As does happen often, people will change their place of employment because it might mean a better quality of life for them (aside from the financial decisions). In a recent situation one of our clients came to us with a dilemma: "should I commute my (defined benefit) pension that I had with my former employer (plan "a") or should I keep it until I retire and receive the payments in retirement (plan "b")". In this case there was no pension plan offered with the new employer.
Many financial advisors would automatically jump to plan "a" because it would "gather" some $400,000 in additional assets to have under administration. Believe me, in my time I have seen it up close and personal, without the advisor doing a scrap of analysis to justify their decision.
Fortunately for our clients (at High Rock) we hold ourselves to a higher standard.
As we do with many clients, we offered to create 2 Wealth Forecasts to show how we (under the guidance of our Certified Financial Planning, CFP professional) would expect both scenarios to play out over time.
Clearly, scenario 1 (plan "a") after a number of growth, inflation and tax assumptions works out in their favour (although not by an enormous amount). The management of the assets is not necessarily the most important point here. It could be the tax consequences of the initial lump sum payment and it could even come down to the health benefits provided with the pension plan (considerably reducing long-term uncovered health care costs in the future).
What is most important is that the client now has a very good basis for making their decision.
Is that the type of advice that you deserve?
The financial industry tends to reward the asset "gatherers" with incentives for doing so.
We are changing that at High Rock, one client or client family at a time.
We do not have managers or shareholders to report to and we are salaried employees. Clients actually do come first.
There is an alternative to what the banks and investment dealers will offer you and we are it.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist