Why Would You Use a Personal Daily Money Manager?

Tue, 09 Nov 2021 10:18:59 -0800

One of the pleasures of working as a fiduciary is adapting to the needs of my clients. Each client is different and requires different services. And those services can change over time as clients' situations change. Some of my earlier posts have been about relatively sophisticated financial planning instruments (Special Needs Trusts, ABLE accounts, passing real estate between generations, etc.). These are interesting and can create a lot of value.

But many clients have a need for straightforward financial management in the form of daily money management.

What is daily money management? To simplify, it is just about managing day-to-day financial tasks. A sample list of activities might be:

Collecting bills in one place
Reviewing bills for accuracy
Communicating with creditors
Questioning or challenging inaccurate or fraudulent charges
Stopping unneeded recurring charges (forgotten subscriptions and automatic payments)
Paying bills
Keeping records of paid bills
Making bank deposits
Organizing tax information
Clear summaries and communication with the client and other appropriate parties (if any)
Budgeting and tracking (if asked to do so)

There are a number of reasons for outsourcing daily money management. Clients may find the tasks difficult or impossible, they may have too much going on in their life (career, family, health) or simply don't like doing them.

Not all clients need all of the tasks above. In fact, most do not. Some clients simply want their bills collected and organized. I review the bills, create a summary, fill out the checks and go over each one with the client. The client signs the checks and I post them. It is a very light process completely under the watchful eye of the client. Some clients want me to manage the whole thing. Most want something in the middle. In each case, the key is to talk with the client, propose a solution and then communicate and adapt as we go through the process.

Some of my clients have asked me the difference between a daily money manager and a bookkeeper. While some of the tasks are the same, the general rule of thumb is that a bookkeeper works for a business while a daily money manager works for an individual. The graphic below may help.

AADM (American Association of Daily Managers)

In nearly all cases, the cost of a daily money manager is more than compensated by discovering unnecessary or fraudulent charges, stopping old subscriptions or automatic payments and eliminating late fees and interest charges. Clients and family members also appreciate the peace of mind that comes from clear expense summaries and communication.

What is a Professional Fiduciary?

Fri, 09 Jul 2021 10:24:41 -0700

I get this question all the time and I’ve been searching for a pithy response. The formal definition - A fiduciary is a person who assumes responsibility for a person of Trust – seems a bit stiff and unclear.

After some thought, I’ve started explaining it this way: A professional fiduciary does what your child would do if your child was nearby, trained, experienced, objective, insured and always available.

That’s not a perfect definition (obviously, not everyone has children, not all my clients are senior citizens, etc.) but I think it gets at the gist. The list of tasks differs from client to client, but it can be long and incredibly varied. A professional fiduciary might:

Act as a professional Trustee. In this capacity, the fiduciary manages assets, reports to beneficiaries and (often) manages the liquidation and disbursement of the Trust’s assets to beneficiaries. This can be simple or it can get very complicated and messy. Trusts can have multiple properties, rental income, functioning businesses, investment restrictions, complicated disbursement instructions and other complexities.

Act as a Conservator. Regardless of how you feel about the Britney Spears case, conservatorships are a valuable structure for people who have difficulty managing daily tasks and decisions. A Conservator might manage finances, household tasks, medical decisions and other critical tasks for their Conservatee. The goal is to preserve, to the extent possible, the quality of life that the Conservatee wants.

Manage probate. This encompasses the whole process of valuing and liquidating an estate, reporting to the Court and getting approval on the plan, disbursing the proceeds and reporting to all interested parties. I know cases where fiduciaries have had to value collections of antique pipes, toy cars, ceramics and other passions. There are also decisions around real estate, vehicles and other assets that somehow have to be divided equitably. And that’s just the financial aspect – estates almost always have items of sentimental value that might be valued differently by family members.

All of the roles above require skills beyond any one person, so part of a fiduciary’s job is to develop a roster of skilled, ethical and reliable experts in a variety of areas: estate attorneys, investment experts, tax consultants, tradesmen, appraisers, estate auctioneers, caregivers, housekeepers, etc.

In most cases, the benefits of bringing in a professional fiduciary far outweigh the costs, particularly in the San Francisco Bay Area, where even modest estates can be quite large because of real estate inflation. A smart liquidation and tax strategy can save beneficiaries hundreds of thousands of dollars. And beyond the financial benefits, having an objective third party involved can avoid hard feelings or suspicions amongst the family, which is priceless in the long run.

There are additional definitions and resources available at the Professional Fiduciary Association of California website.

South Laurel Group - Blog , Definitions

Why Would You Use a Personal Daily Money Manager?

What is a Professional Fiduciary?