Russ Alan Prince: What aspects of financial planning does Fiduciary Trust International handle?
Bryan Kirk: At Fiduciary Trust International, our clients range from millionaires to billionaires. We work with families with large-scale multi-generational wealth, where the focus is on wealth transfers, advanced tax planning, philanthropy, family governance, and optimizing the variety of trusts, partnerships, and other legal entities that may surround their wealth.
We also regularly help folks with more standard financial planning concerns, like retirement planning, when to take Social Security, how to enroll in Medicare, when and how much to pull from their accounts, and importantly, how should they invest. One aspect of working with ultra-high-net-worth families—often across four or five generations—is that the wealth spreads out, so expertise across the full spectrum of planning concerns is necessary. In addition, we work with many executives and entrepreneurs where the focus is on balancing business growth with personal goals, and what can be very time-sensitive and technical concerns around liquidity events and income tax planning for stock options and other forms of executive compensation.
Prince: How often should a financial plan be reviewed and updated? Does this timeline differ for trust and estate plans?
Kirk: The short answer is—as often as your goals change. We have ongoing conversations with our clients about their goals and we dedicate time on an annual basis when we formally revisit a client’s goals. This provides us a chance to focus on any legal or tax updates and any changes in their circumstances or life events that have happened or may be coming up for a client—marriage, divorce, selling a business, supporting a parent or other family member, retirement, other changes in employment, or new children or grandchildren. The annual reviews may not result in any changes, but that’s something important to recognize as well.
Estate and trust plans are part of that annual review. But the deeper dives depend on where the client is in life: their age, health, family circumstances, and level of their assets. For younger clients, which can mean folks in their 50s and 60s, a three-to-five-year review can be sufficient provided they know they need to check in if there are any major life events. If there’s a marriage or divorce, someone loses a child or has a family member involved in their estate plan who is struggling, those all can require major changes to an estate plan or updates to existing trusts.
In addition, for ultra-high-net-worth families, estate planning is an ongoing activity. There’s constant attention to how financial assets and non-monetary assets are being passed on, whether to family members or their communities. The effort for them focuses on awareness of what’s working and what’s not, then adapting and changing along the way, usually with a keen eye on tax planning opportunities.
Prince: Are you seeing new trends in different areas of financial planning as a result of timely events?
Kirk: I think there has been an opening up of clients’ goals set over the last several years, partly resulting from the pandemic but also due to the changing demographics of wealth. Clients still want to make sure they have enough for retirement. They want to save taxes. They want to leave an inheritance in an efficient manner. In addition, you still have clients selling businesses and needing to deal with the tax planning and other complexities that come along. But I’ve also seen clients open to making an impact on their communities in creative ways, versus being more focused only on their families.
For some, wealth is a means for simplification versus involving themselves in the more complicated planning strategies that financial planners traditionally might throw at them. For younger entrepreneurs, there is a greater tilt toward philanthropy. For more established wealth holders, you see families having deeper discussions about how much is enough and what’s the purpose of their wealth. Clients seem more deliberately focused on value-sharing with their rising generations—in part because those values can change family by family. As private wealth is increasingly international and cross-cultural, there aren’t as many givens on what wealth is supposed to look like. For financial planning professionals, it turns us back to the critical importance of understanding our clients’ goals and helping clients develop those goals over time.
Prince: In an uncertain market environment, what should individuals be asking their advisors regarding their financial plans?
Kirk: From 2012 to 2021, the S&P 500 went up well over 10% a year on average. That allowed folks to withdraw a lot from their portfolios without depleting them or needing to think too closely about their investment strategy. The problem now is that spending is baked in for a lot of people, and it’s hard to change when the markets pull back as they did in 2022. This is especially true when you factor in inflation.
Let’s say you’re spending 8% of your portfolio, and it goes down 17% as some portfolios did in 2022. First, you’re now down 25%—a quarter of your portfolio value—for the year. In addition, that 8% spend is now over a 10% spending rate looking forward if the dollar amount stays the same. These are big issues. It can take time to adjust your spending. In the meantime, you may need to adjust your investment strategy to bring down volatility, but then that will also impact your long-time return expectations. Both individuals and advisors need to fight the temptation to look the other way and cross their fingers that the markets will work things out.
RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine (pw-mag.com) and Chief Content Officer for High-Net-Worth Genius (hnwgenius.com). He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.