It seems counterintuitive: Encouraging clients to spend some of their savings, rather than being the stereotypical, controlling drill sergreant tightly focused on building up assets. Consider the view of Kol Birke, a CFP at Commonwealth Financial Network in Waltham, Mass.: "As a financial behavior specialist, I think we should be encouraging clients to live their best lives," even if that includes advice that results in a client spending down savings and reducing assets under management.
"These counterintuitive, unexpected conversations cost very little in terms of fee differential and provide a place where clients feel that you have their best interest - not your best interest - at heart," Birke explains.
What else seems counterintuitive (to some clients, at least), but is worth exploring? Peer-to-peer lending. For years we've been writing about the hunt for yield; that hunt turned ugly last year for many bond investors, who took a rare loss on the usually conservative investment. As planner Kimberly Foss of Empyrion Wealth Management in Roseville, Calif., writes: "In a low-yield environment, P2P lending with proper due diligence can be a way to boost yield, help people and celebrate the free markets." In two years of being a peer-to-peer lender, Foss notes she's seen a return of 7.94%.
Our two cover stories in this issue - "5 Big Real Estate Pitfalls," and "Playing by the Tax Rules," also feature some counterintuitive thinking on real estate and creating investment alpha through tax strategies. (It's a bit hard to believe the renewed ardor for real estate; then again, Americans have historically loved real estate. Indeed, a main, contributing reason for the 2008 financial meltdown was that Americans were so in love with real estate they lost touch with reality.) As the story illustrates, investing in real estate can be particularly rewarding while also being particularly complicated.
Taxes are notoriously complicated and subject to change, of course, but are predictable from day to day and week to week. Investing is not, which is why it can be far easier to create alpha in client portfolios through savvy tax maneuvers than in trying to outtime the markets.
Whether practical or counterintuitive, planners can be far more than a drill sergeant pounding home the notion of saving. Helping the savings multiply and then encouraging clients to enjoy the bounty of their fortunes (and your good work) is the ultimate pay day.
- 5 Big Real Estate Pitfalls
- Planning Tool Moves to the Cloud -- An Improvement?
- How to Train New Advisors
- 5 Tax Rules for Investors
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access