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Case Study:   Untangling the Web Weaved by Family Money

At 41 years old, my client Georgie (not her real name) was a bit frustrated by the way her money has been managed. Georgie's Uncle Wallace - the family patriarch - was a self-made man who did well years ago in the stock market. For most of her adult life, Georgie's Uncle managed her investment account as well as the accounts of her siblings and cousins in this next generation.

Unfortunately, Uncle Wallace's management style was best described as authoritarian. There was no room for questioning anything, including why a certain stock was included or excluded from the portfolio. Wallace made all the decisions and was the gatekeeper in terms of distributions.

When I first sat down with Georgie, I asked her what was important to her - what she valued in life. Her answers focused on her family, friends, creative expression through art, travel, and her desire to enact change through social justice work. What I heard was that her values reflected a certain view of the world that could carry over to her investment portfolio. In other words, she could invest with her values. When I reviewed her current portfolio managed by Uncle Wallace, I saw just the opposite of who she was and what she stood for.

I spent some time coaching Georgie on what would be expected of her if she sought control of her funds, as well as how to handle and frame the situation with Uncle Wallace.  I advised her to present it as both a financial values decision as well as the need to become an owner of the funds - responsible and accountable for her own financial future.

The good news is that Uncle Wallace agreed to let her control her share of the assets.  Plus, he was thrilled to learn that she was being guided by an independent Registered Investment Advisor and fee-only Certified Financial Planner who was more like-minded and able to construct an institutionally-managed portfolio that better represented her ideals.

Case Study: If You’ve Already Won the Race, Why Keep Running?

Dave and Ann’s story is very familiar. Dave and Ann (not their real names) have a traditional relationship. He worked in middle-management at Fortune 500 Company for his entire career and managed their finances and she worked at home raising their kids. They maintained a comfortable home in the suburbs, put their kids through college, and helped pay for two weddings.

Dave’s firm was a public company whose stock appreciated significantly before he retired. Dave appreciated having common stocks in his portfolio due to the increase in wealth it provided. He and Ann have been able to live a very full life, move to a well manicured retirement community, put some money aside for the grandkids, and have the freedom and flexibility to travel the world. This was all well and good until the stock market correction of 2008.

Now in his mid-70s, Dave had seen his share of stock market cycles. But this was different for him because of his life stage.  The couple immediately limited their travel plans to visits to the grandkids and cut back on entertainment expenses.

I generated a big picture analysis and concluded that they had more assets than they would need in their lifetime. But how do you convey this to retirees on a fixed income? With some coaching and easy to follow illustrations, I was able to show Ann and Dave that perhaps their biggest risk was taking on too much risk by having a large portion of their portfolio subject to stock market risk. 

I suggested they would be better served if they repositioned some of the assets from stocks into an income stream that would cover their fixed monthly costs. Now, instead of feeling vulnerable by having too much of their investment portfolio subject to the ups and downs of the stock market, Dave and Ann have peace of mind knowing that their monthly fixed costs are covered by a monthly income stream that is deposited directly into their checking account.
 
Case Study: New Retiree

Milton (not his real name) decided to finally retire from his beloved job of twenty years. Before coming to this decision, I had run some Social Security scenarios, which concluded that Milton and his spouse would maximize their aggregate benefits by having Milton wait until age 70 to start receiving his Social Security retirement benefits. Being in his mid-60s, Milton was now facing an income gap, with no paycheck and no Social Security. He knew he wanted to work outside the home, but was leaning towards a volunteer position with a local animal shelter rather than a paid position.

Milton was now faced with the problem of where this income gap would come from. After reviewing his financial situation, I determined that Milton would need to draw funds from his retirement accounts. A closer look at his retirement assets revealed a portfolio that was growth oriented and frequently fluctuated in value. While this portfolio suited him as he was accumulating retirement assets, now that he made the decision to retire, it was time to rethink this investment strategy.

With Milton entering this next phase in life, I recommended several strategies to help align his portfolio with his need to receive a consistent income stream for the next several years. First, with limited investment options within his retirement plan, we repositioned a portion of his funds to a multi-asset income portfolio to generate the income he needs for his monthly distributions. Second, we repositioned the remainder of the assets into a risk-controlled growth portfolio for his objective of maintaining purchasing power, or out-earning inflation over the long-term. We also consolidated an old IRA Rollover into this portfolio to simplify the number of accounts and financial institutions. So far, things are going smoothly and Milton is enjoying his new life.

 By leveraging the capabilities of institutional third-party money managers available at Fidelity Investments, I am able to create, implement and manage portfolios that allow clients, such as Milton, to focus on what matters most – having the peace of mind to live the lives they want.
 
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