High net worth
High net worth
Background:
From the case, we can know that Joe and Sara Finnegan are both 762 years old and living in Kerrville, Texas. They are retired and have a combined investable net worth of $2 million, the bulk of which was inherited from Sara’s father’s estate. For the total wealth is Joe’s $500,000 defined-contribution retirement plan that is managed separately in a 041(k) plan, which will not begin being withdrawn until Joe reached age 70.
They do not have children so that they do not need leave any money for children. But they have agreed to pay the nursing home expenses for Joe’s 86-year-old father. The total expense per year is $245,000, including $130,000 for their father, and living expense for tracing around the world, $115,000. The Finnegans’ entire income is generated from their portfolio and is taxed at 15%.
From the case we can see Mr. Finnegan’s performance characters:
Because Mr. Finnegan’s performance “without regard fro asset calss characteristics or his own risk and return objectives, Mr. Finnegan has selected a portfolio that is equally weighted in each asset class and instructed his trust manager to rebalance the portfolio at the end of each year to maintain the equal weighting.” I can see that Mr. Finnegan knows a little about the financial things. If I am the investment advisor, I should depends on the client’s willing and do the best investment, which could fit them best. So that, according to the Finnegan’s situation, assume that Finnegans could live for another 15 years and their father could live for another 3 years. So that, for the first 3 years, their expense could be 245,000 per year, and last 12 years the living expense should be 115,000.
Analysis:
1. FV=0, PMT=176,470(living expense = 150,000), I= 3.85, N=12, PV= -1,670,692
2. FV=920,692, PV=-2,000,000, I=3.85, N=3, PMT= - 423,266
After tax, they can get 359,776
Under this situation, I suggest them to invest the conservative asset mix.
Background:
From the case, we can know that Joe and Sara Finnegan are both 762 years old and living in Kerrville, Texas. They are retired and have a combined investable net worth of $2 million, the bulk of which was inherited from Sara’s father’s estate. For the total wealth is Joe’s $500,000 defined-contribution retirement plan that is managed separately in a 041(k) plan, which will not begin being withdrawn until Joe reached age 70.
They do not have children so that they do not need leave any money for children. But they have agreed to pay the nursing home expenses for Joe’s 86-year-old father. The total expense per year is $245,000, including $130,000 for their father, and living expense for tracing around the world, $115,000. The Finnegans’ entire income is generated from their portfolio and is taxed at 15%.
From the case we can see Mr. Finnegan’s performance characters:
Because Mr. Finnegan’s performance “without regard fro asset calss characteristics or his own risk and return objectives, Mr. Finnegan has selected a portfolio that is equally weighted in each asset class and instructed his trust manager to rebalance the portfolio at the end of each year to maintain the equal weighting.” I can see that Mr. Finnegan knows a little about the financial things. If I am the investment advisor, I should depends on the client’s willing and do the best investment, which could fit them best. So that, according to the Finnegan’s situation, assume that Finnegans could live for another 15 years and their father could live for another 3 years. So that, for the first 3 years, their expense could be 245,000 per year, and last 12 years the living expense should be 115,000.
Analysis:
1. FV=0, PMT=176,470(living expense = 150,000), I= 3.85, N=12, PV= -1,670,692
2. FV=920,692, PV=-2,000,000, I=3.85, N=3, PMT= - 423,266
After tax, they can get 359,776
Under this situation, I suggest them to invest the conservative asset mix.