Written by Warren J. Baldwin, Regional Vice President, CFP, R.F.P., CIM
August 2, 2012
The familiar refrain in the movie Ghostbusters was “who you gonna call?”
Over the years I have spent as a personal financial advisor, I am reminded of this simple statement many times by clients who call me with regard to all manner of questions. Many events impact one’s financial life such as the obvious ones like retirement, getting a new job, or becoming disabled or having a spouse or other dependent who becomes disabled. Clearly these are situations where a financial advisor would be working with a client during these events or in advance of them.
Sure, I’ve been consulted many times by clients in these particular situations. But, how about a simple situation like financing a swimming pool and backyard landscaping or purchasing or leasing a car. A client reminded me a couple of weeks ago of how much they had enjoyed the pool they put in their backyard many years ago. They recalled that, together, we had spent time organizing the financing using a home equity line of credit – a significantly cheaper solution to taking bank or 3rd party financing through the pool company.
Yet another simple, mundane financing situation is purchasing or leasing a car. Generally it can be a fairly complex structure, almost on par with choosing the vehicle itself. The process can benefit from some thought that might enable the financing costs to be repackaged as borrowing costs for part of the portfolio and then the interest costs could be tax-deductible.
Sometimes people can tend to believe the “best” answer for their circumstances: I recently met a couple who told me they had a sale transaction this year and they were pleased to also note that they understood that there would be no capital gains tax on this transaction, even though they had made significant money on the asset. I quickly commented that quite likely they have a capital gain tax issue here and they should consult their tax advisor (who they have not spoken to about this transaction). Well-meaning friends and acquaintances of theirs had told them that there was likely no tax payable on the transaction and they simply took this as fact instead of making a call to their tax advisor to confirm.
A number of years ago an acquaintance of mine raised the fact that her husband was going through a rather tough time at work due to the fact that he was considering termination and severance. Knowing that she had a “financial advisor”, I asked her what her financial advisor had said about this situation and her response was that she had not called her since this financial advisor was only someone who sold her mutual funds. Naturally, I advised her to contact her financial advisor to see what implications of the severance might be on their retirement plans and the liquidity profile of their asset mix.
All this serves to illustrate that a true financial advisor has to be a broad-based generalist that can provide (or access) advice in many areas for their clients. They can expect to be contacted by clients looking for advice in many areas of their lives, not just questions about asset mix, investment performance, or have they got enough cash to afford to retire yet. Clients too have an obligation to think about their finances and how any situation integrates with their overall financial plan. The client should contact their financial advisor to check on things even when they may seem very simple because the advisor may have a different insight or two that could save the client money or even help avoid the shock of unpaid income taxes that suddenly become owing.
A well-constructed financial plan is like a car being driven down the road towards a destination (financial independence or retirement). The financial advisor is the navigator for the car and the client is the driver. The driver should consult with the navigator frequently to make sure that they are proceeding properly and safely down the road towards their goal or destination.
Drive safely everyone and remember, “who ya gonna call?”
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