"This is a business where you can build up tremendous estate value but have very limited liquidity," says James Auffenberg, president of the St. Clair Auto Mall in O'Fallon, Ill. "And if you don't make plans to provide for liquidity and something happens to you, well, you hear lots of nightmare stories."

Assembling a strategic plan to achieve this goal requires in-depth knowledge of tax laws, retirement, estate planning, business succession strategies and the myriad financial products available in the marketplace. The task of sorting out these strategies and options often overwhelms dealers to the point of inaction. As Auffenberg notes, it's easy to put off future planning until "you have a week at the dealership with nothing to do." Inevitably that week never comes, so Auffenberg, like other dealers, is working with AIADA partner, AXA Advisors. Auffenberg also has been heavily involved in AIADA's campaign to eliminate the estate tax (see sidebar).

Developing Financial Solutions
AXA Financial Inc., formerly known as the Equitable companies, is one of the world's premier financial services organizations with $463 billion in assets under management (as of Dec.31, 1999), according to Gregory S. Winsper, vice president. The recent name change is meant to better reflect the company's diversified financial services.

Winsper points out that dealers have a number of underlying business concerns that range from asset and money management to estate and business succession planning. A good financial strategy addresses three broad areas: asset accumulation, wealth management and wealth transfer. Naturally, he notes, dealers tend to be most focused on their current financial phase. Baby boomers, for example are in the risk-planning stage; their chief concerns are asset accumulation and protection. Dealers over the age of 50 tend to be concerned about outliving their assets, so they focus on asset and income management strategies as they plan for retirement. As dealers approach retirement, their chief concerns are estate planning and reducing estate taxes.

"Dealers' estate planning needs are rather complex because they have rather illiquid assets," says Winsper. "As we look at the big picture with dealers, one important thing we point out is the need to have an up-to-date valuation of their business. In many major metropolitan areas, that chunk of land beneath the dealership is worth a lot more today than it was 20, or even five, years ago. It's very important for dealers to value their dealership while they're still alive."

But valuating the business is only one part of financial planning. "One of the key things that occurs when an AXA Advisor embarks on a financial plan with the dealer is facilitating a conversation between the dealer and the spouse regarding long-term goals for the business and the family," says Winsper. "What plans do they have for their children's education, donations to charities, their heirs and the succession of the business?" Those types of considerations require a close look in the mirror and careful consideration. "It does take a time commitment from dealers to develop these plans," he says. "Our focus at AXA Advisors is on long-term consultative planning. We don't come in to replace the dealer's stockbroker or attorney. We work in concert with the dealer's other professional advisors. We understand that there's a certain comfort level that has to develop with the dealer."

Extending Financial Planning to Key Personnel
In addition to the personal benefits afforded by financial planning, dealers are recognizing the value of making these services available to key dealership personnel, as an extra incentive when recruiting talent and retaining "stars." Dealerships that offer executive benefits and deferred compensation programs, for example, stand out in a competitive employment market.

"Employers are looking for additional benefits they can offer at a relatively low cost," says Winsper. "AXA Advisors works closely with dealers to offer financial education, as well as benefit programs for key employees. "Today you have more time-starved, dual-income families that have little time to devote to financial planning. More and more financial education is taking place in the workplace," he notes.

"AXA Advisors can work with dealers to provide educational seminars on site," says Winsper. "Employees tend to view these sessions as a perk-something that the dealership is doing for them. We offer 14 different topics. Typically we go into the dealership for about an hour, perhaps in the morning, over lunch or early evening. The seminars are purely educational-not a product pitch. We provide employees with value-added, highly interactive workbooks. It's a win-win situation for everyone involved."

In addition to educational programs, dealers may choose to offer financial planning services through AXA Advisors to key personnel such as GMs and sales managers. In a full-employment climate, these extra benefits may make the difference in keeping or losing personnel.

Preparing for the Future
Although dealers, like most Americans, are currently buoyed by the strong economy and high performance of the equity markets, there are other big-picture factors to consider. As life expectancies are increasing, many people report declining confidence in the social security safety net. Those who have waited until later in life to have children face the double bind of putting their children through college and caring for aging parents at the same time. Also, more people nearing the traditional age of retirement are now reporting that they plan to continue working part-time because they do not feel fully prepared to meet their retirement goals. "One thing you can never bring back is time," says Winsper. "The longer you wait, the more difficult it is to save for your goals."

"Eliminating this tax is a priority for AIADA," says Auffenberg, president of the St. Clair Auto Mall in O'Fallon, Ill.

"I read recently in USA Today that 70 percent of the public is against the tax, but when it comes down to having the tax removed, it's seen as favoring a few rich people," he says. Until the issue of rich vs. poor is removed from the debate, the tax is not going to go away, he adds.

AIADA is working to change the public perception by pointing out that only 1.4 percent of federal gover nment revenues is derived from estate taxes. "It's the most expensive tax collected by our government," Auffenberg states. "Nearly two-thirds of the revenues from the tax is spent on actually collecting the money under distress circumstances." In some cases, family farms and dealerships have to be sold in order for the heirs to pay the estate taxes due. "The government is often in the position of tearing down a family business. There are very high collection efforts associated with the estate tax," he says.

Auffenberg points out that tax should be viewed not from the perspective of taxes gained, but from taxes lost. "What you lose are a lot of good, viable businesses that pay state, federal FICA and Medicare taxes. Collecting estate taxes often either weakens or destroys the business, cutting off income streams from other taxes that far and above outweigh the estate tax."

Auto dealers are in a high-profile business, Auffenberg concedes. "The values can be very high, but the liquidity can be very low. In order for businesses like ours to do well, it takes time, energy and money," he says. "If we could dedicate our time to running the business rather than dealing with tax consequences, we could generate a whole lot more money in the long run for the federal government."