During his student days 25 years ago at the University of Illinois at Urbana-Champaign, Chris Jacob, CFP, found his life’s calling. As an economics major, he took “Fundamentals of Life Insurance,” enjoyed it, interviewed several insurance agents, and decided to try it himself. He signed up with Transamerica in its branch system. “Picking up a phone on a Saturday and calling a list of people is how I got started,” he says.
Chris learned the business from the bottom up, starting in insurance and then earning his securities license and the Certified Financial Planner designation. He learned to incorporate the disciplines of estate planning, charitable tax planning, and full-range financial planning.
Chris, 46, is the president of Cadeau, a firm he founded in St. Louis in 2005. He works mostly with retirees who have a net worth of $5 million and more. His clients are looking primarily for wealth management, retirement income, and wealth transfer.
“We’ve yet to meet anybody of wealth who, when we met them, didn’t already have a financial, retirement, or estate plan in place,” he says. “But I’ve also yet to meet anybody who had a plan they could understand and convey, or anyone who had a complete plan.” Chris believes that a big reason for this is that the advisor community almost always delves straight into tactics, tools, and strategies before it helps clients do what he calls “above-the-line” planning, which focuses first on the clients’ mission, vision, values, and goals.
Chris uses a methodology that gets results and helps plans get implemented. He explains: “We start with the same basic fact finder for everyone and then take them through our process. We do the above-the-line planning first. Once we get answers from this, we help our clients pass along not only the tangible assets of wealth but the intangible assets, such as decision-making patterns, value systems, and the actions that created wealth for ‘generation one’ in the first place.
“When you ask people what’s more important, if they could only pass one of two things — value (wealth) or values (beliefs) — which they would like to pass to the next generation, usually they’ll say values,” Chris says. “But you can pass wealth and values on to the next generation, and that’s one of the things that people find surprising and enlightening.” The kind of planning Chris does is not only effective and efficient in saving taxes and accumulating and growing wealth. Chris’ firm also maintains the wealth, magnifies it for clients during their lifetime (and ultimately for their heirs), and also arranges for the intangible assets to pass alongside the tangible wealth.
The Gift of Wealth
The name of Chris’ firm, Cadeau, is the French word for “gift.” It does not mean “gift” as in a wrapped box. Chris explains: “It’s more like, for instance, my uncle taught me how to fish — he gave me the gift of fishing.” Chris works to help clients give the gift of wealth, the actual tangible, alongside the intangibles that produced that wealth. He believes this truly is a gift — to convey both of those important things.
Most people Chris meets already have done a lot of things right — they have wills, trusts, insurance polices, and brokerage statements. “But they don’t feel that they can just sit back and enjoy their wealth because of the complexity that it adds,” he says. “I know that sounds crazy, but people will say, ‘If we could just get to X level of wealth, we wouldn’t have any of these problems.’ Well, if they do get to X, guess what happens? They don’t have any of those problems, but now they have a whole host of new problems, because it just becomes more complex.”
Chris’ firm organizes and integrates all the moving parts of the plan, and works with clients’ existing advisors, helping them determine what else the clients want to achieve to make the ultimate plan the best it can be.
Working with New Clients
“When we sit down with somebody new,” Chris says, “one of the things we do that’s different is instead of simply taking an inventory of assets, we get to know clients on a much more personal level. I belong to an organization called Legacy Wealth Coach, which is also a methodology for working with wealth holders and really getting to know what they value before focusing on the value of what they own. Part of that is a questionnaire that we give to clients. We do a biography interview with them, getting to know them. We ask things like:
• What was it like growing up?
• Were your parents from this country?
• When was money discussed?
• Did you feel rich or poor?
• How did you two meet?
• How did you start your business?
“We record this interview and transcribe it. That, along with the answers to the questionnaire and the affirmations that we jointly develop for spouses, helps us create a written family financial philosophy. It’s a game plan about their values, attitudes, and preferences toward wealth. It tells the story of how the wealth was created, how they feel an obligation to use the wealth, and how they’d like to see it distributed.”
If they’ve been successful, Chris tells people that some of their wealth will be
redistributed to society for the common good. He asks how they want to see that wealth redistributed, explaining that it will either be a default on somebody else’s agenda (i.e., tax) or it can be directed to organizations they feel strongly about. They are going to have to do some planning, however, to make this happen.
“We ask them,” he says, “given all the taxes they’ve paid in their life, when this wealth passes on, to choose between Congress, children, and charity, if they can only pick two. For the most part, people pick charity and children.
“We tell prospects and clients, using a sports analogy, ‘You’re the franchise owner, and we’re applying for the job of head coach and general manager.’ For the most part, the people we meet already have an attorney, a CPA, an investment advisor, and an insurance individual. We’re not saying the client should work with us in lieu of them but in addition to them. We want to help them win the game, but we need a written set of instructions to do that. They may have a team that consists of all-stars, but who is quarterbacking that team? How can they get the most value from the existing team? We use that existing team because all of its members have unique abilities to bring together.”
Getting New Clients
Chris gets new clients mostly from unsolicited referrals or recommendations from happy clients. “New people also come from our work with charitable organizations,” he says. “We are a resource to development teams and give presentations to their donor groups, enlightening them on the social capital issue — how wealth will be redistributed. We tell them that Uncle Sam doesn’t need to take a seat at the table — he’s already there — but in order for them to disinherit the IRS, they need to take some action. We tell them some things they can do.”
Case History
Chris describes a recently referred client: “This couple came to us and already had a charitable remainder trust, irrevocable life insurance trust, and revocable living trust — but the one thing that hadn’t been taken care of was their IRA. They didn’t know how to defuse that ticking tax time bomb.” Most agents know, given the estate is large enough, that if the client is going to leave the IRA to heirs, it really becomes an IRA for the IRS. The IRS can take 65% to 75% of its value with estate and income taxes.
“We worked with this couple, took them through the Legacy Wealth Process, and they really appreciated it,” he says. “We helped them develop a written financial philosophy. We initially talked about taking money out of the IRA, paying the tax on it, and gifting it into an ILIT to get some insurance. When we were done with the planning, we set up a profit sharing plan, rolling the IRA into the profit sharing plan, buying life insurance inside the plan, and leveraging those dollars via life insurance. We actually had that policy bought out a couple of years later to an intentionally defective grantor trust. The children were beneficiaries, and then we left whatever was in the profit sharing plan to a family foundation.
“With this client, we went from what was initially a nice life sale of $280,000 in premium, to two policies — one for $220,000 in premium and the other for $540,000. Had we only done traditional planning and not taken them through this Legacy Wealth Process, there would have been a lot less going to heirs and not much going to charity. They were gratified that they could see a way in which they could leverage the wealth to heirs, and at the same time benefit charity.”
Working with Charities
Cadeau is involved in one way or another with about 40 different charities, including the Missouri Baptist Healthcare Foundation, Cardinal Glennon’s Children’s Hospital, the University of Missouri – St. Louis, and Webster University. Chris tries to work with as many charities as possible and be effective with a donor motivation program. They are about to work with the St. Louis American Cancer Society chapter on a program that, if it succeeds, may go nationwide. They also work with a number of Catholic charities.
Donor Motivation Program
Chris describes more about the firm’s “donor motivation” program: “We present events to charities and their donors, showing them how charitable tax planning can be beneficial for them, their heirs, and for the charity. We help charities find their B and C donors — they already know who their A donors are. They’ve got diamonds in their own back yard, but there are so many B and C donors, how can they effectively identify them? And even if they could, how could they communicate with all of them?
“We use a proven system that gets the B and C donors to raise their hands. When we put on events, the charities are shocked when they see so many people coming in, because they have never even spoken to 80% or 90% of them before. They find out a certain person who has had a history of giving $25 to $50 a year is Mrs. Smith, the millionaire next door who is worth $8 million, and they never would have guessed. She wasn’t even on their radar screen. This is one way we help the charities.”
Chris tells people that everyone is tuned in to radio station WIIFM — “What’s In It For Me?” Charities’ donors are, too, but one of the problems with charities is they’re always coming to the donor and asking them for something. “We provide an opportunity for the charities to give back to the donors,” Chris says. “At the event, nobody asks the donors for anything. Instead, we show donors how to save capital gains taxes, save income taxes, eliminate estate taxes, and use asset protection. And the attendees do all this via the charity. Our program helps give the charity an even better name. And it separates our firm, too.”
Continued Education
Chris stays current and connected to the latest and best planning ideas by being part of the Legacy Wealth Coach group, which meets in Chicago three times a year and consists of attorneys, CPAs, investment advisors, and insurance advisors. He likes to get involved in organizations that are multi-disciplinary because he believes he derives more benefit from these groups, getting feedback from several different schools of thought.
Another thing that Chris believes has helped make him successful is taking the time to attend seminars, workshops, and study groups away from St. Louis to find out what ideas are being used around the country. “Sometimes if you just focus on what’s going around in your own town, you wind up with intellectual incest,” he says.
Many advisors will say they don’t have the time or money to travel, but Chris has yet to go on one of these trips and not learn something he could immediately apply to a case on which he was working. “I think it helps to have the open-mindedness to admit you don’t know it all, and you’re not going to get it all simply from reading trade journals and going to MDRT once a year. It helps to branch out and become multidimensional,” he says.
Chris always remembers a principle he learned in a Dale Carnegie course: “Every man is my superior in some way, and in that I can learn from him.” When Chris shares his specialized knowledge with wealthy, charitable-minded people, he not only helps the people, he and the charities benefit as well.
Chris really doesn’t ever see himself retiring. He says, “I think people would like to get to that point of financial independence, but who wants to retire and expire? In this business, you can do a lot of good for a long time and have fun doing it, so why clock out?” Why, indeed?