From the July 2004 issue of Investment Advisor • Subscribe!

July 1, 2004

Enough is Enough?

For most people, $20 million is a lot of money--an amount to be dreamed of, a lottery jackpot and then some. Yet there are people who have that amount of investable assets who nevertheless lie awake at night, worrying whether they'll one day run out of money. "It's amazing. I've had clients with net worths of $20 million and a $5 million-per-year pension who are worried about whether or not they'll be able to retire," says Joe Votava.

For most people, $20 million is a lot of money--an amount to be dreamed of, a lottery jackpot and then some. Yet there are people who have that amount of investable assets who nevertheless lie awake at night, worrying whether they'll one day run out of money. "It's amazing. I've had clients with net worths of $20 million and a $5 million-per-year pension who are worried about whether or not they'll be able to retire," says Joe Votava.

In part, these worries may spring from the complexity of wealthy clients' finances. With their money spread among various accounts and investment vehicles, they may not be able to tell easily how much they actually have. What's more, since many of Votava's clients are busy executives frequently jetting from one coast to another, they may have little time to reflect on their positive financial picture. If anything, they probably focus on a perceived need to accumulate more, not on the possibility that they may already have enough.

Part of the problem, too, may be the natural tendency of people to compare themselves to those around them. "They may spend all day with people who have $200 million, so in comparison, they feel that what they have is insignificant," says Votava. It seems that when you're surrounded by people with six vacation homes and four Porsches, your two vacation homes and two Porsches start to feel a little bit less like enough.

To help clients get a grip on their good fortune, Votava pulls together a comprehensive picture of the clients' disparate assets, in order to show them exactly where they stand. He then calculates how much the clients are likely to need for the rest of their lives, and shares his findings with the clients, usually on multiple occasions. "It's not like a light switch: It's hard for it to sink in, so you have to talk about it over a period of years," he says. "Finally, they begin to realize that what you've been saying all along is right: They can't spend it all."

Helping clients realize that they don't need their every last dime has two benefits. One, the clients can finally sleep well at night, and two, Votava can finally begin encouraging them to think seriously about what to do with the "extra," either through estate planning or charitable giving. Sometimes this new topic of discussion seems simply to give them something else to worry about ("I'm going to have to pay how much in estate taxes?"), but the sooner the client is ready to begin thinking about estate and charitable planning, the more effectively Votava can help them plan. "Sometimes I think, 'Boy, this [estate and charitable planning] would have been easier if you'd come to this realization earlier,'" Votava says, "but you can't put the cart before the horse. They have to believe that they have enough before they can start thinking about giving it away."--Karen Hansen Weese

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