A married physician is planning to retire and prepare for the future of his three children and spouse.
INTRODUCTION
Jim is happily married to his high school sweetheart Margie, and they have three children, Joe, 20, John, 17 and Bernadette, 12. Jim is currently a shareholder in a successful neurosurgical medical practice group. He has found his career in practicing medicine to be incredibly rewarding, but recent changes to state healthcare practice standards and an increase in insurance liability has led to a substantial decline in the practice group’s revenue and an increased workload that is hard to cope with. This is especially the case amongst the elder members, like Jim.
Jim’s first son Joe is currently enrolled at Vanderbilt University as a Junior and his other son John is quickly approaching college age, as a junior at the local high school. Jim’s daughter Bernadette is a beautiful 12-year-old but has some challenges. She has special needs related to autism spectrum disorder (ASD).
Despite performing well in elementary school, Jim and Margie are unsure if college will be the right atmosphere for her socially, nor will it have the learning assistance programs and guidance she needs for academic success.
Jim and Margie are also concerned that Bernadette may not be able to live independently as an adult and they may have to provide a level of financial and living assistance throughout her lifetime.
THE CHALLENGE
Jim has accumulated over $1.5 million in assets. His accounts are mostly small and distributed amongst a few different brokerages and mutual funds.
He knows he is not making his finances work more to provide for his family’s future but does not have time to meet with a financial advisor and devise a more effective investment strategy. He would like to retire at 65 but is unsure what he needs to do to be financially safe in retirement. Jim would also like to purchase a small, but well-located golf condo in Fort Lauderdale, Florida sometime in the next 5 years. He also would like a boat for weekend trips to enjoy with the family.
Margie’s primary concern stems from being able to protect the family’s financial future should anything unforeseen happen to Jim. Having recently experience the loss of her beloved father, this concern has become increasingly pertinent for Margie. She has also started to assume more of the responsibility for her aging, widowed mother’s finances and well-being. Margie wants to future-proof the family’s financial situation by having several safety nets in place. These include taking out life insurance and disability insurance policies, as well as having long-term care insurance in place. Margie also wants to ensure her and Jim’s wills are up-to-date and remain so.
HOW DID COVENANT WEALTH ADVISORS HELP? THE APPROACH
Joe and Margie decided that Covenant Wealth Advisor's services were perfect in answering all their financial questions, creating the necessary safety nets and arrange their investments to help them achieve their goals. One of our financial planners collaborated with them to create a complete and tailored financial plan.
Jim and Margie also began working with one of our experienced investment portfolio managers to both merge and manage their investments and accounts in way to achieve their goals.
We did the following financial plan for Jim and Margie:
Create a net worth analysis to examine the family’s assets and liabilities. We recommended they refinance their existing home mortgage and paired them with a trusted lender who specializes in the financial situations of physicians.
Devised a cash flow plan to restructure their fixed expenses to afford them more flexibility should Jim’s income become unstable. We even showed them how to fund Jim’s dream boat for the next year and purchase the golf condo in Fort Lauderdale within 5 years.
We also created a college fund for their children, Joe and John. We examined the cash flow they had and borrowing strategies they could undertake to ensure funds were available immediately for Joe and John’s college expenses. For Bernadette, we developed an education funding plan that is highly flexible, given that she would likely not attend college like her brothers.
Our financial planners then developed a retirement projection that demonstrated to Jim and Margie what they needed to save each year to retire happily. Part of this projection involved devising a comprehensive plan for how Jim could begin identifying value from his shares in his practice group, plus examining the buy-sell agreements between the partners.
Furthermore, we assisted them in seeing how their insurance needs impacted their financial situation and helped them find the most comprehensive coverage to meet their needs. Jim required about $3 million more in life insurance to adequately protect his family than initially thought. Most of this could come from term insurance, but a significant section needed to come from permanent insurance in the event Bernadette needed more substantial financial support.
We then paired them with an independent life insurance agent we know well to get the new insurance policies set up. Jim and Margie also needed a small amount of long-term care insurance, to meet one of Margie’s requests. So, we referred them to another trusted agent who specializes in long-term care insurance to get the coverage in place.
We then went on to review their estate planning and analyze their current wills. One glaring issue emerged that their choices of guardians for Bernadette, in the event of their passing, would not be sufficient for her. They also did not have a power of attorney clause in either will should either Jim or Margie pass to manage the other’s finances. We then connected them with an experienced attorney who helped ensure their assets were properly titled and the designation of beneficiaries on the life insurance policies and retirement plans were consistent with their estate plan.
THE RESULT
Together with one of our portfolio managers, an investment policy statement was crafted that will guide the family in their future investment strategy successfully. We helped them consolidate their assets into a single custodian that allowed them to actively manage their assets. Jim and Margie meet with their portfolio manager every 6 months (or whenever they feel like it) to discuss any changes in their financial plan. Every quarter, the family receives a thorough report of their investments so they can measure their financial progress.
Through the help a personalized financial plan and continuous advice to keep them on track, Jim and Margie now have the peace of mind they need to enjoy life without the stress of money.
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