Section One

"A Must Read"

The Wealth Planning Process

Let's start with the obvious; everyone has an agenda. Attorneys and CPAs are looking for billable hours. Stock Jockeys want to make commissions from selling you the latest deal of the day. Life Insurance agents want the commissions that come from the sale of their products. Trust Officers want to manage the trusts you create and have the trust fees flow into the financial institution they work for. Private Bankers want to lend you money at the highest rate you will accept. Portfolio Managers want to capture the investible assets you have and get paid a fee for allocating, investing and watching out for your money. And, banks don't invite you to their stadium suites just because you can make good conversation in a crowd.

There's nothing wrong with having an agenda, the end result of which is someone makes some money. Just be sure that the agenda starts and ends with you.

There's an old joke that in most major cities in the US there is a Financial Planner for every checkbook. Open the phone book, if you still use one, and see the pages and pages of people who want to help you plan your financial affairs. Try Googling Financial Planners and your geographical location and see what pops up. It is highly probable that hardly a week goes by that you don't get at least one invitation to a Financial Planning Seminar offering a free dinner to those who attend with, of course, no obligation. The airwaves are inundated with ads and seemingly neutral and valuable information all designed to set a hook in your assets and slowly reel them in.

It may sound like Financial Planners, or anyone wanting to offer you their expertise and advice for a fee and/or commission, are not well-intended. For the most part, they truly are trying to balance your needs with their own need to make money. No one with office rent, staff salaries, office supplies, equipment purchase and maintenance, phones, internet and website development, hosting as well as everything else that goes into running a business can ill afford to give you advice without getting something back in return. Even missionaries have to have food, clothing and shelter.

The reason for going through the above is to make sure you understand that no one works for free, and this includes banks. However you want to cut it, fees and commissions will reduce your assets. But this is not necessarily a bad thing if the end result is an increase in assets as a result of planning.

The College of Financial Planning in Denver, CO has done a remarkable job in educating Financial Planners with extensive course work and stringent testing. Someone who has been granted the Certified Financial Planner (CFP) designation by the college has proven their ability to grasp and communicate advanced planning concepts as well as agreeing to abide by the professional principles associated with the designation. Likewise, the American College in Bryn Mawr, PA has done an equally good job of educating practitioners through the stringent Chartered Financial Consultant (ChFC) program and designation. And, the Cannon Financial Institute in Atlanta, GA has experienced great success in giving Wealth Management professionals, working primarily in banks and financial institutions, a working knowledge of Wealth Management Issues and how to integrate this knowledge in the real life world. The Certified Wealth Strategist (CWS) designation is granted after a grueling amount of course work and on-line and face-to-face assessments.

In today's complex financial world there is a plethora of impressive-sounding designations, but when it comes to working with someone in the financial planning realm, the CFP, ChFC and CWS designations at least show the individual's endurance, persistence and ability to pass exams!

There is a big difference between perception and reality. There is the perception that all Financial Planners are going to address a wide range of planning issues when working with you. The reality is that there are many Financial Planners whose sole intent is to handle the investment of your assets. Initially, the planner will go through the motions of fact finding by filling out a questionnaire. This information will be run through a computer loaded with some version of planning software. Out comes a Financial Plan that usually is nothing more than a Cash Flow Analysis and Retirement Income Analysis, both of which are designed to show you why you need to save more money and hand it over to the planner. But wait a minute. You're saying this sounds like someone who is still in the accumulation phase of his/ her life. That's true because many planners are really just investment people who are looking to capture assets. For those clients who have moved on past the Accumulation Stage, they want to capture the assets through investing the assets for retirement income purposes.

Understand that this is not necessarily bad. You may only need planning that involves investment advice, and there's nothing wrong with that. However, there are many, many people who need comprehensive and cohesive planning that goes far beyond advice on how to invest their money.

What is The Wealth Planning Process and how does it differ from typical Financial Planning? The basic building blocks of any Wealth Plan are:

Asset Protection

Succession Planning, and

Saving Taxes

To begin with they both start at the same place, the gathering of facts like name, rank and serial number. The facts will probably include questions about what's coming in and what's going out, a listing of your assets and liabilities and probably even a few subjective questions. Basically, both Wealth Planning and Financial Planning start at the same place: where you are.

The next step is to determine where you want to be at some point in the future. That point may be a comfortable retirement, which most Financial Planners can assist you with. Or it may include a myriad of liability issues, estate issues, business continuation issues, insurance or titling issues or any of the Thirteen Wealth Management Issues discussed in the next chapter. Many Financial Planners can get over their heads here because their practices are designed to capture assets, manage those assets and keep the clients happy with what they are paying for. This is not to say that there aren't Financial Planners who give significant attention to issues other than those relating to investments, but a true Wealth Planning Process presents you with strategies not products.

One very successful Wealth Planner, long tenured in the field, describes his process like this:

"Just like a Financial Planner I begin with finding out where you are and then help you determine where you want to be. The difference in what I do is that I develop strategies to get you there. Many Financial Planners use plans to get you to buy something. Let me use a metaphor as an example.

"My wife and I own a weekend home an hour and a half south of Dallas, and we go there most every weekend. When Friday rolls around, we know where we are, in Dallas. We know where we want to get to, the lake home. Now, there are three routes we can take. One stays pretty much on the interstate and goes through Hillsboro. One goes through Cleburne, TX, and one goes through the country. On any given day each has plusses and minuses.

"Before we hit the highway my wife and I discuss the best route to take based on those plusses and minuses. There may be construction on the interstate. We may need to stop at the outlet mall in Hillsboro or pick up some garden supplies at Lowe's in Cleburne, or we may just want to enjoy the scenery of the country roads when the weather is nice.

"My job as a Wealth Planner is to determine where you are and help you determine where you want to be relative to the wealth you have accumulated and then develop strategies to get you there. Part of the process is to give you the plusses and minuses of those strategies and then work with your other advisors to make sure the strategies selected are actually implemented. I will never approach something in a vacuum, because everything you do, or consider doing, has a cause and effect on other issues."

This Wealth Planner goes on to explain in great detail the following:

WHAT he does.

HOW he does what he does.

The RESOURCES he has at his disposal.

And, what DIFFERENTIATES what he does from others.

If the person with whom you are working or those that you are thinking about working with don't or can't give you answers to the above four critical elements of how he/she runs his/her operation, you might want to look elsewhere.

It is absolutely critical that you not approach planning in a vacuum. Most people address financial issues precisely in this manner. You may have a trip coming up that will take you overseas and all of a sudden you want to get a Will done or amend the Will you have. Uncle Harry just died and you witnessed first hand the turmoil that his family had to endure because he had not given proper direction toward his feelings about being taken off life support, so you call up your attorney and have him draft some documents. You finally let your Kiwanis buddy into your office to talk to you about life insurance, mainly because another friend was just diagnosed with terminal cancer. You wind up buying some life insurance.

The list of triggering events can go on and on, but it is just natural to have something happen in your life that will trigger the need or desire to address a singular issue. This can be good because you get something addressed that needs to be addressed. It can also be bad and ugly because you are probably ignoring how what you do with the singular issue is going to affect other vital areas as well as how what you have or have not done in other vital areas will, or should, affect what you are doing with the issue being addressed.

A simple example will show you what can happen. You have wealth but feel like you probably could use some more life insurance. This, again, comes to the forefront because one of your friends in your Kiwanis Club was just diagnosed with terminal cancer. You make your spouse the beneficiary and your children contingent beneficiaries. You pay the premium, file the policy away, and you feel all is well with your world.

Or, is it? In your haste to give your family added financial security you may have inadvertently created financial security for the IRS by ignoring Estate Issues. If you were to die your spouse would, in fact, receive the $1,000,000 death benefit of the policy you bought free of income taxes and free of Federal Estate Taxes. That's good. But if there's anything left of the million dollars at her death it will be in her taxable estate and subject to Federal Estate Taxes. Or, worse yet she predeceases you and the death proceeds go to your children. The $1,000,000 will be includable in your estate and totally subject to Federal Estate Taxes.

Let's look at another quick example (also covered elsewhere) of "good planning gone bad" because of approaching issues in a vacuum. A couple in Alabama had beautifully drafted Wills and Living Trusts executed. The documents included all the recommended provisions that would do everything possible to minimize Federal Estate Taxes. However, the documents were totally useless because virtually all of their assets would be passed because of the way the assets were titled. This very wealthy couple had done a good job addressing an important issue but had ignored what they had done in another area. Cause and Effect, think Cause and Effect. The Wealth Planning Process should deal with the integration of thirteen issues, not just investments.

In summary, make certain as you go forward that your professional advisors are not working in a vacuum, giving attention only to those matters with which they work. A really good Wealth Planner, or Financial Planner, can and should be the quarterback your advisory team needs. Just make certain that your quarterback not only understands the game but can call the correct plays, pass and run when needed, and makes sure all the members on your team are playing their position the very best that it can be played.

Don't Live in a Vacuum

The Thirteen Wealth Management Issues

If there is a recurrent theme in this book, it is easily that you should look at the preservation of your wealth and the protection of your assets synergistically. The best way to define synergy is one plus one equals three. It should be reiterated over and over that each and everything you do regarding your wealth will have a direct effect on something else that you either have already done, contemplate doing or should have done.

There are Thirteen Wealth Management Issues, a number of which you have probably already addressed. It's a pretty good bet that there are some that you have not addressed but should. Unless you have been fortunate enough to work with a Wealth Planner whose education, experience and skill set allows him/her to not only identify which issues are applicable to you today but also identify the cause and effect of the interrelationship between and among the issues, it's a given that you need some help.

The Thirteen Wealth

Management Issues

Distribution of Wealth at Death

Gifting to Children/Descendants

Business Succession Planning

Charitable Inclinations at Death

Qualified Retirement Plans/IRA

Liabilities

Insurance

Investments

Stock Option Planning

Durable Power of Attorney

Appointment of Executor/Trustee

Titling of Assets

Charitable Gifting During Life

Many Financial Planners and even attorneys and CPAs are prone to concentrate on the issue at hand. The issue at hand for many Financial Planners is to persuade you that your assets will be much better off under their control. For attorneys the issue at hand will generally be whatever it is that brought you into their office. It may be a new Will or Living Trust. It may be getting the paperwork together on a real estate deal or reviewing legal documents. Your involvement with a CPA generally takes on a similar, singular direction at any given point in time. His/her issue at hand may be how to save on the taxes you pay, helping you structure the most advantageous way to sell your business or counsel you on the best way to set up a new business from a tax standpoint. There are numerous other examples of the issue at hand, but the common element in virtually all of them is that the professional with whom you're working views his/her responsibility is to singly address that issue. Obviously, there are exceptions to this, but sadly they are few and far between.

In the previous chapter, "The Wealth Planning Process," the starting point in proper planning was identified as Where You Are. Where you are goes far beyond listing your assets and liabilities, detailing how your assets are invested, determining your risk tolerance, and providing name, rank and serial number type information. Where you are should also include an in-depth assessment of which of the Thirteen Wealth Management Issues you have already addressed. Once these issues have been isolated, you should then move on to describing how you addressed each of them with specific and detailed actions that you took with any particular issue. It is also vital that you detail what you specifically considered, but did not choose to implement, and why you chose not to do so.

For example, you may have addressed insurance issues and determined not to effect any changes in your insurance coverage. That's fine, but why did you choose not make any changes? Was what was presented to you too expensive? Were you concerned about taking a physical until you lost some weight and got your blood pressure under better control? Did you have a spat with your spouse at just the wrong time? Was there something you didn't understand about what was being presented to you? Did the premiums not fit into your annual gifting exclusion limitations? It is important that this information be considered and disclosed as you move through the planning process.

Once the above has been done, then it's time to look at the issues still hanging out there. The remaining issues should be discussed one by one. You might even find out that you have actually addressed an issue and didn't know it, and you will be far better off knowing this. After identifying the issues that are still hanging out there, it's time to go through each one of them in great detail, providing all the objective data associated with the issue as well as the subjective side to the issue. A good Wealth Planner will get you to open up and dig deep into not only the issue, but also the heartfelt aspects associated with it.

The discussions revolving around finding out where you are will automatically evolve into where you want to be. Remember, planning is much, much more than just investments. Granted, investments is indeed one of the Thirteen Wealth Management Issues, but investments is only one.

A properly formulated plan will begin being developed as the process of what is known as Fact Finding shapes up. The proper education, experience and skill set of the Wealth Planner enables the Wealth Planner to identify not only the applicable issues, but also how they are or are not working synergistically. Financial Planning software can be pretty sophisticated, but it has distinct limitations when it comes to the subjective side of things and the interrelationship between the issues applicable to you.