Dialogues. What s on Your Life List? WEALTH STRATEGIES FOR DISCUSSION

Transcription

1 Dialogues WEALTH STRATEGIES FOR DISCUSSION Whether you are focused on accumulating assets, preserving capital, generating income or transferring wealth to loved ones, count on us to help you develop an integrated financial plan for life's most important events. Our comprehensive approach to wealth management centers on creating a plan that addresses what is most important to you. THIRD QUARTER 2009 COURTESY OF WILLIAM R. NORTON III, MBA, FPS Suite # West Patrick Street Frederick, MD Phone: Fax: Tollfree: William.R.Norton@SmithBarney.com WILLIAM R. NORTON III, MBA, FPS Financial Advisor Financial Planning Specialist What s on Your Life List? Set foot on all seven continents. Learn to play Beethoven s Piano Sonata No. 14 in C-sharp minor. Run the Boston Marathon. Having a life list of goals you want to achieve is a growing trend look no further than the spate of books with the phrase before you die in the title, web sites such as or the movie The Bucket List, starring Jack Nicholson and Morgan Freeman. Similar to making a life list, retirement planning also involves identifying long-term goals. In fact, many of your life-list goals and retirement goals may be one and the same. Whether your retirement is 18 months down the road or 18 years, the planning process can help you identify what matters most to you. And because unexpected or milestone events can shift priorities, both your life-list goals and your overall retirement plan may be subject to change it is life, after all. When it comes to discussing your goals and creating your retirement plan, it s never too soon to start. We can help guide you through the planning process and access any resources you may require to implement your plan. If you already have a plan in place, it s important to revisit it on a regular basis, to ensure that it s consistent with your life list and the retirement goals you d like to realize. Whether it s your life list or your plan for retirement, it s exhilarating to think about the possibilities. But the best part is the clarity you can achieve to help you focus on what really matters getting the most out of your life. Morgan Stanley Smith Barney LLC. Member SIPC

2 DIALOGUES//2 Creating a Family Mission Statement In his book The Seven Habits of Highly Effective Families, author Stephen Covey encourages readers to begin with the end in mind. What does he mean by this? One interpretation is that he s reminding us that financial planning is about more than just listing our assets it s about articulating who we are, what we stand for and how we want to be perceived by our children and future generations, as well as our community. Some people begin the planning process by focusing on tax considerations, but it s worth remembering that your values inform your goals, which in turn inform your long-term investment plan. So, your family values and goals should be considered before any plans for tax minimization. Here are some questions to consider:» What makes your family special?» As a family, what do you value most?» What is your family s role in the community today?» How do you want to be remembered by others?» What do you want for your children, grandchildren and future descendants? You may want to do this exercise not only with your spouse or partner, but also with your children and other key members of your family. Some families take this one step further and actually organize a series of formal family meetings to discuss these questions. They make it a family event. Having an open dialogue about your values and goals, however, can be difficult and sensitive and, in some families, emotionally charged as well. Many families find it helpful to have a third party, perhaps a Financial Advisor, facilitate the dialogue and help keep things on track. While it isn t a panacea, it can go a long way toward helping your family understand why you ve decided to take a certain course of action. The family mission statement outlines the family s values, goals and vision of who they are and what role they seek to fulfill in the community. Another helpful framework that families can use to articulate their vision is a family mission statement which is really no different from a company mission statement. It is a document that outlines the family s values, goals and vision of who they are and what role they seek to fulfill in the community. The family mission statement can be as short as a few sentences or somewhat lengthier and some may recount the history of the family, calling attention to the founding members and milestone events or defining qualities. Some family mission statements even may contain descriptions of major traditions or even favorite recipes handed down from generation to generation. So, think about your family s values and the legacy you envision and then speak with your Financial Advisor about the expertise and tools available to help you begin with the end in mind. Courtesy of Women & Co. Women & Co. is a membership service that provides financial education and related resources intended for informational purposes only. No feature of the membership shall constitute an offer or solicitation with respect to the purchase or sale of any security. Citigroup s Consumer Group and Morgan Stanley Smith Barney LLC pay an annual fee to Women & Co. for expenses relating to the delivery of membership services to clients. A member is not required to be a customer of a Citigroup or Morgan Stanley Smith Barney LLC affiliate to enroll. Women and Company, Women & Co. and Citi are registered service marks of Citigroup Inc.

3 DIALOGUES//3 Managing Family Conflict Conflict in families is unavoidable and is not necessarily a negative. A lack of conflict doesn t always mean there s agreement; sometimes it just means there s apathy, which can be even worse. But conflict needs to be managed as one piece of a larger process called family governance. Many families find that the first requisite of family governance is a normative framework within which significant decisions may be made a framework called a family council. For many, the essence of family governance is finding a way to make decisions the entire family will respect. And that s where a family council can make a difference, as decisions are made through a transparent, rule-bound process. When a family makes decisions that way, and does so over a period of years, the council ultimately gains increasing moral and persuasive force, until its authoritative impact can become almost unquestioned an extremely effective way to manage the potential for devastating family conflict. Here are a few questions you need to address in the process of creating a family council. HOW MANY SEATS SHOULD BE AT THIS TABLE? There can be an infinite number of subtle variations, but basically there are two types of family council structures: a true one-person/one-vote democracy, and a representative system, in which a handful of family members are elected to make decisions on everyone s behalf (or serve by virtue of a certain attribute, such as seniority). You may get more buy-in if everyone has a vote. But as a family grows, a system in which everyone votes on every issue may become unwieldy. One smart strategy can be to transition to a representative system after a full-assembly council has set up the basic rules and built a track record of effective and widely accepted decisions. WILL OUR COUNCIL BE COMPOSED OF FAMILY MEMBERS ONLY? Placing one or more family outsiders attorneys, investment counselors or other trusted advisors on your council can bring an independent voice into deliberations. It also can be a subtle but effective way to keep everyone on his or her best behavior. SHOULD CHILDREN BE SEEN AND HEARD? There s no better way to prepare the next generation for future responsibilities than by letting them watch their elders work through challenging issues besides, they may inject a fresh perspective. Many families have success with a tiered structure in which, for instance, family members begin to attend meetings as observers at age 18 and become full voting members at 21. The family council can be one of the tools the family uses to groom and identify its future leaders, and it can be the first formal setting in which cousins and more distant relatives learn to work together for the benefit of the extended family. AND WHAT ABOUT SPOUSES? It s natural to value the opinion of longtime family members over that of a newcomer. But letting spouses fully participate fosters a spirit of openness and recognizes the contribution that in-laws make to a family s culture and it may prevent dysfunctional alternatives. Many families conclude that it s better to give spouses a forum to get those views out in the open, because they ultimately will find expression, one way or another. DOES MAJORITY RULE? While consensus decision-making is very difficult, it is the most powerful and unifying way for families to make decisions. The alternative decision-making by majority vote is easier, but it creates winners and losers. HOW SHOULD WE GET STARTED? Ease your family council into action slowly and modestly. The family council controls its agenda, so pick out matters that are relatively easy and to the extent possible not emotionally charged. Practice on the easy ones, get them under your belt and build a record of success. Over time, the success of the family council becomes self-perpetuating and reinforcing, until it gets to the point where it assumes an extremely powerful place in the ethos of the family. When done right, the family council can become not only the vehicle by which family conflict is managed (as important as that is), but also the chief organized forum for articulating and implementing your family s values, mission, vision and goals. The family council can be a robust and vital family institution and the engine of your family s future success.

4 DIALOGUES//4 Begin with the Basics: Creating a Solid Investment Policy Most builders understand that laying a strong foundation is the key to constructing a good home. Do the job right and the structure will be stable. Do it wrong and it could collapse. The same logic applies to investment portfolios. Investors are more likely to achieve their financial goals if they have a clearly defined investment strategy. And they re more likely to create an effective strategy one they can stick with over the long term. The process of drafting an investment policy statement typically begins with the collection of all relevant data about the investor, such as basic financial data, broad investment objectives, target rates of return, expected future cash flows, investment time horizon and investment constraints. Based on these and other factors working together, the investor and Financial Advisor can create a comprehensive asset allocation plan, one that determines how the assets covered by the policy statement are to be divided among the various asset classes. One of the benefits of this process is that it compels investors to reconcile potential conflicts among their different objectives before those conflicts negatively impact portfolio performance. Of course an effective investment strategy also must be based on reasonable estimates of future returns for the various asset classes included in the portfolio. In addition to the investment strategy and its expected performance the policy statement should describe the process to be followed in executing that strategy. Investors also should establish procedures for reviewing and, if necessary, altering their strategy or their portfolio management team. An investment policy statement can be a powerful tool for refining and focusing a portfolio strategy so that it best serves the investor s specific needs. But a policy statement is only as good as the process that produces it. By developing a clear investment policy statement, and sticking to it, investors can at least be sure their portfolio rests on firm foundations Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

5 Action Response Cards For PROOF purposes only. Actual card is 1/2 wider than image below. Please tell us what services most closely match your needs. PLANNING GUIDANCE Financial Planning Asset Allocation Philanthropic Giving Risk Management Education Planning Retirement Planning Business Succession Planning Personal Trust Services Strategic Borrowing Tax Management Estate Planning Banking Services INVESTMENT SERVICES Annuities Government/Agency Securities 529 Plans Managed Futures Equities Corporate Bonds Life Insurance/Health Care Stock Options Mutual Funds Municipal Bonds Daily Cash Management Alternative Investments Unit Investment Trusts Federally Insured CDs Professional Money Management International Investing NAME ADDRESS HOME PHONE BEST TIME TO CALL: AM PM CITY/STATE/ZIP BUSINESS PHONE 2009 Morgan Stanley Smith Barney LLC. Member SIPC / BUSINESS REPLY MAIL FIRST-CLASS MAILPERMIT NO.6113 NEWYORK, NY POSTAGE WILLBE PAID BY ADDRESSEE WILLIAM R. NORTON III, MBA SUITE # WEST PATRICK STREET FREDERICK, MD 21701