Gift Planning | Giving Back with a Better Financial Plan

Clients reward advisors who give them valuable gifts with their loyalty with more assets to oversee and with referrals. A good financial plan is just such a gift.

Throughout the market volatility during Q1 of 2020, I have heard from a number of financial advisors that the clients who are in the best financial and mental shape are the ones that had well-crafted, conservative “goals-based” plans in place coming into the crisis. I am not surprised. And those that had no plan at all are flocking to financial advisors for the first time in droves. A new report shows that 1 in 4 Americans are seeking out the aid of a financial advisor for the first time in their lives due to the pandemic. 

In my opinion, there are two critical features of any well-devised plan. The first is that the plan gets your clients to the end of their lives with money to spare. The second feature is that even under heavy stress, there is never a need to “sell low”.  Having several years’ worth of spending in cash helps immeasurably here.

A plan that provides for conservatively assumed future expenses, including reasonably anticipatable medical expenses such as long-term care costs, is a real gift from the advisor. The peace of mind that comes from this, in the depths of a financial meltdown, is highly valuable as it can help avoid any precipitous sales or untimely deleveraging. These are very hard to recover from.

Proper healthcare and long-term care are not considered negotiable by most high net worth clients, crisis or no crisis. I have seen financial plans that had standardized assumptions for life span and long-term care costs show a high probability of success, only to collapse in failure when customized assumptions about clients’ real costs are included. The HALO questionnaire provides advisors with this level of personal detail. Advisors are then in the position to make a further gift of advice to protect against negative outcomes. Buying long-term care insurance is often a technique to consider in this case and the HALO process allows advisors to specify premium levels to get the job done and re-test the plan.

The advantages of a good plan are not just defensive. If your plan keeps everyone calm and rational, and if there is “dry powder” in the form of excess cash, fixed income to reallocate or even borrowing capacity, then you can go on the offensive. While others hunker down, or worse yet become forced sellers, you and your client can go shopping for assets that have gone on sale. The same is true of advising on Roth IRA conversions, which are best done during dips. Irrevocable intergenerational asset transfers are also best executed at market lows and can be highly significant ways to increase after-tax family wealth.

The confidence to buy, convert, and transfer is another huge gift an advisor can give, thanks to a good plan.