Debt Management is a critical component of any wealth management service. My friends and clients often ask me, “Should I pay off my debt, or invest my free cash?” This is usually a tricky question, especially without detailed knowledge of that person’s financial standing.
At DreamWork Financial Group, our clients’ best interests are at the forefront of every decision we make. This can sometimes mean giving our clients advice that doesn’t necessarily affect our bottom line in a positive way. This is very common with regard to debt management. To help illustrate this, I’d like to share a story about a recent meeting I had with a potential client.
A young lady walked into my office looking to transfer her investments to DreamWork Financial Group. She had an old 401k and a Whole Life Insurance policy that she was looking to have us manage. As with all appointments, I was very excited to help her out.
During our insurance analysis, we made the determination that she had more than enough term life insurance. With this knowledge, it made sense to transfer the heavily “front-end loaded” Whole Life policy into an “investment” at DreamWork Financial Group.
However, as we proceeded to the debt management portion of the review, she revealed that she had significant outstanding student loan debt – at rate of 8%. In the current market environment, 8% return on a safe investment would be difficult to find. It would be foolish to expect a return higher than 8% without taking on excessive risk. We completed an analysis to determine whether it was a smarter decision to invest the cash and continue paying the loan payments, or to use the insurance funds to pay down the debt. After the detailed analysis, it became evident that investing the newly available funds was not the smartest move for her. Instead, it made much more financial sense to pay down her student loan, even if it meant our firm would not benefit from this decision in the short term.
In the end, she decided to pay off the student loan and began investing her student loan payment (which she no longer owed) into an investment account with us at DreamWork Financial Group. Due to the advice that we provided, our firm will make significantly less from this client in the short-term. But, we believe that by managing her wealth the DreamWork Way, we will grow our relationship and her wealth together. This will result in more wealth for both of us in the long-term.
At DreamWork Financial Group, growing our clients’ wealth over the long-term is in our best interest. Even when a short-term, “in the moment” decision could make us some quick money, we ALWAYS put our clients’ best interests first. This is our fiduciary responsibility and we take it very seriously.
We believe that in the long run, we will build a larger client base by keeping this philosophy. Our long-term approach to client building is what we believe will keep DreamWork Financial Group and our clients happy and wealthy for many years to come.
Debt Management is just a small part of the entire wealth management package we provide at DreamWork Financial Group.
Sharing our experiences is extremely important to me and DreamWork Financial Group. Whenever you need help planning your future or assistance growing your investments, we hope you will think of DreamWork Financial Group first. We look forward to the opportunity to grow your wealth, whenever that need arises.