How advisors can skew your perspective

My wife and I have seen this in the past. I was “just” floored, yesterday, when we saw once more how different advisors’ perspectives can impact one’s plans . . . for better or worse.

Yesterday, our legacy planners wanted to discuss what they characterized as “wealth planning” “to ensure that there is a legacy to plan.” –Especially in these uncertain and highly volatile times, they noted, we must pay particular attention to our cash and near-cash assets.

That all sounded well and good.

But then it hit me. About halfway through the meeting, I held up my hand. “Hold on a second. I just want to make sure I’m hearing you accurately and fully understanding what you are talking about. And if I am understanding you, I want to make sure I pound this into my own brain.

“It sounds as if you are asking a very different question–you are encouraging us to take a very different road–than what our last legacy planner urged. As you ask us about our cash needs, it sounds as if you are asking us about our cash needs for our corporation–our business–and not just for ourselves and our personal lives.

“Our last planner, when he asked a similar question, merely asked us how much we felt we would need to have on hand personally . . . in case we hit a rough spot. He never asked us about our corporate needs. But it sounds as if you are asking us about our corporate needs. . . .”

“That is correct,” he replied.

“Wow! Wow! Wow!” was pretty much all I could say.

If we had followed our previous planners’ advice, it is quite possible we would have never made proper allowances for our corporate needs.

But though our personal finances are separate from the corporation both legally and for tax purposes, if and when the corporation might find itself in need of additional money, in the end, it will be seeking those funds from just one source. And that’s us. Personally. So we need to pay attention to potential cash needs on the part of the company as well as for ourselves.

I commented on this: that, in a way, our former legacy planner concentrated heavily on us and our needs and our children and on our charitable purposes, interests and plans–all truly wonderful and necessary areas of concern. But, by comparison, he rather ignored the business that has generated (and, hopefully, will yet generate) the wealth upon which our entire estate and legacy plans are based. [Perhaps I'm misspeaking. It wasn't as if he ignored the company completely. He wanted us to make it into a 501(c)(3) . . . so in that sense, he was very much aware of the company. But because it would no longer be "our" company--other than in the sense that we would be (presumably) managing it--we would have no special motivation to think how we might want or need to provide additional funding for it. Our charitable contributions would have been made, primarily, when we shifted it into a 501(c)(3) corporate form. . . . Our "new" legacy planners, however, have been proposing a very different model . . . in which our ongoing involvement yields higher long-term funding for charitable purposes. We have to view the company itself, and not just the money it throws off, as a stewardship or "fiduciary responsibility." --I'm not sure I'm even expressing this the way I want. I'm still trying to wrap my mind around the paradigm shift we are still undergoing.]

Our advisor yesterday told us a story of a client who called him for some advice a few years ago.

“I got an offer for my business . . . for a billion dollars,” he said. “Should I take it?”

“Well, let’s look at this,” said the advisor.

“Right now, you’re giving how much to charitable causes?” (The man agreed he was giving–and able to give–pretty close to $150 million a year.)

“If you were to die, do you have any family members [who are pretty much on-board with a similar charitable vision as the client himself] who could run different divisions of the company?”

“Yes.”

“How many?”

“Fifteen.”

“So if you were to die while you still owned the company, they could keep it going in pretty much as profitable a manner as it is being run today.”

“Yes.”

“If you sold the company for a billion dollars and invested those funds in other companies’ stocks . . . you could look at potentially giving away eight to nine percent per year from the dividends these other stocks throw off–$80 to $90 million instead of the $150 million you are producing currently. . . . –Should you sell your company?”

The client decided he wouldn’t.

I don’t think our previous legacy planner would have asked the same questions. And I don’t think he would have come to the same answer, either.

Kind of eye-opening!

And, frankly, rather distressing. How do you know when you’ve received advice you’ll be happy to implement and live with for the rest of your life?

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