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.
Family Investment Center’s Salmen Talks About Financial Advice and a New Rule
The debate around a fiduciary rule is heating up again, which means you’re going to see more about the Certified Financial Planner® (CFP) Board of Standards as its Code of Ethics and Standards of Conduct reaches new areas. Also called the fiduciary standard, it’s been widely debated since the Department of Labor created a controversial rule in 2016 that could impact financial advice given by professionals.
Richard Salmen, president of Family Investment Center, is also the 2018 Chair of the CFP® Board of Directors, which means he’s often in high demand as a source for news articles on various financial/investment topics. He was quoted recently in two articles, one in the Chicago Tribuneand the other in Barron’s.
The CFP® voted that the 80,000 CFPs in the United States would have to follow the new fiduciary rule beginning in October 2019. The current standards say that CFP®s only have to follow the fiduciary standard when offering financial planning services. However, in October of next year, they’ll have to act as fiduciaries whenever they’re giving any type of financial advice.
“This is a monumental step forward in the evolution of not just CFP® certification,” Salmen told Barron’s, “but for the profession of financial planning.”
Many investment businesses have already made sweeping changes to comply with the fiduciary rule, some brought lawsuits saying the labor department had overreached in establishing the new rule. The Securities and Exchange Commission is proposing its own fiduciary rule, which willaffect retirement and non-retirement accounts.
Despite rumblings and rumors, the CFP® board decided to take action and not leave anything to question.
“We are raising the bar even higher now with a fiduciary standard that will apply anytime a CFP® professional gives financial advice,” Salmen told the Chicago Tribune.
The debate began following a White House report (Obama Administration) outlining how conflicted advice from investment advisors costs investors billions of dollars per year. However, for those, like Family Investment Center that have always operated as fiduciaries, the new rule only solidifies the way in which they’ve always practiced their profession.
The change in administrations at the White House has caused some back and forth. The Trump administration delayed implementing the Department of Labor fiduciary rule until July 2019.
“For those who want to avoid conflicted advice from investment professionals, always ask if they are held to the fiduciary standard. Make sure there are no hidden fees or commissions to be made off products they recommend,” says Salmen.
At Family Investment Center, we’ve operated as fiduciaries since day one. Contact us today and let’s plan your future.
The Family Investment Center team is talking about the books that have influenced their view of business success, or of life in general. Enjoy this list below and add a few to your personal shelf!
Richard C. Salmen, President
The Power of Full Engagement: Managing Energy, Not Time, is the Key to High Performance and Personal Renewal - Jim Loehr and Tony Schwartz
Why Richard loves the book:
The central premise of the book is that energy, not time, is the fundamental currency of high performance. From the authors: “This insight has revolutionized our thinking about what drives enduring high performance. It has also prompted dramatic transformations in the way our clients manage their lives, personally and professionally. Everything they do—from interacting with colleagues and making important decisions to spending time with their families—requires energy. Obvious as this seems, we often fail to take into account the importance of energy at work and in our personal lives. Without the right quantity, quality, focus and force of energy, we are compromised in any activity we undertake.”
How it changed his life:
The challenge of great performance is to manage your energy more effectively in all dimensions to achieve your goals. Four key energy management principles drive this process. They lie at the heart of the change process and they are critical for building the capacity to live a productive, fully engaged life.
PRINCIPLE 1: Full engagement requires drawing on four separate but related sources of energy: physical, emotional, mental and spiritual.
PRINCIPLE 2: Because energy capacity diminishes both with overuse and with underuse, we must balance energy expenditure with intermittent energy renewal. To be fully engaged requires strength, endurance, flexibility, and resilience in all dimension. The richest, happiest and most productive lives are characterized by the ability to fully engage in the challenge at hand, but also to disengage periodically and seek renewal.
PRINCIPLE 3: To build capacity, we must push beyond our normal limits, training in the same systematic way that elite athletes do. Stress is not the enemy in our lives. Paradoxically, it is the key to growth. In order to build strength in a muscle we must systematically stress it, expending energy beyond normal levels. Doing so literally causes microscopic tears in the muscle fibers. At the end of a training session, functional capacity is diminished. But give the muscle twenty-four to forty-eight hours to recover and it grows stronger and better able to handle the next stimulus. While this training phenomenon has been applied largely to building physical strength, it is just as relevant to building “muscles” in every dimension of our lives—from empathy and patience to focus and creativity to integrity and commitment. What applies to the body applies equally to the other dimensions of our lives. This insight both simplifies and revolutionizes the way we approach the barriers that stand in our way.
PRINCIPLE 4: Positive energy rituals—highly specific routines for managing energy—are the key to full engagement and sustained high performance. Change is difficult. We are creatures of habit. Most of what we do is automatic and nonconscious. What we did yesterday is what we are likely to do today. The problem with most efforts at change is that conscious effort can’t be sustained over the long haul. Will and discipline are far more limited resources than most of us realize. If you have to think about something each time you do it, the likelihood is that you won’t keep doing it for very long. The status quo has a magnetic pull on us. The power of rituals is that they insure that we use as little conscious energy as possible where it is not absolutely necessary, leaving us free to strategically focus the energy available to us in creative, enriching ways. Look at any part of your life in which you are consistently effective, and you will find that certain habits help make that possible.
How it changed the way he thinks about his business:
Whenever a client tells me “I don’t have time for that.” I now know that what they are really saying is “I don’t have the energy for that.” We then need to dig deeper to understand what their real motivation is and what the real challenges are in order to help them change the financial behavior that is limiting their potential.
What makes a lasting impression from this book:
• Our most fundamental need as human beings is to spend and recover energy. We call this oscillation.
• The opposite of oscillation is linearity: too much energy expenditure without recovery or too much recovery without sufficient energy expenditure.
• Balancing stress and recovery is critical to high performance both individually and organizationally.
• We must sustain healthy oscillatory rhythms at all four levels of what we term the “performance pyramid”: physical, emotional, mental and spiritual.
• We build emotional, mental and spiritual capacity in precisely the same way that we build physical capacity. We must systematically expose ourselves to stress beyond our normal limits, followed by adequate recovery.
• Expanding capacity requires a willingness to endure short-term discomfort in the service of long-term reward.
Additional titles on Richard’s “must read” list include:
The Life-Changing Magic of Tidying Up: The Japanese Are of Decluttering and Organizing - by Marie Kondo
The Science of Liability: 27 Studies to Master Charisma, Attract Friends, Captivate People, and Take Advantage of Human Psychology - by Colin Falconer
Rising Strong: How the Ability to Reset Transforms the Way We Live, Love,
Parent, and Lead - by Brene’ Brown
The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Live a Good Life - by Mark Manson
The ONE Thing: The Surprisingly Simple Trust Behind Extraordinary Results - by Gary Keller and Jay Papasan
Daring Greatly: How the Courage to Be Vulnerable Transforms the Way We Live, Love, Parent, and Lead – by Brene’ Brown
Linchpin: Are You Indispensable? - by Seth Godin
Mindset: The New Psychology of Success – by Carol S. Dweck
The Coaching Habit: Say Less, Ask More & Change the Way You Lead Forever
- by Michael Bungay Stanier
15 Secrets Successful People Know About Time Management: The Productivity Habits of 7 Billionaires, 13 Olympic Athletes, 29 Straight-A Students, and 239 Entrepreneurs
- by Kevin Kruse
Drive: The Surprising Truth About What Motivates Us – by Daniel H. Pink
Fierce Conversations: Achieving Success at Work and in Life One Conversation at a Time – by Susan Scott
How to Get Lucky: 13 Techniques for Discovering and Taking Advantage of Life’s Good Breaks – by Max Gunther
Essentialism: The Disciplined Pursuit of Less
- by Greg McKeown
Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb
Emotional Intelligence 2.0 by Travis Bradberry, Jean Greaves
Get Out of Your Own Way: The 5 Keys to Surpassing Everyone’s Expectations
by Robert K. Cooper
Multipliers: How the Best Leaders Make Everyone Smarter
by Liz Wiseman; Greg McKeown
The Why of Work: How Great Leaders Build Abundant Organizations That Win
by David Ulrich; Wendy Ulrich; Marshall Goldsmith
The Rational Optimist: How Prosperity Evolves
by Matt Ridley
Influencer: The Power to Change Anything, First Edition
by Kerry Patterson; by Joseph Grenny; by David Maxfield; by Ron McMillan;
by Al Switzler
Go Put Your Strengths to Work: 6 Powerful Steps to Achieve Outstanding Performance
by Marcus Buckingham
What You Can Change…and What You Can’t: The Complete guide to Successful Self-Improvement - by Martin E.P. Seligman
Outliers: The Story of Success - by Malcolm Gladwell
Dan Danford, CEO/Founder
Quiet,by Susan Cain
Why you love the book:
Do you get energy from being around people, or from thoughtfully recharging your personal battery? This is a fascinating discussion about introverts. American society historically rewards extroverts with big personalities. Yet, 30-40 percent of us are introverts. Interestingly, some incredibly successful and inspiring people are introverted.
How it changed your life:
My personality never really fit the extrovert salesperson model suggested in business school, or the typical stockbroker. I’ve overcome that in a lot of ways, but I always suspected my quiet ways reflected some sort of character flaws. It’s been amazing to discover – late in life – that those very traits are “normal” and can be helpful in business.
Why it changed the way you think about your business:
I suddenly realized that my ability to read, understand, write, and explain (introvert traits) are responsible for most of my business successes. The very things that seemed negative are enormously positive.
Fortunate Son, by John Fogerty
Why you love it:
I read a lot of books about rock ‘n roll and this is one of the most authentic. Fogerty chronicles his life story with some incredible insights about his life’s ups and downs.
How it changed your life:
There are many ways to live a creative life. Creativity brings to mind occupations like songwriters and actors, but there’s creativity in jobs from teachers to entrepreneurs. The creative process is unique to each person, but the challenges can be similar. Fogerty suffered horribly at the hands of his early manager and others he trusted (all Creedence Clearwater Revival royalties still flow to others). Still, he grew beyond all that and became one of America’s most beloved and successful performers.
Why it changed the way you think about your business:
It’s pretty common to encounter bad situations and people in business, but I admire John Fogerty for rising above the parasites.
What’s your favorite quote from the book?
One of my all-time favorite songs features John Fogerty singing “Put me in coach, I’m ready to play.” I love the lyrics and the infectious tune and you’ll hear it over the loudspeakers at ballparks all summer long. Fogerty wrote the song and played every instrument on the record. It’s a solo recording!
The End of Power, by Moises Naim
Why you love this book:
The world is changing and Naim explores how 24/7 news and social media influence the seats of traditional power. From politics to economics to social culture, power is diminished everywhere by the new order of worldwide openness.
Why it changed your life:
There are no secrets. You’ve heard the adage that “knowledge is power” and that has always been true. Today, it’s very hard to exercise power or earn profits by hoarding information. That knowledge leverage is gone.
Why/how it changed the way you think about your business:
Data about almost everything is readily available, but converting it to usable information and making it operational is where value lies.
What surprised you most from what you read?
There were amazing examples from around the world. For instance, I was surprised to find that institutions like churches and universities also suffer consequences from these changes.
Nudge, by Richard Thayer
Why you love the book:
Thayer won a Nobel Prize for these ideas. The traditional notion that “more is better” is turned upside down as Thayer explains that too many choices often create bad results. Most people choose better among a handful of options than a dozen. It’s counterintuitive, but you know it is true if you ever watched someone new study a Starbucks menu.
How it impacted your approach:
The best way to help people is to guide them in the right directions.
How it changed the way you think about your business:
In business, people turn to us for help. Most times, they understand and expect that we know more than they do. It’s good to offer them choices, but too many choices can paralyze them. It’s best to narrow the choices while staying prepared to go deeper. Probably better to say less and know more!
Is there anything in particular that made a lasting impression from this book?
Thayer explained the 401(k) dilemma first revealed to me back in the 1980s. The 401(k) premise was to offer employees choices on how to invest their retirement savings. Unfortunately, many people opted out of the plans because they were burdened by all the options. Even people who opted into the plans often made sub-optimal choices, but now we know it is better to build positive defaults (nudges).
The Total Money Makeover, by Dave Ramsey
Why you love the book:
I was lucky enough to read this as a young adult and it has turned out to be a true blessing for my family.
How it changed the way you think about business:
This book is partly responsible for me wanting to help others by joining the financial profession.
Any favorite quotes from the book?
Anyone familiar with Dave Ramsey knows his famous financial sound bite: “IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE”.
48 Days to the Work You Love: Preparing for the New Normal, by Dan Miller
Why you love the book:
It was an excellent read after graduating from college and being unsure of which career path to take.
What’s your favorite quote from this book?
“Success is never an accident. It typically starts as imagination, becomes a dream, stimulates a goal, grows into a plan of action—which then inevitably meets with opportunity. Don’t get stuck along the way.”
Maybe your bookstore wish list just grew by a few, or maybe you’re intrigued to know more about how the team at Family Investment Center are shaped by these ideas. Make an appointment with us to talk more about the ideas that come into play when we’re helping you create the future you want.
Books are unique in their ability to inspire, inform and shape philosophies – all through the power of the written word. We’re entering a time of year where we can take a book to our porches and read in comfort. Consider these books for investment advice or just to get a good read for the pure enjoyment of it, each of which comes from a team member at Family Investment Center.
Dan Danford, CEO:
Nudge, by Richard Thayer
This Nobel Prize winner takes on the traditional notion that “more is better,” and turns it on its head. Thayer explains that most people choose better when they have fewer options. Ever witness a Starbucks first-timer labor over the menu? With a little guidance from a “professional,” they can be guided down the right path to something they will like. This is the same logic that can be used in guiding clients who need investment advice.
Fortunate Son, by John Fogerty
If you’re a rock and roll fan, this is a must-read. John Fogerty, the man behind Credence Clearwater Revival, has had a number of ups and a handful of downs. He chronicles them in this book. Fogerty also touches on what it means to live a creative life and how that approach can be used in things other than rock and roll.
Quiet, by Susan Cain
As much as 40% of us are introverts. While the extroverts are often the most rewarded for their outgoing and big personalities, the traits that make an introvert the way they are can also be found in successful people. Cain writes that churches are built for extroverts, as are sales and marketing models. However, introverted traits, such as a passion for reading, writing and understanding various philosophies, are responsible for the success of many people.
The End of Power, by Moises Naim
Naim explores how the 24/7 news and social media cycles influence the seats of traditional power. Power is diminished everywhere, including in politics, economics and social culture, by the new order of worldwide openness. There are no secrets anymore, which means the “knowledge leverage” as we knew it is gone. You can find data about anything, yet converting it to usable information and making it operational is where you will find value.
Richard C. Salmen, President:
The Power of Full Engagement: Managing Energy, Not Time, is the Key to High
Performance and Personal Renewal, by Jim Loehr and Tony Schwartz
The central premise of the book is that energy, not time, is the fundamental currency of high performance. The challenge of great performance, as Schwartz and Loehr discuss in these chapters, is to manage your energy more effectively in all dimensions to achieve your goals. Four key energy management principles drive this process, and they lie at the heart of the change process and are critical for building the capacity to live a productive, fully engaged life.
Chris Steins, Investment Advisor:
The Total Money Makeover, by Dave Ramsey
Even young adults have read this book and used its contents to assist them in taking a healthy approach to managing money. Want to know how to lay the groundwork for a more advantageous financial lifestyle? This book can help you. Need to get out of debt? This book will offer ways to do that. Want to be better prepared for retirement? Dave Ramsey has some ideas for you.
Laura Holthaus, Investment Advisor and Chief Compliance Officer:
48 Days to the Work You Love: Preparing for the New Normal, by Dan Miller
Picking the right career can be intimidating to say the least. Dan Miller offers some insights along that subject line, but also talks about what work exactly is, how change can be challenging, finding your unique path and how the workplace continues to evolve.
What books are you reading this spring? At Family Investment Center, we’re no stranger to a good book, including those that address our industry and otherwise. We like to stay connected and reading is a great way to accomplish that. Need some ideas on investing? We have some book recommendations, but we can also schedule an appointment for you to come in and chat with us about your investment options.
Dan Danford Shares How Financial Planning is Different for Each Employee
When the Harley Davidson plant in Kansas City closes its doors next year, approximately 800 workers will experience a life-changing event. Financial planning is important for everyone, but when losing a job, it becomes crucial.
As Dan Danford, CEO of Family Investment Center, said in an op-ed in the Kansas City Star, the next steps these employees take will be critical.
Different ages, different number of family members, different financial needs and other aspects make each situation unique. The approach an individual takes to this situation will not be a one-size-fits-all scenario. In fact, Danford notes that it’s a mistake to follow the lead of a colleague.
“Good choices depend on thoughtful analysis of some personal issues,” Danford said.
For example, current financial status must be taken into consideration: Is the person married or single? Do they have other family income, such as a spouse who works and can take care of health insurance? Is there an emergency reserve in the bank they can count on until another job is secured? If a job isn’t immediately available, how long can they go without a steady paycheck? These are all important financial planning questions.
“Younger workers may face a big mortgage and a houseful of children,” Danford said.
“Older workers may have health limitations or fewer job prospects. Some workers nearing retirement age anyway may choose not to seek another job.”
Taking Care of Health Insurance
COBRA benefits offer a short-term solution for health insurance, but it comes at a price and it’s not very flexible. Because Harley Davidson offered good insurance, former employees will probably face a situation where their premiums will be high in comparison, which will impact the budget.
Young workers will have access to individual policies that don’t have all the bells and whistles older folks require, so they can probably save some money there. However, anyone with a spouse and children will need something more extensive, and COBRA only covers them for around 18 months.
The Retirement Plan
While it’s tempting to dip into that 401(k) plan while unemployed, it’s not recommended because the costs are high in a number of ways. As you likely already know, you’ll have to pay taxes, state and federal, on funds you withdraw. Second, when you pull money out of your 401(k), you’re negatively impacting the ability of that vehicle to build up compound interest, which sets you back months, if not years. A better choice would be to borrow money elsewhere.
Adjusting the Budget
Danford notes that it’s always tough for workers to scale back a comfortable lifestyle. However, given the fact that these employees will have had many months to prepare for this situation, they can begin gathering information.
“How much adjustment is needed?” Danford said. “Where can you adjust without disrupting your lifestyle and needs? Are there things you can do to boost your emergency fund or savings? Can you sell unused items? Empty the garage or basement, perhaps?”
Finally, Danford offers that, “trauma is likely to be short-lived. Unemployment in the United States is low and good workers are in demand everywhere. It is likely employees will find new work faster than it seems.”
For more information about financial planning for you and your family, contact Family Investment Center today.
In a Time of Complexities, a Fiduciary May be the Solution
The opaque nature of the fee structure that many investment advisors follow has prompted Jay Clayton, SEC chairman, to target the complexities in hidden fees that are bad news for investors. Fiduciaries who are fee-only are becoming a more popular option for investors who need assistance in planning out their financial future.
Clayton is looking to crack down through enforcement, but also by clarifying disclosure requirements, according to an article in Investment News. Clayton has spoken out recently about advisors who are putting money for clients into an expensive mutual fund rather than those that are low-cost. Also, he’s spoken out about a type of financial advisor who will use fund assets to pay expenses for their firm when those expenses should be covered by the firm.
There is also the issue of brokers that will mark up securities prices to give themselves a raise, and they do it in secrecy. Consumers are beginning to take notice, as they become more fluent in investment terms – and as they continue to watch market dips with apprehension.
Fiduciaries act in the best interest of the client, and they typically have less complex fee structures to prevent confusion for clients or keeping them in the dark about what they’re being charged. Commission-free fiduciaries pose far less risk of giving advice that isn’t objective. The White House under Obama put out a report that said, “Some firms incentivize advisers to steer clients into products that may have higher fees and lower returns.” This conflict of interest was estimated to cost investors $17 billion a year.
Simply put, fiduciaries are advisors who will listen to you about your fears, your goals and how you want to spend your life in retirement, then offer advice that is in your best interest. A good advisor will speak in terms that you understand, yet without talking down to you. They will charge a fee that is transparent and easy to understand.
At Family Investment Center, we’ve operated as a fiduciary since day one. Our entire team has a hands-on approach to managing clients’ accounts, which means we collaborate to ensure that every client is thoroughly covered and getting what we feel to be the best advice. Schedule an appointment with us today and find out why jargon-free, client-first service can be a straight path to confidence.
Investment Strategies and Sudden Gains (Such as Tax Returns)
If you find yourself with unexpected money, you may also find yourself with questions. For many, receiving an unexpected sum of money is exciting – but it also requires a strategy. Investment strategies for these life experiences don’t have to be complicated; it can be helpful to review the concepts below.
Here’s more to ponder: thinking beyond tax season, the National Endowment for Financial Education found that almost 70 percent of people who hit it big will find themselves in the same situation they were in before obtaining that money.
Recently Forbes asked a dozen investment advisors about investment strategies for windfalls. Here are their top tips to keep in mind:
1. Pay Down Your Debts
While it isn’t as fun as going on a shopping spree, paying down certain types of debt is vital for a brighter financial future. (Note: some debt is good debt. Credit card debt is never good debt. Talk to an advisor about which debt is good and which is bad.)
2. Make Fact-Based Decisions
The first reaction after receiving a windfall might be to spend, spend, spend. However, to sit and do nothing aside from developing an investment strategy is probably your smartest option. Rather than focus on short-term expenditures that satiate your shopping itch, think long-term.
3. Hold on to It
If you have no real debt to speak of, put some of the money into the bank. We never really know what life will give us, which is why setting aside enough to cover three to six months of expenses (“emergency fund”) is wise.
4. Invest It
Before you invest your windfall, you need to ask yourself a couple of questions: is my emergency fund in good shape and are my debts paid down? If you can answer yes to both, consider investing in accounts like an IRA or brokerage account. There are many different options, so talk to an investment advisor about what’s best for you.
5. Addressing Risk
For those who are immediately thinking long-term with this windfall, it’s reasonable to look down the line and assess when you think you might actually start spending this money. You need to assess the risk associated with various investments so that you have a chance at compound returns, yet the risk is low enough so that it will be there for you when you need it. There are also taxes to consider, so talk to your investment advisor about which options fit your goals.
Windfalls can cause a flood of emotions, which we all know is not the best state to be in while considering financial decisions. Do yourself a favor and hold off on making decisions and contact your investment advisor about steps you should consider.
At Family Investment Center, we’ll talk to you about your goals and how this windfall can work toward those goals. Contact us today and let’s build a solid investment strategy together.
Why an Advisor Should be More Than Just “Experienced”
Most investment advisors have gone through a number of exams and licensing steps to earn their position. But is that enough? You want an investment advisor who is up-to-date in their industry so they can help you develop an investment strategy that is the best fit for your life.
Licensing exams will test the applicant’s knowledge of basic products and state and federal laws regarding investing. While one would hope a firm would only hire people with appropriate education, not all exams hold them to the same rigor. Regardless of how extensive an advisor’s education has been, it’s important for them to continue on a path toward furthering their education.
One credential you have likely heard about is CERTIFIED FINANCIAL PLANNER™ , or CFP®. These professionals complete education and testing in areas including budgeting, planning for retirement, saving for education, tax planning, estate planning, insurance, and other areas. They are also held to rigorous experience and continuing education standards and are required to act in clients’ best interests in a constantly changing environment.
While credentials are helpful, are they enough to ensure that you’re getting the advice that will help you reach your investment goals? Advisors can also attend national conferences to boost their education and gain new ideas.
One example is Charles Schwab’s annual IMPACT conference, which provides an excellent opportunity for investment advisors to hear from others in their industry and to soak up new insights. The cornerstone of IMPACT is education, and the conference is designed to cover vital topics in an industry that continues to evolve.
Dan Danford, CEO of Family Investment Center, says taking his professionals to IMPACT is an investment in and of itself. “It’s not cheap to take all our advisors to the IMPACT conference,” Danford said. “This year it was in Chicago, but we’ve gone to Denver, San Diego, Boston, and Washington DC before.”
Despite the travel expenses, Danford said it’s totally worth the investment because the value is in what they learn.
“There are thousands of advisors there,” Danford began, “dozens of educational sessions and top-rated keynote speakers. Most of all, we learn how others are doing what we do for clients. We see new products, new software, new service models, even new competitors. Most of all, we hone our craft. Because being better each day is one powerful key to helping others.”
At Family Investment Center, we’re constantly expanding our knowledge of the investment industry so we can better serve our clients. Regardless of your level of expertise in investments, we can help you meet your goals. Contact us today and let’s talk about what your money can do for you.
Three Quick Reminders for 401(k) Investing
A 401(k) is an excellent investment tool that many workers utilize today for their retirement. Most pension plans have been replaced, in many cases, with a 401(k). Some companies offer an employer match, which is free money to you (or a company benefit, if you prefer to look at it that way). That is why 401(k) investing can be a key part of your portfolio.
First and foremost – if your company does offer a match, it may only be a single-digit percentage. Consider taking full advantage of this, because if you’re not contributing the maximum amount, you’re leaving money on the table that could be increasing the amount you have in your account when you retire. This means that if your company matches up to five percent, you should attempt to contribute five percent of each paycheck in the company 401(k) to get the full company match.
Many people will contribute more than what the employer will match because not only will they benefit from the compound interest of the matching amount from the company, but they’ll also have extra going into it that will give them more options in what they can do in retirement.
Most employees who contribute to their 401(k) accounts don’t miss it because it’s automatically withdrawn from their paycheck and placed directly into the account. There are no checks to sign or money to withdraw; you just get your regular paycheck, and you can see your contribution in the itemized list of deductions.
Enrollment is automatic, as well, for many companies, which means there is no decision to make on your part. All you have to do is adjust how much you’ll be putting in per pay period.
Take it to the Max
A goal for your investment is to try and reach the maximum amount the IRS allows you to put in every year. (There are some circumstances where this may not be in your best interest, though, so be sure to consult an advisor.) This number can change, but currently, you can contribute up to $18,000 of earned income per year.
If you’re 55 or older, you can contribute more – it’s called a “catch-up contribution” that allows you to contribute an extra $6,000 a year. This is an excellent option for people who’ve gotten a late start on retirement.
Don’t Abuse the Bonus
What do you do with your tax refunds, bonuses and raises? Do you plan big nights out, trips and large purchases? If you just spent a small percentage of that money on those things and then took the rest of that extra money and put it into your 401(k), you will grow your retirement savings at a faster rate. Let’s say you just got a five percent raise. Consider bumping up your contribution by four percent; then you may have that much extra to use in retirement.
At Family Investment Center, we’ve got many ideas to help you plan for retirement. Contact us today and schedule a visit to talk about a strategy for your investments.
Family Investment Center Now Offering Expanded Financial Planning Services
Family Investment Center is expanding its financial planning offerings, and a nationally-known professional in the investment industry has joined the team to carry this work forward. Richard C. Salmen, CFP(R), CFA, EA is leading a new team of investment professionals from a Family Investment Center office in Lenexa, Kansas.
Salmen brings a high-impact resume and national recognition to the Kansas City region. As of January 1, 2018, Richard C. Salmen serves as president of Family Investment Center and will lead the financial planning services. Salmen’s credentials include CERTIFIED FINANCIAL PLANNER® Professional and a Certified Trust & Financial Advisor (CTFA). He received the CFA Institute Board of Governors Chartered Financial Analyst (CFA®) charter. As an Enrolled Agent (EA), he is authorized to represent taxpayers before the Internal Revenue Service at all levels.
Salmen’s previous experience includes serving as the Chief Executive Officer of Northern Financial Advisors, a Detroit, MI, fee-only financial planning and investment management firm. He graduated summa cum laude with a Bachelor of Science in Business Management from the University of Nebraska at Kearney and was a graduate business scholar while receiving his Master of Business Administration (MBA) degree from the University of Kansas.
In 2006, Salmen began a three-year term as a member of the national board of directors for the Financial Planning Association (FPA) based in Denver, Colorado, ultimately serving as national President in 2009. In 2010, he served as FPA national Chairman. In November 2014 he was elected to serve a four-year term on the Board of Directors for the Certified Financial Planner Board of Standards, Inc., beginning January 1, 2015. He is the 2018 Chair of CFP® Board’s Board of Directors.
As a true multi-tasker, Salmen is a retired air traffic controller for the Federal Aviation Administration and also spent 14 years as a member of the Army Reserves, finishing his career at the rank of Captain. Read more here in this Kansas City Business Journal article.
Salmen’s accolades are commendable, but it’s his experience in financial planning that caught the eye of Dan Danford, CEO of Family Investment Center. Danford said in a recent news release that Salmen will expand on existing financial planning services. “This broadens the scope of Family Investment Center to solve client challenges at different levels of goals,” Danford said.
Furthermore, Salmen, like everyone at Family Investment Center, has operated as a fee-only, or commission-free, advisor. He will maintain that model as he works with Family Investment Center out of Lenexa. Areas of financial planning offered by Salmen and his team include tax preparation; estate planning; business planning; insurance planning and risk management; cash flow management; and goal setting.
If you’re interested in 2018 being the year that money makes sense, contact our team at Family Investment Centertoday. It’s time to start doing more of what you love.
How Your Goals Can Get a Boost With an Investment Advisor in Your Corner
Who do you trust with your money? Or, who do you trust to advise you about what you should do with your money? Too many people might offer up the following: “Friends, family and co-workers.” Unfortunately, these people, while highly trusted for a number of reasons, shouldn’t be a source of expertise when it comes to your investments. That is best left to an investment advisor.
Why not friends, family and co-workers? The reason is simply because they’re telling you what worked for them, and their situation is likely much different from yours. What worked for them might be a choice that isn’t right for you. Getting objective advice from a professional can give you a personalized plan for your unique situation.
Ask Yourself Questions About Your Investments
Have you been asking yourself if your money is in the right place or earning what it needs to earn in order for you to meet your goals? If you already have an advisor, have you wondered if they are offering objective advice? And what are they charging? When you have a fiduciary in your corner, you don’t have to worry about getting conflicting advice, and as a fiduciary, they are required to be transparent about their fee structure.
Why a fiduciary, you ask? A fiduciary is required to put your best interests first - not their own profits. A fiduciary won’t take a commission on products they sell to you, which means any advice they offer will not be motivated by lining their pockets with money.
What’s an Independent Financial Advisor?
Independent Registered Investment Advisors, or RIAs, work in independent advisory firms that offer personalized advice, which is especially beneficial if you have complex needs regarding your finances.
Many RIAs are also fiduciaries, which means they’re held to high standards of care. Furthermore, they’re registered with the Securities and Exchange Commission or their state securities regulators.
What’s the Benefit of Working With an RIA?
One of the most common reasons people say they like working with an RIA is that they develop a personal, attentive and responsive relationship with them. Furthermore, the guidance they offer is customized because no two people are alike, nor do they have the same goals. Their fee structure should be simple and transparent, meaning you never have to wonder if you’re getting charged hidden fees that you will find out about later.
At Family Investment Center, we’ve established ourselves as a fiduciary since day one. Our investment professionals have years of experience and work as a team to serve clients well. Talk to us today and let’s talk about you – your life, your goals and your future. Let us develop strategies to fit your unique situation.
Practical Steps Toward Solid Goals With the Right Investment Advice
Investing isn’t about guessing at stocks and bonds or simply selecting which bonds might have the highest interest rates. To the contrary: managers looking over large portfolios, such as pension plans, university foundations and charitable endowments utilize applied portfolio science in a deliberate way, and it’s investment advice you can use in your own planning.
In a practical sense, these large portfolio advisors are looking more at the forest and less at the trees. You can use this philosophy as you look at your 401(k) or IRA investments. If investing has never appealed to you, it should be mentioned that it can actually be fun. Surely you know some people who enjoy the challenge of it. However, be warned – if you’re getting a thrill out of investing, you might be looking at all the trees and have no eye on the forest.
Your winnings on a hot stock might be a thrill, but how many losses did it take to get there? And did you just break even? Results matter, and these aren’t the results you want. If you’ve made a decision that has a potential swing in your eventual portfolio of $100,000, $50,000 up or $50,000 down, what would you do with the $50,000 extra? Buy a better car? Add a cruise or two to your vacation calendar? Upgrade your housing option?
What if the portfolio suffers the $50,000 down? What will you give up? Vacations? Drive an older or cheaper car? Medical insurance? Prescriptions? Rent? You can’t be focused simply on making money – you have to have a plan for long-term results that will set you up for the future when your career ends. This might require some behavioral changes that put less focus on toys, such as bigger homes and faster cars.
Fortunately, you have measurements all along your investment journey to assist you. Here are some practical solutions you need to consider as you plan your strategy:
- Use a goal-based system for finance and investing. What is the upside and downside of achieving those goals?
- Internalize that reward or penalty for each financial goal. Often, the penalty is far more powerful than the reward.
- Don’t impose artificial schedules on something that can’t be scheduled. Investing works, but the cycles and time required are irregular. The stock market, especially, grows in fits and starts.
- Forget the “get rich quick” stuff. The hot stock tip or lottery ticket are long shots. They aren’t a practical solution for reaching your goals.
- Find a good fiduciary advisor to help. Not next week or next month, or “when I get some money.” Today. You surely fall into one of two categories: you know what you need, and a professional can help you get better, or you don’t know what you need, which is an even stronger case for getting help.
At Family Investment Center, we bring the investment advice that is customized to fit each individual situation. Come talk to us in our commission-free, jargon-free setting and we’ll help you see that “Money is freedom, and freedom is fun.”
Planning for Retirement Later in Life
It’s no secret – many Americans aren’t financially ready for life after a career. If you are 40 or older and unprepared for retirement, what steps can you take to start planning for retirement now?
Take Advantage of “Catch Up” Opportunities
If you are 50 or older, you are allowed to make “catch up” contributions to your retirement accounts. For example, if you have a 401(k), you can contribute an extra $6,000 per year to it. Younger investors are held to the $18,000 annual contribution limit.
If you have an IRA, you’re held to $5,500 annual contribution limit, then when you’re 50 or older, you can put in an extra $1,000 per year. That might not seem like a lot of extra money, but if you make those extra contributions over the 15-year period before you retire (assuming you retire at 65), you will be able to increase your retirement nest egg substantially.
Make Approximations for the Future
Good retirement strategies are based on goals. In order to establish goals, you’ll need to crunch some numbers, which means you have to approximate how much money you’ll need in retirement to cover all your expenses. Keep in mind many people will live ten to 15 years longer than they anticipate.
Once you know how much you will need to live comfortably, you can start adjusting your investment strategy accordingly. This might require some adjustments to the way you are currently living, i.e. making cuts in expenditures so you’ll have more money to put toward investments.
Put the Hammer Down
To use an automotive term for rapidly accelerating, this is exactly what you need to do with your investment accounts if you are 40-plus and haven’t started saving for retirement. You need to do everything you can to max-out your retirement accounts, such as your employer-sponsored plan and IRA.
You may have a lot of ground to cover in a short amount of time. Make cuts where necessary, such as vacations or new cars or buying a new house, and save vigorously.
Adjust Plans as Needed
If planning for retirement has been put on the back burner for you, for whatever reason, it doesn’t mean all is lost. If your original idea of retirement was one of fun and relaxation, you might have to consider working part-time in “retirement.” This income will help cover the shortfalls that your investments won’t cover while still allowing you to live a lifestyle that fits your comfort level.
Also, if your idea of retirement was to begin at age 65, you might consider keeping that full-time job for a few more years. This extends the life of your investments, meaning you won’t dip into them as soon as you had planned, giving you more assurances for covering costs when you do finally hang up your career for good.
At Family Investment Center, we can help you navigate these complex waters. Don’t be intimidated by the process of planning for retirement. Let us help you make crucial decisions now that will help you later.
Here’s a little more food for thought: November 2017 is Millionaire’s Month at Family Investment Center. Why are millionaires wealthy? How do they think? What do they do (or not do) that you can apply to your own life? Is there a secret? Read more on our website or listen to Money is Freedom on SoundCloud or iTunes for a special four-part series.
Take a Different Approach to Investing for Women
Are Americans on the right track with a strategy for adequate retirement savings? A report by MassMutual would put the answer at a resounding “no.” The report found that 72 percent of people overall agreed they aren’t prepared for retirement. But what about women? Is investing for women any different than it is for men? Do women feel they are as unprepared financially for retirement as men do?
The answer is “yes,” as the report found that women are three times more likely to say they can’t save for retirement. Women are also more likely than men to say that financial concerns are a cause of stress in their life, limiting how they function in the world and receive medical care. Not surprisingly, it can also be the source of friction in relationships.
The report did find that women are more likely than men to seek employer-sponsored programs to help them feel more confident about their finances. However, when it comes to Social Security counseling, men are more apt to seek that out than women. That doesn’t mean women are less concerned about their Social Security and talk of cuts to that program, as the report found that only 33 percent of men were concerned compared to 52 percent of women.
What are some steps women can take now toward a financially secure retirement? Here are some keys for starting:
· Workplace Retirement
If your workplace offers a retirement plan, sign up for it. Your contributions could help reduce your income taxes, and it’s often money that you don’t miss because it is directly deposited to the account from your payroll.
· Pursue More Education
You will gain more confidence and conquer reservations or outright fear of investing if you’re more financially literate. Consider talking to an advisor that cuts out financial jargon and explains things simply.
· Avoid Emotions
It’s been said before – emotions and investing don’t mix. Bad decisions are almost always made on a “gut feeling” that is brought on by an emotional outburst.
· Stay the Course
Investing shouldn’t be a short-term strategy. Only people looking to “play the market” think of it that way. The market will rise and fall, sometimes sharply in the short term. Stick to a long-term plan and diversify your portfolio to boost your return potential.
If the process of going to a financial advisor intimidates you, just remember that we work with people in every stage of their investment strategy, from young investors just starting out in their careers to those who are well into their retirement. We work with people who are quite literate in finances and investing and with people whose knowledge goes no further than a checking account.
At Family Investment Center, we can help both men and women with an investment strategy that is personalized for their unique needs. Come in today and let’s chat about your plans for the future. Here’s another note of interest: November 2017 is Millionaire’s Month at Family Investment Center. Why are millionaires rich? How do they think? What do they do (or not do) that you can apply to your own life? Is there a secret? Read more on our website or listen to Money is Freedom on SoundCloud or iTunes for a special four-part series.
3 Things You Need to Hear an Investment Advisor Say
Dan Danford, CEO and founder of Family Investment Center, came to the industry “by accident.” While working in the trust department of a bank, Danford was in charge of pension and profit sharing plans. He found that he was proficient at explaining investing to people that helped them better understand the process.
He parlayed that talent by creating Family Investment Center, bucking the trend in the industry by establishing a fee-only structure of payment. As a fiduciary, Danford and his team are solely focused on the best interests of their clients.
Danford is featured in a video on Investopedia where he explains how the Family Investment Center approach is unique in the industry. He also offers insights into how the team thinks about investing. Read on for a summary of these insights.
1. About Family Investment Center: You get a whole team
“People who walk in our door don’t get assigned to a particular advisor and work with that advisor. Instead, our team helps every single client. Each and every one of us sees all the transactions for all our clients every day. Each and every one of us has access to notes and files. That way, no matter who you are or what your situation is, you aren’t dependent on the whims of one person.”
2. Investing Values: Practical insights
“I favor the ones that have been shown to work. When someone comes to me and they ask about investing, one of the first things I want to know is what their situation is so I can compare them in my mind to people I’ve worked with in the past. Then I can draw upon my experience and ask, ‘What has worked for those people and what is likely to work for these people?’”
3. Advice Most Frequently Given: Be mindful
“What I suggest to people is that they are mindful of what they do financially. If they’ll just give it some thought ahead of time, they’ll make wise buying decisions, and those pay off in the long term.”
For more information about how Family Investment Center works for our clients, contact us today and schedule a visit. November 2017 is Millionaire’s Month at Family Investment Center. Why are millionaires rich? How do they think? What do they do (or not do) that you can apply to your own life? Is there a secret? Read more on our website or listen to Money is Freedom on SoundCloudor iTunes for a special four-part series.
Planning For Retirement Requires Focus on Diversification
Are you a small business owner who has avoided planning for retirement? If so, you’re one of a third of respondents to a survey from Manta that said they do not have a plan in place for their retirement. Among those, 37 percent said they don’t have enough money to save for retirement. But, what’s really happening?
A number of small business owners say they’re not planning for retirement because they simply don’t make enough to open a retirement account. However, there really isn’t such a thing as “too little” to begin saving. The truth is, many small business owners are actually reinvesting in their own company instead of focusing on a retirement account. While this seems at first glance as a responsible action, it really puts the owner at risk.
Almost 20 percent of those surveyed by Manta said they’ve taken what retirement accounts they had and sunk them into their business. Doing this means the business owner is losing money due to taxes, penalties, and tax-deferred potential growth. It’s a risk that shows the owner has really invested in the growth of the business, but it comes at a high cost.
Of the survey’s respondents, 20 percent also said they don’t have retirement accounts because they plan to sell their business before retiring. However, what if the timing isn’t right? What about those business owners who had a long-term plan to retire in 2009? They are likely still working today, trying to recoup what they lost. The fact is, nobody really knows what the market will bring, so your best-laid plans can fall victim to unforeseen circumstances.
As a small business owner, here are a few important steps for you to take toward a solid retirement strategy:
· Invest in a self-employed retirement plan, such as an individual 401(k), a SEP-IRA, or a SIMPLE IRA.
· Create a plan for leaving the company. A succession plan can keep your business afloat in your absence, offering you a stable income.
· Planning for retirement should include setting a tentative retirement date. Evaluate your lifestyle and talk to your investment advisor about how you can make a smooth exit that allows you to live comfortably in retirement.
Planning for retirement isn’t easy, especially when you’re passionate about your business and you want to see it succeed after you leave, or if you want to get what you feel it is worth when it’s time to sell. At Family Investment Center, we can help you navigate all the various decisions that have to be made. Contact us today and let’s begin planning for your retirement.
Get Started With Some Investment Advice From Warren Buffett
Are you confused by all the conflicting advice out there on how to best invest your money? What would an investor who has seen a large amount of success with his investing list as top investment advice? Warren Buffett has been successful with his investment strategies and offers up some basic foundational steps that can be a key part of any investment strategy. Let’s take a look at several of his recent tips:
Keep it Simple
Warren Buffett says he doesn’t look to “jump over seven-foot bars” with his investments. Instead, he seeks out the one-foot bars he can step over. These one-foot bars include non-flashy investments like utilities, insurance and manufacturing, which is something that will always be in demand, thus representing a generally safer and potentially successful investment.
Be Careful With Forecasts
Buffett is known to say that forecasts say more about the forecaster than they say about the future. He’s extremely mindful of trying to guess how markets are going to behave, and doesn’t go into panic mode when the market fluctuates. Instead, investors need to stick to their long-term plans.
Trustworthy investment advisors will tell clients to always think long-term in their investment strategies, especially if they’re putting any assets into the market. Yes, when the economy takes a turn, so too may your investments. However, the market recovers, and so too do your investments. Buffett says you can’t think short-term and that if you’re not willing to own a stock for 10 years, don’t even consider it for 10 minutes.
Don’t Make Impulse Decisions
Buffett is a great student, which means he’s always reading and always thinking. He says the more he does that, the less likely he is to make impulse decisions. Impulse decisions can actually be prompted by something investors read – especially anything that touts a stock as a “sure thing.” Don’t jump on it. Always be reading and thinking.
Don’t Sit Fearfully
The only time you should be fearful of jumping on an investment is when others are feeling greedy. However, a careful and well-planned strategy can provide great results. When an opportunity arises that you’ve had your eye on for some time, take action.
Buying Stocks and Homes Have Similarities
Buffett encourages people to buy stock the way they buy a house. Why? Because, if you understand a stock in the same way you understand a house you plan to live in for decades, you’re on the right path.
At Family Investment Center, we like the words of Buffett because we too share the same values in terms of not being impulsive, having a commitment to attention to detail, looking at investments as long-term strategies and not trying to forecast what the market is going to do. We know every investor is different and requires a different strategy to reach their goals. Contact us today to help you develop your personal investment plan.
The State of the Target-Date Mutual Funds in an Investment Portfolio
The best investment portfolio goals are long-term in nature. However, as you get into the latter part of your career, it makes sense to start rethinking how your investments are diversified.
Changing your investment strategies by shifting assets to safer places as you get older could be a change you need to make. Does this mean all ofyour stock investments need to be shifted as you near retirement? Not necessarily. We know that there are risks related to investing in stocks, but there are also rewards. Generally, when one retires, there’s still a need for at least a portion of stocks, just to keep pace with inflation. So, for many, the changes to investment portfolios near retirement are only slight.
The Target-Date Fund
The advantage of target-date funds is that you can invest in a variety of stocks and bonds that will automatically become more conservative as you age. The closer you get to your retirement date, the more bonds and less stocks you’ll see in the portfolio.
For instance, you can choose a fund that currently invests 55 percent of your assets in stocks and 45 percent into bonds. The bonds will help to ensure that a good portion of your money is safe while the stock investments give your investment portfolio room to grow with the market. As you age, the fund manager will adjust the portfolio more conservatively.
Exchange-traded funds (ETFs) are similar to mutual funds in that each ETF owns shares of numerous stocks or bonds. ETFs give you the opportunity to customize how you make investments in equities and bonds in a way that are more suitable for your specific goals and your style of investing.
Another advantage is that ETFs offer lower expense ratios than typical mutual funds. And similar to individual stocks, they are actively bought and sold from open to close of the market.
While buying shares of individual stocks could be the best fit for you, that will definitely not be the case for everyone. Although many of the dividend-paying stocks have rallied for a number of years, that also means that many share prices are higher now. Ask your investment advisor about stocks that will give you a good mix of income, value and growth potential.
Build a Strategy With a Professional
Taking the DIY approach to your investment portfolio might feel gratifying, but this is too important an issue to treat it like a hobby. Consider asking an investment advisor for help assisting you in adjusting your investments as you get closer to retirement.
At Family Investment Center, we’ve worked with many clients in situations just like yours, and we have strategies that can provide you with confidence. Contact us today and let’s work toward your goals together.
Simple Investment Strategies to Get You Started
Are you a part of the Millennial generation that is being discussed so frequently today? Some of the attributes that have been pinned on you aren’t accurate, nor are they fair, but you’re definitely in a generation that is coming up – fairly new to your career and perhaps struggling to come to terms with investment strategies that will see you through to a fruitful retirement. We have compiled some personal finance tips that can put you on the right path.
1. Your Parents Aren’t Always Right
One common characteristic of Millennials is that they have “helicopter parents.” These are well-intentioned parents who took great interest in every part of their child’s life. They are often thought of as friends for whom you can go to for advice. However, when it comes to helping you develop investment strategies, you have to realize your parents’ situation is entirely different from yours.
There is a good chance that the strategies your parents developed for themselves will not work for you. You shouldn’t have your retirement account invested the same way someone from another generation does. You need to look at what you want to accomplish and align with the best investment strategies for your unique personal situation.
2. Look at Your Finances Often
It can be a source of stress when you’re constantly on a tight budget, but you need to avoid ignoring your finances, as that will make developing a plan more difficult. You’re not always going to like what you see, but at least you have the option to be proactive rather than reactive.
3. Look for Inefficiencies in Your Budget
It’s understandable that as you pay down your student loans and pay all your bills on your base salary, the money you put toward investments may not be a large amount. However, making small cuts to your budget can give you a nice little boost now that could turn into a lot of money later on.
Cable television is one expense that might feel painful to cut out at first, but that extra $100 (or more) per month can do wonders for an investment account. From clothing purchases to eating out, find areas where you can make small changes.
4. Take Advantage of Automatic Contributions
Many employers offer retirement plans with a company match. If your company has this, you’re losing money by not signing up. If your workplace doesn’t offer a plan, consider setting up an IRA and have money directly deposited into it each month.
At Family Investment Center, we’re committed to helping our clients find the right path to financial freedom. Contact us today and let’s discuss where you want your own personal “freedom tour” to take you.
Protect Your Future With a Wealth Management Strategy
We all admire the risk-taking entrepreneurs out there who put so much on the line and reap great rewards in return. However, while entrepreneurs are known for their abilities to creatively build a plan for their startup, they can be lacking in planning their exit strategy for safeguarding their wealth. If you are an entrepreneur and this describes you, the lack of a wealth management strategy will not only affect your own retirement, but the financial good of your family and the generations to follow.
It’s not uncommon for the bulk of an entrepreneur’s portfolio to be heavily invested in his or her own company’s shares. However, if for example, you’ve got 60 percent of your money in your own shares, the remaining 40 percent should be in something with less risk associated with it. This will give you a more diversified portfolio.
Why is it so important for an entrepreneur to take more precautions in a wealth management strategy? Most are supported by investors who could stand to lose their entire investment if something goes awry.
And what about the exit strategy? According to a U.S. Trust survey, roughly 63 percent of business owners have not formulated an exit strategy. They don’t have a plan for whether or not they’ll sell or transfer ownership upon their death or retirement. This is also an important aspect of developing a wealth management strategy because this merger or acquisition process can be quite complex, and a lot rides on the success of this process.
Also, according to a study by Deloitte, only 59 percent of family-owned businesses have a plan in place for an unfortunate event, such as the death or disability of the head of the company. The lack of a plan can lead to a difficult and damaging set of events to follow, and it can sink the company and potentially destroy business and family relationships.
If you head up a company and something should happen to you, you will want your family to be protected. Also, a wealth management plan should establish protections for all your business partners so they have the capital they need to continue on.
Many great and powerful companies have been built on the backs of risk-takers, but when it comes to building and managing a portfolio for wealth management, it’s important to turn to a professional investment advisor who is steeped in the knowledge of what risk means in investments.
At Family Investment Center, we can work with you for a wealth management strategy that considers your unique needs. Contact us today and let’s get started.
Steps You Can Take Now to Get Started With Your Retirement Planning
Many people who are still years away from retirement look forward to that day when they leave the workforce to enjoy the golden years. However, when the retirement date comes close, those thoughts of rest and relaxation are often replaced with trepidation. Why? Because retirement planning has been put on the back burner. What can you do to improve your outlook and develop a plan now?
What will weekly and monthly expenses look like in retirement? This is something you must consider as you begin your retirement planning. Perhaps you have debts today that you know you don’t want to carry forward into retirement. Your plan may include managing a way to enter retirement with reduced debt so you’re not tied down.
There are various calculators, such as DebtBlaster, that allow you to come up with a more solid strategy for retirement expenses. You also need to consider how inflation and the cost of living will differ in terms of where you choose to live in retirement and for healthcare costs.
2. From Where is the Income Derived?
You should develop a complete list of pension, 401(k), IRA, Social Security and other income resources. This will help you gain a better picture of how much you can spend at any given moment. Also, be sure to write out all the contact information, passwords, account numbers, etc., so should you become disabled or pass away, there will be no confusion regarding these accounts.
3. Retirement Goals
Part of planning for retirement is looking at things aside from money. Will you follow a passion or pursue a hobby? Will you be focused on recreation, or will you take this time to continue your education? Obviously, if travel is on the itinerary, you’ll need to budget for that, as frequent travel can get pricey. However, it’s important that your retirement goals will work with the plans of your spouse, family and friends.
4. Finding an Advisor
Planning for retirement can be a process full of complexities. When you partner with an investment advisor, your eyes will be opened to a number of issues that you likely would never have known existed. Look for an advisor with transparent fees and for one that will act as a fiduciary. When you have a fiduciary working for you, they are acting in your best interest – not their own. Unfortunately, there are many investment professionals out there who are driven by the commissions they earn, which means their investment advice isn’t always in clients’ best interest.
At Family Investment Center, we’ve always acted as a fiduciary, which means you can trust that when it comes to your retirement planning, we’ve got your best interests as our primary focus.
Preparing for Retirement With 401(k) Investing
Once you hit the big 5-0, there are some financial advantages that can be beneficial for everyone who hits this milestone, including some tax breaks and perks where your retirement investments, like 401(k) investing, are concerned.
As of 2017, you can contribute $18,000 a year to your 401(k). However, once you hit the age of 50, you can put an extra $6,000 into your 401(k) each year. These are referred to as “catch-up” contributions, which can offer people with less time until retirement to contribute more to their plan.
If you’re turning 50 or have already hit that milestone, it can be beneficial for you to take advantage of that extra $6,000 investment. There are also advantages for business owners who have yet to establish their retirement investments. For example, say a couple in their mid-50s wants to finally get the ball rolling on their retirement accounts. They can open a self-employed 401(k), which is also referred to as an individual or solo 401(k), and sink the full regular contribution plus the “catch-up” $6,000 into this account.
For those who would rather go with an IRA investment, there are some options here as well. While traditional 401(k) contributions are tax-deductible, any withdrawals from the 401(k) are taxed as income. A traditional IRA works similarly, but the maximum annual contribution is $5,500, with an extra $1,000 “catch-up” contribution. With a Roth IRA, however, no deduction may be taken for contributions, but then withdrawals in retirement are not taxable. IRAs can be extremely advantageous for extra savings, especially when used in conjunction with employer-sponsored plans.
According to a recent Forbes article, 50 percent of investors age 50 to 69 took full advantage of catch-up contributions in 2015. For those putting their investments into a Roth IRA, 45 percent did the same.
The rules are different depending on the type of plan to which you’re contributing, so be sure to ask an advisor for the applicable rules. Aging into 50 and beyond can be an exciting and rewarding time. At Family Investment Center, we know a lot about the various ways that age has advantages when it comes to investing. Come in and talk to us today about your investment goals. If you’ve yet to establish a strategy, we’ll discuss the options available to you and get you started on the right path.
Cutting Fees When Investing for Non-Profits Can Lead to a Boost in Profits
Do you have a favorite charity? If so, you want to see their investments do well so your favorite cause can receive the maximum amount of assistance possible … and in turn, so they can do the most good possible. You may not consider this often, but investing for non-profits is an important part of funding .
Here’s some insight from Dan Danford, founder/CEO of Family Investment Center, on how your favorite nonprofits can see a better return on their investments, which will allow them to do more for those they serve.
First, it’s important that a non-profit gets the best returns possible on their investment. That means whoever is managing the investments should aim to choose stocks, bonds, mutual funds, or other investments that seek to balance risk with reward.
As most of us know, nobody can predict exactly what the market is going to do. If there were such a person, they’d be unbelievably wealthy. But it is important for someone managing a non-profit’s funds to understand the balance between risk and reward. And perhaps more importantly, you want them to have the utmost transparency when it comes to fees.
When times are great and the market is booming, a non-profit may not be worried about fees, especially if it’s half of a percent. But what about when the market sours and funding is desperately needed for all the programs the non-profit administers?
When the economy takes a nose-dive and investments are suddenly reduced to one percent returns (or worse), that fee of half of one percent becomes a massive piece of the equation. This may be the time a non-profit finds out about all the extra fees they’ve been paying for years and never knew about. The new fiduciary rule, which went into effect in June of this year, should help stamp out any fine print that left people unaware of these fees.
If a non-profit wants to boost their portfolio returns, they should look for a safe and insured custodian with a figurative allergy to high fees. Find one that will provide verified statements. Also, it could be a good move to shift portions of a portfolio to a low-cost index or institutional-share manager. Finally, if a non-profit is happy with the performance of a current investment advisor, they can simply ask them if they’ll reduce their fees – some will take that cut.
At Family Investment Center, we’ve always operated as a fiduciary, which means we put our clients’ best interests first. Need advice investing for non-profits? Contact us today.
Taking a Fresh Mental Approach to Investing for Retirement
Mental buckets of money. It sounds like an odd idea at first, but when you consider all the investments contained in savings and retirement portfolios, thinking in terms of “buckets of money” can actually help deconstruct a complex situation into something more manageable when strategically investing for retirement.
During our working years, we look forward to that paycheck that comes every two weeks or once a month. We plan around that check; taking into account our rent or mortgage, food, clothes, entertainment and savings. Even if our investment accounts are plentiful, when it comes to retirement, we need to mentally adjust to the fact that the regular check is no longer coming in. Call it “mental accounting.”
Morningstar recently published an article on the subject of mental accounting, where Michael Kitces, director of wealth management for Pinnacle Advisory Group, touched on the fact that there are different ways to sort and separate the different “buckets” of money. It’s essentially the way people categorize their money and how they think about their assets and income sources. Some researchers have narrowed these categories down into three main buckets: current income (paychecks), current assets (money used for current needs), and the future bucket for everything else, including retirement accounts.
What’s interesting, as the article explains, is that as humans we have feelings that often don’t line up with logic, or what is actually happening. Take, for instance, the fact that British researchers found when they looked at people’s happiness, the happiest were the ones with a comfortable amount of money in the first bucket, regardless of what was in the third bucket.
The goal for those people is to have cash on hand rather than savings for the future. Investing for retirement requires a different mindset when it comes to that third bucket. Interestingly, people with plenty of money in their retirement accounts will often stress in retirement because they don’t have that regular paycheck coming in to fill the first bucket. This is why it’s important to do the mental accounting.
Financial advisors will often focus heavily on investing in the retirement bucket, taking much of the importance off the money their clients have in a checking account. However, to appease that need to have a constant influx of cash to the checking account, advisors might recommend an annuity. Interestingly, the source quoted in Morningstar said less than one percent of people actually follow through with this advice.
One of the reasons people don’t adopt the annuity method is because if they do, they don’t really have the opportunity to improve their lifestyle from where it is right now, as it removes a lot of the flexibility of other investment accounts.
At Family Investment Center, we’re experts at helping people understand what they need to reach their goals. Investing for retirement, in all its complexities, is an important topic that deserves the attention of people who make it their life’s work. Contact us today and let’s start some mental accounting that will make you comfortable with your position today and in the future.
How Taxes Can Affect Your Investment Portfolio
There is so much going on in Washington D.C. these days that it’s tough to keep up. However, given the recent movement regarding regulatory reform, it might be a good time to stop following the news surrounding the current administration and look at your investment portfolio to how it might be affected.
The Trump administration is eyeing a three percent or better GDP, which Treasury Secretary Steve Mnuchin said in May is achievable, but only if they make historic reforms to taxes and regulations. He also said he’s got a large group of people working on tax system reform while also making strides to undo the Dodd-Frank Act, which was put in place in 2010 in a response to the financial crisis that led to the Great Recession. It’s controversial and people are taking sides.
Mnuchin also said the administration is working to simplify personal taxes and make business taxes more competitive. The reforms Mnuchin talked about last month at a Senate Banking, Housing and Urban Affairs Committee hearing have some believing that if they are able to make these changes, corporate heavyweights could forge ahead with longer-term planning. Could this ease the uncertainty that causes a volatile stock market? The answer may be a resounding “yes” in the corporate world.
It’s also important to note that in 2015, Congress took the research and development tax credit, which had traditionally included sunsets that were frequently extended, and made it permanent. This means large companies, including those that are publicly traded, can more lay out their planning strategies and product development, which again, could lead to more stable performance on the stock market.
However, there might be a snag in the form of funding gaps for a few reasons. First, there is a move to rebuild infrastructure in the U.S. and keep the military the strongest in the world, which is expensive. At the same time, the aging population requires their entitlement programs, which means there will be a funding gap that must be dealt with. One possible solution is a border adjustment tax, which is being opposed by retailers who get a majority of their goods overseas or across borders.
All of this means that as an investor, you need to consider which companies will benefit from these changes, which will be hurt, and make sure your investment portfolio is set up to weather any storm. An investment advisor will tell you that fear and investing are two things that don’t mix well.
To really stay on top of these reforms, talk to your investment advisor about where your money is and if it should be adjusted to better reflect the positive changes that could result from taxation and reforms.
At Family Investment Center, we make it our duty to follow any change in public policy that impacts our clients’ investment portfolios. We welcome the chance to talk about these changes with our clients and offer strategies that will align with your goals and the current or impending reforms. Schedule an appointment with us today and let’s start planning your financial future.
Don't Fall Behind (as most Americans do) on Retirement Planning
As much as Americans focus on money, it’s disarming to know how few are focused on their financial future. The American College of Financial Services, in its survey of respondents who are in retirement or nearing it, found that close to 75 percent failed their quiz regarding retirement planning.
Americans are living longer, which means that if you stop working at age 65, you’re no longer planning for a ten-year period where you’re not earning an income – it’s likely much longer and you need to carefully plan for the decade-plus of no income other than what’s been put in retirement savings.
Only six in every 100 people were able to “ace” the quiz, implying that they are well-prepared for their retirement years. Almost 66 percent of the people quizzed reported that they had high levels of self-knowledge regarding retirement planning, which means that in actuality, they are unaware of their real financial situation as it relates to retiring comfortably.
As with any survey, differences in demographics were revealed in the retirement survey. For example, around 35 percent of males passed the quiz compared to 17 percent of females. This is particularly disturbing given the fact that women, on average, live longer than their male counterparts, which means their retirement planning acumen needs to be on point.
Another demographic difference showed that those with higher levels of education and wealth were more likely to be prepared for retirement. People with one million dollars or more in assets were 250 percent more likely to pass the test than those with less than one million. Furthermore, only nine percent of those without a college degree passed the quiz.
The caveat here is that people who can pass a financial literacy quiz are better planners and are better prepared to meet the challenges that can occur in retirement. And while it is evident that some demographics fair better than others, it doesn’t have to be a barrier to financial preparedness in retirement. All that is needed is a trusted advisor who can assist you in developing a sound retirement plan, and your ability to stick to that plan.
When you seek out an investment advisor, you should choose a trusted, experienced professional that can offer objective and non-conflicted advice. The best way to avoid conflict is to seek out a fiduciary, because a fiduciary must act in what they believe to be your best interests. Rather than work toward boosting their income by choosing products that give them a commission, many are fee-only advisors, which means they have no reason to offer something to you that doesn’t fit your goals.
At Family Investment Center, we have always operated as fiduciaries. Our goal is to get you to think about your goals for retirement and find ways to make sure you reach those goals. Contact us today and let’s start planning your own freedom tour.
Hint: The Fiduciary Rule is Set to Protect Investors
After a delay by the Department of Labor in calling into action a new fiduciary rule, investors need to know that it is now in effect and could affect the way they plan for retirement.
Investors currently have nearly $8 trillion in IRAs, and the new rule looks to protect that money. This almost did not come through as the new executive administration called for the Department of Labor (DOL) to review regulations and prepare an updated analysis regarding economics and legal areas surrounding this rule, which covers IRAs and 401(k)s. The administration also sought public input regarding new exemptions or changes to the regulatory portion of the rule.
However, as of June 9, 2017, the rule is in effect. So, what does this mean, exactly, for the everyday investor? First and foremost, the rule seeks to protect investors from getting conflicted advice from financial advisors. Brokers and investment advisors are now required to act as fiduciaries, putting their clients’ best interests first.
All financial advisors will be required to comply with the rule’s impartial conduct standard, which should help protect billions of dollars worth of investments. According to a 2015 report from the White House, that’s how much is at risk with conflicted advice from advisors who have something personal to gain from selling various products.
The response from the industry has been everywhere from panic to acceptance. Many firms make a lot of money off their former business model, which involved taking commissions on various products they sold to investors. For example, many have adopted new models that involve mutual funds that exclude various fees.
Does this mean that all investors are no longer going to be subjected to investment advice more motivated by profit for the advisor than for themselves? It does not. Investors need to take a little time and look into who is managing their finances. The first question they should ask of prospective advisors is if they are a fiduciary.
Ask them how they are paid for the work they do for you. Are they taking an hourly fee or just a percentage based on your overall portfolio? You need to make sure they’re not taking a commission, or you could be one of the many who are receiving conflicted advice that costs you money.
At Family Investment Center, we have operated as a fiduciary from day one. Our relationships have always been on solid footing because our clients come first, not commissions. When our clients do well, so do we. Let’s start planning your financial future in our truly commission-free and client-focused environment.
Retiring Early Requires the Right Mix of Investing Strategies and Diversification
Do you dream of an early retirement? If you want to get out of the workforce before the traditionally targeted age of 65, your investing strategies may need to be adjusted. It may seem simple, but a quick reminder can be very beneficial. Here are some important steps to take:
Get Involved Early
It’s an overused saying but it is true: the best time to start saving is yesterday; the second-best time to start getting serious about investing for your future is today. If you want to retire early, you need to start planning as early as possible, which is why Millennials should consider strategies now that will put them in a position to make that early retirement decision in a couple of decades. The sooner you begin saving, the more compounding you’ll have working in your favor later.
If you’re making up for lost time, don’t worry – you’re not alone. Many investors pick up the intensity of their investments in mid-life. It’s important to start where you are and move forward consistently.
Establish Solid Goals
If you’re in your mid-to-late 20s, your vision of the future is likely going to alter by the time you’re in your late 30s. That’s fine, but establish your goals for retirement now so you have a plan to guide your investing strategies.
“Where should I put my money?” It’s an appropriate question, and most investment advisors will point to an IRA and an employer-matching 401(k) as excellent vehicles for early retirement. Talk to your investment advisor about diversifying your investments in a variety of types, as this will give you the best chance at growth, especially when the market is volatile.
Keep an Eye on Taxes
Being tax-efficient in your investing strategies is important for an early retirement. For instance, tax-deferred savings vehicles like 401(k)s and IRAs can help you boost your savings. If your employer offers a match on your 401(k) contributions, you're going to see your savings grow more quickly.
Healthcare Can Get Expensive
This is an area of retirement planning that you may not have thought about – your health. Maybe you haven’t been to a doctor in 15 years and any sickness you’ve had has been managed from home. Unfortunately, you’re likely going to be visiting your family practitioner more often when you hit your golden years, which will increase your cost for healthcare.
Even though you may not have medical problems now, you need to budget for costs related to healthcare because your medical issues can wipe out your savings if you’re not prepared.
At Family Investment Center, we’ve established many investing strategies for our clients who want to retire early. Every situation is different and requires a customized approach, which is why you should come in and talk to us about your retirement goals. We’ll help put you on a path where an early and comfortable retirement may actually be attainable.
The Benefits of Having an Investment Advisor on Your Side
Taking the DIY approach can be a fiscally responsible and perfectly acceptable way of approaching a variety of projects. But when the project is complex and requires a great deal of skill to pull off, it is valuable to bring in a professional. When it comes to retirement planning or building up investments for other things in life, taking the DIY route is risky. Working with an investment advisor can ensure you have all the right information you need for your investment planning.
Dan Danford, a frequent contributor to Investopedia, writes in a new column about the joys of the do-it-yourself process and the realities of the complex investment planning that requires a professional investment advisor. Using the analogy of lawn maintenance, Danford dives into the DIY vs. hiring a professional lawn service approach.
“If you want a lawn to look nice and enhance the value of your home,” Danford said, “you can do-it-yourself or you can hire a lawn service. Either approach can create stunning results, but that’s where the similarities end.”
Danford argues that to take care of your lawn, you must purchase all the necessary tools and know how to use them if you want to see a greener lawn. A mower, irrigation system or hoses, fertilizer, grass seed, organic applications, nutrients, blower, spreader, etc. – these are the tools that will cost you a lot of money, not to mention the man hours you have to put in, to make that lawn lush and green.
Granted, some people really enjoy the process of caring for their lawn. Perhaps they find it meditative or an activity shared by the family. And the results are satisfying, if they’ve done it right. The risk is that if you make a mistake, it could take years for the lawn to recover, just as it would if you make a DIY investment mistake.
When you hire a professional lawn service, it “requires less personal attention,” Danford said. “They just show up when something needs doing and they take care of it. They own and maintain the equipment, provide supplies and hire the required labor.”
The investment business offers similar parallels. A full discretionary investment management service offers many more tiers of options than a DIY investor can gain access to. You can spend time and money on the necessary tools to make an investment plan, and perhaps come up with a solid one, but the money (fees) you put toward an investment advisor who does this full time can offer more promising results.
“Many investors would be far ahead to let professionals do their heavy lifting,” Danford said. “A green thumb – in lawns or money – grows ever greener with quality professional help.
Danford and his team at Family Investment Center have the tools required to assist you in your investments. They will discuss your options with you and assist you in making fact-driven decisions regarding your financial future.
Safeguarding Investors Should be Mandatory
The Department of Labor (DOL) is taking a close look at the fiduciary rule as opposing sides are heating up their banter. On one side, people argue that the rule has prompted many frivolous lawsuits against brokers whose clients believe they breached their fiduciary duty. On the other, proponents say the rule protects investors from conflicted investment advice.
Will the increase in litigation cause the cost of advice to go up? That’s something the DOL will be looking at. Also, regulators want to look into any abuse upon sponsors of defined contribution plans.
While the rule is focused on making sure those who want to offer conflicted advice have a disincentive to do so, President Trump signed an executive order to review and perhaps rescind the fiduciary rule, which went into effect in April.
Before the rule went into effect, a financial advisor who is also a registered broker was only supposed to recommend investments that were “roughly suitable” for their clients. This means that if one fund would offer that advisor a better commission, they were more inclined to offer it to you, regardless of how it would fit your investment planning.
The rule took several years to develop, but it has some flaws, including the fact that advisors have found some ways to work around the rule. Regardless of weak areas, it’s estimated that without the rule, investors were losing close to $17 billion a year due to conflicted advice.
Some in the industry are saying the DOL will find that litigation has increased, which means it could be rescinded. Others, however, believe the DOL will recommend adjustments to the rule, not a full rescinding.
Dan Danford, founder/CEO of Family Investment Center, said as a fiduciary, he and his staff want to put all the information out that they can so their investors are safeguarded. For instance, over a 30-year period, investors seeking advice that turns out to be conflicted see a 12 percent loss in potential growth. That’s not something a fiduciary will find acceptable. Founding the Family Investment Center in 1989, Danford opened his doors as a fiduciary, which was rare at that time.
The best choice, regardless of what the DOL does or doesn’t do with the fiduciary rule, is to seek out a fee-only advisor. These are licensed professionals who don’t take commissions. Furthermore and perhaps more importantly, they’re only looking out for the best interests of their clients.
When you come to us at Family Investment Center, we’ll not only act in your best interests, we’ll walk you through everything you need to know about your specific investment planning strategy.
How Baseball Can Help You Know How to Approach Your Investment Portfolio
Warren Buffet, the “Oracle of Omaha,” has a reputation for being a great admirer of America’s pastime – baseball. So when he gives out investment advice, he likes to use a few baseball analogies. As baseball season is in full “swing,” take a look at some of these baseball parallels as they serve as a reminder of how to approach your investment portfolio.
“What’s nice about investing is that you don’t have to swing at pitches,” says Buffet. This is a good rule to follow, as many pitches offered by those who are selling products might often come with too much risk attached, and little to no insight into those risks. Buffet advises that investors only swing at the pitches that are right for them.
Buffet also says that in baseball, when one wants to score runs, they have to watch the playing field, not the scoreboard. He is a consummate student of what’s going on around him and only jumps at investments that have a long history of stable earnings. Investors who are planning their strategy would be wise to do the same – think long term and for the future, not of long shots meant to achieve short-term gains.
The Financial Post also jumped on the baseball analogy bandwagon, offering up the idea that a really strong baseball team will be proficient in pitching and batting, and they’ll have speed, excellent defense and a winning culture in the clubhouse. However, rarely are all of these components firing at the same time.
The same is true of a strong investment portfolio – you’ll have your money spread across many different products, from stocks to bonds and other investments. They all have different levels of risk, but while one is performing poorly, others may be bolstering the bottom line.
The New York Yankees have been notorious for paying big money for players who are no longer worth the large contract? The same could be said of investments people make on products that were once starlets, but have their good days behind them. The best scenario is to acquire them while they are on the rise but still at a low price.
Smart baseball managers won’t hold on to an under-performing player just because they overpaid for him. Similarly, smart investors won’t hold on to an investment just because they overpaid for it. Eat the mistake, learn from it and move on so your investment portfolio has a chance to grow.
Playing baseball at a high altitude is different from playing ball at sea level. The air is thin, which means batters can really let it fly. That’s why Denver’s team looks for batters who can consistently get the ball in the air. They also look for pitchers who can keep the ball low so as not to allow their competition to hit fly balls. They plan for their environment, which is what investors should do.
Every environment is different, which is why every investment portfolio has to account for these differences. When you talk to your investment advisor, they will look at your individual goals, your financial situation, and help you make the right choices to help you reach your goals.
We’re baseball fans at Family Investment Center, but we’re also huge advocates for smart investing. Let us assist you in building a strong investment portfolio for you. Contact us today and let’s talk about how we can improve your situation.
How Establishing Goals Can Improve Your Retirement Planning Strategies
Retirement planning should really be about planning with a purpose in mind. Many people avoid this crucial planning stage because the numbers confuse them and the whole process may seem daunting. However, money is more than a number; when you attach a goal to it, the planning process become less confusing.
Rather than thinking about dollars, try thinking about what you want your wealth to do for you in retirement. And remember – your goals will probably change, even in your golden years, which means you have to be flexible in your planning.
In fact, a recent Kiplinger article titled “To Make a Financial Plan, You Need a Financial Purpose” reminds readers of key questions to ask now, and to revisit often. As you embark on retirement planning goals, keep the following questions in mind:
· Which relationships are important enough that you will be willing to provide (financially) for them?
· Do you have health concerns?
· What lifestyle do you envision in retirement?
· What is your idea of a happy and healthy retirement?
· What hobbies would you like to pursue in retirement?
Answering these questions will help you round out more concrete ideas of what your future will look like and also give you an idea of how much money you will need in retirement. Here are some other questions to explore:
What will you do in retirement? Everyone has different ideas about that, which is why every plan has to be just as unique. For instance, do you plan to continue working part time into your 70s? If the answer is yes, your planning will differ from the person who plans to never work again after the day they retire. Do you want to travel extensively or just stay local and enjoy your family and friends? Again, the traveler will have to make extra room in their budget for the expense of traveling.
When will you quit your career? Do you have a set date that you’ve been looking forward to for years, or are you going to step down when you have saved enough money to retire and have enough for the goals you’ve set for yourself during those years?
Where you plan to retire will also have an impact in how you plan your investments. Are you planning to downsize your current living situation or upgrade to something less modest? Maybe you want to move to a different city in a different state or live with nearby family. The way you answer the question of “where” will also change how you approach your investments.
Getting an objective viewpoint from a qualified professional can go a long way in making the decisions that will put you on the road to reaching your goals. An investment advisor has the expertise to help you invest money in a way that is as unique as your goals. However, be sure to seek out the assistance of a fiduciary. When your investment advisor operates as a fiduciary, they will work for your best interests, not theirs. Instead of pushing products that pay them a commission, a fiduciary will only make recommendations that match your goals.
At Family Investment Center, we’ve looked out for our clients’ best interests since day one. We’ll listen to your plans for retirement and help you choose investments that provide you with confidence toward your future.
Those Working With an Investment Advisor Have a Better Understanding of Financial Terms and Concepts
When it comes to working with an investment advisor, many Americans say that they feel they don’t need to work with an advisor. Getting to the reasons behind this decision, respondents in a recent survey from Plan Adviser were asked why they preferred not to work with an investment advisor and 44 percent responded that their assets didn’t warrant any planning.
Among the respondents that reported not having enough assets to bother with an investment advisor, 28 percent had an income of at least $75,000 a year. These individuals could see many benefits by working with an advisor and planning for their financial future.
Overall, those Americans that reported working with an investment advisor were more comfortable with their understanding of financial terms, including “long-term care insurance”, “Roth IRAs,” and “annuities.” Among those respondents that were working with an investment advisor, there was a high rate of confidence that they understood these terms, at a rate of 41 percent, 69 percent and 49 percent, respectively.
For those not working with an investment advisor, there was a significantly lower level of comfort with financial terms. Using those same terms, only 31 percent felt confident they understood the term “long-term care insurance,” 42 percent understood “Roth IRAs” and 28 percent understood “annuities.”
Of those who did not have an investment advisor, the reasons were varied. As noted above, many didn’t feel that they had the kinds of assets that warrant seeking out a professional opinion. Still others said they preferred to manage their own finances (38 percent) or felt that an investment advisor would cost too much (36 percent). Some don’t know what kind of professional to hire (14 percent) or don’t understand the value of engaging these types of services (10 percent).
Yet in addition to the value of having an investment advisor help you plan for your future and work with you in creating a strategic investment plan, working with an investment advisor positively affects other aspects of your financial life outside of your investment or retirement planning. For instance, those that hired an investment advisor were also more likely to have an emergency fund and a retirement plan. Seventy-seven percent of those working with an investment advisor had an emergency fund or a retirement plan, versus 46 percent of those that had never worked with an investment advisor.
If you’re looking for ways to take some of the guesswork and the emotions out of your investment future, make an appointment with an advisor at Family Investment Center. We can take a look at your current financial picture and help you develop a plan in a client-first, commission-free setting.
401(k) Investing is a Valuable Tool, Yet Underutilized
One of the most widely overlooked investment vehicles today is the 401(k). Surprisingly, two-thirds of all Americans don’t contribute at all in a 401(k) or other retirement account available through their workplace, and that number could shift even more if Congress stops auto-enrollment. 401(k) investing is a remarkable tool, yet often overlooked as an important part of planning for retirement.
According to tax records gathered during the most recent U.S. census, only 14 percent of employers offer a company-sponsored 401(k) plan. However, the majority of Americans work for larger companies which do offer these plans. Ben Steverman covers this topic in a Bloomberg article this year, saying bigger companies are the most likely candidates for offering a 401(k) plan and around 79 percent of Americans work for large companies.
“Four out of five workers are employed by companies that offer a 401(k) or similar plan, but many workers aren’t using them - either because they’re not eligible or because they aren’t signing up,” Steverman says.
These workplace plans create an environment where employees can build up their investments on a tax-advantaged basis. Unfortunately, too many Americans feel that it’s not worth the effort to get involved, probably because in order to get the most out of the plan, the money is tied up for a span of time and a penalty is assessed if the employee withdraws from it early.
Another possible reason for why so many workers aren’t getting involved in 401(k) investing is because they’re not willing to send incremental dollars to a long-term retirement plan, especially those who earn low wages.
People who change jobs often or who work part-time are also less likely to be eligible to participate in a workplace retirement plan. Many companies require employees to work for months or a year before they become eligible to participate in a plan, thus complicating the issue further.
Making investment decisions is difficult for many people. They’re intimidated by the choices that have to be made, so they don’t make any choices. Also, the cost of many plans can be high, which has been widely scrutinized in the media, drawing even more negative feelings out of workers, further complicating their savings plans.
Many companies that offer a 401(k) plan will automatically enroll their workers, as it costs the worker nothing. However, Wall Street believes this practice creates an unfair advantage against the products they sell. Unfortunately, Wall Street has the ear of many lawmakers in the Capitol, which is why there is a real threat that auto-enrollment could be wiped out.
At Family Investment Center, we can assist you in overcoming any fear, intimidation, or trepidation about investing your hard-earned money. Contact us today and let’s discuss your financial goals and how to accomplish them.
Investment Advice for Making the Most of Your Tax Refund
You’ve likely already received a nice refund on your tax return. If you’re like most people, your wheels have started turning. Do you add a few days onto your summer vacation or finally splurge on that new furniture you’ve been eyeing? Few want to consider investment advice that starts with not spending your entire refund, but you may find that you’re happier in the long run investing into a solid retirement fund.
There’s more than one way to invest, though, and it is important to carefully think about your options before you plan your strategy for handling a small windfall that comes in the form of a tax refund.
Why would you want to think about investing some of your refund, rather than spending it all on entertainment, luxury items or home improvement? The average refund enjoyed by Americans is $3,000, an amount that may seem perfect for a good, guilt-free splurge. It’s sizable, but not life-changing, so it may be easy to justify buying yourself a treat.
However, with the average rate of return that the stock market delivers, you could potentially turn $3,000 into $50,000 in 30 years because investment growth and compounding interest.
You could choose from an index, like the S&P 500 or the Dow, but you can also invest in a mix of blue-chip stocks and enjoy solid returns over the course of your investment time. What matters most, of course, is that you don’t go out and spend all of your refund, but invest a portion instead.
At Family Investment Center, Dan Danford, CEO, has a three-part strategy for making the most of your tax refund, or any other small fortune that comes your way. Take a look at these steps for what could be a more satisfying approach to tax refunds:
Blow it: Whether it’s a weekend trip or a great pair of shoes, you should get to spend part of your refund on something that improves your quality of life. Making memories and enjoying a treat are great ways to invest in your satisfaction. Danford believes that many financial plans fail simply because they fail to include some joy and some fun into the mix.
Mow it: Part of your refund should go to maintenance that protects your investments, such as your home or your car. Maybe you have a leaky roof or a fence that needs repaired, or maybe you need to upgrade to a vehicle that is more reliable. These are also important ways to spend your money and are a good option for a portion of your refund.
Grow it: Take part of your refund and invest it in your retirement savings or a college fund. Even a small amount invested will multiply over time and can yield impressive growth. Don’t limit your investments to traditional accounts, though. Danford suggests that taxpayers receiving a refund also consider investments that could further their career, like a college class, or experiences that might widen their horizons.
A balanced approach to investing is always best, and we believe that you’ll have the most satisfying results if you get to enjoy spending some of your money and enjoy watching some of it multiply over time. Make an appointment with us today at Family Investment Center. We welcome you to enjoy jargon-free but experience-based conversation around our table.
Avoid Retirement Planning Missteps and Plan Your Exclusive Freedom Tour
If you’re intimidated by retirement planning, you share a similarity with a great many Americans. However, this intimidation leads to the first big mistake – not planning at all.
“I’ll get to my planning for retirement later,” many people say to themselves. You may think you’ve got decades ahead of you before you have to start worrying about it. Don’t fall victim to this thinking.
Another mistake many people make in retirement planning is that they have a faulty vision of what they’ll be able to spend in retirement. A survey conducted by Fidelity Investments reveals that more than 10 percent of Baby Boomers think they can withdraw 10 to 12 percent of their income on an annual basis. Following that line of thinking can drain a retirement account within a decade.
Everyone’s vision of retirement is unique, as are the strategies one must use to plan for their retirement. A common denominator in all scenarios is that an accurate forecast for retirement relies on how old you are today, how much money you’re saving and how you’re investing it.
This means that if two people have the same vision of living on a golf course in Arizona during retirement, they could have vastly different prospects for reaching that goal. If one of them has a few thousand dollars in the bank while the other has hundreds of thousands, the retirement planning is going to be just as disparate.
To get into the right mindset for reasonable retirement expectations, you have to stop thinking about retirement as a single event; it’s actually a long, extensive event. There are 70,000 people in America right now who have reached the age of 100. Not many of them will tell you they thought they’d reach that milestone.
Think of your retirement as a freedom tour, a series of events that you are free to choose to do during your years of retirement. Here are a few tips for a successful retirement freedom tour:
· Think about your retirement in terms of a theme or idea
· It takes expertise to plan this theme, which some might consider a “tour”
· Planning for the tour begins months before the excursion takes off
· All stops along the way are planned
· There will be emergency stops, so have money set aside for them (think medical emergencies)
· Working together with family and investment advisors provides for a smoother tour
The snapshot of your tour is going to differ from others’ snapshots, which means you can’t rely on someone else’s investment strategy to make yours become a reality. Work with an investment advisor to make sure you’re not making mistakes that could keep you from enjoying retirement.
At Family Investment Center, we love assisting our clients in retirement planning. In fact, we form relationships that have followed through to the next generation of our clients’ families. Let us help you plan your tour.
Solid Strategies for Building Wealth ... Avoid These Mental Pitfalls
Careful and diligent planning over time is a reliable strategy for building wealth, but did you know that your mind may be working against you and your long-term plans? There are a number of mistakes that people make in their financial decisions that can throw off their wealth strategies. Here’s a quick guide to ways that your mind can trick you into making poor financial decisions:
Anchoring: Don’t fall into the trap of relying too much on the first piece of information you learn about something. For instance, pretend you are interested in hiring a housecleaning service and you begin to call around to check rates. The first company you call quotes you $75 per hour. The second company gives you a rate of $90 per hour.
You may dismiss the second company because they are charging $15 more per hour and go with the first company instead. In fact, though, the going rate in your community is $60 per hour, but you overpaid because of the anchoring fallacy.
How do you get past anchoring if you don’t have endless hours to call cleaning companies and compare every rate out there? Some experts recommend that, instead of trying to get a true average rate, you estimate how many hours you’d have to work to cover the cost of a service or product, or what else you will have to give up to purchase it. This might help you get a truer sense of your cost.
One particularly strong anchor in investing is a stock’s price. Investors tend to keep their purchase price at the forefront when making trading decisions. For example, if you buy a stock at $10 per share and it’s currently trading at $8 per share, you may hesitate selling the stock because it’s lower than your initial purchase price. But what if the stock was overvalued when you bought it? Anchoring is often responsible for investors selling winners too soon or holding losers for too long.
Availability Heuristic: In this financial misstep, you pay more attention to more publicized events over those that are most likely to actually happen. For instance, you may have an outsized anticipation of winning the lottery because instances of lottery winners shown on the news stand out in your mind.
This concept carries over to other areas in life, too. You may have sweated a little on a trans-Atlantic flight, but probably not on your drive to the grocery store. Despite the fact that traffic accidents are far more likely than a plane crash, you brain latches on to news stories you’ve seen about flights that ended in crisis.
Likewise, an investor tends to overreact to the “talking heads” on the radio or television who warn of doom and gloom in the markets.
Hedonic Adaptation: When you purchase something new, you often feel a rush of satisfaction and excitement. In some cases, such as with a new car or a dream home, you may feel unable to contain yourself as you bask in the glow of acquisition. Even a new pair of shoes or a weekend trip can make you feel like you could never ask for anything more.
The trouble is, you always do, and it’s keeping you from building wealth. The hedonic adaptation principle says that no acquisition is capable of satisfying you forever. What’s more, you become less willing to go back to your previous lifestyle, even though your new purchase isn’t satisfying you like it did when it was new.
Overconfidence: Overestimating your own ability, at choosing investments, for example, can be detrimental to your financial strategy. If you don’t have the time, expertise and experience to handle an investment portfolio, consider hiring an investment advisor to help.
Hindsight: We’ve all heard it: “hindsight is 20/20.” When analyzing past events, it’s easy to hinge on information that hadn’t been available at the time, believing that the event was predictable (and perhaps preventable) when it really wasn’t. For example, after a stock market crash, you suddenly think of many reasons why youshould have adjusted your portfolio more conservatively, when in reality, there was no way of knowing it was coming. (Interestingly, hindsight can lead to overconfidence, as well.)
Building wealth over time takes a lot of discipline, but it also takes an awareness of the tricks your mind might play on you as you make financial decisions. No matter how solid your wealth strategies are, be careful that you aren’t derailing your goals by buying into these fallacies.
To learn more practical ways to think about building wealth, make an appointment to talk with the advisors at Family Investment Center. Always commission-free and client-focused, we help you develop strategies that are clear-minded and designed to help you plan for a solid future.
Dan Danford Explains 5 Surprising Investing Myths in “Money is Freedom” Podcast Episode
Much of our financial knowledge comes from trusted sources – friends, coworkers, colleagues, family members. But a lot of this information requires a serious update. In fact, it may be holding you back from the success you want.
Today, ask yourself this: Are you believing the five common myths (mistakes) about DIY money management? These mistakes include relying on the “special knowledge trap,” “soapbox time” and “vacuum investing.”
Listen to this brief, jargon-free and value-packed podcast today. It might change your thoughts on DIY investing, and, more importantly, it might change your future.
Listen to the “DIY Mistake” here on Sound Cloud:
Listen to Dan Danford on “Money is Freedom” on iTunes.
Recent Numbers on Investing for Women Show Increasing “Clout”
The numbers of male clients to female clients at investment firms began to even out during 2016, says a recent CNBC article. Why? Because the number of women who have reached millionaire status is also climbing. In fact, it’s believed that in the next 13 to 15 years, as much as 66 percent of wealth in the U.S. will be owned by women. How do these numbers affect investing for women?
According to the article titled “For Women, Retirement Can Be a Serious Challenge,” wealthy women are emerging now in stronger numbers. Approximately 45 percent of millionaires in the U.S. are female, says the article. During the next 14 to 15 years, females will be responsible for at least 66 percent of the country’s wealth. As a reflection of these numbers, it’s no surprise that women are currently the chief money makers in nearly half of U.S. households.
What’s the Challenge?
The numbers are encouraging, yet unique challenges remain for women in investing. As of 2015, women earned roughly 80 percent of what men were paid. This means when retirement comes around, women will draw less in Social Security benefits.
Many women choose to shift focus away from their careers during top-earning years to turn more attention to raising children, meaning less money goes into their retirement accounts. Some work part-time for a season to raise their families, which often makes them ineligible for employer-sponsored retirement programs.
In addition, with 63 million women earning wages today, only 45 percent are enrolled in retirement savings accounts. Of those that are enrolled, they average 50 percent less in their accounts than their male counterparts.
Another challenge, say experts, is that women who reach the age of 65 will live, on average, another 20.5 years. This means many of them will need more money in their retirement accounts than anticipated to live comfortably. Ultimately, too many women may be underfunded in their retirement accounts.
Addressing the Challenges
Investments can be a challenge, even for those who consider studying financial and investment news an enjoyable hobby. That’s why bringing an advisor into the plan can create a number of advantages.
An advisor can put together a plan considering all your information, including your insurance policies, your tax returns and banking records, information about mortgages and loans and all the investment records on your retirement accounts. Your advisor will help you create a strategy, which includes prioritizing expenses in categories such as wants and needs. This will help you devise a savings plan that matches your goals for retirement.
If debt is a concern, an advisor can assist you here as well. You might be surprised to learn that some debt can actually be used as leverage to increase your success. Contrary to some popular thought, not all debt is a hindrance to reaching your goals.
One of the most important things a good investment advisor will do is help you establish your goals and an investment plan that will help you reach those goals – despite media headlines, emotions and market shifts.
A final note: When you look for an advisor, find one that operates as a fiduciary. When you partner with a fiduciary, you have an advisor that puts your interests first. Also, a “fee-only” advisor will never take a commission on an investment they recommend. This is how Family Investment Center has operated from the start. Contact us today and find out more about what makes us so unique.
Do You Know What to Look for in Portfolio Management Fees?
The Beatles said in their hit song, “Money,” that the “best things in life are free,” and they definitely have a point. However, when it comes to managing your money, paying fees to a portfolio management professional can help that money grow, and it’s certainly worth it.
However, due to industry complexities and varying degrees of customer “service,” investment management fees can often be obscure. This can lead to mistrust and poor decisions on behalf of the investors. While the most trustworthy investment advisors use fee structures that are completely transparent, following the tips in a “fee triangle” can assist you in understanding exactly what you’re paying for.
Don't be the victim of unfair or elevated pricing schemes. You can avoid this by shining the light in the right places.
The first layer of fees is often tied to local investment management fees. This is usually a percentage of the portfolio size, AKA assets under management or AUM. Your investment advisor, broker, bank, or trust company or department will charge this first layer of fees.
Portfolio manager fees are the second layer, and although they’re the most common, they’re often less obvious. These are fees that the underlying managers of the mutual funds, hedge funds, exchange traded funds, unit trusts, REITs and other managed products charge to manage the fund. It’s how the manager of the underlying investment is paid. Although it’s difficult to rid your portfolio of these altogether (unless you buy only individual stocks), your advisor should aim to find investments that minimize your expenses while maximizing your investment potential.
Transaction fees are the most insidious of all these fees, which are often hidden from you in trades. For instance, if you buy a thousand shares of stock, a trade fee or commission may be paid on that trade, which should be reported on a trade confirmation. However, you may not see it if your custodian reports the trade at “net” prices. Even scarier is that there is often a huge disparity among the level of transaction fees that are charged to clients.
Not all investment portfolios will include all three fees. Some might only have one or two. A stockbroker might have a recommendation for you, and if you follow through on that, they will take their payment through a commission. If a mutual fund is recommended, there could be a sales commission involved, as well as ongoing portfolio manager fees, which means you could be getting hit with all three layers of fees.
Remember - it’s the total fees that matter to performance, not the particular fee scheme. Investment performance should be tied to broad market averages, not individual stocks and bonds. There are too many instances out there today where investors are getting hammered by layered fees, most often in the hidden fees.
At Family Investment Center, we remain totally transparent about our fee structure and communicate it clearly. We never take a commission – the only way we get paid is through a percentage of assets under management. That way, there’s a direct incentive for us to keep clients’ expenses low and their balances growing over time. We follow core investment principles and practices that go above and beyond the definition of a fiduciary. Contact us today and let’s discuss how we approach portfolio management differently.
Why Fiduciaries are Looking Out for Your Investments … and Your Future
Money. It’s a lot of things, but most importantly, it’s a tool. When it comes to investments, money is a tool that helps people reach their goals. Maybe that goal is to have freedom in retirement, or to go to school, or to travel. Perhaps money is the tool that assists a family legacy. Regardless of the goal, making smart investment decisions can leverage your tools and make those goals a reality.
The investment process can be made difficult by the massive volume of information available today through sources that include television, books, magazines and the Internet. Sorting through all of it can lead to confusion andpoor decision making that can have a negative impact on investments and end goals, which is why it truly pays to have an expert on your side in the form of a fiduciary.
A good investment advisor will explain these complexities in layers, presenting the easiest-to-absorb information first. Some investors are more comfortable taking a hands-off approach and letting their advisor take control. Others have a more vested interest and want to drill down on specifics, which often require a custom dashboard that simplifies the important and complex points.
Dan Danford, CEO of Family Investment Center, is often quoted as saying his firm can provide as much depth as a client wants.
“I’m glad to answer questions and provide detail,” Danford said. “However, just because we follow all the details doesn’t mean clients need or want all that information to get to their goals. We tailor our conversations toward each individual’s preferences. A fiduciary can follow a client’s path through life; looking out for their best interests and helping them achieve their goals along the way.”
For an investment advisor operating as a fiduciary, these end goals might include establishing a fund for a child’s college account, for example. Ultimately, the child graduates from college utilizing that fund, and go on to establish a career and perhaps even begins to save for their own child’s college fund.
Danford says investment advisors feel a special kind of attachment when their client reaches their goals. The relationship that a good investment advisory team forms with a client and their family can span for years – and is often marked by life events and milestones along the journey.
“There is a wonderful sense of friendship and camaraderie among our team and the clients we help,” he says. “In that regard, our clients’ stories, their phone calls, or visits to our office remind us that we are creating brighter futures for families each day.”
Additionally, Danford seeks to remind investors that fiduciaries offer their services based on fees only - not commissions. This allows them to truly focus on the outcomes of the client’s portfolio, rather than their own benefit. This is especially important today when pending national industry changes mean many firms will say they are client-focused - but may not have true experience in this area. (Note: A 2015 report from the White House and Department of Labor indicates investors lose roughly $17 billion a year due to brokers offering conflicted advice. Read more about the report here.)
At Family Investment Center, we have always operated as a fiduciary and always in a commission-free, jargon-free and client-focused setting. Schedule a meeting with us today.
Focusing on Investment Strategies
Feel like it’s too late to start on your investment future? Think again. There’s no hard and fast rule set on exactly when to start or build up your investment strategies. Although getting an earlier start reaps better results over the long term, it’s not too late to start.
Do you need to move past a feeling of intimidation? Compare it to this analogy: do you need to know how to build a car in order to drive it? To combat intimidation, remember there is nothing wrong with taking interest in how investments work, but you can leave the expertise to your investment advisor, a person who has the experience and knowledge to help you develop a goal-focused and personalized investment strategy.
Smart investment strategies are those that work for you personally, not for your friends, family, and associates. Unfortunately, too many investors get caught up in the advice they get from these individuals, all of whom are well meaning, but want to pass off investment advice that worked for them. It’s okay to listen and learn, but don’t be swayed by strategies meant for a person in a completely different situation.
Many decisions are based on emotion, but investment decisions based on emotion can be financially detrimental. Additionally, when you bring other peoples’ emotions into the equation, it quickly can turn into a poor decision for your financial future. Reacting to these heightened emotional situations usually results in actions that can negatively affect your finances. Instead, consider maintaining a calm, “big-picture” focus.
According to Dan Danford, CEO of Family Investment Center, there are some rules to follow regarding investment strategies that will help you fight drama and stick to a long-term plan (of course, these can vary person-to-person, so be sure to speak with an advisor regarding specifics):
· Don’t quickly respond financially to political or economic news
· Use payroll deductions for savings and retirement accounts
· Use mutual funds or exchange-traded funds (ETFs)
· Gauge performance at five-year (or longer) intervals
· Benchmark at broad market averages
· Performance only matters in reference to similar investments
· Increase your savings amount every year
In conclusion, Danford said one of the biggest flaws he sees with do-it-yourself investing is that people don’t set aside enough time for personal finance issues.
“Reading The Wall Street Journal once a week or visiting for five minutes on the phone with your broker isn’t enough,” he says. “If you want to do it right, dedicate one full evening a week or a few hours each weekend. If you can’t do that, then you need professional help.”
Professional advice is good idea for any investment strategy. Find a good fiduciary advisor, like those at Family Investment Center, who can listen to your ideas and concerns and help you move toward a clear plan in a commission-free environment. (In fact, this is our sole focus, every day.) Come find out why we’re a little bit different when it comes to investments … and why our clients like it that way.
Investment Advice for the Middle Class
If you are like most middle class investors, it may seem as if there are a million things that separate you from millionaires. In reality, the way the middle class and the wealthy handle investments can be quite similar; investment advice can be founded on the same principles – and the same misperceptions.
One misperception about wealthy investors is that they are geniuses when it comes to the stock market. Some investors believe they “play” the market every day and take great risks, but enjoy massive rewards. Typically, this isn’t true on many levels. Most experts agree, not many successful investors “play” the stock market. Instead, they focus on consistency over time and planned risk. Additionally, less than one percent of millionaires make daily trades on the market. Instead, they’re likely doing what you might consider for your own investments – thinking long-term and owning a variety of investments for the purpose of diversification.
In fact, the heart of wealth management science, according to Dan Danford, CEO of Family Investment Center, “is the idea of a thoughtful long-term diversification. This scientific basis for portfolio theory won a 1990 Nobel Prize in Economics.” Danford explains that, in essence, an investor’s risk is reduced and performance of investments is enhanced when investors own a wide variety of investments.
If you’re getting investment advice from friends, family, or colleagues telling you that you should put your money in government bonds and bank deposits, this may not align with the strategies of professionals who work with both the wealthy and the middle class. Putting your money in these “safe” places offers low interest rates, but if you consider inflation and taxes, your investment there is nothing more than a shelter where compound interest doesn’t stand a chance.
Wealthy investors seem to understand the difference between price and value. Dr. Tom Stanley’s book titled The Millionaire Mind brings up an issue that many investors fall victim to: they don’t make enough distinctions between price and value. Millionaires tend to look at investment products through the lens of a long-term situation. For instance, Stanley offers up the analogy that they’re purchasing their furniture and shoes based on the lifetime cost of ownership. Are they buying better quality products? Yes. But they last longer than the cheap stuff. When you put yourself in that mindset for your investments, you’re on the right path.
Finally, if you’re a DIYer when it comes to your investments, rethink what your efforts are actually getting you. You might spend hours studying various investments, shopping around to find something that is only marginally better than the previous product you researched. Let an investment advisor who has experience working with a variety of investments help guide you with your investing strategy.
At Family Investment Center, we believe in practical, jargon-free and client-focused service – and always within a commission-free environment. Contact us today to learn more.
How Will 401(k) Investing Change in the New Year?
The 401(k) plan is among the strongest investment tools for many working Americans, especially those whose employer does not offer a pension plan, but will match contributions (up to a specific percent) to the company-sponsored 401(k). When you invest in a 401(k), which utilizes the stock market and other products, you are investing for your future. It’s important to stay informed of the rules that govern your 401(k) investing as they change each year.
The IRS limits your 401(k) contribution and those limits are subject to change annually. The company you work for also limits how much they match on the amount you contribute. The current IRS limit on employee elective deferrals is $18,000. This will continue into 2017, but keep your eyes on 2018 as that deferral amount could go up.
For those of you who are 50 or over, you can make what the IRS refers to as “catch-up” contributions, which allow you to put an extra $6,000 a year into your traditional and safe harbor 401(k) investing plans, or $3,000 extra into your SIMPLE 401(k) plan. When the IRS makes changes to these catch-up contribution limits, it’s generally tied to a cost-of-living adjustment.
Another change impacting a number of people relates to 2017 IRA income limits. Employees who have a 401(k) account through their work can make tax-deductible contributions to a traditional IRA. For example, employees earning up to $62,000 a year are allowed to deduct from income tax IRA contributions of up to $5,500. Unfortunately, if you earn between $62,000 and $72,000 (in 2017), that phases out.
Workers making less than $118,000 can make Roth IRA contributions in 2017, which allows for tax-free withdrawals in retirement. Roth contribution limits phase out for those making $118,000 to $133,000 (in 2017).
It can be challenging to keep tabs on all the rules, regulations, perks, and privileges available to you in your retirement plan investing. This is why it is important to include a professional advisor to keep you informed on the decisions that impact your investments. At Family Investment Center, we’re ready to assist you in these important decisions and more. Contact us today and see why our commission-free environment remains the investment “home” of so many families and individuals.
Survey Says Few Small Business Owners are Planning Adequately
Small business owners are seemingly tireless entrepreneurs when it comes to building and maintaining a business, but they often forget to plan for their exit strategy. A survey by BMO Wealth Management confirms that startlingly few small business owners are planning for retirement adequately.
The survey by BMO found that 75 percent of the owners between ages 18 and 64 had not saved more than $100,000 for retirement. The good news is that nearly 40 percent of business owners age 45 to 64 had at least started an IRA and nearly 30 percent had established a 401(k). For many entrepreneurs and small business owners, their way of planning for retirement is to invest in their business and sell it when the time is right. Essentially, the business becomes their retirement plan.
In some cases, the business owner will wish to keep the business alive. Therefore, they transfer ownership to a family member and get a share of the future wealth in return, which helps to support their retirement. Unfortunately, this doesn’t always work out as planned. Different management methods, a jarring transition between owners, and/or the unpredictability of the market can wreak havoc on a business, potentially leaving the retiree with little or nothing for their retirement.
A number of business owners will say that if their planning for retirement hits any snags, they’ll simply delay retirement. While this seems like a fair way to approach retirement, plans made while relatively young and healthy can turn quite suddenly as we age and our health begins to fail. For example, a survey by the Employee Benefit Research Institute reveals that nearly 55 percent of people surveyed said they retired earlier than expected due to health issues.
What steps can you take in planning for retirement that can help protect your investments?
· Diversify: Putting a set amount of money per month in a variety of investments is a smart move because you’re spreading out your wealth in several directions. As the market ebbs and flows, you’ll see the advantages of a diversified portfolio. Talk to your investment advisor about popular options, like an IRA or 401(k).
· Specialize: Ask your investment advisor about retirement plans that are specifically for small businesses. For instance, a SEP-IRA, solo 401(k), or SIMPLE IRA.
· Know What You Need: How many of your current expenses are lumped into your business dealings? You’re won’t have that luxury when you retire, so crunch the numbers to get an accurate estimate of what you’ll need on a monthly basis when you retire.
If you’re like most small business owners, you have few hours in the day to research retirement vehicles on your own. Talk to a fee-only professional advisor like our team at Family Investment Center. Since our founding, we’ve maintained a client-first, client-focused philosophy. Today, we welcome you at our table to learn more about what makes us truly unique among investment advisor teams.
Investing Strategies in a Time of Uncertainty
The election is officially over and inauguration is just weeks away. Many Americans were surprised at the results as our nation begins a journey with a controversial president. Many investors are beginning to take a second or third look at their investing strategies and preparing for this change.
Actually, many investment professionals may share the viewpoint to stay the course and not change investment portfolios in any drastic way. Refraining from reacting impulsively — while maintaining a focus on your long-term retirement investment plan — may help lead you toward new confidence as presidential changes officially unfold. Note: While analysts seemed wrong about the predicted election outcome, U.S. economic strength was actually improving leading up to the vote. Policies and changes to come, say some analysts, could actually lead to even more economic growth. If this trend continues into 2017, investment options could improve and market levels could return to “typical.”
It’s also important to realize that it’s not unusual for emotions to run high as markets move. Most investors won’t need to access the money they have in investments for at least a decade, which means even if market volatility affects your balances, there is plenty of time for a rebound. Besides, experts have noted that other economic factors remain strong and will carry most investors through the volatility.
If you are nearing your projected retirement date and want to make some changes, ask a professional commission-free investment advisor for help. If you haven’t yet talked to an investment advisor, now is the time. Talking with your advisor about your plan is a great way to review your situation, make adjustments as needed and regain some of that confidence you had before election night.
Historically, when considering long-term investing strategies, the stock market has demonstrated success as a way to build up a nest egg. The ebb and flow of the market is less dramatic when you look at its movement over decades. Even during recessions, such as 2008, the market historically has recovered.
At Family Investment Center, we offer a consistent, commission-free and jargon-free atmosphere for addressing all of your questions and concerns. Contact us today and find out why our team has been interviewed by sources like The Wall Street Journal, Forbes andU.S. News and World Report for our slightly “unconventional” approach.
Experts Suggest Investment Advice May be Best Left to the Professionals
Most people who invest money and are purposeful about their retirement plans believe they have the basics of investing down. They may even consult with well-meaning friends and family when they are seeking outside guidance. However, some of the most common mistakes in investing may be related to taking investment advice from someone other than a professional – along with not keeping up with investing innovations and relying on outdated information. Read on for some other challenges that may be holding you back from the success you want.
Some investing mistakes date back to early family experiences. Ideas about money are often shaped by what a person saw and heard growing up. In reality, what many people are taught growing up is very different now as the landscape of investing has changed, particularly in the financial products, services and fees under which investors operate today. These family experiences may mean an investor follows and seeks advice from friends, neighbors, coworkers and family members; but these people are not likely to carry professional investment experience. Seeking advice this way can also lead to a strong emotional connection instead of a neutral, strategic approach to investing – and this can cost an investor significantly over time.
Another common investing mistake can be connected to changing an investment strategy when feelings or emotions change. Today, you may want to ask yourself, “Is my investing driven by feelings and emotions?” This can manifest from watching media headlines and wanting to make quick changes rather than staying the course through the natural ups and downs of the markets.
It’s human nature to follow the crowd. However, when it comes to investments, giving in to that urge to follow the crowd can lead to investment setbacks. Everyone’s situation is different. What amounts to an excellent decision for one person might be a wrong move for the next, depending on life situations and goals. Most investors with long-term success are operating on a consistent plan that is tailored to their situation, not everyone else’s. Also note that many professional investment advisors suggest caution around making decisions for short-term gains in favor of long-term growth. It’s vitally important to stick to a long-term plan, even and perhaps especially during times when the market is volatile.
Performance is an easy metric to measure, but it’s not the one that matters most. Value and convenience, both of which are metrics more subjective and harder to measure than performance, carry just as much weight as pure performance.
Some people fail to reach success because they think the investments are boring. Investment advisors reject that notion; they see investing as a path to key lifestyle benefits that are definitely not boring. They also know that it’s one of the biggest reasons people fail – or a reason they never get started. A visit to an investment advisor who truly cares about helping clients should not be boring, but instead, should help you feel excited and confident about the direction you’re headed.
At Family Investment Center, we have observed investors time and time again come in with reservations and leave with a sense of confidence they didn’t know they could have toward their long-term goals for investing. We know that many people have an outdated view of money practices, and we are here to listen. Contact us today and let’s get started with a plan that makes sense for your situation.
Listen to jargon-free insights from the Money is Freedom podcast, produced by Dan Danford, founder/CEO of Family Investment Center, at Sound Cloud and iTunes. Enjoy more about advice from friends and family on the episode titled “Free Advice is Poor Advice.” https://soundcloud.com/money-is-freedom/102-free-advice
For many it’s a labor of love. For others, it’s overwhelming to think about what it takes to start and finish the writing of a book. This is something Dan Danford, CEO of Family Investment Center, knows quite well. Danford will relay the experiences he gathered while writing his book, “Stuck in the Middle” at two KC-area Lunch and Learn Events.
Danford, who has worked for decades in investing, wrote the book to highlight the mistakes investors make that jeopardize their financial success. The book also offers tips on how to fix those mistakes. The 20 chapters in the book cover everything from how paying off a mortgage can hurt retirement, investment mistakes endorsed by the media, the stock market (why/how it’s not a casino), how banks are for managing cash (not investing) and many other topics.
Danford says the book is a valuable way to share insights and knowledge gained across his career. He began his career in business in 1984 as a bank trust officer, where he was responsible for managing tax-qualified retirement plans and IRAs. He has since visited with thousands of people who are planning for retirement. He is now sharing his knowledge in the book that asks the question “What if your middle class background is holding you back from the financial success you want?”
Danford will speak at two “Lunch and Learn” events with the topic – “What’s your truth? Using your story to write a book, and using that book to grow your business.”
The events are:
· Friday, December 9, at the Northland Regional Chamber of Commerce office, 634 NW Englewood Rd, Kansas City, MO. Click here for more information. 12 p.m. to 1:30 p.m.
· Tuesday, December 13, at the St. Joseph Chamber of Commerce, 3003 Frederick Avenue, St. Joseph, MO. Click here for more information. 11:30 a.m. to 1 p.m.
Danford will also share information about investing that he covers in his book, largely written for middle class investors. Danford said he has been surprised, quite often, at the mistakes he encounters, which are mostly ideas that conflict with what professional investors know to be true today. He said many people haven’t kept up with innovations in investing, which could lead them to decisions based on outdated information.
“For many investors, their ideas about money come from early family experiences, which leave a powerful imprint on them that makes change difficult to achieve. However, it’s easy to see that the world we live in today is far different from what our parents experienced at the same point in their lives. Everything from fees to financial products and services – they’ve all evolved, and investors need to evolve as well,” says Danford.
Listen to insights on “Money is Freedom,” a new podcast available on iTunes and Sound Cloud.
As the U.S. Department of Labor fiduciary rule moves closer into the spotlight, more investment firms are making changes to shift their service to a “nonconflicted” setting – meaning they will no longer charge commissions on products they sell to investors.
A few months prior to the Department of Labor rule, the White House released their own report outlining the millions of dollars in lost potential revenues investors could see if they receive conflicted advice in a commission-based setting. By the start of 2018, financial brokers who sell retirement products must become "fiduciaries" and act in clients' best interests, instead of choosing products that line brokers' own pockets. Some national entities are putting changes into place, now.
Recent headlines have outlined challenges with this process. What should you know?
1) Family Investment Center has always – and will always – operate in a commission-free, client-focused and nonconflicted setting. It’s how we have always believed your interests as an investor are best served. These changes nationwide mean business as usual for us.
2) Some firms will begin to use terms like “nonconflicted” and fee-only as they make the shift over to these models … but this doesn’t mean they have a genuine client-focused perspective.
3) National responses to the fiduciary rule will be varied. LPL Financial Holdings Inc., the largest independent broker dealerand registered investment advisor in the UnitedStates, is exploring a potential sale – according to an articlein Financial Advisor – as it lowers commissions on high-feeinvestment offerings and looks at higher regulatory costs. Inanother example, Merrill Lynch is among the first to institutechanges and stop its commission for its IRA business. This could trigger brokers who rely on commissions to go elsewhere – as well as push a surge of other giant firms to do the same.
We welcome any discussion or questions as the biggest shift in the investment industry has seen in decades begins to take shape … and we’re proud to say we’ve been helping families reach their goals in a nonconflicted setting since the first day we opened our doors.
Investment Strategies for the Year’s End
We’re in the final quarter of 2016. That means it’s time to start looking at your investments as the year winds down and where you are in meeting your retirement goals. Here are some top things you need to look at:
Put your investments back into balance. Different types of investments will perform differently over time. Diversification of investments is key, but even the most diverse portfolios will have products that do better or worse than anticipated. To reach your original intended asset allocation, you may need to rebalance.
If you monitor you asset classes, you’ll find that in any given year, their returns could knock your portfolio out of balance. For instance, let’s say you want your portfolio to include 20 percent of your assets in real estate and commodities, 30 percent in bonds, and 50 percent in stocks. By now, your investments have been in place long enough that the economy could have shifted those percentages drastically. Now may be a good time to make changes and adjust them to help you meet your goals.
Has your W-4 been reviewed lately? If you’ve had major life changes this year, it’s a good idea to take another look at your W-4. For instance, as you age, your tax situation will change. Or, perhaps you’ve had children who have grown and left the nest – this will need to be reflected in your dependents status. Maybe you’ve re- married, which will also need to be updated. When you make these changes, you can free up more money for investments like your 401(k) and your IRAs. It’s all about compound interest, and even a year’s worth of investments can make a difference.
We know it’s not wise to make investments decisions under duress. However, when the stock market is volatile, risk becomes a factor worth investigating. Some investors will protect themselves with larger cash allocations, which can be beneficial because this gives you something to work with if the market performs strongly.
Are you maximizing your contributions? Workingtoward maxing out right now is a good idea, especially if it’s a deductible retirement plan contribution. It can help reduce current taxable income, which reduces the associated income tax come April.
At Family Investment Center, we can help you maintain confidence (and joy) as 2016 draws to a close. Why not make today the day? Contact us and let’s talk.