Client Case Study #4

Business Owners – Tom, the prosperous small business owner

Tom, a local business owner, originally reached out to Rockwood seeking advice on the mutual funds in his brokerage account. During our Mutual Discovery Process, it became clear that Tom had planning needs that far exceeded simply optimizing his investment portfolio. Specifically, he needed to address strategies for creating wealth outside of his closely held business interests.

We discovered that the current 401(k) that was set up for his business had excessively high costs and equally poor investment options. Tom was visibly upset, since this broker-sold plan adversely affected not only his personal wealth, but that of his employees, about whom he cared very much. Also revealed, was that both Tom and his business lacked proper risk management plans necessary to mitigate the risks inherent to Tom’s business, including his personal liability.

As we moved forward in the financial planning process, we formed a well-organized plan that targeted the areas of most pressing need. We first established a new 401(k) with lower costs and globally diversified investment options. After reviewing the ages and salaries of his employees we implemented a cash balance pension plan so that Tom could save an additional $51,000 on a pre-tax basis on top of the amount he was already saving in the newly established 401(k). Working with a well-suited estate planning attorney, we then reworked his estate plan to make provisions for the assets of his business.

In parallel with the business planning, we addressed the original investment concerns about which Tom sought our counsel. Portfolio analysis revealed that his assets were over-weighted in high-cost, high-turnover, tax-inefficient, U.S. equity funds – which one might expect since they were purchased from the same broker who “sold” Tom his old 401(k) plan.

After receiving amateurish investment advice from his broker for so many years, Tom’s relationship with Rockwood has given him a sincere appreciation for the delivery of professional investment planning and comprehensive wealth management.

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