Average is not good enough … Our goal at Family Investment Center is excellence. We find excellent investment products and supervise an excellent service package. We maintain a library of excellent research materials and financial planning resources. We also demand top safety and security for our clients.
We won’t settle for average. We continually seek top managers or securities and meld them into superior custom portfolios. Each palette of investments is carefully tailored to personal or family goals. We enlist excellent managers, research, resources, and effort for our clients. Don’t settle for average. You deserve excellence.
Please search our blog posts for answers to common investment questions, and we look forward to sharing our knowledge and experience with you first-hand.
Why Did the Top One Percent of Rich Americans Have a 3.73 Gain Last Year?
The top one percent of wealthy Americans saw a 12-month gain of 3.73 over the past year, whereas the bottom one percent of investors saw a negative 3.32 percent return, according to CNN Money. The difference? It’s all in how they invest. What wealth management tips can you take away from this?
One classic investment success strategy focuses on spreading out their investments, which means if one stock isn’t doing well, it’s not going to significantly impact the entire portfolio. Lower gains are sometimes seen when an investor places the majority of investments in single stocks, such as major companies like Apple or Ford or Bank of America, making your investment gains or losses highly dependent on the performance of that company.
More specifically, the top five percent of investors have less than 40 percent of their investments in a single stock. The bottom five percent have around 70 percent of their investments in a single stock, making them more vulnerable to market volatility. CNN’s report shows the volatility of a wealthy investors’ portfolio is around 15 percent, whereas the bottom investors work with volatility in the 33 percent range.
How Can You Invest Like the Wealthy?
As an investor, you want to plan for long-term gains, which means you will want to spread the risk among your investments. Many young investors will put a higher percentage of investments in stocks that are more susceptible to volatility; sometimes they can see tremendous gains. But this can be risky when you face downturns. However, when balanced with other investments, the outcome can level out successfully over the long-term.
When it comes to wealth management, many experts warn against gambling on the market. It is also important to remain emotionally neutral about your investments while sticking with your investing goals, which must also evolve over time. This means you may have to ride out a poor economy when it comes along, instead of making rash decisions based on fear about the market. You may also have to avoid the advice of family and friends. Although well-meaning, they’re typically not experienced professional investment advisors. Work with a professional; the outcomes are too important.
Don’t believe the myth that “it’s too late” to start investing more strategically. A professional investment advisor – especially one that’s commission-free, a.k.a. non-conflicted advice – can help you with your investment strategies at any life stage. Start where you are, and don’t look back.
Family Investment Center has developed a culture of quality for our clients. We approach each individual situation for what it is – meaning every client gets a personalized approach to wealth management. Contact us today and find out what makes us unique enough to be interviewed by publications including the Wall Street Journal, Forbes and U.S. News and World Report.
Recent Court Action Focuses on “Excessive” Fees for 401(k) Investing
How safe is your money? It’s a question that comes up every time we see a case similar to what is happening with Great-West Life & Annuity Insurance Co. The retirement plan service provider is getting hit with a class action suit alleging that it charged and accepted excessive 401(k) investing fees. According to the complaint, the company accepted kickbacks from mutual funds that were part of its investment plan. Great-West is also alleged to have deceptively characterized the kickbacks as service fees and reimbursements.
With more than $416 billion in assets, Great-West services 32,000 retirement plans that cover more than 7 million participants. However, given the action in a recent appellate court decision, the participants in this class action suit could have a difficult time in their attempts to label Great-West as a fiduciary under the Employee Retirement Income Security Act (ERISA). Why? Principal Life Insurance Co. and others have been successful in getting the courts to reject fiduciary liability.
In fact, Pension & Benefits Daily Report highlights that in the last two months, class action suits regarding 401(k) investment fees have seen an upswing. Fidelity Management Trust Co., New York Life Insurance, Co., Deutsche Bank Americas Holding Corp., and Insperity Inc. have all been in court regarding investment fees.
What can you do? If you’re currently participating in a 401(k), make inquiries about the fees you’re being charged. You’re not alone in asking questions about fees and conflicted versus nonconflicted advice. As many investment firms know, the Department of Labor (DOL) is currently looking to expand the definition of an ERISA fiduciary to protect investors. A fiduciary standard requires that clients’ best interests be held the top priority. The DOL is also strongly objecting the defendant-friendly rulings by the appellate courts and urging them to treat these providers as ERISA fiduciaries.
As you consider your investments and those that are managing your funds, also consider investments outside of your 401(k). When it comes to responsible investment advice, it may be in your best interest to work with a fee-only advisor rather than one that operates under the definition of a fee-based advisor. To put it simply, a fee-only advisor doesn’t charge commissions. This helps to ensure that the advice you’re getting from a fee-only professional is objective and geared toward your success.
Know the facts. In 2015, the White House released a report on this issue in a document titled “The Effects of Conflicted Investment Advice on Retirement Savings.” The report highlights that conflicted advice leads to lower investment returns. The report states that around “$1.7 trillion of IRA assets are invested in products that generally provide payments that generate conflicts of interest,” and concludes that “we estimate the aggregate annual cost of conflicted advice is about $17 billion each year.”
Family Investment Center is a fee-only investment advisory team that has been focused (and remains focused) on clients’ interests first, since our founding. Contact us today and let’s talk about what nonconflicted advice could mean to you and your future.
Customizing Your Investment Portfolio for Social Responsibility
We’re impacted by what goes on around us. As the world changes, so too will the values of each new generation. These changes, in the investment world, include seeing investment portfolio of individuals whose values are important to them - whose values may guide their investment decisions as much as the successes of certain investment tools. A younger generation who is seeking out investment opportunities is doing so with socially responsible investing near the top of their list.
No matter what generation you’re a part of, you may want to consider the following points if you choose to make changes to your own investments:
Aligning values with your investment portfolio is possible – and many people are doing it. People who want to align their values with the activities that are important to them will typically invest in companies that share the same values. This is not a new concept, but it has been growing in activity in the last few years. The Forum for Sustainable and Responsible Investment released a report that says this type of investment increased from $3.4 trillion in 2012 to $6.5 trillion by the beginning of 2014. Around 53 percent of Millennials, according to a survey by Spectrem Group, say social issues impact the way they invest, compared to 42 percent of Gen Xers and 41 percent of Baby Boomers.
Seek out socially responsible mutual funds. Did you know there are a wide variety of socially responsible mutual funds available to you? In fact, there are over 950 of them today, an increase from 720 in 2012. Talk to your investment advisor about the risk involved and align your risk tolerance with the right socially responsible fund.
Do a little online research before making changes. For example, you may want to take a look at the Forum for Sustainable and Responsible Investment online. This organization will provide you with a list of sustainable and responsible mutual funds. Many other resources exist for similar information.
Be prepared for possible lower results, but do what you can to limit losses. Almost any investment will carry risk, but because socially responsible funds restrict the types of companies in which they will invest, the results might be less desirable than what a portfolio manager without restrictions might obtain. Again, work with your investment advisor to limit your risk of being tied to low-performing investments – but that still allow you to make some values-based choices.
Shape the future with shareholder activism. Those who own companies are the ones who guide them. When publicly traded, shareholders are often able to influence how the company is managed. Exercising voting rights, attending shareholder meetings, and filing shareholder resolutions are all ways that investors are able to help shape the way a company does business.
Improve your community with your investment. Some socially responsible funds will set aside a percentage of investments for credit union and nonprofit lenders that offer affordable loans to community members looking to create positive change. Information about how this occurs should be available in a fund’s prospectus.
Partner with a trained professional. Whether it’s your complete investment portfolio or just a portion that you want directed toward socially responsible funds, talk to your investment advisor about how to best proceed. Contact Family Investment Center today. We’re ready to listen to your values and your future goals.
Challenges of Investing for Physicians
The landscape for healthcare continues to evolve. More is expected of physicians today than at any point in history. While the focus of physicians continues to be on keeping up with technology, regulations, and the health of their patients, many may be unprepared when it comes to their own personal finances. Investing for physicians follows similar strategies to other professions, but a recent survey shows physicians also have their own set of challenges.
Physicians may delay starting retirement savings. A national poll conducted by AMA Insurance reveals that only six percent of physicians said they are ahead on their investment plan for retirement. Around half said they are not prepared for retirement. Doctors spend at least ten years training to become a professional, which means they enter the workforce at a more advanced age than those in other professions. This can put them behind in their investing goals.
Physicians enter the workforce playing catch-up, typically with debt. Many physicians come out of college with staggering student loan debt, the median of which is $278,000 for private schools and $207,000 for public schools (according to the Association of American Medical Colleges). These stats show doctors could enter the workforce around $500,000 behind in real and potential losses.
Retirement accounts are underfunded. The AMA survey shows that having enough money for retirement was the number one financial concern for physicians. In fact, 40 percent said they have less than $500,000 in their retirement accounts. For those under the age of 45, the average was less than $100,000.
Other areas of estate planning need attention as well. The survey also reveals additional estate planning issues that need to be addressed. For instance, only about half of physicians polled said they had updated their will, medical directives, power of attorney and end-of-life plans. Around 35 percent said they had no estate plan. 70 percent said they do not have a long-term care coverage plan in place.
Like most professionals, physicians live busy and demanding lifestyles, but retirement planning doesn’t have to fall by the wayside of long-term goals. When it comes to investing, there are many options to consider, including seeking out an investment advisor for guidance. Letting a professional work out the details of your retirement plan means more time spent pursuing the career you love, or more time with your family, and less time worrying about your future.
At Family Investment Center we work with people in all walks of life – from young investors to retired professionals. We have the expertise to work within the challenges of complex careers in a commission-free setting. We truly put our clients’ needs first, and have since our founding. Reach out to our team today and let’s get started.
What Successful Investment Advisors Know About Financial Planning
What do successful investment advisors know about investment strategies that can help you with your financial goals? Here are just a few easy tips to apply today for more confidence in your future tomorrow:
The top investment advisors you might rank among have strategies for helping grow your money, but it’s up to you to provide those funds. In other words, to truly see more bang for your buck, save more bucks. This involves budgeting more carefully and putting a higher percentage of your income toward investments. Too many Americans spend too much on things they want now, instead of putting that money to work in an investment account. Chances are, you’re able to invest more than you might think each month.
Avoid commissioned products (these advisors may not have your best interests in mind). By now, you’ve likely heard about recent White House reports warning Americans against commission-based investment advice –including the percentage of revenue that could be lost over time when working with these advisors. If you’re being directed to buy a certain investment by your advisor who receives commissions for selling it to you, it may be time to switch to a fee-only advisor. Fee-only advisors don’t take a commission and won’t be swayed by the possibility of higher profits to offer you a product that may not bring you the success you want. Nationally, fee-only advisors are connected by a willingness to serve clients’ needs first through the National Association of Personal Financial Advisors (www.NAPFA.org).
Don’t overanalyze declines in the stock market. True, the last recession set back the plans of investors who planned to retire at that time, but historically, success comes to investors who place their focus on consistency over time. While there is no guarantee, statistics show that investing in the market in the long-term can bring stronger returns than market-timing.
No one can predict the market. If you’re making decisions based on what you think will happen to a stock in the next few months, you’re “playing” the market. This may not be a rewarding situation to be in, especially if you’re making large investments. Top investment advisors don’t “play” the market. They diversify portfolios over a variety of securities over time that have varying levels of risk.
Address your personal debt first. Pay down your high-interest credit card, for example, before investing heavily for your retirement. One situation that goes against this advice is with your 401(k) – you should consider contributing the maximum amount that your employer will match. Otherwise, put your focus on paying down high-interest debt so that you can invest more for your future. However, while it may be , depending on your mortgage rate, making double payments on your mortgage or trying to pay it off early may not be as wise if those dollars could do more for you in an investment account.
Family Investment Center offers a professional team of investment advisors who know how to communicate clearly, all in a commission-free setting. Contact us today to get started.