Rich Solo, Poor Solo

By Mary B. Young, D.B.A.

The self-proclaimed, best-selling personal finance book of all time is Richard Kiyosaki’s Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! At its core, the book has a simple message: that “regular” people can become richer by learning from the money-management practices of the wealthy.

This month’s article is not an endorsement of Kiyosaki or the tactics he recommends. But his book’s underlying premise is one that Solos should consider when thinking about their financial security as they grow older. Even if you have limited means, you can benefit by understanding how a trust company protects the assets of its well-heeled customers and applying those principles to your own nest egg, however small.

Rich Solos

If—unlike most of us— you’re a Solo with assets of $1m of investible assets or more, you have the option of working with a full-service, corporate trust company to manage your investments and other financial affairs. (Some smaller banks with trust services may have lower minimums. They may also have more limited offerings.) The trust company charges a fee, typically a percentage of the assets they are managing for you. In return, they provide a variety of white-glove services. You get a dedicated person—a personal trust officer rather than a call center at the other end of an 800 number—who is legally responsible for looking out for your best interests. That includes not only managing your investments but working hand-in-glove with your other professional advisors and providing broader financial oversight of your wealth. If you have an unexpected emergency—say a tree topples on your house—and need cash quickly, you’ve got a go-to person who can handle that, so you don’t have to. If you choose, your trust company can also take over your day-to-day banking and bill-paying. “You’re still in control, but somebody else is responsible,” says Elithea Mas, head of trust fiduciary services for MassMutual Trust Company.¹ “It takes a lot off the client’s plate.”

The trust company has a fiduciary responsibility to protect your assets. Their independence eliminates any conflict of interest that might arise if, for example, a family member is both helping to manage your money and, at the same time, could be tempted to use it for their own purposes. The trust company also knows the legal and tax requirements in a way that a well-meaning friend or relative is unlikely to. And for clients whose estate is governed by the terms of a trust, the company can provide oversight to ensure your interests are protected.

If you’re a Solo who qualifies to become a trust-company client, you should consider that option. Your financial planner or estate lawyer can provide guidance and, if you’re interested, recommend a trust company.

But what about the rest of us?

Solos of More Modest Means

Solos with more limited assets should take a page from the trust company’s book. By understanding how it supports and protects customers, you can get better at managing your own assets.

Using the trust officer as an exemplar, you need to figure out who else could perform all or part of that role, should that become necessary in the future. For example:

• Whose guidance would you trust regarding the management of your retirement savings?
• Who could manage your finances and pay your bills, should you become physically or mentally incapacitated, even temporarily?
• Who could help you make financial decisions you didn’t feel confident making on your own?
• After you die, who could support the work of your executor (also known as your “personal representative”), especially if that person has no experience in that role?

Coming up with suitable names to fill these roles can be daunting. The stakes are higher than if you wanted someone to take out the trash or feed your cat, were you unable to. You need a person who understands the financial, legal, and ethical issues related to managing someone else’s finances—and, equally important, someone who has no conflict of interest.

Your personal circle of friends and family may not offer many viable candidates. And without a spouse, partner, or adult children, you can’t assume anyone else will automatically step up.

That’s why it’s critical that Solos grapple with these questions in advance, rather than having to scramble in an emergency or―still worse―leave the outcome to chance. A financial planner or elder law and estate lawyer can talk you through the options. Their own firm may offer some of the same services as a corporate trust company – for example, managing your investments and retirement income distribution–with a more manageable minimum-wealth requirement. They will also have a professional network of elder care managers, fiduciaries, accountants, downsizing and moving managers, even real estate agents you might tap into, to supplement the help you might get from friends and family.

Most Solos—and indeed, most non-Solos―can feel more confident about the uncertainties of aging when they’ve anticipated a variety of scenarios and pulled together a team who will be there for them.

Future articles in this series will dig deeper into the topic of estate planning for Solos. The next article explains dangerous pitfalls Solos should avoid when planning for their future well-being.

¹ MassMutual Trust Company provided financial support for DFG’s 2020 research on Solos.

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