80% or so of my day job is that of portfolio manager. Spending most of a day alone, behind the computer with information to analyze fits my nerdy, introverted soul. For proof, look no further than the majority of posts I have thrown up on this site. However, I do also very much enjoy working directly with clients and helping them maximize and have confidence in their finances. Being an FEG advisor is about so much more than working towards better returns and lower risks; it is about helping people translate those assets into their lives and getting the most out of them. Working directly with the investors is also critical in staying connected to who it is you actually work for and serves as a strong reinforcement as to why it’s all worth it.
The intent of this blog was never to be a high frequency contributor to financial dialogue as the world has no such shortage. Instead, the goal was to share insight into some deeper topics as they arise, with a substantial chunk of those deeper thoughts usually center on the best ways to position fixed income exchange traded funds (ETFs). Over the past several months I have done what I committed NOT to do when starting a blog and that is to fall so far behind on posting content. Part of that is attributed to a particularly busy period, but it is also due not having any truly major changes to share. The equity moves have been spectacular, but after adding a good chunk of bonds last October, the strategy in fixed income has been to mostly sit on the hands. However, I am going to be tossing up a 4 part series on some of the most satisfying conversations I have had with families while wearing the financial advisor hat over the years.
This first story is about a couple that I have had the honor of working for nearly 20 years. Last summer, we lost the husband during an unexpected illness, but not before I had the opportunity to harvest nearly two decades worth of rich wisdom from him. This particular couple resembled a very common scenario that we at FEG have observed over the years. Having been savers nearly their entire life, they found it more than difficult to just flip the switch from saver to spender. They had been living off of a pension, social security and a small portion of their required minimum distribution income as well; leaving most of their nest egg to grow.
Their children were pretty well established in life and their personal philosophy was that they did not need or want to leave behind a sizable inheritance. By mathematical definition, this means they needed to begin not only spending out of earnings but of principal as well. Otherwise, they would certainly remain on path for bequeathing said nest egg. Yet, people who made their portfolio by saving month after month become hard wired for frugality. I’d show him graphs whereby their current path was leading towards leaving substantial assets behind. He’d leave out meetings confident, ready and excited to find a newer motorhome, updated vehicles for him and/or his wife, or perhaps find some other adventure to spend money on. But, eventually that feeling would fade, and would be dominated by the saving mentality within. “I don’t really need a new truck”, I heard him say on many occasions.
One other factor that this much more difficult was by only ever meeting with the husband. This is very common where one spouse assumes financial responsibilities, and the other takes no interest. But for reasons like these and promoting the spending of assets, it can be super helpful to meet with both…at least some of the time. Saving the nest egg took teamwork; and so will spending it down.
We did have one break through that I will never forget. One thing that always bothered him was keeping various records and documentation. At their age, they incurred plenty of medical expenses and were always on the verge of exceeding their standard deduction and qualifying for itemized deductions. Yet, the record keeping it took to prove as much each year proved to be torturous. We did some quick math and found out that keeping such records were likely to be saving him somewhere around $1,000 to $1,500 on his taxes. There, on the spot we came together with a conclusion: forget about it! What a great way to lose the saver mentality and live a little. While not necessarily going out and buying something, to him it was a freeing moment to realize he could afford to NOT save that extra grand or so on taxes.
Monetarily, it may not have been a giant victory – in terms of unleashing wealth to be used during life. However, the look in his eyes was all I needed to feel a major breakthrough and reminder of why this job is so rewarding.
