How We Add Value

Managing Client Emotion

Several months ago, I met with clients Sam & Mary Andrews (names have been changed to maintain privacy). Sam is a retired physician in his early 80s and Mary, his wife, is 74. Sam was concerned about a litany of woes that might befall the US markets, namely China, oil prices, and Iraq.

I explained to Sam that I had no insight into how any of these issues might change our investment plan. Furthermore, the media constantly bombards us with reasons to be pessimistic. Our firm does not have a high degree of conviction in our ability to forecast future world events or these events potential impact on the markets. I gave Sam & Mary a copy of Nick Murray’s book Simple Wealth, Inevitable Wealth and suggested they read it. Two weeks later I received the following letter:

Dear Mr. Palmer,

Thank you for lending this [Simple Wealth, Inevitable Wealth by Nick Murray] to us. We have read, enjoyed and benefited from it. I now know what you meant, and believe your point is well taken. And we are gratified that our portfolio resembles the nicely diversified equity portfolio the author lists on page 164.

Thanks again, and best wishes from us both.

Sam & Mary Andrews

Anticipating Potential Problems

During a recent client meeting we asked a client, whom we’ll call Margie, about any concerns she had regarding wealth transfer to her adult children. Our firm has relationships with three generations of the family, having only recently commenced a relationship with the matriarch of the family, who is in her 80s. Our discussion with Margie uncovered concern about one daughter, Alison, who’s suffered from chemical dependency on and off over the years. Margie noted that she and her husband would leave their assets in trust for Alison. “What about your mother?” we asked. The mother was the beneficiary of a sizable by-pass trust. Upon her death the trust terminates with 50% going to Margie and 50% split equally between Margie’s two children.

Our review of the trust uncovered a limited power of appointment (POA) provision. The POA, if properly exercised, enables Margie’s mother to direct in her will that Alison’s share be retained in trust. Interestingly, only two months earlier Margie had amended her estate plan, but with no discussion of her mother’s estate plan or how her mother’s assets (including any trusts) might best be protected. As a result of our review and Margie’s desire to protect wealth for her daughter, Margie’s mother amended her will to extend the desired protection of the trust assets for Alison.

Finding Solutions to Complex Questions

We recently initiated an estate planning review for a new client, Bill age 64, who remarried several years ago after becoming a widower. Bill executed a prenuptial agreement prior to his marriage that set minimum amounts his wife would receive. However, Bill had not changed any of his IRA or 401k beneficiary designations (they still listed his first wife as beneficiary) and the results could have been catastrophic.

Working in tandem with Bill’s attorney, we were able to insure that Bill’s wealth transfer plans were commensurate with his wishes, while maintaining the integrity of the prenuptial agreement and structuring asset ownership and beneficiary designations in an efficient manner for all heirs.

Providing A Safety Net

We work with many busy physicians who are focused on their professional obligations and who prefer spending their free time enjoying family or pursuing their life passions. These clients value having a trusted financial partner helping them make the right decisions. During a recent relationship review with Dr. Elliott, we discussed his retirement savings and reminded him deferral limits on 401(k) contributions had increased by $1000 in January. We asked whether Dr. Elliott had increased his payroll deduction accordingly. “My office manager took care of that,” he replied. Just to be sure we asked that he send us a copy of his pay stub.

A week later we received a copy of the pay stub, and indeed the deferral had been changed to reflect the $1000 increase. But upon further review, we discovered the client, who will turn 50 years old later this year, was not taking advantage of the 50+ “catch up” deferral. The “catch up” provision enables him to contribute an additional $4000 per year. We alerted him to this opportunity and communicated with his office manager to make sure our client took advantage of this additional savings.

It may seem like a little thing, but this serves as a great example of how we serve as our clients’ financial advocate and safety net. Our attention to detail saved approximately $1400 in income tax and put more of Dr. Elliott’s retirement money to work for him.