In December 2014, Francesca Federico was a featured guest on Small Business Digest Radio. She and host Don Mazzella spoke about her career path, gift-giving advice and succession planning for family-owned businesses.
How Francesca became a wealth advisor
Francesca comes from an entrepreneurial family. When her grandfather was about fourteen years old, he emigrated from Abruzzi, Italy to the Boston area with his brothers and started a business. Based in Braintree, her family now owns several construction companies, auto body shops, a restaurant, and a winery in and around the Boston Metro. “I grew up around a lot of entrepreneurs and I guess I wasn’t the typical Italian woman. I liked to cook, but I also liked to work on the shop floor,” says Francesca. “You’d find me changing tires, doing the men’s jobs…I learned a lot from my family, and it’s lead me to where I am.” Francesca enjoys working with clients who run or own businesses, similar to her own family members. “The number one thing they complain about are taxes,” she says, so she focuses on helping them mitigate taxes and making sure they leave a legacy for future generations.
Money-saving advice on giving gifts
“Everyone thinks if they’re giving a gift, it has to be something materialistic, but, when you really come down to it, it’s about giving. A lot of people have causes that they genuinely care about and they give a lot of time to throughout the year. So one of the best gifts you can give is making a donation in someone’s name to a charitythat they care about,” advises Francesca. “It can actually also count as a tax write off. So, you know, instead of giving someone a sweater or a shirt that they may only have for a year, you can actually make a donation in their name. It will help someone out, and you get a tax benefit from it.” She continues by giving an example: “Say you donated a hundred dollars, and your tax rate’s 25%. The cost to you will only end up being $75, but the charity still receives the full $100.”
For those friends and family members you struggle to find a gift for, especially if it seems like they already have everything they need, Francesca offers a solution. “Sometimes the gift of time can be another great gift, and to be honest, it’s free, it’s just what you put into it. Coming from an Italian family, they love nothing more than to see a good hard day’s work,” she laughs. “Another thing that you could possibly give is an IOU. You know, you do a household chore, a project…my dad always loves if I can come in and give him a few hours to help him detail some cars at his auto body shop. There’s so many things you can give that they really appreciate because it frees up their time, and it would actually save you a lot of money.”
Tips for family business succession planning
When it comes to transferring the business from parent to child, complications may arise. Francesca recommends first figuring out who wants the business, and finding out what they are willing to invest to become an owner. “The person in charge needs to have a conversation with their kids and say, ‘Who really wants a part of this business? And if you do, what are you willing to put up for it?’” The next step is to get a business valuation, then figure out how to make the transfer of ownership as tax-efficient as possible. “Tax laws change every year, but there are a lot of different ways to strategize that.”
Francesca also advises having an insurance policy in place. “If the business owner dies, be it the father or the mother, this ensures that the kids all get their fair share. But,” she warns, “you also have to be aware that some business don’t run without certain people. In that case, the business may only be worth the value of the property.” Creating a trust is another option for business owners to investigate with the help of a financial advisor.
Francesca points out that, unfortunately, some family members lose sight of the fact that they’re lucky to get to work in these businesses.To avoid conflict, she believes in keeping the lines of communication open and planning ahead. “Listen, these conversations are awkward. Having your brothers and sisters sit around a table to talk about when you mother dies, who gets to live in the house, and should you stay here and if it’s fair, they’re awkward. But there’s also professional help available, such as transition consulting groups.”