Is It Possible Anymore?

I recently sat down with “Mike,” aged in his mid 80s who owned and operated more than a dozen car dealerships in the Northeast before selling those dealerships to his son.

“How did you get started in the car business?” I asked.

“I was about 27 years old selling used cars after my stint in the Navy,” Mike said. “Someone who knew someone got a representative from Volkswagen to meet with me about opening a dealership in my community. They painted this picture where I would build a $300,000 building – a lot of money back in the early 1960s. I would build the building, purchase inventory and hire mechanics, sales staff and support personnel.”

“That sounds like a lot of money, even now. In today’s dollars it was probably a couple million dollars or more,” I noted. “Did you have a stash of cash? Inheritance?”

“I didn’t have two nickels in my pocket,” Mike chuckled. “I had another friend from the Navy whose father was the bank President. He loaned me the money. At first, I was nervous because they wanted me to personally sign for all this money. But then I visited a friend who had a thriving business. He asked me what I had to lose! I was judgment proof, really.  If I defaulted there wasn’t anything for the bank to get other than the business. So I did it.”

The rest was history. Mike went on to build several dealerships that sold cars, employed hundreds of people and served communities.

Later that evening I thought a lot about Mike and how he made himself such a success. I also thought about how impossible building that business would be today for someone in a similar circumstance.

Bank regulators would never allow a bank to loan significant amounts even to an ambitious twenty-something without collateral or a co-signor. Purchasing property and obtaining all of the necessary permits to build a car dealership complete with environmentally hazardous materials such as used oil would likely cost multiples of what was necessary back in 1960. Hiring workers entails not only salary costs, but also the remittance of state and federal taxes and compliance costs associated with laws and regulations governing employers, including employer social security matching, Medicare matching, health insurance, disability insurance and others.

So is replicating Mike’s success even possible today?

I don’t know the answer. It is evident that while government plays an important role in regulating business such that the consumer, environment and employees are all treated properly, I question whether we’ve also choked off the American dream in many ways. Has government taken too large of a role in our lives? Where should we draw that line as a society?

Government regulation isn’t the only constraint today. Most businesses compete not only with those down the highway or across the street, but from across the globe. Going back to the car example, how much money would a new dealership have to invest in a web presence and Internet capabilities in order to attract customers, quote prices and close deals?

Obviously the car business isn’t the only one affected by these factors. All of those in business share these obstacles. Are they the right obstacles? Are they too many? Have we over-regulated to the determent of young, ambitious people who don’t have access to capital?

Somehow making money and even our economic system called capitalism have become taboo in our society. That’s too bad because capitalism was named by its enemies, including Karl Marx. The true definition of capitalism according to Austrian economist Friedrich Hayek (1899-1992) “is an ever increasing system of cooperation among strangers.” No other economy in the world works as well as capitalism in creating value and wealth for its citizens.

Less advanced economic systems fail because they require a centralized system of management consisting of individuals who are part of a family, clan, tribe or party. Those outside don’t benefit. Those inside benefit greatly. It’s only when you have a society that is governed by the rule of law rather than the whims of a man or a group can it engage in an economic system capable of producing remarkable results.

When you withdraw money from an ATM machine that is not your banking institution, think about how successful cooperation amongst strangers must be in order for that transaction to occur. In Europe I used ATM machines to withdraw local currency from my checking account here in Fort Myers. Without the reliance among strangers in the economic system, that wouldn’t be possible.

We may all want to take time to consider how today’s young generation is going to make a go of it so that we all continue to prosper.

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Hunt for Scholarships

According to the College Board, the average cost of tuition and fees for the 2017-2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities. Add another $15,000-$30,000 annually for books, supplies, room, board and living expenses depending upon the location of the institution. Consequently, you’ll find that attaining a bachelor’s degree can range between $125,000-$300,000 or more.

Backbreaking expense even for the affluent among us.

In last week’s column I reviewed my perspective on my three daughters’ college admissions processes, as my youngest will be leaving the nest this next academic school year. I promised in this week’s column to address accessing scholarships to help pay for these monstrous expenses.

It’s important to keep in mind that financial aid and scholarships are two different things. Financial aid is usually awarded by means of completing a FAFSA (Free Application for Federal Student Aid) form www.fafsa.ed.gov, which is part of a federal program. Most colleges and universities use the FAFSA process to determine financial need and award federal grants and loans based upon that need.

Generally speaking, the income and financial resources of parents are used to determine the need of undergraduate students. It doesn’t take a great amount of income and/or assets on the part of an undergraduate’s family to decrease the amount of eligible aid and grants offered. Retirement savings, for example, are included in the calculation as an available resource that a parent might use to educate his or her child. With the cost of education high and continuing to rise, it’s conceivable that a parent or grandparent burns through retirement accounts by allocating retirement resources to children’s college educations.

A student might qualify for more aid or grants if his or her siblings are also in college concurrently, but not enough to make up the significant difference in the associated costs. It should be noted that gifts from parents and grandparents in the form of 529 Plans, UTMA accounts and trusts for college education are counted towards available resources, also limiting the amount of federal aid the student will qualify for.

Since student loan debt might crush a freshly minted graduate, caution should be heeded before funding the majority of a college education with government and private loans. Most student loans can’t be discharged in bankruptcy. This might be why so many thirty-somethings reside with their parents rather than renting apartments or purchasing first homes.

Which brings us to scholarships.

Many colleges and universities automatically consider applicants for academic scholarships based upon high school grade point average, standardized test scores and extracurricular achievements. When applying to a college or university, don’t leave the process entirely up to the student. My kids, bleary-eyed from their high school’s rigorous International Baccalaureate studies, often didn’t thoroughly scour colleges’ websites for available scholarships, which sometimes required the submission of a separate application or essay.

Moreover, there are a variety of public foundation and private scholarships available. Numerous websites offer insight, simply Google “college scholarship opportunities.”

Once awarded an academic scholarship, don’t give up! There may be even more money available. When my eldest daughter Gabrielle was accepted to Brandeis University, the scholarship offer wasn’t as meaty as others offered from other universities. I telephoned the Dean of Admissions asking if the scholarship offer could be increased. He explained that Bernie Madoff stole a significant portion of Brandeis’ endowment, so they didn’t have the resources to match competing schools. He did, however, eventually offer additional scholarship money which we accepted, as Brandeis was my daughter’s first choice. Gabi has since graduated Magna Cum Laude with her Bachelor’s degree, and next month will also graduate Brandeis with her Master’s degree.

My middle daughter Courtney is a junior at The University of Florida, a public institution. While negotiating academic scholarships with large institutions isn’t usually possible, there are programs like Florida Bright Futures earned through high school achievement, which provide a healthy scholarship as well. So long as your student maintains a 3.0 average (not a problem for Courtney!) Bright Futures continues for her four year degree.

My youngest daughter, Madison, was invited to compete for Elon University’s Honors Fellowship. Elon invited 350 of the more than 2,000 applicants to visit campus last month to be interviewed by faculty, attend a lecture and write an essay from a prompt related to the class. Madi was recently awarded one of the 43 honors fellowships, along with a Presidential scholarship she received when first admitted.

Elon’s scholarship offers will cover approximately two-thirds of her four-year tuition expense. Madison noticed that she could have competed for a variety of different honors, but chose to compete solely for the one that paid the most – an “all or nothing” approach on her part, which I encouraged. If the Elon’s admission office really wanted her for the Class of 2022 (as I felt they did based on her exceptional high school academic performance), I figured they’d offer the honors fellowship rather than lose her to another school.

A final thought goes to whether to apply for early decision. Many of the more competitive schools encourage applicants to apply early decision which means that if accepted, the applicant is bound to attend, regardless of scholarship offers or lack thereof.

If there is an institution that your student is dead-set on, then applying early decision may increase his or her chances of admission. I don’t favor this course, as I believe it removes all negotiating power over scholarship awards. If you have the resources and don’t care, then by all means it might help your student get into a “reach” school. Two sons of a close family friend were admitted into their preferred schools of Duke and Vanderbilt through early decision. But neither received scholarship awards.

If you’re concerned about academic scholarships, then I would suggest a more flexible approach. It’s similar to buying a car. If you limit yourself to a certain model, you are less likely to get the best deal than if you are open to a number of different models that have similar preferred features. Ultimately, even going through this process, each of my daughters enrolled in the university they felt was the right fit for them.

Please understand that I’m simply stating my opinion formed from my experiences over the past six years. Others may find success on a different path. I wish the best of luck for those currently engaged in the process.

Courtney, by the way, is beginning her search to attend graduate school. If any reader knows of private scholarships for those pursuing a doctorate in physical therapy or hospital sponsorships that may be available please email me at my address below!

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.

Empty Nester: View of the College Admissions Process

Regular readers know that my wife and I raised three daughters, all of whom we are extremely proud. All three graduated (or will graduate) Summa Cum Laude from Fort Myers High’s International Baccalaureate program. Our eldest daughter graduates with a Masters Degree from Brandeis University next month. Our middle daughter is a junior at the University of Florida, aiming to become a physical therapist. Our third recently accepted an Honors Fellowship at Elon University, enrolling this coming fall semester.

Soon Patti and I will be empty nesters. Hard to believe.

We’ve been through the college admissions process on three separate occasions, so I feel that I’ve earned some wisdom to share. Many of my clients believe as I do that helping your child (or grandchild) achieve a higher education is one of the best ways to launch them into the adult world, so it’s common for my clients to establish Section 529 Educational Savings Plans (named for the Internal Revenue Code Section creating them) for their children and grandchildren, and invest in state Prepaid Programs like the Florida Prepaid College Plan.

Are they worth it?

As my children were born, we invested in two Florida prepaid programs understanding that at least one of them would choose to attend a private institution rather than a Florida public state college or university that those plans are best suited for. As it turns out, two chose to enroll in universities outside of the Florida public state system.

Was the prepaid program a bad investment? No, not really. As it turns out, while Florida Prepaid Plans are designed to be used at a Florida College or State University, the plans can also be applied to other schools nationwide. Plans can be used at in-state, out-of-state, public or private schools around the country – or even the world. The Florida Prepaid Plan pays to the other schools the same amount for tuition that it would have paid to a Florida public school.

Because the cost of attending a public university has outpaced inflation, it didn’t turn out to be a bad investment. The annual cost of attendance for an in-state resident at the University of Florida today is estimated to approximate $22,000, with $6,300 of that amount constituting in-state tuition. The rest is room, board, books and other expenses. The cost of attending a private institution like Brandeis University however, hovers around $65,000 annually. So if your student attends a private college then the Florida prepaid plan would pay that private college $6,300 annually for the tuition assuming you purchased a four year plan.

How about 529 plans? While the prepaid plans pay for tuition (and dormitory if you purchase a dorm contract rider) the 529 Plans can be used for nearly any educational-related expense. A 529 Plan usually consists of investments in mutual funds or cash equivalents, and therefore rises and falls with the market. Like all investment plans, some perform better than others.

So long as the 529 plan withdrawals are made for college related expenses, any realized capital gain or other income recognized inside of the plan is not taxed to the account holder or recipient.

I’ve found marginal success with 529 plans. Because of the stock market crash ten years ago, many of my plan assets decreased in value. Low yields didn’t help with those parts of the plans invested in bonds and other income producing funds. But the same probably would have held true with investments outside of a 529 plan for the same time period. The tax-free character did help overall.

What about the admissions process? My observation is that the competition to get into the best colleges and universities is fiercer than ever. It appears that our children compete for admission spots not only against other students from across the United States, but also from those around the globe. It’s common on many campuses to find that international students make up an ever-growing proportion of the student body.

While grades and SAT/ACT test scores remain vitally important, there are other actions you can take to help your student gain admission, especially among private universities. The most significant point I can convey is to take an official campus tour. Most private colleges and universities offer tour dates where you register to attend a presentation, tour the campus, and learn about financial aid and scholarships.

During an Emory University tour, an admissions officer honestly revealed that those who don’t take the time to visit the campus often don’t make the first cut when the admissions office selects who will be admitted and who won’t. The admissions officers have a difficult job in that their goal is to admit those students who are likely to enroll. Since the best students commonly have multiple offers, the school never knows who has that institution at the top of a particular student’s list. When you and your student tour the campus, it demonstrates a certain eagerness to attend that university.

Next week I’ll review what I’ve learned about gaining scholarships while navigating this process with each of my three daughters. 

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.

Immigrant Success Juxtaposes News Reports

For the past 13 years, I’ve participated in Strategic Coach, an international entrepreneurial coaching program. I fly to Chicago or Toronto quarterly to meet with my coach, Dan Sullivan, in a class consisting of about fifty other business leaders, professionals and entrepreneurs mostly from the United States, but also from around the world. Most of the participants in my group established and built multi-million dollar businesses employing anywhere from a few dozen to several thousand employees.

My estate planning legal practice is a spit in the ocean compared to what many of my classmates run. I find it invaluable to be in a room of wise, sound businessmen and women, most of whom also support a variety of philanthropic causes. They give me fantastic ideas how to streamline work, upgrade client service and market my law practice through valuable client education using today’s technology.

But here’s my anecdotal observation: roughly one-third of the participants are either immigrants themselves or first generation children of immigrants to the United States.

One out of every three!

These are individuals who left their homeland, some not knowing how to speak English, having little or no financial resources to make a go of it in our country. Many attained college degrees at our fine colleges and universities while some did not, but all of them built something quite substantial. The program’s annual tuition is $25,000.00, so we don’t have charlatans among us. These people are the real deal.

Before joining Strategic Coach, I would never have guessed that so many created so much in such a short period of time. They are men and women, white, black, brown and every shade in between. I’ve met a Muslim from Asia looking for a bigger future in America, despite knowing he would likely face discrimination here. Another in my class fled Macedonia with his family when war broke out in the 1990s. A Christian Iranian fled as a child with his family when the Ayatollah came into power in 1979. Several Indian nationals have established technology centers here and in their homeland.

They are all multi-millionaires who run successful organizations.

It’s truly amazing what these individuals have accomplished in such a short period of time. And besides, they are nice, quality people that are interesting to talk to. They love our country and the opportunity it provides.

And they give back.

They’ve established centers to help refugees stricken by war around the world. They’ve created foundations to fight dreaded diseases and to feed the homeless. One I know has a program to hire wounded American veterans suffering from PTSD.

I therefore don’t understand the news reports that would have one believe our country has become a conglomeration of xenophobes. Certainly not every immigrant constructs million dollar enterprises, but you also notice hard-working immigrants in restaurant kitchens, hotels, landscaping companies, manufacturing firms and a host of other jobs that require back-breaking hours.

Just about every one of us traces our ancestry back to an immigrant. My great-grandparents landed on Ellis Island in the early 1900s to escape European pogroms. They worked in sweat shops in the lower East side of Manhattan, which at the time was the most densely populated place on earth. Later, they built clothing manufacturing firms and later general retail stores.

My ancestors would beam with pride if they could witness what their progeny have achieved these many years later.

I don’t know why our country can’t readily admit, as a full-fledged citizen, anyone who earns a college level diploma here. Instead, these individuals must endure a grueling application process. Do we really want the brainpower that our colleges and universities train creating businesses, hiring workers and paying taxes somewhere else – especially when they would prefer to reside here?

Yes, we certainly have to be concerned about and screen for those who have destructive intent. Many of our nation’s recent terrorist incidents were home-grown, however. Almost all of those entering our country work an honest job to make it here like the rest of us.

The “brand” of our country, if you will, is built on immigration. I’ve been fortunate to witness first-hand the significant contributions recent immigrants have made. I hope as a country we promote a liberal immigration policy to attract the best, brightest and most ambitious.

Our future depends on it.

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.