Sign of the Times: "Black Swan Funds" to Protect Against "Tail Risk"

Posted on July 8, 2011 by Ken Laino

Some new investment vehicles -- called "black swan funds" -- are designed to go up in value if there is an economic collapse.  They are designed to protect against what some investment professionals are calling "tail risk" (basically meaning the economy going into some sort of disastrous tail spin).

Not all analysts are sold on this new kind of costly protection (similar to buying insurance).  There is an excellent discussion of this new type of investment product in a front page New York Times article written by Azam Ahmed.  The article is appropriately subtitled "On Off Chance of a Total Collapse, a Little Insurance".  Not very long ago, this kind of investment protection probably would have been ridiculed.  It seemed for a while that things like housing and the stock market were always going up.  We have certainly learned in recent years that this is not always the case.

I am not an investment specialist, and I do not know a lot about the so-called black swan funds.  Their existence, however, is a stark reminder that protecting your assets in advance of a calamity is clearly a good idea.  While black swan funds, hedge funds and various other techniques can be used to protect the value of certain assets, a variety of legal techniques can be used to better protect your assets from creditors.  Our litigious society and our uncertain economic times make asset protection planning more important than ever.

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Too Many Lawyers?

Posted on July 7, 2011 by Ken Laino

Given the poor state of our economy in recent years, one would expect that the number of lawyers in the United States would be declining. There has been significant downsizing at larger law firms. Many businesses have been deferring some discretionary legal services. So one would expect a decreased demand for lawyers.

But according to James Podgers (writing in the July 2011 edition of the American Bar Association Journal), the lawyer population in the United States in still on the rise'. Mr. Podgers reports that only five states experienced a drop in their lawyer population between 2010 and 2011. There are over 1.2 million active attorneys in the United States. The American Bar Association reports that is an increase of 2% over 2010 and a 17% increase over 2001. 

Ironically, despite the increasing number of lawyers in the United States, many low and middle income individuals simply cannot afford basic legal services.

We live in a litigious society. The ever-increasing number of attorneys (many of whom are coming out of law school with huge amounts of debt) is certainly not likely to make us less litigious at any point in the near future. This is just one of many trends in the United States that make it increasingly important for individuals and businesses to protect their assets to the greatest extent permitted by applicable law – preferably before they end up in any kind of catastrophic lawsuit.

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Most Small Business Owners Have No Succession Plan

Posted on July 6, 2011 by Ken Laino

In several prior posts on March 19, 2010, February 23, 2010, November 6, 2009 and July 2, 2009, I emphasized that a business succession plan is critical for most closely held businesses. Yet according to an article last week by Marcia Pledger in the Cleveland Plain Dealer, fewer than 30 percent of small business owners have any kind of succession plan. That is according to Bob Nemeth of the consulting firm of Apple Growth Partners in Independence, Ohio.

There are all kinds of reasons that small business owners never get around to focusing on business succession. One of the principal reasons is that they are simply so busy with day to day business operations; and there is frequently inadequate time for long term planning.

Over the years I have helped many clients with business succession planning, and I have found that there are numerous benefits that clients do not even expect. In addition to getting a solid plan in place, the succession planning process often helps focus the business owner on a variety of other matters that may not have received adequate attention including:

  • key person life insurance
  • personal estate planning
  • updating corporate records
  • strategic planning for the business
  • a variety of other matters that simply have not been focused on in many years

Perhaps most important of all, getting some sort of business succession plan in place can bring great peace of mind to the business owner. This is one of those “priceless” benefits of the planning process.

This post is just another reminder that the time and effort involved in business succession planning can pay huge dividends for a closely held business owner.

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