Schwab & TD Ameritrade are Officially One Firm

Schwab & TD Ameritrade are Officially One Firm

On November 25, 2019, The Charles Schwab Corporation announced their acquisition of TD Ameritrade Holding Corporation in an all-stock transaction originally estimated at $26 billion. The deal was initially a surprise to many investors and even Registered Investment Advisors (RIA) that use the Schwab and TD Ameritrade advisor platforms. However, after doing some research, the deal started to make a lot of sense. Schwab and TD Ameritrade have been competitors for over four decades as “alternatives to traditional Wall Street brokerages”. Both companies serve “do-it-yourself” investors, as well as RIAs. Their missions align to empower both the retail investor and the independent financial advisor to ultimately help people reach their financial goals. Both companies have been leaders in reducing costs for the typical investor by eliminating commissions on equity trading (see our past blog “Commission-Free Trading: Is It a Free Lunch?”). Not long after slashing trading commissions on equity trades, the acquisition was announced. Both firms believe that combining firms will enhance the client experience and further scale operating costs.

On October 6, 2020, the deal was closed for $22 billion.

Why did WCFA add Schwab as a custodian in May?

As we wrote back in May, we believe that the Schwab/TD Ameritrade combined company will offer one of the most complete offerings for our clients. Shortly after the announcement of the merger, Walkner Condon added the Schwab platform to our list of custodians. At the time, we discussed what we thought was the best way to hit the ground running when the merger occurs, and that was to familiarize ourselves with the platform prior to the transition. Additionally, it has offered us the ability to help clients with Schwab accounts that they would like us to manage without having to transfer assets over to another custodian. Moreover, many 401k plans offer a self-directed option with Schwab, so this may also open up investment opportunities for our clients without being required to use their preselected investment lineup. Many clients’ assets, particularly in our International Advisory business, are already custodied at Schwab.

How does this affect existing clients? Do I need to do anything?

The short answer is no. Both Schwab and TD Ameritrade sent emails to their advisor partners (including Walkner Condon) stating that it is “Business as Usual”. Given the size of Schwab and TD Ameritrade, the transition is expected to take between 18-36 months. The advisor platforms, Schwab Advisor Services and TD Ameritrade Institutional, will remain separate custodians until the transition is complete. For clients, this means that if their assets are at TD Ameritrade, they will continue to use AdvisorClient.com to access their accounts, download statements, etc. until the transition is complete. Similarly, for clients with assets at Schwab, they will continue to use client.schwab.com. We will share updates with our clients as we continue to learn more over the coming months and years.

What else do clients need to know?

Clients are probably wondering how their resources, tools, and pricing will be affected by the Schwab/TD Ameritrade merger. Here is a quick response to some of these FAQs:

Am I able to open new accounts on the platform that I’m currently using?

Yes. If your accounts are at TD Ameritrade, you can continue to open new accounts on the platform (same with Schwab).

How will the technology and resources I access online change?

You won’t notice any changes in the near future. At some point, there will be some consolidation of the Schwab and TD Ameritrade platforms, and we will communicate those changes to you when we know more. Again, that is estimated to be 18-36 months from now.

Another note on technology:

The beauty of being an independent firm is that we’re able to constantly reevaluate the tools and technology that we use and procure for our clients. Tools such as RightCapital, Riskalyze, Blueleaf, MoneyGuidePro, etc. will continue to be used as we believe they enhance the client experience. That said, if we find a better and more efficient tool for our clients, we will explore those tools with an open mind. Schwab and TD Ameritrade have never dictated the use of these supplementary tools that our firm has chosen.

Does my pricing change?

No. Your investment advisory fee indicated by the fee schedule in your Walkner Condon Client Agreement stays the same.

What happens to my accounts when the transition is completed?

Schwab has indicated that there will be a “bulk conversion” when the transition is completed in 18-36 months. They have stated that they intend to accomplish this with no interruption to clients’ account history, no new client account paperwork, and no new transfer paperwork.

What is being done to protect my assets and personal information?

Both Schwab and TD Ameritrade have earned their clients’ trust for many decades by implementing many safeguards to keep their clients’ information secure. Protecting information will continue to be a priority during the transition. Designing and testing security procedures is of utmost importance.

We believe that the combined Schwab / TD Ameritrade entity will continue to make investing and financial planning more accessible, allow our advisors to utilize modern tools & technology that will enhance the client experience, and allow greater flexibility of investments & services to help people meet their financial goals. Please be on the lookout for additional communication from us, as well as from Schwab and TD Ameritrade. Please reach out to your advisor for any questions that you may have.

Business Succession Planning

Business Succession Planning

One of the most difficult yet important decisions that an owner or owners in a business are faced with is how the business will survive or be transferred when they are no longer serving in the same capacity or roles within the business. Many, if not most owners pour their time, energy and resources into growing a successful business and want to ensure that it continues on whether due to retirement, disability, or even death. It is imperative to put together a logistical plan, considering all of the financial and non-financial factors that will need to be addressed to ensure a successful transition of ownership. There are a number of different ways to plan for business succession that if implemented may help your business or organization to thrive long after you depart as owner.

According to Fit Small Business, there are 5 different ways to transfer ownership in a small business. Selling to a co-owner, leaving it to an heir, selling to a key employee, selling to an outside party and selling back to the company. Each one of these has pros and cons to them and it is wise to consider which ones are best suited for your company. In some cases, such as with a sole-proprietorship, the options may be more limited and can cause the succession planning process to be difficult in ensuring a seamless transition. Where there are co-owners or partners involved, the options are greater but the other considerations such as timeline, valuation and the method of funding can create some complications. In this blog post we are going to share with you some of the strategies that can be implemented into your business succession plan.

Selling to a co-owner: Business partnerships are often formed at the beginning or in the early stages of growth for small companies. Generally you see two (or more) owners who execute a partnership agreement that lays out the amount of equity each partner is entitled to as well as what their responsibilities are to the partnership. Over the lifetime of the partnership the company grows and develops with their customers or clients which often can lead to the value of the company to increase as a whole, which each equity holder will realize individually. But what if one of the owners wishes to no longer be involved in the business? What if they suffer an injury that impares them from being able to fulfill their responsibilities? What if something tragic happened like a sudden death for one of them? Any of these situations can be dealt with through setting up a small business succession plan and the best time to implement one is at the outset of the partnership or creation of the company. It is a best practice to periodically review the plan as time goes by and the business evolves.

So what is the best strategy to wind down a partnership like this? The answer is “it depends.” If you are looking to sell to a co-owner or partner you can choose to self-fund the transaction, take out a loan from a financial institution, or negotiate a long-term payout of the equity. In the case of an unexpected situation such as death or disability, oftentimes a business will use a buy/sell agreement that is funded by life insurance. You can use either term life insurance or a permanent policy (universal life/whole life) for this and the proceeds are used for the remaining partner or partners to buy out the interests of the deceased or disabled pattern. Term insurance tends to be more cost effective but does not pay out if the departing owner retires or is disabled. There are permanent policies that can be utilized for those instances. Buy/Sell agreements are taken out between all of the owners involved and have to be continuously funded and updated as the business equity valuation grows.

Outside Purchase: Sometimes there is nobody to sell to within your organization, which can cause an owner(s) to look outside for interest in buying the business and its assets. There are competitors that may want to acquire for strategic business purposes, entrepreneurs and even private equity firms that may want to purchase to strategically grow and spin off the business. The type of business that you own will make a big difference in the valuation of your company for this type of transaction. If your business is in your name as well as heavily reliant on you as the owner of the relationships, it could lead to a lower valuation than if your company was ready to be transitioned in a more turnkey manner. Some business owners may strategically decide to brand their business outside of their own name so that it can help down the road for this type of a business succession. One of the drawbacks to this type of a transition is that the owner or owners are usually giving up the culture and in some cases the future direction of the business to the new owners that probably do not have the same emotional or financial ties to the business as it has existed pre-sale. Selling to an outside buyer generally happens in a cash transaction or procurement from the buyer of a business loan. 

Heir: If the goal of the owner or owners is to keep the business in the family and you have identified one or more members of the family that could “take the reigns” and run the organization, then this is a good way to handle a business succession. It can deepen the client relationships that have been fostered over the years and also decrease the amount of change and frustration that can arise when a company comes under new ownership. It also allows for the owner or owners to still have some involvement in business as they are often consulted or kept around to keep the status quo while the heirs (as owners now) make important decisions on the growth and direction of the organization. In most cases (over 70%) this is not a successful transition due to the fact that most inherited businesses within a family are changed or renamed by the successor and in many cases the family member lacks the skills or drive necessary to keep the business moving forward and growing. While many business owners wish to have the business stay in the family for years to come, it is one of the most likely options to have it be messy and cause disruption to the business. Especially if you have qualified and talented people working for the business that feel minimized or marginalized in the new organization. 

Key Employee(s): If there is someone or a group of people that are integral parts of the company and wish to continue working for and owning either all or a part of the business then selling to a key employee is the way to go. This type of business succession plan is generally the most efficient and positive way to execute due to the strong business relationships with the clients as well as the culture of the firm itself. Generally the key employee or employees are capable and willing to assume the responsibilities of running the organization and have been around for a long enough period of time to have already made an impact in the culture and success of the organization. Many times as the company grows through the years and the owner or owners get older, they will try to cultivate, educate and develop the key employees or employees that they would like to transition the business to. It can have positive long-term financial implications to the owner and also the employees that will take over in the future. 

If you have a business that has equity to it, business succession planning is one of the most important steps that you can take to ensure that the hard work and efforts that have been put in through the years can provide you with the greatest value when you sell or something unexpected happens to one or more of your owners. If you have a business currently but do not have a solid business succession plan in place, reach out to any of the financial advisors at Walkner Condon Financial Advisors for a no obligation meeting and we are happy to help get you started with this important step. There is a lot that goes into the planning involving business retirement plans, structuring the payment or payments to best align with your personal goals and needs, as well as finding the right resources to make the plan come together. We are happy to help!

 

Jonathon Jordan

Welcome Syl & Stan and the Evolution of Walkner Condon

Welcome Syl & Stan and the Evolution of Walkner Condon

In late December of 2011, Nate and I walked out of UW Credit Union and started Walkner Condon with a buildout on Monroe Street, my brother Craig as our office administrator, and zero clients. Since then we moved down the street to our current office, built out a reimagined office layout and added Jonathon, who later became our first partner.

Mitch was added shortly thereafter, recognizing that building for the future was best done by adding talented individuals that believe in serving clients with their best interests always at heart. Keith joined a little while later, finding us through mutual connections and starting a new niche at Walkner Condon in working with U.S. expats. Hannah joined us in a client support role and will soon elevate to financial advisor in the near future. 

Our advisors and staff are our best recruiters, and when Nate and I approached Keith with the idea of adding advisors to our expat team, he politely declined to reach out to anyone. Keith explained that he wanted to help build the infrastructure to offer complete expat services and serve his clients first, and he would approach advisors later with our value proposition. When I asked Keith who he respected and had values that would align with ours, there were two names that he brought up – Stan and Syl from his previous firm, Thun Financial.

Then in mid-June, Thun Financial communicated that they were being acquired by Creative Planning. It took a few months, conversations were started, and we are happy to announce that Syl Michelin and Stan Farmer are now members of Walkner Condon Financial Advisors! Their additions will greatly benefit our expats clients and others that face cross-border investment and financial planning difficulties. Additionally, one question that always popped up when the partners met was “what happens to our expat business if Keith gets hit by a bus” (or more accurately, what happens if Keith’s pancreas starts to become inflamed and he ends up being out of work)? Now with our international team featuring three experienced members, we will be able to offer support to our clients under any circumstances.

2020 remains a challenging year, but even in difficult times, we are pleased to add such talented advisors to our firm. I would be remiss not to mention all the efforts of the rest of our team, who all pitched in to help while Nate has been absent. Nate is our “glue guy”, and to go through this process without him has been tough. As he gets better, we will be back at full strength very soon.

To read more about Syl and Stan, head over to our expat website.

Here’s to the next chapter of Walkner Condon! Thanks to all of our clients who make us who we are.

Clint Walkner

 

Your Work From Home Network Checklist

Your Work From Home Network Checklist

With many of us making our home offices a full-time endeavor and with a future that looks like working from home will be an increasing part of our lives, giving clients and associates a good experience is key. No one wants to go through the hiccups and dropouts of your Zoom meeting, especially when you are discussing important topics! Here we offer some suggestions on how to assure that your home internet is stable and able to handle the load for today’s work environment. 

Internet Speed

Do this little exercise – find a way to see how many devices are actually on your network. Here’s one way to do this, or if you have something like the Google Wifi points, you may use their app. You’ll probably be surprised at the number of devices that are using up bandwidth (check also that all the devices are approved by you!). It’s likely that you have underestimated your needed bandwidth rather than overestimated it. Keep in mind also that streaming and Zoom meetings require a significant amount of bandwidth. I would recommend a minimum of 100 Mbps service, with a preference of 300 Mbps+. This will help alleviate the dreaded buffering or pixelation that dooms business calls to failure. 

Use Ethernet Where Possible

You’ve probably heard that WiFi networks aren’t super secure. This is correct, though there are certainly things that you can do to protect yourself. No matter how good your WiFi is, you also may have dead spots or interference that could impact your signal. Using a wired ethernet connection is a good way to make yourself more secure and stable. Most modern homes now have cabling, though you will want to assure that you don’t have Cat5 wiring since that could potentially be slower than your WiFi in some cases.

Cable Modem and Router

When was the last time you checked on your cable modem to assure you have that equipment up to date? It’s worth a look and/or a phone call to your internet service provider (ISP). Cable modems can be a number of years old and don’t offer the same efficiency that newer models achieve. 

Good performing WiFi is key and provided in a couple of ways. Sometimes the cable modem also has a router in it, though if it is older technology you will probably want to use your own router. Aren’t sure the difference between a modem and router? Here’s a helpful post.

Eliminate WiFi Dead Spots

If you have a larger home or want to assure that your WiFi signal can reach certain areas of the house (workbench, screened in porch, your WiFi enabled birdbath), you will probably want to consider a mesh network. Basically a mesh network is one network created out of a number of devices sending WiFi signals. The one I use is from Google. The nice part about using this type of network is it’s fairly portable, allowing you to move the “pucks” around if you are seeing a decrease in the quality of the signal in any particular spot. Furthermore, you may plug in an ethernet cable in many cases to make the connection wired.

Protect Your Network

There are a number of things you can do to protect your network from cyber attacks. Using strong, unique passwords will help wall off your exposure when (not if!) you are compromised. A password keeper such as 1Password will help you keep track of your passwords instead of that yellow sheet of paper you keep next to your laptop. Running regular virus and malware checks using software is also a good idea to assure you haven’t picked up something while you browse around. Avast offers a free virus protection program that’s easy to use. Finally, using a VPN creates a “tunnel” that shields your web browsing from your internet service provider and other prying eyes. This is also important when you go out to places that may have unsecured wireless networks as well.

Putting It All Together

If all of this seems like a lot, consider the role of each of the items discussed above. The pipeline into the home is provided by a cable. If you’re lucky, it’s a fiber optic one since they offer incredible bandwidth capabilities. The modem receives the signal from the cable, and the router helps move around the signal to different places, including the wireless network in many cases. Some will choose to set up a mesh network as an alternative, sending wireless signals from different points stationed around the house. 

Regardless of how simple or complex your needs are, it is important from a business perspective to have a stable, secure network. Take the time to educate yourself and make the best use of your home office!

Clint Walkner

  

 

How to Hire a Nanny During COVID-19

How to Hire a Nanny During COVID-19

As those with children at home are well aware, the COVID pandemic has greatly changed childcare in 2020 (and potentially beyond). Many schools are no longer meeting in person, thousands of daycare centers have closed, and generally speaking most families’ “normal” child care setup has been drastically altered. Not only do many families have to watch their children now that they are home, but they are expected to guide them through their school curriculum and still perform at their day job remotely. 

Some families that pay for childcare have saved quite a bit of money since the pandemic since they no longer are paying the recurring childcare bill (for the time being). I recently had a conversation with some clients that are expecting a baby. The costs of childcare, of course, came up. Unless your family is in the fortunate situation of having one spouse stay-at-home or have extended family in the area to help care for your children, you are probably going to have to pay child care costs. A lot. “A lot” as in nearly the amount of a second mortgage in many cases. I’ve mentioned how expensive it is to raise children in a past blog post.

Instead of focusing on the fact that childcare is expensive, let’s focus on strategies to help reduce some costs, have more flexibility, and (potentially) be an alternative childcare option for those that are worried about how daycare centers etc. are handling their COVID-19 procedures and the exposure to more children. Additionally, we will outline how to go about hiring a nanny and some considerations that come along with that decision. Remember, I’m not an epidemiologist, doctor, public health figure, or the like. Rather, I’m your friendly neighborhood financial advisor that has simply received input from clients informing me that they like the idea of hiring an in-home nanny for multiple reasons: one of which is more control of who their child is coming in contact with in this COVID era. 

If my family decides to hire a nanny, where do I begin? 

First and foremost you will need to find someone that has demonstrated caretaking qualities, is trustworthy, and aligns with your family’s values. You should interview several candidates. You can find candidates through Care.com, local “Mom” groups, or by simply asking others in a similar life stage that are already in your network. If you are going to do a “nanny share”, where you and another family (or two) collectively find a nanny to watch your children as well as the other family’s children. Ideally you find a family that you get along with and have similar or complementary schedules. Joining a nanny share can considerably cut your costs, especially if you have additional children. For example, if you have one child and are paying $300/week for that child to go to daycare, your second child could very well double your weekly payment to $600/week for both children! With a nanny share, it is expected that you should give your nanny a pay increase when you have additional children, but it isn’t expected to double their pay. 

OK, we found a trustworthy nanny, now what?

I would recommend “doing it by the book”, and formally establishing an entity to pay your nanny. This means legally paying your nanny. To be more clear, this means not paying them cash under the table! I believe that there is a social obligation to your nanny when you hire them. Some of these responsibilities include withholding taxes for them and paying into unemployment. By formally reporting wages for your employee and paying into Social Security, you provide earnings history (in case they apply for a loan, for example) as well as help them earn Social Security credits. In the situation where you need to layoff or furlough your nanny, paying into the Unemployment Insurance program will allow them to collect unemployment benefits. During Safer-at-Home orders, many families furloughed nannies. Assuming they are eligible, your nanny can receive some sort of income through the state unemployment program during their furlough. 

You are considered a Household Employer and your nanny is considered a Household Employee. Many simply establish a sole proprietorship in their name. This is the easiest route but could potentially expose you to more liability (vs. establishing an LLC, for example. You may want to discuss this with an attorney as I cannot give legal advice). You will have to register for an Employer Identification Number (EIN) online through the IRS. One thing that is overlooked is for the Household Employer to have their nanny complete an I-9 form to show that their employee is authorized to work in the United States. 

I have my EIN, how do I handle taxes and unemployment insurance?

You will have to register your Household Employer through the state. If you pay your nanny more than $2,200 in gross wages to your nanny in 2020 (or $1,000 in any calendar quarter), you are required to withhold and pay Social Security, Medicare, and Unemployment Insurance taxes (see the IRS Household Employer Tax Guide). In Wisconsin, there are a couple of steps to do this. For Unemployment Insurance, you register through the Department of Workforce Development (DWD). You will also need to complete your Business Tax Registration through the Department of Revenue. One common misconception is that your nanny is a 1099 employee; this is not true! Your nanny is a W-2 employee. You should have them complete a W-4 form upon their hire (and associated state form, like Wisconsin’s WT-4) for withholding. 

When it comes to paying taxes, you will have to submit your nanny’s wages on a quarterly basis in Wisconsin. A common mistake is to submit your quarterly Unemployment Insurance payment to the Department of Workforce Development and neglect to submit your quarterly payment to the Department of Revenue, or vice versa. You need to complete both of these items every quarter. If you are a sole proprietor, you account for your nanny’s federal income taxes withheld taxes when you file your annual tax return, via Schedule H. A good habit is to automatically put your nanny’s withheld amounts in a savings account, knowing that you will have to submit those taxes at some point. You could also withhold an additional amount from your personal wages to help account for any extra taxes that might be due when you file your tax return. 

Now that I’m an employer, what risks are involved?

Being an employer with an employee exposes you to some risks. You should definitely consider a Workers Compensation Policy to protect you and your family in the case of your nanny getting injured or ill while on the job. Become familiar with the laws in your state, as some states require Household Employers to procure a Workers Compensation Policy. The State of Wisconsin does not require you to have a Workers Compensation Policy. 

How do I pay my nanny?

The mode of payment isn’t necessarily as important as tracking your nanny’s gross wages, taxes withheld (federal, state, Medicare, Social Security, etc.). For example, paying them by physical check or even Venmo is fine. I would highly recommend using a software such as NannyPay or HomePay. This will make it much easier for you to track and report quarterly wages to the state, generate a year-end W-2 for your nanny, or provide them with paystubs. 

What else should I be on the lookout for?

Review options through your employer’s benefits package that might give you a tax break. I’m specifically thinking of a Dependent Care FSA. Most families that hire a nanny will pay their nanny more than $5,000 (the maximum a married filing jointly couple can contribute to a Dependent Care FSA in 2020) in a given year, you might as well take full advantage of using an FSA so you can pay a portion of child care expenses income tax free. Work with your accountant to see what other tax breaks might be available to you, such as the Child or Dependent Care Tax Credit.

Have I talked any of you out of hiring a nanny? Seems like a lot of work, doesn’t it? It can be more work and more responsibility, however speaking from experience I think it is actually quite manageable. I know that my family (and some of my clients) have saved money by going the nanny or nanny share route. If this is something that you would like to learn more about, please reach out to me! I can give you my perspective as a financial advisor as well as my personal perspective since my family has decided to choose a nanny share setup over daycare. 

Mitch DeWitt