There are some universal truisms for most retail financial advisory clients. For instance, investors wouldn’t load up their retirement savings with illiquid assets.
But for the 2 million U.S. families that rely heavily on farming for their bread and butter, there is often no choice.
“For family farmers, their 401(k) is the equity in their land,” says Todd Van Hoose, CEO of the Farm Credit Council. His organization comprises cooperatives with $235 billion in loans outstanding to half a million men and women who make their living the old-fashioned way.
The one liquid asset that has been a core of farming since the dawn of civilization—rain—is becoming less important to farmers’ livelihoods as drought-resistant hybrid crops have taken some of the boom and bust out of agriculture.
But on the other hand, the boom is taking more land than it used to, says Larry Winum, president and CEO of Glenwood State Bank in Glenwood, Iowa.
“It’s a lot tougher to be a farmer than it was 20 years ago,” Winum says. “It used to be you could farm 200 acres and make a living. Now to do fairly well, you need at least 400 acres.”
As farming grows more complex, it requires a broader degree of advice. Farmers must not only keep up on opportunities in export markets but stay abreast of tax and estate planning.
Farm wives are becoming more involved with estate planning because they want to make sure there’s fair treatment for the children who stay in farming as well as for those who leave it, says Travis Krueger, a financial advisor with Swenson Investments & Commodities in Sioux Falls, S.D.
Financial advisors working with agriculture clients deal with different problems than peers in the cities and suburbs, including the clients’ wild gyrations in year-to-year income.
In Kansas, the average net income was $122,000 in 2014. That plummeted to $4,500 the year after, notes professor Allen Featherstone, head of the Department of Agricultural Economics at Kansas State University.