The 2018 movie, Bohemian Rhapsody, spends a great deal of time focused on the development of the amazing title track; how unusual it was (and still is) in the realm of rock music, not only with its operatic vocals and classical instruments, but also the constant tempo changes and the song’s length (just under six minutes).
The song was written for Queen by lead singer Freddie Mercury, and despite pushback from the band’s record label, which – according to the movie – didn’t want the song, it went on to become one of the most iconic, and progressive tracks of all time.
What made that song a triumph of creativity was not solely the fact that it was a song, but even more that it stitched together differing ideas and concepts to create something totally new.
In his book Human Motivation, Robert E Franken describes creativity as “the tendency to generate or recognize ideas, alternatives, or possibilities that may be useful in solving problems…”
That said, although we don’t often associate financial solutions with creativity, I would suggest that truly compelling financial advice and planning often includes a healthy element of creativity.
Family Finances and Creativity: A Brief Case Study
The following is an actual case, with names and other specifics changed.
A successful couple called one day with a vexing issue. Their 17 year old daughter (let’s call her Mira) for whom they had been dutifully plowing money into a custodial account for her education, was a bit off track. Mira was a star high school basketball player, however she had recently been suspended from her team. The final straw (and there had been other straws broken leading up to this) was when she smuggled alcohol into training camp.
By the time I received this call, Mira was two months away from her eighteenth birthday, and her account (to which she was legally entitled at age 18) had over $100,000 in it. Her parents were very uneasy about this. In their minds, this was the classic disaster looking for a place to happen. They were already worried about some of the choices Mira had been making, her 18th birthday was just a few months away, and this account they’d been building was starting to make ticking sounds.
When I asked what Mira might do if she were able to figure out how to get her hands on the money, they exclaimed that she’d likely either buy an exotic car, or plan a huge trip with several of her friends. Either way it was definitely keeping mom and dad up at night, and things were not turning out the way they had planned.
The complicating factor was that their existing advisors had all indicated (correctly) that the account could not be reversed – without significant legal complication. So, they were calling us, seemingly on the “eve of destruction” (another music reference?) with the hope that we might have a game saving idea.
What Happened Next
As our team brainstormed we remembered that in a prior conversation the parents had referenced an office building they owned, to which they were considering some expensive energy saving upgrades. One of the team suggested that perhaps Mira could be convinced to, in essence act as a bank, using her account (which would remain invested for her benefit) as collateral for a credit line which her parents would then use to finance the building improvements.
It turned out that eco-friendly Mira actually liked the idea of being involved in the project with her parents.
The line of credit was created (with a very favorable rate of interest) and the “plan” effectively tied up Mira’s account until the loan was repaid. Since it was a line of credit, mom and dad had a lot of flexibility as to when full repayment would actually take place – while giving their daughter a few more years to mature.
Fast forward… Mira is back on track, and moving ahead. The building has grown in value and now has reduced utility costs. Everyone is enjoying the fruits of this decision – and there wasn’t a family fight to get there.
The bottom line of this short story is twofold; First, age 18 is generally too young to have significant assets transition to a young person’s full control. In addition, we can see that the first “answer” isn’t necessarily the best answer. While the first answer was technically correct – you can’t change the account structure – it was not the answer the family needed. The goal wasn’t to change the account. The goal was – since we can’t change the account – let’s at least ensure that Mira’s long-term well-being is protected and conflict in the family is reduced.
It pays to take the time to look at situations from higher ground. This decision was about so much more than a single account. All the pieces of the puzzle, about who this family is, what each individual wanted and needed, as well as what they collectively wanted together, deserved to be contemplated, and rearranged, to create the picture that would give them most, if not all, of what they were hoping for.
By Dan Darchuck, CEO
