Mastering Comprehensive Financial Planning with Bill Gombert
Introduction: In this interview, Alan Olsen, CPA and featured guest Bill Gombert discuss comprehensive financial planning and much more.
Hi, this is Alan Olsen and welcome to American Dreams. My guest today is Bill Gombert. Bill, welcome to today’s show.
Thank you very much pleasure to be here.
So, Bill, you’re in the financial industry and more specifically you do comprehensive financial planning. Can you can you give me some background? How you got started out with that with your career path there?
Yeah. Well, I oddly enjoyed a calm and tax law. So that’s right up your wheelhouse. But I enjoyed that in high school, and then continued in college. So that was one of my majors accounting and in Business and Computer Science. And during that timeframe, what was rather fun is as being in a program, they I don’t even know if they still have it was called the Voluntary Income Tax Assistance program. Okay, so I sat in the library and did some tax returns for people for free, which was, it was fun.
I enjoyed helping people. And then ultimately, after college, ended up in an insurance company, doing some 401 K plan. Record keeping things basically, which is a lot of I mean, I like doing that work, but I like talking to people more. Because when you’re in the back, it’s less than fun. So then I ultimately they relocated me, few states away, and I became a sort of a customer service person where I worked with people in the financial services and, and what I came to find out as I enjoy helping people, and helping them find the right solution.
And when you work, at some companies, at least at that time, you weren’t allowed to go outside of the confines of the organization, putting the things together. So that’s ultimately how I got here. And it’s, it’s to me, it’s devils are in the details always. And that’s where the opportunity lives. So there’s that that’s, I like it from that aspect, you get to meet a lot of neat people. Well,
in in my brief interaction with you, I will say I was totally delighted from the dinner conversation that we had, which led to this follow up, you’re very, very personable. And I want to I want to go rule back a little bit on client relationships. In your approach to client services, you emphasize getting to know clients, personally. How does this deep understanding your clients dreams, you know, help to shape your advisory methods? Well,
yeah, I think the client experience in odd, I know, a lot, never all of it, but I know a lot about tax law and things of that nature. Then planning stuff, but what unless I understand what the clients, I mean, goals and objectives are fine. That’s where everyone starts. But a lot of people have historical thoughts. I mean, for instance, when I was probably 10, my grandfather used to fill my head with stuff while we were playing checkers. Well, his comment to me was, you get to own on one car after that cash only.
And you can own your house. That’s it. And here’s the reason why. So a lot of those things come into play. And when you when you’re talking with people, and it’s not usually it takes a while to, to get there. But people’s experiences are super interesting. I know people worth 10s of millions of dollars, and they’re terrified to run out of money. And the reason they are is because, you know, they had a family situation where someone they know, well and closely ran out of money.
And so when other people look at him and say, you know, you’re worth 10s of millions of dollars, well, that doesn’t matter if they still have the fear in their head, how do we get that out so that they have the confidence knowing that they’ll be able to make ends meet? And no one else is talking about that? Because they have a standard of living?
That’s very, and the situation I’m thinking of, they have a standard of living, that’s very doable on their on their net worth, but as the other stuff still plagues them, so how do we get rid of the stuff that plagues them so that they can live life after they’ve, you know, obviously accumulated a great deal. So those if all I’m there to do is put myself in their situation, understanding what they are and tell them what I would do if I was in their situation.
You brought up your grandfather and what strategies when we’re dealing with multi generational strategies you’d find most effective in ensuring financial comfort across multiple generations.
Yeah, that in order for them to have confidence in what’s going on, I think the biggest issue the thing that’s left out most Communication. I mean, all the trusts and all the grid, scratch Grots, all those technical things that really mean nothing unless you’re in the thick of the woods, none of that matters unless you’re having a conversation with your family. So I mean, I’ve talked to attorneys that have seen it, you know, there. I had one friend, who was a big estate attorney in the area, and he’s retired, but he’s off counsel.
So he comes back from time to time, and we have lunch. And he said, It disheartens him because some of the heirs were just pulling as much out of the trust as they possibly could. And really, the people that set it up for him, it’s not there, so that they can enhance their lifestyle, it’s there so that they don’t fall on their behind from a, from a financial perspective, because the only thing money does is give you options.
If you’re sick, and you want to go to a certain hospital, and it’s expensive, you can’t go if you don’t have the money, so it limits choices. So if you have the money, and if you know, we’re blessed enough to have that situation, you can get there and you have other options. So all it really does is buy options. It does not it’s not a happiness thing. I mean, I don’t need a Ferrari if something happens to one of my family members. But something happens that just it’s it’s counterproductive.
So building a comprehensive process, comprehensive process of growing engagement, various strategies to help clients achieve their goals. Could you give some examples of how you integrated multiple strategies in terms of assisting clients implement them? The comprehensive plan?
Yeah, I mean, there’s a lot of different ways Hubbard I mean, there’s ones where we intertwine business businesses, they have to help reduce some of the tax income tax liability they have, and ultimately, using some other things that are a little more technical, well, like gifting minority shares of a business to a trust that’s happens to be inside.
The trust that it’s inside is defective for income tax purposes, which hopefully means nothing to everybody we’re talking to except you, me, but it’s, it’s a way to effectively get money out of your estate, so that the kids don’t have to sell the business want to cause because that’s one of the biggest issues in keeping money in the family. I mean, taxes are, are a large part. And when you have a business that, you know, is good size, maybe isn’t huge.
But if you have if everything’s in the business, where typically most business owners assets are because they love the business, they feed the business, they feed the business, and then that there once when God calls them on, you could potentially have a 40% tax on a pretty large chunk of the thing. And and that’s not optimal. So you have to plan for it ahead of time, which is difficult, because you’re talking about your own demise.
But in order to have that conversation, I mean, they need to understand that, hey, this is something that we need to work out. I had one gentleman who has a rather successful business. And those depending on the timeframe was worth, I don’t know 10s of millions. And when he passed the, the lawyer was kind of new on the scene because the old attorney retired. And he said, I’m surprised you’re able to get this out of his estate, without any estate tax as well, a I’ve been working on that for 12 years.
So it does take a lot of that stuff takes time, you can’t turn on a dime. So when you’re, unfortunately in a hospital bed, if that’s where you find yourself that is not the time to do any kind of serious planning, this stuff takes time. And that’s a blessing because hopefully the communication that goes with it to the family. I mean, those things are difficult. This one this client told me so I’ve seen a lot of other competitor businesses where the kids end up in two different offices and they’re just plotting against each other out of throw each other out.
So that’s he suggested to his heirs that if they felt that way, and need to shut up, be quiet and get to sell the place as fast as humanly possible. So it’s it’s it’s this far, you’re
bringing up a very good point with you know, having a long lead time for estate planning rather than a, you know, deathbed plan put in place with what is the right time to start an estate plan. You know, you have any thoughts on
I personally don’t think you can start too soon. I mean, I had some people that I was worried it depends on your trajectory and how well you feel. But I, I worked with people that are in there. I think they were in their early 40s At the time, and they had a pretty good run path and feel for what they were going to do.
So we were doing survivor planning, because they didn’t have enough money for the survivor if they needed to do something, but we were also setting and setting the insurance policies, because that’s the only thing that creates instant money, putting the insurance policies and trusts that would be that were, the insurance was more enduring in nature as what they call a permanent policy. But it was their thought was it wasn’t going to be a temporary need, it’s going to be a long term need.
So we use the insurance in the beginning to cover the shortfall if God forbid, something happened to one of them, and they wanted to stay on the survivor want to stay home and take care of the kids fine. But then longer term, because we hope they’re gonna live a long time, then we’ll use it for estate planning purposes, and those proceeds will be outside their estate.
So heavy hand. Yeah. Now, how do you handle situations with conflicting based in different domains like legal financial might conflict? How do you resolve those types of conflicts with your, your clients,
I would just get everybody in the room, then have a conversation, because somebody’s missing something. And oftentimes, you’ll say something, and you’ll think you’re getting it across. So if I tell you we can, I think you should go this way. And here’s another couple of options you so I need, I think you should go this way. But that’s okay. But now, I’m second guessing whether I made what what I told you, I think you should go this way, I don’t care that you want to go this way, that’s fine.
But I need to cut I need we need since a little bit longer. So I can make sure you understand what I’m trying to say because I might have said it wrong, it might hit you at the wrong time. Something but if we have a number of other people in the room, everybody has their own opinion. And we can talk them out. And it’s this is a you know, it’s a very complicated area.
So you know, I have to say, Bill, that your your demeanor, you’re very gifted in resolving conflicts and bearing, you know, points of view. And I appreciate, I appreciate the way that you lay our teachers get everyone together, and let’s listen and hear hear things out. Our rollback? Do you mix it Insurance insurance or financial planning? How does it surance planning fit into your overall strategy for clients financial health? And could you give some examples?
Have you successfully integrated insurance into a comprehensive plan?
You’re talking about life insurance? In particular?
Or are you talking about other types as well?
Well, it could be a it could be life insurance, it could be long term health care. You know, when is it right to have insurance come into the picture, there’s varying degrees of points of view on this understanding there. But let’s this focus on your approach,
okay, I’m the life insurance side, you only need insurance twice for life insurance twice, and your life wants one, that’s when there’s not enough money to accomplish the objectives that you want to have for your family if, if you if God calls you home. So it makes, you know, millions out of thin air. So that’s fine. And then the only other time and he doesn’t want us the best economic alternative to help you help fund some of the tax ramifications you have going forward.
So for instance, if you if if we’re trying to do some estate planning and gifting is in in order. So you set up some different trusts. And some people set up trusts that are in the one spouse sets up a trust for the other spouse and the other spouse sets up another trust for another there’s reciprocal trust actors and other things we could get into. But that’s beyond the scope.
But essentially, what happens is, you have money that while you’re both alive, one spouse is working from the beneficiary, this one on one spouse is the beneficiary this one one of them, this one dies, that money goes away and goes to the kids. So then that leaves the other spouse here, if the if this spouse is worried, or we determined that they still need this money. What happens if this person dies and they go away?
Well, if we put life insurance potentially as an option in here, than if this is a couple million dollars, and it goes away to the kids and the life insurance policy over here, you know matures so to speak and throws another couple million dollars in here the survivor spouse still has the same amount of money at their disposal, probably in a better spot from from an estate tax perspective.
And it depends on an income tax perspective, but Those are just some of the things, especially if you’re using some you know, more advanced planning stuff, like generation skipping elections, depending what state you use, and all those other things. But like life insurance is a four letter word to most people. And not no one likes to have it. But the fact of the matter is the way the way things are laid out a number of times, it’s the best economic alternative, because there’s no tax on the bill up going in, and there’s no tax on the proceeds.
At the act, I’ll take said that changes is not going to be a good economic alternative. But for the time being, that’s where we are. We don’t I mean, I don’t use it every time or a lot of time. But if we’re, if we’re, it depends how much people want to maximize what they’re doing. And unfortunately, a lot of people lead with life insurance, because these, I don’t have to worry about gifting strategies. I just throw this in a trust over here, and I find it and it explodes. But it’s outside my estate. So I buy assets out of my estate to pay the tax.
Well, that’s awesome. But don’t you think we should reduce the tax before we got all excited about buying something huge and doing something over here to stop this? Because you don’t feel like doing it? I don’t know. So it’s not often, like life insurance is not a Swiss army knife, no, nothing is was not a one size fits all
this willing to tax datasheet alignment, so taxes can significantly impact investment outcomes, what are some examples of ways you might, or you may align tax strategies with investment planning to maximize the client’s financial benefits?
Well, you worked through some Roth conversions, or what they call backdoor Roth strategies, which is not huge, but now you, you could make Roth contributions inside 401 K plans, and it doesn’t matter what you do, how much you make, and don’t have to worry about some of those things. So those those are helpful, that they’re oftentimes as a percentage play, kind of minimal.
So then Then, depending on net worth, you look at portfolio investment portfolios, and a lot of them do throw cash, but if you use or throw a taxable income when you don’t need it. So you can use some varying things like exchange traded funds, which tend to be more tax efficient. And then it depends not only as asset allocation that port and asset location is equally important.
So for instance, if you had an I’m probably going too deep here, but if you have an intensely defective trust, so that it’s an irrevocable trust, so the assets are outside your estate, you probably could sell it outside your estate, and you know, the the grantor is paying tax, and whatever happens inside that trust, so it just grows unencumbered by tax.
So the stuff that’s laying out taxable income, depending on how much money left in your estate, it may be but and that the other thing is, with people converting to Roth’s I have a gentleman a number of years ago, when this was allowed, he had a million or a little bit more in his 401 K plan the study they should do with this. I said I think you should convert it. He said converted to a Roth he said, Do you have any idea how much that’s gonna cost?
He said a lot less than the estate tax, because he was he was right at that spot where he was going into another 40% tax. And I said, this is going to cut down the amount that’s subject to that. So it’s a wit. Now, I know you have to consider that a little differently because both Roth I Roth money and pre tax money are subject to a 1010 year distribution, if you’re not if it’s not a spouse. So is that what you want? That’s a whole nother discussion.
You know, Bill, say that you’re very, very knowledgeable. And these insights are enough to give an understanding of the need to have a very good financial planner such as yourself to walk through all the estate and the tax nuances. future trends. Looking ahead, which friends do you foresee in comprehensive playing and how might these changes impact the industry?
I think a lot of people, all the stuff that’s happening now a lot of people are nervous about running out of money from a longevity perspective, because the thing that comes out is the 4% rule. So that if you take out 4% of your investment portfolio, it should last for 30 years. That’s what they all talked about. Well, what if you retire at 60? You live to 110 30 years left me a while back still. So how do we how do we, you know, I’d love to live longer.
That’s I mean, it’s so how do we have some sort of guaranteed income flow because pensions are kind of a dinosaur, no business This really wants to add them because of the portfolio doesn’t do well, they have to make more contribution. So poorly defined contribution plans, like 401, k’s are really the nature of the beast, because it’s, we know what our liability is from a contribution perspective, and it won’t be any more. So it’s easier for the company to deal with. So I think that’s what makes those popular.
So I think I think guaranteed income planning at some point is going to, it’s gonna rear its head. And that’s, it’s a feel good. But you really have to crunch the numbers to see how, how good it feels. Because I’ve seen one does years ago, though, so I can’t comment on anything that’s out there currently. But someone was offering, you know, here, we’ll put this in the plan, and you’ll get a guaranteed income from it.
Well, the rate of return was like 1%, when he actually dug in and no one wants that you’re, you’re losing purchasing power on an ongoing basis. So it’s much like when, you know, a pension plans today, they said, well, we want to get rid of liability. So let’s buy some people out and you look at the numbers. And so, oh, well, if someone needs a lot of money in a hurry, this is probably the way but long term, it’s probably not in your best interest. But those are just calculations, there’s nothing more to it. So I think that’s going to happen.
And with the debt level where it is from a country perspective. You know, it’s hard to not believe tax rates are not going to go up. And when you’re looking at the camera or the statistics, but the top the top 50% of taxpayers pay about 97% of the tax. So unfortunately, both hands vote, so no one wants to pay more. Everybody I talked to whether they pay tax or they don’t they don’t want to pay any more. I was talking to a gentleman once and he, I think he was in was a totally different tax bracket than I was used to.
But he was just as adverse as paying tax at his level. And he was on the lower rungs as somebody who’s in the top. And people are only adverse, I think, I don’t think Patriots are as adverse when they if if they felt the money was being spent. used wisely, and I’m not sure we believe that.
That is the person now reach out to you for more information or to engage your services or to learn more, they’re a good fit for you is their phone number email, or they
can call the office. The number is 309-788-1970. And we’re in the middle of redoing our website, so I’d be remiss if I did plenty of the one that needs to be replaced.
So slug checks. Let’s get in there. Bill. It’s been a pleasure having you here on today’s show.
I appreciate you taking the time.
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