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Asset Management vs. Financial Planning

  • October 20, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Financial Planning, Investing 101, Personal Finance, Seeking Prudent Advice

At a 100,000-ft level, we do two things in our financial advisory practice: Asset Management* and Financial Planning.  Although these two functions are distinct, they are very much interrelated.  Both are essential components for our client families’ long-term success, but it’s important to understand and appreciate the differences:
(* Asset Management also falls under the monikers of  “investment management” or “portfolio management”)

Asset management is about asset allocation, expected returns, risk tolerance and time horizons.
Financial planning is about making wise choices about the use of debt, setting up college savings plans, tax efficiency, estate planning and ensuring your insurance needs are taken care of.

Asset management is about managing investments.
Financial planning is about managing investors.

Asset management is about portfolio construction and risk management.
Financial planning is about comprehensive planning and emotional management.

Asset management is about measuring portfolio performance by comparing results to predetermined index benchmarks.
Financial planning is about measuring your performance against your true benchmark — your goals.

Asset management is about allowing your money to work for you to help you reach your financial goals.
Financial planning is about helping people define their goals, dreams, desires and fears.

Asset management is about creating a process that guides your actions in a wide variety of market environments.
Financial planning is about implementing a plan and making corrections along the way as life or market and economic forces intervene.

Asset management is about creating a portfolio that can survive severe market disruptions.
Financial planning is about creating a financial plan that can survive severe life disruptions.

Asset management deals with financial capital.
Financial planning deals with human capital.

Asset management is about growing and/or preserving your wealth.
Financial planning is about understanding why money is important to you personally.

Asset management is about where to invest a lump sum.
Financial planning is about how and when to invest a lump sum.

Asset management is about asset allocation.
Financial planning is about asset location.

Asset management is about creating policies to guide your actions in the face of economic and market uncertainty.
Financial planning is about helping people make better decisions with their money in the face of uncertainty that is impossible to reduce.

Asset management helps you understand how much you need to earn on your investments to meet your future spending needs.
Financial planning helps you understand how much you need to save meet your future spending needs.

Asset management helps you figure out where to take your money from when you need to spend it.
Financial planning helps you figure out where to spend your money in a way that makes you happy.

Asset management helps you grow your savings to meet future consumption needs.
Financial planning helps you plan and budget for future consumption needs.

Asset management is about creating a long-term process to guide your actions in the markets.
Financial planning is about creating systems that allow you to spend less time worrying about your money.

Asset management is about reducing the anxiety that comes from the volatile nature of the markets.
Financial planning is about reducing the anxiety that comes from making important decisions with your money.

Asset management involves growing your wealth so some day you can become wealthy.
Financial planning involves figuring out what a wealthy life means to you.

To get the most benefit from asset management, you really need comprehensive, well thought-out financial planning.


25 Important Documents You’ll Need Before You Die

  • October 13, 2016/
  • Posted By : admin/
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  • Under : Uncategorised

death-dossierDesign your “Death Dossier” soon or you could be setting up your heirs for frustration and financial pain:

25 Important Documents You’ll Need Before You Die

The Essentials
• Will
• Letter of instruction
• Trust documents
Proof of Ownership
• Housing, land and cemetery deeds
• Escrow mortgage accounts
• Proof of loans made and debts owed
• Vehicle titles
• Stock certificates, savings bonds and brokerage accounts
• Partnership and corporate operating agreements
• Tax returns
Bank Accounts
• List of bank accounts
• List of all user names and passwords
• List of safe-deposit boxes
Health-Care Confidential
• Personal and family medical history
• Durable health-care power of attorney
• Authorization to release health-care information
• Living will
• Do-not-resuscitate order
Life Insurance and Retirement
• Life-insurance policies
• Individual retirement accounts
• 401(k) accounts
• Pension documents
• Annuity contracts
Marriage and Divorce
• Marriage license
• Divorce papers

Learn more in this article


Got retirement plans? Your spouse may disagree

  • October 6, 2016/
  • Posted By : admin/
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  • Under : Uncategorised

couple

A recent survey by Fidelity shows that wives and husbands don’t share retirement-planning duties nor agree on the plan:

  • Only 41% of couples surveyed handle retirement investment decisions together.
  • Only 17% of couples say either spouse is prepared to assume sole responsibility of their retirement finances.
  • Although women are more likely to outlive their husbands, only 35% of wives say they are completely confident in their ability to take over the finances. 72% of husbands feel they can.
  • 33% of couples say they don’t agree or don’t know where they plan to retire.
  • 62% of couples nearing retirement don’t agree on the age at which to stop working
  • 47% of couples nearing retirement don’t agree on whether they will continue to work in retirement.

Here’s what you should do and know:

  • Both husbands and wives should know where critical documents are kept
  • Both need to know what to do if their spouse is no longer able to assist with financial decision-making
  • Both should have an understanding of the family’s finances, savings, and investment goals.
  • Both should become active in financial planning and meeting with the family’s financial and investment advisors.
  • Both husbands and wives should talk about retirement and finances more often together for better agreement and mutual understanding.

Basket of Financial Deplorables

  • September 29, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Uncategorised

basketIt’s hard to not to riff on something political in the same week of that presidential candidates Hilary Clinton and Donald Trump squared off for their first debate.  That’s exactly what Tony Isola did when he offered up his “financial products” version of Hilary Clinton’s uncomplimentary description of her opponent’s supporters (“basket of deplorables”).

Here is Tony’s list of products that are toxic to the retirement savings of our people and institutions:

  1. Equity-Indexed Annuities – How about an investment with limited upside but large potential for a substantial loss? Throw in a 10% sales charge and no dividend participation (50% of historic market returns) and we have the ingredients for a deplorable retirement scenario.
  2. Funds with 12b-1 Fees – Fund size and investment returns are negatively correlated. Investors are paying a fee to brokers designed to increase assets and reduce returns. Kind of like paying a restaurant to give you food poisoning!
  3. Proprietary Mutual Funds – This is cross selling at its most heinous. Never buy a mutual fund created by a broker’s employer- this is the ultimate perverse incentive.
  4. Non-Traded REITs – A false promise of safety combined with 10% upfront commissions, this is a true sucker’s bet. Just because something is not traded doesn’t mean it cannot go down in value. By the way, their publicly traded cousins have vastly outperformed this group over time, because of greater transparency and lower fees.
  5. Commodity Funds – High risk combined with low returns rarely ends well. These products specialize in something called ”Contango.” Investor translation: Nearer dated futures’ prices are lower than the longer dated ones, or more commonly known as buy high and sell low, rinse and repeat.
  6. Variable Annuities – These are often sold on the pretense of guaranteed income and tax-deferred growth. In reality, very few investors need this product fraught with complexity and egregious fees. These are often placed inappropriately in tax-sheltered accounts; investors do not need both a belt and suspenders.
  7. Front-Loaded Mutual Funds – Investors pay a premium of 5.75%, and an additional 1% a year in fund fees to purchase an investment that is almost guaranteed to underperform an unmanaged index fund costing .05%, annually. There is NEVER a reason to pay this fee.
  8. Over-Niched ETFs – Healthcare Shares Dermatology and Wound Care ETF and Pure Drone Economy Strategy funds are all that needs to be said. The prosecution rests its case.
  9. Hedge Funds – 2% annual fees combined with 20% of yearly profit makes it pretty hard for investors to bring home any type of meaningful positive returns. While there is a small minority of hedge funds that are worth the steep price, they are either closed or have account minimums that rule out everyone except for the Bill Gates’ crowd.
  10. Market Linked C.D.s – The ultimate vanilla investment has been hijacked by Wall Street. Unless you enjoy paying a 3% commission and having the possibility of losing principal due to early withdrawal, run away from anyone who approaches you with this nonsense. Purchasing a complicated structure that will underperform your Credit Union’s basic offering is a deplorable choice.

Vote for transparency, low fees, and an investment advisor who will look out for your best interests!

source: Tony Isola


Six College Loan Mistakes

  • September 22, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Personal Finance

private-student-loansManaging college loan debt smartly has never been more important than it is now.  Total college debt in the U.S. is five times higher than 20 years ago.  As with many things financial, good results come by simply avoiding the common mistakes.  The best golfers aren’t the ones that make the most killer shots – they’re the ones that make the fewest bad shots.  With that in mind, here are six common college loan mistakes to avoid:

MISTAKE NO. 1: Failing to consider income-driven repayment plans
Federal student loans have many payments options (check out the infographic below).  Don’t just assume the default payment plan is best for you.

MISTAKE NO. 2: Failing to understand the loans
There are two basic types of student loans: federal and private.  They come with different interest rates and different repayment options.  It pays to know the differences and options to make the best choice for your needs.

MISTAKE NO. 3: Failing to research student-loan forgiveness programs
Borrowers with federal loans are eligible for debt relief under the Public Service program for a range of careers including teachers, law enforcement, doctors, lawyers and others.  Some employers even help pay employee student loans including the U.S. military, PWC, and Fidelity.

MISTAKE NO. 4: Prioritizing student loans at the expense of retirement savings
Prioritizing debt payment ahead of retirement savings is a mistake.  For example, if your employer provides a matching contribution to your 401(k), that’s free money that you need to capture.

MISTAKE NO. 5: Automatically refinancing or consolidating
Consolidate carefully!  You can capture a lower overall interest rate.  However, you may be giving up flexible payment options and other opportunities.

MISTAKE NO. 6: Failing to automate payments
Make it easy and automatic.  You don’t want to accidentally miss a payment and blow up your credit score or compromise your eligibility for loan forgiveness.

 

loan-payment-optionsSource: WSJ


Simplicity

  • September 15, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices

simplicity-006

Although we live in a complex world, this doesn’t mean we have to accept nor invite complications. In fact, very often a simple solution is the best solution.  So what are some possible non-complex approaches to complicated finances?

Advisor Tony Isola, CFP, has a few ideas for you to consider:

  • Automate your retirement contributions and eliminate the default status of doing nothing;
  • Try to stay married (divorce is a great destroyer of wealth);
  • Buy experiences and not things, and de-clutter your life while increasing happiness;
  • Do not spend $250K for a four-year private college education for your children;
  • Exercise and eat right; this will save you a boatload of cash on health care in the long run;
  • Bank at a credit union;
  • Do not invest a dime on an investment “tip;”
  • Don’t be cheap when finding an accountant;
  • Check your investment portfolio annually, not every day;
  • Don’t cheat people because karma is a bi*ch; and
  • Get disability insurance.

Sir Isaac Newton chimed in on the subject as well: “Nature is pleased with simplicity and nature is no dummy.”

Source: ATM


Pundit or Professional?

  • September 1, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

pundit

What’s the best source of financial advice?  A pundit or a professional?  Charlie Bilello, the Director of Research at Pension Partners, provides this perspective-building comparison so you can make the right choice:

Pundit (noun): A supposed expert in a particular field who is frequently called on to give opinions to the public. See also Dennis Gartman.

Professional (noun): A person competent or skilled in a particular activity. See also John Bogle.

***

The Pundit spends their days making subjective predictions.

The Professional spends their days making objective assessments.

***

The Pundit seeks self-promotion.

The Professional seeks self-improvement.

***

The Pundit exudes hubris.

The Professional exudes humility.

***

The Pundit is forever calling for the next big melt-up or crash.

The Professional is forever focused on avoiding the next big mistake.

***

The Pundit seeks out only opinions that confirm their views.

The Professional seeks out all evidence, even if it runs contrary to their views.

***

The Pundit believes they know everything.

The Professional knows they know nothing.

***

The Pundit makes a living selling fear and greed.

The Professional makes a living helping to control these emotions.

***

The Pundit has a sense of entitlement.

The Professional has a sense of gratitude.

***

The Pundit seeks to inform.

The Professional seeks to educate.

***

The Pundit makes extreme forecasts to gain attention.

The Professional forecasts wide ranges of possible outcomes to gain respect.

***

The Pundit thinks in terms of long or short, this market or that market.

The Professional thinks in terms of asset allocation and the entire portfolio.

***

The Pundit believes in certainty, conviction, and precision.

The Professional believes in uncertainty, reservation, and probabilities.

***

The Pundit reads the news and listens to financial TV.

The Professional reads books and listens to podcasts.

***

The Pundit sees everything in markets as black or white.

The Professional understands there is often a gray area.

***

The Pundit makes the simple sound complex.

The Professional makes the complex sound simple.

***

The Pundit has a prophecy.

The Professional has a plan.

***

The Pundit has an answer for every question.

The Professional is often saying “I don’t know.”

***

The Pundit is an entertainer.

The Professional is an educator.

***

The Pundit gives recommendations.

The Professional offers guidance.

***

The Pundit provides a reason for every wiggle in the market.

The Professional provides evidence of randomness and noise.

***

The Pundit believes their success is a result of their exceptional talent.

The Professional understands their success is a result of hard work and luck.

***

The Pundit lectures.

The Professional listens.

***

The Pundit is thinking about the next day.

The Professional is planning for the next decade.

***

Pundit or Professional? The choice is yours.


Lessons of History

  • August 25, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Seeking Prudent Advice

historyHistory provides a huge wealth of wisdom for helping us grow and protect our money.  Trader-turned-educator-turned-financial planner Tony Isola provides an awesome analysis of the application of history lessons:

How can investors act as applied historians and use this skill set to create wealth?

There are several minefields that could easily be avoided with some knowledge of the past:

  • Most market corrections don’t turn into bear markets.
  • Using leverage to boost investment returns often ends badly.
  • The president has very little control over the global economy.
  • Buying new financial products at market peaks is a poor idea.
  • Bull markets last much longer than bear markets.
  • Stocks are six times more likely to be up 20% than down the same amount.
  • Uncertainty is always present and it is not a wise choice to use it as an excuse not to invest.
  • Stocks will do the best job of protecting future purchasing power over long periods of time.
  • Investing in the fastest growing world economies will not guarantee higher investment returns.
  • Most recessions haven’t turned into depressions.
  • Investment costs, savings rates and time in the market are the biggest components in generating healthy investment returns.
  • Factor investing won’t work for most people because of their cognitive deficiencies.
  • There is a large behavior gap between total mutual fund returns and what investors actually receive.
  • The great majority of mutual fund managers will underperform low-cost index funds because of costs.
  • Diversification works, just not every year.
  • Stocks can stay massively over- and undervalued for very long periods of time.
  • Real returns after inflation are the only returns that matter.
  • Stocks are in a bull market 85% of the time.

All of the following can be proven with applied historical analysis. This is a much better strategy than relying on your gut, or believing a compelling story, when allocating money.

Source: Teachable Moment


Happy Money: The Science of Smarter Spending

  • August 18, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Live Well

happy-moneyIf you think money can’t buy happiness, you’re not spending it right. Two rising stars in behavioral science explain how money can buy happiness—if you follow five core principles of smarter spending:

1. Buy Experiences
2. Make it a Treat
3. Buy Time
4. Pay Now, Consume Later
5. Invest in Otheres

 

“Buy Experiences” essentially means to spend money on memorable experiences instead of expensive toys, because you are able to relate to those experiences on an emotional level for much longer that with objects.

“Make It A Treat” focuses on the concept of over-consumption creating a weakening of the enjoyment factor. If you have something every day, even if it’s something you love, it becomes routine rather than fully enjoyable.

“Buy Time”: The idea that you make life decisions that allow you to have more free time. Suggestions include outsourcing unnecessary tasks.

“Pay Now, Consume Later” is a fascinating concept. In society today, we’re more apt to do the reverse, thanks to credit cards. Essentially, it’s sort of like half the fun of a road trip is getting there. When consummation is delayed, from something as simple as eating candy to attending an event, the enjoyment is increased. When something’s already paid for, if enough time passes, it seems “free” when it’s actually consumed.

“Invest In Others” hits on how donating or spending money on others feels better than buying things for yourself.

Happy Money (by Elizabeth Dunn and Michael Norton) offers a tour of new research on the science of spending. Most people recognize that they need professional advice on how to earn, save, and invest their money. When it comes to spending that money, most people just follow their intuitions. But scientific research shows that those intuitions are often wrong.

Happy Money explains why you can get more happiness for your money by following five principles, from choosing experiences over stuff to spending money on others. And the five principles can be used not only by individuals, but by companies seeking to create happier employees and provide “happier products” to their customers.

By the end of this book, readers will ask themselves one simple question whenever they reach for their wallets: Am I getting the biggest happiness bang for my buck?


Most Underfunded State Pension Plans

  • August 11, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

underfunded


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