By Taylor Ranker, founder and CEO of Questmont
Remember the “circle of vultures” from the last article? Well now, let’s discuss their modus operandi.
Try to envision a tiger, or possibly a leopard, quietly crouching and preparing to “pounce on” and devour its prey. Do you really think it is possible they have the prey’s best interest in mind? No, they are simply hungry, looking to devour and move on to the next victim. Unfortunately, we see this all too often in the financial advisor, insurance and even real estate world. The mission of this article is to alarm, and arm, you so that you are better informed, proactive and ask more insightful questions. Even I fall victim to the pounce when I least expect it!
Imagine yours truly, pulling up a barstool at Eddie V’s for a quick glass of wine and takeout. When the woman next to me attempts to strike up a conversation and proceeds to blabber on about how successful she had been in the wealth management industry, as the manager of one of those large national brokerage firms, who I would love to name here but don’t wish to get sued. She then enamored me with tales of her wildly successful son, also in the wealth management industry. We are now 15 minutes in, and she has yet to ask me a single question. I’m desperately hoping my order will come soon. They are slammed, so I feel compelled to order a second glass and dull the pain. At minute 20, she finally asked her first question “What do you do for a living?” I’m not a liar but it damn sure crossed my mind. I begrudgingly offered that I was the chief executive officer of Questmont Virtual Family Office, a form of elevated Wealth Management. Behold the pounce! She immediately perked up and launched into pablum about her new career at a local life insurance brokerage, cleverly disguised as a “Wealth Management” firm. The thinly veiled pitch was essentially we could run all of our life insurance sales through her brokerage, where she would clearly receive a commission. To be clear, at this stage, she had asked no further questions. (Such as – do we even have need of this service) and did zero discovery.
Most certainly, you have witnessed this “pounce” yourself. As we learned from the “The Circle of Vultures,” this pounce can come from inside or outside the fort. Here are a few instances we have seen recently. How about the business owner who spends 100 hours working with my team, planning the sale of her business, (getting valuation, combing the books to recast EBITDA, developing a tax-efficient exit plan, and a sustainable goal plan after the sale.) Throughout this entire year-long process, never once did she hear from her local banker of 30 years – or her life insurance agent or her 401(k) provider. Then the sale occurs, and the millions hit her bank account, behold “the pounce.” Within days she heard from each of them saying “You must talk to our Wealth Management guy” Her exact quote to me was “They showed a complete insensitivity to my needs, they never even asked me a single question”
Or how about the guy who goes through the same, diligent, year-long process selling his roofing business? Only days after the liquidation event, his best friend of decades immediately suggests that he needs substantial amounts of life insurance, due to his newfound estate tax problem. Forget the fact that the family already had enough insurance and simply transferring it to a trust solves the problem, or that this was number 44 on his list of 43 concerns. Finally, maybe the most sad and egregious, is the greedy granddaughter. Imagine you have spent your entire life building a business and preserving the wealth your parents passed to you. Sadly, you have developed Alzheimer’s, and your live-in girlfriend is now your future caretaker. Over the seven years where I was involved with the family, I never met the granddaughter, or heard of her visiting grandpa, and now she is calling and emailing five times, daily requesting her inheritance.
Like a great athlete, it helps to prepare yourself for the pounce, long before it happens.
“Defense against the pounce”
- Have a written wealth and goal plan, such as a Life Optimization Chart, which spells out your goals such as “have to now“ vs. “want to now” and “have to later” vs. “want to later.” This is an airtight filter that allows you to make capital allocation decisions and kindly say “no” to the golf buddy or greedy relative when they ask for money.
- Utilize a form of liquidity and cash flow management such as the Questmont Bucketology tool. This makes vivid the way your wealth is disbursed between cash, after-tax investments, pre-tax investments and illiquid wealth such as your business or real estate holdings.
- Form a “Virtual Family Office,” or coordinated team of experts, who act as your family’s personal CFO and defense network. The team must make any major decisions.
George Bernard Shaw said it best “We have no more right to consume happiness without producing it, than to consume wealth with producing it.”