Step One to Taking Ownership of Your Financial Future: A Painless Conversation

By Ryan P. Dolan

“The best time to plant a tree was 20 years ago.  The second best time is now.”  

Chinese Proverb

”Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

  Abraham Lincoln

You’re a high-performing professional or business owner.  You take great pride in your career accomplishments and the sacrifice and hard work that went into it.  You’ve reached a point where you are reaping the financial benefits of that commitment and drive. And yet, you feel a nagging sense that something isn’t right.  There is a stark dichotomy between the time and bandwidth you expend on your career to earn financial resources, and that spent focused on how those resources should be optimally protected and nurtured to achieve your many goals and aspirations. 

It’s totally understandable how this lack of congruency occurs.  Most of my clients work very hard, and have a reasonably strong sense of control with regard to their careers and income prospects.  They know their business, and which levers they need to pull to hit their professional and financial goals. With regard to the planning and stewardship of the assets their career affords, on the other hand, they feel far less focused, competent and in control. 

This lack of alignment between these two sides of their financial life, particularly as assets and responsibilities build, starts to create tension.  Are they living up to the responsibilities and capacities of their financial resources? Many chose to respond to this tension by reinforcing their strengths.  They increase their commitment to work, grinding longer, putting the pedal down, and trying to compensate for their lack of any real strategy or planning. Throw more money at the problem.   Instead of taking some time to strategize, plan and reflect on what they are really trying to achieve, and where they want to go, they keep whacking at the financial tree with an increasingly dull axe.  Proactive and comprehensive financial planning, on the other hand, serves to sharpen the axe.

What stops people from taking action?  First, simple inertia. We’ve been in a bull market for over a decade.  So many have no idea if they are on track towards their priorities, transitions or goals.  But their income is increasing and investments are appreciating. Good times almost inevitably increase complacency and reduce initiative to change.  In addition, many smart, competent people have a sense of shame for their current financial condition. The causes run the gamut. They make a lot of money, but don’t save much.  They’ve made terrible investment mistakes. They feel insecure about their perceived lack of financial sophistication. Maybe they feel like they should have taken action a decade ago, and feel like they’ve waited too long.

Whatever the rationale, taking the first step is always the hardest part.  With this in mind, I’ve crafted Dolan Partners’ process of meeting with prospective clients to be the very opposite of what most people think meeting with a new advisor would be: painful, awkward, and pushy.  Instead, it’s two people having a candid, honest, confidential, and completely judgment-free conversation. In a time efficient way, I gain an appreciation for who you are, a broad understanding what you are trying to achieve in your life, and how money plays a role in that.  

There are a million advisors out there.  I know it seems daunting to try and find the one suited to your needs.  If you’re a mid-career (30s to 50s) professional or business owner, who is looking for a fully-engaged, holistic and comprehensive financial advisor, spend some time researching me and my firm.  The best way to get a sense of my process at the outset is to review my website and blog at www.dolanpartners.com  

If you would like to know more, here are a few suggestions for getting started on the path to ownership of your financial future.  My ultimate goal is to encourage people to take action, whether that leads to a relationship with Dolan Partners or not.

Step 1: A Painless Introductory Phone Conversation (20-30 minutes):

On our website, you can schedule a time to have an introductory call with me.  In a half hour or less, my goal is simply to learn about you, personally and financially, and broadly identify the financial opportunities and challenges you face.  

This call is an easy dialogue.  I’ll ask a series of questions which will give me a sense of who you are, where you are trying to go, your current financial progression toward goals, and what you are looking for in an advisor.  Typically, initial questions beget additional questions. I will then describe my services in more detail, and how I work with clients.

There is zero sales pressure.  I aim to have 100% client retention, and to work with clients for the rest of their lives.  This calls for a process where both parties have adequate time to vet each other. By the end of this call, I will suggest next steps. If your current plan is broadly aligned with your goals, I’ll be the first to tell you, and we can part as friends.  If you need financial direction, but for whatever reason aren’t likely a fit for us, I will always endeavor to steer you in a helpful direction.   

Finally, if we both agree that further discussion is warranted, we will set up a second, face-to-face meeting.

Step 2: A No-Pressure, Face-to-Face Meeting (45-60 minutes):

The next step is for you to come to my office, or have a video call if you aren’t local.  It will simply be you and me sitting in my conference room having a one-on-one conversation.  My goal in this meeting is to dive more deeply into who your background and life history. I ask prospective clients to come with an open, transparent, and introspective frame of mind.  Before we can plan for the future, we need to understand the past, and its influence on us. Only after understanding the person, can we best identify how to manage their finances. I will ask about your upbringing, family history, relationship with money and investing, and career progression.  

Once a baseline understanding of your history is set, we will look forward to your priorities, values and goals.   Prior to this meeting I’ll have you fill out a brief survey asking about your degree of satisfaction in a broad range of financial areas such as spending, investments, taxes, and estate planning, among others.  This survey will assist in focusing the direction of the conversation.  

In the last 15-20 minutes, I’ll describe more thoroughly my background, Dolan Partners, how I work with clients, and the rights and obligations of both parties to ensure a successful long-term relationship.  I’ll give them a copy of my advisory agreement to review at home.  

That’s it.  I encourage the prospective client to leave the meeting and think everything over, as will I.  Typically, we will have a brief follow-up call a week or two later, and either agree to working together, or part as friends.  Should we decide to not work together, that is where the conversation will end. No pressure, and no obligation. I simply hope I was able to help push you in the right direction.

What’s stopping you from getting a second opinion with regards to your financial life?  Other than your family, what could be more important than the sound planning and stewardship of your resources in a way that aligns with your goals and values?   Whether you currently work with an advisor or not, what’s the downside in getting a painless second opinion? 

Take the first step. 

What is Risk?

By: Ryan P. Dolan

For long-term savers and investors there is a common misjudgment about what risk is, and what it is not.  Many define risk as losing money.  Ok, fair enough. And what is the prime financially risky suspect in people’s minds?  Almost inevitably, it’s the stock market. I am always surprised at the questions people ask when they learn what I do:  ”What do you think about the market?” or “What about this crazy stock market?”   

This happened just recently.  A friend, intelligent and successful, asked how I was weathering the recent stock market volatility, and whether I was getting calls from clients freaking out.  I was initially confused-what volatility was he referring to? The market was within a few percentage points of its all-time-highs, and had been on an epic decade-long bull market.  Admittedly, the market was churning up and down from one day to the next over the past few weeks, but this was not volatility in any real sense of the word.  

And yet it hinted at a common fear.  The subtext of these questions speaks to a widespread association that stocks are inherently risky.  It’s understandable. Humans simply don’t like losing money. You worked years to save some money, you put it in the market, and 3 months from now it could be worth 15% more, 15% less, or the same-there’s no certainty.  The market’s movements seem indecipherable, unpredictable, almost fickle. This drives people crazy. 

Most questions typically boil down to asking for a prediction of the market’s near-term direction.  This speaks to why most individuals, left to their own devices, tend to achieve lackluster investment results.  Most view stock markets through the lens of short-term performance. And when looked at that way, the market’s actions do seem mercurial.  I have no idea-literally none-of what the market will do over the next year. I also have no idea whether the next move is up 20% or down 20%.  It took me a long time to learn this valuable lesson, by the way, and I have the investment battle scars to prove it.

The simple fact is, the longer the time horizon of the goal you are saving and investing towards, the less risk stocks pose, and the more exposure to them should be considered.  Your job, with the help of your advisor, is to not only tolerate stock market volatility, but to learn to embrace it. The proper mindset views large price drops as a gift, as they lower risk and increase future return projections and allow future savings to be invested at higher rates.  Volatility is only a loss if you need to sell-or worse, are emotionally compelled to sell.  

So,

Point One: People consistently overstate the risks of long-term stock ownership, and mistake volatility for actual loss.  

Which lead me to,

Point Two: This distorted view of risk paradoxically opens people to a genuinely real risk: the erosion of their long-term purchasing power, thereby jeopardizing their goals and financial security.

In my view, there are two main causes: one external, the other internal.  First, the external. We live in an inflationary world. Everything we need to live our day-to-day lives, both tomorrow and three decades from now, will cost more than it costs today. We know this intuitively.  A gallon of gas cost $0.96 30 years ago, and is $2.87 (over $4.00 in the Bay Area) today, an increase of 200%. A pound of bacon is up 175% over the same time period. 

Inflation, and its relentless assault on your money’s purchasing power, can devastate improper long-term planning.  A couple retiring today at 60, could conceivably have a 25 year, 2-person retirement-or longer. Over that time, they will see their expenses more than double!  How will they prepare for that? Will their assets grow at a rate which ensures their lifestyle and independence over that long a time period?

In addition to overall inflation, I see another threat to purchasing power: the impact of lifestyle creep.  With our core clientele, affluent professionals and business owners in their 30s to 50s, this seems to be a particular problem.  Most of our clients are in the middle of successful careers, and have become conditioned to strong income growth. Typically, this has been accompanied by material increases in their lifestyle and expenses.  What was considered a luxury or indulgence at 40 can quickly become a cast in stone necessity at 50. The problem is that income tends to be far more volatile than spending, and once spending patterns become ingrained, they are very difficult to reverse.  In addition, we’ve found income growth for many starts to slow in their late 40s/early 50s, while lifestyle creep continues unabated. This is a worrying combination.  

So what’s the solution?  It is imperative to have a properly constructed strategy and battle plan.  You need to define risk properly.  

For long-term financial plans and portfolios, equity volatility and near-term market movements are close to irrelevant.  Volatility does not equal risk. While stocks are not without risk, the longer your investment horizon, the less risk stocks pose.  Widen out the lens through which you view stock performance. Stocks become an indispensable ally in the fight against purchasing power erosion.  This combined with disciplined management of expenses and lifestyle creep form a double barrel approach to long-term financial success.  

www.dolanpartners.com

Embrace Your Inner Patriarch/Matriarch

By Ryan P. Dolan

“A society grows great when old men plant trees in whose shade they know they will never sit.”  

Greek proverb

“Don’t judge each day by the harvest you reap but by the seeds that you plant.”

Robert Louis Stevensen

A central goal of my work with clients is to get them focused on identifying their core first principles, the motivating values and philosophy that guide their view of a life well lived, and then work to align their money to that mindset.  This approach demands clients step out of the busyness and pressure of daily life, and work to articulate their greatest financial hopes and fears. Like everything of value in planning, it demands shedding a myopic focus on the short-term and superficial and embracing self-knowledge and a long-term mindset.  

This process tends to unearth a more magnanimous and generational view in clients.  I encourage them, no matter what their age, to willingly embrace the role as a family patriarch or matriarch.  To me, I define a patriarch or matriarch as a wise, benevolent, family sage that embodies long-term vision, stoicism, maturity, character, perseverance and self-control, to the benefit of everyone around him.  To anyone who has had one of these pivotal figures in their life, they know what a profound impact these people can have. Quite simply, they can alter the trajectory of lives.

In observing people and clients for many years, my experience has been that those who embrace this mentality with their money, more interested in helping others than self-gratification, almost invariably tend to be the happiest and most content with their financial life.  Now I can hear the cynics, “Well it’s easy to be anxiety-free when you have enough money to give it away freely,” but I couldn’t disagree more. In my experience, many of these honorable people embraced his mentality well before they had accumulated any material wealth.  

How can someone start thinking and acting like a patriarch/matriarch today?  I believe it begins with a commitment to engaging in financial education and communication with their families.  It starts with your children. It is never too early to imbue them with your financial values and work to incentivize good financial habits.  This can range from crafting an allowance that rewards children for doing chores to discussing business and the stock market around the dinner table, to building an appreciation for delayed gratification, the value of thrift, hard work, saving and the amazing nature of compounding.  There is a high degree of financial illiteracy in our society, across the economic spectrum. Matriarchs and patriarchs ensure this doesn’t occur in their family.

Financial communication and candor should also extends to your parents.  It means having honest and candid conversations about their estate plans or the degree to which you may need to support them financially in their old age.  I realize these are unpleasant and uncomfortable conversations for many families, but you cannot competently plan your own financial future, or for future generations, without an understanding of the older generations’ financial situation.  Everyone benefits, and it can proactively reduce the chances of hurt feelings, surprises and potentially bad outcomes down the line.

Many people start to think about giving generationally late in life.  Typically a few years into retirement, affluent people begin to concretely realize they will not outlive their assets, but have them to pass on.  We ask our younger clients to, given enough resources, visualize themselves as that retiree and think about how they would like to utilize their surplus wealth to have the most important impact on the people and causes that mean the most to them.   Let’s say they identify a desire to potentially provide for the college education of grandchildren?  

Some simple math.  Let’s take the aforementioned affluent retiree, 75, who has come to the realization that he will have excess assets.  He has one grandchild, five, and would like to pay for his college education. Let’s say today’s all-in private college cost is $250,000, with the cost increasing to nearly $600,000 by the time the child attends.  To fund this goal, with reasonable investment return assumptions, the grandfather would need to contribute roughly $22,000 per year for the next 15 years. Alternatively, let’s say this grandfather, at 45, embraced his patriarchal role and started thinking about generational planning.  By starting 30 years earlier, he would need to contribute only $900 per year to achieve the same goal.  By having this foresight, investment returns are allowed to play a much bigger role in the funding than for the 75 year old.

Most of our clients, despite their large and pressing financial needs and goals, could find a way to fund this goal, and others like them, provided they had the vision and the mindset to idenfity the desire and start early enough.  Importantly, when clients start thinking in these terms, and understand the generational impact they could have on their families, it often motivates better near-term decision making. They feel, for example, more energized to exert discipline in controlling excessive spending on trivial things today, understanding that it could come at the expense of providing a monumental gift to their kids and grandkids decades in the future.  They increasingly see their income and assets as not solely dedicated to their own security and gratification, but rather as part of a broader mosaic of influence they could exert on future generations of their family, one that would live on well after they are gone, in the memories and lives of their loved ones. 

Begin today to take the steps to embrace your inner patriarch/matriarch.  

www.dolanpartners.com

The Icarus Files (Chapter 1): The Rise and Fall of Aubrey McClendon

“You can’t spell ‘McClendon’ without ‘lend.’”

Oklahoma Gazette

We live in an era of debt.  From governments, to companies big and small, to households and individuals-debt has surged to levels past generations would have been shocked by.  This is largely due to the fact that, for a long time, debt has seemingly worked. Assets, from residential and investment real estate to stocks, have been rallying for years, and interest rates have fallen to historically low levels.  This has been a magic combination for those using leverage to accumulate assets, and seems to validate the notion of leveraging-up your balance sheet to maximize your lifestyle and net worth. Given the prevalence of this view, it is an opportune time to take a hard look at debt and the proper role it should play in your unique financial life. 

A Wall Street Journal article, “The Truth About Wealth”, published in 2011, looked at how affluent households were affected by the financial crisis.  According to the article, the top 1% of income earners saw their incomes fall by more than 30% from 2007 to 2009. In contrast, the bottom 90% experienced only a 3% drop.  In terms of net worth, the top 1% also suffered much larger losses, due to its much heavier exposure to volatile assets. Fully one-third of these households fell out of the 1% over the period in terms of net worth.  It is not surprising that the income and wealth of the affluent is more volatile-this has been the case for long periods of time. What is unusual is the increasing degree of that volatility. According to a Northwestern University study, the financial volatility of the top 1% has quadrupled since the early 1980s.  

While there are many factors behind this, I believe a core reason has been the wealthy’s increasing use of debt.  Prior to the 1980s, the 1% was heavily populated with inherited wealth and the owners of businesses. Both groups tended to have conservative balance sheets with low debt levels.  Since then, the 1% has been comprised increasingly by those in the technology, finance (particularly private equity, hedge funds, and venture capital), and real estate industries.  All three industries are volatile, and with the exception of tech, have a business model based on highly leveraging assets.   

Leverage, at its core, magnifies outcomes; making good outcomes better, and bad outcomes worse.  When debt works, it really works. However, when taken too far, and it’s only clear what’s too far in hindsight-it can cause financial devastation.  I believe the remarkable story of Aubrey McClendon, an admittedly extreme example, can serve to illustrate the two-sided face of leverage. McClendon, a pioneer in natural gas fracking, founded and built Chesapeake Energy into a leader in this nascent field.  He had the vision and courage to buy up huge tracts of land, and to fund the massively expensive task of drilling, based on his near religious faith in the future of fracking, his own entrepreneurial drive and financial wizardry. At his peak, McClendon was worth more than $2 billion, and had a reputation as a maverick who could seemingly do no wrong. 

And yet this remarkable success story of incredible-and rapid-wealth creation was built on a very fragile foundation.  First, the vast majority of McClendon’s assets was largely dependent on a stable natural gas price-a notoriously volatile commodity.  He had so much conviction in the future of natural gas, that he relentlessly leveraged those assets to buy even more-thereby increasing his leverage and concentration.  Over time, virtually every asset McClendon owned was pledged as collateral against loans, eventually getting to the point where he even pledged his homes, wine collection, and stake in the Oklahoma Thunder basketball team.

Eventually, like Icarus, McClendon flew too close to the sun.  The factors which served to create his wealth and success were the same ones that undid him.  The collapse of natural gas prices crushed the values of McClendon’s investments and assets. This caused his creditors to demand increased capital or collateral on his debts, and the eventual forced sales of assets into an already distressed market.  With almost unbelievable speed, the vast majority of his wealth was vaporized. Shortly thereafter McClendon was killed in a car accident. It was a tragic end to a brilliant and tumultuous career. Over three years have passed since his death, and his creditors continue to fight over what remains of his estate.  

There are many lessons from this very unfortunate story.  For our clients, business owners and professionals in mid-career,  I’ll focus on a few:

-More volatility = less debt:  McClendon put huge leverage on hyper-volatile assets.  This is not a game worth playing. Volatility, in itself, is not bad.  It is much better to have your income and net worth growing at a lumpy 15% over time, than a smooth 5%.  But that degree of volatility impacts the degree of leverage you can prudently carry.  

-More concentration and illiquidity = less debt:  McClendon’s assets were overwhelmingly concentrated in natural gas assets, many of which were illiquid.  This is a dangerous combination to lever. The more concentrated and illiquid your assets, the less overall leverage you should have.  

-Balance conviction with prudence:  McClendon couldn’t conceive of his judgment being wrong, which obscured the risks he took on.  Life doesn’t always work out as we anticipate. None of us have a crystal ball. Many natural risk-seekers look at debt in the context of best case outcomes.  While they may occur, it is not advisable. We advocate stress testing client finances in challenging environments to determine the appropriate debt levels.  

Make sure your debt levels are appropriate and suitable for your unique financial situation and psychology.  Don’t be a member of what the media calls the “high beta rich.”

Visit www.dolanpartners.com to learn more.

Financial Security Starts With Insurance Planning

“We insure against what can go wrong to acquire the luxury of investing for what can go right.”  

Nick Murray

Insurance is not a topic most people want to talk about.  Who wants to consider awful hypotheticals about your own mortality, a crushing liability lawsuit, a serious illness, or your home burning down?  Plus, insurance can be complex, and nobody likes paying for policies that, hopefully, will never be needed. Despite this, insurance planning is at the core of financial security.  Our clients tend to be executives or business owners in mid-career. Their lives are hectic, busy, and ever-changing. When they start working with us, they often have a grab bag of insurance policies, acquired over the years, without any clear, overarching structure.  Typically, they have policies which are either unnecessary, needlessly complex and expensive, or have failed to keep pace with their changing finances. More concerning, many have large uninsured risks, which pose a legitimate risk to their families' assets and financial security.  Insurance planning must be the first step in developing an overall financial and investment plan. It isn’t logical to plan for retirement, for example, if there are large uninsured risks which have the potential to cause catastrophic financial losses well before you ever get to retirement.   

A core question we ask throughout our planning process, but particularly with regard to insurance planning, is: “What could go wrong?”  Take a hypothetical, 42 year old business-owner, with a wife and three children under 10, whose main financial goals are paying for his kids’ education over the next 15 years, and saving for his retirement in 30 years.  He has a sound, and well-thought out savings and investment plan which will allow him to achieve those goals. But what if his assessment of the future is wrong? What if this man is out for his morning run tomorrow morning, and is struck and killed by a texting driver?  Of what use are those long-range retirement plans then? If he didn’t engage in comprehensive insurance planning, it’s quite possible he had far too little life insurance. Perhaps what life insurance he had, combined with investments are enough to pay off the mortgage, fully fund the kids’ education, with enough left over for a couple years of family living expenses.  But what does his family do after that?

Let’s take it a step further.  What will happen to the valuation, ownership and control of the husband’s business now that he’s gone? Was there any key man insurance, a succession plan, or a buy/sell agreement.  The ownership of the business represented a major component of the family’s net worth. What is that equity worth now? At a time when his family will be dealing with the shock and grief of losing a husband and father, they will also be forced, at the worst time, to confront considerable financial insecurity.  

We do a comprehensive analysis of the risks clients face, and how best to protect them.  We look at all of their current insurance policies (health, property & casualty, liability, life, disability, business insurance-everything).  We determine what insurance the client needs and which current policies should be dropped or augmented. We walk clients through potential worst case scenarios, and  while not enjoyable, it focuses clients on the importance of and need for risk management and insurance planning.  

It is common for new clients-smart, successful business people-to make two common mistakes with their insurance and risk planning.  First, they tend to over insure smaller, high frequency risks. They know, for example, that they will have medical bills for routine check-ups, or that they will have minor fender benders, and they want to insure against those and limit their out-of-pocket.  We urge clients to increasingly retain, or self-insure these risks. This could mean choosing high deductible health care plans, or raising deductibles across the board in their policies, often meaningfully. The second mistake is underestimating the risk and the impact of infrequent, but high magnitude financial events. The likelihood of that 42 year old client dying or being disabled tomorrow is, from an actuarial perspective, quite small.  But the magnitude of the financial impact on his family and their financial security is profound. Like a game of Russian Roulette, no matter how small the odds of losing, it isn’t a game worth playing.  

Are you absolutely convinced and confident that your insurance coverage is proper given what you’ve just read?

If not, you owe it to yourself to get a second opinion, particularly from a comprehensive financial advisor who isn’t paid to sell you insurance.  

Protect what’s important to you today.  

www.dolanpartners.com

Embrace Radical Financial Simplicity

”Simplicity is the ultimate sophistication.” Leonardo DaVinci

At Dolan Partners, a central philosophy is to inject simplicity, and over time radical simplicity, into our clients’ financial lives. Simplicity doesn’t mean handing off responsibility for our finances, it doesn’t mean dumbing it down, and it doesn’t happen quickly or without effort. Rather, simplicity, as the English historian Frederick Maitland said, “is the end result of long, hard work, not the starting point.” 

We start new clients with the building blocks of simplification.  At the outset, we “Marie Kondo” their financial lives. As the home organizing guru explained: “The point of the process isn’t to force you to eliminate things, it’s really to confirm how you feel about each and every item you possess.”  We do a robust spring cleaning, closing and consolidating accounts, and determine if there are any account types that are missing (typically tax-advantaged). The higher the number of unnecessary accounts, the greater the likelihood that the client has little grasp of their overall spending, cash flow, investment risk allocation, or progress towards goals.  They are too buried in statements, websites, tax forms and confusion. We aggregate the slimmed down list of banking, investment, and spending accounts into our intuitive web-based planning portal, which allows a client to understand their entire financial life in real time. Less confusion and stress, more focus.

Next we assess any obvious unaddressed priorities.  Typically, a couple issues will jump out. A 42 year old, high-income client with young children who appears to have a material life insurance gap given his circumstances.  Or a 55 year old with considerable assets, will be missing several key estate planning documents. Or perhaps a 59 year old client doesn’t have a healthcare power of attorney.  Typically, the client has known subconsciously that he needs to take care of these issues, but for whatever reason, hasn’t taken action. It’s like the friend of mine who hasn’t had a physical in 10 years.  He knows he should, he knows he is being irresponsible to himself and his family, and he knows he should have done it years ago. Inertia, rationalization and avoidance, keep him from doing it today. We make sure this doesn’t continue.  Increased security, less anxiety.  

After these initial steps, clients typically feel engaged and energized to push the process forward.  It’s at this stage that we move toward building radical financial simplicity. Radical simplicity at Dolan Partners means many things.  Here are a few:

• It means clarity: having a crystalline view of your financial journey: where you’ve come from and where you are going. You understand your financial strengths and weaknesses, you’ve identified your financial priorities, goals and transitions, and you understand the path and behaviors which will allow you to achieve them. 

• It means trust: your life can be so much easier if you surround yourself with people you completely trust.  Berkshire Hathaway, despite having nearly 400,000 employees, has no human resources department, no general counsel, and doesn’t allow its directors to have liability insurance.  Charlie Munger explained, “A lot of people think if you just have more process, you could create a better result. Berkshire, has had practically no process. We just try to operate in a seamless web of deserved trust and be careful whom we trust.”  We strive to minimize unnecessary process, and instead work to earn a deep reservoir of trust with our clients over years and decades. Working only with people you trust is a key part of keeping your life simple.  

• It means focused rationality: understanding and concentrating on the core tenets of what works in planning and investment, and ignoring the ocean of financial distraction, fads and superficiality that doesn’t. You embrace the fact that while the main ideas are simple, its human behavioral issues which trip up most people.  We focus on not falling into those traps.

• It means transparency: the process must involve all key constituents, typically both spouses.  By creating a platform for both spouses to be heard, not just the financially dominant one, we unearth areas of agreement, and often a few long-simmering resentments and frustrations.  Only when all the key players feel heard and have a hand in decision making, can we drive long-term sustainable progress.  

• It means adaptability: your life changes everyday, in mundane ways and profound ones.  Our clients know that while their plan’s bedrock ideals are timeless and unchanging, the process is also pliable and adaptable to tack when their life tacks.  The process is proactive in anticipating change, and works to reduce reactivity.  

• It means balance.  It doesn’t always come naturally for clients to delay gratification, or make smart financial or investment choices.  We understand this, and strive to strike the right balance for each client in a way that fits their life, while working to strengthen the areas that need bolstering.  
  

Radical simplicity ultimately means serenity.  To build a rock solid foundation of financial security and freedom, which allows you to live the life you want, protect and provide for those you care for, and confidently know you can handle whatever life throws at you.  The result is clients with a level of confidence and equanimity in their financial life, that allows them to focus on what really matters to them.

If you feel like your financial life has become unfocused and distracted, which leaves you with a gnawing sense that you need to address it, schedule a call with us.  We can give you a quick, no obligation assessment of our thoughts and whether we can help. Take action today. Learn more at www.dolanpartners.com

Building the Right Financial Foundation for Professionals in Their 30s

Over many years working with clients, what’s become very clear is that the earlier someone engages in our process, the more beneficial the impact on their financial life.  One of the biggest advantages a young person has is time. To truly harness this benefit, one must engage in proper financial and investment behaviors as early as possible, and let the benefits of those actions compound over as much time as possible.  Modest improvements in behaviors can have monumental long-term effects. The problem is, most people wait too long to engage a planner, often having made a myriad of prior financial missteps. A typical client who comes to us in their 40s and 50s often has a financial picture that is, to varying degrees, unfocused, disjointed, and unaligned with their stated goals.  If is far better to avoid making mistakes in the first place, and set in place, proactively, a solid financial foundation on which to build.  

Picture this:  You’re in your early 30s, having spent a decade grinding and establishing your career, and the hard work is starting to pay off.  You’ve been promoted, maybe changed jobs a couple of times, are moving up in seniority or are pondering going out on your own. Your income is growing, and you can envision a strong trajectory for future advancement and income growth.  You’ve made some headway in your finances, perhaps saving a bit, paying down student debt, and contributing to your 401K. Despite this, you have the unmistakable sense that your life and your finances are gaining complexity and of being increasingly overwhelmed.  You know that with more money comes more responsibility and missteps carry bigger repercussions. You feel like you have neither the time, experience nor the inclination to do this on your own. What’s worse, you see friends and colleagues around you who do seem to know what they are doing: buying houses, or making a lot of money in the stock market, or living large.  The subconscious sense of “Am I doing something wrong?” or “Am I missing out?” starts to build.  

I can speak from experience.  In the late 1990s I was in my late 20s, and working at a boutique West Coast investment bank.  I was doing well and progressing in my career. The firm I worked for was in the center of the dot com bubble, taking nascent tech companies public virtually everyday.  The amount of big money being minted all around me was palpable. There is nothing worse than seeing peers, family members, and friends, many with little investment experience, making, supposedly, massive gains in the market.  I was inexperienced and rudderless without any serious financial or investment anchors. FOMO continued to mount until finally I couldn’t resist it anymore and, in late 1999, plunked a considerable bonus payment into a bunch of speculative and unproven tech IPOs.  Within months, the bubble, and my portfolio, were nosediving. It was a sobering and painful lesson that could have been avoided with the right financial counsel.    

This realization prompted us to launch our Foundation Program, which while geared toward our traditional client niche, professionals and business owners, focuses on the unique needs and wants of younger clients in their 30s.  We place a special emphasis on planning and investment education and coaching. We focus on the issues that young people face as they start to build their financial foundation: from managing monthly cash flow and spending, to financial organization and simplification, to identifying near and long-term goals and building a plan to achieve them.  We help Foundation clients through the host of transitions they will face over the next decade, from career changes, to planning for a house purchase, to the financial implications of getting married and starting a family, to building a sound investment framework, managing debt, among others.

Our Foundation Program is streamlined to meet the busy schedules of people in their 30s.  In year one, we typically meet with new clients 4-6 times, with 2 meetings per year thereafter, either in person or on a video call.  We connect Foundation clients to our industry-leading online portal that serves as the dashboard for their financial life, aggregating all of their financial accounts in one intuitive interface.  With regard to fees, Foundation clients pay a one-time upfront planning fee plus a manageable monthly retainer fee. Foundation is open to clients in their 30s with over $250,000 in annual household income.  

If you think Foundation might be right for you, please connect with us at www.dolanpartners.com to learn more and to set up an introductory call.

Key Financial Decisions for Professionals Considering a Job Change

Transitioning to a new career opportunity can be a time of excitement and anticipation, but it also calls for a clear and rational focus on the financial implications. Changing jobs has become far more common today than in the past, particularly in vibrant and volatile sectors.  It is not uncommon for some of our mid-career clients in the technology sector, for example, to have had half a dozen or more jobs in their career. Typically these transitions result in a myriad of questions about best practices for optimizing financial outcomes. More often than not, a series of job changes result in a tangled and disjointed financial picture without any clear direction.  

Here are a few ways we work with clients who have either had frequent job changes in the past, or are vetting a new opportunity.

Minimize the Money You Leave on the Table; Timing a Move:

For clients considering a career move, we review their current employer’s equity awards, RSUs, EESPs, and vesting schedules to determine how to best time a job change to minimize the assets left behind.  

Build Understanding of New Employer’s Incentives:

We work with clients to ascertain the value of the new company’s incentives such as equity awards, as well as the amount of compensation in the form of stock, how the equity is valued if private, vesting schedules, along with a variety of other issues.  We look at the historical performance of the company’s equity over time and in different economic environments, and model a range of future outcomes and the resulting financial impact on the client. We help clients have an unbiased and rational view of the potential performance of these incentives, and not to make an employment decision based on excessively optimistic expectations.

Assess Client Asset Concentration, and Determine Options:

On the plus side, most of the wealthiest people in the US became so through massive net worth concentration in a hyper successful  business. On the other hand, there are numerous examples of formerly high-flying companies which suffered a stupendous collapse in value, taking their employees net worth, and often their income prospects, with them.  For every employee of Google who never sold a share of stock, there are many times the number who had a very different outcome who worked at AIG, or Bank of America, or GE.

Senior employees tend to have considerable concentration of their net worth in their employers’ equity, as well as their income and benefits.  This presents opportunity, but also considerable risk. Senior employees tend to have a strong belief in the prospects for their company’s financial performance, understand the asset, and value the perceived  control they feel they have over the company’s direction and outcomes.

We assess client’s overall net worth and asset composition and concentration, and typically advise a cautious approach to expectations, and the benefits of taking advantage of liquidity and diversifying.  

Organization, Simplification: Converting old 401ks/Advising on new 401K:

It’s very common for new clients to have 401ks scattered at former employers.  We work to consolidate and rationalize their financial accounts. Typically, clients have little idea of fees, performance or allocation of these very important tax-deferred vehicles.

We advise on the options for converting these 401Ks, typically to a lower cost IRA with a much wider range of investment options.  We study the new employer's 401K plan and determine how to maximize and time contributions along with the company match. We educate clients on the importance of tax free compounding, project long-term outcomes, and how to best structure the asset allocation to their unique situation.

Maximize New Company’s Benefits:

Finally, we dive into the new employer’s range of benefits.  From health insurance options, to flex spending and HSA accounts, to company subsidized life and disability, we advise the client on how to best utilize these to fit their life, and whether to augment them with non-employer options.

Had a series of job changes, or considering one?  Are you focused on your finances, and trying to understand all the financial ramifications of what a change could mean?  This is a perfect time to work with an advisor who will assist you through the entire process, and make sure every base is covered.  Start your next chapter on the front foot, confident in your choices and decisions, and ready to attack the new opportunity with confidence and clarity.

Schedule a call with us today:

www.dolanpartners.com