Dave & Laura Wilson
BUSINESS OWNERS NEARING RETIREMENT
Here’s What Happened
The first of three family businesses was recently sold leaving Dave and Laura with a large windfall of money.
The Wilsons wanted to invest the money and began to search for a financial advisor. They were referred to a broker from a large Wall Street bank that sold them a “proprietary investment strategy.”
The Wilsons became increasingly frustrated with the high fees, unnecessarily complex investments, and the advisor's unwillingness to help with real estate and other investments not invested with the bank. They shared their concerns with their broker at several meetings but found a number of their questions remained unanswered.
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Where This Left Them
After a year, their concerns with their current broker left the Wilsons unsettled about their investments and retirement.
In addition to the confusion around what they owned and why, the Wilsons realized that the frequent trading in their account meant earnings were being taxed at more than double their long-term capital gains rate. Additionally, they realized that they were paying two sets of expensive fees: one to their broker and another to the mutual fund.
What We Did to Help
I met with the Wilson family and after discussing their concerns, I implemented the following strategies:
Invested in private real estate opportunities: With an interest in maximizing their income, I introduced stable, cash-flowing real estate investments to Dave and Laura. This income supplemented their stocks and bonds to build an investment plan to meet their family's needs.
Implemented a tax efficient investment strategy: Through lowering the portfolio turnover, I further reduced their overall taxes.
Introduced our evidence-based investing approach: Using a focus on data and evidence to make intelligent, efficient investment decisions, I took the time to answer all of Dave and Laura’s questions. This left the Wilson family feeling more comfortable with their retirement.
Addressed their accounting needs: Discussing those concerns that had arisen from the family business being sold, I implemented some actions to lower their taxes resulting from the business sale proceeds.
How the Wilsons' Benefitted
Lowered tax obligation: By moving investments to our rules-based investment models, I created a significant tax savings with a move from short-term capital gains that are taxed at 32% to the long-term capital gains tax rate of 15%.
Lowered investment fees: By moving from high-fee, active mutual funds to low-cost indices and individual stocks, I significantly decreased fees, resulting in the Wilson’s keeping more of their investment gains.
Personalized, proactive communication: By taking the time to increase the Wilson’s understanding and comfort with key investment principles, Dave and Laura have greater comfort with their portfolio and overall financial plan. The Wilsons know their money is not entirely invested in stocks, and they have other investments to help meet their current spending needs.