The Approach and Solution
- Work started with a client risk assessment, to understand what degree of risk they are open to take on their investment portfolio (-13%). (NOTE: What is -13%?)
- Analysis of the client’s existing investment portfolio to understand the various asset classes invested in and to assess fees and expenses associated with each investment instrument.
Cash equivalents
(Checking, Savings, Cash in hand)
Bonds
(MFs, Direct Bonds, and ETFs)
Alternative Investments
(Digital currency or any collection)
Equity
(MFs, Stocks and ETFs)
Real Estate
(REITs or DSTs)
Precious Metals/Commodities
(Copper, Aluminum, Zinc, Platinum)
Note: The analysis step allowed us to obtain a clearer picture of what the client was paying as a percent of AUM which was 1.2% as well as, to identify the expenses the client was incurring on MF investments.
The AUM fee was above industry standard, and the advisor decided to offer a new, flat rate AUM fee of 0.90%, leading to a savings of $5,000 per year.
The MF investment fee was reduced further by replacing and recommending ETFs and individual bonds, which aligned better with the client’s risk appetite.
Entered baseline data in the financial planning software (eMoney) to complete a holistic review of the client’s current financial situation – cash flow, insurance, retirement, portfolio, and liabilities.
Following this, a strategy call with the advisor was conducted to review all the financial analysis results and chart a future course of action.
Scenario Modeling
Developed multiple scenarios in the financial planning software to generate enough information for the client to make a well-informed decision about their real estate and investment goals.
| Home Purchase using Savings ($700K) |
- Purchasing a home using savings of $630,000
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| Home Purchase by mortgage ($700K) |
- Purchasing a home of $700K with a 20% down payment and 80% mortgage(30-year term loan with an IR of 3.65% (repayments escrowed))
- Having $90K as an emergency fund
- Saving $400K into a brokerage account from a savings account with an investment return of 5.00% Income generated – $20,000/year
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| Home Purchase by mortgage ($1MM) |
- Â Purchasing a home of $1MM with a 20% down payment and 80% mortgage ($800K)(30-year term loan with an IR of 3.65% (repayments escrowed))
- Having $80K as an emergency fund
- Saving $350K into a brokerage account from a savings account with an investment return of 5.00% Income generated – $17,500/year
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| Rental Property Sale and Purchase ($1 MM and $700K) |
- Sale of rental properties – Net of taxes $1MM(Buying a rental property of $1MM and receiving rental income of $36K (indexed at 2%))
- Purchasing a home of $700K with a 20% down payment and 80% mortgage(30-year term loan with an IR of 3.65% (repayments escrowed))
- Having $90K as an emergency fund
- Saving $400K into a brokerage account from a savings account with an investment return of 5.00% – Income generated – $20,000/year
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| Sell Rental Property to invest the proceeds and buy a $700K home |
- Purchasing a home of $700K with a 20% down payment and 80% mortgage.(30-year term loan with an IR of 3.65% (repayments escrowed))
- Having $90K as an emergency fund.
- Saving $1.4MM into a brokerage account from a savings account with an investment return of 5.00% Income generated – $70,000/year.
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Note: All the above scenarios include extensive research and analysis on the following areas as client cashflow will be impacted by each decision.
- Mortgage broker to get the quote on interest rate based on the client’s credit rating.
- Research on rental and residential real estate based on client’s preferred neighborhoods.
- Insurance broker to get quotes on HOI.
The client, based on our analysis, went with the plan of selling her rental real estate investing the proceeds with the advisor, and buying a $700K house on a mortgage.
The advisor put the client in touch with his COI’s connections for the best service experience.
Real estate agent
Real estate agent
To get the best possible market value for the properties the client plans to sell and buy.
Mortgage Broker
To get the best possible interest rate quote for the mortgage.
Insurance Agent
Get the best quote on HOI.
CPA: Worked towards creating a strategy to mitigate taxes on the sale of real estate. Looked at investment portfolio to understand taxes that will be generated
by portfolio rebalancing.
Estate Attorney: Create an estate plan (Trust) that works in the best interest of the client’s heirs. This addressed the client’s asset transfer goal while simultaneously lowering the tax impact.
- Revocable Trust
- Donor-Advised Fund
Education Savings – 529: Established an education savings plan to be funded with $10,000/year to support fund growth over the next 15 years to the time the client’s grandson will be ready to attend college. In a 529 plan, all redemptions for education purposes are tax-free.
Key Business Outcomes & Results
- A $4 million increase in AUM through comprehensive financial planning and research, increasing our client’s income year on year.
- A swift turnaround in the delivery of the financial plan within 2 weeks via a streamlined process, surpassing the usual 4 to 6-week timeline.
- The advisor prioritized investment consulting and client communication over financial planning and research, allowing the client time to focus on higher-value tasks.
- The financial advisor introduced the client to his COI, resulting in two positive outcomes: the client experienced high satisfaction, and the COIs were pleased to take on the business, creating the potential for reciprocal favors for our client in the future.
- Success with this client gave our client the confidence to target high-net-worth individuals, knowing that the skilled team behind him could effectively support planning for such clients. Previously managing alone, the client struggled to expand the book of business.
Consulting