9 Ways Fiduciaries Can Build a Strong Financial Future for Clients with Limited Means

Whether you’re overseeing the financial well-being of a beneficiary, a senior, or someone with special needs, crafting a solid financial plan requires a strategic approach—one that not only prioritizes your client’s long-term financial security but also minimizes your own investment-related liability.

At Prudent Investors, we specialize in navigating the complexities of trustee investing and helping fiduciaries build sustainable financial plans. Here are our nine top tips for managing finances for individuals with limited resources.

1. Don’t ignore the existing investments when reviewing a case

Before making any financial decisions, take stock of your client’s current assets and investments. Instead of making sweeping changes right away, evaluate what is already in place and determine whether these investments still align with your client’s financial needs and long-term goals. A thoughtful approach ensures that valuable assets aren’t unnecessarily liquidated or reallocated. 

2. Choose an investment advisor who understands your needs as a fiduciary

Fiduciaries have a legal and ethical responsibility to act in the best interest of their clients. That’s why it’s essential to work with an investment advisor who understands the unique obligations of your fiduciary duty. A knowledgeable advisor can help you navigate risk, maintain compliance, and structure an investment strategy that prioritizes growth, while being mindful of government benefit eligibility. 

3. Develop a detailed financial plan

A well-crafted financial plan should outline all sources of income and fixed expenses. This includes:

• Government benefits like Social Security, disability payments, and pension income
• Trust distributions
• Investment earnings
• Monthly living expenses like housing, healthcare, utilities, and other essentials

Having a clear picture of income and expenses allows fiduciaries to allocate funds effectively, ensuring that the client’s financial needs are met without depleting resources too quickly. 

4. Give investments time to grow before spending down

If the financial situation allows, avoid spending down investments too quickly. A prudent financial strategy involves allowing investments to compound over time, maximizing their potential growth. This is particularly crucial for clients who rely on the investments as a primary source of long-term financial security. 

5. Manage investment related expenses

Every investment comes with associated costs, including management fees, transaction costs, and tax implications. As a fiduciary, keeping these expenses in check is key to maximizing returns and ensuring the financial plan remains sustainable. Regularly review all investment costs and explore opportunities to minimize unnecessary fees. 

6. Put idle cash to work

Sitting on too much cash can mean missed opportunities for growth. While it’s essential to have a liquidity buffer for emergencies, excess cash should be made productive through investment strategies that align with the client’s risk tolerance and financial objectives. Money market funds, short-term bonds, and other low-risk investments can help maintain liquidity while generating some level of return. 

7. Consider Tax Implications

As investments grow and distributions are made, taxes will need to be paid in some form. Work with your CPA and financial advisor to understand how a client’s trust or estate may be taxed now and in the future. 

These advisors should be able to provide strategies on how to manage the investments in a tax efficient manner, whether that be how distributions are made from retirement accounts or how investment gains may be realized to offset medical expenses. Planning around reducing income and/or future estate taxes can be a critical part of extending the life of available assets.

8. Review and update the financial plan regularly

Financial plans aren’t set-it-and-forget-it strategies. Life circumstances, market conditions, and client needs evolve over time. Regularly reviewing the plan with your investment advisor ensures that the financial plan stays aligned with your client’s current needs while adapting to any changes in financial status, expenses, or regulations. 

A financial advisor plays a key role in this process. They bring expert insight into how investments are performing, whether any adjustments are needed, and how external factors like economic shifts, inflation, or tax law changes might impact the plan. Advisors can also help assess whether the financial plan aligns with any new expenses, income changes, or shifting financial goals of the client.

9. Document and communicate to mitigate liability

Proper documentation is a fiduciary’s best defense against liability. Keeping thorough records of financial transactions, investment strategies, and communication logs helps demonstrate due diligence and compliance with fiduciary responsibilities. Best practices include:

• Documenting Investment Decisions: Keep written records of why certain investment choices were made, including risk assessments and expected outcomes.
• Tracking Client Expenses and Income: Maintain detailed reports of all financial transactions, including monthly expenses, income sources, and asset allocations.
• Maintaining Advisor Correspondence: Store emails, meeting notes, and financial reports from investment advisors to provide a clear history of decisions.
• Recording Beneficiary Communications: Summarize and archive discussions with beneficiaries regarding financial matters to avoid potential conflicts.

Building a Financially Secure Future

Crafting a financial plan for individuals with limited resources requires careful planning, disciplined investing, and a fiduciary-first approach. By following these eight strategies, fiduciaries can create a plan that is sustainable, adaptable, and legally sound, ensuring that your clients’ financial well-being is protected for years to come.

At Prudent Investors, we specialize in supporting fiduciaries with expert guidance, tailored investment strategies, and ongoing financial planning assistance. Let’s work together to build a secure financial future for your clients. Connect with a Prudent Investors Advisor for a complimentary consultation. 

Investment advice through Prudent Investors, an SEC-registered investment advisor. This blog is general communication being provided for informational purposes only. This information is in no way a solicitation or offer to sell securities or investment advisory services. It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy. This does not contain sufficient information to support an investment decision. Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved. No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Prudent Investors. Prudent Investors does not provide legal or tax advice. Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.