In this episode of The 3 Wins Podcast, our executive team at Legacy Advisory Partners talks about How to Navigate Your Business in a COVID-19 World.
To set the stage...
- Most states have issued stay-at-home orders for non-essential businesses and travel
- The Trump Administration announced that it extended the federal guidelines for stay-at-home orders to April 30th
- Congress also passed the 2-trillion-dollar stimulus bill to stem the impact of COVID-19 on the U.S. economy.We dive into these questions and more…
So...what kind of impact is COVID-19 having on the businesses we speak with? What advice do we have for business owners and executives on how to navigate these uncharted waters?
We also dig into the $2 trillion stimulus bill (aka the CARES Act). What provisions in the bill are the most noteworthy for small and mid-sized businesses?
Other topics we cover in this episode:
- The 3-Step Triage: How to Manage Your Cash in Crisis
- How to Prepare to Thrive as the Economy Reopens
- How Great Leaders Communicate in Crisis
- New Exceptions in the CARES Act for Early Withdrawals from Retirement Plans
- Putting Today’s Market in Proper Perspective.
Below, you can either watch the episode, listen to it, or read the lightly edited transcript from our conversation.
Let us know what you think in the comments!
Episode 2 Transcript:
00:00 Sean Lyden (Host, CEO, Lyden Communications): Today I'm with the executive team with Legacy Advisory Partners, and we're gonna talk about how to navigate your business in a COVID-19 world. And we're recording this on April 2, 2020, and so much has changed in the past couple of weeks. Most states have issued stay-at-home orders for non-essential businesses and travel. And this past weekend the Trump administration announced that it is extending the federal guidelines for stay-at-home orders for another 30 days, to April 30th. And Congress just passed the $2 trillion Stimulus Bill to stem the impact of COVID-19 on the US economy. With that frame in mind, I wanna kick off our conversation with this question. At Legacy, you all work with a wide range of sizes and types of companies in various industries across the US. What kind of impact have you seen that COVID-19 is having on the businesses that you all are speaking with?
01:03 Russ Clemmer (President, Legacy Advisory Partners): Yeah, I'll jump in. We've heard different things. Some of the folks we're talking with and clients are... They're just going gangbusters because they're trying to keep up with all the demand, all the demand right now. And some of those are manufacturers. Some of those are part of the supply chain process. And they're having to hire extra people; they're having to do X, Y, just to keep up with the demand.
Whether the people who are placing these orders can pay for those orders in the next three months is a big question, but some folks are having a pretty steady or increased situation.
Some construction firms, who were hard-bid, whether they're government-related jobs, they're doing fine. Others who were working with private owners or are... It's a big question mark out there right now, where people are saying pause, or just postpone, or we gotta wait and see a little bit more before we can get some things done.
Definitely a lot of uncertainty and, David, you may share a little bit about this, Marc, Matt, but it's the wave after wave that we'll probably end up seeing of unintended consequences, unknown, unintended consequences that are slowly discovered as this thing comes together and we see what happens.
02:27 David Harper (CEO, Legacy Advisory Partners): One of the more recent developments is the governor's order, the shutdown order, and that we're, up to this point in time, a lot of manufacturing and construction has been seen as essential, but that may change. Just we're hearing rumors that that could be shut down as well for a couple of weeks. That would be a major, major impact, so we'll have to wait and see some of those things.
03:00 Matt: Yeah. I think even the companies that aren't deemed essential, they're still... Even if they're doing well with supplying orders and keeping their manufacturing busy, the home office-type employees are all working from home. So, now you've got employers trying to make sure all your employees are set up to work virtually, keep in contact with them, keep things running as smooth as possible and be efficient, but also keep your employees safe. It is an ever-changing, I guess, environment that we're seeing. And we're trying to be sympathetic with our clients and help them any way we can and let them hear what we're hearing in the marketplace.
03:50 David: Yeah.
03:51 Russ: It's such a unusual time. We've never been through anything like this. And especially with the resources that we have available with technology, a firm like ours being able to still operate completely as far as doing video calls like this, being able to use high-speed internet and use telephone, sharing files, sharing screens, doing things like that. Different industries are gonna be affected differently, and it's just so uncertain. And a lot of people are a bit apprehensive, just scared. Uncertainty is tough. And being able to navigate those waters, it's either your business is still fully operational and you're just having to work maybe a different way, working from home or working teleconference. If you're used to dealing with people, you can't do that anymore. You're having to navigate these different government mandates, which we don't know what they're gonna be, and they come out with new stuff all the time. Or if you are in a business that you can't really operate, it's a great time to focus on innovation or efficiency, being able to take a step back, "Okay, we're not loaded down with projects or timelines. Let's take a look at where we've been." We've got some bandwidth now to take a look back, take a breath, and figure out how we want to... When everything goes back to normal, whenever that is, how we wanna continue forward.
05:36 Sean: So, using that time as an opportunity to do some strategic thinking essentially.
05:43 Russ: Yeah. Do something. You've got either the people that are going crazy because they're as busy as ever, maybe busier, and they're trying to figure out how to do that with maybe impacted resources, or they're not as busy as they're used to. And just a way to stay efficient and stay productive is use your time wisely to prepare, strategize, get ready for when you do go back to work. Is there ways that we could be doing things better and hit the ground running?
06:16 David: Yeah, I would say until three weeks ago, just about all of our efforts were to get our customers to think long term, planning for the long-term future. Now, everything's been forced into present day survival mode. We've actually had to kind of re-think some of our messaging to say, "Okay, how do you work toward the long term? What's the progression of thought that needs to happen?" So, Russ has developed a new triage that you might wanna share about, Russ, as far as working toward the long-term, but there's some intermediate and immediate steps that had to be taken now.
Conducting a Cash Triage
07:03 Sean: Yeah. Actually, that's a good segue, Russ, in terms of what you can say on how to help these companies navigate these uncharted waters. And when David's talking about this kind of triage methodology, walk us through what that is.
07:24 Russ: Yeah, yeah. The primary difference between types of business owners that we see and types of business leaders is the professional leader in an institutional size company, they've been through these different things, they have certain systems and processes in place. And whether they are managed and led well or not, the systems are there and they know... Typically, they know what to do in this type of environment to make adjustments and to model out different changes and to be able to look and see. A lot of our clients are entrepreneurial owners and entrepreneurial leaders, meaning that they are... They're talented at what they do, but to the degree that they have not developed the systems and processes within their business to be able to model out different scenarios after they've gotten on a certain track to be able to respond in a nimble way to this high level of uncertainty.
#1. Revenue Opportunities
08:28 Russ: And so what we've been encouraging our clients to do is to think through, at any time but especially this time, what are you best revenue opportunities. What are your best revenue sources? What are your best revenue opportunities within this shift? So, make sure you're taking care of your best clients. Make sure you're taking care of the clients who are really good at paying. What can you do to not only bring in accounts receivable? But if you've got a really good client that's taken... That's been a good relationship, and for some reason they're going through a certain situation right now, don't hammer them for payment on whatever invoice. You wanna make sure that you survive this time, but you also preserve that relationship. So, it's seeing your revenues all the way across the board, making sure it's not just a dollar in your bank account, but it's a person and a relationship. They're trying to keep their business open, they're trying to do these same things, they're trying to make sure that they're able to get through like anybody else. So, knowing who your best revenue sources are and keep those relationships well maintained.
09:43 Russ: The other idea here is with expenses, and it's just kinda walking through and saying, "All right, for my business, I've got to look at my expenses in three lenses." That's a section of expenses that can be postponed or delayed. "Which ones can I put off for a little while?" Now, that doesn't sound nice, 'cause you don't wanna be the person on the other end of that. But you do have to look at it with that sense. You don't wanna have to go through something where you're messing up a vendor relationship if you're delaying something, because when things turn around they're not gonna appreciate it. So, it's all about these relationships within your business and your vendors. You also have to look at expenses that you can reduce. Maybe it's reduction for a certain time period. Maybe it's something we can look at it and say, "Man, that was fat in the expense list and, man, that should have been cut six months ago. I don't know why I haven't done it."
10:45 Russ: And the last one is making sure that you understand, "Hey, I'm gonna cut this. It doesn't belong. I can't just reduce it, I can't just postpone it. I've got to cut it, I don't have any other options." And that really is a kind of final level, unless it was just unnecessary to begin with. But if you have to make some cuts, understand what those are, cut certain things, and connect on your ability to come back quickly when the economy and when the market begins to come back. And so we look at those three... Those revenue and expense triage. The last one is cash. You got to have what we call "dry powder," you've got to have your cash sorted out and know where it's coming from.
11:35 Russ: A lot of people have lines of credit, a lot of people have saved up well for this particular type of situation. They've looked ahead and say, "Hey, you never know what can happen, why don't we just keep some cash on the books?" Certain people have accounts receivable that they haven't tended to, so they need to tend to that and make sure they can get as much as they can out of that in a short period of time. And, of course, with the stimulus package, there are some good things that have been put in place. And I don't know how we're all gonna pay for it eventually as taxpayers, but for the short term, in order to help some people survive and help other people prepare to thrive on the upside, the economy, whenever it does settle down and begin to grow in return, those people are gonna be best positioned if they have the right amounts of cash to take advantage of certain things as the economy does begin to rebound.
Positioning Your Company for Success When the Economy Reopens
12:29 Matt: And I had to add, we... I saw a survey... Goldman Sachs did a survey of 10,000 small businesses. We talk about doing all this planning for potential short-term transition, long-term transition. As a small business owner, you're generally thinking just how to keep growing, and you're not really thinking about these fringe scenarios. And here we are in the midst of one of these fringe scenarios and it affects everyone. It might not be a full transition, but taking a look at this survey of the time that small businesses can continue to operate and just the amount of cash that they have on hand to be able to continue funding their operations, about 15% have less than one month worth of cash available. About 35% have one to three months, and then four to six months is about 20%.
13:32 Matt: So, there's a lot of different businesses that they're in full expansion mode or they're in full whatever mode. And they're not really thinking about these different scenarios that could take place. And if they had just stepped back and, yeah, it's exciting to... Your business is growing, and you wanna keep pouring into that. But to take a step back and reevaluate, what if, this is the perfect time. This is a wake-up call for everybody of this can happen. And what if it is more severe? What if it only affects you, and you don't have this government stimulus package to help bail you out? What are you gonna do at that point?
14:11 Sean: Yeah. And the big takeaway that I got from when you share those numbers, when you add the 15% and 35%, that means 50% of all those companies have three or fewer months of cash to stay in business. That's astounding when you think about it. And, Matt, you bring up a good point. Yeah, this is a great reminder of when we do get through this for companies to go, "Okay, we need to start thinking about these contingency plans," but what do we do now? You're talking to a business that's dealing with this and they're looking at, "Okay, we're gonna have to make some hard decisions on our expenses that may end up having to be payroll and so forth." How do they navigate this to preserve it, preserve that relationship and the folks that they're working with?
15:14 David: Yeah. I think the balance is we have to be thinking beyond the current crisis to say, when it does come back, how are we positioning ourselves to thrive? And it's gonna be painful between now and then, but what can we be doing now? And to what degree... This is where the organization development or the culture part of this comes together of are we treating our people right? Are we really being wise in deciding on who needs to stay, who can we keep? Who's better off if we let them go ahead and go on unemployment? All those crucial things, because you've invested a lot into your workforce, and so to the degree you can have your workforce intact and ready to go when it does come back, that's gonna be a key.
16:17 Sean: Yeah. Russ, Matt, anything you guys wanna add on that?
16:24 Russ: Yeah. It's a very painful time for many, many, many employees and employers. Some people, the writing is on the wall. You are in certain industries, obviously restaurant, tourism, entertainment. It's a done deal for a lot of people. Some people are still on the break. The stimulus package may help them be able to survive and get to a certain point. Not to discount their realities and to wash over what's going on there, those folks have to figure out a way to regroup. Some folks who are... They're less impacted or they're hurting, but if they triage correctly, they can make it through. Those folks, if they're able to take these steps and be diligent now, immediate... Not in three weeks, not when the social distancing ends but right now. If they can begin to think through and make some certain plans, and to communicate well with everybody, and that plays a role in helping their business to succeed, vendors, employees, strategic partners, bankers.
17:53 Russ: All of the people that help in that process, if they can prepare and begin to think, "Right now, things are less than ideal. No one expected it. No one could have technically predicted it. They're less than ideal, but I need to pause," back to what Matt was saying earlier, "I need a pause and say, all right, is this the time to make any strategic paradigm shifts? What we do and how we do it, so that we're ready to come out ahead after this thing begins to settle down and we're able to get back to the daily routine of leading a business and competing in the market. How am I going to set up my people in my firm in a way that it is ready to come back... And not necessarily bigger and stronger, but smarter and more efficient?" And if it is bigger and stronger, if that's the strategy and the goal that's determined by the, to David's point, the key leaders in the firm, the people who have their ear to the ground and are willing to weigh in and help this thing happen, then that's what you have to do.
19:10 Russ: So, it's determining what you want your business to look like when things come back. What's the idea? How are you gonna be impacted? And then be able to start talking through that and not to be fearful, not to be afraid of what could be around the corner, but begin to say, "All right, what is this thing gonna look like? Nothing's gonna be the same. It's gonna be different. Nobody is gonna be able to just forget about what's happened. How do we work through that, and how do we factor that in and lead into the future well?"
How to Communicate and Lead During These Times
19:45 David: One of the key factors right now, during these perilous times, is to communicate. How do we keep consistent communication, letting people... Letting our key relationships know we're thinking about them? "What can we do to help? Here's what we're hearing, what are you hearing?" And I think just staying in touch with regular contact with your employees, give them the straight scoop. "Here is the risk. Here's where we are. Here's what we're gonna try to do." But that constant communication is gonna be a critical part of this whole thing.
20:23 Sean: Yeah. And how do you strike that right balance between being candid and calm to project that to help? If you're having to make hard decisions with employees, or having to make hard decisions with vendors and so forth, how do you strike that balance in your communication?
20:54 David: I do think it goes back to the virtue of peacemaking where you wanna say, "We don't need to leave anything unsaid. We need to get it out there and not hold back." We wanna air to the side of greater transparency, even to the point where it's better for them to be aware of the risk and for them to be somewhat alarmed with the reality of things than it is to hold back in... Because being worried about people, being alarmed, it's better to be right upfront. But then I think the balance is to say, "With all that being said, we will get through this. We will prevail." And that's where the courageous vision comes in, is that we need to think, "What can we do now to prepare for when things do come back?" And that really ends up being the silver lining in what's really a tragic situation right now.
Applying ‘The 3 Wins’ Framework
21:56 Sean: Yeah. Now, we call this the Three Wins podcast, and it's based on the three wins framework. The shareholder or owner win being the first one, the second win being the company win, and the third being the key leader win. How do you apply this, the three wins framework, to helping companies think through how they navigate these times?
22:31 Russ: Yeah. So, what we talked about earlier, the revenues, expenses, and cash, that really fits under the corporate win banner. And right now, there's the key leader win, the shareholder win, those have to be supported by a healthy corporate win. Right now, with that high level of uncertainty around corporate businesses and their viability, and making it through this and beyond with such a high question mark, the idea right now is that you just have to stop and focus and ask those big questions. And what we see is that you may have the chance to talk about the key leader when you may have the chance to see who some up and coming key leaders are. And right now it's really the ability to not ask, "Well, how does this affect me," but, "How does this affect the company?" Because the key leaders understand. They get... We have one client in particular. I'll just give a quick example. We're sitting there and we... I jump on a call with the leadership team and the owner, so we're going through the, "Yeah, send an email." Say, "Hey, here are the things to think through, triage, revenues, and expenses in cash." And we talk through it.
23:57 Russ: And a very talented employee, when it's their turn to weigh in and give some insight and hopefully what they've... They just said, "No, I don't think we're gonna have a problem. I don't think everything should be the same. I don't think we'll be impacted." And everybody is, you kinda see it flash across their face, like, "Are you crazy?" And so my job is to balance things. And so I said, "Okay. Well, what do you mean by that?" And as he defined it, it was clear that he was looking at his own, his own story. "No, I can make sure that mine is okay," that's what he meant. And so there's a very big difference between, "We will be okay." That's what a good owner thinks. "We will be okay," or, "We'd be okay," versus, "No, I will be okay." And that's the two different types of clients that we work with. We find an owner that says, "No, we're gonna do this together," and promotes that transparency and honesty and courage.
25:14 Russ: So, you're sitting there and you're listening to this alternative which is, "No, that's good. I can still achieve what I need to achieve this year, so it's no big deal. I'm not worried about anything else." And you stop and say, "Wow, that's... Man, that is not what we want. That is not the idea that we want to promote." And so you have this ability to look on to the other voices, and some of the other voices around the table were, "Why don't we look at these expenses? Can we change this? We don't really don't need this over here. It was just we were doing it because we thought there might be some upside. We don't need to take that risk right now, so let's do this over here. And what about these other... Who can we... Who might be out there on the talent side that may have been laid off, that we can go scoop up when they wouldn't otherwise left the company?" They're thinking. They're thinking. They're thinking.
26:13 Russ: And the owner right away just said, "Hey, just forget about paying me for the next couple of weeks, and just however long I need to. We just kinda see what happens. We need to make sure cash is okay." So, they're thinking through these things. That's what you want a grade eight virtues leadership team to act like. And it's not that they're not concerned about themselves. Because, again, the three wins are the shareholder win, the key leader win, with the corporate win in between. At a moment like this, you have to be able to say, "Hey, listen, nobody's coming out of this if the corporate win is not maintained." You can just forget about all the other plans, the corporate win has got to be maintained."
27:00 Sean: That's exactly what I was hearing from you, is you've got the shareholder win and you've got the key leader win, but neither one can achieve anything right now, because the existential kind of urgency right now is with that company win. And, Marc, go ahead, I interrupted you there.
The Importance of Virtuous Leaders
27:20 Marc Walker (Chief Investment Officer, Legacy Advisory Partners): No. I think now more than ever is the time that everybody needs to be in the same boat, rowing in the same direction. This is a time to forget about my own agendas. If you see somebody that's drowning on the side, pick him up, pull him in the boat, and let's work together to create synergy and get through this. I think the goal is to not just get through this, but to be better when we come through on the other side. That's what we're hoping and praying for our clients about.
28:01 David: If there's ever a time for us being humble, this would be it. [chuckle] Humble, empathetic, attentive, and yet being accountable for what we need to do, and accepting the situation and the people where they are, really showing integrity, the peacemaking, and then the... You think about it. If ever there was a time for virtue, aspiring to the virtue, this is the time for it to be exemplified.
Breakdown of the CARES Act
28:30 Sean: Yeah, we've talked in the past about the great eight virtues being a competitive advantage. But at this point, I would see it as being vital to survival at a time like this. Now, the past weekend, Congress and then Trump signed into law the $2 trillion Stimulus Bill to help stem the impacts on this for small businesses and the economy at large. What is your all take on that bill? And how do you see the businesses that you speak with, how they can be helped by it?
29:22 Russ: Yeah, we're... I think the first step that we're seeing the majority of the team and advisors that we... CPAs, attorneys that we communicate with is for businesses to take advantage of the Paycheck Protection Program.
29:45 Sean: Break that down.
29:46 Russ: The Paycheck Protection Program right now is designed for businesses to keep their employees employed, to keep them on the payroll. That's the primary function there. So, what funds you would otherwise take and pay your employees with, this is a stimulus offering, relief offering from the government to allow you to take other funds and use for other needs that you have. But they are trying to protect employment and people's livelihoods in the short term. So, it's a controlled amount of money, for that it's your last 12 months W-2 payroll, less payroll costs, multiplied by two and a half. You take that monthly average, you multiply by two and a half, and I think you have eight weeks to repay it, or eight weeks to spend it on eligible costs, which are payroll and rent and a couple of other things, utilities. Don't spend it on those qualifying expenses within eight weeks. And some of it may have to be repaid, but otherwise it can be forgivable and turned into a grant. That's very encouraging. And that should help give the boost needed for a lot of these companies to tide them over in some of these employment questions, keeping their employees there. If you let go of employees, if you do any layoffs, then that threatens the forgivable nature of the loan.
31:31 Sean: 'Cause if they follow through on the terms of that loan and ensure that their expenses qualify, then it makes that transition from a loan to a grant. Is that correct?
31:46 Russ: That's correct. That's correct. So, the immediate thing to do, and any business owner that's got 500 or fewer employees, even if you're a sole proprietor, self-employed, independent contractor, you are eligible for that. But what you have to do is get whoever helps you with your books, your payroll, to run your payroll report for the required range of months, the last 12... I think it's March to February 19 through 20. So, get that confirmed, but then work with a CPA, or whoever does your books, to define what that is, get or confirm a relationship in a hurry with an SBA-approved lender. So, if you have a banking relationship, get in touch with them very quickly. There is an application to fill out, pair it with your payroll data, and get that submitted, and then make sure that you're hopefully in the front of the queue to receive those funds. And the idea is that you're able to bridge that gap.
33:00 Russ: The second piece is... If that's not enough to carry you forward, the second piece is a disaster relief loan that's also administered by the small business administration. However, it's got some more stringent ways of reviewing it and getting it approved. There's $10,000 you're gonna be immediately eligible for, depending on your ability to prove or to show that you've been impacted because of the economy. You want to make sure that you consider that before applying. But there's a much higher loan opportunity there, so you can really get some operating relief there so it's not just tied to keeping your folks employed.
33:52 Sean: Okay. And what we'll do is, if you have the links, great, you can forward them to me, or I'll find those links and we'll put them in the show notes for our audience.
34:03 Russ: Okay.
34:06 Sean: Anything else you all wanna add on that? David? Matt?
34:11 Russ: Well, there's a couple of other things that pertain to employees. I know that a lot of our conversation is focused on the employer, the business owner, but to the degree that some of the folks, the key leaders out there, and different participants in these, so there is relief that is provided through the bill for employees. There's stimulus money coming back to people. There's a certain calculation, depending on how much you earn. But there's also ways to flexibility around your retirement savings. Just, Matt, if you don't mind sharing just... We want people to get ahold of what they need, but we also must speak to the urgency of people being able to weigh the long-term impacts if they do decide to incorporate some of their retirement savings, some of their pre-tax retirement savings into their current need, allowing that to fund their current needs, just so they understand some of that. Matt, why don't you walk through some of the maybe benefits, short-term benefits, but also some long-term savings risks that they would encounter if they do go down that road now?
35:35 Matt: Yeah. The situation that we're in is basically... I think it's 50... I can't remember the statistic exactly, but 50% of working Americans, they're either with reduced hours or a complete furlough. They're not getting any income coming in, but expenses are still coming due. We're in this interesting time, and basically part of the stimulus package and opening it up to the individuals. So, rolling it down from what we talked about for the small business, and the loans, and grants, and everything available, rolling it down to the households and the individual Americans. What they did is basically just push through a blanket hardship eligibility that's gonna... It's open to all qualified plans, all 401k. So, unless you opt out of this, and the optics aren't great as an employer if you were to opt out of this, it makes the 401k balances available to take out. You're gonna pay taxes, income taxes like you would normally, like it's a normal qualified distribution. But you're not gonna have any...
37:00 Sean: Penalty.
37:01 Matt: Yeah, the early penalties that generally prevents you from getting access to the money. So, being able to qualify for the money is one of the barriers. And then paying a penalty usually for early access is another barrier. Both of those are being lifted. It's potentially... It's good if you need it. You're able to basically, instead of going out and borrowing money from a bank and paying interest rates, whatever. You can borrow money from yourself, the problem is we're already in a bit of a savings predicament as a culture. So, it has the potential to compound. If you can be aware and if this is your last source that you can really access to get money and to basically survive right now in this interesting time, sure, yeah, use the money. Great, that's a good feature. The problem is, just like loans in 401k plans, or anytime that you see individual participants accessing their money, there's almost a psychological change that you see when you're accessing that money that's normally this is long-term money. We've earmarked this to be long-term. This is for retirement. We're putting money in, we're not really worried about bringing it out, because you've now brought it to the forefront, and now it's, "Okay, are there other opportunities that I could use this money for now that maybe I didn't think about?" And we don't want you to really think about those because those are... That is your long-term savings.
38:54 Matt: It's a matter of keeping your discipline as a long-term saver. Keeping that money, keeping your goals intact. If you do draw money out, make sure that you are... When the times are good, you're using your surplus at that point to be able to refill the coffers. You're borrowing from yourself. Are you a good enough borrowee that you are willing to lend to yourself? Are you gonna pay yourself back? It's a good feeling to not have to pay the interest and not have the bank or whatever down your throat, but you're borrowing from your future self, and that potentially is just as dangerous. You really wanna be convicted and disciplined and take it seriously. So, if you are taking this money out, it's not going to affect your long-term goals.
39:45 Sean: Yeah. And just so I understand correctly on the 401k. Now, you talked about folks being able to withdraw without paying the penalty. You still gotta pay the taxes as they would normally do on that. What do they need to do in order to qualify for that? Does their employer need to do something in order to trigger that ability? What does the individual need to do if they had to access their 401k funds like that without the penalty?
40:22 Matt: There's gonna be a plan amendment that's pushed through for everybody. You can opt out of it, but it is an opt-out program. So, unless the employer goes in and says that they don't wanna offer that to their plan, they do have this extra hardship distribution available. And then as a matter of proof, being able to access the money, I'm actually not sure the exact process of what you will need to approve, if it's an approval from each individual employer and potentially adding more administration, or if it just is kind of a window. And there's potentially so many claims right now, instead of bottlenecking it and having all those forms or all that administration in the middle. Not entirely sure how that's going to shake out as far as that goes, but it does have potential to affect a lot of employees, a lot of households. And potentially five or 10 years down the road, they were in a pretty good spot as far as on-track to retire.
41:37 Matt: And the same concept that happens by putting money in and letting it snowball for your retirement, for your long-term savings, if you take that pebble away before it can start snowballing, then you've really made a pretty serious impact. And you don't want to downplay the amount of impact that that can have over the long term. That's what we're the most afraid of people getting access to, not being fully... With so much fear and uncertainty, people not thinking all the way through, thinking with a clear head of what potentially this does for my long-term outlook.
42:20 Sean: Yeah, that makes a lot of sense.
Putting Today’s Market in Proper Perspective
42:22 David: Sean, to give some perspective to the market, we went through some... There were some similarities between now and what happened in 2008 and '09. And so March the 6th, 2009, when the DOW was at its lowest point, 64, 69. And even today it's at 21, 4 or 13, currently in that range. And it was close to 30,000 before the current discount that we're in. And the worst thing to do is to bail out in the midst of a discounted market. So, the best thing to do, if you can do it, is to keep investing through the market 'cause dollar cost averaging is really working in your behalf in the long run. This is a really... So, when you think about it, you're able to buy shares at a discounted price right now relative to the historical markets.
43:29 Russ: Sean, the reason I asked Matt... And that's a good comment there, David, as well. But the reason I asked Matt to weigh in on that is because the key leader win is not just about the people who are on the leadership team. It's about everybody in the company. It's about all your employees. So, if we can get our owners communicating in an open, transparent, and honest way, saying, "Here's what we know, and here's what we don't know. Here's what we're doing to make good decisions for everybody's benefit so that the company, everybody included, can survive this and weather this and come out ahead," if they're communicating well, then it's going to not eliminate but hopefully relieve some of the fear that employees are feeling so that they don't go and make a decision that's going to adversely affect them further down the road.
44:27 Russ: And when we talk retirement planning, whether it's qualified retirement plans or non-qualified retirement plans, that's a part of our three wins business financial planning process. So, it's important to mention that here. Owners need to be making good decisions, and so do the employees that are with these companies.
44:52 Matt: And, Russ, your story earlier about the key leader that they thought everything was okay because them personally, they were okay. The opposite can happen, too. If there's potential for... If things aren't good at home, or your own personal financial situation is in jeopardy, that's gonna take quite a bit of your thought and your ability to think about the business and do your job, that's gonna take a lot away from you being able to perform at a high level. As a business owner, having your key leaders, have their ducks in a row, have them be able to survive these uncertain times. It's a good thing for them to feel comfortable and confident during these times that they're not going to be affected, but then taking the next step of, okay, they're... We know that they're not acting from a panic or a fear mindset. Now, how do we get them... How do we get the transparency where it needs to be? Or how do we get them with that ownership mindset? But we've checked the box of their personal story is taken care of. How do we get them now, using their clear mind, to be able to help the business in a pretty competitive time?
46:23 Russ: And maybe it's a little Darwinian, but these trying times are... You're gonna see a lot of businesses fail. A lot of your competition is potentially failing and understanding that that's gonna happen. We're not wishing for it to happen, but it's going to happen, and understanding that there's gonna be a lot of opportunities when we come out of there. So, being positioned to come out of this in a way where... If it's stepping back, strategizing, innovating. If you're not busy now with projects or contracts, as soon as everything gets back to normal, and you can start going back to normal in your industry, you can take advantage of the companies that didn't survive, or they were more focused on other things than their clients that their clients start looking around. There's plenty of opportunities. Just like you wanna be successful when times are good, knowing that some of those best booms are generally after big downturns. Being positioned well to come out of that is a great time to grow your business.
47:38 Sean: Absolutely. Anything we haven't talked about today that you think would be really important for our audience to be thinking about as they navigate these uncharted waters right now?
47:54 David: Well, I would just like to say one thing. I think that I'm seeing in the... Not to be too patriotic, but just thinking about the US. In times of crisis like this, this is when we see some of the best things come out from us, as far as innovation, and great ideas, and risk taking, helping our neighbor out. I think we're gonna look back on this time and say, "Wow. It's amazing what has happened with some of these people and leaders who stepped forward and made a difference." And we're gonna learn a lot during this, what's really a very... Probably one of the most trying times in the history during my lifetime. But I think that really is that opportunity to see that the good prevail.
49:01 Russ: The guy with the cowboy hat has to be at least a little patriotic.
49:10 Marc: Amen.
49:14 Sean: Any other closing thoughts? Marc, did you want to add any closing thoughts?
49:18 Marc: No. I think everybody kind of wrapped it up pretty well. The only piece that we could add a little bit of color to, when Matt was talking about your participants taking distributions and the secure act. Different providers are taking a different stance on this, and then since this is so new, each provider is trying to make sure they have all their people trained and everything set up. But some of the providers are basically having the participants, if they can take the distribution and they would just have to validate it on their own when they do their taxes. Just encourage people to check with their plan providers, their advisor, to make sure everything's being set up for your amendment, and then just check what the procedures are and kind of close that loop for your participants.
50:15 Sean: Awesome. And earlier in the conversation, we referenced the Great 8 leadership virtues. And for those of you in our audience that aren't familiar with that, that's from David's book, "The Great 8: A New Paradigm for Leadership." I'll include a link to that book in the show notes as well. Well, you all, again, I always enjoy spending time and talking with you about some of the pressing issues of our day, so thank you all so much.
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About the Author: J. David Harper, Jr. serves as CEO and principal of Legacy Advisory Partners, an Atlanta, Georgia-based firm that provides total retirement plan advisory services that give clients a greater competitive advantage to attract and retain top talent. David is also the author of the book “The Great 8: A New Paradigm for Leadership” that teaches business leaders how they can tap into eight timeless “virtues” to expand their influence and achieve sustainable success for their organizations.