Most people seek financial advisors for one specific service. You may think you just need some help with planning for college, saving for retirement, or managing your investments. But imagine if, after a few conversations, you could get actionable advice on the best way to reach other milestones, too. (Saving you precious time and money.)
Brian and Leslie are born-and-raised New Yorkers. They moved to Austin after falling in love with its vibrant scene eight years ago. When they found no great New York-style bagels in their new neighborhood, the ever-entrepreneurial Brian had the idea to open up a bagel shop.
The first two years were brutal. Eighty-hour weeks, staffing issues, problems with sourcing ingredients, trouble with the landlord – the couple persevered through it all. Lucky for them, people loved their bagels! After a few years of occasionally borrowing money from family to make payroll, Brian and Leslie were finally doing well.
Brian, who was in charge of admin and taxes, reached out to our office after the couple was surprised by a high tax bill.
We took a look at the past years’ tax filings and figure out what had gone wrong. During the free hour-long consultation, we realized taxes were definitely an issue.
The good news? There were things Leslie and Brian could do right away to avoid a significant tax bill. We recommended that they adjust their salaries to reduce payroll tax. They could expedite some equipment purchases and take a higher deduction this year. Finally, they could set up Health Savings Accounts – something they couldn’t have dreamed about in the early years.
Brian and Leslie weren’t sure how much to pay themselves. Was it better to pour all the “extra” money back into the business? If so, were they making a good-enough return on that investment? The business wasn’t struggling any more, but were they looking at the right performance metrics?
Our team listened to their questions and pulled together a 16-page report to answer them. If you want to nerd out on key performance indicators, you can see it here.
Brian and Leslie were also thinking about franchising. We ran some cash flow projections, then scheduled a meeting with our General Counsel. He walked the couple through the pros and the cons of franchising vs. licensing. On closer inspection, franchising didn’t look attractive to them. Brian and Leslie wanted to grow organically. In the future, they might consider licensing their intellectual property, but franchising was off the table.
During the last five minutes of the meeting, Leslie mentioned that a little boy almost spilled a pot of hot coffee on himself during the breakfast rush last week. Thankfully, his mom grabbed him out of the way – but the incident had left Leslie wondering.
Leslie didn’t know the answer. Brian thought that an accident like that would be covered by their leasing agreement. We set up a 20-minute phone call with Tim Power, our in-house property and casualty insurance advisor. After reviewing the lease and the current insurance policy, Tim reported that the business was seriously underinsured. A lawsuit could have put them in a bind to the tune of $500K or more!
Brian and Leslie also had old investment accounts spread across several brokerage firms. They weren’t sure about the total amount, because neither one of them had the patience to go through the stack of unopened account statements. We asked our senior wealth advisor Garrett Myer to pull these accounts into a single portal. Now, Brian and Leslie could see everything in one place. No more hunting for account statements and resetting passwords! If you are curious about it, you can check out the portal here.
Andrea and Mike were a power couple, both earning over six-figures working in technology, they had two perfect kids, ages 7 and 9, and they still found time to volunteer at supper club! Hate them yet? :)
Andrea was an HR rockstar and was recently promoted to Senior Director. Mike was VP of Sales for a SAAS company. Andrea’s promotion meant an increase in responsibility, more travel and a large grant of RSUs (restricted-stock units) and non-qualified stock options. Mike also received 40% of his compensation via ISOs (incentive stock options).
During our free consultation, they were asking for investment advice. How much of their stock should they keep? How much should they sell? Where should they invest the proceeds? All good questions…
But before we could start developing answers, we asked them a question that shifted the focus of the whole conversation:
They looked at one another and weren’t quite sure how to respond.
After a few minutes of discussion (and more questions), they decided that they wanted to use the money for college planning, buying a larger house, funding vacations, and working towards retirement.
With an eye on all those goals, we determined that it would make sense for them to have a customized financial plan. Our senior wealth advisor Bob Gavlak, CFP pulled it together for them. You can see the sample plan here.
As we started digging in to everything Mike and Andrea had going on in their financial life...
Mike forgot to file his 83(b) election for his ISOs (which essentially allows you to pay your taxes in advance). His company was growing rapidly it wasn’t looking to slow down any time soon. An 83(b) election would have allowed him to pay income tax based on the grant price instead of the vested price (which was much higher) and started the clock to receive the preferable long term capital gains rate.
Mike didn’t know he could exercise this option early. But we were able to sit down with Mike and implement a strategy that worked for him to start paying lower taxes right now. They implemented an Exercise and Hold to AMT Crossover strategy. They showed Mike how to exercise up to his alternative minimum tax, so that he wouldn’t have to pay more in income tax. This allowed Mike to start the clock ticking towards getting preferential tax treatment on a good chunk of his stock options and save a lot on taxes in the long run.
And then they had to consider all the aspects associated with Andrea’s promotion and raise. When our team looked closely, they realized the couple was now over-concentrated in US Growth stocks. So, we recommended a strategy to diversify into smaller (value-oriented) companies.
Once they felt good about taxes, investments and had a financial plan that was working for them and their own personal goals, we casually asked them about their catastrophic coverage. Turns out, Mike and Andrea also hadn’t revisited their life insurance since their kids were in diapers. Our insurance expert, Tim Power, analyzed their policies and determined that they were underinsured by $1,500,000 each, even though their employers provided basic term life insurance coverage.
Robert and Mary Foster have lived in Round Rock, Texas for the past 35 years and are well-loved pillars in the community. Mary is a local bank manager. Robert is an engineer who moonlights as a guitar player in a country band.
After Mary’s 62nd birthday, the Fosters decided to start thinking about life in retirement. They wanted to spend more time with their three grandkids who live an hour away. Traveling the Western U.S. in their RV was high on their list of priorities, as well.
With their ideal retirement in sight, Robert and Mary started looking into their social security options. After a few days of searching online, they were more confused than they were before they started! They were looking for a simple answer to what they thought was a simple question: when should they claim Social Security? But between page-long charts and all the fine print, it became clear there was no simple or “right” answer.
With their retirement plans on the line, the Fosters didn’t want to make a mistake. So, they scheduled an appointment with our team. The question they brought to the table was:
To help the Fosters answer that, our team began by running a Social Security Analysis. We analyzed 567 different Social Security claiming strategies and picked the one that would best suit their needs and plans. You can see a sample Social Security Analysis report here.
As Robert and Mary talked with our experts, it turned out their real question was much bigger than figuring out Social Security benefits. What they really wanted to know was:
Will we have enough money to retire the way we want? After all, even the most perfect Social Security filing strategy isn’t enough. The Fosters are in good health, but they still have to think about their Medicare options. Should they choose traditional Medicare or Medicare Advantage? What about prescription drug coverage? Do they need to worry about the infamous Medicare Part D “donut hole”?
Then Mary asked our team about Long Term Care (LTC) insurance. Alzheimer’s runs in her family, and she's worried about the possibility of getting sick. She has heard about the new kind of a LTC policy that allows spouses to share benefits. How much would that cost? Would it be a good option for them?
As we talked, Robert pointed out that they hadn’t looked at their life insurance policy in a long time. The Fosters’ family home is paid for and their kids are grown. Are they wasting money on premiums – or should they keep the policy to cover their final expenses?
And then there were investments. Robert and Mary each have a 401k plan and an IRA. Robert wants to stay the course – their investments have been doing just fine, he says. Mary is worried about a stock market tumble and would rather cash out now, while they are ahead. Every time they try to talk about investments, they have a fight. Could our experts take a look at their portfolios and settle the argument?
While we don’t specialize in marital advice, the information we provided let them both look at their assets and strategies in a more objective light, which brought a compromise to the table they’d never have arrived at on their own.