The Role of Diversification in Wealth Planning
I am sitting here in the office writing on a snowy day in Logan, Utah. The Winter Olympics are getting started this weekend in Sochi and I can’t wait. I have always loved the Olympics, especially since I had the opportunity to attend the 2002 Winter Games in Salt Lake City. It is just an amazing event. One of my favorite Olympic athletes is Lolo Jones. Of course Jones made her name in Track & Field as one of the great hurdlers of all time. But, Track & Field glory is always greatest for Olympic champions and Jones was snake bitten when competing in the Summer Games. In two tries she has come up without a medal. Not one to give up easily, Jones turned her attention to winter sports, the bobsled in particular. Jones has now qualified as part of the United States Bobsled team competing this month in Sochi. I am rooting for her to finally get that medal.Of course this is a blog about estate planning and business succession planning issues so you may be wondering how Lolo’s story applies. Lolo’s story is a great example of diversification at work. We often think of diversification in the sense of a “well diversified investment portfolio” but I want to consider that idea in a little bit different context. I meet quite often with business owners and others about estate planning and business succession planning. I believe that estate planning and succession planning are only parts of an overall approach to Wealth Planning. Wealth Planning can include business planning, succession planning, estate planning and retirement planning. Nearly all business owners desire to sell their business at some point. Most are relying on that sale to substantially fund their retirement. However, the business may not sell as quickly or be worth as much as they are hoping. The purchasers of the business may default on the purchase. In other words, despite their best efforts with the business, they, like Lolo Jones, may trip on a hurdle in the finals race. However, if they have thought more broadly about Wealth Planning by establishing well funded retirement accounts or other investment planning there will be another resource to turn to. The opportunities for success will be greater because they are not defined by one option. It can be tempting to funnel all of your income back into your business, but you must resist this temptation and diversify into other investments to create more options.So enjoy the Olympics, but when you see the bobsled team, take a moment to consider how you are planning. Are all of your eggs in one basket or are you well diversified? GO USA!