THIS ARTICLE IS THE THIRD IN A SERIES IN CELEBRATION OF NATIONAL FINANCIAL PLANNING MONTH DURING OCTOBER
Our first article discussed the importance of financial planning, and our second article explored how middle-aged couples can benefit from a dynamic financial plan.
BY: David W. Russell, CFP®, CSA® VP, Trust Officer
(601) 707-0008
We often think adolescence is the most tumultuous time in our lives, but at least it is limited to about seven years and, if we are fortunate, we have loving parents to guide us through the ups and downs. Middle adulthood lasts much longer, generally from ages 40 to 65. It often includes substantial personal and financial transitions and is commonly experienced without the same family support structure in place. In this article, we discuss some of the life transitions experienced by James, a successful business owner whose personal and financial life benefitted from a dynamic financial planning relationship.
Year 1: An Open Door for Financial Planning
Argent was introduced to James by his private banker when James was 50 years old. James had inherited a business that was started by his father who had died 10 years earlier, and James had built it into a successful company serving the construction industry. He owned 100% of the company and though he wanted to keep it that way, he also wanted to reward and retain the key people who had helped him get to where he was. As a busy business owner, James deflected most of our initial questions about his family or his financial goals. He preferred that we avoid the “touchy-feely stuff” and only address his current business need, which was to keep key employees from leaving.
Rather than force him into a financial planning relationship that he was not ready for or comfortable with, we focused on remedying the issue about retaining key employees. Working with his CPA and insurance advisor, our team crafted an executive benefit package for his key employee that provided future cash benefits if they stayed until retirement, but were forfeited if they left early. It also provided protection for their families in the event of their untimely death. We re-designed his company’s 401(k) plan, improving the investment options for the participants and saving his company money on administrative costs. James was happy, yet still avoided our attempts to engage him (or his wife) into a deeper financial planning relationship. His reasoning was that he did not have time “to get into all that.”
Six months later James called with some difficult news. His wife Margaret had been diagnosed with ovarian cancer. She had begun treatments, but there were a lot of financial things he said he needed to discuss. However, it was clear when we met that finances were the least of his concerns. He needed to tell his story, how he and Margaret had met, about their four children (ages 12 to 17), and ultimately about how was he going to do it alone – the it being both running a business and managing a family (something Margaret had always done). “These are things,” he said, “that I can’t discuss with my buddies.” In many instances, people only get serious about financial planning when they experience a life-changing event, and James had just experienced a major one. Because we were willing to listen and empathize without any sort of sales agenda, James decided to work with us on more holistic planning.
Over the next 12 months we met with James and Margaret in between her chemotherapy treatments and began to address the most pressing financial planning themes they were facing, as well as the less-obvious ones, using a financial planning table of thematic events.
Years 2-7 (Ages 52-57): A Return to Normal
Margaret’s treatments were successful and after about 20 months the doctors declared her cancer in remission. While the threat of its return was an ever-present reality, it had not spread, and she was encouraged to live her life as normal as possible. As the children got older, and to increase their retirement savings, Margaret was added to the company payroll in year four of the financial plan, and their oldest son Robert started working for the company after he graduated college.
This time served as a wake-up-call for James and unlike when we first met him, thanks to a changed perspective and working for the first time with a business coach/consultant, James was less driven and more reflective on the value of time and the priorities of his family. He now fully embraced the deeper financial planning relationship we had initially proposed. Over the next few years, we addressed several transitional themes:
Years 8 – 15 (Age 58-65): Business Succession and Beyond
It had always been James’ hope that his children would one day take over the business as he had from his father. The differences in his circumstances when he inherited the business as an only child compared to those of his children are vastly different. A plan to sell the business if James died prematurely or became disabled that was put into place a few years earlier did not contemplate a family succession plan. With Robert now having worked for the company for six years, James wanted the business to pass to his oldest son should something happen to him. This was a simple adjustment if James died prematurely, but the more likely scenario is that he lives a normal life expectancy and that the bigger challenge is how and when to exit the business. James figures he will remain active in the company until age 70 if his health holds out. Robert and he work well together, but James admits it will be difficult turning over the reins of “his” company. This common reality created new planning themes and projects to undertake with James:
The past 15 years with James and Margaret have been filled with transitions, unexpected turns and many altered courses. They have battled cancer, paid for a combined 22 years of college tuition, weathered a construction recession and kept a business alive through it all. This case illustrates just a few of the typical transitions that financial planning clients go through, and no doubt there will be additional plot twists in the years to come.
Key Takeaways:
1| A financial plan is a compass, not a roadmap, and requires constant monitoring and adjustment.
2| Financial planning is a professional relationship, not a product to be bought and sold.
3| The best financial planning relationship is with a team of trusted professionals who can walk with you through life’s challenges and transitions because these transitions are not only about money.
4| Do not wait for a difficult life event to begin the financial planning discussions around “What happens if things don’t go as we planned?”
Next Steps:
1| Read the final article in this series.
2| Or, if you are in the middle adult phase of your life and could benefit from financial planning or simply need advice on related wealth management strategies, please contact me or any one of our professionals at 800.375.4646. We are ready to help.
