Optimize Your Maximization!

When financial professionals use these words, beware. More often than not, the intent is to promote the vague idea that the listener is going to receive some “best possible” service that is certainly worth paying for. This illusion can stand as long as the listener doesn’t ask probing questions to clarify what, exactly, the speaker means.

A financial planner recently gave me a list of his client’s goals, including “they are interested in maximizing the amounts they leave [to their children].”

What am I to make of this? What does it mean?

The client could maximize his estate value by using all of his money to buy a one-year term insurance policy and then conveniently dying during the year. Or he could buy a smaller five-year term insurance policy, giving him a five-year window to die. Or he could buy a no-lapse universal life policy, which functions as term insurance for life.

What about the uncertainty of future premiums and policy values? If he buys a non-guaranteed cash value policy, such as traditional whole life, will that maximize his wealth transfer compared with a no-lapse universal life policy? Is wealth transfer maximized by having cash values that can make a future policy replacement possible? Is it optimal to buy a no-lapse universal life policy today if interest rates increase in the future, leading to lower life insurance prices?

What about the planned premiums? Most cash value policies offer some degree of premium flexibility. What is the optimal premium schedule that minimizes the cost of the policy until death?

When academics talk about maximization, they usually have something specific in mind. They are thinking of an objective function, constraints, and a mathematical method to solve the optimization problem.

For well-intentioned practitioners, the first step to get beyond fuzzy thinking is to specify the measure that you will use to compare one plan with another. How will you decide which plan is better?

When you know that, you can speak meaningfully — and probably with low expectations — about maximization.

 

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A Strategically Focused CE Curriculum

With classes approved for over a decade by the CFP Board, IWI, and NASBA, Advisors4Advisors CE classes are an optimal knowledge stream for CFP®, CIMA®, CPA, CPA/PFS®, CFA®, and other practitioners. It's not a grab bag of speakers willing to sponsor CE content. Nor is it a one-man CE course. It's a group of subject matter experts with amazing communication skills and a history of thought leadership that, together, give advisors a well-rounded knowledge system for running a professional practice ethically and intelligently.

CE Since October 2008

A4A CE classes for financial professionals began in October 2008, the week Lehman Bros. collapsed. Initially billed as “The Financial Crisis Webinar Series,” A4A connects advisors with authoritative sources on investing, tax, and financial planning, chosen by A4A Editor Andrew Gluck, a veteran financial reporter. A4A members get a stream of CE classes for an advisor who: 

  • holds a CFP®, CIMA®, CPA, CPA/PFS, CFA or other designation requiring CE annually 
  • values monthly CE classes by Fritz Meyer, Craig Israelsen, Bob Keebler, Frank Murtha, or Andrew Gluck
  • diversifies a core of client portfolios in low-expense funds
  • invests based on MPT and economic fundamentals
  • advises on tax and financial planning as well as investing
  • needs financial counseling skills
  • wants the Certified Financial Counselor™ designation 
  • is building a brand as a thought leader locally or in a niche
  • wants the facts when bad news breaks
  • wants CE aligned with a content marketing system
  • wants 24/7 access to CE on-demand
  • insists on objective evidenced-based tax and investment planning analysis
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I’ve subscribed to A4A since its inception, and always find it intellectually stimulating and on point. It’s one of the few CE solutions out there that doesn’t waste my time by pushing product or talking down to me.

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Pete Deacon, CPA, CFP®
A4A has had a profound effect on my business. Since 2009, I’ve relied on the consistent messaging and updates to run my business successfully. Being able to present the information from Bob, Fritz, and Craig's ongoing CE webinars has been a significant benefit.

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Fredric Mayerson, MBA, PhD, CFP®
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Norman Politziner, CFP

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