FA Magazine March 2023 | Page 27

A home is a use asset , not an investment asset . The fact that home prices had been rising since the Great Recession does not change that reality . Yes , many clients made a bunch of money on their vacation homes , but that was an accident , not genius . For those clients now feeling bad that they paid too much for a recently acquired property , remind them why they own it and encourage them to enjoy it . If there ’ s no getting around the fact that they overextended themselves , talk them through it . Can they walk away , or do they want to compound mistakes ?
Take one of the clients at our firm , Accredited Investors Wealth Management . This client regretted that they ’ d bought a vacation home somewhat impulsively against our counsel . They realized that they didn ’ t want to use it and had no appetite for converting it into a rental . But they would lose tens of thousands of dollars if they sold it .
I told them , “ Heck , I lost tens of thousands of dollars in your investment account in a few days this year .”
The point was that the cost of selling was not going to cause them long-term financial harm , so why contend with the emotional pain of keeping a property they didn ’ t want ? They ’ d be paying high ongoing costs to keep something they rarely used .
Issues like this give you an opportunity to do great work and communicate it to your clients .
Let ’ s take another example . We also performed aggressive tax swaps last year , which helped our clients take significant capital losses they could either use against capital gains in the future or to offset current gains from this year ’ s sales of their property or businesses . Advisors should educate clients and talk about how helpful these losses can be . A down market is great for things like Roth conversions , since the taxes will be lower , and spousal lifetime access trusts , since there ’ s a good chance your heirs will benefit when markets eventually rebound .
Grantor-retained annuity trusts can
Last year we were able to take advantage of slightly lower interest rates and moved a client ’ s large position in a dividend-paying stock , one that had significantly declined in value , into a GRAT .
be helpful the same way ; you can pass on the potential growth of the assets without even using your exemption . Higher interest rates may make these less attractive ( since they must pay interest to grantors at applicable federal rates and the key is to keep these payments low ). Last year we were able to take advantage of slightly lower interest rates and moved a client ’ s large position in a dividend-paying stock , one that had significantly declined in value , into a GRAT . Depending on how markets do , we think we will have potentially shifted tens of millions of the client ’ s dollars to the next generation without recognizing a gift . Even if it doesn ’ t work out , the client is only out legal fees . These types of opportunities may not arise again for years , so make the most of them .
But you don ’ t have to do these big things to do great work . You simply have to recognize your client ’ s needs , whatever they are . The pandemic has made many clients want to take some kind of action , any action . When you do the “ slow work ” of talking them through it , reminding them what ’ s most important to them and challenging their more questionable ideas , that ’ s the most important service you can offer . And it ’ s something that can ’ t be replaced by artificial intelligence or a call center .
As hard as 2008 and 2009 were , that period set the stage for our company to grow tremendously . People called us because they were looking for somebody to walk them through challenging times .
That might happen to you now . But try to understand whether you are being hired for the right reasons . What if you get a call from someone who ’ s mad at their current advisor for the wrong reason — say , they called you just because the other planner did not help them avoid the 2022 market calamity . Ask yourself in this case whether they would have been better off following your advice instead , and if they were already being well-served ( and don ’ t know it ), consider not taking them on . Instead , let them know that their advisor was doing the right thing , even if the results were dissatisfying for them .
On June 6 , our firm is again hosting “ Be Our Guest ,” our formal program showing how we deliver wealth management to our clients . Last year , we had almost 20 people from more than a dozen firms around the country spend the day with us . We went over all the aspects of our business and succession plan . Everyone left with a memory stick that included information about our various procedures , operations information , investment ideas and agreements . Our firm has 60 staffers and more than $ 3 billion of assets under management , but firms of all sizes benefit from spending the day . A $ 1,500 donation to the Foundation for Financial Planning will give you access , and I guarantee you will come away with multiple ideas and methods to improve your business . Everyone in our company is available to you and is open in their sharing . I hope to see you up here . If you are interested , please reach out to me at ross @ accredited . com for more information .
ROSS LEVIN is co-founder of Accredited Investors Wealth Management in Edina , Minn .