In the midst of all of the economic turmoil, everyone is scrambling to get advice.
How can I protect my assets from further loss in a declining market? Can I still plan on retiring when I thought? Are there year-end tax strategies I should be considering? The answer to these questions is...
it depends on who you ask.
Your stockbroker? Your accountant? Your attorney? Your life insurance agent? It seems that financial advice is spewing from every direction like water out of the Trevi fountain, but how do you know if it's the right advice? More importantly, what if your advisers don't agree? As a certified financial planner in private practice since the early 80's, this is what I know to be true.
The investor whose entire financial strategy is shaped by a stockbroker may have made money over the years, but might not know how to convert these investments into income at retirement.
Those investors who have used a team approach- a stockbroker, an accountant, an insurance agent and a lawyer, may have received expert advice, but not the same advice.
In other words, as long as the market was performing well, their deductions were as high as possible, their insurance needs covered and their estate planning complete, they felt confident that they were on track.
Then one day they discover that their team was working at cross purposes with one other because they didn't communicate.
Here is a typical example.
A stockbroker might have directed their client to buy and sell certain stocks and bonds that promised a great return, but did so without considering the tax implications.
An accountant might not be knowledgeable about certain financial products the client purchased and doesn't learn until the tax year is over that the client created an additional tax liability.
An attorney who wrote a will might not be monitoring how the assets are held in an asset account or know who is the beneficiary designated in a new IRA account, which would possibly negate some of the planning in the will.
This is why I believe so strongly that the only sensible approach for an investor is to work with a certified financial planner- an objective expert who has earned the coveted CFP designation after rigorous training and education and who understands how to manage all aspects of a client's financial life.
A CFP doesn't replace the stockbroker, accountant or lawyer- they coordinate their efforts to make sure they are all on the same page.
Another important difference between a stockbroker, for example, and a CFP is that the planner is offering you a process, not a product.
After consulting with you and examining your financial history and challenges, a CFP offers independent, objective advice and a written, customized plan with specific asset allocation strategies.
They focus on your retirement plans and major financial obligations.
They consider your age, career path, tax burdens and estate planning needs.
In other words, their focus is holistic.
They look at the big picture, not try to sell you one size fits all investments.
Have a lot of financial questions? Meeting with a Certified Financial Planner may be the one right answer you get this year and it won't cost you, it will pay.
What I Know That You Need To Q.
I'm confused.
I see lots of ads for financial experts and they all call themselves something different- certified retirement planners, wealth-management advisers, chartered advisers, independent investment advisers, financial planners, etc.
How do I know which credentials mean something? A.
While there are numerous ways that financial professionals can be licensed to work with the public, only a Certified Financial Planner has received the rigorous education and training to earn the coveted CFP designation.
In order to complete their certification, which takes several years and involves passing challenging exams, they must prove knowledgeable in a variety of areas- taxes, retirement planning, estate planning and investment products.
They are further obligated to continue classroom training and earn credits in order to retain their certification.
Finally, they must also abide by a code of ethics requiring that they disclose and document their credentials, fees, and impartiality.
Q.
Working with a CFP sounds great, but the way things are going, I may not be able to afford it.
How much do they charge? A.
First off, most planners offer a free consultation so that you can determine in advance if they understand your needs and if they will explain their compensation arrangements.
Secondly, if anyone can appreciate the subject of what things cost, it's going to be a financial planner.
That's why bringing up the question of what they charge is something they are more than prepared to answer.
Some CFPs offer fee-based services that are dependent on a client's income, net worth and/or assets under management.
An industry standard is 1%, but certainly this varies based on geographic locale, size of the firm and the complexity of your particular case.
Other firms work on a fee- plus commission schedule, where the fee is reduced based on the commission earned from investments.
The advantage of the fee plus commission structure is that the CFP has a vested interest in portfolio performance and will closely monitor the investments they recommended.
Q.
What is the best way to find a CFP in my area? A.
You can search on line by going to the Financial Planning Association's website.
fpaforfinancialplanning.
orgThey make it very easy and fast to identify CFPs in your area who have the expertise in the areas you need, such as asset allocation, budgeting, retirement planning, estate planning, etc.
Whats unique about our firm is that we include financial planning and money management in our fee so we can constantly update the advice and integrate it with the money management strategies.
Money management includes asset allocation, performance, risk and volatility, adjustments to the portfolio and year end tax planning.
IS MY MONEY SAFE Q.
Should I change my asset allocations based on my age? A.
Yes.
Based on how close to retirement and how long you're going to deposit into the portfolio.
As you get closer to the time when you'll be drawing on those assets, it's important that certain financial products be integrated into the allocations to reduce volatility and risk and increase dividend income that can be provided by the portfolio.
The conventional wisdom is to increase percentage of bonds in the port.
Used to be stocks and bonds .
New thought process But new approaches enabled by a widening variety of asset classes including have been designed now which include tangible assets real estate, gold and natural resources, long short funds inflation adjusted bond funds and even hard assets such as timber can refine these portfolios for increased ability to have non correlated assets in a port.
Non correlated when stocks go up, bonds would go down.
What happened is this time they went down together, so an increase in need to find assets that will offer true diversification to moderate the ups and downs of the market.
Create natural offsets as one asset class goes up and the other goes down.
Rules of thumb are out the window.
It used to be that you would subtract age from 100 or 110 and it would tell yo the percentage of stocks vs.
bonds in port.
However people living longer and their port.
Been damaged by market decline, there is an increasing need for protecting what you're saving by finding ways to reduce volatility and now what we're doing is creating game plans one year at a time which adjusts to the market conditions regardless of clients age to try and have the greatest flexibility and enable the portfolios to adjust to the opportunity as they present themselves as certain sectors will recover at different timetables.
Taxes Q.
Are there any tax strategies that I can take advantage of before the end of the year that would save me money? A.
There are four or five year end tax ideas that could help you reduce your income or potential tax on capital gains including taking capital losses on your portfolio, offsetting capital gain and loss Look at the potential for taking capital gain or offsetting gain and losses.
It's important that you simulate your potential capital gain and loss and taxable income
How can I protect my assets from further loss in a declining market? Can I still plan on retiring when I thought? Are there year-end tax strategies I should be considering? The answer to these questions is...
it depends on who you ask.
Your stockbroker? Your accountant? Your attorney? Your life insurance agent? It seems that financial advice is spewing from every direction like water out of the Trevi fountain, but how do you know if it's the right advice? More importantly, what if your advisers don't agree? As a certified financial planner in private practice since the early 80's, this is what I know to be true.
The investor whose entire financial strategy is shaped by a stockbroker may have made money over the years, but might not know how to convert these investments into income at retirement.
Those investors who have used a team approach- a stockbroker, an accountant, an insurance agent and a lawyer, may have received expert advice, but not the same advice.
In other words, as long as the market was performing well, their deductions were as high as possible, their insurance needs covered and their estate planning complete, they felt confident that they were on track.
Then one day they discover that their team was working at cross purposes with one other because they didn't communicate.
Here is a typical example.
A stockbroker might have directed their client to buy and sell certain stocks and bonds that promised a great return, but did so without considering the tax implications.
An accountant might not be knowledgeable about certain financial products the client purchased and doesn't learn until the tax year is over that the client created an additional tax liability.
An attorney who wrote a will might not be monitoring how the assets are held in an asset account or know who is the beneficiary designated in a new IRA account, which would possibly negate some of the planning in the will.
This is why I believe so strongly that the only sensible approach for an investor is to work with a certified financial planner- an objective expert who has earned the coveted CFP designation after rigorous training and education and who understands how to manage all aspects of a client's financial life.
A CFP doesn't replace the stockbroker, accountant or lawyer- they coordinate their efforts to make sure they are all on the same page.
Another important difference between a stockbroker, for example, and a CFP is that the planner is offering you a process, not a product.
After consulting with you and examining your financial history and challenges, a CFP offers independent, objective advice and a written, customized plan with specific asset allocation strategies.
They focus on your retirement plans and major financial obligations.
They consider your age, career path, tax burdens and estate planning needs.
In other words, their focus is holistic.
They look at the big picture, not try to sell you one size fits all investments.
Have a lot of financial questions? Meeting with a Certified Financial Planner may be the one right answer you get this year and it won't cost you, it will pay.
What I Know That You Need To Q.
I'm confused.
I see lots of ads for financial experts and they all call themselves something different- certified retirement planners, wealth-management advisers, chartered advisers, independent investment advisers, financial planners, etc.
How do I know which credentials mean something? A.
While there are numerous ways that financial professionals can be licensed to work with the public, only a Certified Financial Planner has received the rigorous education and training to earn the coveted CFP designation.
In order to complete their certification, which takes several years and involves passing challenging exams, they must prove knowledgeable in a variety of areas- taxes, retirement planning, estate planning and investment products.
They are further obligated to continue classroom training and earn credits in order to retain their certification.
Finally, they must also abide by a code of ethics requiring that they disclose and document their credentials, fees, and impartiality.
Q.
Working with a CFP sounds great, but the way things are going, I may not be able to afford it.
How much do they charge? A.
First off, most planners offer a free consultation so that you can determine in advance if they understand your needs and if they will explain their compensation arrangements.
Secondly, if anyone can appreciate the subject of what things cost, it's going to be a financial planner.
That's why bringing up the question of what they charge is something they are more than prepared to answer.
Some CFPs offer fee-based services that are dependent on a client's income, net worth and/or assets under management.
An industry standard is 1%, but certainly this varies based on geographic locale, size of the firm and the complexity of your particular case.
Other firms work on a fee- plus commission schedule, where the fee is reduced based on the commission earned from investments.
The advantage of the fee plus commission structure is that the CFP has a vested interest in portfolio performance and will closely monitor the investments they recommended.
Q.
What is the best way to find a CFP in my area? A.
You can search on line by going to the Financial Planning Association's website.
fpaforfinancialplanning.
orgThey make it very easy and fast to identify CFPs in your area who have the expertise in the areas you need, such as asset allocation, budgeting, retirement planning, estate planning, etc.
Whats unique about our firm is that we include financial planning and money management in our fee so we can constantly update the advice and integrate it with the money management strategies.
Money management includes asset allocation, performance, risk and volatility, adjustments to the portfolio and year end tax planning.
IS MY MONEY SAFE Q.
Should I change my asset allocations based on my age? A.
Yes.
Based on how close to retirement and how long you're going to deposit into the portfolio.
As you get closer to the time when you'll be drawing on those assets, it's important that certain financial products be integrated into the allocations to reduce volatility and risk and increase dividend income that can be provided by the portfolio.
The conventional wisdom is to increase percentage of bonds in the port.
Used to be stocks and bonds .
New thought process But new approaches enabled by a widening variety of asset classes including have been designed now which include tangible assets real estate, gold and natural resources, long short funds inflation adjusted bond funds and even hard assets such as timber can refine these portfolios for increased ability to have non correlated assets in a port.
Non correlated when stocks go up, bonds would go down.
What happened is this time they went down together, so an increase in need to find assets that will offer true diversification to moderate the ups and downs of the market.
Create natural offsets as one asset class goes up and the other goes down.
Rules of thumb are out the window.
It used to be that you would subtract age from 100 or 110 and it would tell yo the percentage of stocks vs.
bonds in port.
However people living longer and their port.
Been damaged by market decline, there is an increasing need for protecting what you're saving by finding ways to reduce volatility and now what we're doing is creating game plans one year at a time which adjusts to the market conditions regardless of clients age to try and have the greatest flexibility and enable the portfolios to adjust to the opportunity as they present themselves as certain sectors will recover at different timetables.
Taxes Q.
Are there any tax strategies that I can take advantage of before the end of the year that would save me money? A.
There are four or five year end tax ideas that could help you reduce your income or potential tax on capital gains including taking capital losses on your portfolio, offsetting capital gain and loss Look at the potential for taking capital gain or offsetting gain and losses.
It's important that you simulate your potential capital gain and loss and taxable income
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