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Reasons #12 & #35 That You Might Need A Financial Advisor

What are the reasons that you might need a financial advisor? They vary by individual, but there are common needs that many folks have.

Transitioning to a Financial Planning Career

Every once I a while I will be asked to give my opinion on some logical steps to take when pursuing a financial planning career. This post may be beneficial for individuals who are entering the financial planning profession right out of college or are looking to change careers. Some are steps to take and others are questions to ask yourself and others along the way. What is it about financial planning do/would you enjoy? It could be client-facing meetings, technology, back-office work, or a combination. And you may not know until you try your hand at several things. Ask some current planners or even your own. The point is to find an area that you enjoy and work to get better at it. Find the right firm. Will you work for an RIA or broker-dealer? What type of firm do you want to align with? This could mean starting […]

Life Moves Pretty Fast…

In the classic 80’s movie, Ferris Bueller’s Day Off, Ferris Bueller says, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” In other words, life happens. That’s why it’s important to meet with your financial planner to see if anything has changed, and if there’s anything that needs to be done to assist with those changes. The reason it’s important to meet with your planner is that he or she can ask questions and propose situations that you might not even be aware of or think about. A recent example would be how the new tax law affects your situation. Another example would be a child that is going to college, a job change, death, divorce, or 2018 being the year you plan to retire. A financial planner will be able to provide another set of eyes to your situation […]

5 No-No’s for IRA Investing

It is generally well-known that in an IRA account you have a wide range of investment choices. These choices are typically only limited by the custodian’s available investment options.  However, there are specific prohibited transactions that cannot be accomplished with IRA funds. Often these prohibited transactions can cause your IRA to be disqualified, which can result in significant tax and penalty, along with loss of the tax-favored status of the funds. What’s Not Allowed for IRA Accounts? Self-Dealing.  You are not allowed, within your IRA, to make investments in property which benefits you or another disqualified person.  A disqualified person includes your fiduciary advisor and any member of your family, whether an ancestor, spouse, lineal descendant (child) or spouse of a lineal descendant.  It is important to note that this limit applies to both present and future use of a property. So if you purchased a condo and rented it […]

Comprehensive Financial Planning – Explained

Do you know what is involved in comprehensive financial planning? This post gives an overview of the components and how they all fit together.

Create Your Own Luck

“Luck is when preparation meets opportunity.” The other day I was eating lunch with my kids. After lunch was over I gave them a “treat” from the drawer that we normally house goodies of all sorts. I happened to grab a couple of gold-wrapped chocolate coins. These coins were renditions of the JFK half-dollars. My youngest grabbed her coin and said, “heads or tails?” I quickly said “heads” while she flipped the coin in the air. The coin landed on the floor. Tails. I said, “Well, we both lost.” My daughter quickly exclaimed, “I won daddy.” When I asked her how she won when the coin landed tails she replied to me, “I called both heads and tails.” Win-win. Essentially, my daughter had created her own luck. And I immediately thought, “This is excellent fodder for a blog post. So here we are. The reason why I mention this is […]

5 Questions to Ask Your Advisor

If you’re contemplating hiring a financial planner or advisor or if you’re currently working with one, here are some fair and important questions you may consider asking him or her. Are you a fiduciary? Being a fiduciary means that the adviser must legally act in your best interest. While not an absolute guarantee that the advisor will never act otherwise, most advisors who are fiduciaries embrace the responsibility – they want to be fiduciaries. Any other answer then yes to this question means you need to keep searching for an advisor who is. How are you paid? Generally, three different answers will follow. It will either be fee-only, fee and commission, or commission. If the advisor says fee-based or salary, you’ll want to dig deeper. These two responses don’t say how the compensation is derived. More importantly, you want to know how you will pay the advisor. And if you’re […]

Read the Fine Print

As I was reading the paper the other day I came across an ad for a pretty prominent mutual fund broker-dealer. The ad was touting the investment acumen and performance of its mutual funds and fund managers. It mentioned how many of its funds had outperformed category medians over a certain span of years. Then I read the fine print. The fine print stated the following: Rankings are based on total return and do not include the effects of sales charges The rankings were based on the funds’ Class Z shares. Past performance does not guarantee future results. In providing these materials the company is not acting as your fiduciary as defined by the Department of Labor. Let me summarize what these fine print statements mean. First, sales charges reduce returns. In other words, their rankings didn’t include the expenses associated with commissions earned by the salespeople that sell the […]

Sorry to Rain on your Parade

I wanted to take a brief moment to remind our readers of a fundamental investing truth that tends to get overlooked, forgotten, or deliberately disregarded during times of market euphoria. Think about this. If you had a million dollars at the beginning of 2016 to invest and I said that over the year that there would be a Supreme Court vacancy, the Cubs would win the World Series, interest rates would rise, and Donald Trump would become president – would you invest that million dollars in the market? I would bet that many people would not. They would guess that 2016 would be a dismal year for market returns. Yet, in 2016 the Dow returns 13.4% and the S&P 500 returned 9.5%! With all of that uncertainty and the improbable happening, the market still had a great year of returns. Those who stayed invested were rewarded. Those who sold (say, […]

Planning Without Assets

Many individuals, especially after graduating college have an enormous amount of human capital but very little when it comes to financial capital and investable assets. A common question or concern may be that they are of little interest to financial planners because they don’t have any investable assets or wealth. Let me say that this is both correct and incorrect thinking – depending on the financial planner – and just as important; how the financial planner is paid. Let’s start with the correct version first. Financial planners are paid in a number of different ways from commission, fee-only and fee and commission. Focusing on fee-only planners for a moment, these planners may be compensated by the hour, retainer, or as a percentage of assets the planner manages for the client. If a fee-only planner is only compensated by assets under management, then the planner may not be interested in helping […]

What to Expect After the Election

Now that the election has come and gone I wanted to send a note on what we should expect for the next four years and beyond. Really, these are no big predictions, but at times we may tend to forget our long-term goals in the hype and excitement of short term events. Expect volatility. Volatility is the norm, not the exception. Therefore, it should come as no surprise that markets will fluctuate, gyrate and generally have many ups and downs over the next four years and beyond. Think of it this way, would we expect any higher returns on our investments if markets were always calm and stable? No. Volatility is the price (risk) we pay for expected higher returns. We can diversify and maintain focus, but volatility will never go away. Expect change. As the saying goes, the only thing that is permanent is change. Do I know what […]

Should I Pay Off Debt or Save for Retirement?

Over the last few weeks I’ve gotten quite a few questions from individuals ready to graduate college and start embarking on their first job. As is often the case, many of these individuals have varying amounts of student debt but also understand the importance of saving for retirement. Naturally, a common question is should they pay off student loans or save for retirement. Here’s my take. As I’ve mentioned in previous posts, there are few ways to receive guaranteed returns. One of those ways is by paying down debt. This is an example of a guaranteed rate of return that is also risk free. By paying off a loan early, the interest that would have normally gone to the lender ends up in your own pocket. The good news is that the debt is retired faster, and the individual experienced zero volatility exposure compared to investing in the market. On […]

Should You DIY Your Financial Planning?

Many individuals may consider doing their own financial planning over the course of their lives. Although financial planning is generally not too terribly difficult, to answer the title’s question, the answer should be “No.” Here are some reasons why. Get a second opinion. Even if you do it yourself, it’s wise to have another professional take a look at what you’re doing. A good financial professional will confirm good decisions you’ve made and will politely tell you if there’s a gap in your plan or if you may be making mistakes or omissions here and there. Even good financial professionals have another professional look at their plans. Be wise enough to realize you don’t know everything. Time management. Although many individuals are smart enough to learn how to do their own financial plans, many aren’t willing to take the appropriate amount of time. It takes quite a bit of time […]

Pregnant Men and Tattooed Aristocrats

  When you read the title to this article your mind immediately processed the words as unfamiliar and not particularly logical. After all, how many pregnant men do you see and how many tattooed aristocrats do you run into? The title was actually taken from the book, Thinking, Fast and Slow by Daniel Kahneman. I’m currently in the middle of my third time through the book and it seems like each time I read it I gain valuable insight as to how our minds work and how we perceive things. Most notably, these words stuck with me as a way to inform our readers of other financial words and pairings they may encounter and to make readers aware that these word combinations will seem and are illogical. The goal is to help inform readers that should they see some of the following phrases, they should immediately realize that something doesn’t […]

Check Your Vitals

Whenever you go into the doctor’s office for a check-up what’s the first thing he or she usually does? The doctor checks your vital signs. Generally, this is heartbeat, blood pressure, breathing, reflexes, etc. Sometimes either the doctor or the nurse practitioner will have a questionnaire asking various questions such as number of drinks per day, whether or not you smoke, and any allergies – to name a few. Most individuals give this information without thinking twice. Most of the time, the answers we give don’t change. So why does the doctor keep asking the same questions every time we have an appointment? The answer is because if one of these answers does change (such as an irregular heartbeat or high blood pressure) this changes the potential diagnoses and outcome. This is why it’s important in your financial planning to always check your vitals. In other words, even though you […]

The Value of a Stay-at-Home Parent

In earlier posts we’ve discussed the importance of a spousal IRA for a spouse that stays at home taking care of the children in order to still save for retirement even though the “non-working” spouse has technically no “earned” income. Spousal IRAs aside, I wanted to shed some light on the value of a stay-at-home parent has, even though they might not be getting paid a salary for their work raising the children. The goal is to point out why stay-at-home parents still have a need for risk management and retirement planning as they (in my opinion) work one of the hardest jobs – raising children. According to the 2016 salary.com Mother’s Day Infographic, the value of a stay-at-home mom (parent) is approximately $143,102 annually, accounting for 40 regular hour work and 52 hours of overtime. This “salary” takes into account occupations such as driver, teacher, chef, nurse, and janitor. […]

Sometimes it’s Not a Good Fit

Whether you’re the prospective client working with a financial planner or the planner working with a prospective client, sometimes for whatever reason the relationship doesn’t make sense. The purpose of this post is to help prospective clients and planners in deciding whether or not a client/planner relationship is worth pursuing or maintaining. First, let me start from the perspective of the client looking for a financial planner. Initially, as the client you’re going to want to look for some of the minimums every financial planner should be doing. The first is the CFP® designation. This means that the planner has at least a minimal amount of financial planning education and had passed a rigorous exam. Next, make sure the planner is a fiduciary. This is not optional. This means that the planner is legally required to act in your best interests always. Additionally, make sure they are fee-only. This means […]

A Note for New Advisors

This post is for an advisor just starting out in their career. Their work could range from working for a large broker-dealer, to a small financial planning firm with a few employees. The main point of this post is to give the advisor reading it some hope and inspiration. Having had experience working for both a large broker-dealer and a small firm (here at BFP) my hope is to give some advice thoughts as the advisor shapes their career. First, you are in one of the greatest positions in your career. You have the choice of determining how you want your career path to look. Determine the path and what type of financial professional you want to be moving forward. Identify if you are a hunter or a farmer. If you decide to be a hunter, you will spend the rest of your career “going for the kill”. This means […]

A Risk Management Checklist

Although many individuals have various risk management policies in place, sometimes those policies get brushed aside and every once in a while the dust needs to be wiped off of them and perhaps some updating needed. Here’s a checklist to consider the next time you review your risk management strategies. Auto Insurance – Review your coverage to make sure it’s still adequate. Liability limits of at least $250,000 should be the norm. Limits of $500,000 up to $1 million are better. If you drive an older car, consider raising your comp and collision deductibles or eliminating them altogether to save on premiums. Upside down on your car loan? Consider gap insurance. Better yet, don’t have a car loan. Home Insurance – Make sure your home is insured to its reconstruction cost. This is the cost to rebuild your home using today’s prices for materials, labor, etc. It is NOT the […]

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