September 2022

Finding someone you can trust with your money can be tricky. Go online and search “financial advisor near me” and you’ll get dozens of results. The search results will all seem to have a common theme: financial advisor, wealth management, etc., but as a consumer what do all these terms really mean and how can you differentiate one from the other?

Did you know that anyone can hold themselves out as a financial advisor? That can be a scary thought when you begin to look for someone to help you with your life savings. Hopefully the following story about ‘suit shopping’ will help you to remember the differences between the options available to you within the finance industry.

John has an important event coming up that he’d like to buy a suit for. He’s never purchased a suit so he calls his sister Jill to ask where he should start. Jill first tells John that there’s a lot of information and videos on the internet about how he could sew a suit himself. He only needs to go to the store, buy some fabric, and figure out his measurements. John tries this route, only to discover that he does not have a talent working with textiles. He’s left with random pieces of fabric that don’t work for him and is frustrated from wasting time and money.

Do-it-yourself (DIY): Maybe you feel the same way about managing your money: you see others do it and are self-proclaimed experts, why not you too? Like John DIY’ing his suit, you may decide to DIY your investments. This may turn out okay for you or maybe you end up like John. Unsure of your measurements (i.e. goals, risk tolerance, overall market knowledge), you piece a portfolio together. Before you know it, you are several years into investing, regretting your decisions and holding random investments that don’t fit.

After John’s failed suit making debacle, his sister suggests that he head to a department store to see if a salesman can help him find a suit. He goes to a name brand store, finds a salesman whose job is to place John in a suit that he can wear. He does just that, but the salesman doesn’t take the time to see if the suit fits John well. The sleeves are too long, his buttons are too tight, and it is in a color that John doesn’t care for. Nonetheless, the suit salesman has done his job and still gets a commission for the sale.

Broker/Financial Advisor: Relate John’s department store visit to that of a broker/financial advisor. Similar to a department store, a broker’s business may have name recognition and you may see the same business in most major towns you travel through. Similar to that of the store salesman, a broker’s job is to make sure that your investments ‘fit’ or are suitable for someone your age. This means that while decisions made may not be specifically best for you, a broker is doing their job. Also similar to that of the suit salesman, they will also make a commission for each ‘sale’ they make.

When John goes to his sister’s house to show her his purchase, Jill regrets her decision to send him to the department store. The suit John bought simply won’t work. Jill sends John to a tailor to make John a custom suit. The tailor takes John’s measurements, asks his preferences on fabrics and colors, and asks him to come back once the job is complete for final changes. When John and Jill return, the suit fits John perfectly and both are satisfied.

CERTIFIED FINANCIAL PLANNER™/Fiduciary: Just as the tailor in John’s story, a CERTIFIED FINANCIAL PLANNER™ professional must provide work that is custom to a particular client; not their neighbor, friend, or stranger on the street. A fiduciary is required by law to act in accordance with your best interest, not their own. Decisions are custom to a client and are not driven by sales or other potential conflicts of interests.

Whether it be a suit or investments, everyone’s needs and preferences are different. You may be confident in your abilities of some areas of your life, but also accept that there are others you may need to seek an expert’s opinion. If you find yourself shopping for someone to manage your money, I encourage you to ask yourself, ‘Do I have the right suit maker?’

Published in the Victoria Advocate

Sara Potts is a CFP® Professional and Operations Manager with KMH Wealth Management, LLC

There is a saying that encourages you to know where you have been to know where you are going. Or, as William Wordsworth more eloquently said “Life is divided into three terms – that which was, which is, and which will be. Let us learn from the past to profit by the present, and from the present, to live better in the future”. To know what we want in our future experiences, we should know the cost associated with our prior experiences.

This resonated with me as I am slowly retiring and Lane, my husband, will be retiring in the future on his own terms. We have used a personal finance software product for most of our marriage to help us record our expenses and banking transactions. The software also includes budget planning and the ability to measure progress against it. We have loosely used that feature but know it is an excellent way to review prior expenses.

Lane and I have both shared the task of entering data over the years. We have categorized expenses differently. For example, I will categorize a gift to a child as “Gifts Given” and tag with a child’s name. Lane will categorize as “Missy (or one of the other three children) Gifts Given.” This is a problem when pulling a report because not all the gifts associated with a child are in one neat, concise report.

These reports matter. Deductions such as property taxes, medical expenses, charitable gifts and gifts given in general have potential tax considerations and a possible gift tax return filing requirement. Therefore, last month I sat down and re-categorized all the expense categories, including gift categories. Every expense is on the same playing field now, and the reports are more effective in showing us what has been important in our lives. (Too bad there is not a deduction for the clothing category, unless you donate them to charity.)

Another situation was Lane’s definition of a gift to a child. He thinks, being a CPA, I should input the child’s part of dinner as a gift when I take one out to dine. My definition is when we make a monetary Christmas gift to them. Those two definitions are miles apart, so we compromised on a minimal financial number that was worthy of being considered and recorded as a gift.

The annual federal gift tax exclusion for 2022 allows you to gift up to $16,000 to as many people as you wish without those gifts counting against your $12,060,000 lifetime exemption. There are other gifts that are exempt from the federal gift tax. Reviewing your total gifts made during the year can help determine if you are or are not required to file an additional tax return.

Analyzing and learning from our past experiences and expenses help us to profit in the present and live better in the future, as the aforementioned quote suggests. Organizing financial data gives us concise snapshots of past experiences; experiences that may continue, evolve or discontinue.

For more information about gifts and the tax repercussions contact a Certified Public Accountant and a CERTIFIED FINANCIAL PLANNING™ professional.

Published in the Victoria Advocate

Phyllis Keller, MBA is the Information Security Officer for KMH Wealth Management, LLC and Keller & Associates CPAs, PLLC.

Do You Have the Right Suit Maker?

The Cost of your Lifestyle

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