Trends – Roth&Co

January 2023

Investors: The market feels very risky right now. With inflation still very high, and the Federal Reserve aggressively raising rates, I’ll play it safe and invest in short duration treasuries yielding a risk-free 5%.

Stock market: LOL

At first glance, investing in non-volatile assets in response to an unstable and risky market may seem sensible. But it brings to mind one of Warren Buffet’s best pieces of investment advice: “Be greedy when others are fearful, and fearful when others are greedy.” This is the essence of successful investing; take advantage of opportunities when others are too apprehensive to seize them.

At the close of 2022, Wall Street had weathered a backbreaking annual percentage drop. The S &P market cap, the Dow, and Nasdaq fell drastically. It was a year of sharp losses and hefty interest rate hikes. Investors ran scared and turned risk-averse. They abandoned the market and went into safe, predictable government treasuries – investments that promised no variations in outcomes and no surprises.

In hindsight, we can see that the market bottomed on October 13th, 2022, a day when the Consumer Price Index (CPI) came in much higher than expected, with inflation running at 8.2% year over year. By that time, the Federal Reserve had already raised rates five times, with three consecutive hikes of 75 basis points; and they showed no sign of stopping until the inflation was under control.

Curiously, on that day, the market opened down by 1.5% and then, against all odds, managed to close with a 2.5% increase. At that point the market was down about 26% from previous highs. Since then, the market has risen 23% and is only a small percent away from reaching its previous highs. This unpredictability highlights the cruel irony of the market: it tends to be forward-looking and often thrives when things seem bleak on Main Street.

It’s natural for the investor to feel the need to run for cover in a volatile market. But historically, from an investment perspective, it’s always better to stay the course. Investors that abandoned the market after 2022’s debacle are still left with their stable government treasuries, while those who were able to endure the risk are now reaping higher returns. Had those timid investors remained invested, their shares would have ridden the waves and ended up high with the market.

From our vantage point at Equinum, we often witness how emotions play on an investor’s ability to make effective decisions. From our conversations with clients and prospects, we have seen patterns emerge: When investors are comfortable they tend to invest more, and when they are hesitant, they bail out – often counterproductively. Moving in and out of the market based on feelings is never a sound approach in the long-run.

As advisors, we are tasked with keeping our clients’ emotions level through both the good times and the uncertain ones. And given people’s innate tendency to make the wrong decisions when investing, it becomes crucial to adopt a big-picture approach and remain invested for the long haul. Emotional reactions to short-term fluctuations can lead to impulsive actions that may not align with one’s overall financial goals.

For more information, please reach out to us at info@equinum.com.

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Meetings are critical to a company’s success. Good meetings, that is.

Leading an effective and productive meeting is part science and part art. The science is in putting in the pre-meeting work to ensure that the essential elements of the meeting structure are in place. The art is in the way we run the meeting and promote positive engagement with participants. Here are six strategies to help you lead positive, engaging and efficient meetings that actually yield results.

Clearly Articulate the Purpose – Be clear and concise about the goal of your meeting. If you can’t describe why you’re holding a meeting in a sentence or two, you probably don’t need to have it. The meeting objective should have results-oriented terms and actionable goals.

Prepare an Agenda – Have the meeting leader prepare an agenda beforehand and send it to participants in advance. This will sharpen and clarify the purpose of the meeting and give everyone a chance to prepare. The agenda provides a compass for the conversation, so the meeting can get back on track if the discussion wanders off course.

Invite the Right People – Meetings are expensive and time-consuming. Avoid inviting anyone who is not needed to achieve the meeting objective. At the same time, be sure that you have enough participants for a productive, open discussion with diverse perspectives. A good meeting strikes a balance between minimizing attendees and maximizing the creative potential of a group.

Keep Detours Brief –The meeting leader’s job is to intervene when the conversation gets derailed. And nothing derails a meeting faster than discussing something that may be connected to the agenda, but not essential to the meeting. If you or someone else introduces an idea that’s only tangentially related or unrelated, get ‘in and out’ quickly so you can refocus on the purpose of the meeting. Set the climate for engagement by encouraging productive behavior and discouraging unproductive behavior. Nothing prevents engagement like letting bothersome behavior and random discussions run rampant in your meeting.

Keep the Meeting Short – Don’t overload your meeting agenda. Better to have four 30-minute meetings than a single 2-hour meeting. Setting a time limit for meetings is a respectful way to honor people’s time get them back to their schedules as promptly as possible.

End With Meaningful Action Steps – One of the biggest blunders people make when leading meetings is failing to record, recap, and follow up on action items, next steps, and important meeting outcomes. Leave the last few minutes of every meeting to discuss who is responsible for what, and what the deadlines are. Otherwise, all the time you spent on the meeting will be for naught. Every action item needs three things: 1) Clear deliverable; 2) Owner; and 3) Due date.

Meetings are a critical avenue for growing your business, improving productivity and communication, promoting team integration and increasing job satisfaction. It pays to run them well.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

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Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2023. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact your financial advisor to ensure that you’re meeting all applicable deadlines and to learn more about the filing requirements.

July 31

Report income tax withholding and FICA taxes for second quarter 2023 (Form 941) and pay any tax due. (See the exception below, under “August 10.”)
File a 2022 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

August 10

Report income tax withholding and FICA taxes for second quarter 2023 (Form 941), if you deposited all of the associated taxes due in full, and on time.

September 15

If a calendar-year C corporation, pay the third installment of 2023 estimated income taxes.
If a calendar-year S corporation or partnership that filed an automatic six-month extension:
- File a 2022 income tax return (Form 1120-S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due.
- Make contributions for 2022 to certain employer-sponsored retirement plans.

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If a long-time business owner fails to establish a clearly written and communicated succession plan, the result can be chaotic. While there are many aspects to succession planning, one way to clearly document your goals — particularly if your company has multiple owners — is to draft a buy-sell agreement.

Avoiding conflicts

A “buy-sell,” as it’s often called for short, is essentially a contract that lays out the terms and conditions under which the owners of a business, or the business itself, can buy out an owner’s interest if a “triggering event” occurs. Such events typically include an owner dying, becoming disabled, getting divorced or deciding to leave the company.

If an owner dies, for example, a buy-sell can help prevent conflicts — and even litigation — between surviving owners and a deceased owner’s heirs. It also ensures that surviving owners don’t become unwitting co-owners with a deceased owner’s spouse who may have little knowledge of the business or interest in participating in it.

A buy-sell also spells out how ownership interests are valued. For instance, the agreement may set a predetermined share price or include a formula for valuing the company that’s used upon a triggering event, such as an owner’s death or disability. Or it may call for the remaining owners to engage a business valuation specialist to estimate fair market value.

By facilitating the orderly transition of a deceased, disabled or otherwise departing owner’s interest, a buy-sell helps ensure a smooth transfer of control to the remaining owners or an outside buyer.

This minimizes uncertainty for all parties involved. Remaining owners can rest assured that they’ll retain ownership control without outside interference. The departing owner, or in some cases that person’s spouse and heirs, know they’ll be fairly compensated for the ownership interest in question. And employees will feel better about the company’s long-term stability, which may boost morale and retention.

Funding the agreement

There are several ways to fund a buy-sell. The simplest approach is to create a “sinking fund” into which owners make contributions that can be used to buy a departing owner’s shares. Or remaining owners can simply borrow money to purchase ownership shares.

However, since there are potential complications with both options, many companies turn to life insurance and disability buyout insurance as a funding mechanism. Upon a triggering event, such a policy will provide cash that can be used to buy the deceased owner’s interest. There are two main types of buy-sells funded by life insurance:

1. Cross-purchase agreements. Here, each owner buys life insurance on the others. The proceeds are used to purchase the departing owner’s interest.

2. Entity-purchase agreements. In this case, the business buys life insurance policies on each owner. Policy proceeds are then used to purchase an owner’s interest following a triggering event. With fewer ownership interests outstanding, the remaining owners effectively own a higher percentage of the company.

A cross-purchase agreement tends to work better for businesses with only two or three owners. Conversely, an entity-purchase agreement is often a good choice when there are more than three owners because of the cost and complexity of owners having to buy so many different life insurance policies.

Getting expert guidance

Speak to your financial advisor for help creating, administering and executing a buy-sell agreement.

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If you’re a frequent traveler, you may have accumulated hundreds of thousands or even millions of frequent flyer miles. The value of these miles may be significant, so it’s important to determine whether you can include them in your estate plan and share them with your loved ones.

Learn your options

Your ability to transfer miles at death (or any other time) is governed by your contract with the airline, which requires you to accept a long list of terms and conditions when you join its frequent flyer program. Most programs make it clear that miles aren’t your property and that you’re not entitled to transfer them during your lifetime or at death. But many programs provide that the airline may transfer miles to authorized persons at their discretion.

For example, American Airlines’ rules state that miles are nontransferable, but that, in the event of death, the airline “in its sole discretion, may credit accrued mileage to persons specifically identified in court approved divorce decrees and wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.” Anecdotal evidence indicates that American routinely grants these requests and often waives the fees.

Read the fine print

There are no guarantees, but you can maximize the chances that an airline will honor your wishes by including a provision in your will, leaving your frequent flyer miles to one or more beneficiaries. It may be beneficial to put on your reading glasses and read the fine print of your frequent flyer mile programs. Your attorney can answer questions on how to address your miles (or other nonstandard assets, such as a firearms collection) in your estate plan.

Investors in January 2023

How to Run Better Meetings

2023 Q3 Tax Calendar: Key deadlines for businesses and other employers

Avoid succession issues with a buy-sell agreement

How to address frequent flyer miles in your estate plan