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Business and Estate
A Publication of Business & Estate Advisers, Inc.

VOL. 12, NO. 1 WAYZATA, MINNESOTA Spring 1998

Russ Hagen, Mike Casserly Sr., Mike Casserly Jr. and Jim MacLachlan are enjoying Skip-A-Day XIII at Turtleback Golf Course, even though the weather (as you can see) is not cooperating!!

We are soon going to be opening an Ad Campaign with the "catch phrase"...We Don't repair washers, they don't need it...We do repair 401(k)'s, most of them do! This will be our Ad picture!

How to Beat Compound Taxation

By: E. Dennis Zahrbock

As one's personal investments (not IRA's, 401(k)'s or Pensions) grow they start earning higher and higher cash returns. This results in larger and larger 1099's which, in turn, increases income taxation.

Most people "cash flow" the income taxes with smaller "tax refunds" or larger "taxes owed" on April 15th. What we once thought was great "compound earnings" have created something most of us never thought of - "compound taxation". It can become so high that "cash flow" can't handle it and many clients actually have to sell some of their investments to pay their taxes. When they do this, a potential capital gains tax is triggered making matters even worse!

The solution, we've found, is to transfer the annual growth to "Institutional Life Insurance". Unlike most life insurance, initial cash values are instantly over 90% of the premium deposit. Once the cash is inside the life insurance policy, the policyholder (you) can select from a dozen or so brand name fund managers.

Under current law, Section 7702(b) of the IRS code, then allows these funds to grow on a non-current taxed basis. As a matter of fact, if this is properly structured, no income tax will ever be due. This works a bit like the Roth IRA but without the contribution restriction or income cap.

Is "Institutional Life Insurance" right for you? The answer is generally yes if you have a five-year or longer game plan. While it may sound complex, it's really quite simple. If your Life Insurance costs 10% and your taxes cost 30%, and you must pay one or the other, which would you choose? Call our office if you would like to know more details.

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E. Dennis Zahrbock, CFP

In Perspective

By E. Dennis Zahrbock, CFP

1997 proved to be a threepeat in the Stock Market . this has never happened before. plus 20% returns three years in a row. So what will '98 bring?.we're almost always wrong when we speculate, but our guess is an 8 - 12% positive year.

General American's MasterPlan for 401(k) investing may be establishing a new benchmark for others to follow. Many plans now offer multiple fund managers and daily access to participant values. But we know of no others that create participant statements without third party Administrators being involved. We know of no others that offer monthly, quarterly, semi-annual, annual or no asset re-balancing. And we know of no others that offer both "Concept Style" investing and "1-800 Style" investing. General American has created a winner and employers and employees both love it.

We're in four time zones. Rachael is a junior at Butler in Indianapolis (Eastern), Sue and I are here in the Midwest (Central), Lori has moved to Denver (Mountain) and Steph now lives in Portland (Pacific). Who'd have thought just five years ago that our family would be so spread out?

Skip-A-Day XIV is less that 60-days away. May 18, 1998 to be exact. We'll again have Spanky's cater a fish fry fit for Kings (our clients and friends). Golf will be at Cumberland Golf Course, Fishing at area lakes and (most likely) bad weather until evening. Hope you all can come. Invitations go out soon. If for some reason you don't get one, it was an oversight. Call our office, we still want you to come.

Mission Jamaica 1998.in March Sue and I took a weeks leave and, with 70 other Wisconsin and Minnesotans we helped build a playground, a new kitchen, repaint a dining area and construct a new staff bathroom. What a way to share what we, in America, have with the Third World that has so much less. The concept also sends a true goodwill message to our Third World brothers. People from the USA pay their own way, take off from work, use vacation time and them come to our country and work for free! It's also a great way to see God's work when 70 people that hold normal American jobs team-up together doing things they've never done and.actually get something done!

Red Barn Theatre auditions were on Saturday March 28th and Yours Truly has tried out! They're doing six plays this summer, but I don't know yet if I'll be chosen or not.if I am chosen - OSCAR HERE WE COME!

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January 1998

The Securities Specialist position has been filled by Julie Kingren. Julie comes to us full of securities knowledge and is working on her Series 7 Brokers License.

February 1998

Business & Estate Advisers was recently recognized nationally by General American as the Top Pension/401(k) Affiliate for the year 1997.

February 1998

E. Dennis Zahrbock was also recognized as the TOP PERSONAL PRODUCING GENERAL AGENT NATIONALLY FOR 1997.

March 1998

E. Dennis was Featured Speaker at the Minneapolis/St. Paul CLU Chapter. One hundred friendly competitors attended his two hour presentation on.you guessed it.the ins and outs of the 401(k) market place.

May 1998

E. Dennis will be traveling to Washington May 1-6 for the annual AALU meeting. A few days of sharpening the Brain. Sue's going with, so Ford's Theater tickets on Saturday, Lunch in Senate Dining Room on Monday with Senator Grams, and Lunch in House Dining Room with Congressman Jim Ramstead will be some real highlights.

June 1998

Appreciation Day for our school community is again scheduled for Thursday June 11th. This is our 5th year of breakfast for our local teachers and staff. It is our way of saying thanks for all they do.

August 1998

The Top 401(k) Pension Producers of General American will be hosted by E. Dennis at the Stout Lodge near Rice Lake, WI. This will allow sharing of ideas, further tweaking each attendee's practices.

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Advisory Board Member Interviews

The following three interviews continue our series on members of the Advisory Board of Business & Estate Advisers, Inc. We are pleased to present to you Dennis Pottebaum, Gary Briggs and Idelle Schranck, all of whom are current board members.

Dennis PottebaumDennis Pottebaum

Dennis is President and Founder of Quality Resource Group. He is recognized nationally as an expert in Business Forms.


Q: How did you first become acquainted with Business & Estate Advisers?
A: Dennis was the Chairman of the Board for the TwinWest Chamber of Commerce when we first met.

Q: During your association, what has Business & Estate Advisers done for you?
A: B & E has helped us establish a 401(k) program for our company. Additionally, Dennis has helped us in our benefits program by providing an educated and unbiased viewpoint of the various options from insurance needs to investment opportunities.

Q: What has your service on the Advisory Board meant to you?
A: I've found it insightful to work with a great group of interesting and experienced individuals.

Q: What, in your opinion, makes Business & Estate Advisers different from other financial services firms?
A: The people. This team listens to what we are saying and cares. I trust them with our future!

Gary E. BriggsGary E. Briggs

Gary is President and Founder of both Wayzata Marine and Minnetonka Marine. He was recently featured in Boat & Motor Dealer as the National Marine Dealer of the year.


Q: How did you first become acquainted with Business & Estate Advisers?
A: I became acquainted with B & E through Denny Zahrbock and his involvement with the Wayzata Rotary.

Q: During your association, what has Business & Estate Advisers done for you?
A: B & E has provided to me and my company investment advice, retirement advice and company benefit plan advice.

Q: What has your service on the Advisory Board meant to you?
A: Service on the advisory board has helped share business problems of other closely held companies!

Q: What, in your opinion, makes Business & Estate Advisers different from other financial services firms?
A: I know them!

Idelle SchranckIdelle Schranck

Idelle is a realtor with Edina Realty. She resides in Golden Valley. Her hobbies include her 9 grandchildren, spending time at her lake retreat and riding her bike.


Q: How did you first become acquainted with Business & Estate Advisers?
A: I met Dennis at Twin West Chamber of Commerce events and Board of Directors.

Q: During your association, what has Business & Estate Advisers done for you?
A: B & E has created a knowledge base which is imperative in today's society. I would not hesitate to allow the B & E team to handle my financial resources or refer them to my friends and family.

Q: What has your service on the Advisory Board meant to you?
A: A continued association with active community leaders concerned with mutually supporting one another.

Q: What, in your opinion, makes Business & Estate Advisers different from other financial services firms?
A: Genuine concern for clients. Consistent effort to provide the best quality service coupled with unequaled knowledge of their industry.

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Business & Estate Adviser's
"Tips for Teens"

Volume 2 Issue 1

Edited and Revised by Business & Estate Advisers, Inc. as an insert to our newsletter

By: E. Dennis Zahrbock, CFP

Welcome to our first issue of "Tips for Teens". The idea of a special insert for teens can be credited to my three daughters who are now all in their twenties. Even though they grew up in a home that had it's primary income derived from the Financial Services industry, they failed to become aware of what's going on in the financial service arena. I apologize to my daughters for not giving them more "financial ideas" than I did. However, thanks to this experience, hopefully your son's and daughter's (and maybe even you) will gain from our "Tips for Teens" insert.

"Tips for Teens" will be based on a format of a football team. We'll discuss both the offensive and defensive teams. And, of course, we'll be discussing the referees.

In this first issue we will be introducing some of the team members. In future issues we will do more in-depth analysis of the team and how a winning financial plan uses both a strong offense and defense.

So here's our starting Offensive Team:

Bonds: A bond is a type of loan. Both government and corporations borrow money by issuing bonds. When you own a bond you are loaning money to the bond issuer. A bond is for a stated time period (5 years, 10 years, 20 years, etc.), so during the life of a bond it's value may go up or down depending on changes in interest rates and other factors. If interest rates go up, the value of a bond you own will go down. If interest rates go down, the value of your bond goes up.

Stocks: Instead of making a loan to a company (bonds) you actually become an owner of part of a company. Stocks are sold in divisible units known as shares. If a company has total shares of 10 and you own 1, you effectively own 10% of the company. If a company has 1,000,000 shares and you own 100 shares you own .01%.not very much! When you own shares, you are entitled to rights, which include your right to vote on how the company is run. You also have the right to share in profits through either dividends or appreciation in the stock value.

Bank accounts: Instead of a bond or stock, which each carry risk, you may invest your money in a Guaranteed Savings Account. In a savings account you loan money to a bank and they agree to guarantee to pay you interest and to guarantee that your principal cannot be lost. A bank is further guaranteed by the Federal Government up to $100,000 per depositor. You normally earn less interest in a savings account than in a stock or bond investment. This is a trade you make for no-risk! The bank may then loan your money to someone who wants to buy a car.but if the person that wants to buy a car does not pay their payment, it is the banks problem, not yours! The bank must use its profits to pay you your interest and your principal. Bank accounts can include Checking, Savings and Certificates of Deposit.

Annuities: Annuities are also guaranteed instruments, but they are issued by Insurance Companies, not banks. Again, you loan money to an Insurance Company, and they guarantee both principal and interest. They are not guaranteed by the Federal Government, but many states have State Guarantee Associations that guarantee up to $100,000 of your principal.

Real Estate: When you own real estate you may rent your property to someone else. The rent is then yours to keep and spend just as interest would be in a savings account. Real estate is hard to buy in little pieces (like stock shares) so they generally require more investment or a combination of investment and loans to buy any. Good real estate provides increasing rent to its owners and appreciation in value. For example real estate at a freeway interchange would be very good to own as you could rent it for large amounts to McDonalds or Holiday Gas. If, on the other hand, you own real estate twenty miles from nowhere it has much less rent value.

There you have our Starting Offense, we may have a few substitutes in the future, but we will introduce them later.

Our Defensive Team will consist of team members that will hold field position. A great offense that always has "the ball" will nearly always win! The problem is that no Offense always has the ball! Many a game is won by having a good defense hold field position while the offense regroups and plans strategy.

Our DEFENSE consists of Property & Casualty Insurance, Medical Insurance, Long Term Care and Disability Insurance, and Life Insurance. We'll discuss the basic defense team in our next issue.

Today's Quiz:
True False

  1. A bond guarantees principal and interest T F
  2. A stock share has the right to receive interest T F
  3. Real estate is always a place for high rent T F
  4. Annuities are often guaranteed by states T F
  5. With a strong offense you don't need defense T F
  6. Banks will share their profits on your savings account T F
  7. If you invested $1.00 in 1492 when Christopher Columbus landed, and you earned 5% every year, What do you thing your account would be worth today?
    • $50,000
    • $5,000,000
    • $50,000,000
    • $50,000,000,000

Fax your answers to (952) 475-0816 with your name, address, phone & e-mail (if available) for a free prize if all answers are correct.

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Business and Estate
Business & Estate Adviser, published periodically, is composed on a personal computer utilizing Microsoft Word 97 and Times New Roman typeface. Camera-ready copy is generated on a Hewlett-Packard LaserJet III printer. Gray-shades and printing by Wallace Carlson Company, St. Louis Park, Minnesota. For additional copies or information, please contact Michele Mattson at (952) 475-0440. Copyright © 1990-1999 Business & Estate Advisers, Inc. All rights reserved.

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