Let’s be clear: life is too short to have troubles weighing you down 24/7. You’ve got things to do, people to love, sports and games to play, work to finish, and passions to pursue. So the more time you spend with pounding headaches as you work out your problems, the less time you have to do with life what you’ve always dreamed of doing.
As I noted in Part 1 of this series, one of the biggest roles your fiduciary financial advisor should play for you is that of Conflict Solver.
Here I’ll take you through three more of the nine most common financially related conflicts I’ve seen in my three decades of serving clients and show you what we do to solve them.
Let’s get going. Here are Financial Conflicts 4–6 of this series:
Financial Conflict 4 – Is it OK to manage my own portfolio?
Do-it-yourself investing doesn’t have to be a bad thing, but there are some important considerations to make before going down this path.
First, I would recommend checking out my earlier book, Reinvent Rich: How to Make More Money, More Moments and More Meaning in Life, for in-depth insights on best investing techniques.
Second, I’ve found that many people who decide to do this tend to chase the hot dot. This means that they invest in whatever is doing the best at the moment. They will often buy near the high price for a stock, and when it begins to sell off, they get nervous and sell that same investment. Then, they buy the next hot investment, which provides for mediocre returns over time.
We had a business couple, Linda and Jay, join our firm as clients many years ago. Linda and Jay worked for a large publicly traded health-care company (where they met), and they had high-paying jobs and were enmeshed in the cultural identity of the company.
Over the course of their careers, they had amassed millions of dollars of publicly traded stock and stock options. They joined us in need of guidance because the company’s stock price became volatile, and they could no longer take the ride because they were nearing retirement.
From our detailed analysis, we were able to demonstrate to Linda and Jay that a diversified portfolio would be better positioned to withstand volatility in the stock market. We embarked on a multiyear plan of selling the stock each year by setting a capital gains budget to minimize taxes.
We set price targets to maximize the profits of their stock options and set up a charitable donor-advised fund to donate highly appreciated shares to go to their charitable endeavors, which further reduced their tax exposure.
Fast forward many years later, and they still own the stock in their portfolio, but in much smaller quantities and have a diversified asset allocation —which creates a much more resilient portfolio for them in the long run.
Ultimately, we fiduciary financial advisors are here to maximize your wealth and minimize your risk, which is why wealth management is such an integral part of our approach and focus.
Financial Conflict 5 – How do I protect my children financially if I remarry?
The last thing we would want a client of ours to do is jump into a new life-changing event without checking all of the boxes. We make sure our clients know all of the marriage planning alternatives available.
For example, a prenuptial agreement is one method that clients can use. We also look at beneficiary designations to ensure assets that you want to pass down to your kids go to them and not inadvertently to a second spouse. Finally, update your estate documents to ensure your kids inherit what you want them to receive.
None of this means you have to cut out your new spouse from your will. If you still want to take care of your spouse after you’re gone and still leave the “farm” for your kids, we often see this carried out with a trust.
One such trust is called a QTIP or Qualified Terminable Interest Property Trust. With this type of trust, you are setting aside a chunk of your estate from which your spouse can be entitled to income every year while preserving the principal for future generations, i.e., your kids and grandkids.
Financial Conflict 6 – How do I prepare for a financial emergency?
This is a very real problem—and a scary one. Thoughtful meetings with your fiduciary team should include not only financial planning but healthcare planning as well. Our goal is to make sure you are taken care of.
We had one client, Mary Beth, whose husband died suddenly of a heart attack. Mary Beth had no adviser and modest liquid assets. She and her husband’s net worth was in a handful of residential real estate properties that paid them income.
To start, we hired a person to act as property manager to save Mary Beth from having to deal with all of that, and we found her a trustworthy virtual administrative assistant to help pay her daily bills.
Then, over several years, we worked with Mary Beth to sell the real estate to create a portfolio of liquid assets to support her lifestyle. After all the properties were sold (including her personal residence), she moved to a low-maintenance condo. She has been living off her portfolio comfortably ever since.
Since life changing events are often unexpected, the bottom line is that we can help figure out the best course for any situation. Being prepared is much better than struggling at the last minute.
Want to learn more about solving common financial conflicts? Stay tuned for Part 3!