The case studies presented are real descriptions of actual client relationships. We have protected the identity of the clients by changing names and locations. Given that many of our clients experience similar life events, the case studies are designed to depict the value proposition Simon Quick Advisors brings to the table. Each family we work with is unique. There is no “cookie cutter” set of solutions. We bring our full set of resources to the table to solve, educate, implement, and monitor.
The Jones family built a successful manufacturing company in the Midwest over three generations. They were approached by a competitor in 2005 with a generous offer for the company that combined cash and stock in a publicly traded company. The offer was too good to pass up. It was a bittersweet decision that presented a unique set of issues and opportunities for this multi-generational family.
Key Issues to Solve
• The family felt pressure to put the money to work.
• The vast majority of the family’s wealth had been tied up in the business. Historically, they had minimal exposure to publicly traded securities.
• The company paid a generous dividend, providing an income stream to the family. This income had to be replaced.
• The liquidity event provided an opportunity to review wills, trusts and multi-generational planning strategies.
• The risk of a large single stock position warranted evaluation.
Simon Quick initiated a two-pronged approach to the planning and investment process. We suggested the family place the proceeds of the sale into short-term treasury bills to give them time to plan properly. Our Certified Financial PlannersTM worked with their attorneys and accountants, coordinating the process to get the right structures around their assets. Wills were reviewed and revised. A series of trusts, including GRATs, were created to begin the process of flowing wealth down to future generations. Some of the solutions were quite simple (paying for education and medical costs for generation two and three, annual gifting, etc.) while others were more complex and required sophisticated analysis and execution. We brought in outside experts on insurance to evaluate current policies and assess future needs.
Concurrent with the structural analysis, we began an ongoing education process about investing. We met periodically with the principals to discuss different asset classes, risk tolerance, income needs, and time horizons. We structured a cash flow analysis using base case, best case, and worst case assumptions. As a result of these meetings, our client’s goals and expectations became more clear to us and them. We drafted an investment policy statement for the family designed to govern the management of their liquid assets. This included asset allocation guidelines, a designated custodian, risk parameters, rebalancing requirements, performance reporting and portfolio accounting needs, hedging their large single stock position, tax efficiency, and a spending policy.
Once the structural changes and investment policy statement were finalized, we constructed customized multi-manager portfolios for each entity designed to meet the stated goals. We initiated a partial hedge on the single stock position, in effort to immunize the risk of a large concentrated exposure. We provided the family with quarterly performance reporting using a blended benchmark based on the asset allocation policy. We also took responsibility for portfolio accounting, tracking interest, dividends, cash movements, and realized and unrealized capital gains and losses. We organized the disbursement of income on a monthly basis. During the first six months of our relationship, we met with the principals monthly, reviewing investment performance and continuing our ongoing educational process about each individual manager and the role they were designed to play in the portfolio. We now have ongoing periodic conference calls and face-to-face meetings.
By slowing down the transition process we were able to ensure that a proper trust and estate planning exercise took place. It provided us time to educate key family members about their investment options and institute a thoughtful investment policy statement to govern the management of their assets. In this situation it was our goal to create a clear process for the family and to provide them with peace of mind during this exciting time of their lives.
Please Note: The above hypothetical case study is offered to illustrate the benefits that Simon Quick Advisors’ customized approach can provide. Please note that actual client experience could vary, and there can be no assurance that Simon Quick Advisors will be able to deliver the same type of results referenced in the case study. The scope of any financial planning and consulting services to be provided depends upon the terms of the engagement, and the specific request and needs of the client. Simon Quick Advisors does not serve as an attorney or insurance agent. Simon Quick Advisors does not prepare estate-planning documents or sell insurance products.