Case Study – Investment Management, Financial Planning, Estate & Succession Planning

Through her accountant, Ellen approached us to help manage the portfolio she inherited following her husband’s passing a few years earlier. She had adjusted to her new circumstances and was building a life on her own when she decided that changes to her investments were needed. She had a sizeable portfolio but there were two issues:

Firstly, the account was invested 100% in equities. While this afforded long-term growth, it was entirely too volatile for Ellen’s comfort. She told us she didn’t want to worry about the ups and downs of the stock market; she just wanted to know her money would be there for her and her family. We agreed that her existing portfolio represented more risk than needed given her needs and objectives and did not provide steady income.

The second issue was that there were unrealized capital gains equal to more than half the portfolio. Given that Ellen’s other objective was to leave an inheritance to her children, she hoped to minimize the impact of taxes down the road.

Before we made any changes to the portfolio, we worked with Ellen to confirm her spending needs and ran financial projections to determine how long her capital would last. This was essential for determining the target rate of return and level of risk she would need to assume to meet her objectives.

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We also arranged for an insurance policy to cover her projected capital gains taxes. Ellen was aware that the unrealized capital gains in her investments would result in her estate having a large tax bill. She wanted to ensure she left her adult children financially secure. An insurance policy was a good way to use some of the capital that she would not need to fund her lifestyle to ensure her children received the full inheritance she planned for them.

With the planning and structuring work done, we made changes to the asset mix to reduce the amount of equities – adding income-producing alternatives such as real estate, infrastructure and high-yield debt. We were able to greatly reduce the risk and volatility levels of the portfolio while continuing to deliver an attractive rate of return that would meet Ellen’s personal objectives.