FA Center: This financial adviser’s family inherited $1.4 million and quickly lost it all. ‘I promised myself I’d never be that broke again.’
Jacqueline Schadeck was 14 years old in 2007 when her life took a dramatic turn.
Raised by a single mother in northern California, Schadeck found herself with enough money to buy new clothes and eat in restaurants for the first time. That’s because her mother unexpectedly inherited $1.4 million from the sale of property owned by a relative.
“I finally got my first matching Coach bag and shoes,” Schadeck recalled. “And I went to the nail salon consistently for the first time.”
Her mother contacted an acquaintance she knew from her high school days who called himself a financial adviser. He took the money — and mismanaged it. Within two years, the inheritance was gone.
“He never did any comprehensive financial planning,” Schadeck said about the adviser. Instead, he put most of the money into a 529 college savings plan with a high-cost mutual fund company. “My mom waited tables and worked for minimum wage,” she added. “She didn’t understand where the money was going” or how the adviser invested it.
What’s worse, her mother faced early withdrawal fees and taxes when she pulled out the funds. The adviser had put the 529 plan in a fund class that paid him a high upfront commission but imposed steep penalties on account holders who wanted short-term access to their cash.
“He never told my mother about all the taxes she’d owe,” Schadeck said.
For Schadeck, now 28, this rollercoaster ride showed her the power of money up close. So much so that she is now an Atlanta-based certified financial planner.
“The relationship with that adviser was very short and it was devastating to see how everything came to a crash after about one-and-a-half years,” Schadeck said. “I promised myself I’d never be that broke again.”
By the time Schadeck applied to college, her family had $6,000 in the bank. She earned a basketball scholarship at Kennesaw State University that funded her tuition along with a Pell Grant.
After experiencing both poverty and wealth in her teens, Schadeck took an interest in personal finance. She cites one fateful day in college as a turning point in her life.
One morning she typed “financial advice” into a search engine and started reading about financial planning as a profession. She found a list of the top 10 jobs that were expected to be in demand over the coming decade — and financial adviser made the cut.
Later that morning, another student in her Introduction to Finance course mentioned that the Financial Planning Association was sponsoring a job fair that evening.
“I went and got three interviews that night,” Schadeck said. She chose an internship at a small independent firm — and the lead adviser there is still her mentor.
In her own practice, Schadeck emphasizes the value of holistic planning. She educates clients — many of whom are first-generation wealth builders — about the importance of preparing a comprehensive plan that includes estate planning, tax planning and investment management.
“The different components of a plan don’t necessarily work in tandem,” she said. “You need all the pieces to work together and you need someone on your team, like an adviser, to put them all together and help you see the big picture.”
While she rarely shares the details of her family’s inheritance with clients, she may cite a lesson she learned as it applies to a given situation. For example, her mother bought her first home with part of the inheritance but didn’t realize the financial repercussions of the purchase. So Schadeck helps first-time homebuyers factor in variables such as the cost of property tax and the mortgage interest deduction’s impact on their federal taxes.
“My family lost $1.4 million due to poor financial advice and lack of [financial] literacy,” she said. “So I focus on serving people who may need guidance on their financial journey because they weren’t blessed into a family with significant financial means. Sometimes, we have to put parameters in place to protect them against themselves and explain how far their money will go. ”
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