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Wanted: Magician/Financial Advisor

| June 04, 2015
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Magic.  It’s a divisive topic, at least it is in my household.  I love magic, my wife can’t stand it.  Did I watch, and love, the old David Copperfield television specials back in the day?  You bet I did.  Did the Statue of Liberty actually disappear?  You bet it did.  I’m not saying that my exit plan from the financial advisory business is to ‘leave it all behind’ and do chintzy magic shows at kids’ birthday parties, but I am impressed with the craft. 

A few years back we were visiting some good friends in Nashville.  We went to this great brunch spot that our friends couldn’t stop talking about.  They told us that the Crème Brule French Toast was to die for (which it was), but the highlight of the meal was sure to be the guy who came around to do card tricks.  I was skeptical.  That skepticism didn’t last long.  This guy was amazing!  I was picking a card, writing my initials on a card and placing it back in the deck, etc. and this guy was pulling these cards out from everywhere!  Cards were hovering above the deck, getting pulled out of my wallet.  It was special.  Was I drinking mimosas?  Of course I was.  Was that impairing my ability to not believe what I was seeing?  Of course not.  Mimosas or no mimosas, I was leaning in and watching this guy’s hands from point blank range.  No one was going to distract me.  I wasn’t going to fall for the old ‘hey, what’s that over there?’ trick.  I wanted nothing more than to figure out how this magician was doing this, to no avail.  He proceeded to kill it with trick after trick.  I’m not sure I’ve been so impressed with anything or anyone, since.  All the while, my wife was sitting there doing her best to not punch the guy.  She hated it.  Why?  Because she is of the ilk that can’t handle magic because they can’t figure out how the tricks work.

Why am I telling you this story and is it pertinent?  I’m telling you the story because I love telling people about this magician, and no, it’s only pertinent in that the word magician is in this post’s title and the topic of magic is going to help me tie it all together at the end.  Frankly, I’ve always been frustrated with my wife’s disdain for magic, and this blog just so happened to provide the ideal public pulpit from which to call her out on it!  And in doing so, this blog has hereby reached a new plane of sophistication.  You know when you watch a football game and the announcers will hone-in on a key offensive/defensive line matchup?  They sometimes refer to this a ‘the game inside of the game’.  In my humble opinion, my bringing my friendly marital spat about magic into the mix truly is the ‘game inside of the game’. We’re going deep here.  Is this starting to become a waste of your time?  It’s getting there, so I’ll get to the business at hand…………..

I was recently contacted by a local accountant who had a unique request.  They wanted me to speak with one of their clients (let’s call him Frank) as this client’s ex-wife needed a financial advisor, whom HE (Frank) would be paying for.  I called this gentleman and here’s an abridged version of our discussion:

Me:  Hello Frank, how can I help you?

Frank:  I asked my CPA if they knew anyone who could help my ex-wife with some financial planning advice.  I’m hoping that you’re the guy for the job. 

Me:  Tell me a bit about her situation.

Frank:  Her alimony payments run out tomorrow (had been paid for 5 years), literally tomorrow, and she has no idea what she is going to do about getting a job and managing her finances.

Me:  What type of assets does she have and what types of marketable job skills does she possess?

Frank:  Well, she’s 55.  Her only asset is our old house, which is worth approximately $600,000.  I’m thinking that she should sell the house and buy another, cheaper home for $250,000 or so.  Or maybe she should rent something and invest all of the home equity?  Either way, she doesn’t want to sell the house and isn’t planning to.  That’s where you come in.  Anyway, as far as job skills go, she used to be in customer service making $30,000 or so, but she hasn’t worked in years.  She’d probably be making that much at any job that she got now.

Me:  Why did she wait until literally the last second (alimony ends in less than 24 hours) to figure all of this out?  Shouldn’t she have found a job years ago?

Frank:  Like I said, she hasn’t worked in years.  She just never wanted to.

Me:  On the issue of whether to sell her current house and buy something cheaper or rent a place…………..if she did rent a place, I’d probably advise her to rent a trashy apartment for something like $500/month given her earning potential.  She’ll be making the same type of money that a new college graduate makes, and new college grads rent $500/month apartments. 

Frank:  Yeah, see, we have a 14 year old daughter and I don’t really want to see her living under a bridge.

Me:  Wow.  With all due respect to everyone involved, this sounds like a disaster.  I’m sure you’re all great people but this does not sound good at all.

Frank:  Don’t I know it!  She needs an advisor to help her out.

Me:  Frank, she really needs one of two things, a magician to make money appear out of a top hat, or Dr. Phil to sit her down and tell her how it is.  With her asset base and earning power, she is not in good shape at all now, let alone for retirement in 10 years.

Frank:  Yes, I know.  She just needs to hear all of this from someone else who isn’t her ex-husband.

Me:  Frank, you sound like a nice guy, but I have a wife and four young kids at home, so I have enough stress in my life.  I just can’t put this type of emotionally stressful case on my shoulders because frankly, there isn’t much that can be done here.  I don’t want to be paid to essentially be a hatchet man who is going to make your ex-wife cry.  I’ve arrived at a point in my career where I try my best to work with people on their ‘good problems’ rather than on bad ones.

Frank:  I totally understand and respect that.  As you can see, I was basically throwing a Hail Mary pass here. 

Me:  You should contact Jim X, he is a local fee-only financial planner who works on an hourly basis.  I’m sure that he’d be happy to sit down with your wife and give her advice on improving her situation.  Because he’s paid by the hour he doesn’t care if your wife is talking about her portfolio or a credit card balance transfer strategy.

Frank: That sounds great, thank you for the referral.  This sounds like a good fit because my ex-wife does have some credit card debt as well.

Bag of worms averted.  So what are the takeaways?  Obviously, divorce is emotionally, and in many cases (such as this one) financially, devastating.  That said, no matter how skilled an advisor is, they are not magicians.  At the end of the day, financial plans come down to money and math.  The laws of math cannot be changed.  If there isn’t enough money, the math won’t work, no matter how you massage the numbers.  To circle back to a previous topic - Behavioral Finance - and a previous blog post ‘Traditional Finance:  All Steak No Sizzle’, this ex-wife has certainly been behaving like, and making decisions as, an emotional being rather than the R.E.M. (Rational Economic Man).  If she were a totally rational being making rational decisions, she would’ve made some serious life changes YEARS ago so as to not put herself in her current bind.  Why hasn’t she been working for the last 5 years to prepare for the day that her alimony runs out?  She didn’t want to.  Why doesn’t she immediately unload her big, expensive house and buy or rent something less expensive in a cheaper part of town?  She doesn’t emotionally want to let go of the house.  What she wants to do and what she should do are two completely separate issues (Traditional vs. Behavioral Finance).  None of this is to say that Frank is free from fault here either.  While his ex-wife is indeed an adult who can and should make decisions for herself, they do have a teenage daughter who is obviously affected by all of this. Some thoughtful planning upon their divorce could’ve minimized what will likely be some uncomfortable circumstances for her (the daughter) in the near future (moving homes, school, etc.)  

Are there any specific action items to be taken from all of this?  I don’t’ think so.  I think that we can all take something different away from this though.  This conversation with Frank struck me as interesting if for no other reason than to provide perspective on our own lives and decisions that we make/don’t make.  My takeaway: while I love magic, I’ll save it for entertainment purposes, not my (or my clients’) financial planning.  You should too.

By: Andrew Gonski

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.  LPL Tracking #: 1-387533.



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