Sherri contacted us because she was concerned that she was not getting the best financial advice. She was retired and using her nest egg for income; she wanted to make sure that her investments were doing okay because she was always worried about running out of money.
Our meeting began with my gaining a good understanding of where she was today and what she was trying to accomplish. I then asked what questions she had brought with her to our meeting. She responded, “I’m sure I should already know all this, but,” and then asked me a couple of questions. I could tell that she felt tense and uncertain what questions to ask.
Asking the right questions can make all the difference in an investor’s comfort and confidence regarding the choices they make about their money, especially because there are many different types of financial advisors out there–often claiming to provide identical services. Following are key questions to ask, when you evaluate a financial advisor. I shared them with Sherri:
1. Are you a fiduciary?
Working with an advisor who is a fiduciary is an important first step to ensuring that the advice you receive will be in your best interests. As a fiduciary, an advisor has an ethical commitment to put the client’s interests before his or her own. In other words, the advisor is client-centric, not product-focused. The advisor must also disclose how he or she is compensated, as well as any conflicts of interest that might arise in the working relationship. Financial advisors who have earned their CFP® certification are held to this highest standard in the financial services industry.
2. Do you work with a team?
Many advisors practice on their own, perhaps with support staff. However, some firms choose a team structure, because they value having team members representing a variety of expertise, ensuring rich collaboration for providing clients with a holistic experience. Just as important, a team also serves as a succession plan, so you can be confident that your needs will be met even if the unexpected occurs.
3. What services do you offer?
All financial advisors offer slightly (and sometimes significantly) different services to their clients. It is important to know exactly what services an advisor will provide and to make sure they are aligned with your values and needs. For example, for most advisors managing investments is the end-game. At Entrust Financial, we start with astute investment management. But that is only the beginning because we know that to help clients make good financial choices in all aspects of their lives, we also need to address their financial concerns that go beyond investing.
4. What will our relationship look like after I become a client?
You want to understand that the investment philosophy and asset allocation approach of the firm is disciplined, deliberate and articulated in advance so emotional decisions may be avoided during times of heightened market volatility. You also want to know how the firm will communicate with you. For instance, at Entrust Financial, we schedule regular progress meetings to fit each client’s needs and preferences, as well as communicating current events perspective by email to inform clients about the economic and capital markets climate.
With these questions in hand, Sherri finally began to relax and enjoy our conversation. The answers I was able to provide gave her a new level of comfort because she had a framework for making her decision about how to hire a financial advisor, to help her move past her fear of running out of money.
What do you want in a financial advisor? Asking these questions provides a first step in evaluating your financial advisory relationship. Reach out to us today with other questions that come to mind. We welcome the opportunity to start a conversation.
An unprecedented news flash of earlier this year read: Millennials overtake Baby Boomers as America’s largest generation¹. No wonder parents routinely ask us what advice we have for their millennial offspring–especially their daughters. Well, we have some suggestions and discovered in writing them down that they apply to a larger audience than just Millennial women. So read on!
Affluent Millennial women and those in the process of growing their wealth are known for being highly ambitious, educated, and dedicated. They have redefined what success is and they work hard for their assets. As women of increasing wealth, what do they need to know about taking care of their money?
First and foremost, affluent millennial women need to take charge of their money. Whether they earned it, inherited it, or received a substantial divorce settlement, the decision to take responsibility is paramount. Sound a bit intense? There is a good reason for the passion behind this statement.
As a woman Certified Financial Planner™ professional for the past fifteen years, the number one mistake I have seen women make is to deflect financial decision-making responsibility to a man in their life–whether their father, another male family member, or–often the most damaging of all–to their love interest. No matter how gorgeous, sexy, charming, or authoritative, I can pretty much guarantee that the spouse or life partner in your life will not do a better job managing your money than you will.
Time and again I have witnessed that special person in her life dissipate, spend in ways not aligned with her values, and often just plain take her wealth while she stands on the sidelines wanting affection and rationalizing she doesn’t know enough to make her own choices. Remember, such rationalizations are past thinking. Happily, we are in the twenty-first century and you, as a powerful force to be reckoned with, do know what to do. Or you can avail yourself of the resources you need to figure out what to do with your affluence–so you can fulfill your values, needs, and interests as well as avoid losing your wealth.
So tip number one to all affluent millennial women is to take charge of your wealth planning. Tip number two is to avoid the “Just sign here, honey!” syndrome, as described above when that special someone is given authority over your personal finances. Tip number three is to consider the benefits of finding a competent wealth advisor to help you achieve all that is important to you with respect to your money.
To help with tip number three, here are a couple of guidelines for selecting that all-important advisor:
Work with an advisor who has attained the Certified Financial Planner™ credential. This professional is seasoned in the aspects that can help you maintain your financial well-being as well as achieve all that is important to you. Search for professionals in your area: http://www.cfp.net/ When you visit the websites of the CFP® professionals you have identified, make sure they are comfortable working with your team of advisors, such as your CPA and attorney.
Then, during the initial consultation with the advisors under consideration, take note of whether they listen to you, educate you as the conversation unfolds, and have a long-term perspective focused on you. If all they want to discuss is their great investment products, watch out! Your long-term financial success is built upon what you need and what is important to you, not on a product.
Tip number four for wealthy millennial women is to make a spending plan. Yes, even with the best advisor, if you are not quite sure where your money is going (your expenses), you may be in for unpleasant surprises down the road. Never assume you know; be precise about what comes in and goes out; I believe your sense of command over your personal finances will grow accordingly.
Tip number five is to “get started.” No matter what your former experience, muster your courage and begin taking charge of your personal finances now. Even baby steps right now will likely result in better than ever tomorrows. If you are not sure where to begin, I created a how-to guide, complete with exercises, to get you going on your journey– Balancing Act: Wealth Management Straight Talk for Women. All proceeds from the sale of this book benefit a scholarship fund at Temple University.
I predict a couple of phenomenal outcomes when affluent millennial women choose to take charge of their money. The first is they will be better able to take care of themselves and their families no matter what curve balls life throws their way. The second is that women are charitably minded, more so than men, and often serve as a catalyst for social change, change that benefits not only their families but all of us.
So whether you earned your wealth, inherited it, or received it in a settlement award, I challenge you to take responsibility for your money. Learn what you need to know, make choices, and enjoy the experience of growing financial confidence that results.
¹FACTANK: News in the Numbers, Millennials overtake Baby Boomers as America’s largest generation, Richard Fry, April 15, 2
For most of us, making the right choices is a balancing act. Not only are we faced with balancing our values, needs, and interests, but our choices are complicated by the need to balance all of this within the context of our whole style of living. Balancing Act: Wealth Management Straight Talk for Women tells the story of many women. It records the choices they faced, the life balance for which they aimed, and the results they experienced. The book is a how-to guide for managing your wealth, protecting your style of living, and building the confidence you need to leave fear behind.
We are thrilled to share that when you purchase a copy of Balancing Act: Wealth Management Straight Talk for Women, you are not only helping yourself with the enlightening and inspiring true stories of many women, but in addition you are also helping students with financial need. We have decided to donate 100% of the proceeds from your purchase to a Temple University full-tuition scholarship fund.
Stock markets have been on a wild ride this year and it is likely that the volatility will continue through the remainder of the year because of the degree of uncertainty around the world. Current events with indeterminate outcomes almost always trigger emotional responses on the part of investors, thereby affecting capital market movements.
When there are large swings in market activity it is often just an overreaction to uncertainty; there may be no fundamental reason for investor worry. A good example of this is when the media aired the news that Britain voted to exit the European Union. Overall the U.S. capital markets suffered for the first two days following the BREXIT vote; suddenly, when investors realized the sky wasn’t falling, the markets quickly recovered.
If markets continue to gyrate don’t be surprised and definitely don’t panic. Panicking (or selling) does not serve you or your portfolio results over the long term. Market fluctuations–even wide, uncomfortable swings–are a normal part of investing that we investors have to accept in order to reach long-term goals.
For instance, a client contacted us the morning after the BREXIT vote and asked, “Does it make sense to move money from my investments into cash?” Because her goals are long-term and there is no way to anticipate the market’s next move, our response was, “No. Making a move would not help your portfolio results.”
In our experience, successful investors look beyond short-term capital market movements and stay focused on their investment plans. This picture says it all:
Motivated to know more? Check in with your financial advisor to confirm that your investment portfolio is properly diversified or Contact Us Today for a second opinion regarding your investment planning.
If you are a parent, you understand the importance of teaching your children good money skills; unfortunately, many of us are not sure where to begin.
Here are some ideas to get you started:
Help your children begin to save. Encourage your children to save a little from all the money they receive, such as allowances, birthdays, bar and bat mitzvahs, etc. Open accounts for your children and assist them with tracking their money. A couple of ideas for tracking their money would be www.mint.com or you could go the traditional paper and pencil route (it doesn’t need to be fancy).
When I was a kid my mom taped a piece of paper on our refrigerator door and that was what she and I used to track my money. I loved making that number grow! So every Christmas and birthday I would make additions; then when I got my first job the additions became more frequent. I was always saving for something but my first meaningful purchase was my car (I paid for one third of it). I was proud and protective of that car because I saved for it. Accomplishing that goal felt good.
Next, teach your children the difference between saving money for short-term and long-term goals. After your children understand the difference between short-term (purchasing a toy) and long-term goals (saving for college) help them to understand how money should be treated differently for the two types of goals. You want your children to understand that bank accounts are great for short-term goals. However, money that is geared toward longer-term goals should be invested appropriately, so that it may grow and outpace inflation.
Summer is almost here and everyone seems to have vacation on their minds. We often get questions about paying for travel; a typical one is: “How much can I afford to spend?” So today we’ll provide you with some helpful tips on how to create a vacation fund that fits easily into your budget. That way you can enjoy vacation without feeling guilty about the expense.
A good first step for creating a vacation fund is to determine how much you feel comfortable spending. Start by recording all of your monthly income sources; some examples are salaries, child support, pensions, investment income, and annual gifts. Be sure to add everything up so that you know how much money is coming in every month.
After you know how much is coming in, you should review and record all of your household expenses. The goal is to gain a firm understanding of where your money is spent. Start by tracking your expenses for at least one full month. It is usually easiest to start by recording your fixed expenses such as mortgage, car, and retirement savings. After you have recorded these fixed costs–for your needs–then identify the costs for things you want, your discretionary items such as clothing, walking around money (WAM), and travel. Write down all of your discretionary expenses. Now you are ready to give careful thought to how much money you are comfortable allocating toward vacation.
Recording your income and spending is a key to success because simply assuming you know the financial details leaves a lot of room for miscalculation. And miscalculation leads to budgets that do not work. Another benefit of tracking your income and expenses is the sense of control you feel when you know where your money is going.
We encourage you give it a try for a month or two. Here is a great spreadsheet to use or you may prefer an online budget system like www.mint.com.
Now you are ready for the second step: Set money aside and earmark it for your vacation. This step is important because it provides you with peace of mind, knowing that your money is there and available before you head out of town.
Everyone has a slightly different approach to this. Here are four examples:
Inheritors often set aside a portion of the income produced by their investment portfolio as their vacation fund.
Business owners tend to earmark a portion of their business profit or bonus to fund their vacation plans.
Executives may decide to set aside a portion of their annual bonus or utilize a portion of their exercisable stock options to create a fund for travel.
Retirees commonly establish a separate account for their social security income and earmark a portion or 100% toward travel.
To recap, start by recording the details of your income and expenses. Then select the way you prefer to earmark money for travel. The sooner you begin the sooner you may feel peace of mind, knowing the money you need is already saved.
When we realize that we have inherited money, most of us have the thought, “Wow, I want to make sure that I am responsible with this money but I have no idea what to do!”
A good first step is to determine the answer to the following question: “What do I want this money to do for me?” There is no right or wrong answer to this question and the answer will be slightly different for everyone. For example, our client Mary contacted us upon inheriting money from her father. She wanted to be sure that she was being responsible with this money and for the first time in her life to feel financially literate.
After some careful thought and discussion, it was clear that Mary wanted her inheritance to help her accomplish 3 primary goals:
Provide her family with some income now. Mary wanted to take a step back from her current career and pursue her dream of entering a different field.
Grow her money for retirement. It was very important to Mary that she and her husband would have financial security throughout their lifetimes.
Pass money along to her daughter. Ideally Mary wanted to be able to keep the principal intact so that she could leave a legacy.
As you can see, Mary had important goals that she wanted to address with her inheritance. She was not sure how or if she could obtain these goals, which leads us to the next important point.
After you have determined your priorities, the second step is to decide how your money should be invested. Keep in mind that investments are really just tools to help you accomplish everything that is important to you; this is why you need to start by determining your goals.
Many times people who inherit from a family member (especially a parent) think their money should be invested the same way that their parent chose to invest. This may not be a good idea primarily because your investment portfolio should be designed to fit you. Your financial picture is likely different from the person from whom you inherited the money.
For instance, when Mary first walked into our office she thought that all of her money should be invested in municipal bonds and Exxon stock because that was how her father had invested his money. After some education, Mary came to the realization that because her financial life and priorities were different from her father’s, her investment portfolio should also be different.
As you can see, inheriting money is complicated. If you find yourself having a difficult time making decisions you may be inadvertently trying to please or adhere to the philosophy of someone else. My suggestion is to give yourself permission to let go of the past and confidently seek the advice you need. If you are ready to seek the advice you need, contact us today.