Business Executives

Hardworking, prudent individuals and families who saved diligently while building their business, advancing their careers and raising their families. These successful entrepreneurs, executives, doctors find gratification from experiences such as travel as opposed to luxury items or status items. These individuals know what it takes to achieve their wealth and they want to be just as methodical and prudent with the management of their wealth as they were accumulating their wealth.

CASE STUDY

Randolph and Felicia

BACKGROUND

Randolph and Felicia joined AOG Wealth Management 10 years ago as a couple in their mid-40s. They both had successful careers, with a combined annual income of $500k. Because of Randolph’s medical practice, the main reason for their engagement with AOG was to partner with a firm specializing in an Endowment Style Portfolio and Tax Mitigation Strategies that may be beneficial to small business owners with substantial ordinary income, and the need to retain key staff colleagues.

While they had a comfortable lifestyle and a healthy income, they had focused most of their discretionary income on paying off student loans and building his practice. They had not set aside very much for savings or long-term investments. They had accounts spread across various investment companies as they tried multiple platforms and advisors without finding an ideal fit. There was no real commitment to any firm because none of them provided a holistic plan for how to turn strong earnings into long term wealth in a tax-efficient manner.

Like many successful entrepreneurs, Randolph was spending too much time working “in” his business rather than “on” his business. He had purchased the practice from a retiring doctor and wanted to make sure that he was taking the necessary steps to wisely grow the practice. At the same time, he realized that at that moment, he had all his eggs in only one basket. His practice was his career, his income, and his long-term wealth and that created a heavy concentration risk, which could be mitigated by also building a sustainable portfolio outside of his business.

Ultimately, Randolph wanted to make sure that his career would create sufficient wealth and enable Felicia and him to continue to live a refined lifestyle and capitalize on their hard work in retirement.

AOG

ACTION PLAN

Starting a 401k w/ Profit sharing - Randolph did not have a 401k plan in place when he joined AOG.

This was the first step to get their retirement fund started.
While the maximum 401k contribution of $16,500 and profit-sharing of $32,500 was a good start, there was the need for additional opportunities for tax-deductible retirement savings and income deferral.

Adding a Cash Balance Pension Plan - Setting up a Cash Balance Pension Plan allowed Randolph the ability to defer additional revenues into retirement savings.

As Randolph ages, he hopes to be able to increase his tax-deductible savings from $100k+ in his 40’s -to $200k+ in his 60’s in annual pre-tax contribution, in addition to his 401k and profit sharing.
In addition to enhancing their retirement planning, utilizing this tool created a secondary benefit by helping them to focus on their financial plan. With confidence in their long-term plan, they naturally injected a little more discipline in their spending habits and built a healthy short-term savings account. Their biggest surprise came at tax time, when they realized how much less they paid in state and federal income tax. The net change meant less of their money went to Uncle Sam, and more of their money stayed working for them.

Tax Mitigation - The retirement deferrals were a great first step for tax mitigation. With the strength of the increasing cash flow from their growing practice, there was interest and need for additional income tax mitigation.

AOG worked in concert with their CPA to introduce investment strategies that helped further reduce their annual income tax bill, while providing community-friendly investment options.

Investment Management - Since none of the former Broker/Advisors had approached Randolph and Felicia with a holistic plan and comprehensive strategy, they did not focus their resources, and just maintained small pockets of investments here and there.

AOG consolidated their accounts under one umbrella using a single custodian and single, risk-adjusted investment strategy.
The modified university endowment model expanded Randolph and Felicia’s portfolio beyond stocks and bonds into commercial real estate, private equity & credit, absolute return strategies, and natural resources.
This diversification has the added benefit of generating an income stream for them to utilize in retirement and replace their “paychecks” with a “work optional lifestyle”.

Professional Support

Engaging with AOG was the first step in getting Randolph and Felicia on the path of building a team of trusted advisors around them.
We coordinated our efforts with an Estate Planning Attorney and Certified Public Accountant.
In the end, what began with a Financial Plan became a Wealth Management Strategy. The investment of time by Randolph and Felicia to build their circle of Trusted Advisor relationships enabled them to build confidence that they had the right people working on their behalf while they focused most of their time and attention working in their business.

AOG

WHERE ARE THEY NOW?

In the 10 years that Randolph and Felicia have been clients of AOG, with a clear focus on not just working in the business…but working on the business, they have gone from an investment portfolio of $300k in 2010 to more than $3M in 2020.

Those assets along with the equity in their home, the equity in the medical practice, and the durable income stream from the portfolio have brought them to work-optional status. Because they enjoy their work, they will continue to serve patients, guide younger colleagues and volunteer helping those in need. However, they go to work each day because they enjoy it, not because they need to pay bills, a mortgage or fund college accounts. They are now truly “work optional”!