Monthly Archives: July 2017

Mistakes Most Investors Make

Many investors have unknowingly scattered their assets, resulting in no one person managing or fully understanding their entire situation, goals or dreams. Without comprehensive planning, there actually is no plan at all.

1. Improper Asset Allocation

Most investors have their assets dispersed with several advisors and several financial firms. No single advisor knows what the other is doing resulting in an uncoordinated portfolio. One advisor in firm A might be selling the very asset that an advisor in firm B is buying. Unless there is one coach reviewing the entire portfolio, then your money is not coordinated. Your asset allocation should always reflect your current position in life, your current goals, future, feelings and family characteristics. When your hard earned money is scattered to other advisors and institutions, you alone are left to properly manage your portfolio. Many individuals are not trained to monitor this correctly and consistently. Unfortunately, the overall plan suffers.

2. Improper Correlation Within Investments, Managers and Funds

Without saying, each investment needs to be excellent on its own. The investment, manager, or mutual fund needs to have a strong track record. You might be able to select quality investments. That’s not the problem. Where the breakdown occurs is knowing how these investments interrelate. This is nearly impossible to track when one advisor is doing one thing, and a different advisor is doing just the opposite. Let’s think about a recipe analogy. You might have the best ingredients to make your favorite dish. You might even have quality chefs at your beck and call, ready to make this dish for you. If you put all of these chefs in the same kitchen, but don’t let them know what the other is doing, a culinary disaster awaits. You can see that the likelihood of your dish coming out correctly is very low, no matter how good the ingredients were. Same is true with your investment portfolio.

3. Failure to Monitor the Consolidated Portfolio

You know life is not static. Life is constantly changing. Whether it’s your job, children, the economy, world events, new laws, unplanned expenses, your world constantly moves. Your entire portfolio needs to be dynamic as well. When market forces move, the properly managed portfolio needs to move with it. I am not talking about day-trading, but rebalancing when and where appropriate. Additionally, your goals, future, feelings and family characteristics are changing as well. Every day is either a day closer to your goals, or not. Having your assets scattered makes it nearly impossible to properly monitor your portfolio based on your changing life. With the technology and tools available, along with the new open architecture available at full service financial institutions, you are better off hiring one advisor to help you monitor your portfolio. This trusted advisor will coordinate all of your eggs and not put them in the same basket.

In conclusion, years ago, many firms were limited to the solutions they could individually bring to the client. Many had their own proprietary funds or investments, which may or may not have been in your best interest. Today, full service firms have an open architecture and are able to go out into the market place and bring any solution to you that is appropriate. For your strong consideration, only hire an advisor who can go anywhere in the marketplace without limitation!

 

Benefits of a Multi Generational Advisory Firm

Many clients of financial advisors share a common concern and fear. Because the process of finding an individual to trust with their money is not something to be taken lightly, this concern can be magnified. Clients wonder what happens to them if their financial advisor retires or unexpectedly dies. This is a legitimate concern. As a result they have been deemed physically or mentally incapable of handling your finances. This commonly voiced concern is why advisory firms and the financial industry have begun focusing more on succession planning and multi-generational advisory teams.

Built In Transition Planning 
Life is unpredictable and we cannot predict the future. What we do know is that change and growing older are inevitable. Just as you are working hard to save enough to retire, your financial advisor is doing the same. Multi-generational advisory firms have a built-in transition plan. These firms are acclimating their newer and younger associates with current clients. They are leveraging the experience and wisdom that the senior advisors have gained to help train and guide newer associates. Newer advisors will gain experience, knowledge and expertise in the field while working with senior partners. This built in transition plan ensures continuity and no disruption of service to the client. While this won’t happen over night and will require a lot of work, this type of planning is in the client’s best interest. Feeling confident that your advisors have a plan for you and your future should be encouraging and expected. Multi-generational family practices offer an additional dynamic where family life, familiarity and genetics can also contribute to the trust factor.

Experience And Wisdom Meet New Technology And Expanded Communications
As an advisor enters into the industry, there is one valuable thing that all of the studying, textbooks, and exams cannot provide experience. Experience is undeniably an important attribute when looking at an advisor. This can only be obtained with time and is something every new associate has to go through “on the job”. Multi-generational advisory firms are more prepared to alleviate this concern. While they cannot completely eliminate this, aging advisors are able to pass down their experience and wisdom to the next generation of advisors through training and mentorship. This is extremely valuable asset for any new advisor in the field and can play a huge role in their development and client successes. The veteran advisor also stands to benefit from this relationship. After doing things the same way for a number of years, a fresh new outlook and access to new communication tools will be of tremendous help to the senior advisor and their clients.

Legacy Planning Addresses

Dedicate enough time to legacy planning, and you will ensure that your estate has a lasting positive impact. However, there is more to legacy planning than just numbers and calculations; the process aligns more traditional estate planning practices with the goals of your family. It identifies the core values holding your family together and prepares your children and grandchildren to receive not only your money but also those values that matter to you the most. The question is, how prepared are you to leave all your savings in the hands of young people? Many people are concerned that the recipients of their gifts will squander them. But that’s what legacy planning services are for they help you make the right decisions when it comes to passing things to heirs and beneficiaries. Still, there are a few problems you should think about before you begin legacy planning.

1. Protecting Your Legacy

According to a 2015 Reuters study, almost 70 percent of prosperous families lose their fortune by the second generation and the generation that follows wipes out the wealth of more than 90 percent of families. So, even if you’re good at handling your money, your children or your grandchildren may spend all your wealth unless you make proper arrangements in your legacy plan.

2. Targeted Spending

Most people don’t know what to do with their money – it’s sad but true. According to the same Reuters study, “lack of financial education” was one of the major reasons why heirs squandered their fortunes so easily. This is because most people are hesitant to discuss subjects related to money. So, when the time comes to transfer their financial knowledge to the next generations, they falter. In the end, individuals inherit sums of money they have no clue how to manage. Fortunately, legacy planning can rectify this situation by counseling your heirs on how to spend your wealth correctly.

3. Failure to Value Your Wealth

The same Reuters study revealed some more interesting points. Of particular interest is the fact that individuals are likely to buy a new vehicle within 19 days of inheriting a large amount of money. This isn’t surprising considering how most people lack the discipline to hold on to their wealth. They become spendthrifts and fail to value all the hard work you put in to save up that money for your descendants.

4. Keeping Predators at Bay

 While there’s some truth to that, nobody can make do without strong financial resources. So, the moment someone receives a large sum of money, the predators start to circle. And no matter how capable and smart you think your loved ones and heirs to be, there’s always going to be someone who’s smarter than them; someone would want to benefit from the situation at their cost. Legacy planning safeguards them against bad circumstances in the future.

 

Planning and Achieving Financial Fitness

The complex nature of financial planning means that everyone would require a financial plan tailor-made to suit their unique financial positions and circumstances. While it is impossible to do so with an article, we can give you the next best thing – an overview of the steps taken to become financially fit.

Step 1: Settling Debts

Financial planning is always complicated, so allow me to tell you a story to simplify this subject. The same applies to your bank loans. The quicker you settle your debt, the less interest you have to pay. Hence, the first step of financial planning should always be to settle all debts as soon as possible so that you can start building and accumulating wealth. By the same token, avoid rolling over your credit card balance and avoid using unsecured credit lines. Many people unwittingly bleed financially from their over-reliance of easy credit.

Step 2: Build a Safety Net

One of the reasons why financial planning is so complicated is because life is a series of wild cards. Car breakdowns, theft, layoffs, fire, flood, hospitalisation – there are a number of events that could hinder your plans to grow your wealth, for example, if you are planning to invest in fixed deposits or invest in real estate.These avenues are less flexible and you may not be able to access the funds locked up in them in the event of an emergency. Even if you are able to unlock them,you’d have to incur some form of financial penalty. And that brings me back to the second step of planning for financial fitness. A safety net is a sum of readily available fund that is set aside specifically to cushion emergencies. As such, you should steer clear from using that fund, regardless of how much you want that new phone or what discounts the Great Singapore Sale is offering. Note that you may set aside another sum of money for entertainment purposes or for occasional splurging, but your safety net should be separated from these other funds.

Health insurance is another safety net you need to consider. Medical bills are not getting any cheaper, and huge unforeseen medical bills have been known to wipe out entire savings, so do prepare, I mean, insure yourself adequately. Another issue you may wish to take note when planning for this step is that the amount needed for a safety net differs across individuals and families. Due to the fact that there are many incidents – such as layoffs, major illnesses or accidents – that halt your income, some financial experts state that your safety net should be able to cover your expenses for at least 6 months. Others, however, claim having a safety net that covers 2 months of expenses is plenty. Planning your finances with the help of a financial consultant can help you determine the amount you need to set aside for your safety net. While you’re talking to your financial consultant, you can also have them get you the appropriate life insurance or medical insurance to protect yourself and reduce your exposure to large medical bills.