Does Professional Planning Add Value?

The Smith Family

Suze Orman has told PBS audiences all this month that you don’t need a financial advisor, you need her books and tapes. Is this true? Can you get any value from professional financial advice? Let’s look at a case study.

Tim Smith (not his real name) was 58. Tim had worked as an engineer at Northrup Hopkins Applied Physics Corporation (not his employer’s real name) as an engineer for 30 years. He and his wife June were healthy and ready to retire. Their house was paid for. Their kids were grown, married and prospering.

Here were their concerns:


  • They were concerned about the accuracy of their informal planning assumptions. What would their income really be in retirement, now and in the future. They didn’t want to fall short through poor assumptions.
  • They wanted to manage their new and changing tax environments.
  • They needed to estimate their taxes next year.
  • They were concerned about significant 1998 taxable capital gains in a successful mutual fund account.
  • They wanted to leave an estate to their children, but they wondered if they could afford to leave something to their college alumni foundation as well.
  • They wondered if they should purchase long term care insurance. Could a prolonged illness jeapordize their retirement? Was their employer’s group policy best for them?
  • They thought they might have too much life insurance, but didn’t know from whom they could get objective advice about insurance.
  • They wanted help in making some financial decisions about relocating to South Carolina in about three years.


Here were our observations and recommendations:

We verified that their assets would safely provide an annual average inflation adjusted income of $87,312 per year for their entire retirement. We helped them adjust their retirement account allocations at work to an appropriate level of risk for the short period remaining until retirement. We recommended a method of organizing and managing their assets to provide income without exposing their assets to potential loss. They are now comfortable with their portfolio structure. Checks come to them regularly and tax information will be provided in simple-to-use form each year.

We helped them estimate their tax liability, planning three years worth of transactions and strategies to minimize taxes. We eliminated capital gains on their highly appreciated mutual fund entirely while creating a substantial charitable tax deduction and establishing a lifetime income asset which will pass to their university at their death. Their university is featuring them in an upcoming issue of their alumni magazine.

We suggested a long term health care insurance product that was superior to that offered by their employer and tailored the plan to meet but not exceed their needs. They don’t have to worry about the effects of prolonged illness on their assets and it is not costing them a fortune.

We suggested a low-load, second-to-die life insurance policy to replace the money they have dedicated to the alumni foundation and to pay estate taxes.

We suggested ownership and trust techniques that would eliminate enormous amounts of estate tax liability. We met with their attorney at our office and helped them implement and fund the completed structure of their estate. Since we neither sell insurance nor write trust instruments, and since we were able to show them financial analysis to support our recommendation, they took our advice.

We also recommended that they reduce individual life insurance, preserving cash values by using tax free exchanges.

The Smiths have some issues in common with others, though every person has unique health issues, family responsibilities, pre-existing financial assets, income needs, probate conditions, and retirement plans.

The assertions made by some media financial evangelists that a book, newsletter, or video tape is all you need to plan your retirement is good marketing and sales technique, but untrue.