Asset Consolidation with Matthew Tomlin, CFP?

Matthew Tomlin, CFP?, Associate Director of Financial Planning at Falcon Wealth Advisors, joins Jake to discuss asset consolidation on this week’s episode of Upticks. In their discussion, Jake and Matthew dive into how working with a single wealth advisor has the potential to improve your portfolio’s performance, lead to effective tax planning, and simplify your life.

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Matthew Tomlin, CFP?, Associate Director of Financial Planning at?Falcon Wealth Advisors, joined me to discuss asset consolidation on a recent episode of?Upticks. Matthew, who joined Falcon Wealth Advisors two years ago, is a University of Missouri grad who worked in finance prior to joining our team. He’s both a CERTIFIED FINANCIAL PLANNER? and a licensed financial advisor.

In our discussion, Matthew and I dive into how working with a single wealth advisor has the potential to improve your portfolio’s performance, lead to effective tax planning, and simplify your life. A summary of our conversation is below.

Jake:?As we approach 700 clients at?Falcon Wealth Advisors, it’s beneficial to have a CERTIFIED FINANCIAL PLANNER? like Matthew on our team. Matthew, what did it take for you to earn the CFP? designation and what topics does it cover?

Matthew:?There are “Four E’s” needed to become a CERTIFIED FINANCIAL PLANNER?. The first is education—at The University of Missouri, my classes were centered around financial planning, covering topics like estate planning, retirement, investments, insurance and more. As a CFP?, I am now required to complete continuing education courses each year.

The next E stands for exam. The CFP? exam takes about 6-8 hours and covers some of the topics I just mentioned, as well as behavioral finance, psychology of finance, and more. It was a wide ranging exam.

The next is experience—work experience specifically. To earn the CFP? designation, one must have at least three years of financial planning experience.

And the final E is ethics. We have to finish a course on ethics to become a CFP? and ethics courses are part of the annual continuing education I mentioned.

Jake:?Thanks for the time you spend on continuing education and learning about the new rules that impact our industry. You’ve been an important addition to the team and have added a lot of value for our clients.

Let’s talk about asset consolidation. People know they should avoid putting “all their eggs in one basket” and should aim for a diversified portfolio, but don’t necessarily understand what that looks like in practice.

Matthew:?I think some people understandably assume that if they invested in multiple mutual funds with multiple wealth advisors, their investments are properly diversified. But that’s not necessarily the case, because the mutual funds could be made up of mostly the same stocks and sectors of the market.

At?Falcon Wealth Advisors, we believe a diversified portfolio should include individual stocks—from companies of different sizes and in different sectors—individual bonds, cash, and other assets, like real estate, depending on your situation. That’s what diversification is, rather than just trying to spread your assets all over the place.

Jake:?As you alluded to, it’s possible to both have all your assets with one wealth advisor?and?have a diverse portfolio—assuming your advisor allocates those assets properly, which I believe we do at?Falcon Wealth Advisors.

And as you mentioned, if you work with multiple wealth advisors, there could be some overlap between investments. I’m grateful most of our clients have consolidated their assets at Falcon Wealth Advisors, and we spend a lot of time and energy making sure their portfolios are diversified. Because we use individual stocks and bonds, it’s easy for both our team and our clients to see where they’re invested and where they’re not.

Would you please talk about why asset consolidation is important for tax planning?

Matthew:?If we’re able to see all your investments, it makes it possible for us to pursue tax planning strategies like tax loss harvesting, which involves selling stocks at a loss to offset capital gains taxes. If your investments are spread amongst advisors, this can be more difficult.

And as you retire and begin to take withdrawals, we can be more efficient from a tax planning perspective if all your assets are consolidated with one firm. We can work with you to determine how much you should withdraw from your taxable brokerage account, your Roth IRA, your traditional IRA, etc., all in an effort to lower your tax liability in both the near and long term.

Jake:?That’s a good point. Tax planning is difficult if we don’t have all the information we need. Let’s imagine you have an IRA with another wealth advisor and an IRA with?Falcon Wealth Advisors, and you take a withdrawal from the account not managed by us and we don’t find out about it, or don’t learn about it until months after the fact. It’s not difficult to see how this could prevent us from doing effective tax planning for you—and the planning we are doing for you could even backfire, as we won’t have all the pertinent information we need.

Clients are welcome to work with us and other advisors, but I believe it can create a lot of work for clients to keep multiple advisors on the same page. I believe you can simplify your life and improve your financial plan by working with one fiduciary wealth advisor.

To state the obvious: as fiduciary wealth advisors, we want to manage the entirety of our clients’ portfolios. This is how we generate revenue for our firm. But I’ve been doing this long enough—about 16 years—to see that clients who have their investments spread between advisors aren’t getting the full value of our services at?Falcon Wealth Advisors.

Matthew:?Yes, consolidating your assets allows our team to make sure the assets in your portfolio align to be more tax efficient. I’ve seen tax-efficient accounts like a traditional IRA have tax free bonds in them, for example. This is not a good idea.

Jake:?Wow. And we’re not suggesting you consolidate?everything. If you like keeping some cash in a checking or savings account, you should. We’re mostly talking about long-term investments or assets geared towards your retirement goals.

An analogy: most people only go to one dentist. After going to the same dentist for a while, that dentist becomes familiar with your health, your needs, any medical issues, etc. They’re able to see the big picture. Working with one fiduciary wealth advisor isn’t all that different.

And working with a single wealth advisor has the potential to lower the fees you pay advisors. At many firms—including?Falcon Wealth Advisors—the fee percentage clients pay decreases as they invest more money. It’s harder to take advantage of this if your money is managed by multiple advisors.

Matthew:?Another thing we should discuss are the Required Minimum Distributions (RMDs) investors are required to take from pretax retirement accounts, like traditional IRAs, beginning at age 72. If you have multiple IRAs, it makes it more difficult to track and ensure you’re withdrawing enough money to satisfy the RMD. If you don’t withdraw enough to meet the RMD, you could be liable for a hefty tax penalty.

And regarding estate planning, consolidating your assets with one wealth advisor will make things easier for your beneficiaries.

Jake:?Those are both important points, Matthew. The IRS doesn’t care how many IRAs you have; they just need to see that you’ve met the full RMD. It can be a lot for someone in their 70s—who should be enjoying their retirement—to navigate this process.

As you mentioned, beneficiaries having to work with multiple advisors can make things more cumbersome, especially during an emotional period in their life when they may be grieving.

It’s also vital to make sure beneficiaries are listed properly on your retirement accounts, and having multiple accounts with multiple advisors increases the risk of issues developing. This could lead to your beneficiaries having to go to court, spend money on legal fees, and wait for an extended period before receiving the funds.

At?Falcon Wealth Advisors, we are fiduciary wealth advisors, meaning we are legally obligated to act in your best interests. If you want to learn about how our detail-oriented team can help properly diversify your assets and simplify your life, please contact us today. You can reach me directly at?[email protected].

Clients choose to work with us to enhance their financial literacy and explain exactly what their financial plan means to them.

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