As I have mentioned before, one of the greatest blessings of a long career in this field is that my clients become my friends. With this and all great blessings comes a deeper responsibility: I want to do right by my friends. Last week I had a meeting with a friend who has been a client for nearly 40 years. We have seen each other through many of life’s sweetest and most challenging moments – the college graduations and marriages of our children, the deaths of our spouses. Through those times I supported my friend the same way you support your friends – I sent and received cards of congratulations and condolence, I attended and hosted both heart lifting parties and heart breaking funerals. But, as her financial advisor, I also remained keenly aware of our fiduciary relationship. Together, we set goals and designed a plan to achieve them. We allocated her resources in a way that we hoped would both protect her and allow her to achieve her investment and legacy planning goals. When her husband unexpectedly lost his job at a paper mill, we met immediately and they left my office assured that they would be okay financially. Given their age and risk tolerance, we positioned their retirement account with an eye towards growth and a baseline of protection in an annuity. We tweaked that allocation through the years as their risk tolerance changed, and took a close look at it years later when her husband died unexpectedly. So last week, we reminisced about all we had been through and how well we had worked together. That small annuity we purchased in 1990 will provide her with an income stream through 2020. Because of the tweaks we made when her husband passed away, she has other sources of protected income that she can turn on in 2020. Meanwhile, her investment portfolios continue to grow. It’s especially sweet when… | Read More »
Fiduciary
Don’t be afraid of your financial advisor
An astounding 71% of Americans say they’re afraid to speak with a financial advisor, according to a recent survey by the Harris Poll. In addition to cost concerns, many of the people cited said they were afraid an advisor would give them bad news about their financial situation. The quickest way to ease these fears, of course, is to sit down with a financial advisor. We suggest choosing an advisor who is also a fiduciary, which means he or she sits on the same side of the table with you, gets paid on a percentage of your assets, and makes money when you do. As Madam Curie said, “Nothing in life is to be feared. It is only to be understood.” In the face of long life expectancy, it is critical to understand the obstacles you may face in your retirement. A financial advisor will encourage you to take a thorough look at your finances, which might be painful, but he or she also will talk you through solutions. Together, you can set up a budget, track your 401(k), Roth or traditional IRA contributions, optimize your Social Security withdrawals, review your insurance needs and talk through options to cover yourself and your family in the event of a debilitating illness. A qualified financial advisor works as an ally to combat the real fear in life, outliving your financial resources. Our clients tend to find genuine enjoyment in their meetings with our advisors. They provide an opportunity for reflection, goal setting, and genuine camaraderie. The meetings become touchstones and include laughter and respect, photo sharing and family pride, encouragement and prayers. If you find yourself among the nearly three-quarters of American adults who are afraid to talk to a financial advisor, pick up the phone and call us today. You’ll be surprised at how much you’ll enjoy the conversation.
Absurd payday loan provision in WI budget troubling
For more than 30 years we’ve been strong proponents of financial success through education. We teach classes, host seminars, run an active blog and write a weekly market commentary. We hold the industry’s highest credentials, including the CFP®, CFA®, CMT®, and CPA because we respect both our clients and our fiduciary relationship with them. That’s why we’re so appalled by item 61 in the Wisconsin state budget, which expands the types of financial products a payday lender can sell, including insurance, annuities and other financial products. It is hard to imagine a more complicated financial product than an annuity and a less suitable person to break it down for consumers than a pay day lender. Consider the nature of the pay day loan business model, which lures clients in with the promise of immediate cash inflow, charges exorbitant interest for that privilege, and then hopes for a cycle of repeated loan requests. According to a report from the Consumer Financial Protection Bureau, over 80% of payday loans are rolled over or followed by another loan within 14 days. This results in a digital debtor’s prison in which consumers have little hope of breaking free. Clearly, the very first piece of advice any reputable financial advisor might give a client is to avoid doing business with a payday lender. That these same lenders should offer financial advice, sell insurance products, and vet investment opportunities strikes us both absurd and dangerous. We urge the Wisconsin legislature to reconsider this proposal and, should this budget remain intact, we stress again the importance of seeking financial advice from a reputable professional, preferably one with a fiduciary responsibility to his or her clients.
Trap or boon: annuities require fiduciary analysis
Annuities became a popular refuge after the market crash of 2008. Investors, promised a guaranteed return, flocked to the annuity market as insurance companies ramped up their sales efforts. While a carefully evaluated annuity can play an important role in a well-balanced retirement plan, some annuities can work against an investor’s retirement goals and offer little of the liquidity necessary for successful active money management. We have seen some instances in which frightened investors fled to annuities and found themselves trapped by long surrender periods and guarantees they didn’t understand. Recently, a new client asked us to review the five annuities she owned. They ranged from a simple, fixed product, to indexed annuities with income guarantees. The annuities left her unable to access her money until between 2015, for the annuity with the shortest surrender period, to 2021, for the annuity with the longest. One of the more alluring qualities of annuities is the guaranteed growth, but those guarantees can be deceiving. For instance, in our new client’s case, she could never take a lump sum withdrawal from the growth account, which is the only account with the 8% guaranteed growth rate. The account values of annuities grow according to the indices into which it is allocated. Extra riders like lifetime income features cost extra money up to and exceeding 90 basis points. The only way our new client could access her 8% growth was to turn on a fixed lifetime income payment stream, which is age banded. This left her with the following options: Access it from age 60-69 and take 5% of the value annually for life Access at age 70-79 and take 6% Access from age 80 and up, and receive 7%. This feature is designed for investors with a larger portfolio who can justify putting a significant amount into something with these account limitations and can wait 10 years to get money out without penalty. We’re working hard… | Read More »