The purpose of this case study is to provide a inside look into how Financial Synergies Wealth Advisors provide wealth management services for their clients. While this is a fictious example, it does provide a real-life glimpse into the advisor-client relationship. The case study also outlines the stages new clients go through when working with Financial Synergies, including:
Jeff and Susan Matthews are middle-aged working professionals who have an eye on retirement in the next few years. Jeff is 62 years old and works as a sales consultant for a large industrial company. His wife, Susan, is 57 and is a nurse practitioner. They have two children, Stephen and Mary, who both graduated from college in the last few years.
Jeff and Susan have never engaged in a formal relationship with a financial professional. With their children out of the house, they are beginning to have questions about when they can retire and what that may look like. In the past, their discussions on retirement were brief because it seemed so far off and was very overwhelming.
Things changed when Jeff’s company recently announced upcoming layoffs. He was notified that he would be receiving a mandatory retirement package. He was caught off guard by the decision because he has only worked for the company for a few years. He had pondered retirement but did not expect this change so suddenly. As part of his retirement package, Jeff will receive:
Given this unexpected change, they decided to research financial firms and quickly realized the importance of working with a CFP® professional. They read several articles about the qualifications to seek in a financial firm – most importantly a fee-only, fiduciary advisor. These professionals are not compensated by selling financial products and they are required to put the best interest of their clients first.
Their online search led them to the website for Financial Synergies Wealth Advisors (FSWA). Reading about their many years of service and the expertise working with retirees, Jeff and Susan felt comfortable contacting the FSWA team.
Step 1 – Discovery Meeting
Shortly after their initial inquiry with Financial Synergies, they were contacted by one of the firm’s CFP® advisors. Jeff and Susan briefly explained their situation and how they were interested in discussing more about their circumstances. Jeff’s employment termination would be effective in 60 days, so they needed help.
The FSWA advisor welcomed the opportunity to meet with Jeff and Susan. He set clear expectations for this “discovery” meeting. The purpose was to better understand their financial situation and learn more about their goals for the future. The advisor assured them that there was no obligation when meeting with the team. The ultimate purpose is to determine if FSWA is a good fit for their needs and to make sure the team could add value to their financial lives.
During the discovery meeting, Jeff and Susan and the Financial Synergies advisors had a detailed conversation about their family, their finances, and their careers. They asked a lot of questions that Jeff and Susan had not considered before. The advisors spent time asking how they felt about retirement, what concerns they had, their experience with money throughout their life, and what goals they had for this next chapter of their lives.
The advisors provided a background on the firm and important details about their services, including:
Given that retirement was not too far off for Jeff and Susan, the advisors explained their retirement income distribution strategy. Known as “The Retirement Salary,” the advisors walked them through the detailed process of how they provide ongoing, flexible income to their retiree clients.
It is a great compliment to their overall investment strategy, and they emphasized they do not use any investment products – like annuities – for retirement income. Jeff and Susan felt assured that when they were ready to full retire, the FSWA team knew what to do.
Financial Synergies even has a program call Pathway to help you professionals like their children. They wished they had the opportunity to work with a great team like this early on in their careers.
Overall, Jeff and Susan found the discovery meeting very refreshing and they learned a lot about Financial Synergies’ wealth management approach. The advisors emphasized the importance adding value to all clients’ lives and the team felt they could certainly do so for Jeff and Susan. They left the meeting with the understand that the FSWA team would follow up in the agreed upon time frame regarding their decision.
Step 2 – Client Engagement
Jeff and Susan felt confident that the CFP® professionals at Financial Synergies could help as they faced a major lifestyle shift. Having mutually agreed to work together, Jeff and Susan met with advisor team to complete the paperwork to formalize their relationship. They signed the non-binding management agreement and were given other important disclosures and privacy documents.
Prior to the meeting, Jeff and Susan were provided a digital questionnaire that gathered their personal and financial information. The team prepared the necessary paperwork to set up the needed investment accounts (such as IRA, Roth IRA, brokerage accounts, trusts, etc.) at the desired custodian (Schwab or Fidelity) and explained the transition process, which made it seamless and easy.
The FSWA team laid out a clear time frame for the accounts to transfer. They reviewed the digital tools they use for secure document sharing & storage and the online portals Jeff and Susan will access to review their investment account performance and financial plans. Jeff and Susan were impressed with the technology Financial Synergies provides to their clients. While they were able to meet in-person, it was clear to Jeff and Susan that FSWA has the capabilities to work with clients regardless of where they live.
Financial Synergies offers multiple client portals for investment management and financial planning.
STEP 3 – FINANCIAL PLAN
Jeff and Susan next met with the Financial Synergies advisor team for a detailed fact-finding meeting. The advisors explained how they like to do a “deep dive” into all aspects of their financial lives. While Financial Synergies will eventually manage a majority of their investment accounts, there are other important factors that need to be incorporated into the plan. During the conversation, the FSWA team learned the following regarding Jeff and Susan’s current financial situation:
Jeff’s current 401k balance is $100,000 (pre-tax) and he’s fully vesting in the company’s matching contributions.
Jeff has an old 401k plan from his last job worth $600,000 (pre-tax).
He also has a pension from his old employer worth $150,000 (lump sum, pre-tax).
Jeff’s current company RSU balance is $60,000 ($30,000 vested / $30,000 unvested).
Susan contributes 10% to her 403b plan at the hospital and has a $450,000 balance.
The hospital makes a 6% annual contribution on her behalf in a separate profit-sharing plan, which is worth $60,000 (pre-tax).
Jeff and Susan purchased an annuity when they were younger for $50,000 and its current value is $75,000.
They have $200,000 in cash between their checking and savings account.
Jeff and Susan purchased their current home 10 years ago; they paid $300,000 and owe $150,000 on the mortgage (4% interest rate, 30-year term). The current value is $360k.
Jeff drives a company vehicle, so he does not have a car loan.
Susan leases an SUV for $400/month and typically likes trading it in every three years.
Outside of the mortgage, they do not have any other debts.
Jeff’s salary was $150,000 and his annual bonus was $25,000.
Susan’s income is $95,000 per year.
They are both fully qualified for Social Security. Jeff’s benefit is projected to be $3,100 at his Full Retirement Age and Susan’s benefit is estimated to be $2,500/month.
Jeff and Susan spend $6,000/month for day-to-day expenses (gas, groceries, utilities, etc.).
The mortgage payment is $1,145/month.
They like to travel and typically spend $12,000/year on family vacations.
They each purchased 20-year term policies when their children were young; the death benefit is $500k each and total premiums of $1,200/year. There are 4 years remaining on each policy, with the option to renew.
They purchased long-term care insurance a few years ago and pay $300/month for each policy.
Jeff and Susan each set up a basic will when their children were young. However, they do not have any powers of attorney (POAs) for health and finances.
They would like to leave something for their children but don’t have specific inheritance goals.
Both of their parents are still alive and are in decent financial shape. If they were to have a significant health event, it could strain their finances.
Jeff wants to start his own consulting business and possibly retire by age 65. He may work longer if the business is doing well and he enjoys it.
Susan would like to retire at 60.
Susan would like to do more traveling when they retire. Jeff would prefer to buy a lake house.
Jeff will need to purchase a vehicle.
Jeff and Susan have concerns about running out of money in retirement.
They are concerned about the cost of healthcare in retirement.
They don’t want to be a burden for their children as they get older.
Jeff hates debt and wants to pay off the loan. Susan is more comfortable paying the mortgage over time, which can be a source of frustration for them at time.
They are holding more cash than they need but are unsure of what to do with it.
Jeff is planning to start his Social Security benefits early at age 62.
STEP 4 – FINANCIAL PLANNING
AND INVESTMENT RECOMMENDATIONS
Jeff, Susan, and the Financial Synergies team met to review the financial plan recommendations. They recapped the information gathered in the fact-finding meeting. The advisors had input this information into their financial planning software and reviewed all aspects of the plan.
The advisors walked them through a mathematical technique called a Monte Carlo analysis. It is a simulation that takes their finances and helps model the outcomes when investing in different market cycles (i.e., it helps determine whether or not they will out of money). The current situation resulted in a 56% success rate.
While the current projections seemed dire to Jeff and Susan, the advisor team saw several areas where they could improve. They made a wide range of recommendations, including:
GENERAL PLANNING RECOMMENDATIONS
2019 Tax Analysis Summary - Jeff & Susan Matthews
- Total Income: $183,805
- AGI: $183,687
- Deductions: $24,400
- Taxable Income: $159,152
- Total Tax: $26,961
- Filing Status: Married Filing Jointly
- Marginal Rate: 22.0%
- Average Rate: 14.7%
- 2020 Safe Harbor: $29,658
- Tax Exempt Interest: $0
- Qualified/Ordinary Dividends: $68 / $68
- ST/LT Capital Gains: $0 / $0
- Carryforward Loss: $0
Estate Plan Observations
The advisors were able to show Jeff and Susan how these changes would impact them. By implementing these recommendations, the Monte Carlo results increased dramatically to 93%.
Probability of Success
Probability of Success
STEP 5 – IMPLEMENTATION
AND ONGOING REVIEW
Jeff and Susan were very pleased with the entire process with Financial Synergies. They would have felt overwhelmed with all the decisions to make and the advisor team helped them avoid several pitfalls that could have been costly. They feel that the team understands their situation very well, and they have laid out a clear plan moving forward.
The advisor team explained what would happen over the next several months. Jeff and Susan will receive quarterly performance reports from Financial Synergies. They will monitor the investment accounts on an ongoing basis and make any rebalancing adjustments as needed. The team set reminder for important dates upcoming, such as Jeff’s employment termination, rolling over the retirement accounts, and coordinating with the CPA on tax materials. They also provided an estate attorney recommendation and helped coordinate a meeting to complete their estate documents.
The advisor team planned a follow up meeting later in the year, and asked Jeff and Susan about the frequency they would like to meet each year going forward. Jeff and Susan did not foresee the major life changes that came their way. It was overwhelming and scary, but they felt very fortunate about their decision to work with Financial Synergies. They feel confident that they’re working with the right team that can help make their future retirement dreams a reality.
- Review financial goals.
- Update financial plan as needed.
- Discuss quarterly reports and investment portfolio.
- Schedule next meeting.
- Send detailed client newsletter.
- Provide quarterly performance report.
- Give market updates and commentary.
- Your advisor will review your accounts and reach out if updates need to be discussed.
- Investment portfolio monitoring.
- Account trading and rebalancing.
- Ongoing investment analysis.
- Weekly blog and commentary.
- Client events (social and educational).
- Unlimited phone and email conversations with your advisor.
This is a hypothetical illustration of the services provided by Financial Synergies Wealth Advisors. Investing involves risk, and past performance is not a guarantee of future results. None of the information conveyed in this example should be considered financial advice. Financial Synergies does not provide tax or legal advice, and it is recommended to consult with tax and legal professionals on such matters.