Did you know that families who own their home have a net worth of 40 times families who rent? Home ownership can be an important part of your financial plan, and is why so many people look to a Certified Financial Planner (CFP) for advice. Our friend John Quattlebaum is an independent Certified Financial Planner. He worked for two decades in the Washington D.C. area at firms like PriceWaterhouseCoopers and later Wachovia Bank advising high net worth clients, CEOs and CFOs. During this time, John met District Real Estate’s® Chief Real Estate Advisor Kenneth Rub and developed a synergistic relationship where their clients both benefit. Today, John runs his own practice, A2Q Financial Planning, in Durham, NC where he lives with his husband.
You used to work for big name companies and now you’re independent. Why did you make that pivot?
The reason I set up my practice, what I love to do, my passion if you will, is so that I could work with what I call the 99% of America. The bulk of their net worth is in their home and in their 401k. If they went to a financial advisor, the advisor would say “You need to have at a minimum of $250,000 liquid assets to bring with you to the relationship.” And even at that range, you’re likely going to be at the bottom of their list and may not get a lot of attention.
With me, a financial planner, I sit down with the client and review their whole financial picture and talk about setting goals. The client and I then create a plan together, and I work with them as they implement that plan. And as they get hit with life events, like adding to their family or buying a house, they want help making big decisions and deciphering financial strategies. I’m on their team- they have retained me to be sitting on their side of the desk!
How do you go about setting a plan?
It all starts with determining their goals and understanding what their current financial situation is. I collect information and build out a complete picture. Then I show them long-term cash flow and net worth projections. We talk about their financial goals and their ability to meet these goals. We look at their budget, savings rate and income tax projections. If there is money to invest, we discuss the best way to invest it – savings account, brokerage account, retirement account, etc. After the client does a risk tolerance questionnaire I review how their overall portfolio is allocated among asset classes, including real estate, and together we develop a recommended asset allocation. Additionally we review their life, disability and long-term care insurance needs and review their estate plan.
So your client is buying a home, how can you help with that?
Some clients are ready to buy or they think they’re ready to buy now and some clients are working toward the goal of buying a home, say next year. I explain what ducks they need to get in a row. For example, what’s their credit score and if it’s low, why? What can they do to improve it? Also, I want to understand their spending habits and make sure they are not adding to credit card debt.
How else do you help them prepare for this?
I ask a lot of questions! Do they want to take vacations? Do they eat out at restaurants a lot? Do they go clubbing? Movies, entertainment, whatever it may be, and I’m trying to understand their cash flow and how that will change. “Okay, you’re no longer paying rent, you’re paying a $2,000 mortgage. Will you still want to maintain your lifestyle? Are you going to be able to also put 15-20 percent aside for savings?” What about an emergency plan?”
Asking these questions and answering them truthfully makes all the difference. I want to make sure the buyer isn’t suddenly house-poor and not enjoying life because they are being held hostage to a mortgage payment. I want them to be mentally aware of all of this, because I was not when I bought my first condo and it sucked.
What are other parts of the home buying process can you help with?
Determining how much money they can and should put as a down payment. What does it mean to have a 2% down payment versus a 20% down payment in terms of the interest rate and mortgage insurance? I help them evaluate all their mortgage options, allowing the buyer to make sure they are buying a home in their budget with the best mortgage products tailored for them. Additionally, we will have a discussion of the likey tax benefits of buying a home.
What if a client wanted to purchase real estate to add to their investment portfolio?
Great question. If they are interested in building real estate into their investment portfolio, that’s also a great reason to consult with a financial planner. Working closely with a real estate professional, Ken for example, can provide great information and advice on what types of investment real estate is available. I then come in and look at the client’s cash flow, before and after the prospective investment, in order to make a more informed decision. We work as a team to get the best benefit for our clients!
