What You Need to Know

“I’ll be the pleasant voice on the other end of the phone or the first smile you see when you walk in.”
-Debra Baron, Administrative Assistant

 

The decision to seek out a Financial Advisor is not easy and the choice of picking the “right team” is even more challenging. The financial services industry has a well-deserved negative reputation due to some bad eggs who simply do not believe in and honor the Fiduciary Standard. The purpose of this page is to break down the barriers, cut through the jargon, and provide you with simple and honest answers to your questions.

FAQs

Here are the most frequent questions we hear along with some other information we think is important for you to know about us. Whether you choose White Pine or another investment advisory firm, you should be asking these important questions.

Months before Russ started his company in 1997, he wanted to choose a name which would represent good business values and be memorable to his clients. His thoughts turned to the beautiful landscapes that had always fascinated him: from the rolling Southeast Michigan golf courses where he caddied during his youth to the gorgeous campus of Michigan State University that he walked every day as a student. Having gone on to complete the master gardener program through MSU, he realized that trees are the backbone of almost every landscape. So it seemed natural to include the name of a tree in the company name. But not just any tree. It would have to be a fast and steady grower. A tree that could withstand storms and disease. A tree with inherent stability to represent perseverance through the challenges of life. Finally, he reasoned that the name should reflect the beauty of the state in which most of his clients live (or have lived)-Michigan. So it was that he chose the beautiful Eastern white pine (pinus strobus) for the name, White Pine Investment Company.
We care about our clients and their families and believe in creating lasting relationships with them. We build financial plans that are realistic and attainable, and we manage them with skill and integrity. We view our role as stewards of our clients’ financial lives, family stories, even spiritual connections. We continually push to expand our knowledge base with our decision-making process for which we consider all that we’ve read, all that we’ve heard, and all that we’ve learned. Finally, we strive to seek Divine guidance in every aspect of our lives.
The financial planning process begins by filling our Digital Questionnaire or PDF Version. We use this to create a strategic financial plan based on your unique situation. You will then have a better picture of where you stand regardless of whether or not you decide to work with White Pine to bring that plan to life.
Our client base is made up from a very wide range of people from various professions, education levels, life stages, and ages. Most of our clients live comfortably but are not so wealthy that they can spend indiscriminately. They need a well-designed plan that will carry them through their retirement years. In addition, many of our clients are interested in providing for future generations and educating family members about financial basics. We encourage our clients to involve their children and grandchildren in the investment process. We carefully consider each aspect of our clients’ circumstances when creating their personalized financial plan.
All of our clients’ assets are held at Charles Schwab & Co., Inc. It is important for your assets to be held by an independent third party with the proper insurances and protections as an added layer of security.
Our only method of compensation is the annual fee that we charge on a quarterly basis. That annual fee is based on a percentage of total assets under management (AUM) and the asset mix of your portfolio, never to exceed 1%. We do not accept compensation for placing our clients in any specific investment product.
No, we charge no other fees. However, Charles Schwab charges a transaction fee when securities are bought or sold. White Pine Investment Company does not receive compensation for these fees. Charles Schwab’s fees for stock transactions are extremely modest and rarely exceed $20. If you sign up for paperless statements and confirms, we are able to ensure that trading fees cost less than $9. For mutual funds, fees do not exceed $50.
Although not a hard-and-fast rule, the minimum new-account size at White Pine is $500,000. If your investment dollars total less than that, we would still be happy to talk with you and recommend appropriate next steps. Also, we welcome the opportunity to help children of our clients understand the importance of investing early and intelligently. We are always willing to help members of your family and consider them valued White Pine clients.
It is pretty simple: we invest our portfolio in the same manner that we invest yours. In fact, we also pay fees according to the same schedule as our clients.
You will be provided with a comprehensive financial plan as well as ongoing investment management services to execute your plan. We will be happy to answer your questions concerning all aspects of your financial life such as:
“Should I refinance my mortgage?”
“How should I save for my child’s college education?”
We are always willing to recommend and/or meet with other professionals involved in handling your estate. We wish to be with you every step of the way to help you navigate all of the important decisions that must be made to responsibly and effectively managing your assets.
NO. White Pine is in good standing with all governmental bodies.
Yes. One of the benefits of an individual equity portfolio is the ability to control taxable events more closely than through mutual funds. When we make decisions regarding whether or not to sell a security in your account, we first look at the investment merits of that decision. We then consider the tax consequences of selling a security. For example, the majority of our investment holdings are held for more than 12 months, thereby subjecting them to a more favorable capital gains tax rather than an ordinary income tax.
We disclose every detail about our company to the SEC and want to make sure that all of this information is available to you in simple and understandable terms. You can find our form ADV Brochure or click on the “Broker Check” button at the bottom of the page to get a more comprehensive look.
We value consistent communication and schedule face-to-face meetings on a regular basis, and we are always available to meet upon your request. In addition, you will receive a quarterly newsletter and a report detailing your portfolio’s performance. You will also have the opportunity to set up online access to your accounts at Charles Schwab.

Case Studies

Every individual is different and every financial plan must invariably be different. What is your current plan? How often do you revisit your plan and goals? Here are some examples of people who have been able to achieve their financial goals.

Case Study: James and Susan Johnson whencaniretire

Background

The Johnsons have the following financial profile:
Now both in their mid-50’s, they have a combined salary of $210,000. When they are retired, they are expected to have a collective $45,000 in social security benefits. While neither has a pension, they have been contributing to both their companies’ 401k plans and brokerage accounts totaling $700,000 and $625,000 respectively. They have been living in their home for the last 12 years and have recently refinanced a $250,000 loan with a 3.9% APR. Beyond mortgage payments they expect to spend $82,000 annually and are now concerend about their retirement goals being met.

Problem

Given their moderately aggressive portfolio allocation, the Johnsons expect their assets to grow 6.1% per year. Considering a 2% inflation rate and their current lifestyle trend, they would like to know:
“When Can We Retire?”

Solution

In general, the longer a couple can wait to retire, the better their plan will work. For each year they wait, there is one less year of spending and one more year of saving. Several critical variables must be considered before answering the Johnson’s question. Will their assets have enough time to grow to a sufficient level to maintain their standard of living? Will they be willing to adjust their spending levels after they retire especially during downturns in the market? How much risk are they willing to take during their retirement?
If the Johnsons were to retire at the age of 60, it is likely that their assets will have grown to a sufficient level to sustain their standard of living throughout retirement. However, since much of their income needs will come from their portfolio, and the portfolio must take on some level of risk, there is only a 64% chance their money will take them to age 90 (see first graph on next page). The Johnsons are not willing to retire knowing there is a 36% chance they’ll run out of money. If they work another five years to age 65, their chance of success rises to 93% (see second graph on next page), so that is what they have chosen to do.

Probability of successfully meeting their goals if they retire at age 60:

Probability of successfully meeting their goals if they retire at age 65:

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DISCLAIMER: “All names, characters, businesses, places, and incidents described are fabricated to simulate a real life scenario. Any similarities to actual events or persons, living or dead, are entirely coincidental. This case study may showcase investments that are not suitable for all investors. Past performance is not a guarantee of future results and investors should consider their own risk tolerances, tax brackets, financial needs and investment objectives as it may differ from those listed in this case.”

Case Study: David Fischer

givingback

Background

Over the past 40 years, David Fischer has built his manufacturing business into one of the most respected in the state. He has been able to save more than he needs for his retirement and has consistently invested a portion of his income. David has found fulfillment from volunteering his time with his favorite charities and is now interested in supporting these organizations. He has considered making annual gifts, but he isn’t sure of the most tax-effective method.

Problem

David’s company provides him with a $495,000 income every year which puts him in a 39.6% tax bracket. He believes that he is in a position in which he can donate $125,000 annually but isn’t sure if simply writing a check is the best vehicle for that donation. How can he be more deliberate with his giving?

Solution

While David can certainly write a check for $125,000 comfortably each year, both his charities and he can benefit even more from other avenues of contribution.

Donating Cash: Since charitable donations are tax deductible, the actual cost of the donation is reduced by the tax savings. For example, David is in the 39.6% tax bracket; therefore, his annual $125,000 donation would provide him with a $49,500 tax savings each year.

Donating via a Charitable Trust: Donating stock that has appreciated is more tax-efficient than donating cash. This is good news for David who has accumulated many highly appreciated securities during his long history of investing. David can donate $125,000 of securities into a Charitable Trust and will not have to pay any capital gains taxes on those securities. For example, if he holds 1,000 shares of a stock purchased for $10/share which has now grown to $125/share, then David will forgo having to pay $27,370 in capital gains and other taxes.* In addition, he is entitled to the same $49,500 tax savings as he would get from a $125,000 cash donation. This will save him a total of $76,870 each year.

Additional benefits of the charitable trust include:
 Contributions do not need to be distributed in the same year, but David’s tax savings occur at the time of his contribution.
 All funds remaining in the trust will grow tax-free, so the charities will receive even more money over time.
 The charitable trust will vet each charity for David to ensure that his donations are tax deductible and that each charity’s filings are current.

* The tax rate on capital gains for David’s income level would be 20%. He will also be saving the additional 3.8% surtax that would have been charged for Medicare. With his cost basis for his donated stock costing $10,000, his tax savings would be ($125,000-$10,000)*.238=$27,370

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DISCLAIMER: “All names, characters, businesses, places, and incidents described are fabricated to simulate a real life scenario. Any similarities to actual events or persons, living or dead, are entirely coincidental. This case study may showcase investments that are not suitable for all investors. Past performance is not a guarantee of future results and investors should consider their own risk tolerances, tax brackets, financial needs and investment objectives as it may differ from those listed in this case.”

Case Study: Carly & Leslie Rose

starting-early

Background

Leslie and Carly, sisters and best friends, just graduated from college together. Many of their friends and family have been known to refer to Carly as the practical sister and Leslie as the “free spirit.” When asked about their future plans, the sisters’ responses reflect their different viewpoints. Carly promptly states that she would accept an appropriate job and start saving as much as she could for retirement. Leslie, being the free spirit that she is, prefers to travel for a few years and take some part-time jobs before starting to save for retirement. She thinks that even if she waits until she is 30, she should be able to catch up to Carly’s investment by the time she retires by adding to her portfolio over a longer period.

Question

If Carly were to start contributing $2,000 to her investment portfolio each year for the next 10 years, how big would her portfolio be by the time she turns 90? If Leslie were to wait for 10 years and then contribute $2,000 per year until she is 90 years old, would she catch up to Carly’s portfolio assuming that both sisters were able to attain an 8% return per year?

Answer

 If Carly were to start investing today and contribute $2,000 per year for 10 years (ages 21-30 for a total of
$20,000 out of pocket), her portfolio would have $3,168,432 by the time she was 90 years old.
 If Leslie were to wait for 10 years before investing and then contribute $2,000 per year for the next 60 years (ages 31-90 for a total of $120,000 out of pocket), her portfolio would have $2,706,941 by the time she was 90 years old.
 Simply stated, Leslie would have to invest nearly 6 times as much money as Carly to achieve only 85% of Carly’s portfolio.
 Starting early makes a huge difference!

sepicture

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DISCLAIMER: “All names, characters, businesses, places, and incidents described are fabricated to simulate a real life scenario. Any similarities to actual events or persons, living or dead, are entirely coincidental. This case study may showcase investments that are not suitable for all investors. Past performance is not a guarantee of future results and investors should consider their own risk tolerances, tax brackets, financial needs and investment objectives as it may differ from those listed in this case.”

Case Study: George & Olivia Olsen

pensionbuyout

Background

George Olsen spent his entire professional career working for a major automotive manufacturer while he and his wife, Olivia, raised their two children. At the age of 65 he retired and started to receive an annual pension of $45,000. Upon his death, Olivia would receive 50% of George’s pension payment for the remainder of her life. Now, at the age of 76, his former employer has given him the option of receiving a $425,000 lump sum in lieu of taking his annual pension as scheduled. George and Olivia are not sure which option is best for them. George is in fair health and thinks that he should be able to live to age 85. Olivia, who is also 76, is in good health and expects to live to age 90.

Problem

Would George and Olivia benefit more from taking the lump sum buyout option, or should they choose to continue receiving the annual pension?

Solution

The first step in the analysis is to define the breakeven point for the pension versus the lump-sum buyout. If George and Olivia were to invest the lump sum in a conservative manner, the expected rate of return for their portfolio would be around 4% given today’s low interest rate environment. If they invest their pension funds in a like-fashion, the breakeven point can be calculated on the graph on the next page. The graphs cross at age 91, suggesting that if they both were to die before age 91, they would be better off with the lump-sum.

Next, we have to consider their risks. If they continue to take the pension, Olivia runs the risk of George dying early which would cut her pension payout in half. Another risk consideration is if either of them live beyond the age of 91. With a 4% interest rate assumption, this suggests it would be better to take the pension. However, if they have other investment assets which would allow them to take on more risk and thus earn a higher return on their investments, the lump-sum option may be better. Finally, if neither lives beyond age 91, the pension stops and their heirs would not benefit. On the other hand, any funds remaining from the lump-sum option becomes available as an inheritance.

There is rarely a clear cut answer with pension versus lump-sum options. Providing a framework to deal with all of the uncertainties will help them make an informed decision. George and Olivia decided they should take the lump-sum because of health considerations and their ability to take on slightly more risk in their portfolio. Their children will benefit from any extra inheritance the lump-sum may provide.

penspic

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DISCLAIMER: “All names, characters, businesses, places, and incidents described are fabricated to simulate a real life scenario. Any similarities to actual events or persons, living or dead, are entirely coincidental. This case study may showcase investments that are not suitable for all investors. Past performance is not a guarantee of future results and investors should consider their own risk tolerances, tax brackets, financial needs and investment objectives as it may differ from those listed in this case.”