The roundtable on wealth building was conducted May 19 at the Courtyard by Marriott, Canfield. Seven panelists talked about strategies for building wealth, preparing for retirement and educating young people. Participants were Stephen VanSuch, managing director of investments/branch manager, Stifel Financial; Sid Jones, managing director, Jones Wealth Management, Merrill Lynch; Brian Hostettler, senior vice president and senior relationship strategist at Hawthorn Family Wealth, PNC; Jonathan Lapine, CEO, Tolmiros Financial; Linda Carey, senior investment adviser, Farmers Investments; Tim Petrey, CEO of HD Growth Partners; and Stephen Daprile, president of Gem Young Wealth Advisors. Business Journal associate editor George Nelson led the questions.
Business Journal: When should someone start thinking about retirement savings? What strategies would you suggest for someone who is starting late?
Stephen VanSuch, managing director of investments/branch manager, Stifel Financial: So, it’s a great question. It’s a question that I get often, but the short answer is, as soon as possible you can begin to, first and foremost, start thinking about long-term financial goals. But first of all, from a financial standpoint, you should begin saving and investment as soon as possible.
Sid Jones, managing director, Jones Wealth Management, Merrill Lynch: Time magnifies money. So the earlier you begin, the better off you are.
We love to work with the families and suggest that they use a Roth for their children when they have W2 earnings to both educate them and give them that head start.
We like to have the children involved. They don’t necessarily need to know about the family’s wealth. …But I think it’s a great educational piece, and we like to have the children give input – better off for the children to make mistakes early in life, when the dollars are small, than later.
Brian Hostettler, senior vice president and senior relationship strategist at Hawthorn Family Wealth, PNC: I’d say starting as early as possible is important for everyone and for those that are starting later, I think there’s no time like the present to get started, because it’s never too late to start a good habit, which is saving for yourself for the future.
Jonathan Lapine, CEO, Tolmiros Financial: Compounding is the eighth wonder of the world. I think it’s attributed to Einstein, but yeah, the amount of effort your money has to do, has to exert – if you start later – it just way outweighs the amount that money needs to work and earn on itself starting earlier. So the earlier the better. Let it compound. And you know, it can create futures.
Linda Carey, senior investment adviser, Farmers Investments: Obviously, I agree with what everyone said: starting early is best. And also making sure that you educate your clients and educate yourself.
Sometimes people are not familiar. Obviously, they’ve had savings accounts, but they need to understand the risks and rewards of investing in the market and investing in index funds, becoming comfortable with that.
Because, as Jonathan mentioned, it is important to compound.
It is important to grow that money, more than inflation. So educating your clients, being familiar with the market and being comfortable with the returns those markets can give.
Tim Petrey, CEO of HD Growth Partners: I undoubtedly agree with everybody’s sentiment about starting earlier rather than late, if at all possible. I think the other side of the equation that people often forget is spending habits and starting to learn healthier spending habits earlier in your career.
One of the functions of accumulation is just simple math – is what you accumulate minus what you spend is what you’re left over with. So often the forgotten portion of the equation is how much you spend and thinking about keeping your spending habits in check earlier in your career.
Or checking those things later in your career and maybe dialing those things back and not getting caught in that lifestyle creep that often prevents people from achieving their goals when it comes to retirement and building wealth.
Stephen Daprile, president of Gem Young Wealth Advisors: Certainly the compound interest would be all the more reason to start early. I think being gainfully employed is usually people’s first initial trigger – once you have a real job, or even a part-time job, and you have wages, you likely are ready to start thinking about it, or you should start thinking about it.
This country doesn’t do a great job educating its people on personal finances. So … conversations like these are all that much more important for somebody who doesn’t have our background.
Business Journal: How should someone strike a balance between risk tolerance and financial goals? How should that change as someone ages?
Jones, Jones Wealth: I think changing as someone ages is a much more complicated concept than what’s been talked about in the past. Everyone’s in a different position. If they’ve got significant assets, it may not need to change as much. If they have a pension, it may not need to change as much.
But finding the comfort level for an investor is one of the most difficult things we have to do. If we are too aggressive, they’re not going to stay in in a period like what we just saw a month ago.
And if they’re too conservative, they’re going to leave too much on the table. So finding that level is really one of the most difficult things that we do, and then keeping the client in in a period like a month ago.
I’m sure everyone at this table was not enjoying themselves at that point and trying to make people comfortable. That was a very significant policy shock. But you know, the clients that were able to stay with it succeed, and that’s our job. We’ve got to find that match.
VanSuch, Stifel: I believe sometimes there’s actually even a misconception about age and risk tolerance. Some of my, let’s call them elderly clients…they forgot more about investing than a lot of people even know today. They are shrewd investors.
They understand market volatility…But some of my more experienced investors, they have usually the most conviction.
Ultimately, I try to tell people to truly understand your investments. What you own, but just as importantly, why you own those investments. Also, it can be very cliché to be a long term investor, but you really have to understand that and fundamentally understand what your investments are.
But like everyone I assume here would agree with, we do understand a lot more about volatility as we become more and more experienced as an investor, and as you go through episodes, most recently is another example. I think we just all become better long term investors as a result. So I think it’s an evolving process over time, where you balance the risk versus the reward…
Carey, Farmers: I think too, diversification is important as well. If you work with a client, and you tell them how they’re invested and how diversified they are, so they don’t have, per se, all their eggs in one basket. I think that’s important for them to understand that they are not exposed to too much to any one sector that might be volatile at that time.
So I think that’s important, just working with your client, having those conversations, reaching out to your client, being proactive when you have periods of volatility like we had about a month ago.
Hostettler, Hawthorn: I think striking a balance between risk tolerance and goals is critically important before you even start to invest. So you should list out your goals, your objectives, your risk tolerance, your tax situation and then you design the investment portfolio so that if you have a high risk tolerance as an individual and you’re willing to ride the market up and down…
However, as you age, and you start to pull money from those funds, you’re no longer working, let’s say, and you need to withdraw from those funds. It’s a time to reassess again and determine: Is now the right time to have that higher risk tolerance, because if the market pulls back 10 or 20% you have to pull money out.
Are you liquidating in a down market, which oftentimes clients may not want to do? So it’s something that needs to be reassessed all the time, on an annual basis, I would say, at least, but especially on pivot points, when you hit milestones such as retirement or if you’re just starting to save.
Lapine, Tolmiros: I think that the risk and age have this symbiotic relationship, but it’s not necessarily that easy. I think we have plenty of 80-year-old investors who have money that maybe is likely a legacy asset, and that money doesn’t have to be invested as if it’s needed for income within the next 10 years. If it’s maybe the next generation’s money and that’s the goal or the most likely use, it should be invested with that risk profile.
And I really like to look at risk in two different ways. There’s risk capacity, which is when you’re assessing the textbook version of an investor, and what their propensity to risk is based on the use of the money. And then there’s risk tolerance, which is a deeply personal thing. Can I weather the rides? Can I handle it if I see a ton of volatility in my accounts…I think Sid started this conversation with that – a plan, no matter how great it is, is irrelevant if the investor can’t stay disciplined to that plan when it gets difficult. So marrying the risk tolerance, which is internal and personal, with that capacity, is really the best link. in my opinion.
Jones, Jones Wealth: Well put. And I would add cash flow analysis is extremely helpful. You need to know that you have your needs covered. If you have your needs covered for the next year or two, three years with cash on hand and cash flow, that makes this a lot easier to show the client and derive through those periods.
Business Journal: Several of you have mentioned the volatility of the previous month. Did you have many clients that responded, ‘OK, I don’t have this kind of risk tolerance. I need to get out of this.’ What did you do to kind of talk them down, and how successful were you at that?
VanSuch, Stifel: I would say maybe not as framing it as much as a blip. I think a lot of people were uncomfortable. It’s cliché these days, but just managing through the uncertainty, and at the end of the day, no one had any certainty, for that matter.
But I was very proud of our clients, how resilient that they were, very few, as we kind of say in the industry, a lot of times, incoming calls. We try our best to be very proactive.
I think part of the seasonality of that volatility was it was also tax season, and I could speak for myself, I may be on the periphery of tax season, but we’re very much involved. So I think people’s attention was on a couple different subjects, but I really believe in these last several years to decade, it’s one of those things where I think volatility is probably going to be with us for the future as well…
In fact, most of the clients that we were talking to were looking at it opportunistically and looking to add funds understanding back to what most of us have been saying. Investors today, I think are pretty educated.
I think they understand what they own, and more important, why we own these things, and at the end of the day, the fundamental reason for owning the investments that we own. It made some sense to actually add to them.
Jones, Jones Wealth: This is a very politically charged time, and for really the last election cycle through now, people have been conflating investments and politics and politics and profits don’t always go together. If you were pro Trump, you were negative on the market last year…and vice versa.
We have a new administration that’s come in, and the changes are significant. And these are things you need to remind people of, politics and profits should not go together. CEOs make a great deal of money to try to navigate the times that they’re dealing with.
There’s a reason you saw so many of them make the migration down to Mar-a-Lago. They’re doing the best they can for their shareholders. What happens generally with a change in administration is a change in the winners and the losers.
Deregulation, for instance, which has been touted as a hallmark of this administration, will benefit certain industries like banking or industrials. The tariffs will hurt other industries. So it’s talking through things like that with clients, and if you note what’s gone on recently, we’ve had a lot of retail buying with hedge funds selling.
Lapine, Tolmiros: I would just add peak uncertainty is a really awkward time to start the risk tolerance conversation.
A neutral environment is a great time to start to look at what is my tolerance, and then when peak uncertainty presents itself, it’s always around the corner. We don’t know when. That’s when folks, need reminded of what the long-term plan is, and to stay disciplined to that long-term plan and to not make short-term emotional decisions with a long-term plan.
Business Journal: How much should someone save for retirement? Is there a rule of thumb that you recommend to your clients?
Petrey, HD Growth: So I think the part that people tend to forget when it comes to this conversation is the harder question is, how much do you need? Because the answer to that is different for every single person, probably in this room and everybody that’s planning for retirement.
That takes a lot more time to assess what is the annual living costs that you’re going to not only need to live, but the annual living costs that you want to have…
But I think the most important part that a lot of people forget is they just save, save, save. They make sacrifices to the quality of their life. They try to accumulate as much as humanly possible. But in reality, they oversaved and they made sacrifices to the quality of their lives and time with their families over the period of their earning career and save too much, and then at the end of the day, when it comes time to retirement, they have all of this money and they didn’t use their time properly over that period of time.
VanSuch, Stifel: I couldn’t agree any more. Always keep in mind the end goal. But just to your point, I do think people especially new getting started. I do think sometimes rules of thumb can be applied, but I try to set the bar pretty high for people.
I look at myself as kind of like their financial fitness coach. And you know, why not kind of come out of the gate pretty strong, but I would say a general rule of thumb is 15%.
Another way of looking at things is having 10 to 12 times accumulated savings of your last additional years, or your last several years of salary.
Again, these are just benchmarks to go off of in the camp with Tim is just kind of trying to be very, very personalized…
Business Journal: How can someone build wealth while minimizing tax liability?
Petrey, HD Growth: I think the easiest way is to have an ongoing relationship and conversation with both your tax professional and your financial adviser. I think it’s very important that those two pillars in your life are communicating on a regular basis, sometimes even without you.
Most of the people in this room I have a very personal relationship with for our clients, when they’re thinking about making a big move in the market, or realizing a gain, or reallocating a portfolio, they’re staying in touch with us.
We’re adjusting things from a tax perspective, and saying, ‘Hey, we have this loss to consider. We have this other life event that’s happened in this business.’ So if you can ensure that your financial adviser and your tax professionals are constantly in some form of communication, then you can minimize the risk that you’re giving away any extra of those dollars to your favorite uncle.
Lapine, Tolmiros: Yeah, there’s some, fairly thoughtful and sophisticated ways to minimize the taxes side of investment portfolios. Vanguard did a study. I’m sure a lot of people on this panel are familiar with the adviser Alpha study that identified that there are tactics that you can do.
One of them is asset location, where you’re just parking the right assets in the right containers. You know that can add up to, in this case, 0.75% to your annual return by doing so.
So I think when we look at investing, it’s, as I said earlier, it’s not what you make, it’s what you keep. And there are tactics, particularly in the nonqualified side, of the investment world, to where you can tax manage that portfolio in times of volatility – doing things like loss harvesting, where you’re pocketing, you’re getting something out of the volatility by pocketing losses, carrying those forward, and adding those against future gains.
There are a lot of things that one can have done inside of a portfolio that keeps that net as high as possible.
VanSuch, Stifel: Great comments. I would say, relationships that I have, the strongest relationships that I have, the most experienced clients that I have, not only am I part of a trusted adviser to them, but there’s also a team approach.
And a team approach is going to be your tax preparer a lot of times, various types of attorneys as well, too.
It’s very rare where we’re making large planning decisions without the group discussing that in detail again, during the volatility.
And it was tough because it was also tax time, but we took advantage, as Jonathan was talking about, of tax loss harvesting.
Also took advantage of a lot of Roth IRA conversions during that period of time, too, but I would not have made especially on the Roth IRA conversion.
I would not have made those decisions on my own without consulting with the client’s tax adviser, especially just because those are pretty big decisions and it’s best to have as many minds and the clients and comprehensive team involved in those decisions.
Daprile, Gem Young: Yeah, I like to say we’re tax knowledgeable, not tax professionals. And if you want your portfolio, or whatever your situation, to be most optimized, you take the team approach, just to kind of what you said.
Petrey, HD Growth: I think one other tactical point that’s worth expanding on what Jonathan mentioned, is if you’re solely focused on just putting money into your 401K and not putting money into a brokerage account, putting money into a Roth portion of the 401K, then you’re going to have a lot of limitations when it comes time to taking that money out later, which could cause tax problems in and of itself.
If you only have money in a 401K, and let’s say that you know one of your children is getting married, and you need to take that money out of somewhere and the only place that you have to take it out of is that 401K, that additional taxable income that you’re tacking on to your tax return that year could cause other issues.
Could not only cause you to pay more taxes, but could put you in a situation where now all of a sudden, your Medicare premiums are higher or your Social Security is more taxable, and things like that.
So sometimes it’s just as important to consider where you’re starting with those dollars, and what you’re allocating into those buckets, into those containers, as Jonathan mentions, to ensure that you’re in a position where you can pull the money out in the most tax efficient way possible later.
Business Journal: What are some common pitfalls encountered in wealth building?
Daprile, Gem Young: Well, there’s two components to what we do. What we do for people is we plan and we optimize, right? So that could still be a good plan. And I think that’s to your point. I think that’s what you were trying to say, is oversaving isn’t a problem in and of itself. You’re able to accomplish the things on your list that you want to accomplish, but it’s not the most optimal way to do it.
You’re pulling from resources. You’re going to have RMD [Required Minimum Distribution] problems. You’re going to have liquidity problems. If you
overstuff your 401K and you could still get the money, but you have 10% penalties and ordinary income taxes on quality or traditional withdrawal before 59 and a half.
So again, there’s a large component of what’s the most optimal decision to reach our overarching plan.
Carey, Farmers: I think to emotional investing. I think again, what we saw during Covid, with the 30% drop in the market and people wanting to pull out.
Last month with the tariff talk, I think a lot of clients, what they do is a mistake, and what’s a pitfall to them is that they see these spikes in volatility, and the first thing they want to do is – for those maybe that aren’t as seasoned investors – the first thing they want to do is take the money out to preserve that money, even though they may have already lost 15% of the account value.
So I think emotional investing sometimes can be a large pitfall to a client that’s not as sophisticated in the market. So I think that’s financial adviser’s job to kind of talk them off the ledge a little bit, and explain to them the volatility is normal, and it actually creates, sometimes, an opportunity to possibly add dollars and show them that they’re well diversified and educate them on their portfolio and what the long-term investing is all about.
Jones, Jones Wealth: We’re going to constantly go through periods like we did last month in one way or another, and they’re always different. Interestingly, last month, the VIX volatility index exceeded the level we had during Covid.
That’s how extreme the concerns were. At that point, we had 2 and 3% market moves each day. So I think Stephen’s right about emotions.
You want to try to take emotions out. You want to remember what your plan is. With regard to over- saving, I think you have to build towards your goals. And what are your goals? And think about it, the happiest clients we have are not those that look at their portfolio of value as a scorecard, but they look at money as a tool.
It’s there to take care of themselves, their family and the things that are important to them. These are the people I think, that are truly the happiest.
Hostettler, Hawthorn: I would say one of the pitfalls is not having a plan. If someone doesn’t have an investment plan, because then they can be driven by emotion. They can be driven by trying to time the market versus the old adage of, it’s the time in the market, not timing the market.
There’s always volatility. But if you have a plan and you stick with that, it works out in the end, oftentimes, as long as it’s a good, solid plan, where you’re working with your outside advisers, the attorneys, accountants, financial advisers, to make sure your plan’s in place.
And I think that as long as you’re looking at it from that perspective, you can shut out the media, so to speak, the CNBC, where the price is up there every single day. You can see your net worth, versus when you own your house, you drive up to it some days, if you had a market value, when you pulled up to it, you’d say, Oh, it’s a great day.
And other times you’d pull up and say, wow, it’s a terrible day, because it’s not – the value goes up and down. The problem with technology today is we can see our value every single day, if you really want to. So shutting that out and saying, this is planting a garden for the future, and letting it grow. That’s the best way to avoid those pitfalls.
VanSuch, Stifel: I’m talking about common pitfalls, lack of diversification, emotional investing, neglecting to plan for taxes, failing to adjust financial plans as circumstances change, everything everybody talked about, but I would say diversification is paramount.
And over the last couple years, there’s been truly just a couple of leaders, just for example, in the Standard and Poor’s 500 that have been the dominant market participants for the last couple years.
So I think clients just sometimes think they’re a little bit more diversified than they are, and then you go through some bouts of volatility, and you understand it a little bit more. So, constantly taking an X-ray of your investments also to understand diversification truly, and making sure that you have proper diversification across asset classes.
Lapine, Tolmiros: And just on a more technical note, I think I’ve seen a lot of investors struggle with the distribution game.
They’ve worked and saved their entire lives, and they’ve gotten to that point, and they’re just pulling from the wrong assets at the wrong times.
This goes back to what Tim had mentioned. They’re triggering IRMAA Part B costs without really knowing it or being aware of it, and so there’s a ton of opportunity on one side to managing that distribution phase well and optimizing your tax brackets at the point in which you’re distributing.
Petrey, HD Growth: One comment from maybe a slightly different perspective, is that I think that people have a correlation that financial health and wealth are the same thing and financial health and wealth are not the same thing.
Financial health is a component of wealth, but wealth factors in so much more. Wealth factors in time. Wealth factors in physical well-being. Wealth factors in, obviously that financial health piece as well.
So I think everybody should have a different perspective and different definition of what accumulating wealth truly means. Accumulating wealth might mean showing up to every single sporting event that your child is participating in.
Wealth might mean to someone else having the largest balance in their 401K. I’ve had the luxury of meeting a lot of successful people being an adviser at a CPA firm, and there are plenty of people that have a huge balance in their 401K plan, but are not by definition wealthy because they’re miserable.
So I think that that’s something that a lot of people forget, and that’s a big mistake that people make in that accumulation of wealth is just trying to stack as many dollars up as possible, and forgetting about all the other things that are so very important.
Business Journal: What should parents and educators be teaching about investments and finances in general, and at what age should they be teaching this to children?
Daprile, Gem Young: I think soft skills is probably the biggest one, as in basic budgeting, basic understanding of the market, basic understanding of taxes.
We’ve all taken planning your financial future or something just like it in college. I feel like that class should be accessible at a high school level. Sorry for the hot take here, but it’s crazy that I had to learn about weather patterns, but I didn’t learn about taxes in college. I had to take my core classes to learn that.
So I know it’s kind of a cop out answer, but start small and start at a broad audience, because people have to go out of their way to find financial education, and there’s so much miseducation out there, especially now.
Carey, Farmers: I’m a financial adviser, and I work at a bank, and my kids didn’t have a savings account until they started working. So that was my bad, almost, that I didn’t start them earlier. Because I do think that if you do have a child that’s younger, that they are doing chores that you are giving them some type of compensation.
I think it’s important that they learn the value of money and budgeting and understanding that if they do want to buy something, they have to save for it.
So once I started the savings account for my children, and they got to see their online accounts and what they’re spending money on, and we went through their budgets I think that that makes sense, that starting earlier, because now they’re a little bit behind the eight ball.
But it’s never too early to start. It’s never too late to get your child involved and understanding what I do and understanding investing.
I started a custodial account for them so they can see. We started it with a pretty basic S&P 100 index fund, and then showing them – putting $25 a month into that account and showing them how it grows, and giving them online access, and showing them the value of money and them being actually excited about seeing their values grow.
Lapine, Tolmiros: Kids are wonderfully curious, and you can cut this if you want, but I have a 9 year old, and he is obsessed about starting a landscaping company.
He’s been obsessed since 3 years old, and it’s so funny, you’ll think I made it up because of the question in the panel. But last night, after I tucked him in, he started to just ask me questions about ‘Dad, how do you start a business? Is there a lot of paperwork?’
And he starts it, and he’s thinking about it from this landscaping perspective of, can you start with one garage and then add a second bay someday? And, all of that is to say, you know, kids are amazingly curious. I wish some of my clients asked those kinds of questions, frankly, because the older you get, the more insecure you are about what you know and what you don’t.
But I have always taken the tack of trying to talk to our kids as if they were an adult and let them ask the questions, and you’d be surprised at how you can instill some good habits that way.
VanSuch, Stifel: Great points by Jonathan and Linda. I would say again, rules of thumb. I don’t think 10 years old is too young to get started. But just talking about basic, basic concepts.
Linda, I like what you said, too, and it’s something that I’ve actually adopted as well, too. I personally believe in sharing the custodial accounts, 529 plans.
I like educating the children about what they actually own. I think a lot of times they get excited if you humanize investing for them, ask them just simple drills, go through the pantry in the home and turn around those cans or those boxes, and actually look at the companies that manufacture those goods, or what pair of sneakers are they wearing, or what type of technology are they using. Where did they source their music, things like that, and just simple drills.
I asked them to visualize driving up and down 224, here in Boardman. And I asked them to rattle off some of the marquee signs that they remember. And so they’ll start mentioning some of those names, and I’ll tell them, ‘Look, that’s a publicly traded company. Those are companies that you can invest in.’ So I think a lot of times they don’t realize that investing is part of our everyday life too. But basic concepts, again, budgeting is incredibly important. You try to instill that whole concept of delayed gratification.
Petrey, HD Growth: I have two children. I have an 8-year-old and a 6-year-old, and I often think about this conversation, and started very early thinking about this conversation with my children.
And think about the conversation I have when we’re speaking at high schools or colleges with other students, and there’s three areas that I think are the most important when we’re talking about educating our youth about their finances. I think that number one is teaching them mindfulness.
I think that if you turn on the TV and watch TV alongside your children, you understand that they’re constantly under attack about what someone is telling them or encouraging them to buy and teaching them to understand those tactics at an early age.
My son and I will watch the NBA Playoffs, and he’ll see an advertisement, and he’ll say, ‘That’s them trying to convince me to buy this at an early age already.’
I think that mindfulness is important. I think that teaching our youth the importance of credit is extremely important. That was something that was beat into me by my family members as I was growing up, and I think that it’s a tool that is underutilized for kids. I think that our country encourages people to spend more than they make, but if we can continue to teach people the importance of credit, then they’ll be in that much better of a position when they start off, because often those early mistakes and those early decisions that you make are then compounded over the course of your life.
And then finally, I think the importance of teaching people the difference between what truly is an asset and what truly is a liability, and understanding the things that you can buy that will provide for you into the future.
An asset is a tree. An asset is something that will grow fruit for the future, and a liability is something that you have to pay to maintain over some period of time.
So there’s often a mix up as to what truly is an asset and what truly is a liability. So focusing on those conversations at an earlier age will provide for people to not be digging themselves out of a hole later in their financial lives.
Business Journal: How should someone create a nest egg from an inheritance, court settlement or other windfall they receive?
Carey, Farmers: I think possibly, the first thing they should look at if they do receive an inheritance or lottery winnings, is to take a breath and take a step back a little bit.
Give themselves some time, possibly just kind of park those assets in a high yielding money market or savings account, and then just kind of evaluate, surround yourself with a trusted financial adviser, a trusted CPA, an attorney.
Possibly get some recommendations from family members who they work with, even interview advisers and CPAs to make sure that you’re comfortable that they have a plan set in place for you.
I think that’s probably the first thing that I would do is just kind of take a step back, take a breather and kind of evaluate where you are and surround yourself with good people.
Daprile, Gem Young: Yeah, get the dream team together, right? If you have outsized wealth, if you come into outsized wealth for the first time in your life, it’s going to be unique to you.
And it’s kind of like exactly what you said, get your accounts in order, get your estate plan in order.
That’s how you got the inheritance, in this case, in the first place. So make sure you have that.
And then make sure you have a financial planner at your back. Get the dream team together and let those people put their heads together, come up good solutions.
I know a lot of my clients will take time and just keep everything as is, and then when they’re ready to talk about it, three to six months later, get the estate settled things like that.
Lottery winnings is a little different. I’d say, go to Vegas for a little bit of that, or have some fun. But … certainly get the dream team together.
VanSuch, Stifel: But Tim talked about it a couple times, and I couldn’t agree more, truly, truly evaluating what your liabilities are, I would say would be first thing to consider.
I agree, not making an emotional decision right away.
Give it some time, let some time pass, but paying off high interest debt then also reflecting how you accumulated that debt.
So sometimes with inheritances, especially some of those folks do have those situations where there is some debt, and we end up paying off the debt, but then they could fall into a trap, or just accumulating further debt after that, just based on habits.
I think it’s truly reflecting where you are at in life, making an honest assessment about those things, working with a team and just trying your best to stick to some type of plan.
Lapine, Tolmiros: Yeah, I found the investor’s psychological relationship to windfall money, or found money, is, in my experience, different than the I’ve saved paycheck by paycheck for this money – their own retirement savings or otherwise.
And I think that understanding that emotional relationship and psychological relationship that clients and investors have with their money is very important. And being able to take a windfall and translate it into what’s possible for that investor is very important.
Money has a variety of jobs. I think, Sid, you may have mentioned that earlier, and identifying, OK, this part of this windfall is going to be your baseline lifestyle.
This part of your windfall is going to be the legacy that you leave someday. On and so forth, going through that building of the plan and then having that investor plug into that psychologically so that they don’t view it all as found money, because the statistics on what investors do with found money are generally not great.
Business Journal: Final thoughts you’d like to share?
Petrey, HD Growth: I think that we’ve talked a lot about having a plan over the course of today, and I think that the relationship that people should have with their financial advisers is similar to that of a personal trainer.
And Steven made a good comment about that earlier, is that this is the person that you should be going to to hold you accountable to this plan.
They’re going to prevent you from making too many sacrifices. They’re going to prevent you from overspending or from doing things that you shouldn’t do, that are going to be difficult later along the path. I think that one of the things that we’ve seen with a lot of our clients is that if they have a good plan, they can use their wealth and their finances as a tool to not only make their life better, but make the people around them’s lives better or their community better.
They can consider things like, if I have a great plan, and I know what the end game is like, I can give these dollars to my kids earlier, and I can make a bigger impact on their lives now.
I could pay off their mortgage today, so that they have less stress and they have less trouble today, rather than them inheriting a bunch of money when they’re 70 or 80 years old and they can’t necessarily enjoy it. So making sure that you start with the end in mind, and using that financial adviser is that coach, is that person that’s on this journey alongside with you, is something that’s really important and underutilized.
Carey, Farmers: I think with the way technology is today and a lot of the younger generation being comfortable using technology and investing for themselves.
To Tim’s point, when I started in this business over 30 years ago, your financial adviser was everything. They didn’t have the online trading, the E trades, the Robin Hood, things like that. So, to Tim’s point, to keep yourself in check, sometimes you’re going to need that help.
You can buy an S&P 100 funder. You can buy a stock here and there. But I mean, really, if I think it’s important, just because of the knowledge base of a lot of financial advisers out there, they can help you avoid those common pitfalls that people make as maybe not diversifying enough, putting all their money in one stock or just the Magnificent Seven, or whatever that would be.
I just think that it’s important to take a step back and thinking that you can do all these things on your own, and investing on your own, which you can to a certain point, but then it becomes important to pull an adviser in to help you keep on track.
Lapine, Tolmiros: Yeah, I think having a plan. In my opinion, having a plan is what unlocks what’s possible for an investor. And I think it’s easy to assume that this panel’s job is to make sure our clients don’t run out of money, but I would argue that our equal and other job is to make sure that the client doesn’t leave a massive amount of money if that’s not what their desire is.
And so our job ends up being managing these two guardrails, and in between, those guardrails are kind of the best life for the investor.
And I think our job is to pull that earlier in their life, when they have the time to do the things that they love and that they’re passionate about. So being able to give them the confidence when they’re 60 that they’re going to be OK, and they can do that. Things that they want to do. That’s where a plan really unlocks the potential.
Hostettler, Hawthorn: I would say the key word would be education. Everything we’ve talked about today is good for anyone to learn about, to teach their spouse about, to teach their children about, because you can work hard and learn all this information.
But it’s also beneficial to pass it on to others that will inherit this wealth someday. So I think it is important to educate because there’s experts in various areas. So to educate themselves on this, their spouse, their children, and that way, it maintains the wealth and helps them understand how best to take care of it and to use it to the benefit of the greater good.
Jones, Jones Wealth: I think Jonathan and Brian are both absolutely correct there. If someone is generating wealth again, they’re taking care of their family and the things that are important, there should be an educational component on our part, not only to them, but to their generations.
And that educational component should help not just that family for instance, those with excess wealth, things like donor advised funds or foundations can be established.
These are great ways to not only help the community, but to teach the children about what’s important beyond their own lives.
And I would venture to guess that everyone at this table has done what you would call pro bono work. Talk to a friend, a neighbor or relative that doesn’t have the financial means. And probably every one of you has helped their lives be better by doing that, and I think that’s important.
VanSuch, Stifel: At the end of the day, having an end goal. And I would also add a purpose in mind.
I would say that’s probably the number one mistake I see on the front end, is just not understanding. At the end of the day, take a step back. What are we trying to accomplish here?
Then I would say, monitor that progress, not daily, but monitor that progress. And then lastly, be flexible as well.
Daprile, Gem Young: Can I throw one more thing out there real quick? One thing that I wanted to talk about, because it affects my generation … is reading your news from a quality news outlet. My brother’s a journalist, and he’s been pounding this into my head. So a lot of people my age have a lot of misinformation at their disposal, and they just eat it up. And it drives me nuts. It drives me crazy.
So read your news, read local, but certainly when it comes to, for the sake of the panel, when it comes to reading your financial news, make sure that you’re trusting quality news outlets.
Pictured, from left: Brian Hostettler, Stephen Daprile, Jonathan Lapine, Linda Carey, Tim Petrey, Stephen VanSuch, Sid Jones.