When Have You Advised a Client to Make a Counterintuitive Financial Decision that Paid Off?

When Have You Advised a Client to Make a Counterintuitive Financial Decision that Paid Off?

When it comes to the complex world of finance, sometimes the most unconventional advice yields the greatest rewards. Tapping into the wisdom of Presidents and Chief Finance Officers, we've compiled eight counterintuitive financial strategies they've recommended to clients. From the surprising benefits of paying off debt early to the strategic financing of projects amid economic uncertainty, these financial professionals share their most insightful experiences.

  • Pay Off Debt Early to Save
  • Request Refunds from Unlicensed Lenders
  • Advise Splitting Windfalls for Stability
  • Utilize Tax Credits for Cash Flow
  • Invest in Tech During Economic Downturn
  • Invest in Mixed-Use Property for Income
  • Implement Early Succession Planning
  • Finance Projects Amid Economic Uncertainty

Pay Off Debt Early to Save

Paying extra off your debts can save on interest. We always advise our clients with loans to try to get ahead on their debt payments when they can afford to do so.

When you take on a loan, car finance, or start racking up credit card debt, the minimum repayment amount might seem manageable and affordable. You might think, "Great, I can handle this!"

If you've got a favorable interest rate, sticking to regular payments might suffice. But when interest rates soar into the twenties or thirties, like with credit cards or payday loans, just paying the minimum can become very costly in the long run.

For instance, consider a high-interest loan of $10,000 at an annual rate of 23% (that hurts). Over five years, you'd end up paying nearly $7,000 in interest alone. However, if you're able to add an extra $100 to your monthly payment, you could cut your interest costs to just over $3,500.

If you find yourself with some extra cash, it might be wise to put it towards your debt before you're tempted to spend it elsewhere. Just make sure to check if your lender imposes any fees for early repayment.

Eric Croak, CFP
Eric Croak, CFPPresident, Croak Capital

Request Refunds from Unlicensed Lenders

One of the clients owed money to a payday loan company. She owed almost $7,000 to three payday loan companies. The payday loan companies called her every day for payments. Initially, they were polite, but later, their behavior became quite rude. They had access to my client’s bank account and took money from that account every month until it had a zero balance. My client was panicked and worried. When she approached me for financial advice, I told her to ask for a refund from the payday loan company. My client was shocked because, instead of repaying the debt, I was asking her to request a refund.

During my research, I found out that the payday loan company is not licensed in the country. They belong to the Chippewa tribe and follow tribal laws. As such, my client is only required to pay the principal amount—nothing else. The illegal payday loan company had already taken way more than the principal amount. My client doesn’t need to pay anything more; rather, she deserves a refund.

My client revoked the ACH authorization, which stalled the payday loan company’s efforts to withdraw money from my client’s savings accounts. Next, my client asked the payday loan company to issue a refund. Otherwise, we would file a lawsuit against the company. Though the lender was not ready to issue a refund initially, they agreed later. My client got back almost 60% of the amount, and our counterintuitive financial decision finally paid off.

Loretta Kilday
Loretta KildayDebtCC Spokesperson, Debt Consolidation Care

Advise Splitting Windfalls for Stability

In my role as the CEO of BlueSky Wealth Advisors, I often encounter situations where counterintuitive financial decisions prove beneficial. One memorable instance involved a high-net-worth client who received a substantial windfall. Conventional wisdom suggested investing the entire amount for maximum growth. However, after analyzing their specific goals and financial situation, I advised them to split the windfall—investing a portion and using the remainder to pay down their mortgage. This hybrid approach not only provided immediate peace of mind but also set them on a path to financial independence much earlier than anticipated. The client saw significant investment returns while maintaining a more manageable debt load.

Another case involved advising clients during the 2008 financial crisis. While many were panicking and eager to liquidate their holdings, I emphasized the importance of staying disciplined and maintaining a long-term perspective. We revisited historical data showing that markets typically recover after downturns. By holding their positions in a globally diversified, passive investment strategy, our clients avoided the pitfalls of selling low and later benefited from the market rebound. This advice significantly improved their long-term financial outcomes, as evidenced by the substantial growth in their portfolios in the years following the crisis.

More recently, I advised a client to consider a nuanced estate planning strategy involving GRATs (Grantor Retained Annuity Trusts). Despite the perceived complexity and initial legal costs, this approach allowed them to dramatically minimize estate taxes. By transferring appreciating assets into the GRATs, our client could pass on wealth to future generations efficiently. The outcome was a considerable reduction in estate taxes, which saved millions and ensured the client's legacy would be preserved for their family. Each of these examples illustrates the value of nuanced, counterintuitive financial planning that goes beyond conventional wisdom.

David Blain, CFA
David Blain, CFAChief Executive Officer, BlueSky Wealth Advisors

Utilize Tax Credits for Cash Flow

I've got relevant experience that paid off well for my client. A small restaurant owner was facing financial strain during the COVID-19 pandemic. Instead of cutting costs by letting go of employees, I advised him to leverage the Work Opportunity Tax Credit (WOTC). This involved hiring individuals from targeted groups like veterans and long-term unemployed individuals, which offered substantial tax credits.

Despite his initial hesitation to take on what felt like additional risk, the strategy worked. He received significant tax credits that improved his cash flow, allowing him to retain staff and even attract new customers, ultimately increasing his revenue.

Another instance involved a golf course owner who was wary of the complexities of tax strategies. I recommended exploring Cost Segregation. By reclassifying certain assets to accelerate depreciation, he managed to increase his depreciation expense from $40,000 to $80,000 annually. This led to yearly tax savings of $14,000—a significant amount to reinvest into improvements and add to his facility's net operating income.

In both cases, the counterintuitive approach of utilizing specific tax credits and strategies resulted in immediate financial relief and long-term benefits, demonstrating the value of looking beyond the conventional methods.

Philip Wentworth, Jr
Philip Wentworth, JrCo-Founder and CEO, Rockerbox

Invest in Tech During Economic Downturn

As a Chief Financial Officer, I once advised a client to invest in upgrading their technology infrastructure during an economic downturn—a counterintuitive move when many were cutting costs. The client was initially hesitant, concerned about spending capital in uncertain times. However, after a thorough analysis, I demonstrated that the investment would improve operational efficiency, reduce long-term costs, and position the company for a strong recovery.

We identified key areas where technology upgrades could streamline processes, enhance productivity, and provide better data analytics for decision-making. The initial expenditure was significant, but the anticipated long-term savings and competitive advantage outweighed the upfront costs.

Within a year, the upgraded systems led to a 20% reduction in operational expenses and a significant boost in productivity. When the market rebounded, the client was well-positioned to capture new opportunities, leading to a 30% increase in market share. This strategic, albeit counterintuitive, investment decision proved highly beneficial, showcasing the importance of forward-thinking financial planning even in challenging times.

Rose Jimenez
Rose JimenezChief Finance Officer,

Invest in Mixed-Use Property for Income

During my time at Profit Leap, I advised a small law firm in Sao Paulo to make a counterintuitive financial decision that significantly transformed their business. Faced with a volatile market, the firm's partners were inclined to cut costs and delay any major investments. Instead, I encouraged them to invest in a mixed-use property, despite the higher upfront costs and perceived risk. This property housed their offices and included several residential units for rental income.

The rationale behind this advice was based on robust market analysis indicating a strong demand for rental properties in the area. Though initially hesitant, they proceeded with the purchase. The residential units quickly filled up, generating consistent cash flow that offset a significant portion of the firm's operating expenses. Within two years, the property's value appreciated by 20%, substantially boosting the firm's asset base and securing a stable income stream.

In another instance, I advised a startup in the tech sector to invest heavily in a rigorous estate-planning strategy, despite their concerns about the complexity and upfront legal costs. They were averse to the idea initially, but I demonstrated how setting up family trusts and strategic asset transfers could minimize their long-term tax liabilities and protect their assets. This planning paid off when they secured significant investments, as the robust estate framework reassured their investors about the company's financial health and governance.

These experiences highlight the importance of sometimes veering away from conventional wisdom and taking calculated risks. By leveraging strategic financial planning and data-driven insights, these counterintuitive decisions led to substantial long-term benefits, emphasizing the critical role of innovative approaches in achieving financial success.

Victor Santoro
Victor SantoroFounder & CEO, Profit Leap

Implement Early Succession Planning

In one notable instance, I advised a tech startup to implement a rigorous succession and exit-planning strategy while they were still early in the growth phase. This seemed counterintuitive to the founders, who were primarily focused on scaling and product development rather than contemplating an exit. However, I recommended incorporating professional advisors such as accountants, lawyers, and financial planners to draft a comprehensive succession plan, which included identifying potential successors and securing the company’s future beyond the current leadership.

The startup was initially skeptical due to the possibility of high upfront costs and the perceived distraction from their primary growth objectives. However, the decision paid off remarkably well. When one of the co-founders had to unexpectedly leave the company due to personal reasons, the well-crafted succession plan allowed for a seamless transition, minimizing disruption to operations and maintaining investor confidence. This planning not only protected the company’s value but also provided a strategic framework that attracted additional investment, boosting their growth trajectory.

Another example involves advising an e-commerce company to invest heavily in an AI-driven customer insights tool during a period of market uncertainty. Initially, the business owner was inclined to cut back on investments and conserve cash. However, by demonstrating how AI could provide enhanced customer segmentation and personalized marketing strategies, I convinced them to proceed with the investment. This move resulted in a 25% increase in customer engagement and a 30% revenue boost within the first six months, proving the value of taking calculated risks backed by thorough financial analysis.

These experiences underscore the importance of looking beyond conventional wisdom and being willing to adapt and plan strategically. Whether through advanced planning or leveraging cutting-edge technology, these counterintuitive decisions often lead to substantial payoffs.

Russell Rosario
Russell RosarioOwner, Russell Rosario

Finance Projects Amid Economic Uncertainty

I had a client who was considering financing a commercial building project during a period of economic uncertainty, which made many lenders hesitant to provide funding. However, after conducting thorough market research and analyzing the client's financial position, I recommended moving forward with the project. Despite the prevailing caution, this counterintuitive decision paid off as the market eventually stabilized and demand for commercial space increased. The client secured a prime property at a lower cost and experienced significant returns on their investment. This experience highlighted the importance of carefully assessing market conditions and taking calculated risks, ultimately leading to a successful outcome for the client in the money-lending industry.

Sacha Ferrandi
Sacha FerrandiFounder & Principal, Source Capital

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