts.

One could not count on their fingers how many gurus, specialists and trend setters there are in the world of social media. So what makes them believable? Why is it that more people take their word rather than anyone else’s? It’s because they have established themselves as the authority in their own niche.

Social media is all about interaction and it would help you to create and build authority. Being an active member of a certain social networking site does not make you an expert or an authority figure overnight. It would take time for you to build credibility. People all over the world generally recognize and respect authority figures.

However, there’s a need for exposure. You cannot claim to be an expert in a certain field if you just popped out one morning on any social networking site. You have got to earn the respect and trust of the people you want to reach out to. Your followers and friends should have a basis that you know something they don’t know about topics they care about.

Here are some tips to get you started:

  1. Create a profile that emphasizes your area of expertise. You are trying to connect to like-minded individuals such as yourself and it is important that they at least have an idea who you are and what you do.
  2. Build a number of quality followers. It is true that the more people follow you, the more exposure you and your brand gets. But then, how solid is that following?  It’s better to have a manageable number of followers which you can truly reach and have more likelihood of getting your word out for you than a hefty number who probably are just looking for more followers without thinking about conversion. The bottom line? It’s not about the number; it’s always about the quality.
  3. Create relevant and interesting content and do away with fluff articles. Blogging is another medium in which you can build authority. You have to know which customers you’re targeting. Once you have established that, you have to be consistently giving them new information, advice and tips to have a steady flow of traffic to your site.
  4. Dare to be different. It’s not about creating controversy, it’s about voicing your own opinions. Whatever social media platform you’re using, you need to be honest and vocal about what you really feel on a subject or topic which piques the interest of your target market.
  5. Remember your manners and put social media on your priority list. It’s important to maintain online relationships if you want to be considered an authority of a certain niche. You have to observe proper social media etiquette because it might just spell your doom if you don’t.

As a prolific social media user, what are your thoughts on how to be seen as an authority in your niche? Share your experience and results in the comments.