Reactive Advisers

John and June Roberts (as I will refer to them, though not their real names) came in for a conversation a few months ago.

They had been working with an advisor for nearly 20 years at one of the big, reputable brokerage firms, but felt like they needed more.

They weren’t sure what it was, but talked about the lack of tax minimization advice and how the same securities investment conversation tended to come up over and over again.

Even that wasn’t really enough, because they believed the investments had performed pretty well over the years because at this point in their life, being retired, they had amassed a good fortune for themselves.

As we talked about what they wanted and dug into their frustrations a bit more, some other concerns surfaced they were not aware of before our conversation.

While the portfolio was professionally managed, they were led to believe there was a portion of the investments in alternatives that were to do well on the upside but also provide safety in a market downturn. As we dug into the details of the investment provided in the fine print of the prospectus, the exact opposite was true.

Certainly there was the possibility of a nice upside, some of which they had experienced. But it was also true that the upside was capped, meaning limited. This may at times be appropriate, especially if the downside is also limited, but in this case it was not. Ouch.

Adding to the concerns became the realization that costs were more than double than what they were aware of, because as the investor they were paying for the investment costs inside these security investments.

Now, as the year-end approaches, John and June are for the first time trying to get ahead of potential tax problems and had gotten our help calculating tax liabilities and tax saving opportunities available to them this year. But then, one more email came in from their current advisor.

The email simply said they had some realized capital gains in the year. That was it. No solution. No pre-planning for it throughout the year. No recognition of whether or not waiting to realize those gains into next year might be better. And no clarity about whether the gain was short-term or long-term, which is a critical detail.

That was it. With that, John and June threw up their hands, so to speak. They decided they wanted proactive advice going forward for their retirement. Advice that allowed them to invest with insight and prepare proactively to minimize tax surprises and actually enhance their tax situation.

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