Ask almost any farmer or rancher who is the most unpredictable member of their team, and they will probably answer, “Mother Nature.”
Farmers and ranchers are no strangers to the risks caused by the weather and fluctuating markets that can threaten their business.
The benefits of hiring a financial planner are he or she can provide guidance on how to mitigate those risks associated with farming and make sure you stay on solid financial ground.
A financial planner also allows farmers and ranchers to focus on the operation of their business while he takes care of ensuring its future.
“Many modern farms also now have financial assets that need to be managed as well,” business attorney Joe Hobson said. “Financial management in today’s world is not something you want to try on your own at home. It takes special expertise with access to research and advice that most of us will never be privy to.
“A good financial planner can be a big help over the long haul to help grow the wealth of the farming organization,” he said.
If you are looking for advice on who to hire as a financial planner, the best place to start is talking with your network of peers. They can recommend who they have worked with. When it comes to hiring a financial planner, ask for three references. Remember, this person will be managing the financial future of your business.
When interviewing the person, ask how he would manage market volatility risks.
Age is another factor. Farmers should consider a financial planner to manage long-term care and health-care risks, especially since almost 70% of people over age 65 will eventually need long-term care at some point in their lives. Planning ahead could help prevent farmers from having to sell or downsize the farm to pay for health care costs.
A good financial planner also should have the expertise to manage your farm or ranch’s succession plan. It takes time and consideration to pass the farm or ranch to the next generation and a financial planner can help reduce the emotional stress while making sure the plan’s goals are met.
A financial advisor for Prudential Advisors in Salem, Ore., David Souter said business succession is a tough topic for families to tackle without assistance. A financial planner can help the family navigate issues such as children not wanting to succeed the parents in the farming business and the farm business being owned by multiple family members.
A financial planner would make certain things are in order for a succession plan including having an official valuation of the farming business and answering questions about estate equalization.
An example of estate equalization is, let’s say Greg and Cindy are the children of farm owners. Cindy works on the farm and Greg does not. The owner parents will eventually die, and Cindy expects to inherit the business but that would leave Greg with nothing.
This is not an acceptable result for Greg. Rather than this becoming a legal issue, it could be resolved using a financial planner ahead of time. For example, the farmers could buy joint life insurance that that would pay Greg for his share of the farm and allow Cindy to have the farm free and clear.
A financial planner can also help make sure there is a retirement plan in place when the farmer retires or if he wants to offer a plan for his long-term employees.