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Always spend less than you make.

Grace Lau has lived by that rule since peanut butter sandwiches sustained her as a college student. Now, as founder and CEO of PacWest Financial Management, she tries to pass along that wisdom.

 But it’s been a long road with many sacrifices for Lau to achieve the success she has.

She finished high school in Hong Kong and immigrated to the U.S. to study biology and chemistry at the University of Wisconsin at Eau Claire. She found a part-time job washing dishes on campus, making $1.15 an hour. Even with such little pay, she managed to save money to send home to her family in Hong Kong.

 ”I always paid for everything with cash,” she said, “and I never took on any debt.”

After graduation, Lau landed a scholarship to study for a master’s degree at George Washington University in the District of Columbia. She still remembers dissecting hamster brains in the research lab.

Early in her studies, however, she realized pursuing a doctorate in biology – which she felt was necessary for a career in that field – would make it difficult to continue sending money home to her family. After speaking with a professor, she decided to go for an MBA instead, and she hasn’t looked back since.

With her MBA in hand, Lau landed a job as a financial analyst at Riggs National Bank in Washington. In keeping with her motto, she purchased her first condo with cash. Even then, she managed to keep sending money home to her family.

Lau liked the work at Riggs, but found she was giving analyses based on other people’s research rather than putting together her own. So, when the opportunity arose, she took a job as an analyst on the international bonds desk at Standard & Poor’s in New York.

“There were very few women on Wall Street at that time,” she said. “It was a tough environment.”

Lau was just settling into life in New York when her family decided to immigrate to the U.S. landing in Phoenix. Again, she had to adapt to a new situation.

“There weren’t any global financial powerhouses in Phoenix, but she was hired at a Valley bank based on her international bond experience, and eventually she began managing client accounts. Given her conservative financial background and experience, she couldn’t understand at first why people would want to own equities.

“I couldn’t imagine ever losing money for people,” she said.

She worked for several financial institutions in Phoenix, and she said working for large banks created a delicate balancing act between earning a profit for the bank and putting client interests first. So, when the bank she was working for in the late 1990s was purchased, she decided to take her severance pay and launch her own business.

In starting PacWest Financial Management, Lau lived by the same financial rules she had adopted as a college student: She paid cash for everything. Initially, she worked out of her spare bedroom and eventually was able to stretch her dollars to purchase a small building.

“That’s the same message I want to impart to my clients today: Use minimal leverage. Also make sure you are saving and investing and getting value for your dollars,” she said.

Today, Lau has about 200 clients and manages about $250 million in assets. 

She is proud that PacWest always tries to find lower commissions, independent research and quality results for its clients.

Lau said financial planning is about helping clients reach their financial goals, whether by putting aside money to send to their grandchildren to college, buying their dream vacation home, or planning for retirement and health care.

She advises her clients to plan for basic needs first, then go for their dreams. After all, she knows firsthand that anything is possible with hard work and discipline.

Q & A

EDUCATION: Bachelor of Science, University of Wisconsin-Eau Claire; MBA, George Washington University; Chartered Financial Analyst

FIRST JOB: Dish room at University of Wisconsin cafeteria

HOBBIES: Chinese brush painting, travel, reading

LIFE GOAL: Financial security

PROUDEST ACHIEVEMENT: Started PacWest Financial Management and am still in business after 15 years.

FAVORITE BOOK: “Blue Ocean”

WHAT KEEPS YOU UP AT NIGHT? Losing money for clients

WHAT LIVING PERSON DO YOU MOST ADMIRE? My mother. She raised and educated four children on limited financial resources. All of us received advanced education in America. All of us have good careers and are law-abiding citizens. The next generation is doing well also

GREATEST EXTRAVAGANCE: A condo in Flagstaff that is expensive (by my standard) to maintain

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…….. Grace Lau, President of PacWest Financial Management, Inc. in Phoenix, said she has concerns about the increasing debt load of college students and graudates. 

“Young people are beginning their lives weighed down by debt, and the youngest ones do not even realize what is happening,” she said, adding that life decisions such as when to get married, have kids or purchase a home often are impacted by student debt.

Lau said as a small-business owner, she has witnessed the financial stress student loans can create for younger employees.

“When I interview a potential employee, I ask for a credit report,” she said.  “I have learned that financial stress affects job performance.”………

Mark Moritz, Esq.

Mr. Mark Moritz is an attorney in Chandler specializing in estate planning with an emphasis on ‘non-boilerplate’ situations.  In addition to his law degree from Arizona State University, he has also earned the designations of Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC).   He was the past Chairman of the Probate and Trust Section of the Maricopa County Bar Association on top of being member and past president of various estate planning organizations.

2. Estate Planning (Who’s going to get my stuff when I die?)

• Wills
• Beneficiary Designation: Life insurance proceeds, retirement plans, annuities, etc.
• Right of Survivorship: Bank accounts, brokerage accounts, mutual funds, automobiles and real estate
• Transfer on Death/Pay on Death: Bank accounts, brokerage accounts and mutual funds
• Deed: Real estate
• Trust                 

3.  With a Will, you can dispose your property on death; appoint a personal representative (executor as called in other states); name a guardian for minor children; and direct payment of debts and taxes. The Will is the “deuce of clubs”.  If there is ever a conflict between the Will and any other methods of distribution such as designated beneficiaries for IRAs, the term in the Will is no longer effective. 

(a)  A holographic (handwritten) Will is valid in Arizona provided that the entire document is in the testator’s handwriting and signed by the testator.  No witness is required in this case.  Typed Will is also valid but it must be signed by the testator with two witnesses’ signatures and preferably notarized (even though it is still legal if not notarized.  Having the Will notarized saves the trouble of calling the witnesses to court when there’s a need to verify their signatures).  

Guests enjoying their lunch during the workshop

(b) Same requirements as above apply if you want to make amendments (codicil) to your Will. 

(c ) Bequests can be specific (in the form of dollar amount or property), percentage or residual of your estate.  

(d) Federal estate tax exemption is now $5,120,000 and the rate is 35% on the excess but note that the exemption is scheduled to decrease to $1,000,000 on January 1, 2013.  However there is unlimited transfer of wealth to the surviving spouse with no estate tax due. The problem will arise when the second spouse passes away and the estate is larger than the exemption amount.

 4.   If there’s no Will (intestate distribution), the estate will go to your spouse and then your children (as defaulted by Intestate Succession Law in Arizona).  Nothing will be left for survivor of unmarried couple living together or for charities.  Without a Will, a bond is required on the personal representative unless the heirs formally agree that a bond is unnecessary.  You can waive the bond requirement in a Will. 

5.   Revocable Living Trust:  It can help to save estate taxes for married couples with estates larger than the exempt amount by doubling the exemption amount and is also useful for attaching “strings” for distributions.  Distribution can be clearly split for his/her kids (from previous marriage).  You can also set up irrevocable trust so that the principal is protected from the beneficiaries’ creditors and finally, unlike a Will, it avoids the probate procedure.  However, avoidance of probate is restricted only to assets in the trust.  If you do not fund your trust, the assets outside the trust are still subject to probate. 

Grace Lau, CEO of PacWest Financial Management delivering her opening address at the workshop

6.   Life Insurance:  Assets are distributed to the beneficiaries and are not subject to probate.  If the owner of the policy is not the deceased, there will also not be any estate tax.

 7.   Retirement Plan/IRA/Annuity: You can designate beneficiary/ beneficiaries apart from your Wills and Trusts.  This is the best way to defer tax by stretching out the IRAs for the younger beneficiaries. 

8.   Real Estate Deed: Community Property Right of Survivorship – CPROS (for married people only) and Joint Tenancy Right of Survivorship – JTROS (for either married or unmarried people).    A word of caution: Do not have JTROS between the parent and a child.   The disadvantage is that if the child is to be sued the parents’ house can be lost along with all the other assets to his/her creditors.  A better way to do it will be through a beneficiary deed and name the children as heirs to the house. 

9.   Transfer on Death/Pay on Death: This is applicable to bank accounts, brokerage accounts and mutual funds and is an efficient form of distribution upon death.  Those assets will not be subject to probate. 

10. Do not name the estate/trust as the beneficiary of an IRA.  You can lose the option to stretch the IRA.  Specific language needs to be in the trust so it can be treated as the conduit to create an inherited IRA. 

11. Distribution of tangible properties can be listed on paper, signed and attached to the Will. 

12. There are other Complex Planned (or Split Interest) Gifts to Charity.  Some of them are:

•   Charitable remainder trust
•   Charitable lead trust
•   Charitable gift annuity    

 Disclaimer: The writer or PacWest Financial Management, Inc. is not responsible for the legality and accuracy of this article.  Readers should seek advice from their attorneys or financial advisors prior to taking any action with regard to the above mentioned. 

“To control risk, one needs to keep a diversified portfolio,” Lau said.

Some of her favorites include HSBC Holdings (HBC), Johnson Controls (JCI) and Novo Nordisk (NVO).

Grace Lau, PacWest Financial Management, Phoenix