Friday, January 9, 2009

The Making of a Financial Planner

What makes someone want to become a financial planner? In my case you might call it a series of unfortunate events.

My father died from pancreatic and liver cancer almost 15 years ago. In the last year of his life he suffered terribly not only from the ravages of his disease but because his financial life began to unravel at the same time.

For most of his life he had been a successful businessman. He and his brother sat atop a small empire of retail stores and a variety of investments in local businesses in my Midwestern home town--a family business my grandfather built after emigrating from the Ukraine. We lived very comfortably in our small community while I was growing up; in fact I'd say my brothers and I were pretty spoiled, never wanting for anything. I saw my dad as a savvy businessman and a person of the highest integrity.

Our fortunes first began to turn when my dad and uncle decided to open a new store halfway across the country in Nevada. Until then I had been unaware that dad was unhappy with his life, but he was restless and looking for a big change. Boy, did he get it! Our family voted (four to one -- I was the only one opposed) to relocate so that dad could manage the new venture. Soon after moving the family he left my mom and filed for divorce.

Not surprisingly, my mom chose to leave Nevada and headed back to the east coast where she had grown up. During her marriage mom had paid the bills, but dad really managed all other aspects of the family's finances. Every element of money management was new to her -- living on a budget, buying a house on her own and making big financial decisions -- and she was ill-equipped to deal with any of it. Over the years she was victimized by salesmen and brokers who won her trust and sold her inappropriate products with no regard for what she really needed.

Meanwhile my dad fell in love and remarried. While his love life was flourishing, changes in the IRS rules created massive tax liabilities for the family business. It was a financial blow dad never really recovered from, but he hid it from the rest of us even cooking the books to keep his brother in the dark. I think he believed his fortunes would turn and he would make it all right, but he got sick and ran out of time.

After his condition was diagnosed, dad began to count on a large life insurance policy he had purchased to keep the business afloat and to provide an inheritance for his wife and three adult children. The plan was in place and might have worked as dad hoped, but less than a month before his death my step-mother convinced him to transfer ownership of his life insurance policy to her. She promptly made herself the sole beneficiary and received the entire death benefit when he died.

That sounds like the end and enough to motivate me to want to learn more about financial planning, doesn't it? But there's more!

Dad's life insurance policy was what's known as key-man insurance, intended to carry his business partner--his brother--through several months during which he would find someone to fill dad's shoes and keep the business (which my dad had thrust deeply into debt) afloat. So it wasn't really dad's policy to leave to his children or his new wife, and it certainly wasn't his to transfer to a new owner. It's probably not too surprising that my uncle sued my step-mother and after months of very ugly back-and-forth they came to a settlement. She bought him out; over time she paid off and negotiated down the remaining debts. She owns and runs my dad's business to this day.

While all of this was happening I began taking CFP courses. I wanted to learn how to spare others from the mistakes my family had made.

Initially, I saw my step-mother as the villain who stole my inheritance. When my uncle sued her and won, he joined the bad-guy team. But as I learned more about personal finance I realized that my dad and my uncle had an agreement and dad had broken it first by changing the beneficiaries of his life insurance policy and then by giving it to his wife. So my uncle was a victim too. Even my "evil" step-mother was going to be stuck with credit card bills my dad had hidden. I could eventually see that she was doing what she needed to just to keep his wreckless acts from dragging her down financially. She wanted to save her house and the assets she had built up over a lifetime. I can understand why she did what she did.

My dad blew it by failing to plan, by denying the reality of his financial limitations, and of course by lying to everyone along the way. I'm even willing to see him as a victim -- a victim of unfair tax laws and even more a victim of love! He was so eager to please his second wife he didn't want to confess his failings; he wanted to give her everything.

And in the end, I don't really see myself and my brothers as victims at all. We were clearly last in line for the insurance money. We didn't receive any inheritance at the time of his death, but my dad put us all through top-notch colleges and instilled a work ethic that has allowed each of us to survive and flourish on our own. And his missteps brought me to a profession I love--that's a pretty good silver lining in my book.

Annette Simon

Copyright 2009 Garnet Group LLC

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