May 12, 2017
Aspiriant’s David Muchow became a financial planner at a momentous time. It was 2006, and the U.S. economy, pumped up by a real estate boon, was in full swing. Within a couple of years, it was free-falling, leading to major paradigm shifts in investment and financial management.
While challenging, David learned a lot from the event. “I experienced the emotions of the market peak and market trough. It helped me to understand how clients process various market environments and the importance of avoiding emotional, knee-jerk reactions by sticking to a long-term plan.”
David applies those lessons as a manager in Investment Advisory in Aspiriant’s Milwaukee office, guiding clients through market tumults by helping them to manage their investments and estates. David serves affluent individuals and families who often experience some sort of influx of wealth — owners of a privately held company who are selling the family business, C-suite executives with complex compensation and retirement benefit packages, and multi-generational clients who have received an inheritance or windfall.
He helps them to minimize taxes and re-invest, or otherwise allocate, the funds according to a personalized, holistic financial plan. This requires David to keep up with the ever-changing tax laws and financial regulations, not just at the federal level, but also at the state level as clients often have property and business interests outside of Wisconsin.
Luckily for clients, David is primed for this type of work and enjoys alleviating the stress involved with making complex decisions that help them reach their goals. While some people fall into financial planning as a career, David always had an indication where he would end up professionally. Raised by parents who both had business backgrounds, he once stated in a local newspaper article, spotlighting high school athletes who had committed to playing in college, that he would be an accountant or pursue a career in wealth management.
After earning his B.S. in finance at the University of Wisconsin Whitewater, David accepted a job at Deloitte Investment Advisors, a private client advisory group. He then earned an M.B.A. in finance at Marquette University in Milwaukee. The bulk of his work at Deloitte was in investment management and wealth management. However, by serving ultra-high net worth clients, David was also exposed to a great deal of income tax and estate planning, which he grew passionate about.
In 2010, Deloitte Investment Advisors merged with Aspiriant, and David was promoted to manager. Soon after, his professional drive, commitment to clients and entrepreneurial spirit led him to become one of the youngest principal owners of Aspiriant at the age of 31. He currently serves about 50 families throughout the country.
“I’ve always had a passion for finance,” says David. “Yes, there’s a technical aspect of it, and I consider myself analytical and detail-oriented. But for me, I enjoy forming that personal relationship with the client; more so than measuring the Sharpe Ratio of their portfolio. To watch clients and see the peace of mind they’ve achieved from the decisions they’ve made is really, really rewarding.”
Here’s how David walks clients through some life-changing financial events.
First, I help them understand the power of planning so they can reach their goals and make a difference. Usually, the clients come to us with four main goals: achieving financial independence, making meaningful gifts to charity, passing on their assets to heirs and limiting taxes.
So then, we need to understand the tax consequences of the type of event they’re experiencing. If it is an inheritance, what is the form of the inheritance and is the sum large enough that they could someday be subject to the estate tax or generation-skipping tax? If it’s a business liquidity event, we need to help them understand what amount, if any, may need to be reserved for taxes.
Then we can discuss opportunities to minimize the impact of taxes, depending on the client’s goals and objectives. For example, transferring assets to a family limited partnership or a limited liability company may help manage the legacy they are trying to create by reducing the amount toward an individual’s $5.49 million lifetime gift exemption (which increased this year). Or maybe they can shift privately held stock prior to the sale of the business. There are a lot of wealth transfer and charitable planning techniques to explore with clients — what makes the most sense depends on their specific goals.
Generally speaking, it’s helping business owners understand the lifestyle they can afford to live after the sale. They’ve always had the safety net of the business income, so it’s not unusual if they haven’t spent much time paying attention to how much they spend on personal consumption.
They often have several personal goals after the sale, and it is my job to ensure they understand the financial impact of pursuing their goals.
For example, they may intend to sell the business to their children. But then I have to ask, “Is your objective to maximize the sale price or give a fair price to your children? Take that into consideration when contemplating the lifestyle you want to live.”
Even clients worth $20 million may have the same concern of running out of money as those with $1 million, and that’s generally because of the lifestyle they choose to live. In the end, I help them translate how much money they can spend each year after the business income ends. It is an emotionally charged process, and one of my favorite challenges of my job.
First and foremost, understanding the client and their family on a personal level. Are they married, is it a first marriage, are there children involved? How we decide to manage the assets depends on how complex the family dynamics are.
In many cases, the client is married, and the relationship with other family members may be strong and cordial. But still, an important part of our job is ensuring the assets remain in the family bloodline in the event of a divorce or premature death, which means protecting them in the name of the recipient.
Ultimately, I try to help people understand the impact of the inheritance they are receiving — wealth can be really meaningful. So, I’ll talk to the client about their goals and what they want to provide for their family. We’ll discuss estate planning and how to best position those assets.
For example, I’ll highlight how important it is to talk to family members ahead of time about their intentions for the inheritance, or better yet, put them in writing, so the heirs have some direction on what to do with the assets.
There are lots, but a common occurrence is helping long-term, loyal employees understand the risk involved with a concentrated stock position. Often, clients have invested a lot of hard work into a company and are very loyal to it. But they’ve also put a lot of reliance on the company’s stock performance for their long-term financial well-being.
We help them to understand the benefits of diversification and why it’s important to move away from the concentrated stock positions. Then we find ways to divest of the shares in the most tax-efficient manner possible and find new investments commensurate with the level of risk they may take to meet their goals.
The events of the past 10 years had a dramatic impact on the financial industry, for both professional advisors and the clients we serve. Highlighting just one takeaway would be difficult, so I will name a few: Clients tend to really be much more risk-averse than they think they are, so be patient, trust your long-term plan and keep it simple.
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