Blog - Page 19 of 71 - NorthStar Capital Advisors

6 Core Values a [Good] Financial Planner Provides

A good financial planner is client-centric and focused on improving your “Return on Life”. At NorthStar Capital Advisors, we focus on six key value propositions in this dimension:

Organization. We will help bring order to your financial life, by assisting you in getting your financial house in order (at both the “macro” level of investments, insurance, estate, taxes, etc., and also the “micro” level of household cash flow).

Accountability. We will help you follow through on financial commitments, by working with you to prioritize your goals, show you the steps you need to take, and regularly review your progress towards achieving them.

Objectivity. We bring insight from the outside to help you avoid emotionally driven decisions in important money matters, by being available to consult with you at key moments of decision-making, doing the research necessary to ensure you have all the information, and managing and disclosing any of our own potential conflicts of interest.

Proactivity. We work with you to anticipate your life transitions and to be financially prepared for them, by regularly assessing any potential life transitions that might be coming, and creating the action plan necessary to address and manage them ahead of time.

Education. We will explore what specific knowledge will be needed to succeed in your situation, by first thoroughly understanding your situation, then providing the necessary resources to facilitate your decisions, and explaining the options and risks associated with each choice.

Partnership. We attempt to help you achieve the best life possible but will work in concert with you, not just for you, to make this possible, by taking the time to clearly understand your background, philosophy, needs and objectives, work collaboratively with you and on your behalf (with your permission), and offer transparency around our own costs and compensation.

The real value we want to bring to you is to know what really matters to you and to be a part of that.

Source: Mitch Anthony, “Moving from ROI to ROL”

Medicare 101: “The What’s”

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities and medical conditions. The different parts of Medicare help cover specific services:

Medicare Part A (Hospital Insurance)
- Inpatient care in hospitals
- Skilled nursing facility care
- Hospice care
- Home healthcare
Medicare Part B (Medical Insurance)
- Services from doctors and other health care providers
- Outpatient care
- Home health care
- Durable medical equipment
- Many preventative services
Medicare Part C (Medicare Advantage)
- Includes all benefits and services covered under Part A and Part B
- Usually includes Medicare prescription drug coverage (Part D) as part
  of the plan
- Run by Medicare-approved private insurance companies that follow
  rules set by Medicare
- Plans have a yearly limit on your out-of-pocket costs for medical
  services
- May include extra benefits and services that aren’t covered by Original
  Medicare, sometimes for an extra cost
Medicare Part D (Prescription Drug Coverage)
- Helps cover the cost of prescription drugs
- Run by Medicare-approved drug plans that follow rules set by Medicare
- May help lower your prescription drug costs and help protect against
  higher costs in the future

We’ll cover the when’s and how’s of enrolling in forthcoming articles.

Source: medicare.gov

What Assets Make Up Wealth?

This is the time of year where our office is busily updating our clients’ net worth statements. Net worth is the best measure of both your current financial health and the financial progress you’re making over time. Remember that your net worth, simply put, is the sum of all the financial assets you own minus all of the debts that you owe. Almost every good financial decision you can make serves to either grow or protect your net worth. For example, saving and investing increase your the financial assets you own, while paying off debt decreases the amount you owe.

The Visual Capitalist recently published the fascinating chart below that examines how the composition of assets varies by net worth.

It’s readily apparent that the asset mix changes greatly between lower and higher net worths:

Primary Residence:
This is by far the most important asset class for all net worth tiers up to $1 million.

Vehicle:
For the $10k net worth tier, the value of a vehicle is more than investments such as pensions, IRAs, mutual funds, stocks, etc.

Stocks:
The proportion of directly-held stock increases up the tiers, and billionaires hold a significant portion of wealth in stocks.

Business Interests:
Most multi-millionaires or billionaires are not liquid, and have most of their wealth in business interests.

Smart Questions Clients Ask

How much will your financial advisory services cost me, all-in?
What will the additional trading costs be, if any, to implement your strategy?
What are the internal expenses of the funds you use, if any?
What might the taxes on gains or income look like, on average?
Are there costs associated with our transactions that I may not see but will have an effect on my net returns?

These are the questions we get asked by the savviest people who inquire at our firm. Not everyone knows to ask these but we make sure to answer them anyway. Offering transparency around costs is important. If your financial advisor is not able to give you clear answers to these smart questions, you need to reconsider if your advisor has your best interests in mind.

Behind the Curtain: Pro vs. Amateur Advisors

For most people, it is very difficult to discern a truly good advisor from a lackluster hack — a professional versus an amateur. To help you recognize the difference, we want to highlight a deeply insightful article penned by Josh Brown, aka The Reformed Broker. Here is Josh’s wisdom reformatted and mildly edited for easy consumption:

Professionals take this opportunity to manage client expectations, pointing out that 2017’s returns were above average (by about triple) and unlikely to represent an average annual return going forward.	Amateurs use the returns of last year to raise more money. “I made you 18% in 2017, let’s talk about the assets you’re still holding away from me. And maybe some referrals.”
Professionals maintain allocations through the start of January, with perhaps some rebalancing.	Amateurs turn over positions, incurring commissions and possibly taxes, and start to talk about the “playbook” for the New Year.
Professionals point to the holdings that didn’t keep up with US and global stocks as a teachable moment and a reminder that for diversification to work, not everything can be going up at the same time.	Amateurs look for replacements for the holdings that are “disappointing” the clients, switch out managers based on last year’s performance and cut down exposure to asset classes that aren’t “working.”
Professionals review client financial plans and have uncomfortable but essential conversations with households that are falling short of their stated goals.	Amateurs traffic in “Five Hot Stocks for 2018” and send out three-year return charts for funds they want to add to portfolios.
Professionals talk to clients who are far outpacing their goals about enjoying life more now.	Amateurs talk to clients about adding new hedging strategies and more alternatives.
Professionals admit they don’t know what the new year will bring, and focus instead on the durability of what they’re doing.	Amateurs have year-end price targets and can’t-miss sector bets.
Professionals will keep clients focused on the important stuff and get the job done in 2018, come what may.	Amateurs will direct client attention to all the wrong metrics and inevitably fall short, which means more prospecting come 2019 to replace disenchanted and under-served clients.

Donate Wisely

Whether you’re contemplating a last-minute donation for 2017 or planning a major move to define 2018, we advise you to donate wisely. The awesome decision tree below from Bloomberg assembles the advice from philanthropic advisers, nonprofits, and volunteer experts to help narrow down the best method of giving for you. Download a PDF if you’re having trouble reading it below.

You Are Your #1 Threat

The chart above from Dimensional Fund Advisors is an excellent demonstration of the resilience of the market. Each event marked on the timeline was accompanied by thousands of articles and TV reports discussing at great length how bad things were going to get and what you supposedly needed to do. Despite all that noise, the market just keeps powering up over the long term.

Individual investors (that’s you!) constitute the number one threat to their own portfolio. How’s that? In the face of market stress and volatility, they usual reaction is some combination of the following :

Fleeing into the arms of a charlatan who purports to having predicted it
Buying into Black Swan funds and protective products that cap all future upside and cost a fortune
Obsessing over hedges after the fact
Selling out with big (permanent) losses and sitting in cash
Freezing 401(k) contributions or having retirement cash allocated to money market funds
Excessive trading
Planting a flag and being unwilling to publicly change our minds in the face of new evidence
Throwing money at bizarre alternatives like coins, bars, bricks and bullion which have no proven ability to fund a retirement
Conflating political views with investment expectations

According to adivsor Josh Brown, “every one of these things is extremely detrimental to our financial health. In some cases, the damage could be irreversible. Nothing kills the long-term returns of a portfolio like throwing away the playbook in the heat of a market crisis.”

Source: TRB

Simple, Bedrock Rules on Personal Finance

When financial columnist Brett Arends penned his final piece for the Wall Street Journal, it was absolutely foundational!

Ignore economic and financial forecasts. Their purpose is to keep forecasters employed. Most professional economists were blindsided in 2008 by the biggest financial collapse in 70 years—and by the stock market’s recovery.

Ignore “expert” stock picks. The stocks that Wall Street experts like most generally fare no better than those they like least—or stocks picked at random.

Keep it simple. Complicated financial strategies and investments are mostly designed to enrich managers and salesmen.

Buy individual stocks only as a gamble. Never buy fashionable investments.

Put most of your long-term portfolio into equities. While equities are volatile, they generally produce the best long-term returns—typically about 4% to 5% a year above inflation. But remember to hang on when they plummet.

Invest globally, not just in the U.S. Foreign stock markets, in the aggregate, are no riskier than U.S. markets and offer terrific diversification.

Buy Treasurys, too: In addition to stocks, own some long-term Treasury bonds and some Treasury inflation-protected securities. These are likely to hold their value, or even go up, when stocks crash.

Save early, save often. Time and patience are the investor’s best friends.

Use those free shelters. Contribute as much as possible to your company’s 401(k) plan or equivalent (such as 403(b) or 457), and at least enough to get the company match. If you can, contribute to individual retirement accounts for yourself, and a nonworking spouse, as well.

Plan for a long life. A third of your adult life could come after you’re 65. Try to pay off your mortgage, and save at least 10 times your annual salary, by the time you retire. Delay taking Social Security for as long as you can up to the age of 70, to maximize each monthly check.

Beware of buying your employer’s stock. Your job there is probably financial exposure enough.

Protect your nest egg. Don’t drain your retirement savings to pay for your child’s college education. Likewise, don’t empty your 401(k) or IRAs to start a business. You will be taxed and penalized on the withdrawals even if you lose the money.

Teach your children about money. Teach them early and often. No one else will, and they will have to make their own way.

Stock Market’s Merry Performance Over Time

Stacking up the stock market’s annual performance going back nearly 200 years looks rather merry and bright. Our graphic above updates the seasonal interpretation of the stock market’s history first pointed out by Carter Worth.

Each block of the Christmas tree represents the annual total return of the U.S. stock market. The S&P 500 is used from the index’s inception in 1928 through the present. The Dow Jones Industrial Average is used 1896 through 1927. Finally, aggregate data published by Goetzmann, Ibbotson and Peng covers 1825 through 1895.

Since 1825, the stock market has produced an annual gain 71% of the time, or 137 times, while losing ground just 55 times. A standard distribution chart, which happens to take the shape of a Christmas tree, shows how for most years, the market moves within a range of zero to up 10%.

With only 15 trading days left in 2017, the S&P 500 is up nearly 20% year to date. So it looks like we’ll be adding a new branch to the right side of our tree!

Happy Holidays from our family to yours.

Best Illustration of Bull & Bear Markets

Here’s the best illustration we’ve ever seen of history’s bull and bear markets. This chart shows the performance of the S&P 500 Index from 1926 through September 2017. Blue denotes past bull markets’ durations and returns (total and annualized). Orange denotes the bear markets. The pink vertical bars delineate recessions.

At a 100,000-ft level, this chart underscores the benefits of investing for the long-term. Two specific takeaways:

There’s a lot more blue than orange meaning stocks tend to spend more time going up in value than going down.
The current bull market might feel long, but by historical standards, the length and strength of this bull is not exceptional

Source: First Trust

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