Our involvement with the couple came about when they asked us to evaluate whether they were paying too much for the administration of their 401(k). The investments inside the 401(k) were not doing real well and the couple didn't have a high regard for it as a tax and retirement planning vehicle. In looking past the cost factor, we discovered the plan severely limited the amount the couple could contribute. Even worse and unbeknownst to the couple, the plan exposed them to significant liability as a result of the 2006 Pension Protection Act. The plan lacked a qualified deferred investment alternative and had no asset allocation or lifestyle funds, and the funds it did contain were not doing well, exposing the couple to the risk of an enrolled employee lawsuit.

We proposed changing the plan design from the standard safe harbor to a "new comparability/ safe harbor" combination. This greatly enhanced the couple's tax savings and allowed them to put an additional $55,000 into their 401(k). We proposed keeping their current provider, switching third-party administrators, adding a Roth(k) and expanding the lineup of investment alternatives to help alleviate the potential for lawsuit. In the process, their administrative costs fell roughly $12,000 a year.

Finally, we eased any concerns the couple might have had by sharing our proposal with both their CPAs. This is an important advantage of bringing added value. Before opening my own practice, I was an advisor coach for a large brokerage firm and those advisors cringed when I suggested including a client's CPA in the decision-making. They were trying to keep the CPA out of the process because they knew that what they were proposing wasn't unique or adding any value. These advisors would offer a strategy to manage the client's 401(k), likely without making any meaningful changes. They would also help with the investments and perhaps sell the client an insurance policy or annuity. But they had no clue how to really add value. If you can do it, you're likely to garner all of a client's business, and they will appreciate your willingness to include their other advisors.

Our proposal for the married couple was approved and implemented. The CPAs were not only satisfied, they shared the names of several other clients they thought we could help.

Later, we discovered a potentially disastrous liability issue related to the couple's olive farm, which employed some 30 seasonal workers. If a worker were injured, the couple could be held liable. Insurance helped indemnify the couple, but why should they risk retirement security when alternatives are available that offer lifestyle options without the attendant risk? The couple eventually sold the farm, olive trees and all, to a retired professional athlete.


Another man we worked with, a physician, sold his practice and retired so he and his wife could do the one thing they loved most: travel. Soon after his retirement, however, they discovered that the income thrown off by their retirement assets was insufficient for them to travel in the manner they preferred. In addition to the doctor's self-managed securities portfolio, the couple owned a residential investment property that was worth $700,000 but was generating only $2,200 in monthly rental income. After calculating taxes and home owners association and maintenance expenses, the property's net income was only about $800 a month, or 1.4% annually.

We suggested they sell the house and purchase a commercial property. It was a tough decision because the doctor viewed selling the property as an admission he might have made a mistake. Tact and perseverance eventually won the day (not to mention the couple's desire to cruise first class) and so the doctor agreed to the transaction. Doing so increased their portfolio income, gave them the opportunity to travel as they chose and eliminated the hassles associated with their former rental property.

In Conclusion

Busy business owners and entrepreneurs often pay lip service to their retirement plans. They often have an array of assets but no clear plan or unified strategy to generate a consistent income stream after retirement. They may also inadvertently have duplicate services or wasted resources that erode their tax and retirement planning efforts.

Advisors who want to help successful businesspeople enhance their retirement strategy should know how to bring meaningful value to the table (on more than one level) if they expect to secure this business. Knowing where to look for sources of tax savings and added income are the key to gaining the confidence of successful people who have been inundated with conventional investment platitudes. Having enough confidence in your own solutions that you can include the client's other advisors will only add to your chances for success.

Mike Sheets is president of Provence Wealth Management, Irvine, Calif. Mike is also a registered principal with and offers securities through LPL Financial.  He can be reached at 949.222.6400, [email protected], or www.provencewealth.com.

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