The beginning of a new year generally facilitates moments of reflection on the ups and downs of the previous year. The year 2020 was challenging, to say the least, yet there were certainly positive aspects for the firm, particularly in the area of performance. One critical area that is often overlooked is distribution planning. More often than not, emphasis has been on the accumulation side of the ledger. We tend to focus on the growth of our wealth as opposed to the distribution of our assets. Websters defines distribution as “the action of sharing something out among a number of recipients.”
How did we do in fulfilling income needs or providing access to capital for our clients last year?
In 2020, our clients withdrew funds in excess of $27,000,000! A rather remarkable figure given our size and locale. What then, are the required tools to successfully execute a proper distribution strategy?
The process begins with our advisors in an in-depth discussion and analysis prompted by the internal resource, WealthMap, our proprietary financial planning tool. WealthMap is the means by which we begin setting up a template, to guide us in making informed decisions on when and how you should be taking income and/or withdrawals. Then, we can properly allocate your account to help meet your financial goals and needs. For example, investing in a diverse mix of dividend paying stocks and investment grade bonds can help generate monthly income without the need to invade principal. Sprinkle in some growth stocks and an international sleeve and you have a diversified portfolio designed to generate both growth and income over time.
There are certainly other avenues and strategies to generate income, but we generally find that these other financial instruments usually lack liquidity and/or transparency. A trade off that we believe doesn’t justify the increase in yield or distribution. In the end, the time-tested strategy of taking a systematic withdrawal from a well-thought-out portfolio, properly diversified and aligned to the investors emotional make-up, generally results in a very positive experience.
If you wish to discuss this topic in greater detail, please reach out to one of our Wealth Advisors. We value and appreciate the confidence you place in us and hope to continue to earn your trust in the years to come.
Karl A. Wagner III
Partner, Senior Wealth Advisor