Financial Gravity Companies, Inc. · OTC:FGCO
Financial Gravity Companies — Financial Gravity Tampa Conference 2022 (Day 1)
174 slides from Financial Gravity Companies's conference presentation, October 2022
Slide 1: The Future of the Entrepreneurial Tax Professional
The Future of the Entrepreneurial Tax Professional A Bold Vision for the Future of Tax Professionals
Slide 2: Our Speakers
Our Speakers Scott Winters Ed Lyon, J.D. Dave O’Rourke CEO Chief Tax Strategist Chief Evangelist
Slide 3: The Future of the Entrepreneurial Tax Professional
The Future of the Entrepreneurial Tax Professional Scott Winters CEO
Slide 4: Family Office Director Plaque Presentation
Family Office Director Plaque Presentation ● Erling Brakke ● Chris Middleton ● Scott Terry ● Shelley Johnson ● Bill Perlette ● John Bell ● Dean Specker ● Joe Reyes ● Nick Secord
Slide 5: ul
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Slide 6: The Future of the Tax Business
The Future of the Tax Business
Slide 7: The “Big Four” Questions
The “Big Four” Questions 01 02 How do you get How do you out of low-value, eliminate toxic low-margin clients without transactions? losing revenue? 03 04 How do you How do you exit provide more more effectively value to your from your clients? practice?
Slide 8: Destruction
Destruction
Slide 9: Don’t Be the Dinosaur
Don’t Be the Dinosaur Be the Mouse!
Slide 10: Circles of Value
ul Circles of Value im Horizons ul
Slide 11: More Time, More Money
ul More Time More Money ul
Slide 12: More Time
More Time ? ? ? ? ? ? ? ? More Money
Slide 13: Transforming Transactions into Relationships
Transforming Transactions into Relationships Day One | 9:45 am | 45 minutes Ed Lyon
Slide 14: Process: Diagnose, Prescribe, Fill
(= Process Prescribe e_. Diagnose Fill
Slide 15: Overview of the Disc Model
[Ss Overview of the Disc Model OUTGOING Dominance Influence + Direct + Outgoing + Firm * Enthusiastic * Strong-willed * Optimistic + Forceful ~ * + High-spirited + Results-oriented wn fe) * Lively é 2 m Conscientiousness Steadiness * Analytical + Even-tempered + Reserved * Accommodating + Precise +
Slide 16: Maslow’s Hierarchy of Needs
ul Maslow’s Hierarchy of Needs 7 Love/Belonging Safety Physiological
Slide 17: Apply that to Your Business
(Ss Apply that to Your Business is Values Fees for Forms Hours for Dollars
Slide 18: The Best-Kept Marketing Secret in Your Business?
The Best-Kept Marketing Secret in Your Business? LEAD CAPTURE MONTHLY WEBSITE CAMPAIGNS WHITEPAPERS ADs
Slide 19: Relationship Question
Relationship Question “How much do you need to secure the rest of your life?”
Slide 20: Relationship Questions cont.
Relationship Questions cont.
Slide 21: Lifelong Relationship
Lifelong Relationship Income - Spending = Savings GROW WITHDRAW How Long? How Fast?
Slide 22: Keys to Year-Round Income
Keys to Year-Round Income Break the Roll Up Tell a Break the Create Link to Ancillary Compelling Mold Process April 15 Services Story
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Slide 24: Best Practices: Prescribing and Filling
Best Practices: Prescribing and Filling Day One | 10:45 am | 45 minutes Ed Lyon
Slide 25: Introducing Intuit Tax Advisor
ul INTRODUCING INTUIT Tax Advisor |
Slide 26: Choose Your Pricing Strategy
Choose Your Pricing Strategy Low Premium Luxury
Slide 27: Breaking
BREAKING
Slide 28: Find the News
(5 Find the News ¥ ¥ Connect it to Taxes Y Find the Pain y Solve the Pain ul
Slide 29: iW Wy
iW Wy
Slide 30: Slide 30
Slide 31: Slide 31
Slide 32: Ww
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Slide 33: Tax Architect® Data Entry
The client's family: 1, Taxpayer, Barney Beeper, b. 1981 AddPerson |2. Spouse, Mrs Beeper, b. 1982 ‘GepuuE |3- Child, Primo Beeper, b. 2010 4, Child, Segundo Beeper, b. 2011 Baise) |S. Child, Trey Beeper, b. 2014 OsSingle O)Plan to marry (within 12 months) OHead Of Household @ Married Filing Jointly
Slide 34: Tax Architect® Process
i | 1 Elect to be Taxed as an S-Corporation $8,140 Tax Strategy Detail Tab: module not selected ‘+ Split business income into salary (subject to FICA) and net Income (not subject to FICA, and eligible for Qualified Proposed salary: Business Income deduction) Vendor Recommendation: ‘+ Limits employme
Slide 35: Tax Architect® Deliverables
Tax Architect® Deliverables
Slide 36: Tax Architect® Payoff/ROI
Tax Architect® Payoff/ROI * From an actual Tax BlueprintⓇ
Slide 37: Tax Architect® Payoff/ROI
Tax Architect® Payoff/ROI * From an actual Tax BlueprintⓇ
Slide 38: Opportunity Report
(3 Opportunity Report Opportuni PP Report Presented by 5/3/2022
Slide 39: “Taxes First, Then Math” Analysis Preview
“Taxes First, Then Math” Analysis Preview Proposal Meeting
Slide 40: Fill the Prescription!
Fill the Prescription! ● Accounting/Tax Prep ● Business Consulting ● Business Entities ● Employee Benefits ● Business SPVs ● Charitable Giving ● Insurance/Annuities ● Assets Under Management
Slide 41: Sponsor: CIC Services (Captive)
Sponsor: CIC Services (Captive) Day One | 11:30 am | 45 minutes
Slide 42: Enterprise Risk Management via a Captive Insurance Company
Turning Risk Into Wealth Enterprise Risk Management via a Captive Insurance Company Prepared by: Sean G. King, JD, CPA, MAcc Bryan D. Ridgway, ACI Presented by: J. Randy Sadler & Ram Patel
Slide 43: Disclosures
Disclosures CIC Services, LLC hereby expressly authorizes each All information, numbers and calculations in this person to whom these materials are given by CIC document are for conceptual and illustrative Services, LLC or its affiliates or authorized agents (and purposes only and are not intended t
Slide 44: About CIC Services, LLC
About CIC Services, LLC CIC Services, LLC is a risk management and consulting firm, specializing in the formation and operation of captive insurance companies for our clients nationwide. As an independent captive insurance manager, CICS provides unparalleled solutions to mid-market businesses in all
Slide 45: About CIC Services, LLC (Cont’d)
About CIC Services, LLC (Cont’d) Making Headlines 45 PROPRIETARY PROPERTY
Slide 46: About CIC Services, LLC (Cont’d)
About CIC Services, LLC (Cont’d) Award Winning Captive Manager 46 PROPRIETARY PROPERTY
Slide 47: Randy Sadler
Randy Sadler Principal Randy has been a Principal with CIC Services since 2012. He has been a Sales and Marketing professional since 2007, when he joined Procter & Gamble’s Brand Management Group. His career transitions have taken him from P&G to Pfizer Pharmaceuticals to the Ellison Group to Jewelr
Slide 48: What Is A Captive Insurance Company?
What Is A Captive Insurance Company? 48 PROPRIETARY PROPERTY
Slide 49: Captive Insurance Company
Captive Insurance Company Definition: • Captive Insurance Company (Captive): a real insurance company (with policies, policyholders, claims, reserves and surplus), licensed in an appropriate jurisdiction, formed to insure the risks of its owners and sometimes third parties. • Captives are generally
Slide 50: What Do Captive Insurance Companies Do?
What Do Captive Insurance Companies Do? • Replace Commercial Insurance • Insure Enterprise Risks • Insure Warranties • Issue Performance Bonds • Insure Employee Benefits / Healthcare • Any Combination of the Above 50 PROPRIETARY PROPERTY
Slide 51: Captive Example Structure
Captive Example Structure Shareholder(s) Profits Profits Business owner(s) also owner(s) of the captive insurance company Business Captive Ins Co. (Insured) Insurance Policies (Captive) Purchases insurance Receives Insurance coverage from Captive Business pays premiums to Premiums from Captive in ex
Slide 52: Captive Flow Of Funds = AUM
Captive Flow Of Funds = AUM Example Captive Insurance Structure Shareholder(s) Captives Can Create A Business owner(s) also owner(s) of the captive Separate Profit Center insurance company Resulting In Assets Captive Ins Co. Business (Insured) Insurance Policies (Captive) Under Management Purchases
Slide 53: Why Do Enterprise Risk Management?
Why Do Enterprise Risk Management? 53 PROPRIETARY PROPERTY
Slide 54: Why ERM?
Why ERM? Even the U.S. Government encourages small and mid-size businesses to prepare for a wide range of threats. (Chart from Ready.Gov landing page for businesses as of March 2015). 54 PROPRIETARY PROPERTY
Slide 55: Enterprise Risks
Enterprise Risks Commonly Un/Under-Insured Risks Strategic Risk (examples of available coverage) • Business Interruption • Loss of Key Customer • Kidnap, Ransom & Extortion • Key Contract Termination • Subcontractor Default • Loss of Franchise • Entrance by Competitors • Loss of Key Employee • Busin
Slide 56: Businesses Face A Fork In the Road
Businesses Face A Fork In the Road Insure Current Un/Under- Insured Risks Don’t Insure Current Un/Under- 56 Insured Risks PROPRIETARY PROPERTY
Slide 57: The Conundrum: Sunk Cost
The Conundrum If A Business Does Not Have Claims On Its Commercial Insurance Policies, The Premiums Were A: Sunk Cost 57 PROPRIETARY PROPERTY
Slide 58: Solving The Conundrum: Sunk Profit
Solving The Conundrum If A Business Does Not Have Claims On Its Captive Insurance Policies, The Premiums Are A: Sunk Profit 58 PROPRIETARY PROPERTY
Slide 59: ERM Enhances Long Term Viability
ERM Enhances BUSINESS 1 BUSINESS 2 Long Term Viability Reserves: $6.3 Million¹ Reserves: $10.9 Million¹ Insurance Policies: Insurance Policies: Which Business is • Auto Liability • Auto Liability better suited to survive • Employment Practices Liability • Employment Practices Liability • Property &
Slide 60: Claims Paying Ability/Loss Reserves
Claims Paying Ability/Loss Reserves Program Years 1 through 10 SUMMARY STATUS QUO (NO CAPTIVE) CAPTIVE CAPTIVE & HEDGING Name: Business Company: Sample Company Fed & State Captive Type: Pure Captive Inv. Inc. Hedging %: 45.0 Inv. Inc. Taxes: 21.0 Age Used: 45 Premium Taxe 42.90% Expenses North Taxes
Slide 61: Long-Term Wealth/After-Tax Distributions
Long-Term Wealth/After-Tax Distributions Owner’s Ages 65-90 SUMMARY STATUS QUO (NO CAPTIVE) CAPTIVE CAPTIVE & HEDGING Name: Business Company: Sample Company Fed & State Taxe 42.90% Captive Type: Pure Captive Inv. Inc. Taxes: 21.00% Hedging %: 45.00% Inv. Inc. Taxes: 21.00% Age Used: 45 Premiums: $1,
Slide 62: Why ERM? Survival
Why ERM? SURVIVAL Stronger Business Model Asset Protection Improved Risk Management Wealth Accumulation Improved Cost Control Advantageous Tax Treatment Insurance Profits 62 PROPRIETARY PROPERTY
Slide 63: ERM With A Captive Insurance Company
ERM With A Captive Insurance Company More Insurance More Money 63 PROPRIETARY PROPERTY
Slide 64: What’s In It For You As A Trusted Advisor?
What’s In It For You As A Trusted Advisor? - Deepen Client Loyalty - Sticky Assets Under Management - Captive Management Fees 64 PROPRIETARY PROPERTY
Slide 65: Taxation Of Insurance Companies
Taxation Of Insurance Companies 65 PROPRIETARY PROPERTY
Slide 66: ERM & Captive Insurance Companies (cont’d)
ERM & Captive Insurance Companies (cont’d) Taxation of Captive Insurance Companies*: • Traditional Captive Insurance Companies: Premium income is offset by reserves for losses (claims); the resulting Underwriting Profits (along with any investment earnings of the captive) are taxed at ordinary tax r
Slide 67: Captive & Reinsurance Structure
Captive & Reinsurance Structure 67 PROPRIETARY PROPERTY
Slide 68: ERM & Captives: Reinsurance Pool
ERM & Captives: Reinsurance Pool Purpose and Background: • The IRS and Tax Courts have ruled that in order for a policy issued by a Captive to be treated as real insurance (and therefore allow for the deductibility of premiums paid to the Captive), there must be Risk-Shifting and Risk-Distribution.
Slide 69: Risk Distribution
Risk Distribution Related Party Risk Distribution (Rev. Ruling 2002-90) • 12 related entities all purchasing insurance from the same Captive • Each insured - 5% minimum; 15% maximum of total risk insured • Cannot be a disregarded entity Unrelated Party Risk Distribution (Rev. Ruling 2002-89) • Minim
Slide 70: ERM & Captives: Sample Structure
ERM & Captives: Sample Structure Shareholder(s) Republic Profits Profits Reinsurance Business owner(s) also owner(s) of the captive Company, Inc. insurance company Pool Owner Business Captive Ins Co. Reinsurance Pool (Insured) Insurance Policies (Captive) Retrocedes Unrelated Risk (Pool) Purchases i
Slide 71: Risk (Reinsurance) Pool
Risk (Reinsurance) Pool 100 Captives In Pool Shareholder(s) Business owner(s) also owner(s) of the captive insurance company CAPTIVE CAPTIVE CAPTIVE CAPTIVE CAPTIVE CAPTIVE INSURED CAPTIVE RISK POOL CAPTIVE CAPTIVE CAPTIVE CAPTIVE 71 PROPRIETARY PROPERTY
Slide 72: Why ERM – Example Uninsured Loss
Why ERM – Example Uninsured Loss Your Business The loss is paid for out of operations, has a loss that is not retained earnings or the owner’s savings commercially insured $200,000 YOUR OWNER LOSS BUSINESS(ES) Wealth Is Destroyed Employees Are Laid-Off 72 PROPRIETARY PROPERTY
Slide 73: Why ERM – Example Insured Loss
Why ERM – Example Insured Loss YOUR Your Business OWNER BUSINESS (ES) has a loss that is insured by your Claim Filed $200,000 Captive Reimbursement $200,000 LOSS RISK POOL CAPTIVE LOSS ADDRESSED $102,000 NOTE: • Loss must be insured by the Captive • Captive pays $98,000 of the claim (49%) • Risk Poo
Slide 74: The Owner Keeps Everything
More Money (Found Money) What happens to assets in a captive that are not paid out in claims or expenses? The Owner Keeps Everything* *Includes paying a pro rata share of risk pool claims **Assets may be taxed at exit from the Captive 74 PROPRIETARY PROPERTY
Slide 75: Who Is A Good Candidate To Own A Captive Insurance Company?
Who Is A Good Candidate To Own A Captive Insurance Company? 75 PROPRIETARY PROPERTY
Slide 76: Successful Business Golden Eggs
Successful Business Golden Eggs 76 PROPRIETARY PROPERTY
Slide 77: Businesses Typically Assess How To Allocate Their Golden Eggs
Businesses Typically Assess How To Allocate Their Golden Eggs 77 PROPRIETARY PROPERTY
Slide 78: Businesses Typically Assess How To Allocate Their Golden Eggs
Businesses Typically Assess How To Allocate Their Golden Eggs Dividends What Is The Employee & Most Logical Owner Capital Benefits Profits Choice? Expenditures & Bonuses 78 PROPRIETARY PROPERTY
Slide 79: Protect the Goose
Businesses Typically Assess How To Allocate Their Golden Eggs Dividends Employee & PROTECT THE Capital Benefits Owner Expenditures & Bonuses Profits GOOSE 79 PROPRIETARY PROPERTY
Slide 80: Every Year: Protect the Goose
Every Year PROTECT THE GOOSE 80 PROPRIETARY PROPERTY
Slide 81: Who Is A Good Candidate To Own A Captive Insurance Company?
Who Is A Good Candidate To Own A Captive Insurance Company? A Business Owner Or Business Owners Who Have A Golden Goose Or Golden Geese That Are Laying Golden Eggs 81 PROPRIETARY PROPERTY
Slide 82: Who Is A Good Candidate To Own A Captive Insurance Company?
Who Is A Good Candidate To Own A Captive Insurance Company? In Short… Successful Middle Market Business Owners That Have Something To Lose 82 PROPRIETARY PROPERTY
Slide 83: Who Is A Good Candidate To Own A Captive Insurance Company?
Who Is A Good Candidate To Own A Captive Insurance Company? Ideally: - Gross Revenue Of $3 Million Plus - $300 K Plus Of Golden Eggs Annually That Can Protect The Goose 83 PROPRIETARY PROPERTY
Slide 84: Questions?
Enterprise Risk Management Via a Captive Insurance Company Questions? Contact a CIC Services Representative Directly: www.cicservicesllc.com 865-248-3044 Turning Risk Into Wealth 84 PROPRIETARY PROPERTY
Slide 85: Appendix – CIC Services’ Structure & Formation Process
Appendix – CIC Services’ Structure & Formation Process 85 PROPRIETARY PROPERTY
Slide 86: CIC Services Captive Formation
CIC Services Captive Formation 1. Risk Focused Client Education Process 2. 3rd Party Risk Assessment 3. Underwriting To Identify Policies & Appropriate Limits 4. 3rd Party Actuary Develops Pricing 5. Client Approves Policies To Purchase 6. Independent Captive Attorney Retained By Client, Forms Capti
Slide 87: CIC Services Captive Structure
CIC Services Captive Structure 1. Risk Pool Is 51/49 Split & Is A First Dollar Reinsurance Arrangement (Based On Rev. Ruling 2002-89) 2. Captives Transfer Both Funds & Risk To Reinsurance Pool 3. Pool Is Onshore Reinsurance Company In North Carolina & Regulated By NCDOI 4. All Pooled Captives Pay 3r
Slide 88: Appendix – Case Examples
Appendix – Case Examples 88 PROPRIETARY PROPERTY
Slide 89: Franchise Operation
Franchise Operation • Involved in real estate transactions • Approximately 140 franchisees • Client was looking to replace their E&O, GL and • Sell home warranties to their customers Captive Insurance Profit Retained • Annual Captive Premiums of $2.7M Year 1 - $778,000 • 8,000 Annual Home Warranties
Slide 90: Oil Field Supply Company
Oil Field Supply Company • 1,000 units • 1,500 employees • Annual Revenues of $1.2 Billion • Est. Annual Traditional P&C Insurance Spend of ~$9M • WC loss ratio of approximately Captive Insurance Profit Retained 63% Year 1 - $2.7 Million Year 5 - $13.9 Million 90 Year 10- $27.9 Million PROPRIETARY P
Slide 91: Trucking Company
Trucking Company • 500 power units • Long haul • Operate in 48 states • Estimated Auto Liability, Physical Damage and Cargo Insurance Spend of Captive Insurance Profit Retained ~$4M Year 1 - $750,000 Year 5 - $4.1 Million 91 Year 10- $27.9 Million PROPRIETARY PROPERTY
Slide 92: Property Manager
Property Manager • $6 million rental income • RE Value: $50 million • 8% Cap Rate • $750,000 P&C Premiums Captive Insurance Profit Retained • $2.5 million net profit Year 1 - $200,000 Year 5 - $1.1 Million Year 10- $2.4 Million 92 PROPRIETARY PROPERTY
Slide 93: Lunch
Lunch 12:15 – 1:15 pm Yucatan Buffet
Slide 94: Sponsor: Ed Lloyd
Sponsor: Ed Lloyd THE FAMILY ENDOWMENT PROGRAM™ Day One | 1:15 pm | 45 minutes
Slide 95: The Family Endowment Program
THE FAMILY ENDOWMENT PROGRAM ™
Slide 96: Circular 230 & Disclaimer
CIRCULAR 230 & DISCLAIMER In order to comply with requirements with Circular 230 which may apply to the information in this presentation, please be advised that the material contained herein is not intended or written to be used, and it cannot be used, by anyone for the purpose of avoiding any penal
Slide 97: Overview
OVERVIEW THE FAMILY ENDOWMENT PROGRAM™ provides an opportunity to increase the cash flow available for charitable gifting and is funded with transactions including: § Sale of a Business § Sale of Professional Practice or Goodwill § Post-Sale or High-Income Taxpayer Income Tax Reduction § Sale of Rea
Slide 98: How Is the FEP Structured?
HOW IS THE FEP STRUCTURED? Ownership: _______________________________________________________________________________________ ________________________________________________________________________________________________ _ Charitable Gifting: _______________________________________________________
Slide 99: What Is a Post Sale and How Does This Work?
WHAT IS A POST SALE AND HOW DOES THIS WORK? Considerations: ____________________________________________________________________________________ ________________________________________________________________________________________________ _ § ______________________________________________________
Slide 100: Post-Sale Capital Gain: Summary & Comparison
THE FAMILY ENDOWMENT PROGRAM™ Post-Sale Capital Gain: Summary & Comparison Assumptions: • Client lives in a state with 7% capital gains tax and has $500,0000 ordinary income. • Client has $10M in capital gains and is seeking to contribute $5M into The Family Endowment Program after the sale. • Clien
Slide 101: What Is a Presale and How Does This Work?
WHAT IS A PRESALE AND HOW DOES THIS WORK? Considerations: ____________________________________________________________________________________ ________________________________________________________________________________________________ _ § ________________________________________________________
Slide 102: Pre-Sale Capital Gain: Summary & Comparison
THE FAMILY ENDOWMENT PROGRAM™ Pre-Sale Capital Gain: Summary & Comparison Assumptions: • Client lives in a state with 7% capital gains tax and has $500,000 ordinary income. • Client also has $10M in capital gains and is seeking to contribute $5M into The Family Endowment Program prior to the sale. •
Slide 103: What Is a Cash Contribution and How Does This Work?
WHAT IS A CASH CONTRIBUTION AND HOW DOES THIS WORK? Considerations: ____________________________________________________________________________________ ________________________________________________________________________________________________ _ § ______________________________________________
Slide 104: Cash Contribution: Summary & Comparison
THE FAMILY ENDOWMENT PROGRAM™ Cash Contribution: Summary & Comparison Assumptions: • Client lives in a state with 7% income tax rate. • Client has $10.5M of ordinary income and is seeking to contribute $5M into The Family Endowment Program. • Client will transfer the cash into a new entity in exchan
Slide 105: What Can My Client Do With Their FEP?
WHAT CAN MY CLIENT DO WITH THEIR FEP? Start Business:____________________________________________________________________________________ ________________________________________________________________________________________________ Buy Real Estate: ________________________________________________
Slide 106: What Are the Ongoing Benefits of the FEP?
WHAT ARE THE ONGOING BENEFITS OF THE FEP? Legacy: __________________________________________________________________________________________ Gifting: __________________________________________________________________________________________ Asset Protection: _________________________________________
Slide 107: Endowment Management Group LLC Services Provided
ENDOWMENT MANAGEMENT GROUP LLC Services Provided • Management of the formation and ongoing governance of the appropriate business entity(s) that will be used as the vehicle through which the charitable transfers/gifts will be made, and the transfer of agreements/assets into THE FAMILY ENDOWMENT PROG
Slide 108: Client Investment Structure
Client Investment Structure THE ENDOWMENT MANAGEMENT GROUP’S compensation for the Formation Services provided is calculated on the amount contributed into THE FAMILY ENDOWMENT PROGRAM™ is as follows: Percentage Contribution Amount 6.00% Up to $5,000,000 ($1 million minimum) 5.00% $5,000,000 up to $1
Slide 109: Client Analysis
CLIENT ANALYSIS Go through the list below and write down the names of clients you have that fall into these categories: § Upcoming Sale of a Business or Capital Asset ________________________________________________________________________ ____________________________________________________________
Slide 110: A Tale of Two CPAs
A Tale of Two CPAs Day One | 2pm | 45 minutes
Slide 111: Agenda
Agenda • Dickens’ key insight • Maslow’s Tax Pros • Our 2 Tax Pros: Bailey • Concept of wallet share • Altruism meets capitalism: demand drivers create mandate • Productivity as the fundamental determinant of value–the DFY model • Concept of wallet share • https://www.accountingtoday.com/opinion/the
Slide 112: Maslow’s Hierarchy of Needs
Maslow’s Hierarchy of Needs Works for Career Lives, too
Slide 113: The Tax Pro Multiverse
The Tax Pro Multiverse Which Box Are You In? Financial Wealth Bookkeeping Planning Management Numbers Tax Planning Risk MFO in Boxes Management Director As scope of services grow, so do revenues, margins and business valuations.
Slide 114: Meet Bailey, CPA
Meet Bailey, CPA • 42 years old • 20 years in the profession • Owns their own tax practice in Anytown, USA (250 clients, one FTE staff) • Compliance, bookkeeping, payroll services, some planning • 2021 Income: $152,000 • 25% of clients own a business Has reached the Esteem • Plans to retire in 2045
Slide 115: Bailey’s Upside
Bailey’s Upside • Owns their own business / Is their own boss • Feels well qualified / suited to their job • Earns a good living • Knows many people in their community • Enjoys a good reputation/is well trusted • Can look forward to a secure retirement Never has to sell anything to anyone
Slide 116: Bailey’s Key Challenges–They Think
Bailey’s Key Challenges–They Think • Too many clients. • 50% of clients bill under $600/year • Revenues are low during off season • Profitability of out-sourced work is low • 70 to 84-hour workweeks in peak season • Difficulty raising average fees y/y • 1040 clients can be profitable but irritating
Slide 117: Bailey’s Key Challenges–In Reality
Bailey’s Key Challenges–In Reality • Captures <10% of total finserv wallet share • Trades “dollars for dimes” • Is threatened by “Big Tax” • Will be offered 1.1x to 1.4x upon sale • Soon will face a “buyer’s market” to exit early • Loses control of referral’s objectives • To build substantial wealth
Slide 118: Bailey’s Key Challenges–In Reality …cont
Bailey’s Key Challenges–In Reality …cont • Wallet share growth is blocked: • Potential partners in conflict • Choice under conflict • Concerns about reputation, brand and identity
Slide 119: Bailey’s Clients Need More
Bailey’s Clients Need More Clients rarely get their prescriptions filled properly • Siloed service providers • Lack of transparency • Miscommunication about risk exposure • Pervasive, persistent failure Bottom line: Most of Bailey’s clients can’t tell if their investments are good for them
Slide 120: SOW: The Ultimate Metric of Value
SOW: The Ultimate Metric of Value Example: $1M “Investable” Client Family Annual Financial Services Expenses ● Tax Compliance: $1,000 ● Asset Management: $15,000 - $30,000 ⇢MFO Model Wallet Share = 100% 16x to 32x increase 120
Slide 121: The How: Wallet Share
The How Wallet Share: The Ultimate Metric of Value Result Externality • Massive productivity • Opportunities for Tax • Revenue Planning & Consulting • Margins Multiply • Business Value Growth Bottom line: One “MFO” client = 16 to 32 Tax Compliance Customers 121
Slide 122: SOW Impact: Client Lifetime Value Comparison
SOW Impact: Client Lifetime Value Comparison $400,000 AUM Client VALUE COMPARISON Present Value Tax-Only Client MFO Client Present Value MFO $1,000 year $4,000 year Combined Present Value 2% growth rate 6% growth rate 77,154 7.5% discount rate 7.5% discount rate 65,333 20 years 20 years Present valu
Slide 123: The Demand Side
The Demand Side According to a Study: Retail Investors: 46% Trust the financial services industry Think their advisor is their most trusted 59% source of advice Think their advisors always put their 35% interests first Trust is downstream from Transparency 123 Source: https://donconnelly.com/3-issue
Slide 124: The Demand Side
The Demand Side 30 Years of Failure: 1987 through 2016 Pervasive, Persistent Failure – and we know the reasons WHY Source: DALBAR Quantitative Analysis of Investor Behavior https://wtop.com/news/2019/11/7-financial-behavior-biases-that-influence- 124 investment-returns/#:~:text=A%20Dalbar%20study%20
Slide 125: The Virtual Family Office
The Virtual Family Office Inherently, and obviously, better for the client ● Positioning yourself & your firm ● Intersections and the fiduciary model ● Truths and myths ● “Good enough” for whom? ● Know your competitors Be the first point of contact for all things financial. CONFIDENTIAL ADVISOR USE
Slide 126: The How--Tax Pros and the MFO
The How--Tax Pros and the MFO Successful FOD Candidates Must be Able to Demonstrate Good Confidentiality Lack of Confidence Teamwork Integrity Judgement Ego Who does this remind you of? 126 Source: https://www.privatebank.citibank.com/ivc/docs/A-guide-to-establishing-a-family-office.pdf
Slide 127: Democratized Multi-Family Office Services
Democratized Multi-Family Office Services UHNW can have anything they want, and they choose the Family Office Structure. Bottom Line: 1,000 41 When you see the scope of the Family Office North American service package, Segment Growth Family Office Space Growth you’ll understand 2010 - 2020 Past 2 Ye
Slide 128: The Other CPA
The Other CPA Bailey’s Practice FOD MFO • Small Wallet Share • Power Brand • Blah Brand • Dominant Wallet Share • So-so Loyalty • Customer as Marketing Team • Middle Road Pricing • Value Pricing • Zero Non-Cash Comp • Quality of Life / Reputation/ Happiness
Slide 129: The Other CPA is also Bailey
The Other CPA is also Bailey FG’s Turnkey FO Charter Works: ● Empathy born of decades with tax pros ● Witnessed/now lead the evolution ● TPCA can estimate practice potential ● DFY partnership solves for the barriers to entry When barriers are removed, great things happen.
Slide 130: TPCA Highlights - Revenues
(5 $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 so TPCA Highlights - $47,000,000 $329,001 Total Potential lm Revenue $25,714,286 $15,110,000 Required to Replace All Required to Replace Current After Price Ml Assets Commodifica
Slide 131: TPCA Highlights – Practice Value
TPCA Highlights – Practice Value
Slide 132: Ww
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Slide 133: Deconstructing the American Wealth Paradigm
Deconstructing the American Wealth Paradigm A Revolution is coming for both tax and financial services in the coming years Day One | 3:00 pm | 45 minutes
Slide 134: Inevitable: Economics & History
Inevitable: Economics & History My bona fides: The WEFA Group …Lawrence Klein, Lawrence Chimarine, Nariman Baravesh, Mark Zandi Joseph Schumpeter: Michael E. Porter: What is Creative Destruction? Porter’s 5 Forces Peter Thiel: Henry George: Schumpeter 2.0 Pro Human Optimism Industrial vectors conver
Slide 135: Commoditization and Democratization
Commoditization and Democratization Massive, natural trends will define both tax and financial services Two Massive Trends Commodification: Democratization: Winning & losing becomes solely In new categories, winning & losing is based on price entirely based on value innovation (race to the bottom) (
Slide 136: Trend One: A Decades Old Business has Matured
Trend One: A Decades Old Business has Matured • Compliance & Prep fees under pressure What to do? • Margin Shrinkage • The Volume Trap • Dispute resolution is transactional and T hi nk the residue is a poor prospect outside • Offshoring is a Race to the Bottom of t he BOX.
Slide 137: Trend Two: On the Demand Side
Trend Two: On the Demand Side What do your clients WANT but do not have? Fiduciary Transparency Coordination Multiple-Benefit Diversification Lower Costs Realistic Risk Score Bottom Line: They want the same advantages enjoyed by the “elite.”
Slide 138: The Demand Side
The Demand Side Positive Industry Trends Regulatory Trends $30T Transfer Coming Advisors Badly Needed 25% Already Involved at Some Level Opportunity of a Generation
Slide 139: The Demand Side
The Demand Side According to a Study: Retail Investors: 46% Trust the financial services industry Think their advisor is their most trusted 59% source of advice Think their advisors always put their 35% interests first Trust is downstream from Transparency 139 Source: https://donconnelly.com/3-issue
Slide 140: The Demand Side
The Demand Side 30 Years of Failure: 1987 through 2016 Pervasive, Persistent Failure – and we know the reasons WHY Source: DALBAR Quantitative Analysis of Investor Behavior https://wtop.com/news/2019/11/7-financial-behavior-biases-that-influence- investment-returns/#:~:text=A%20Dalbar%20study%20show
Slide 141: Different Model: The Family Office
Different Model: The Family Office The “Dynasty Preservation” Business • $10T worldwide • 7,000 to 10,000 offices - 3,100 in US • Private, Unregistered & Unregulated • Fly below the radar “Everybody wealthy seems to want to have their family office” - David Rubenstein (billionaire) - Co-founder, the
Slide 142: Trend Convergence
Trend Convergence ent Fi m du gn Ali ci ar y Essential Premise: A Comprehensive, cy Coordinated Team The MFO Model Transparen Tax, Investments, WILL Democratize e Risk & Legal ok sp Be Concierge Obviously and provably a superior value proposition.
Slide 143: The Big Idea: From “Sell To” to “Buy For”
The Big Idea: From “Sell To” to “Buy For” Success and Satisfaction by Wealth Cohort Loyalty Statistics Tell the Tale Low Prices Do Not Mean Low Profits or Margins High Customer Satisfaction Does Not Mean Low Productivity https://www.wealthmanagement.com/industry/new-study-finds-clients-using-financi
Slide 144: The Wealth Gap
The Wealth Gap Source: Institute for Policy Studies and Americans for Tax Fairness
Slide 145: The Wealth Gap
The Wealth Gap The richest families are the only group to have gained wealth since the Great Recession % change in median family wealth, by wealth quintile and for the top 5% Note: Data for families in the first quintile (bottom 20%) are not shown. Their median wealth was as follows: 1989 - $0: 1998
Slide 146: The Wealth Gap
ul The Wealth Gap Total net worth held $50 trillion $41.5 trillion 40 30 Top 1% 20 10 0 1989 2000 2010 2021
Slide 147: The Super Rich Had Help
The Super Rich Had Help The Retail Investor Underperforms “Investors Experience Devastating Investor Performance Gap” Average Equity Fund Investor earned more than 10% LESS than the S&P 500 in 2021” Source: DALBAR, Ind. Quantitative Analysis of Investor Behavior, March 21, 2022
Slide 148: Explaining the Gap
Explaining the Gap It Must Be the Hedge Funds “Over the decade, the average annual return on the S&P 500 was 14.4% or almost three times higher than the 5.0% average return for hedge funds.” Source: DALBAR, Ind. Quantitative Analysis of Investor Behavior, March 21, 2022
Slide 149: Explaining the Gap
Explaining the Gap It Must Be the Real Estate “The compound annual growth rate for home prices in the USA between January 1991 and December 2021 was 4.3%.”
Slide 150: Wither the Gap
Wither the Gap Equal Opportunity, Unequal outcomes It Must Be the Real Estate The compound annual growth rate for home prices in the USA between January 1991 and December 2021 was 4.3%.
Slide 151: Explaining the Gap
Explaining the Gap It Must Be the Private Equity “Private equity produced average annual returns of 10.48% over the 20-year period ending on June 30, 2020.” FO Asset Allocation to Private Equity 7% (Funds), 14% (Direct) Source 1: Investopedia, How Do Returns on Private Equity Compare to Other Invest
Slide 152: Design, not Accident
Design, not Accident It Must Be the Private Equity • They Employ a Different Model • Liquidity is Not an Issue • Wealth Creates a “Bias Barrier” • They Concentrate Super Rich invest in remaining Super Rich
Slide 153: The Family Office
The Family Office Fundamentally Different Coordinated Economies of Teams of Pros Scale Employees, Incentive Busy, Complicated Not Structure Lives Salespeople
Slide 154: Emulate Success
Emulate Success The Multi-Family Office structure is obviously and provably a superior value proposition. https://studyfinance.com/present-value-of-a-growing-annuity/
Slide 155: Analogous to a Medical Concierge
Analogous to a Medical Concierge
Slide 156: Taxes First, Then Math ™
Taxes First, Then Math ™ Control the Controllables ™
Slide 157: Money and Happiness
Money and Happiness $6M By the time household assets reached $6 million or more, the happiness gap between customers with and without advisors was higher than at any other level. https://www.forbes.com/sites/paulwestall/2021/09/13/how-family-offices-measure-success/?sh=121187db9c3c
Slide 158: So, What to Do?
So, What to Do? Think Different: Remove Barriers Demand Side to Entry Eliminate Risks Wallet Share Democratize Innovations and the MFO DFY Model https://studyfinance.com/present-value-of-a-growing-annuity/
Slide 159: Taking Wallet Share
Taking Wallet Share Goal: To compete more effectively to capture some of your competitors’ business. Client Needs Tax Savings Identify Solutions Requires processes, systems, expertise, packaging, and marketing https://studyfinance.com/present-value-of-a-growing-annuity/
Slide 160: Your Assets Define Your Opportunities
Your Assets Define Your Opportunities Born on Third Base • You are the most trusted financial professional • You operate as a true fiduciary • You have a reputation for accuracy and timeliness • Many of your clients are deeply dissatisfied with their advisors and results • New Merrill Lynch FAs woul
Slide 161: Getting Safely Home
Getting Safely Home MFOs Require Build Buy Sales Skill vs Value Innovation vs vs Distributor FOD
Slide 162: Fiduciary Wars
Fiduciary Wars The “Buy For” model must inevitably win over the “sell to” model Day One | 3:45 pm | 45 minutes
Slide 163: Agenda
Agenda • Definitions • SEC v DoL • Bespoke v Briefcase • Some Industry Stats • Control the Controllables Bright Line • From “Sell To” to “Buy For” • You Are Already There • Demand Drivers and Democratization
Slide 164: What is a Fiduciary (Really)?
What is a Fiduciary (Really)? A Fiduciary must: ● Put their client’s best interest above their own. ● Has an ethical duty to recommend the best investments ● Any investment advisor
Slide 165: What/Who is NOT a Fiduciary?
What/Who is NOT a Fiduciary? ● Broker-Dealers Per: ● “Reasonable Belief” ● “Suitability”
Slide 166: Commissions – Not Always Bad
Commissions – Not Always Bad ● Real Life Examples ● Compliance is like the Jungle: Better Friend than Enemy ● The Advertising Rule ● Great example of using math to make the best decision ● What is the decision making paradigm?
Slide 167: A Noun But Also a Process
A Noun But Also a Process MFOs Get it Right: • Taxes First, Then Math® • Control the Controllables® • Win = Client Maximum Benefit Premise: A fiduciary relationship requires two-way transparency
Slide 168: MFO Client Development Process
MFO Client Development Process No Selling-Educating Meritocratic Principles & Aligning Taxes First… The Blueprint and Dialog …Then Math Systematic Risks Yes, Luck No Solutions Developed on Request
Slide 169: FG Core Beliefs
FG Core Beliefs Taxes First, Then MathⓇ Our Guiding Philosophy Tax Policy Structure Planning Tools Risk
Slide 170: FG Core beliefs
FG Core beliefs Control the ControllableⓇ "It’s in the nature of stock markets to go way down ● Does Not Rely on Luck from time to time. There’s no system to avoid bad markets. You can’t do it unless you try to time the ● Is Transparent and Systematic market, which is a seriously dumb thing to do. ●
Slide 171: Controllables
Controllables Control the ControllableⓇ Tax Costs Efficiency Risk Diversification Alignment
Slide 172: Bezos Doesn’t Answer His Door
Bezos Doesn’t Answer His Door No One Sells Him Anything ● Total Alignment of Goals World Class Tax and ● Everyone Seeks the Same Outcomes Financial Experts Execute ● Perfect Motivation His Mission ● The Most Trusted is Most Trusted
Slide 173: FOD Panel Q&A, Wrap Up
FOD Panel Q&A, Wrap Up Day One | 4:30 pm | 60 minutes
Slide 174: Dinner
Dinner 6:00 – 8:00 pm And Entertainment by Pinellas Room “Southern, not Stupid”
Financial Gravity Companies — Financial Gravity Tampa Conference 2022 (Day 1) on 6ix