The following representative client situations illustrate a small selection of the types of analysis we may perform for our clients and some of the various considerations involved. Please see disclosure at the bottom of the page for more information.
Wealth Management Case Studies:
- Doctors, surgeons and healthcare professionals
- Single, divorced, or unmarried individuals
- Aging parents and adult children
- Stock options
- Saving for college
- Getting started with a financial advisor
- Job transitions
Doctors, Surgeons and Healthcare Professionals
Although doctors, surgeons and other medical professionals typically enjoy very high incomes, they may find themselves behind when it comes to retirement planning and other savings goals by the time they complete their residency. We have worked to help a number of doctors in a variety of practice areas and specialties develop a financial plan and an ongoing investment strategy designed to help them reach their life goals.
Just as doctors may tell their patients, time does have its advantages; additional planning opportunities are typically available when we begin working with a client early on in their career.
It’s often advantageous to begin by developing a financial plan to jump-start retirement savings, manage student loan debt, analyze cash flows and insurance coverage, and review employee benefit plans. Many of our clients in medicine strongly believe in the value of education, and may wish to incorporate college planning into the analysis, depending on their family situation and life stage.
Keeping an eye on lifestyle spending is often a priority at any age. Comprehensive financial modeling is a great way to incorporate all your lifestyle expenses, earnings, and savings rates to help determine how sustainable the current lifestyle may be and what trade-offs could be made to achieve your objectives, such as an early retirement.
We invest right alongside our clients and firmly believe in a low-cost investment philosophy based on data-driven evidence of effective strategies over the long term. Diversification is a key component to an effective investment strategy, as being well-diversified helps to even out your investment returns and protect your portfolio from sharp losses over the long-term. If your portfolio is too concentrated in a particular stock or asset class, you may experience greater volatility (and losses) than your well-diversified counterparts. Staying fully invested and not engaging in market timing is especially important during periods of volatility, as the impact of being out of the market can devastate portfolio returns.
Advisory support that grows with you
Doctors and medical professionals have a variety of specific planning needs that often requires close coordination with their team of tax or legal professionals. We’ll act as a quarterback to help ensure nothing falls through the cracks. Here are just some examples of these specialized planning situations:
- Asset protection strategies and estate planning
- Setting up and managing a retirement plan for self-employed doctors
- Selling a medical practice
- Purchasing a second home or vacation home
Single, Divorced, or Unmarried Individuals
With the abundance of financial planning and investing articles and resources online focusing on married couples and families, we have made an effort to publish resources specifically designed to help single, divorced, and otherwise unmarried individuals.
As a single person, certain elements of the financial planning process are simplified, as there may be no disagreement about what an ideal retirement lifestyle looks like. However, planning for one does also present other unique challenges, such as estate planning and managing cash flows on one income.
We’ve worked to help a number of successful unmarried women and men develop a financial plan and investment strategy to align with their goals. If your situation changes in the future, we’re here to help with analysis and modifications as necessary.
As we work to help ensure your financial life is managed at the highest level, single investors and divorced individuals may require specific planning needs. We will act as the quarterback in these situations, coordinating with your team of tax or legal professionals as needed. Here are just some examples of these specialized planning situations:
- Do you need life insurance? How much?
- Estate planning: who should you leave your assets to? What’s the most tax-efficient way?
- Tax planning strategies
- Optimizing your employee benefits
- Stock options and diversification
- Separation agreements and financial planning for divorced individuals
Choosing a Financial Advisor: meeting the needs of aging parents and adult children
As life expectancies grow, so too does the need for adult children to become involved in their aging parents’ finances. Although there’s often hesitation to do so, it is important for adult children to be aware of their parents’ situation, in the event of diminished capacity. As a second-generation family business, we have a unique understanding and perspective on families and wealth.
Not all clients share the same needs. In this type of situation, the prospective client needed to find a financial advisor that was a good fit for the needs of his family – and his parents, who were no longer living locally. It was also essential that the advisor would work openly with the parents and the adult child, so he could monitor their financial situation.
The prospective client began his search for an advisor, interviewing nearly two dozen wealth management firms. Focused on working with an advisor who could advise on their entire situation, independent from a conflicting compensation structure, he settled on finding a fee-only registered investment advisor.
The now client ultimately decided to work with Darrow for a number of reasons: our global approach to investment management, size of the firm, understanding how real estate fit into his wealth strategy, and the personal connection or “fit” he had with the team.
There is no one-size-fits-all wealth management firm. Since 1987, Darrow has been focused on building long-term relationships with clients and their families. The personal attention we give clients and our experience working with multiple generations across the U.S. helped to solidify the fit in this case.
Equity Based Compensation: strategies for diversifying out of vested RSUs
For many clients, part of their employment compensation comes in the form of Restricted Stock Units. These are grants of the company’s stock that vest on a specific schedule, usually over 4 years, which acts as an incentive for your continued employment with the company. Vesting RSUs show up on your W-2 at year end as ordinary income, and companies usually sell enough of the newly vested stock to cover your taxes due.
The question then becomes: what to do with the company stock you now own? While you may decide to hold onto them if you feel confident that the company will continue to do well, over time you may build up a concentrated stock position that means you have “all of your eggs in one basket”, exposed to concentrated risk in a market downturn.
Darrow works with you to determine how this form of compensation fits in with your other long-term planning goals, such as a home purchase, college education and retirement, and helps to develop a strategy for systematically diversifying out of the stock that is appropriate for you and takes your tax situation into account.
529 Plans: challenge of fully funding college
For parents of young children, the challenge of paying for college some years down the road can seem overwhelming. The cost of attendance (tuition, room, board and other expenses) can easily be between $40,000 and $60,000 per year or even more, and costs are going up faster than the rate of inflation.
Darrow analyzes the level of savings needed to fully fund college as part of the financial plan – but part of the discussion is how much to plan for? When discussing the future of a toddler, it is really hard to guess where she might go to college, what she would study, or what kind of scholarships she might be eligible for. And while a 529 college savings plan is an excellent tax-deferred savings vehicle for college, it may not always make sense to fully fund the college goal in a plan which restricts tax-free withdrawals to qualified higher education expenses only.
Darrow works with the client to consider all methods of paying for college: maybe using Roth IRA savings; investing in a brokerage account in the parents’ names so that if funds are not needed for college they are available for other purposes; or whether parents’ cash flow from employment in the college years will be sufficient to cover part of the cost. Paying for college often turns out to be funded from multiple sources: 529s, student loans, scholarships, cash flow. What is most important is making sure that the parents’ retirement is covered first, and then Darrow works with you to cover college as efficiently as possible.
The Do-It-Yourself Investor: a shift in focus
Darrow recognizes that it takes something of a leap of faith to decide to work with a wealth manager, especially for those who have been managing their own investments for years. On occasion, a client may decide to ease into the relationship gradually by having Darrow manage just a portion of their assets and continuing to invest other accounts by themselves.
How does this usually work out? Darrow prepares a comprehensive financial plan which looks at the client’s total financial situation – and which requires making the assumption that assets are going to be managed in accordance with their risk profile and timeframe. When there are outside assets beyond those Darrow oversees, it adds a level of uncertainty in trying to oversee the whole situation – especially if assets have not been rebalanced periodically or if someone has been moving in and out of the markets in response to volatility.
A financial plan can easily be derailed if one component is not followed through on. In practice, after a year or two we find that clients prefer to have Darrow look after everything, so they can get on with doing what they do best – whether professionally or enjoying retirement – knowing that Darrow is coordinating all aspects of their wealth for them.
A Severance Package: navigating a job transition
Sometimes high-level executives find their position eliminated due to a company reorganization or merger. During a job transition, there are a number of immediate decisions to make around how to handle such things as the severance package, continuation of benefits, pension, SERP and deferred compensation payout elections.
Darrow works with you and your HR department to make sure everything is processed appropriately for your needs. Of course, it is also important to plan for next steps, so Darrow works with you on “what if” scenarios for your financial goals: what if you relocate to another part of the country and need to sell/buy a home? What income level do you need to stay on track financially? Can you retire early? What if you start a business? At a stressful time Darrow strives to act as a valuable partner in helping you regroup and move forward.
Please note that the information provided is for illustrative purposes only and should not be should not be construed as the rendering of personalized investment, legal, accounting or tax advice. These selections are only intended to provide representative samples of Darrow’s hypothetical approach to a given topic, and illustrate the types of analysis we may perform for our clients. Actual experiences with Darrow may differ. This information is neither based on any person’s specific experiences with Darrow Wealth Management nor is it intended as an endorsement by any such person. Due to various factors, including changing market conditions and/or applicable laws, the presented information may no longer be reflective of current opinions. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to contact us or another professional advisor.