Background: Our clients often come to us with a focus on one or two priority problems. As we dig a little deeper, we often find that they may have other issues they were not aware of. Not only are there issues they are not aware of, the issues often affect other areas of their overall financial health. By using a comprehensive financial plan to fully evaluate our client’s financial health, we can help to solve their problems, both known and unknown, while also tying their entire financial picture together.
Our Case: We received a call from John Smith (1), who felt it was time to come and visit with us. Initially, it appeared to be an issue of investment returns that were not to his satisfaction. John is a small business owner who recently bought out his partner and now has an interest in bringing key employees into an ownership role as he begins to plan for retirement. He provides a retirement plan to his employees as part of their benefit package. John and his wife, Jane (1), have two children that they would like to assist with college education expenses. In addition, he has a surplus of cash on hand that he would like to put to work but not necessarily expose to market risk. Based on all of these facts, we recommended completing a comprehensive financial plan to clearly identify his goals and help guide his family towards these goals.
The Results: In our Goal Map stage, we spent time helping John and Jane identify and prioritize their goals. We found that receiving a higher investment return was not as important to John as being able to touch and feel his assets or see a value of his account that would not go down. He was also concerned for his employees, who were being directed to visit a website for 401(k) assistance instead of receiving personal attention. His primary goal was planning for retirement by transitioning the business to the next generation and managing taxes.
By reviewing the current “as-is” picture in our Checkpoints stage, we found that if John and Jane did not make any changes to their financial picture, they would certainly have a comfortable life, but they and their heirs could face significant taxation at the income and estate tax levels. Their primary asset is their business and they did not have protection in place should John become disabled or pass away unexpectedly, which was a large concern for Jane. They realized how significant the business was to their overall financial picture.
In our Navigator stage, we provided various recommendations to improve John and Jane’s financial picture including providing education and assistance to their key employees who have since purchased a portion of the business. We also recommended moving their retirement plan to fall under our umbrella where we focus on educating and serving participants relative to their 401(k) without the focus on a website even though it is available. To help John with his uncertainty of the stock market and future tax issues, we utilized cash accumulation life insurance with a focus on accumulating cash.
Bottom Line: The client was surprised we were able to identify so many issues, as he had no idea we were able to do all the things we do. By walking through our planning process, we were able to help John and Jane identify their goals and create a plan to meet these goals while also addressing their initial concerns.
This emphasized our tagline of With Your Interest in Mind! It confirmed that our role is to look at all ideas and options, not just what is “right in front of us at the moment,” but what is best for the client.
This is a hypothetical example for illustrative purposes only. The experience of this client may not be representative of the experience of all clients and is not indicative of future results. Any tax advice contained herein is of a general nature and is not intended for public dissemination. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein. This advice is being provided solely as an incidental service to our business as financial planner. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC. Financial Planning and Investment Advisory Services offered through B & E Investment Advisers, Inc., a State Registered Investment Adviser, Business & Estate Advisers, Inc., B &E Investment Advisers, Inc. and B&E Pension Advisers, Inc are separate entities from ValMark Securities. (1) Names have been changed to protect the identity of the client.