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Leadership Insights - April 2020

"Change before you have to."

Jack Welch


Chairman and CEO of General Electric from

1981 to 2001


"Remember there's no such thing as a small act of kindness.

Every act creates a ripple with no logical end."

Scott Adams

Creator of "Dilbert"

Faith and Brutal Facts: The Stockdale Paradox:

In "Good to Great" Jim Collins identified what he called "Level 5" leadership, a combination of humility and fierce resolve, as a required and defining trait of those who built great, enduring companies.

One example he shared was the of Admiral William Stockdale, the highest ranking POW during the Vietnam conflict and how his leadership in an utterly uncertain situation required balancing the tension between the duality of faith and brutal facts that's come to be known as the "Stockdale Paradox."

To help leaders cope with the impact of Covid-19, Mr. Collins recently released a 7 minute video that explores "the Stockdale Paradox" which is particularly relevant in the current context. I hope you will take time for this before starting your week and share with the other leaders in your organization.

Leading Through a Crisis - HBR

Harvard Business Review offers 12 key points that will help you Lead Your Business Through the Corona Crisis.

The Next Normal

One of the burdens of leadership is to look to future opportunities while simultaneously battling a daunting present. Do you have a "plan ahead team?" This article from McKinsey suggests some ways to organize your team for planning to get ahead of the next stage of the coronavirus crisis.

Financial Opportunities

The virus has impacted all of us in our businesses and personal financial lives. While we can't change what's happened, we can't let the Covid-19 situation blind us to options for action. Fifteen year Vistage-Member Jim Maher, CEO of Archford Capital Strategies was asked by his Vistage CEO Group for some financial ideas to explore and he suggested the following 12 possibilities for exploration that you may find helpful : Note: Everyone's situation will be different and these are only ideas to explore, not advice or recommendation. Consult with your attorney, accountant and/or financial advisor before taking action:

For Everyone:

  1. Convert an IRA to Roth IRA - the balance of your current IRA is probably lower compared to the beginning of the year. You can convert some, or all, of the investments inside your Traditional IRA to a Roth IRA. Those investments should have time to recover inside a Roth IRA where that appreciation would be tax-free. Note: you will have to pay ordinary income taxes on the value of the investments on the day the Traditional IRA is converted to a Roth.

  2. Consider reducing the long-end of a bond ladder (and timing) - most long-term bonds have seen a jump in value. It's hard to imagine there is much upside room given where interest rates are. Also, consider margins against these if you need liquidity short-term as rates are low. There are a lot of bonds being sold so pricing should be better in a couple months.

  3. Reduce or eliminate High-Yield Bonds - these are the companies that could have a difficult time paying their debt with significant business interruption. This also assumes you view High-Yield Bonds as a risk- reduction element in your portfolio. We do not like them currently as a yield enhancer to fixed income portfolio because of principal risk. If you are using in a portfolio then consider as equity risk.

  4. Quicken the pace of your dollar cost average investment plan - if you have a plan to invest cash over the next 12 months, consider speeding that up.

  5. Refinance your home or other debt - review the interest rate on your mortgage to see if it makes sense to refinance. I have a feeling many people are doing this right now so you may need to be patient with the lender. Also, business owners should look into new SBA lending programs.

  6. Consider accelerating the funding of Retirement accounts (SEP, 401k, IRA) or Education Savings Plans- if you normally contribute to these.

  7. Family Gifting - Remember NOT to give family members assets with a loss (better to sell the asset yourself so you can preserve the tax loss)... then give the money. Note: If you are giving assets to family members when the market is down, then you can give more shares of the security.

  8. Charitable Giving - If you or your spouse are over 70.5 years of age, use your traditional IRA for charitable gifts. If you are over 70.5 years of age and know your children are philanthropic, this may be a good year to contribute on behalf of your child to their charity. Again, you should never give a security to a charity where you have a loss. Sell it first and realize the loss for tax purposes. People under 70.5 should use their donor-advised fund this year for gifts. The donor-advised fund investment strategy is probably more conservative than the assets you contributed to the fund. This also preserves your personal liquidity. One may postpone gifts of securities until the end of the year. Often when there is a sharp pull back in the market the recovery can be quite swift. There has been a lot of reference to this pullback in the market and the 1987 "crash" but remember the market was positive for the year at the end of 1987.

For Business Owners:

  1. Pull cash from your line of credit even if you don't yet need it. We have seen banks reduce lines of credit in the past on the unused portion at a time when you could need it most.

  2. If your business income will be down then review the new marginal tax rates to potentially make additional strategic tax moves.

  3. If you own your building, take a hard look at a Sale-Leaseback especially now with the current interest rate environment. A Sale-Leaseback is when you sell the building that your business occupies and then sign a long-term lease to rent it back. This could provide additional liquidity that could be put to work in other areas of your business. This also can help diversify the overall percentage of assets you have tied directly to the business.


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