What is Business & Estate Advisers
By E. Dennis Zahrbock, CFP

Business & Estate Advisers, Inc. is a financial resources firm, whose knowledgeable team solves any problem using creative solutions and exceptional service for each and every client. Friendly interaction, concise communication, confidentiality and integrity are key values held by the company.

After 24 years of existence, Business & Estate has finally drafted and adopted a Mission Statement. Could it be that this is something we should have had long before? Could it be that I just didn't understand how to put one together? Could it be that two bright young MBAs convinced him it was time to do so? Together, as a team, here is the mission we created.
Way back when I was a young teenager studying for confirmation we were given the Ten Commandments to memorize. We were also given "the meaning" of each commandment. Well, above is our firm's commandment, so what does it mean?

The Ten Commandments of Business & Estate Advisers, Inc.!

Meaning 1: Financial Resources Firm...Means we have the resources either inside our walls or via our large network to resolve any and all financial issues.

Meaning 2: Knowledgeable...Our entire team is knowledgeable. Those of us that produce our business are knowledgeable in all financial products and their financial, as well as tax, implications. Each of our support staff is extremely knowledgeable and capable in the many tasks and services that must be performed to best serve our client's objectives.

Meaning 3: Any Problem...Means any problem. Although our stated skills are in the financial services arena, we wish to help our clients solve any problem they may be having. Sometimes it's just a listening ear, but often it's a referral to someone in our network that resolves the issue. Some of our general business experiences have also allowed us to solve client problems in the area of goal setting and business efficiency.

Meaning 4: Creative Solutions...Although it can be said we are conservative in product advice, it has never been said that we lack for unique, innovative and creative solutions. For years our clients have appreciated the fact that we "think outside the box"! It shall always be our goal to be the most creative problem solver in the industry.

Meaning 5: Exceptional Service...Since re-focusing our company some six years ago, there is not a week that goes by without someone (unsolicited) saying to Sarah or me, "your Staff provides the most exceptional service we have ever received." Wow! It is our every intention to continue to maintain outstanding and personal service to everyone that does business with us.

Meaning 6: For Each And Every Client.. .This is one of the most important parts of our mission. We do not want to be seen as a firm that only takes care of our affluent client base, but one that takes care of any client that appreciates our services. We never want to give the impression that we do what we do for the money. Although we are a profitable company, we do what we do because it helps our clients. When they appreciate what we do, we are most rewarded. Size of account has no bearing on our mission statement. Appreciation by our client gains exceptional service for all.
Meaning 7: Friendly Interaction.. .The office atmosphere we provide and the friendly way we treat each other and our clients is not an accident. We genuinely like each other and our clients and treat them as we would any good friend.

Meaning 8: Concise Communication...we have always prided ourselves in being able to take extremely complex information and convert it to a one-page, easy to understand solution. We shall continue to provide these "bottom line" style answers to our valued clients.

Meaning 9: Confidentiality…It goes without saying that the relationship we enjoy with our clients is highly confidential. But it is also necessary that we clearly make this statement in our mission.

Meaning 10: Integrity…What could be a better word for Meaning 10 then integrity? We have always done so and will always continue to have integrity at the top of our list. We currently practice and shall always practice - always, always, always - the clients needs come first and ours second. We will do what we promise to do. This is one of our long-term core principals. And should we make an error, we shall deem it our responsibility and fix it.

When God gave Moses the Ten Commandments, I suppose he knew when he started with Number 1 that there would be ten. I'm pleased that, by the numbers, we have Ten Meanings to our Mission Statement. And, since I have integrity, I must admit I did not know there would be exactly ten when I started this article. I guess, once again, God was watching while I was writing.

Amen.

WHAT'S HAPPENING? By E. Dennis Zahrbock, CFP

And the best news of the Winter was Steph, Greg and Sabrina (born last May) moving to the Twin Cities area. They purchased a nice older home in Edina so are now close for visits and leaving our car when we go to the Airport!

The best Duck Hunt in over twenty years was experienced the last weekend in October. My two invitees, Russ Hagen and John Happe both cancelled at the last minute so I had to make the drive to Canada with my dog Ole. My friend Jim Eidsvold and his friends were already in camp. The next morning the marsh had frozen so our party broke ice for a couple of hours, creating some of the only open water in the marsh. The ducks then began coming to our spot and the six of us shot 48-ducks in the next three hours. This memory will live for years. Russ and John better not cancel next time!

The week before the Super Bowl, Sue and I hosted the first annual Mission Jamaica Chilly Open. We created two nine-hole courses, the Montego Bay Course and the Kingston Course on the Ice in front of our home. We had over 60 golfers for this first event. With "ice fees", sponsorship of holes and a NFL Jersey and Football signed by Tommy, we raised over $5,000 for the Mission Jamaica fund. Next year we hope to double this amount.

A very exciting Super Bowl this year as our long-term friends Tom and Galyn Brady's son Tommy was the QB of the Patriots. Last year the three of them accompanied us to our Mission Jamaica week so a special closeness was present when we watched the Patriots win and Tommy being named MVP.

Sue and I and daughter Rachael ventured to Mission Jamaica for #5 for Sue and I and #1 for Rachael. In addition to helping with building projects our group was asked to bring the orphans to the beach one day. They have done "beach day" for five years now and it is the only day of the entire year that the children leave the orphanage. Most of the kids are handicapped either mentally, physically or both. It was a tough day for all of us in keeping up with these kids, but the smiles will be remembered forever. God has blessed us all.

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BULLETIN BOARD OF CURRENT EVENTS

FEBRUARY 2002
B & E team met for the 2nd annual staff retreat. Our cover story depicts the fruits of our labor.

MARCH 2002
Sarah and Dennis conducted two seminars for Lorman Educational Services titled "The Nuts and Bolts of 401(k) Plans". Over 50 employers and human resource representatives from the Twin Cities area attended the sessions. We're pleased to say our ratings were high!

Dennis traveled to Chicago to rehearse for his second main platform presentation to the members of the Million Dollar Round Table. He is expected to be speaking in front of 5,000 to 7,000 attendees at the June meeting in Nashville.

Sarah & Darvin braved their first family flight with all three kids (ages 5,3, and 1) to Marco Island, Florida. Dennis & Steve traveled to St. Louis to attend the Max Linn seminar conference. Both came away with many new and exciting ideas.

APRIL 2002
Sue and Dennis plus two daughters, one son-in-law and three grandchildren spend Easter plus an extra vacation week in Palm Springs.

Dennis and daughters Stephanie and Lori attend the AALU meeting in Washington, D.C. Steph and Lori get to tour some of the Washington museums and monuments while Dennis improves his brainpower at the AALU conference. One of the program highlights will be the speech given by former New York mayor Rudolph Gulliani.

After surviving tax season, Sarah & Darvin will go for their annual R & R in Deadwood, South Dakota.

MAY 2002
Jules, Steve and Dennis travel to St. Louis for a four day educational symposium at ValMark Securities. Dennis will be a featured speaker at this symposium.

Don't forget the big event in May happens on May 20th with Skip-A-Day XVIII.

Business & Estate Advisers will be sponsoring Jules in the Race for the Cure Breast Cancer walk on Mother's Day!

JUNE 2002
Sarah & Dennis will be attending the 75th Anniversary meeting of the Million Dollar Round Table in Nashville, Tennessee. This is Dennis' 30th year of MDRT membership and Sarah's second (she's two for two in qualifying).

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LYNETTE A. GOLLY, Third Party Administrator - EBSC

Q. How did you first become acquainted with Business & Estate Advisers? Referral from another NAIFA member, Steve Hammer.

Q. During your association, what has Business & Estate Advisers done for you? They have
been an advocate for my business and have referred business to me.

Q. What has your service on the Advisory Board meant to you? Honored to be asked.

Q. What, in your opinion, makes Business & Estate Advisers different from other financial services firms? They are friendly to work with and detailed in their responses in our request for information.

PAUL KLAPPRICH, - Wayzata Fire Chief

Q. How did you first become acquainted with Business & Estate Advisers? Through Fire Department Relief Association.

Q. During your association, what has Business & Estate Advisers done for you? Improved the financial standing of the Relief Association to raise the retirement benefits of the volunteer fire fighters.

Q. What, in your opinion, makes Business & Estate Advisers different from other financial services firms? Personal friendliness.

The best news of the Fall was the birth of our first grandson Parker Wayne Zahrbock Bowman (which used nearly every letter in the alphabet). Parker brings the total to three so you other grandparents understand the joy and those that aren't will hopefully someday have this experience. He was born October 29, 2001, 9 lbs., 10 oz. and 22 inches long! Lori, Steve and Big Sister Addison are proud as can be!

By: E. Dennis Zahrbock, CFP

In this article we'll discuss retirement planning, why you need to do it and what options are available. Since our readers are in their teens, it may seem like it is too far away to plan for retirement, but the old saying "you can never start too early" is important to keep in mind.

I don't know if you have heard the story about the twin brothers, both age 25. Brother #1 saved $1,800 per year from ages 25-35 (10-years) and brother #2 spent $1,800 per year on having fun during this same age span. Brother #1 then quit saving at age 35 while brother #2 started saving $1,800 per year from ages 35-65 (30 years). When age 65 retirement arrived brother #1 has $273,600 and brother # 2 has $212,640. Why does brother #1 have $60,960 more? Because interest compounding on brother #1's account over the 35 year period more than made up for the 35 years deposits of brother #2! Thus the moral of the story is start early and you won't have to save for so long!

Let's take a moment to discuss retirement planning from various points of view:

From the Government's View

It is good public policy to have the elderly be financially secure. It is, thus, good policy to allow tax incentives.

From the Family's View

Without financial security, support must come from children. It is difficult to have parents live with you.

From the Person to Retire's View

Financial security allows options. Financial security creates no burden on government or family.

Since it is the Government's goal to not have to be responsible for providing for the lifestyles of the retired workers, they wish to create public relations campaigns that encourage people to save for their futures. They also want to be certain that people who save are not taken advantage of by unscrupulous individuals and institutions.

In 1974 the Government passed a law called ERISA (Employee Retirement Income Security Act) which has been the law for retirement planning ever since. The law, in its original form, provided great incentives (tax deductions) and great retirement benefits (tax brackets lowered) and great death benefits (benefit free of estate taxes). The public relations campaign that the Government employed got all American's excited about creating retirement savings and security. The Individual Retirement Account (IRA) was introduced with this legislation.

Just an aside, if you've ever heard of a Minneapolis-based company called Minneapolis Moline, their story on employee retirement was one of the main reasons ERISA became law. Minneapolis Moline had promised its employees a retirement benefit, but when it came time to retire there was no money they ultimately vent out of business in a state of bankruptcy. They had what was called an "unfunded promise". ERISA changed the rules. Since 1974, an employer must provide a "funded promise". That means that they must set funds aside during an employees working years that can be drawn upon at retirement regardless of whether the company remains in business! The funded promise is deposited in a retirement trust account with very specific rules (defined by ERISA) for the employee and retiree benefits.

Before continuing, a word of caution should be noted. The Government created great incentives in 1974 and a great public relations campaign, however, almost every year s ince 1974 Congress has met and changed the rules created by the original law. About 95% of the time the rules have been against the taxpayer and about 5% in favor of the taxpayer. Yet, because of their public relations campaign, the average taxpayer thinks of retirement plans as all good and only a little bad. As we continue with this article, we just want you to know that "too many eggs" in a Government created plan (which they can also change) is not good planning.

The family's view is really quite simple. Because of the Government's very successful public relations campaign very few families are faced with supporting their retired elderly members. This was certainly not the case 60 and 70 years ago! Very seldom do we see in today's world parents living with children because they "have to". Yes, we see it because all parties want them to or because elderly care is required, but seldom because of financial insecurity.

Now let's look at it from the retiree's perspective. What can be better then to have enough financial security to be able to make choices as to how to live, where to live, when to vacation, and the like? Since ERISA, millions of Americans can now enjoy this security. Let's examine how they did it and what you, as a soon to be member of the workforce should know:

• In the 70's (as well as before) most retirement plans were sponsored by employers which meant everyone did not have a plan. Most retirement plans were also of the variety known as Defined Benefit. These types of plans told the employees that at retirement age they would retire with a defined benefit, such as 60% of their pre-retirement wages. If a retired employee could get 60% of pre-retirement wages plus social security, in general, they could retire in a financially secure lifestyle.
• But as the 80's and 90's evolved many employees found they were not working for the same employer when they retired as when the started so were not employed at retirement to collect the defined benefit. The other type of plan known as Defined Contribution became a more popular option. In this type of plan each employee had their own account and whatever was in the account was theirs. The employer contributed a set amount (usually some percent of the employees pay) which is called the defined contribution and the account earned whatever it earned. If it earned a large amount it got larger and larger. At retirement (or any time prior to retirement) the account could be transferred to the employee's control in an IRA account known as a Conduit IRA. Thus the employee had a great deal of control at all times.
• Perhaps the best part of ERISA and a new amendment to ERISA passed in 2001 is that Individual Retirement Accounts (IRA) can now be combined into one single retirement spot. This can all be in a 401(k) during working years and all moved to an IRA after the working years. Prior to 2002 you could not combine regular IRA's with 401(k) plans and thus, many employees, had to maintain several different retirement accounts. This was not only somewhat cost inefficient, it was also confusing. A middle aged employee who has changed jobs three or four times may have three to five different retirement funds. The new law is allowing the employee to combine all to one!
• A simple way to remember the difference between a Defined Benefit Retirement Plan and a Defined Contribution Retirement Plan is to use this analogy.

Suppose a wealthy individual enters a Dairy Queen and says to the attendant "I want a Banana Split." Suppose, on the other hand a youngster with 25 cents in their pocket enters the same Dairy Queen and they say top the attendant "I have 25 cents please give me the biggest cone it can buy!" In the first example, the wealthy individual has defined the benefit (the banana split) and has not worried about the cost. In the second example the youngster has defined the contribution (the 25 cents) and can only hope the attendant will give them a big cone!

• It's also important to understand the "promise" in each of the two types of plans. In a defined benefit the promise is the benefit. Since its true cost is not known until actual retirement, most employers are not willing to promise too large a benefit. In a defined contribution the promise is the contribution. This is known at the time it is made, thus employers having good years can make a larger promise for this year and then wait and see each year what they can afford to promise. In a defined benefit an interest assumption is made by the employer (within ERISA standards). If the employer earns more then the assumption, the extra is given to the employer. If they earn too little, the employer must make up the shortage. Remember, they are promising a benefit not a contribution or a pot of money! In a defined contribution either the employer or the employee (in most cases today it is the employee) selects the investment and the earnings become theirs! On the other hand if they don't invest very well, the losses or lower account value is also theirs!
• The Government has amended ERISA to require that employers provide investment education if they allow employees to choose their investments. There is a very fine line between investment education and investment advice, so much of the information is hard -to get. Investment education reduces some fiduciary responsibility for employers, while investment advice given by employer increases the responsibility.

We hope that this Tips For Teens has given each of our readers the basic understanding of the two types of retirement plans; defined benefit and defined contribution. In future editions we'll cover some of the various options available to the defined contribution retirement account.