Monday, February 13, 2006
Cost vs. Price vs. Value
I came across this amusing little vignette on a professional financial planner forum today:
Had a meeting today, at my office. Interesting to say the least. Client, Type A, driver, stern decision maker. Very entreprenuerial, real estate, business interests, etc. Net worth (in and out of estate) $100m plus.
First few meetings were at the CPA's office. Today, first meeting for the group (CPA, client, attorney, me, client's cousin/best friend/trustee who is a retired T&E attorney), at my office (which is rare, as most meetings are at my office, at least much sooner that this case).
Two incidents -- first, when discussing various estate, asset protection, wealth transfer, income and estate tax reduction, etc. strategies, the CPA asks the attorney what the legal fees would be. The attorney talks about hourly fees, project pricing, etc. and answers the question and says about $50,000, plus, minus, etc. The CPA starts reacting, rolling his eyes, inferring it's a lot of money, it's expensive, etc. Never mind that it would save millions in income, gift and estate tax (real savings TODAY).
The client, who doesn't say a word, clearly does not agree with the CPA's mindset. We move on.
Second, when discussing the life insurance and related strategies (not the traditional "life insurance to pay estate taxes" one trick pony), the CPA asks "what's the price". I ask "do you mean the price or the cost". He seems confused. We discuss it, I answer the real question the real way and tell the group (approx. mid six figures in premium for X amount of millions of coverage). The CPA starts again.
Without any response, we move on. End of the meeting, attorney leaves, I walk the client and cousin out, along with the accountant. Three cars in the parking lot -- the client's, mine, and the CPA. The CPA says his goodbye, gets in his car. It doesn't start the first time, finally starts, and he leaves.
Client looks at me and says "what kind of car is that"
I say "I think it's a Toyota Camry"
The client gestures toward his Bentley, chuckles, and says to me "You know, he (the CPA) thought that was too expensive . . . I love that car . . . let me know what the next steps are and we can move ahead on all this . . . don't worry about him, he works FOR me . . ."
There's a reason the man can afford a Bentley: He knows how to make decisions. He knows how to recognize the VALUE of an investment, and not get hung up on its cost. And if it makes him happy to drive a Bentley, well, Bentley owners rarely finance. 95% of other car owners do.
Look beyond the short-term cost of good advice to the endgame. Good advice - especially in the realm of recognizing the time value of money early in one's career, and in the arena of IRA and estete planning - can be worth hundreds of thousands of dollars in accumulations and tax savings - even to middle class families. Don't believe me? Read one of Ed Slott's books!
A few hundred or thousand dollars here and there is small price to pay to a good CPA or financial planner who can put you on the right road.
Get Zen. Be like water. Give in order to get. Be in motion when the environment rewards motion, and still as ponds when the environment rewards restraint. Deliberate carefully and then act decisively, and with good counsel you need not fear regret. And don't be one of those people who recognize the cost of everything and the value of nothing.
Jason
Had a meeting today, at my office. Interesting to say the least. Client, Type A, driver, stern decision maker. Very entreprenuerial, real estate, business interests, etc. Net worth (in and out of estate) $100m plus.
First few meetings were at the CPA's office. Today, first meeting for the group (CPA, client, attorney, me, client's cousin/best friend/trustee who is a retired T&E attorney), at my office (which is rare, as most meetings are at my office, at least much sooner that this case).
Two incidents -- first, when discussing various estate, asset protection, wealth transfer, income and estate tax reduction, etc. strategies, the CPA asks the attorney what the legal fees would be. The attorney talks about hourly fees, project pricing, etc. and answers the question and says about $50,000, plus, minus, etc. The CPA starts reacting, rolling his eyes, inferring it's a lot of money, it's expensive, etc. Never mind that it would save millions in income, gift and estate tax (real savings TODAY).
The client, who doesn't say a word, clearly does not agree with the CPA's mindset. We move on.
Second, when discussing the life insurance and related strategies (not the traditional "life insurance to pay estate taxes" one trick pony), the CPA asks "what's the price". I ask "do you mean the price or the cost". He seems confused. We discuss it, I answer the real question the real way and tell the group (approx. mid six figures in premium for X amount of millions of coverage). The CPA starts again.
Without any response, we move on. End of the meeting, attorney leaves, I walk the client and cousin out, along with the accountant. Three cars in the parking lot -- the client's, mine, and the CPA. The CPA says his goodbye, gets in his car. It doesn't start the first time, finally starts, and he leaves.
Client looks at me and says "what kind of car is that"
I say "I think it's a Toyota Camry"
The client gestures toward his Bentley, chuckles, and says to me "You know, he (the CPA) thought that was too expensive . . . I love that car . . . let me know what the next steps are and we can move ahead on all this . . . don't worry about him, he works FOR me . . ."
There's a reason the man can afford a Bentley: He knows how to make decisions. He knows how to recognize the VALUE of an investment, and not get hung up on its cost. And if it makes him happy to drive a Bentley, well, Bentley owners rarely finance. 95% of other car owners do.
Look beyond the short-term cost of good advice to the endgame. Good advice - especially in the realm of recognizing the time value of money early in one's career, and in the arena of IRA and estete planning - can be worth hundreds of thousands of dollars in accumulations and tax savings - even to middle class families. Don't believe me? Read one of Ed Slott's books!
A few hundred or thousand dollars here and there is small price to pay to a good CPA or financial planner who can put you on the right road.
Get Zen. Be like water. Give in order to get. Be in motion when the environment rewards motion, and still as ponds when the environment rewards restraint. Deliberate carefully and then act decisively, and with good counsel you need not fear regret. And don't be one of those people who recognize the cost of everything and the value of nothing.
Jason
