Accounting & Finance

2020-spring-semi-variance

That Semi-Variance Yuck

Few people have fond memories of statistics class. From complicated formulas to confusing interpretations, for most, stats class was a hurdle to a diploma and an exercise in memorization followed by an immediate flushing sound. A colleague once told me that if I ever find myself using the statistical term semi-variance with a prospective client, […]

Few people have fond memories of statistics class. From complicated formulas to confusing interpretations, for most, stats class was a hurdle to a diploma and an exercise in memorization followed by an immediate flushing sound. A colleague once told me that if I ever find myself using the statistical term semi-variance with a prospective client, I should consider the prospect lost.

I get it. Technical talk isn’t slick. Yet semi-variance is exactly what grips you when markets fall. It’s why people lose sleep at night. When markets rise, the variability of that upward trend is exciting; we high five and wonder, “how high can it go?” When markets fall, the variability of the fall, that semi-variance yuck, is why you worry, wring your hands, and think about bailing on carefully planned long-term investment plans.
The recent news cycle has COVID-19, better known as Coronavirus, all over it. Many attribute the equity market’s February fall to it and its possible reaches. A pandemic has broad implications for global supply and demand. Economic activity requires people to create and consume; pandemics limit both sides of that equation.
The Toyota Production System was popularized in the 1970s. More commonly known as just-in-time manufacturing (JIT), it relies on steady production, high-quality output, and a reliable supply chain. Building large inventories just-in-case is no longer necessary. The spread of COVID-19 or any other pandemic puts JIT at risk, making supply chains unreliable. Moreover, China’s importance in supply chains is unquestionable. That a China originated epidemic could progress to a global pandemic means even less reliability in global supply.

On the demand side, the spread of COVID-19 curbs consumption. Empty streets in Wuhan, a city roughly the size of New York City, are a visual reminder of how quickly demand can dry up. So, what, you might ask. Order out, have it delivered! Recall that those services may not be as reliable as they once were because supply has been disrupted.

All of this can lead to at best a delay and, at worst, destruction of demand. If COVID-19 is contained, these problems largely subside, and delayed demand likely reappears in the coming quarters. If it worsens, prolonged decreases in supply and demand could lead to a global slowdown, or worse, recession. Most importantly, unlike a financial crisis that can be combatted by central bank tools, the Fed cannot stop a pandemic. It is hard to see how lower interest rates, or another round of quantitative easing could stop the spread of a virus and stimulate economic activity.

Back to semi-variance! Uncertainty about bad things leads to increased downside volatility and sometimes sharp market selloffs. Nobody knows how far COVID-19 will go, so markets discount equity prices. A company facing supply disruptions and a loss in demand for its products cannot be worth as much as it was before the threat of a pandemic. There are winners and losers, of course; a videoconference services company may benefit wildly from a pandemic as business travel declines.
What’s worse about falling markets today is we are not behaviorally conditioned for it. The S&P 500 has been up in nine of the last ten years, averaging 13.6% per year at the end of 2019. We must remind ourselves that times of uncertainty require buckling your chinstrap, evaluating your situation, and riding out periods of trouble. Since the beginning of time, a million news articles could have been extrapolated to forecast the end of the world, yet here we are.

In virtually all aspects of life, rash decisions do not translate into long term success. There are scarier things out there than COVID-19; they just aren’t at the forefront of the news. This is not a doomsday note but rather a reminder that when your investment account value falls, your emotions should never be your first defense. Whether or not a pandemic ensues, your long-term investment plan should still allow you to sleep at night without worrying about the day-to-day fluctuations in the market – because if it’s not one thing, it’s sure to be another.

Past performance is no guarantee of future results. Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Cornerstone Advisors Asset Management, LLC, which is independently owned and operated. 2978944.1

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2020-spring-tiger

Debt that can eat you alive!

Have you ever thought about what your life would be like if you could eliminate all your debt? Increase your cash flow and make sure your retirement was secure? There are plenty of advisors to advise you on how to save and invest. Not many of them are talking about how to reduce or eliminate […]

Have you ever thought about what your life would be like if you could eliminate all your debt? Increase your cash flow and make sure your retirement was secure?

There are plenty of advisors to advise you on how to save and invest. Not many of them are talking about how to reduce or eliminate your debts. Nor are they addressing how to protect your family and secure your financial future all in the same conversation. If I could show you how to eliminate your debt, including your house in 9-years or less, would you be interested?

One thing is for sure – the interest rate you pay to the banks or credit card companies can keep you stuck in that revolving debt structure, unable to keep your head above water. In the way of electronic statements and paying your bills online, I think we miss seeing our true debt number. When you get a moment, pull up one of your credit card statements and find the interest rate you are paying. Second, look for the number of years it would take to pay off your debt with just minimum monthly payments. It can be quite surprising. I know credit is necessary at times when there’s an emergency, and you need to use it to buy a new refrigerator, or the furnace just went. But is it necessary when you see a sale and then just whip out your card to buy something? If you can pay it off before interest accrues, then yes, it was a great deal. As soon as interest hits the balance of that half-price sweater, jeans, or other items, then it doesn’t turn out to be such a good deal anymore. You’re not alone. Did you know that 8 in 10 Americans have debt? Student debt is the biggest bucket of debt plaguing younger Americans.

So, what’s the answer? Don’t live, don’t educate yourself, don’t start a family? Unrealistic as all of these are, we are all set up in the game of life. Money needs to be spent on these life items and many other things. Life is expensive. The choices we make can chain us to debt for a good part of our life, putting off saving for the future. The key is to use your money at least twice. Banks turn over our $1 deposit 7-times to make a profit. So how do we do it? The focus must be on eliminating and reducing our debt in the most strategic way. Paying 20%+ interest on credit cards must be a thing of the past. By utilizing products that allow us to borrow our own money while still getting the benefit of dividends. Deciding to create our own bank that we can tap into and pay ourselves the interest by securing that loan. We can take loans out on our own money and then get the reward of dividends paid back to ourselves. It’s no secret. Banks and other large companies have been utilizing this system for years. It is available to us but understand that not all companies or products are the same.

The goal is to shift inefficient dollars into being more efficient, tax-favored, and working harder for you. Look for ways to save money in your budget, plan for the expected and unexpected, minimize debt to create additional wealth. Remember when you were younger, and you got your first real job making real money. You thought, wow, this is great! I have enough money to pay for my housing, car, insurance, food, and some leftover. But then you get to a point when it wasn’t enough, so you find a different job making more money. Back to feeling like life was great. How many salary raises and job changes have gotten you to today? When will it be enough to sustain your lifestyle? Looking back to simpler times, how could I afford life then with so much less, and now I am struggling? Think about what’s changed. Try to think back to that place when life was less expensive. Maybe not all the way back to that studio or shared apartment but somewhere in the middle. You could conquer the world. Now maybe you’re just trying to make it through the week. If this feels like you, there is hope. There is something we can do today to reverse where you are. Take a good look at your budget and see if there are things that you can cut today to shift into a savings program. Get a good handle on where your money is going and utilize a system or philosophy for yourself that makes you think before you swipe. Talk to an advisor that is certified in the Debt Free Life program.

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2020-winter-gravity-didnt-come-out-of-thin-air

Gravity Didn’t Come out of Thin Air

History is taught in short tales of inspired genius. Actual events are more complex. Humans build off the knowledge of those who have come before. Newton did not discover gravity by sitting under an apple tree; his revelations about gravity were the culmination of hundreds of years of human study and experience with the topic. […]

History is taught in short tales of inspired genius. Actual events are more complex. Humans build off the knowledge of those who have come before. Newton did not discover gravity by sitting under an apple tree; his revelations about gravity were the culmination of hundreds of years of human study and experience with the topic. Newton was standing on the shoulders of the giants who learned about the subject and shared their insights.

Like scholars contemplating their intellectual legacies, parents can spend angst-filled hours trying to decide how to divide their assets amongst their progeny. “How much is enough for them to live comfortably without being spoiled?” is not an uncommon discussion.

But what if that is the wrong conversation? What if these parents instead focused on sharing their family values and history so that regardless of how much the kids receive; the family’s legacy will persist? What if your purpose was to provide the shoulders from which your kids could embark on their own future? How would you go about that?

Start early: You do not need to share the extent of your family’s wealth to begin teaching your children and/or grandchildren about the impact they can have on society. You can separate your charitable assets from the rest of your net worth. Many organizations sponsor donor-advised funds that allow you to make a charitable contribution now with the final recipient of those dollars to be named later. If you set up such a fund, you can engage your heirs about why you give to certain organizations and allow the youngsters to opine on the types of charities important to them. Donor-advised funds can be established with as little as $5,000.

Educate: Utilize your trusted advisors to share the concepts of financial prudence. A well-educated family with a solid understanding of the wealth available to them is more prepared to avoid the “shirtsleeves to shirtsleeves in three generations” stereotype than one with “unlimited” wealth foisted upon them after mom and dad are no longer able to protect them from themselves. These advisors can also discuss your charitable intentions and serve as the institutional memory of the family, assuming the advisors themselves have developed their own intergenerational transition plans.

Write it Out: A personal note can last a lot longer than a spoken lecture. Take the time to record your contribution to the family story. What were the good and the bad times? What were your motivations? How has society benefited from your existence? What was your personal “why”? Why do you live as you do? Why have you committed to specific causes? Like any game of whisper down the lane, if you rely purely on the spoken word, your meaning can be distorted quickly. If you write it down, there can be no confusion about your intentions for future generations. There are things that you may be more comfortable committing to paper than discussing directly with your heirs. That is okay. Even if you are not able to have that conversation with your kids, be sure to have it with your trustees and executors. They will be positioned to interpret any potential points of confusion.

Imagine the vantage point you would have if you were standing on the shoulders of giants. Then envision that you did not have to climb up there yourself and instead were given a well-intentioned boost, avoiding years of toil. We are all able to provide that same advantage to future generations. The beauty of the American way of life is that dynasties can exist. The equally beautiful corollary is that no family is ensured its status – we have no hereditary aristocracy. The American Dream is to want better for your kids than you have. In conjunction with establishing wills and trusts to direct your financial assets, you should be investing time into sharing your values and history. That could be one of your most fulfilling endeavors.

Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Cornerstone Advisors Asset Management, LLC, which is independently owned and operated.

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2020-winter-outsourced-bookkeeping

Outsourced Bookkeeping: A Better Bang for Your Buck!

The number one priority of a CEO, whether it is a small business venture or a Fortune 500 company, is long-term, sustainable profits earned in an ethical manner. As such, business owners are hard-pressed for time: providing services or products, overseeing employees, or creating and innovating to align with the market or consumers, to name […]

The number one priority of a CEO, whether it is a small business venture or a Fortune 500 company, is long-term, sustainable profits earned in an ethical manner. As such, business owners are hard-pressed for time: providing services or products, overseeing employees, or creating and innovating to align with the market or consumers, to name a few.   In addition to these responsibilities, handling the day to day tracking of income and expenses is a daunting and stressful task to keep up with. There is an alternative solution available today, which is the option to hire a private contractor to manage all aspects of bookkeeping. Choosing this option is a wise investment of resources for many reasons. Read below to see the many ways professional bookkeepers provide value-added services to those they work with.

Reduced overhead expenses. No matter how well versed a business owner is with finances, all understand that the largest contributor to expenses is through the wages and benefit expenditures required to pay employees on payroll. Through hiring an expertly trained bookkeeper as a contractor, one can reduce administrative type positions, thereby reallocating precious dollars to sales, marketing, or other support members. Additionally, having less “in-house” employees can also reduce the need for office space or supplies and technology/software expenses.

Confidentiality. Outside of compensation concerns, business owners also often have to grapple with the concerns of internal employees having access to secure and private data. This becomes especially concerning when payroll for peers comes into play. Hiring an independent bookkeeper will not only bring peace of mind through confidentiality but will also allow business owners to obtain full control over how data is shared and handled.

Accuracy. Although tax season is usually synonymous with the month of April, bookkeepers understand the crucial need for businesses to stay in compliance with GAAP practices year-round. Having comprehensive accounting experience and being trained on QuickBooks will allow for high-quality bookkeeping, as opposed to an administrative employee who may have limited financial exposure or understanding. Since the data produced will be accurate, financial statements can be provided at will to the bank, investors, or the owner for any business needs or concerns.

Scalability and Flexibility. A new start-up or younger business benefit from this aspect, in particular, as cash flows are typically lower within the first five years of formation. The initial needs may be small, but over time, as the business grows, the terms of the arrangement can be altered as needed. Options exist at the onset and throughout the bookkeeping arrangement to fulfill the needs at various stages of the business’ growth.   

Financial Advising. Not only do bookkeepers understand how to construct balance sheets, income statements, and cash flows statements, they also comprehend how to interpret them. The bookkeeper will be able to advise on business decisions based on spending activity, which could result in improved cash flow, assist with budgeting, or develop future projections.   

In addition to these five key assets, professional bookkeepers will also help you save a precious resource: your time. If any one of these skills could assist your business to flourish, don’t hesitate to reach out to your local bookkeeper today!

ASAP Business Support Services, Inc. has been supporting Lehigh Valley businesses for 25+ plus years. Please visit our website (https://www.asap-business.com) for more information.

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2020-winter-offering-financial-peace

Offering the Benefit of Financial Peace of Mind to Your Employees

We all know that employees don’t leave their personal lives at home.  The stresses of home life are a shadow that can have very real consequences for your business. As a business owner, you are constantly under pressure to compete for customers, and in the current strong job market, the competition for the best employees […]

We all know that employees don’t leave their personal lives at home.  The stresses of home life are a shadow that can have very real consequences for your business.

As a business owner, you are constantly under pressure to compete for customers, and in the current strong job market, the competition for the best employees is also at a peak.  Offering your employees, a path to financial peace of mind can help you keep your best talent and keep your best talent focused on their jobs and your customers when they are at work.

According to a survey conducted in 2017 by the Jobsite Career Builder, 78% of American families are living paycheck to paycheck. The Report on the Economic Well-Being of U.S. Household in 2018 found that as many as 39% of households wouldn’t be prepared for a $400 emergency (Board of Governors of the Federal Reserve System, May 2019).  This kind of stress can cause strain on families; chances are good that some of those folks work for you.

Financial stress can lead to loss of sleep, increased absenteeism, lower productivity, and higher health care costs.  Additionally, financial difficulties are one of the leading causes of divorce in this country.  Divorce is a traumatic, emotionally fraught time that leads to additional stress and distraction while your employees are at work.

Most employers will say that their number one priority is for their workers to get home safely at the end of the day.  Knowing that financial stress can lead to daytime fatigue and distractions, both of which are closely linked to safety incidents in the workplace, makes it imperative that we, as business owners care about the financial stress of our workforce.   

To help your employees avoid or deal with financial stress, consider one or all of these options:

Offer an Employee Assistance Program or (EAP) – According to the Society for Human Resource Management, an EAP is “An employer-sponsored employee assistance plan (EAP)  a work-based intervention program designed to identify and assist employees in resolving personal problems that may be adversely affecting their performance at work, such as marital, financial or emotional problems; family issues; or substance or alcohol abuse.” EAPs are a benefit offered by 78% of employers.   The quality and scope of EAP services can vary significantly.  Additionally, EAPs are not intended to provide long-term assistance, but rather to get the ball rolling and then refer the employee to an external provider.  That means your EAP may only be as good as their referral network.

Another benefit option to offer employees is financial coaching.  Financial coaches are trained to work with individuals over a longer period of time to help clients address the underlying behavior that created their financial challenges in the first place, as well as to develop and track concrete plans/budgets to get their financial house in order.

Focus on financial wellness as part of your overall wellness program.  Many employers offer wellness programs and incentives for exercising, losing weight, and getting healthier.  Offering employees and their spouse’s courses on budgeting and other financial topics as part of your wellness program promotes financial fitness and minimizes financial stress.

The benefits of financial stress reduction to your employees and your business are endless.  People who see a path out of their financial challenges begin to feel hope for their future and can better focus their attention on their job and your customers.  While I don’t know of a study that has demonstrated the correlation of the reduction of financial stress to the increase in productivity, what if it was 5% or even 10%?  What if it means you have less employee turnover, produce a higher quality product, and have happier customers?  Clearly, good health means good business. When your employees enjoy physical, emotional, and financial health, there’s a good chance your bottom line will be healthy, too!

If you’d like to learn more about how to reduce financial stress in your workplace, contact Kindra Walker at 484-22-2957 or at TremontFinancialCoaching.com

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fall-2019-senior

What about Mom?

Ever worry like crazy about something, but don’t want to talk about it?  The topic of aging and long-term care seems to fall into this category. We’re all suffering from a terminal disease, and that disease is called time. Rarely does a week go by that someone doesn’t mention to me about how worried they […]

Ever worry like crazy about something, but don’t want to talk about it?  The topic of aging and long-term care seems to fall into this category. We’re all suffering from a terminal disease, and that disease is called time. Rarely does a week go by that someone doesn’t mention to me about how worried they are about their parents, grandparents or themselves. What’s going to happen when they are no longer able to care for themselves? Who will care for them? Where will they be cared for? How will they be able to pay for care?

These are important and difficult questions.  I realized that my clients had nowhere to go to get these answers, so I decided to better educate myself on the topic. I wasn’t looking forward to it, because I thought it was going depress me. I have good news!!  I feel much better now.

This is not your parents’ long-term care.  Options in this area have made significant progress since my parents were in this situation. Ten thousand Baby Boomers turn 65 each day.  Baby Boomers have changed the world as they’ve gone through each phase of their lives. Now they’re working on improving what retirement and aging look like. As with everything else – they want options!  So now, we’re beginning to have great options for aging and long-term care. “Nursing homes” are moving to the back, while an array of better options are moving forward.

What are the options?

  • Aging in place – there’s no place like home. This is a good option for people who are generally in good health. A major consideration is the current floor plan, and if it needs to be changed. Check out universal design for suggestions on preparing the home. There has also been a large increase in the types of services available to come to your home, including meals, transportation, and nursing care.
  • 55+ independent living communities – best suited for active, healthy, 55+ adults looking for a hassle-free lifestyle. There are options for every budget. They usually provide limited health services.
  • Continuing Care Retirement Communities (CCRCs) – this is a combination of living accommodations and a continuum of health care services for life. Independent living, Assisted living, and Skilled nursing is usually in one location. There are a wide variety of price ranges. Most provide a wide range of activities for active, healthy adults. They will help you when/if you become ill, but that is not the vast majority of residents.
  • Assisted living facilities – this is for individuals who need help with some activities of daily living, such as bathing or dressing. Many have individual apartments and activities, including things like a movie theatre.
  • Skilled nursing facilities – this is the closest to what we think of as a nursing home. They provide 24-hour skilled nursing services for the seriously ill or advanced dementia.

 

What do they cost?

The costs are vastly different based on the option, and even within each category. The good news is that there are options for most budgets. You will want to take your time and get a clear understanding of what services are included and what are extra.  A few questions to ask:

  • Is there a down payment? Is it refundable?
  • What does the monthly fee include? Food? Utilities? Transportation? Activities? Health care services?
  • Do the monthly fees increase each year? Do they increase with additional care?
  • What if I run out of money? Is there a benevolence fund? Do they take Medicaid?
  • Private pay – maybe use the value of your home?

 

How do you pay for them?

I suggest you talk to your financial advisor/planner. You can use your home, your investment assets and your retirement assets. You can also use a long-term care policy as additional care is needed. There are many more long-term care insurance options today. Your advisor should be able to educate you on all of these options.  Many policies now allow for a death benefit, or for you to change your mind and get all or most of your money back.

The bottom line: Options, options and options – from the type of places, to the services offered, to the cost and the availability of insurance.  At some point, we will all have to face this for ourselves or a loved one.  Start educating yourself today!

Any opinions are those of Mary Evans and not necessarily those of Raymond James.  Expressions of opinion are as of September 6, 2019, and are subject to change without notice.  There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.  Investing involves risk, and you may incur a profit or loss regardless of strategy selected.

Mary Evans, CERTIFIED FINANCIAL PLANNERTM, 1134 Pennsylvania Avenue, Emmaus, PA 18049.  610-421-8664

Securities offered through Raymond James Financial Services, Inc.  Member FINRA/SIPC.  Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.  Evans Wealth Strategies is not a registered broker-dealer and is independent of Raymond James Financial Services.

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Important Real Estate Investing Considerations and the Need to Plan

Many people have decided that real estate is a powerful tool to accumulate wealth.  Some believe it’s the only tool.  Many of those investors have been successful at it.  Like all markets, the Real Estate market goes up and down.  So, what is so special about owning real estate? When talking with investors and professionals […]

Many people have decided that real estate is a powerful tool to accumulate wealth.  Some believe it’s the only tool.  Many of those investors have been successful at it.  Like all markets, the Real Estate market goes up and down.  So, what is so special about owning real estate?

When talking with investors and professionals who work with them, a few consistent themes emerge as to why they’ve decided on real estate investing:

  1. Substantial tax benefits. There are many sections of the tax code of which real estate investors regularly take advantage.  They can defer (and sometimes avoid) capital gains tax on appreciated property.  Any losses incurred can offset future capital gains, and those who are designated Qualified Real Estate Professionals can avoid the loss carryforward rules that often limit or delay the benefits of a substantial tax loss.  They can use depreciation and other expensing techniques such as cost segregation to limit their exposure to income tax.  As with most sophisticated tax planning techniques, this should be completed with the guidance of a skilled tax professional in order to properly execute without running afoul of the IRS.
  1. The power of leverage. Investors who use debt to finance their deals, utilize someone else’s money to acquire their properties.  Once acquired and occupied, the rents received provide the money to service and retire the debt.  Properly structured, real estate investors can acquire large assets using a relatively small amount of their own capital.
  1. Potential for long term appreciation. While rents are covering debt services and providing income, the long-term growth in the value of real estate assets can add substantial value to an investor’s balance sheet.
  1. Passive cash flow. Properly structured real estate investments can generate income streams independent of an investor’s daily effort.  With enough properly designed assets in place, consistent cash flow can be generated by the investor.
  1. Inflation protection. Every financial plan must address inflation.  Real estate values tend to rise with inflation.  Investors can include rent elevators in their contracts to ensure their income streams keep pace with inflation.   This can offset the impact of inflation.  Successful investors must understand if a particular market has inflated over time, and whether it is likely to do so over time.

 

  1. It’s Tangible. After living through decades of boom and bust stock and bond market cycles, many concluded that they wanted tangible investments.  Real Estate investors can touch their investments – be it a house, apartment complex, warehouse, or office building.

 

 

This list is not comprehensive, but the themes are quite common.  It should be noted, that real estate is not a silver bullet that helps achieve all financial planning objectives.

In fact, for many of the concepts above, there are risks against which these strategies must be measured.  For example, using leverage as described adds potential risk to an investment.  Without the means to handle higher than anticipate vacancy rates or carrying costs, new investors might suffer financial harm.  While real estate tends to appreciate over time, market bubbles do occur.  Real estate tends to be illiquid, so investors may not have access to their capital for some time.  It is important to understand how these risks may impact an investor’s long-term plan.

Like all people, real estate investors arrive at financial crossroads in their life.  At points such as those, they would benefit from a comprehensive understanding of their finances.  Investors may come to a point where they are financially independent and want to plan for their family’s legacy.  They face issues of protecting their assets from avoidable taxation, while also protecting their family from the pit-falls of inherited wealth.

Others may be less interested in leaving a legacy but want to unburden themselves from the management of their portfolio.  While the IRS has provided a great advantage in accumulating these assets, the bill comes due when it’s time to sell.

Many mid-career professionals embark upon real estate investing to free themselves from their 9 to 5 job.  It’s important to have clarity about the cash flow and return expectations they need to meet to replace their paycheck, which assets to deploy, and what risks they deem prudent in this endeavor.

When determining the best direction at these stages in life, investors are well served by seeking competent counsel from Financial Planning Professionals, as well as Attorneys, and Accountants who understand the unique opportunities and challenges real estate investors face.

 

David Ellowitch, CFP ® is the Managing Member of Ellowitch 3, LLC, a Financial Services Firm with offices in Allentown, PA and Paramus, NJ.  He is a registered representative of Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Ellowitch 3, LLC is not an affiliate of Lincoln Financial Advisors Corp.  CRN-2699557-082319

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fall-2019-two-faced

How Well Do You Know Your Financial Advisor?

First, let’s define the title of Financial Advisor. The title itself is often lumped into the Advisor category, which could be someone who specializes in taxes, mortgages, finances, real estate, law, etc. What makes a Financial Advisor different is that they have passed certain licensing examinations which allow them to provide financial advice as well […]

First, let’s define the title of Financial Advisor. The title itself is often lumped into the Advisor category, which could be someone who specializes in taxes, mortgages, finances, real estate, law, etc. What makes a Financial Advisor different is that they have passed certain licensing examinations which allow them to provide financial advice as well as manage investments and portfolios. On the one hand, you may work with someone who strictly does investment management and another who offers insurance products. Some Financial Advisors do a combination of both, amongst other services. Do you know what your Financial Advisor specializes in? Do you know what professional licenses and designations they hold? Most importantly, are you aware of a history of client complaints, lawsuits, or criminal charges? If you are unsure of any of these questions, now would be a great time to look at your Financial Advisor’s FINRA BrokerCheck. https://brokercheck.finra.org/

BrokerCheck is a web-based tool created by the Financial Industry Regulatory Authority (FINRA) to provide full transparency to clients on all Registered Representatives. To clarify, Registered Representatives are different from Financial Advisors in that they mainly are limited to buying and selling securities, not providing financial advice nor managing investments. Financial Advisors are often Registered Representatives; too, however many Registered Representatives are not Financial Advisors. In just a few clicks, you’ll have a full detailed report of any Financial Advisor or Registered Representative. This report will help you make informed decisions about working with that financial professional. BrokerCheck tells you instantly whether a person is registered, as required by law, to sell investments or offer investment advice. The report will also give detailed employment history, regulatory actions, licensing information, lawsuits & client complaints. These are vital pieces of information when deciding who you are going to trust with your family’s, your business’s and/or your own personal assets. You want to ensure they are fully licensed to offer unbiased advice and have a limited number of client complaints.

Some red flags to watch out for:

  • Frequent Changes in Firms
  • History of Fines
  • Criminal Charges (DUI’s, Traffic Violations, Theft, Etc.)
  • Unable to Locate Your Advisor on the Site

Choosing the right financial professional is a huge decision. The intention is to work with a Financial Advisor up to and through retirement. A Financial Advisor who looks at your overall financial situation, provides an objective analysis, and works with you over time to create a concrete yet flexible plan will help put you on a path to success. Always make sure to do your due diligence to ensure they have your best interested in mind as well as sufficient knowledge and experience. If you are not comfortable with something you see on BrokerCheck, you are certainly entitled to ask your Financial Advisor for more information. So, let’s revisit the questions again: How well do you know your Financial Advisor?


 

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 1767 Sentry Parkway West Suite 200, Blue Bell, PA 19422 (267-468-0822). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian.  Independence Planning Group is not an affiliate or subsidiary of PAS or Guardian.

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Today vs. Tomorrow How Lifestyle Creep Could be Jeopardizing Your Financial Future

As I think about the 155th meeting of Lafayette and Lehigh’s football teams on November 23rd, I find it difficult not to reminisce about the good ole’ days at Lafayette. During my college years, the hit HBO series The Sopranos was in its prime, guiding much of my Sunday night social calendar. Each week, my […]

As I think about the 155th meeting of Lafayette and Lehigh’s football teams on November 23rd, I find it difficult not to reminisce about the good ole’ days at Lafayette.

During my college years, the hit HBO series The Sopranos was in its prime, guiding much of my Sunday night social calendar. Each week, my friends and I would pool together funds for a pre-Soprano’s meal consisting of pasta, butter, and some frozen garlic bread. Looking back, that meal was far from luxurious and not something I’ve since served dinner guests. After all, being in a better financial position should mean better meals, right?

The habit of upgrading spending habits alongside increasing income has a name: lifestyle creep. While it’s natural to enhance your lifestyle as earnings grow, folks would be well-served to focus on the pace of both. Young professionals right up to retirees often fall victim to inflating their lifestyle at a faster rate than their earnings. When this happens, the sacrificial lamb is almost always long-term savings.

It’s easy to see why this happens. Present bias is a technical term for a sentiment many of us understand and experience — it’s far more enjoyable to use the money now than it is to save it for the future. This is especially the case when the notional future is retirement, which could still be decades away. This bias compounds lifestyle creep, and it seems to transcend age, influencing those in their early professional years right up until the golden years.

Young professionals seem to be the poster child for lifestyle creep. Many professionals in their 20s and early 30s are shackled with student loans and maintain little in the way of emergency reserves. Yet at the same time, many sport luxury apparel, buy new technologies and maintain a buzzing social life.

The next phase for many is the life building stage: marriage, mortgage, and maybe children. Between kids’ activities, making your house a home, and the occasional date night, lifestyle creep is never-ending for this category. While some life builders may have started saving into their retirement plan years ago, many failed to escalate those savings rates, spending more on happiness today.

As people move beyond this stage of life and become more well-established, bigger ticket items tend to sneak into the picture. Many find themselves sandwiched between aging parents and adulthood-seeking children.  Both may require significant financial support.

While lifestyle creep can come in many different forms and cross many different life stages, the point is that it distracts and derails people from reaching longer-term financial goals. Over the last ten years, an extended bull market has masked many savings shortfalls. However, forward-looking capital market assumptions suggest a reversion to historical averages. Equity returns over the next ten years may not be as high as they have been in the past, and the impact of poor savings habits may become more pronounced, especially for those who assume market returns can make up for an underfunded retirement.

While returns may be outside the control of market participants, there are factors well within their control. Chief among them, and perhaps the largest driver of future wealth, is one’s savings rate. Using technology to automate savings, regularly monitoring your financial goals, and evaluating the lifestyle creep you may be experiencing is a combination that will pay long term dividends. Finding the balance of happiness now versus happiness later is an imperfect pursuit, but one worth considering no matter where you are in life.

Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Cornerstone Advisors Asset Management, LLC, which is independently owned and operated. #2715889.1

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Long term care – What is it? Who needs it? Should you have it?

Long term care is a range of support and services affecting your personal care needs. When you can’t do activities of daily living that includes bathing, dressing, toileting, incontinence care, transferring from a bed or chair, eating or you have severe cognitive impairment that requires substantial care then you need long-term care. Many of these […]

Long term care is a range of support and services affecting your personal care needs. When you can’t do activities of daily living that includes bathing, dressing, toileting, incontinence care, transferring from a bed or chair, eating or you have severe cognitive impairment that requires substantial care then you need long-term care. Many of these things we can take for granted, but as we age, or health becomes a challenge, it becomes more challenging to do these seemingly simple tasks. Long term care insurance is one way to help cover some of the costs that you would have to pay out of pocket for or have a family member assist you in your day to day routine.   

Medicare doesn’t cover long term care – the fact is it only covers a short term stay in a nursing facility but under strict guidelines that you are in a hospital for 3-days and then transfer directly to a facility because you are unable to return home but have expectations to return home and live independently.  It is important to get insurance while you are young and healthy as you must qualify in good health to get coverage. Many people say that it is an expensive insurance, but if you think about the costs associated with long term care, the insurance can be a bargain. Personal care with a home health aide can cost upwards of $22/hour, assisted living costs start at $3,500/month, and skilled care can be double assisted living costs. Paying for long term care insurance in advance of needing care instead of expending your life’s savings for care can be a huge value.

There are various levels of care, and they are adjusted as care needs change. Personal care can be given at home or in a facility which includes some basic daily needs. The next level is assisted living and then finally, skilled nursing care. The only covered services via Health and Human Services through Medicaid is skilled nursing care. You may have reduced quality of life if you don’t need that high level of care but don’t have insurance or assets to pay for the first steps of needing basic assistance.

Long term care insurance is a big part of your financial well being offering you peace of mind to know that if the unexpected happens, you won’t need to depend on your family or go through all of your assets to get the care you need. Once you reach the age of 65, you have a 70% chance of needing some form of long-term care during your lifetime. (Medicare and You, 2015) The unexpected need for care can arise at any age.  Over 50% of people on a claim are between the ages of 40-64. (Unum Ins Co)

If you are a business owner depending on how your business is structured, you can get a tax deduction based on your age and other factors when you buy long term care insurance through your business. This offering can be extended to your employees at no cost to you and can be part of your health insurance benefit package. They too can qualify for a tax deduction on their individual taxes. If you have a health savings account (HAS) premiums can be paid pre-tax.

Traditional long-term care insurance is still available but new products have given rise to alternative ways to protect assets, provide care and offer a different option versus a use it or lose it benefit. Hybrid whole life insurance policies have a rider add on that will allow you to pull forward the death benefit to use towards long term care while still leaving some death benefit coverage. There are one-time lump sum policies that allow you to carve out a piece of your savings and secure it for long term care needs instead of having a monthly payment moving into retirement years. If it turns out, you don’t need long-term care in each of these scenarios at some point your family will get the benefit of the insurance upon your death. Protecting yourself and your loved ones, taking the burden off your family to care for you is one of the best gifts you can give to you and them.

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