While teachers likely don’t read the Wall Street Journal, that newspaper does some very solid investigative reporting, and on October 2019 they reported on one such investigation around the high cost of many 403(b) retirement plans. Costs were sometimes much higher than justified in many of these plans because sales agents for insurance companies used deceptive sale techniques to gain support and enroll subscribers.
How to protect yourself? Ask the hard questions and don’t accept general answers. Read the fine print when the presenter stands to earn money from your purchase, because they have a strong interest in your buying their product, perhaps much stronger than their interest in protecting you from exorbitant fees. AND learn the basics of financial management for yourself, because you are your own best advocate. Grab a copy of my book “Financial Mastery for the Career Teacher”, Corwin Press 2014. You will learn how to manage your money more effectively with chapters covering such key areas as:
- Your personal business plan
- Managing debt, life insurance and savings
- Buying a home
- Investing in the stock market and/or real estate
- Retirement planning, wills and trusts
- How manageable technology can help you
Find it on Amazon or other online book sellers. All from Your CFO for Rent®
When someone uses your registered trademark without permission, it’s important that you challenge that activity, and police illegal uses of your valuable marks. Otherwise you risk losing the right to it. That’s one way of abandoning your rights to your trademark. So, we police our valued registered trademark regularly, and recently found a Google ad placed some time ago by a Phoenix-based firm called B2B CFO. When we advised the owner of the violation he was actually indignant that someone would dare bring it to his attention. His response to us:
“CFO for Rent is a horrible trademark and we do not want our good name associates with such trash.” Then a bit later: “You are an ass-hole, Gene. We will not do anything about the matter. Please hire an attorney and sue us.”
Charming, huh? I’m thinking this is someone who represents the integrity of the CFO in their image to the world, but who is that arrogant about violating others’ rights. Hmmm. If I were a company CEO, would I really want them advising me on financial and strategic matters? On risk management? Food for thought.
I just read an excellent article on this topic, compliments of Bob Kelly of Capital Group’s Private Client Services. I wanted to share it with you, via this link:
No comment from me needed, the article speaks for itself. As always, we welcome your thoughts, comments and questions.
Alert: This is not a techie post about bits and bytes. It’s about making good decisions when your internal growth requires support from outside your company in an area that is not your area of expertise. And it’s from an actual case history, although the end to the story is yet to be written.
A company in the chain fast food restaurant business had grown significantly over several decades, to the point where their internal HR systems would no longer support the huge hiring, management and turnover needs of their large part-time worker force, which typically experienced upwards of 100% turnover each year. Added to their needs were the requirements of their franchisor, including mandating seamless integration with the franchisor’s HR systems. So they decided to go outside for a new system that would satisfy their data needs as well as those of their franchisor. Without an internal IT department to assist (red flag #1), the process was managed by their VP of HR, who had never managed such an effort before. Despite advice to the contrary, he declined to engage an outside IT advisor to help manage the process (red flag #2). He was clear on what he wanted to see, and the selected vendor sales team assured him they could provide what he wanted (red flag #3). The transition was long and costly, but it was expected to increase data visibility and reduce internal HR staffing.
Well, they couldn’t and it didn’t. After struggling to make it work for over two years the company decided to scrap that relationship and find a different vendor. This time they engaged a skilled outside IT consultant to advise them and help evaluate prospective vendors. Several vendors appeared well qualified in the eyes of their advisor, but now the cost of a transition was even larger than the first time around. The company balked at the realization that they were going to incur another high transition cost in addition to the inevitable strain on staff time already stretched by compensating for the shortcomings of the vendor they had. Caught between the proverbial rock and a hard place, they opted to stay where they were.
No happy ending here, it would appear. But perhaps a lesson for others facing a similar set of choices. We frequently read advice to companies to “stick to their knitting” – do what they’re really good at, and get someone else to do the rest. That is really good advice. And with the light speed at which technology is evolving today, few companies can afford to keep current with only their internal staff as a resource. This applies to many areas of support that companies rely upon outside their normal core competency: human resources, finance and accounting, supply chain management, and of course technology.
In other words, companies should look for opportunities to outsource those functions they can’t do well rather than drain valuable resources trying to do them badly.
And that’s the moral of the story.
We are your CFO for Rent®
The Wall Street Journal reported recently (7/18/19) that CFOs of public companies are retiring at the fastest pace in over a decade. Exit rates of nearly 18% annually are now thought to be higher than for CEOs, a historically high turnover job. The trend, captured by a survey commissioned by the Journal, is said to be the result of a variety of factors:
- the increased pressure on today’s CFOs to respond to an increasingly aware – and critical – investing public,
- the often added responsibility of operations, technology, talent management and human resources, often requiring more and more time spent on the job,
- increasing involvement in setting strategy and executing deals,
- M&A deals that accelerate vesting of restricted stock options,
- and, of course, normal retirement age decisions.
What does that mean for the CFOs of non-public companies? While they don’t typically get the visibility of their public counterparts – and they don’t have the cushion of cashing out restricted stock options – the same pressures are often felt, maybe even more acutely because the typically smaller organization size presents fewer options for offloading those pressures to skilled executive team members. And, of course, many private company CFOs have not had the opportunity to grow into these areas before having the responsibility. Some universities offer programs aimed directly at this market. Harvard, Wharton, University of Chicago and Stanford all offer such programs for enhancing CFO skills in strategy, leadership and communication. The challenge is getting the off-site training while also having to be in the office doing the job.
The silver lining in this could be the opportunity to present subordinate managers in privately held companies with career enhancing growth education that builds employee loyalty, makes employees more valuable to the company, and enables CFOs to manage more and execute less.
What might that look like?
Some of the readily available options include payment for online courses offered by specialized educational resources like Illumeo.com or in-person courses at local universities. More generous options could include financing an MBA program or Master’s degree, or at the high end individual professional one-on-one coaches. As the cost goes up, so does the opportunity to tailor the training to the individual. And so does, presumably, the gratitude of the employee whose career is being enhanced by their employer.
First, full disclosure #1: “Non-digital” may not be a real word, but it’s my attempt to identify those businesses whose owners don’t rely on the Internet for their business and don’t think they’ll ever have to. Think: Blockbuster, Radio Shack, Borders, Polaroid, etc. Because they were huge they were a visible target, and they became obsolete in a couple decades by the power of technology. Because you’re not huge, it would be a mistake to think you’ll never be a target. Think of the little bookstore that used to be in your neighborhood. Thoughts for reflection on that idea is the subject of this post, as you contemplate your next strategic planning activity.
Next, full disclosure #2: This wisdom is not mine, but it’s the recent post of an entrepreneur that I interviewed many years ago for my newsletter, and who still has words of wisdom to share with every entrepreneur/business owner.
Finally, go to Dave Berkus’ latest post at his website and consider how this might touch you: https://berkonomics.com/?p=3850
In a recent California court case, a female employee was hired at 5% over her last salary with a prior employer, a starting wage policy the new employer followed for everyone. A while later the employee found that male workers doing similar work were paid more, likely because they had earned more at a prior job. So she sued her employer under the Equal Pay Act. And won. The court ruled that prior salary cannot be used to justify a wage differential, as it is not a legitimate, job-related factor.
Source: Rizo v. Yovino, per Fisher & Phillips LLP
Some years ago (over 10, actually) I wrote an article that bore the tongue-in-cheek title “Financial Training Isn’t for Everyone!” I was then typically traveling virtually every month speaking to business audiences nationwide on the value of financial education, and watching glazed eyes in many of my audiences, as some attendees recognized the need intellectually but not in their bones, as my wife would say. Many of them were there because someone said they should learn this stuff.
These days my workshops and coaching talks are mostly more intimate events for the management teams of clients for our CFO consulting practice. My belief is that the value is more easily felt when it’s seen as relevant to their company (for owners) and their job (for managers), and the participation is noticeably more enthusiastic.
In fact, two recent examples brought that home with particular emphasis.
The first came from the CFO of a client in Texas where I had been coaching several company executives, including their controller, on the strategic side of financial management. During a recent phone call the CFO told me that someone had proposed a spending project during a budget planning meeting, and someone else objected, saying “There’s always a ‘good reason’ to spend money, but that doesn’t mean we should spend it.” The controller jumped in with the observation: Isn’t that from Gene’s book? And in truth it is. I at that point reaffirmed my belief that the coaching had borne fruit and awakened some solid financial instincts.
The second example came from a California-based client whose young management team has been attending one of my workshops, this one developed specifically for their industry. We had covered in an earlier session some of the concepts of manufacturing cost accounting, things like shop rates, gross margins, optimum order quantities and such. Several weeks after that particular topic had been presented the team was discussing a particular customer project and the CEO told me that one of his managers enthusiastically quoted a line from one of my slides, and others recognized the principle as well. Needless to say, made my day! Again!
What’s the point? It’s not about what a great teacher I am. It’s about how relevant financial education tailored to the audience transforms listeners from glazed eyes to genuine learners. And genuine learners actually apply what they’ve learned – to the benefit of the company, the owners, and the managers’ careers. And yes, financial training IS for everyone. Everyone who wants to succeed, that is.
As always, I welcome your comments and suggestions for future topics.
The following VERY long post is compliments of Morningstar, which provided a good recap of the rates and due dates for 2018 and 2019 tax filers.
The year 2018 ushered in seismic tax-code changes that you’re likely to see reflected on your 2018 return: notably, the end of personal exemptions as well as higher standard deduction amounts that mean many fewer taxpayers are apt to benefit from itemizing their deductions than in the past.
As 2019 dawns, the changes to the tax code are far less remarkable–more evolutionary than revolutionary. Most of the changes amount to tweaks that reflect the effects of inflation in various provisions within the tax code.
Here are key tax-related dates and data points to have on your radar for the year ahead.
2019 Important Tax Facts for All Taxpayers
Income Tax Brackets: Seven tax brackets remain, but the specific parameters have changed, as follows:
- 10%: Single taxpayers with incomes between under $9,700; married couples filing jointly with incomes of less than $19,400.
• 12%: Single taxpayers with incomes between $9,700 and $39,475; married couples filing jointly with incomes between $19,400 and $78,950.
• 22%: Single taxpayers with incomes between $39,475 and $84,200; married couples filing jointly with incomes between $78,950 and $168,400.
• 24%: Single taxpayers with incomes between $84,200 and $160,725; married couples filing jointly with incomes between $168,400 and $321,450.
• 32%: Single taxpayers with incomes between $160,725 and $204,100; married couples filing jointly with incomes between $321,450 and $408,200.
• 35%: Single taxpayers with incomes between $204,100 and $510,300; married couples filing jointly with incomes between $408,200 and $612,350.
• 37%: Single taxpayers with incomes of $510,300 or more; married couples filing jointly with incomes of $612,350 or more.
AMT-Exempt Amounts: The exemption amounts for the alternative minimum tax are increasing slightly in 2019, to $71,700 for single filers and $111,700 for married couples filing jointly. The full exemptions are available to taxpayers with alternative minimum taxable incomes of less than $510,300 (single filers)/$1,020,600 (married couples filing jointly).
Estate/Gift Tax Exemption: This amount is increasing slightly, to $11.4 million per individual. The annual gift-tax exclusion amount stays the same at $15,000. (Note that annual gifts in excess of this amount do not automatically trigger any sort of gift tax, as discussed here. Most people won’t owe estate or gift taxes in their lifetimes under current tax laws.)
2018 Important Tax Facts for Investors
Qualified Dividend and Long-Term Capital Gains Rates: Three rates are still in place for dividends and long-term capital gains–0%, 15% and 20%–but they don’t map perfectly by tax bracket as they did in the past. Here are the parameters for each of the rates.
- 0%: Single taxpayers with incomes between $0 and $39,375; married couples filing jointly with incomes between $0 and $78,750.
- 15%: Single taxpayers with incomes between $39,375 and $434,550; married couples filing jointly with incomes between $78,750 and $488,850.
- 20%: Single taxpayers with incomes over $434,550; married couples filing jointly with incomes over $488,850.
Medicare Surtax: As in years past, an additional 3.8% Medicare surtax will apply to the lesser of net investment income or the excess of modified adjusted gross income over $200,000 for single taxpayers and $250,000 for married couples filing jointly.
IRA contribution limits (Roth or traditional): $6,000 under age 50/$7,000 over age 50.
Income limits for deductible IRA contribution, single filers or married couples filing jointly who aren’t covered by a retirement plan at work: None; fully deductible contribution.
Income limits for deductible IRA contribution, single filers covered by a retirement plan at work: Modified adjusted gross income under $64,000–fully deductible contribution; between $64,000 and $74,000–partially deductible contribution; more than $74,000–contribution not deductible.
Income limits for deductible IRA contribution, married couples filing jointly, if the spouse making the contribution is covered by a retirement plan at work:Modified adjusted gross income under $103,000–fully deductible contribution; between $103,000 and $123,000–partially deductible contribution; more than $123,000–contribution not deductible.
Income limits for deductible IRA contributions, married couples filing jointly, if the spouse making the contribution isn’t covered by a retirement plan at work but his/her spouse is: Modified adjusted gross income under $193,000–fully deductible contribution; between $193,000 and $203,000–partially deductible contribution; more than $203,000–contribution not deductible.
Income limits for nondeductible IRA contributions: None.
Income limits for IRA conversions: None, but note that the tax legislation that went into effect in 2018 eliminated the opportunity to recharacterize a Roth IRA as a traditional IRA, or vice versa.
Income limits for Roth IRA contribution, single filers: Modified adjusted gross income under $122,000–full Roth contribution; between $122,000 and $137,000–partial Roth contribution; more than $137,000–no Roth contribution.
Income limits for Roth IRA contribution, married couples filing jointly:Modified adjusted gross income under $193,000–full Roth contribution; between $193,000 and $203,000–partial Roth contribution; more than $203,000–no Roth contribution.
Contribution limits for 401(k), 403(b), 457 plan, or self-employed 401(k) (traditional or Roth): $19,000 under age 50; $25,000 for age 50 and older.
Total 401(k) contribution limits, including employer (pretax, Roth, aftertax) and employee contributions and forfeitures: $56,000 if under age 50; $62,000 if 50-plus.
Income limits for 401(k), 403(b), 457 plans: None, though annual compensation limits can come into play in certain situations.
SEP IRA contribution limit: The lesser of 25% of compensation or $56,000 ($62,000 for those 50-plus).
Saver’s Tax Credit, income limit, single filers: $32,000.
Saver’s Tax Credit, income limit, married couples filing jointly: $64,000.
Health savings account contribution limit, single contributor: $3,500 (under 55); $4,500 (over 55).
Health savings account contribution limit, family coverage: $7,000 (contributor under 55); $8,000 (contributor 55-plus).
High-deductible health plan minimum deductible, self-only coverage: $1,350.
High-deductible health plan minimum deductible, family coverage: $2,700.
High-deductible health plan out-of-pocket maximum, self-only coverage:$6,750.
High-deductible health plan out-of-pocket maximum, family coverage: $13,500.
Jan. 15: Estimated tax payments due for fourth quarter of 2018.
- Individual tax returns (or extension request forms) due for 2018 tax year.
- Estimated tax payments due for first quarter of 2019.
- Last day to contribute to IRA for 2018 tax year (2018 contribution limits: $5,500 under age 55; $6,500 for age 55 and above).
- Last day to contribute to health savings account for 2018 tax year (2018 contribution limits: $3,400 for single coverage, contributor under age 55; $4,400 for single coverage, contributor age 55 and above; $6,750 for family coverage, contributor under age 55; $7,750 for family coverage, contributor age 55 and above).
June 15: Estimated tax payments due for second quarter of 2019.
Sept. 15: Estimated tax payments due for third quarter of 2019.
Oct. 15: Individual tax returns due for taxpayers who received a six-month extension.
- Retirees age 70 1/2 and older must take required minimum distributions from traditional IRAs and 401(k)s; those RMDs are based on their balances at the end of 2018.
- Last date to make contributions to company retirement plans (401(k), 403(b), 457) for 2018 tax year.
We’ve been reading a lot about the aerospace industry lately – strong demand for product from airlines, defense, technology. Difficulty hiring enough qualified workers to fill the orders. What a former boss of mine would have called a high class problem. But there’s another side to this story that applies to the many small businesses in the aerospace industry. Here is one such real life story that is painfully representative of many companies in this space.
We have a long time client in the aerospace manufacturing industry. In business for over 40 years. Its co-owners were in their mid-50s when we started talking about an exit for them. Neither wanted to be working past age 65. The company was profitable and in a strong industry with lots of demand for product, even 10 years ago. But they had several challenges common to similar companies in the industry:
- Very high concentration of revenue from a single top tier manufacturer
- A long term contract that fixed prices for the term
- Constant pressure to lower costs, provide flexible delivery timetables, ensure repeatability, and maintain quality – a very challenging set of standards to meet consistently.
The owners enjoyed strong profits, producing products that they’d been making for years, almost like a recurring revenue model, and in our planning meetings agreed on a plan to build a bench of managers who could replace them when they sold the business and exited.
And then they delayed implementing the plan – for years. Meanwhile the large customer’s contract carried on, neared its contract term. And then we learned their contract had a unilateral extension provision with no changes in pricing despite rising costs – an extension that could be maintained indefinitely at the customer’s option. As costs grew, prices didn’t, profits shrunk. They’re now struggling to negotiate a better contract, without numerous profit-killing provisions, and facing the task of establishing a credible profit trend despite recent history.
And the owners are now in their early 60s. At this stage the recovery plan is…
- Push back to get a better contract with reasonable pricing and renegotiation provisions – and risk losing the business
- Re-establish an acceptable profitability pattern, assuming the first step works
- Find a buyer who understands the industry and is not put off by its unique challenges
- Support that buyer in the transition, including staying around a few years longer than planned.
If your industry has similarities and you’re well down in the supply chain, a lack of long term planning – and solid execution – is not a good strategy. Want to learn how to change that? Here’s my course on strategic planning: