Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > College Planning > Student Loan Debt

How an Advisor Handled 2 Tough Client Cases in Florida’s Tourism Mecca

Your article was successfully shared with the contacts you provided.

The Florida tourism industry was hit hard by the COVID-19 pandemic, especially in the Orlando area that’s the home of popular attractions including Disney World, Universal Orlando Resort and Sea World that all temporarily shut down their amusement parks.

With a clientele that is largely made up of Disney World employees, along with investors who work for the other parks and the Marriott Vacation Club, there are also those who have retired from those tourist destinations. Dennis Nolte, vice president and financial advisor at Seacoast Investment Services in Winter Park, Florida, has seen the pandemic affect his clients in a wide variety of ways, he told ThinkAdvisor.

About 95% of his 290 clients with about $64 million in assets under management combined either currently work at Disney World or used to work there and have retired or now work for one of that attraction’s local rivals, he noted.

Roughly one-third of his clients were affected by recent Disney furloughs or had to take pay cuts at Disney or Universal, including executives who took pay cuts of about 20%, he pointed out. Those furloughed — about 20% of his clients — were not paid and were supposed to receive unemployment insurance checks, but many of them were still waiting for those, although most received stimulus checks, he said.

His clients have not seen their investment portfolios destroyed by the pandemic and resulting economic fallout, he noted. For one thing, most of his clients were not furloughed and have been working from home during the pandemic, he said. Another positive: Disney World, Universal and Sea World are all planning to open again soon.

“A lot of them are retirees” and most of the Disney folks have pensions, “so they’re not … in dire straits” like many other Americans right now, he noted.

What has also helped these clients has been careful investment planning.

How a Client’s Death Led to a New Client

Nolte received a grim text one day from an investor who had been a client of his since 2006 and retired about two years ago from his job as an engineer at Disney World, he recalled.

The client was texting him from a hospital, where he was being treated for double pneumonia, and told Nolte it was the roughest night ever for him and he didn’t think he was going to make it. “I didn’t hear from him” after that, but later saw on Facebook that the client’s nieces had posted he had died on or about April 11.

“It’s hard to say whether it was COVID-related or not,” Nolte noted. But the client was 66 and “had immune deficiency issues, so he was definitely part of the at-risk population and he went pretty fast,” Nolte said.

The death certificate did not name COVID-19 as the cause, but both his client before dying and his sister thought he had COVID “based on the rapidity/symptomology of his illness,” he explained.

The client was single, and his siblings would be splitting up his assets, about $600,000 to $700,000. One of those siblings was a sister living in California who had about $70,000 in credit card debt, he recalled. Nolte wound up helping the sister and her husband try to figure out their overall financial situation, he noted, adding that he was initially not being paid for that assistance.

The sister initially wanted to cash in her share of the inheritance, pay her debt off and pay the taxes all at once, he recalled, adding he was “in the process of talking [with her] about how best to strategize that so she can get rid of that debt and not incur” the huge tax hit that would come if she were to take it all as cash at one time and pay the taxes up front the same year.

“Maybe we can pay the credit card debt first, but maybe wait to have the rest of it paid out over next year or pay it out over the next couple to three years,” he noted.

Less than one week after our phone interview, Nolte told ThinkAdvisor that the sister “retained us to manage her account.”

Buying and Selling a House in a Pandemic

“That was actually more of a dire situation than any of my clients,” Nolte said.

He pointed to a married couple in their mid-50s with a seven-figure net worth who had been clients of his since about 2004. They still work full time for Disney World, one in upper management, the other in a salaried job. Neither was furloughed.

They had recently become debt-free, “had their home paid for” entirely, but late last year decided they wanted to buy a new home that was much bigger than the one they had.

“They both borrowed 50 grand and it wasn’t enough to pay for the down payment” on the new house, “so we robbed Peter to pay Paul, meaning that we took money out of their college funds for their kids, [and] we were going to take money from their IRA so they could put it back within 60 days and not pay the tax on it,” he said.

Unfortunately, “it turned out it ended up being longer than 60 days,” so they owed taxes, he noted. The couple also took $100,000 combined from their 401(k)s and “took money out of a 529 plan, so they’re going to have to pay some in taxes on gains” there also, Nolte explained.

The couple wound up getting the mortgage for the new home in early February, before COVID-19 spread widely in the U.S., closed on the old house and moved into the new one right around the time that Disney announced furloughs after closing their amusement parks in March, Nolte recalled.

“They ended up probably having to take $50 [thousand] to $75 [thousand] less than they thought they were going to get” for their old house only “three months earlier to get out of the house that they had owned,” he noted.

Nolte had wondered if they really just had to buy a new, larger home after working so hard to get debt-free, and they said they had to have the new home, he recalled. It might have seemed like a goofy idea, although they didn’t know a pandemic was coming.

The advisor pointed out that he didn’t try talking them out of it. “I know these folks for 15 years and I know when they start the ball rolling it’s just like ‘OK, how are we going to make this work?’”

He advised them to price the old home to sell because “you don’t want this on the market too long” as the pandemic had started, and it looked like it could “kill the tourism industry locally,” he said.

It was also unclear how badly the local housing market would be hurt, if the couple would be furloughed or not, and it was not clear who was going to be laid off, he pointed out. So, he suggested they take the risk off the table by selling the home quickly and “that’s what they did,” he said.

“They actually sold it in two weeks, so they priced it to sell… It worked out and they’re as happy as clams now,” he said, adding: “Now they’re going to pay their 401(k) loans back in full and still have a couple of hundred grand left over to invest.”

While Nolte wouldn’t recommend that any of his other clients do the same thing during a pandemic, it worked out fine for that couple. And “their financial plan wasn’t disrupted in the least because” he and the husband were really on top of their portfolio strategy and the couple’s assets were continuing to grow, Nolte noted.

“They knew that they were in really good shape,” he said, but added he had to do “a lot of hand holding, [if not] necessarily heavy lifting.”

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.