By Jake Withnell, CFP®
Auto dealers are a tight-knit group. I know this firsthand as I’ve watched my grandfather and father run the same family-owned dealership for the last 50 years. Because of the close-knit mentality, dealers want to make sure that financial professionals know what they’re talking about, that they truly understand the automotive industry before they hand over the keys to any aspect of the dealership.
And yet, reinsurance investments are often outsourced to third-party companies that don’t have the dealer’s best interest at heart. I’ve seen the ins and outs of the business, but I’ve always struggled to understand how such a close-knit group could so easily hand over such an important financial component to outsiders. I watched my dad make similar mistakes until I was able to step in and help manage the investments.
You need to ask yourself: When was the last time I’ve talked to my reinsurance financial advisor? Was it last month? Last year? Or have I ever had a conversation with a professional about my reinsurance investments? For my father, the answer was never.
With three generations of experience in the automotive industry and extensive knowledge of finance, I’ve gained the expertise necessary to maximize reinsurance investments for my father—and I can help you too.
Three Generations of Experience
My family has been involved in the auto dealership business for more than 50 years. It started with my grandpa, who originally worked at U.S. Bank. He saw the size of the loans given to local car dealers and realized, along with several of his colleagues, that he wanted to make a change.
With a young family and not much experience in sales, he left his job at the bank. It was a huge risk, leaving a stable job with guaranteed income for something sales-oriented and commission-based. But he was determined to be successful. He rose through the ranks and eventually bought a car dealership in Salem, Oregon. He built his business from the ground up, then retired at age 60, passing the dealership to my father.
My father worked at the dealership for 15 years before taking over as owner. I spent many summers throughout high school and college helping as a lot attendant, washing and moving cars and getting to know the business just as my father had done before me. Our whole family became very involved in the local community.
I learned so much from my grandfather and father about how to run a dealership, but I wasn’t very interested in working for my dad. I always enjoyed finance and markets, so I became a CPA and a CFP®. Since then, I’ve learned to combine what my dad does best with what I’ve become an expert in: investment management. Today, I’m actively involved in the auto dealership business, helping owners understand and maximize their reinsurance portfolios.
The Importance of Reinsurance
Truthfully, reinsurance is one of the most important aspects of a dealership. It gives you greater profit control and gives your customers peace of mind by allowing them to purchase things like warranties, vehicle service contracts, and gap coverage in-house.
The excess cash flows received from selling these products to your clients can be invested to create an additional income stream for your business. It’s a lifeline for the dealership, but it comes with many complexities. Many dealers don’t quite understand the process, and therefore they outsource it. But you wouldn’t do that for washing and valeting the cars, so why do it for reinsurance?
That’s exactly what my dad experienced and what I helped him to overcome.
When he was selecting an administrator on the reinsurance account, he was asked if he had an investment advisor. Of course, he immediately thought of me. But that was the first time he had ever been made aware that he could select someone to manage the funds. Why hadn’t he known this before? After working for his father, being an owner himself, and having many friends in the auto dealership business, he had no idea that he could play an active role in the management of his reinsurance investments.
It was a lightbulb moment that opened both of our eyes to how much more efficiently the investments could be managed. And all it took was for us to open the door and take a look under the hood.
Since then, we set up a surplus account and I began actively managing the portfolio. The tangible investment returns have far exceeded what my dad originally expected and now he wishes we would have done it 15 years sooner.
How We Can Help
As a third-generation son of an auto dealer, I know what it’s like to navigate the confusion surrounding reinsurance. As a CPA and CFP® professional, I know how to actively manage your reinsurance portfolio so that you can have confidence and your returns can grow. My dad can tell you, there are no downsides to a second opinion.
You might not be losing money with your current structure, but you’re also not maximizing your returns. At JGP Wealth Management, we understand the complexities that go into opening and managing these accounts, from asset allocation to tax implications. If you’re ready to take a look under the hood at your reinsurance investments, reach out to me at 503-446-6450, firstname.lastname@example.org, or click here to schedule an introductory phone call online.
Jake Withnell is a financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. Jake is known for going the extra mile for his clients and for his passion for working tirelessly to help his clients find solutions to their financial concerns so they can confidently live out the life they want. He prioritizes listening and understanding as the foundation of his relationships with his clients, and his highest hope is that they can spend more of their time and energy on their passions knowing he is watching over their financial future. Jake specializes in serving business owners, Nike executives, and retirees, and plays a key role in JGP’s portfolio management process, building and analyzing financial models, and conducting client cash flow analyses.Jake graduated from Eastern Washington University with a bachelor’s degree in professional accounting and finance. He is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER® (CFP®) professional. Jake’s claim to fame is his time playing tight end for the Eastern Washington University Eagles, all while earning four-time Big Sky Conference First Team All-Academic honors! Jake values giving back to his community and does this by volunteering with the Children’s Cancer Association, Family Building Blocks, and New Avenues for Youth. In his free time, Jake takes advantage of the many outdoor activities the Northwest has to offer, such as trail running, mountain biking, and hiking. He loves traveling and spending long weekends at his family beach house in Seaside, OR. To learn more about Jake, connect with him on LinkedIn. You can also watch his latest webinar, 6 Ways to Maximize Your Nike Employee Benefits.