In this episode of Stride 2 Freedom, we chatted with David Fain, an expert insurance specialist with MCM Insurance, who has 18+ years of experience in protecting individuals and their assets with insurance. We discussed how business owners can utilize insurance to better protect their assets, the common obstacles business owners face, and how David helps them jump these hurdles with ease.
During our discussion, he explains that in its simplest terms, insurance buys us time to ensure our families and businesses can survive and thrive no matter what life throws our way, along with protecting our gifts and skills. And what may come as a surprise to many, is that these insurance policies are quite competitive in pricing and much more affordable for a business to take on than one may expect. Now more than ever is the opportune time to reassess not only the agreements your business is currently in but to review the funding behind those agreements to make sure they’re current, up to date, and still working for you in 2020 and beyond.
Outside of business policies, personal insurance is one of those things entrepreneurs and business owners tend to overlook. We’re just busy in the mayhem of keeping our organizations afloat and managing the day to day business needs, whether it’s employee payroll, managing projects, or a number of other responsibilities we face. Things like planning for life insurance, disability, or long term care aren’t exactly on an entrepreneur’s radar until much later down the road. But truth be told, asking “What if?” is incredibly important to protect our families, businesses, and of course, ourselves. David shares his personal experiences in helping business owners to provide insight into why they should be considering protecting their assets much earlier in the game instead of when an incident occurs. Enjoy today’s incredibly informative conversation!
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In this Freedom Speaker Series episode with David Fain, you will learn:
- How to utilize insurance to increase confidence in your security and financial future
- The difference between various type of insurance policies business owners should consider
- How to prioritize the options between these insurance policy options
- Why it’s so important to consider protecting your assets from day one
We are fortunate to have David available to spend time with us on this edition of Stride 2 Freedom. If there is a speaker you’d like us to interview, click here and let us know. Stay well. Stay safe. Stay healthy.
Show Notes and Links From Episode:
Russell Benaroya: Hey everyone, welcome to the Stride 2 Freedom podcast. My name is Russell Benaroya, and I’m the co-founder of Stride Services, a virtual back office, bookkeeping, and accounting firm serving hundreds of clients around the United States.
This podcast is designed to help small business owners focus on growth and innovation. In other words, focus on those things that inspired you to start your business in the first place. We call it your genius zone. We do our job on this podcast when business owners feel like they have the trust and confidence to build the right team of partners around them that will help them grow. Thanks for joining. Let’s go.
This week, I’m excited to welcome David Fain to the Stride 2 Freedom speaker series. Welcome, David.
David Fain: Thank you. It’s great to be here.
Russell Benaroya: David is an Insurance specialist with MCM insurance. He’s also a good friend of mine. I really know David as an expert in Life Insurance, Disability, and Long-term Care. Let’s just be clear, we’re talking to someone today who’s been in the business of protecting individuals and their assets with insurance for over 18 years. David is an absolute expert.
This is not only about what David does. It’s very much, for David, about why it matters. We’ll hear from David shortly on the why of his area of expertise. My goal today is to learn about how business owners can better protect their assets, the key obstacles that David experiences with business owners, and how he helps them overcome those obstacles. Let’s jump in. Thanks so much for joining us, David. It’s such a pleasure to have you.
David Fain: Likewise. I look forward to the conversation. This is going to be fun.
Russell Benaroya: Let’s start out, David, by just sharing a bit of who you are, what you do, why you do what you do, why it matters, and really what value you deliver to business owners.
David Fain: It really goes back to my dad who was in the insurance business for 50 years in Rhode Island where I grew up, serving as a role model. The idea of going out every day and protecting people’s lives and livelihoods and families and allowing kids to be able to go to college was something I saw every night, either by osmosis at the dinner table or practically when, from time to time, I would go out on meetings with him.
More importantly, when I was a senior in college, my mom was diagnosed with Lou Gehrig’s disease. Fortunately, my dad had actually bought a long term care policy the year before. For the seven years that my mom was alive, we were most fortunate that we didn’t have to worry about the financial burden of being able to care for her.
That’s really what inspired me, was this was no longer a statistic. This really wasn’t somebody who didn’t take care of themselves. It was my mom and I love the entrepreneurial aspect of being in business for yourself and being able to help smart people make decisions to protect, oftentimes, their most valuable asset, and that’s being able to get up and go to work every day.
Russell Benaroya: As business owners, as entrepreneurs, we are often our greatest obstacle to success. in the mayhem of trying to keep our business afloat and care about other people’s payroll for our employees, we tend to put ourselves last in the equation. Can you talk about how you help business owners face this concept of insurance, prioritize it, and frame it in a way that it becomes something that they might want to consider being proactive about?
David Fain: Sure. It’s very interesting in working with business owners because they have so many competing issues and considerations that are tugging at their time and their focus, both at the office and at home. Often, their personal planning comes much much later. It’s very challenging when you’re meeting with a business owner to be able to get enough space to be able to ask them about their planning.
In particular when working with business owners, what we see most commonly is that there has been a change in ownership. There are new partners that may be joining a particular company, or a child may be coming into the business, or key employees may be rising in terms of their ownership stake. That causes them to step back and be able to go, well, maybe holistically, we really need to look at what’s going on here from the perspective of can the business afford to lose any one of us, whether those are owners with key responsibilities or relationships or skills? Or if I’m in a partnership, how would happen if something happened to my partner? Would I want to be in business with their partner or their spouse?
The idea is that oftentimes business owners’ largest asset is their business. It is funding their family, and it is also funding their employees. The way that I have found it’s most effective in talking with business owners is to really just chat with them about what if and allow them to share whether that is a priority or not. If so, what sort of planning have they done or thoughts do they have to be able to maintain that business, not only for the employees but also for their families? It’s carving out a really particular sacred space to be able to have those conversations. Often, they just don’t have the bandwidth or feel it’s quite the priority.
Russell Benaroya: At what point do business owners typically find their way to you? Is it typical that they’re introduced to you because some conversation comes up with somebody where there’s a mutual friendship, or an event happened that prompted this feeling of urgency? We were even talking last week about how COVID-19 has even prompted people paying a bit more attention. Curious if you could share that part of the buyer journey?
David Fain: Yes, absolutely. In particular, for business owners, the key qualifying event, in most cases, is when they’re actually reviewing their legal documents that have to do with ownership. They’re either creating them or they’re updating them. Think of a small business that may have just gotten started, they have articles of incorporation. How are we going to structure the business? You might have a business partner or two or a couple of owners so you’re setting up an operating agreement of how is this actually going to work?
Usually, it’s that attorney or that accountant who is saying, “Well, we have an agreement, but what happens if one of the partners leaves? What if one of the partners dies? What if one of the partners is disabled?” What we find most often is the agreement is there, but they haven’t actually put anything in to fund the agreement. The agreement is, Russell, you and I are in business together. Great. I have 50% and you have 50%. If something happens to me, well, Russell, would you like to buy the business? Sure, but with what?
The way that people most often find their way to me is, usually, it is the accountant who’s rewriting that agreement or updating it, or it’s the accountant because most often that business owner is in touch with an accountant at least once a year and will have questions about, “My son is coming into the business. My daughter’s coming into the business. We need to change the ownership structure. Or our key employee, we’ve elevated them to being an owner now, what do we need to change? Is there anything that needs to be done?” Then they say, “Well, we probably would need to update any insurance that we might have because the detrimental impact of not having that is maybe the business survives, maybe it doesn’t.”
Russell Benaroya: Speaking very tactically here for a minute, at the beginning, in my introduction, I mentioned Life Insurance, Disability Insurance, Long-term Care Insurance. Maybe you could, just for all of us as a bit of a primer, explain what each of those are, how they’re different considerations. Do we put them all in one bucket? Help us untangle that.
David Fain: Yes, you bet. Life Insurance very, very simply, is buying time. If someone gets enough time, we’re going to be able to get up and go to work every day and make a few bucks, pay a little to the government, hopefully, save and enjoy some. In the event that we don’t get enough time, Life Insurance is a pot full of money really to replace the time that a person didn’t get. That’s what Life Insurance is, very simply. It is buying some time.
Disability Insurance, which is far lesser-known although far more common, is I need the time to be able to get up and go to work every day, but if I’m out on the boat this weekend and I bumped my head and I can’t quite work full time, is there a safety net for income there to be able to kind of continue to allow me to recuperate and get back on my feet?. So the idea of having a safety net underneath us so that at least we don’t lose the roof over our head is the reason we have Disability Insurance. It comes in lots of forms, but the idea is that I have gifts and skills, and I need to make sure that those are protected.
Lastly, Long-term Care Insurance, we hear about it, we think about it for older folks, maybe our parents or grandparents might have needed to have care provided for them. Essentially, health insurance only covers 100 days worth of any medical needs, if we needed it. Everything beyond 100 days has to come out of our own pocket. For any of us who have had experience with Lou Gehrig’s disease, Dementia, conditions of that sort, the individual has to pay for all of the care for it that is required. There’s no other insurance.
Long-term Care Insurance essentially says, maybe I’d like the insurance company to pay because it’d be rather expensive if I had to start writing checks and not knowing how long they’re going to last. Long-term Care Insurance is really allowing those expenses to be paid by an insurance company. Ideally, we all would like to stay at home. We have these visions, I’ve got to go somewhere to a facility. That’s not the case. All of us want to stay home although we may need a little bit more support, and some more resources to do it. That’s really the basic differences.
Russell Benaroya: If you got one thing in place right now, what would you say to make sure you get Life Insurance in place, or is it very personalized based on the circumstance?
David Fain: If I am a business owner, the single greatest impact would be Life Insurance to the extent that that business owner could share some of the responsibilities with other people on the team. Meaning, if that business owner could say if I had to step out, I could have a couple of other people or that other partner could help fill my shoes, then I would say Life Insurance is the most important because there is no tomorrow.
If that business owner has really unique skills or relationships or capabilities and the business wouldn’t be able to function significantly, let’s say 30% or 40%, then I might look at disability first because it’d very hard for the supporting team to go to the marketplace to find somebody else to replace those skills while that other owner was recuperating or may not be able to come back.
Now, fortunately, from a cost perspective, these are not significant. There’s a misnomer in the market or a misconception that insurance is expensive. These are not expensive solutions, normally relative to the risk that they’re covering. Fortunately, in most cases, folks don’t have to choose. I would look at what risk is higher to the business and has a greater impact and look to protect that.
Russell Benaroya: Well, you touched on where I wanted to take my next question, which is, what is something that might surprise business owners when they learn more about these products? The one that came to mind for me is you might be surprised how reasonable or how affordable it is. It’s such an opaque industry that I’m sure some people think, myself included, wow, this is going to be really expensive. Maybe expand on that a little bit. Maybe talk about any of the other surprises on the business owners’ side
David Fain: First of all, there is complete parity in the industry as far as the cost of products. In other words, each company sets the cost and those costs will be the same from every outlet. Whether it’s online, for someone like myself, your college roommate, your investment advisor, that cost for that particular company is set.
What people are surprised is to learn that the costs are the same. There’s no real incentive to sell one over another because, in terms of how folks are compensated, it’s not significantly different from company to company. I would say, the value of working with an advisor is someone who can help you make smart decisions as to what is the proper amount of coverage to have, what are the types of policies that will allow you to do that?
They will help you through the process of obtaining the policy relative to calling 1-800, dealing with the forms, all of the work that goes into it because we do get busy. Having someone as an advocate who is proactive to help you get things done, especially with business owners, is really essential to be pleasantly persistent and to work with your other advisors to be able to get that done.
I would say that the other area that is surprising for most is when they actually are able to see a variety of different companies in their costs, oftentimes because these markets are so competitive, the costs actually are driven down because the likelihood of someone dying early is very, very low, although the impact is very, very high. The costs normally are not high at all. Those would be the big things that people don’t know or appreciate that there’s no added charge to work with an advisor relative to going and trying to do it on their own.
Russell Benaroya: I had no idea. Tell me a little bit about the David Fain modus operandi. It’s one thing to advise a business owner on a policy and then help facilitate them securing that policy. What’s the model of how you tend to work with your clients?
David Fain: Well, thank you. First and foremost, I speak two languages. I speak English and I speak insurance. My high school girls aren’t so convinced that I speak English very well, but the whole idea in terms of working with business owners or anyone else is to keep everything in plain English, not in insurance.
The second thing is, these are their issues and their problems. To the extent that they recognize that and I can help them to see them, they then can decide whether it’s important enough for them to address them. My role is to help educate business owners and individuals, not only in terms of the risks that they have but also in terms of the variety of ways you can address this risk. Insurance is actually the last one.
If the business owner has a problem and the problem is that we need to create several million dollars if one of the other dies, well, could they go to the bank? Do they have their own resources? Do they want to sell a portion or all of the business? Then there’s this other thing we could do called Life Insurance. At least allow that owner to look at all of those options to decide what is best for them in their situation.
I believe that smart people will make educated decisions as long as they have the ability to be educated. My way of approaching things is, let’s keep this simple. Let’s make sure that we actually understand what the problem is. Let’s look at what the options are to be able to address this problem. Then with their consent, and if they believe that insurance would be a viable option, let’s look at the variety of choices of types of policies and be able to educate them. Only with their permission, then are we really able to help them. At least they have the opportunity to have the discussion, evaluate where they are. If they decide to do something, then that’s their strategy.
I think that’s all that any of us can hope for, is to have people just be able to present the pros and cons, considerations. I want people to see that at the end of the night, they are going to go home and hopefully feel that they are better off. That they’ve discussed it and they’ve addressed it in a way that is satisfactory for themselves, their families and their employees.
Russell Benaroya: You’ve been in this industry, as you just reinforced, a long time. Has there been a lot of innovation in this industry, like the innovation of products, product design, tax benefits? What’s the future look like for these products or is it now?
David Fain: Well, there’s been a couple of things that have really been very innovative. Insurance companies are not known for being progressive, and regulations often make it difficult. Where we’ve seen a lot of advances in terms of technology are in the underwriting pieces, replacing the traditional model of having to go and request medical records and provide samples in order to issue policies. Now, and especially against the backdrop of COVID, we don’t really want anyone to have to stop by the house to take any sort of medical information or measurements.
The second one is there are now resources where people can actually go online themselves and be able to get a sense for different types of policies, the cost for policies, and be able to obtain policies directly without having to, in reality, work with a representative. They can handle it themselves. The do-it-yourself model.
We have seen innovation both in terms of on the carrier side, and we’ve also seen it on the consumer side. The idea is to be able to make it a little bit easier for those who are seeking insurance to be able to get it and be able to do it on their timeline at the hours that it works for them.
Russell Benaroya: Because you’re based here in Washington, are you limited based on licensure to do business with companies that you can serve based on where they are headquartered?
David Fain: No. Actually, licensing allows for working coast to coast. As well, on the individual side, I have clients literally around the world, both those who are foreign clients, who actually are not US citizens, and those who are US citizens living abroad. We’re actually not restricted whatsoever. It’s just different product opportunities, or product offerings, depending on where someone lives outside of the United States. In terms of being able to serve as a resource, I am limitless in that capacity.
It really does help because what we also find is that in many towns, they don’t have pure insurance specialists who have this niche and they want to work with someone and their advisors want to work with someone who knows exactly where they fit and how it fits in with the other planning that’s going on.
Russell Benaroya: Perfect. David, is there anything I didn’t ask you today that you think is important to share about your business who you serve, how you serve, that you just don’t want to miss sharing?
David Fain: For business owners, this is an opportune time to be able to reassess, not only the agreements that they have, as I mentioned earlier, but also the funding for those agreements to make sure that they are up to date. I’m working with a company, as it turns out, in Washington, where there are four owners. However, the agreement actually says that they have equal voting rights, even though their ownership shares are not the same. You end up with situations where decisions need to be made regarding the business, and the person that actually has the smallest percentage ownership has the same weight, in terms of making decisions, as the person who has the greatest ownership stake.
For the business owners out there who may not have set their plans up, it would be worthwhile to have them reviewed. I would encourage all of you who are business owners or close to business owners to just check back in and just make sure that things are consistent with where they want them to be and set the path for the future so that they have that runway.
Russell Benaroya: Terrific. David, thank you so much. I’m going to put your contact information in the show notes, your cell phone number, home address, and all those things so people can find you. Well, certainly your email address. Most important, David, I want to thank you for joining us today on this edition of Stride 2 Freedom. We wanted to talk about insurance and the ways in which business owners can have more confidence in their financial future for themselves and their loved ones and their partners. I always learn a lot from you. Thank you so much.
David Fain: Thank you, Russell. Really appreciate the opportunity to be here today and look forward to seeing more about Stride and how it continues to grow.
Russell Benaroya: All right. Have a great day, everyone. Thank you. Bye-bye.