Enterprising Kin: The Ins and Outs of Managing And Growing A Family Enterprise

Not too long ago, people lamented the incoming decline of the traditional mom-and-pop shop to the seemingly unstoppable expansion of mega businesses. Today, family-owned enterprises are experiencing a bit of a revival in contrast to the sudden decline of their corporate-run counterparts as former employees turn to entrepreneurship to tide over the recession.

The family business, therefore, has renewed its position as a key player in economic recovery, and its continued development plays a key role in securing long-term sustainable growth.

But for the nascent family entrepreneur, it isn’t always smooth sailing. The genuine challenges of running a profitable business aside, the enterprise as run by a family is a lot more complex given its primary involvement of the next of kin. Conflicts can arise when the roles of family and business overlap.

Entrepreneurs who run family enterprises, for instance, may need to decide which between family members and nonfamily employees are best suited for a particular role in the business, which can cause tensions between the two parties. Conflict within the family can also affect the business, which may be difficult to sort out if things go downhill.

Family members must work in concert with one another, and each decision must be made not only with respect to the business but also the individual goals of each family member.

The biggest issue is perhaps that of succession or transition; many businesses still do not survive past the first generation. To address this problem, entrepreneurs running family enterprises must outline a plan surrounding their succession, which includes not only passing the torch of management but also creating value through tax optimization and ironing out inheritance and probate issues in the long run.

Anthony Amaradio heads Select Portfolio Management, which assists family businesses through financial planning, succession planning, and wealth management. Visit this page for more on the company’s services.

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Innova-give: Driving actual Social Change through Cutting-edge Strategies

While seasonal gift giving, feeding programs, fundraising, and other traditional forms of charity are always welcome, it is about time for more innovative philanthropy to dominate the landscapeof altruism. Communities, especially the poor and disaster-stricken, need sustainable solutions that will provide them long-term relief.

Image source: forbes.com

Philanthropy is evolving, and albeit at a slow pace, the future of giving is definitely at hand. Altruists must start thinking outside the box and going beyond simple financial contributions or donations. Innovative approaches, such as venture philanthropy, microfinance, impact investing, and job creation can provide communities much broader opportunities to support themselves for a long time and even stimulate economic progress on a local or national level.

Ulra high-net-worth (UHNW) individuals certainly know how money works. This is why they do charity so differently from altruists with modest incomes. Today’s wealthy philanthropists have placed greater emphasis on philanthropic initiatives that provide long-term solutions to various socio-economic issues. They do this by enabling the poor to embrace entrepreneurship and work around new opportunities that could hone their business management acumen and encourage financial independence.

Funding new school facilities, providing access to digital technology, or campaigning on sufficient nourishment will have no use if the recipients will not be taught and supported on lasting improvements to socioeconomic conditions. Individuals with diplomas but zero opportunities will not be lifted out of poverty; they need access to diverse opportunities for income-generating projects. In other words, there must be an increased focus on social investments that fuel venture philanthropy and impact investing.

Image source: charitywater.org

Anthony Amaradio is an ardent philanthropist, a commited financial literacy advocate, and is the current chief strategist of Select Portfolio Management, Inc. Know more about his professional endeavors by visitng this website.

For the Budding Entrepreneur: Keeping Personal and Professional Finances Separate

There are heaps of challenges that await new and young entrepreneurs, and managing finances is just one of them. But there is one tip that can give them a good start when it comes to their business finances: keep your personal and business funds separate.

It is essential for business owners to split the two parts of their financial life, even if they are just starting out with their entrepreneurial activities. One reason for this is it keeps their books in order. From a record-keeping standpoint, separating accounts allows the owners and the Internal Revenue Service (IRS) to observe cash flow straightforwardly. Keeping things separate provides a clear audit trail not only for business expenses but also for the personal finances, which will be reliable for tax duties.

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Image source: SBA.gov

Another reason it is a good idea to separate finances is because it allows owners to save on accounting costs. With an organized record, small business owners would not need to avail the services of an accountant just to go through their taxes and finances.

Creating a separate banking account for the business also gives it a professional image among the clients and the public. For customers, having to send payments to an account under a personal name and not a company name gives them the idea that the business is just a “part-time thing.” With a separate banking account, the business receives its own identity.

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Image source: Entrepreneur.com

Anthony Amaradio is a visionary and innovator in the financial services industry. He is the founder of Select Portfolio Management Inc. Learn how his company helps business owners with their finances by visiting this website.

Retirement Planning Does not Have to be a Dusky Affair

Calling them the “twilight of life” may be acceptable, but post-retirement years, for many, are anything but somber and still. In fact, the generation of baby boomers, who have enjoyed longer lifespans than their forebears, has a lot on its plate. This is a generation that is hard on itself. Therefore, not just any sort of retirement living prospects will do. This generation, culturally speaking, has to retire in style, and that doesn’t mean lounging poolside.

downloadImage source: Money.USNews.com

Social security in America is now facing questions about its ability to provide decent living in its beneficiaries’ retirement years. Meanwhile, given recent economic events, current generations are wising up to advanced measures that will ensure their retirement income. Summarily, American society has higher expectations of the quality of life retirement brings, and part of those expectations are evolving practices towards building a fund devoted to what could be, in modern times, one of the most productive life stages.

Gen X is now looking at the baby boomers and taking after the latter’s financial tenacity. It is also witness to an increasing preference for starting early with the savings. Gen X will be the generation that spends a lot, even more than they earn. Pundits, themselves baby boomers in many cases, see this as an alarming trend. Financial planners then largely address this demographic in disseminating financial choices that will lead to a sizable income “in the twilight of their years.”

Pensive businesswoman with arms crossed in office windowImage source: Forbes.com

Enter millennials, or Gen Y. This generation isn’t in better shape financially, either, as it revels in its rather bourgeois bohemian ways. However, both Gen X and Gen Y can take advantage of their relative youth to do some investing. Granted, this will also require significant outlays on their part, but learning the art of investing could be the fun, “adult” activity they would have to undertake. This entails some risks, which they could mitigate through a balance of bonds and equities purchases.

The first step for the new generations is to manage their finances so they can participate in employers’ plans that will add towards their retirement funds. More crucially, the time to do this is now.

Anthony Amaradio is founder and chief strategist of Select Portfolio Management Inc., which undertakes integrated wealth management for high-net-worth clientele. For more information about his company, visit this website.

REPOST: The Real Way to Fix Finance Once and for All

Creativity plays a crucial role in establishing a reliable and sustainable financial structure. Read the following article to know what changes and reforms must be made in today’s corporate governance:

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Image source: TIME

Changing the way financial institutions operate will require more than calculations and complex regulation

We live in an age of big data and hot and cold running metrics. Everywhere, at all times, we are counting things—our productivity, our friends and followers on social media, how many steps we take per day. But is it all getting us closer to truth and real understanding? I have been thinking about this a lot in the wake of a terrific conference I attended this week on “finance and society” co-sponsored by the Institute for New Economic Thinking.

There was plenty of new and creative thinking. On a panel I moderated in which Margaret Heffernan, a business consultant and author of the book Willful Blindness, made some really important points about why culture is just as important as numbers, particularly when it comes to issues like financial reform and corporate governance. As Heffernan sums it up quite aptly in her new book on the topic of corporate culture, Beyond Measure, “numbers are comforting…but when we’re confronted by spectacular success or failure, everyone from the CEO to the janitor points in the same direction: the culture.”

That’s at the core of a big debate in Washington and on Wall Street right now about how to change the financial system and ensure that it’s a help, rather than a hindrance, to the real economy. Everyone from Fed chair Janet Yellen to IMF head Christine Lagarde to Senator Elizabeth Warren—all of whom spoke at the INET conference; other big wigs like Fed vice chair Stanley Fischer and FDIC vice-chair Tom Hoenig were in the audience—agree more needs to be done to put banking back in service to society.

But a lot of the discussion about how to do that hinges on complex and technocratic debates about incomprehensible (to most people anyway) things like “tier-1 capital” and “risk-weighted asset calculations.” Not only does that quickly narrow the discussion to one in which only “insiders,” many of whom are beholden to finance or political interests, can participate, but it also leaves regulators and policy makers trying to fight the last war. No matter how clever the metrics are that we apply to regulation, the only thing we know for sure is that the next financial crisis won’t look at all like the last one. And, it will probably come from some unexpected area of the industry, an increasing part of which falls into the unregulated “shadow banking” area.

That’s why changing the culture of finance and of business is general is so important. There’s a long way to go there: In one telling survey by the whistle blower’s law firm Labaton Sucharow, which interviewed 500 senior financial executives in the United States and the UK, 26% of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24% said they believed they might need to engage in unethical or illegal conduct to be successful. Sixteen percent of respondents said they would commit insider trading if they could get away with it, and 30% said their compensation plans created pressure to compromise ethical standards or violate the law.

How to change this? For starters, more collaboration–as Heffernan points out, economic research shows that successful organizations are almost always those that empower teams, rather than individuals. Yet in finance, as in much of corporate America, the mythology of the heroic individual lingers. Star traders or CEOs get huge salaries (and often take huge risks), while their success is inevitably a team effort. Indeed, the argument that individuals, rather than teams, should get all the glory or blame is often used perversely by the financial industry itself to get around rules and regulations. SEC Commissioner Kara Stein has been waging a one-woman war to try to prevent big banks that have already been found guilty of various kinds of malfeasance to get “waiver” exceptions from various filing rules by claiming that only a few individuals in the organization were responsible for bad behavior. Check out some of her very smart comments on that in our panel entitled “Other People’s Money.”

Getting more “outsiders” involved in the conversation will help change culture too. In fact, that’s one reason INET president Rob Johnson wanted to invite all women to the Finance and Society panel. “When society is set up around men’s power and control, women are cast as outsiders whether you like it or not,” he says. Research shows, of course, that outsiders are much more likely to call attention to problems within organizations, since not being invited to the power party means they aren’t as vulnerable to cognitive capture by powerful interests.

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REPOST: A Three-Question Test of Financial Literacy

Do you want to know how financially literate you are right now? Answer the following questions for an initial assessment.

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Image source: wsj.com

Are you—or your spouse or your teen or your parents—among the financially illiterate?

For a quick answer, try this three-question quiz that two professors—Olivia S. Mitchell of the University of Pennsylvania’s Wharton School and Annamaria Lusardi of the George Washington University School of Business—have been using for years to assess individuals’ basic financial savvy.

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?

A. More than $102

B. Exactly $102

C. Less than $102

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?

A. More than today

B. Exactly the same

C. Less than today

3. Please tell me whether this statement is true or false: “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”

-True

-False

The correct answers are at the bottom of this post.

In a recent working paper, Ms. Mitchell and Ms. Lusardi review some of the sorry statistics on financial literacy that they and other researchers have come up with over the years—including breakdowns by education, gender, age and nationality. Among the findings:

-In a survey of Americans over the age of 50, only half could answer the first two of the above questions correctly. Only one-third got all three right.

-Forty-four percent of Americans with a college degree answered all three questions correctly. The figure was 31% for people with some college and 64% for Americans with postgraduate education.

“Even well-educated people are not necessarily savvy about money,” the professors write.

-In the U.S. and other countries, men are much more likely to get all three correct answers. The figure is 38% for men vs. 23% for women in this country.

But the gender variation has an additional twist, as Ms. Mitchell and Ms. Lusardi explain:

“Another striking finding, also consistent across countries, is that men are more confident about their financial knowledge than they should be: even when they were wrong, they reported being ‘very confident’ about their answers. In contrast, women generally answer fewer of the financial knowledge questions correctly, on average, but they are more likely to admit when they do not know how to answer our questions. This suggests that financial education may be more welcomed by women, should the opportunity arise.”

-Fifteen-year-olds in the U.S. ranked in the middle of the pack in a more-extensive test of financial literacy given in 18 countries by the Paris-based Organisation for Economic Co-operation and Development. The top performance came from Chinese students, with 15-year-olds in countries including Australia, France and Poland also scoring higher than Americans.

Feeling confident about your responses to the three-question quiz above? You can try your hand at some of the questions from the OECD’s Programme for International Student Assessment.

Correct answers:

A.

C.

False

Anthony Amaradio, founder of Select Portfolio Management Inc., has built his wealth with substantial financial knowledge and wise investing strategies. Subscribe to this blog for more advice on building and handling your finances wisely.

Investing to create real impact: Doing business with divine generosity

Guided by a sense of munificence and a commitment to translate their faith into action, a circle of investors earn more than enough to help millions of people break free from the chains of dire poverty.

Image Source: mission-vision.org

Beyond knowledge gained from peers, textbooks, and experience, investors consistent with their faith inject their strongly held values in the ways they conduct their businesses. They believe that God created the sprawling abundance of the world’s resources out of His exceeding generosity, and that people are stewards to whom He entrusts this immeasurable wealth. Hence, they manage venture capital exactly what the Scriptures call for: to grow their wealth so that it can be shared with a multitude of people who need it the most.

Image Source: adb.org

Investors of their type have engaged in proactive ways of giving. Set out on improving the lives of the disadvantaged, they reach out to impoverished nations and, through livelihood programs, microfinance schemes and other similar undertakings, teach dwellers in remote villages to fish instead of asking for fish, so to speak. Entrepreneurial circles both religious and secular have known such business model as impact investing.

Longer than mainstream investors have coined the term and started to test its feasibility, faith-based investors have already laid the groundwork for the founding of business initiatives that both yield solid financial and social returns. In fact, as the Christian Investment Forum points out, they have been offering flexible and accessible loans and other financial instruments for low-income families from as far back as the 1960s.

Image Source: microcreditsummit.org

Seeing the success of such initiatives being gradually felt in Africa and the rest of the developing world, impact investing has become an appealing option even for the ultra-high net worth individuals. Along with and other forms of reaching out to the needy, impact investing is here to stay until poverty has significantly diminished and people have all received a fair share of the divine provision.

Wealth management expert Anthony Amaradio advocates financial stewardship and impact investing. Visit this Facebook page to learn more about the great prospects that await faith-based investors.