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Financial Advisor, Financial Services, Insurance, Investing, life insurance, Personal Finance, Retirement

Financial Planning Resolutions for 2022

Now that we’re approaching the tail end of February, it’s not too early to assess the success of those New Year’s resolutions you made for 2022. Many of these have a familiar ring such as losing weight, spending more quality time with family or friends, or taking up a new hobby. While many people have already started to drift away from these good intentions by Valentine’s Day, there’s another resolution to which you can still dedicate yourself this year.

Getting into better financial shape is an important goal because it will bear fruit not only for the rest of this year but also for the ones that follow. Try these individual resolutions to improve your financial situation before the next new year rolls around.

Change Your Coffee Routine

Believe it or not, a fair number of articles on financial planning deal with how to cut coffee out of your daily routine. While you might be in denial about how many points you’ve accrued on that Starbucks card, you should look at how you spend your money on coffee instead of trying to eliminate it altogether. In order to cut back on your Starbucks outlay, try brewing your cup of joe at home or purchasing pre-brewed coffee from the store.

The bigger financial issue here isn’t expensive coffee. Instead, it’s about how to get rid of unnecessary expenditures. Whether it’s buying another soda or snack at the gas station on your way back to the pump, all of these items tend to add up.  Nevertheless, you can help both your waistline and your wallet by reducing your dependence on unhealthy and unnecessary snacks.

Take Account of Your Financial Security

Taking stock of your current financial well-being is a resolution that’s within reach for anyone. To accomplish this, look at how secure your income is and whether your current expenses will stay the same or not.

If expenses have been going up steadily, you need to ask yourself why. Are you charging more on your credit card than you used to? If so, what kinds of things have you spent your money on? Examining how much money is going out and whether it’s sustainable should give you an idea of how financially secure you are and if changes are in order.  

Formulate a Savings Plan

If you’ve already got a decent nest egg, it’s time to begin protecting it. Many people, for instance, invest in life insurance as part of their financial planning. Buying a life insurance policy can be a great way to safeguard your income.

Similar to a budget, creating a bona fide savings plan can put you on the right track towards a financially secure future. With the information gleaned from the step above, you can see how much money is left over after expenses that can go towards your savings plan.

Then you can set up automatic transfers to a high-yield savings account to grow your money without having to think about it. An effective savings plan is like having a road map to a better financial life. And it all starts with a plan to put aside a portion of the money you are earning right now.

Consult a Financial Services Professional

Meeting with an experienced financial services professional is another goal that you can achieve right away. An experienced financial advisor can look at your situation objectively and recommend the best options for your current situation and how to guarantee a comfortable retirement.

You could also speak with a licensed tax professional to get help saving money on your taxes this year. Financial services professionals are a terrific resource because their job revolves around improving people’s financial well-being.

Resolve to Stick with the Plan

Last but certainly not least, you need to adhere to the plans you’ve made. Persistence is the main reason that people become financially secure. The key is to develop a strategy that works and stick with it for the long haul. Furthermore, making these habits a normal part of your daily life will help you develop your financial literacy.

By following these individual resolutions, you will naturally achieve your overall goal of greater financial health for this year and the years to follow.

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Young couple meeting financial advisor about investments
Financial Advisor, Financial Services, Investing, Personal Finance, Retirement

Is Combining Investments the Right Idea When Getting Married?

Getting married involves more than its fair share of decision making. One of the biggest of these decisions revolves around how you and your spouse will manage the money you’ve each been investing by yourselves over the years. For many couples, their natural inclination is just to combine their investments since they’re already combining the rest of their lives.

However, there seems to be a range of opinions among financial services professionals. Some encourage the idea of putting investments together and having a bigger portfolio balance to work with. On the other hand, other financial planners recommend that spouses keep their investment accounts separate. In every case, couples need to be open and honest with each other about their finances and their goals before making such an important decision.

Women in the Workforce

Data from the U.S. Bureau of Labor Statistics shows that 961,000 women returned to the workforce between Dec. 2020 and Dec. 2021 compared to 666,000 men. Moreover, women’s share of the workforce has been on a steady increase over the past century from 20% in 1920 to about 47% in 2021, according to the Department of Labor. Now that more women have their own incomes, they’re also weighing in more on the issue of combining savings and retirement accounts with their spouses.

It used to be the case that couples put everything together after the wedding. However, the trend has shifted a bit over the last few years, especially since men are often not the sole providers. Women who are earning money rightly want a say in how their finances are managed.

Pros and Cons of Combining Investments

Clearly, there are pros and cons to this issue that need to be discussed if you’re hoping for a long and fruitful marriage. In fact, a survey of divorce financial analysts cited money issues as one of the top three causes of divorce among their clients.

Strengthening Your Portfolio and Your Marital Bond

Research from the University of Iowa found that couples who lived together and combined their assets usually had stronger relationships than couples who did not. Nevertheless, many couples are still hesitant because of the ever-present risk of divorce. This can be even more of a factor when couples marry later in life and have children they want to designate as beneficiaries.

But some people find that keeping everything separate keeps couples from having the kind of financial intimacy that comes from solving economic challenges together, which can also strengthen a marriage.

Building Trust

The bedrock of any relationship, trust, is often reflected in the way that people deal with money. If you share all your assets, it’s clear that you aren’t keeping another account that enables you to pay for things you wouldn’t want your spouse to know about.

In addition, maintaining separate finances goes against the idea of making a commitment to share your life with someone. In essence, it’s difficult to be fully committed to each other if you’re managing your finances separately.

When Keeping Things Separate Is the Smart Choice

If one partner has outstanding financial obligations like credit card or student loan debt, those bills should still be paid from a separate account after they get married. A new spouse shouldn’t have to incur the existing debt that the other spouse brings to the marriage.

Although managing some expenses separately will entail strong communication between partners, the same couple can switch to a joint approach after their finances become more settled.

Merging Finances Makes It Less Complicated

Paying bills and putting financial investments in one basket makes couples more aware of their financial situation. You don’t have to stress over which account to use for your mortgage or property tax payments when there’s only one place to draw from. And you’re less likely to miss a payment too. It keeps things simpler. Furthermore, it helps couples have a better understanding of their financial well-being and what they need to do to provide for their future.

Speak With a Financial Advisor to Map Out a Plan

One of the smartest things couples can do to get started on the right financial footing is to speak with an experienced financial advisor who can help them figure out their goals and the level of risk with which they are comfortable. A knowledgeable financial planner can guide couples along the right path to consolidating their finances and setting them up for future financial success. In the end, the best strategy is one that suits both partners and enables them to achieve financial stability and a comfortable retirement when the time comes.

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1 percent with paper money in background
Financial Advisor, Financial Services, Investing, Personal Finance, Retirement

Is the 1% Financial Advisor Fee a Thing of the Past?

Charging a percentage of assets under management has been the accepted fee model in the financial advisor industry for decades now. And despite pressure to change, asset-based fees remain the norm for most advisors. Yet the standard 1% fee has faced increased scrutiny in recent years as clients have asked for more personalized services from their money managers along with a justification of their fees. With lower stock market returns projected for the next few years and the growing popularity of other financial advisory pricing models, the 1% investment advisor fee may soon become a thing of the past.

Assets Under Management Fee Model Continues to Grow

The assets under management (AUM) fee model continues to grow in popularity as many financial advisors who worked on commissions or flat fees have decided that this model makes the most sense. Indeed, advisors who charged a percentage of assets, either in total or as part of fee structures to their clients, actually increased to 92% last year from 90% in 2019, according to a recent survey from by Ignites Research.

And while trading fees and mutual fund commissions have declined in recent years, the fees that registered financial advisors charge on the portfolios they manage have risen. For example, clients with approximately $750,000 paid an average of 1.04% of assets in 2020, up from 1.02% in 2015, according to the research firm Cerulli Associates. Furthermore, investors with $10 million paid an average of 0.62%, up from 0.54%.

Market Uncertainty Leads Investors to Seek Alternatives

After years of outsized returns from a booming stock market, industry analysts now predict that stocks will yield only 1.3% annually for the next decade, with bond yields faring only marginally better at 1.8%. While other estimates may not be so gloomy, few expect the market to continue doing as well as the last few years. For the decade that ended last June 30, stocks yielded 14.7 annually and bonds 3.4%.

When your net worth is going up by double digits, a 1% management fee might seem like small potatoes. When annual returns start shrinking, however, those fees start to eat up a bigger share of the pie. As a result, many consumers have sought out alternatives to the traditional financial advisor fee model such as advisors who charge fees monthly or annually or robo-advisors that handle portfolios via computer algorithms.

Below is a more detailed look at some of these options:

Flat Monthly or Hourly Fees

Often, advisors who charge monthly for financial advice target younger individuals who haven’t had the chance to accrue much wealth. These advisors will charge anywhere from a few hundred to a thousand dollars a month, depending on the intricacy of their clients’ finances and their overall net worth.

Many fledgling investors wind up with advisors that charge monthly because traditional advisors won’t take them on without a bigger portfolio. Other investors prefer this model because it saves them money over the long term.

Furthermore, some financial advisors now act more like law firms that charge hourly. These advisors will charge anywhere from $300-450 an hour for financial advice. In this case, clients usually retain custody and control of their assets while the advisor guides them through trades. Regardless of a person’s net worth, these advisors charge only for the time spent with a client.

Flat Yearly Fees

With these new fee models, investors are realizing that the more money you have, the more it makes sense to pay a flat fee instead of a 1% yearly rate for financial services. Should someone with a $5 million net worth pay an advisor five times as much to manage their portfolio as a client with only $1 million? Is it really that much more work to manage the former portfolio than the latter?

For instance, Wedmont Private Capital, a West Chester, Pa., firm that launched in January 2020, charges a flat $10,000 a year. Moreover, the firm’s co-founder claims he employs the same investment approach he used at a prior employer charging 1%.

Charging Less Than 1% of AUM

Another way financial advisors are using to retain clients is to lower the fees they charge from the traditional 1% of AUM. Mutual fund behemoth Vanguard Group, for example, charges a limit of 0.3% of assets for an advisor to handle a client’s portfolio. Furthermore, this 0.3% yearly charge on the first $5 million drops to 0.05% for portfolios greater than $25 million.

In addition, well-known robo-advisors such as Wealthfront and Betterment charge only 0.25% to manage money using computer algorithms. Indeed, Vanguard’s own robo-advisor charges just 0.15% of assets. One caveat about robo-advisors is that they aren’t great for those who need lots of handholding.

Nevertheless, the advantage clients have nowadays is that they can save quite a bit by comparison shopping, even if they still want a full-service financial advisor. Some advisors will have arrangements whereby they charge 0.65% on the first $2 million of a client’s assets and 0.35% on anything beyond $5 million, with a graduating scale in between.

The bottom line is that the way investors choose to pay for financial advice has significant implications for their long-term finances. Although the need for financial services isn’t going anyway anytime soon, the traditional 1% of AUM model is no longer a given in today’s world. Not only do investors have much better access to investment advice, but they also have more reasonably-priced options as far as financial services are concerned.

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Financial Advisor, Financial Services, Insurance Brokers, Personal Finance

What Is a Fiduciary Financial Advisor?

When you are figuring out how to manage your finances, it’s important to know not only about the different strategies for financial planning but also how the money management industry works. When you are entrusting your savings and income to someone, you want to be confident that this individual is responsible for acting in your best interests. Unfortunately, this is often not the case. Therefore, it’s crucial to vet financial advisors carefully to see if they are the right fit for your financial situation and goals.

Fiduciary duty acquired a much deeper meaning in April of 2016 when the Department of Labor released their Fiduciary Rule. It was vacated later, but a newer version was approved by the Biden administration in February of 2021.

The new rule basically separated the world of financial advisors into two different categories: fiduciaries and nonfiduciaries. If anything, this just added to the confusion and risk for investors. The problem stems from the fact that there is no legal definition of the term financial advisor. In other words, basically anyone and everyone can use the term. And yet, most clients are not aware that the term financial advisor does not stipulate the ethical standards under which the advisor must operate.

A 2019 survey by wealth manager Personal Capital revealed that almost 50% of Americans incorrectly believe that all advisors are legally bound to act in their clients’ best interest. Unfortunately, this creates a situation in which many clients unknowingly pay for financial advice from advisors who are free to put their own interests in front of their clients. In actuality, only financial advisors who are fiduciaries are obligated to act in their clients’ best interests.

What Is a Fiduciary?

A fiduciary is a person or entity that has the power to act on behalf of someone or something else. Essentially, a fiduciary must act as if they are who they represent and make decisions that are in that person’s best interest.

The most well-known example of a fiduciary is a trustee of a trust. In this case, the trustee or fiduciary has discretionary authority over the assets in the trust. Similarly, a fiduciary financial advisor has the authority to buy and sell securities in an account on the client’s behalf without their express consent. For this reason, fiduciaries are held to a higher standard than nonfiduciary advisors.

What’s the Difference Between a Fiduciary and a Financial Advisor?

The difference between fiduciary and financial advisor lies in the definition of the terms. A person who advises others regarding their finances can be either a can be either a fiduciary financial advisor or a nonfiduciary financial advisor. A fiduciary, however, must act in their client’s best interest. And they don’t have to be financial advisors. They can also be attorneys or guardians or trustees or other professionals.

What’s the Difference Between the Fiduciary Standard and the Suitability Standard?

On account of the Department of Labor ruling, we now have two different standards in the financial industry: the fiduciary standard and the suitability standard. The problem becomes even more pronounced when brokerage firms fail to mention which standard they are working under.

The main difference separating the fiduciary standard and the suitability standard lies in how an advisor makes his or her decisions. Prior to making a recommendation, a fiduciary must go through a thorough process to determine a client’s best interest. They must also explain the recommendation in detail to their client, so there’s no misunderstanding about it and the reason for the fiduciary to suggest it.

For financial advice to meet the suitability standard, the advisor need only have sufficient reason to think that it meets the client’s financial needs. Basically, the advisor would only need adequate information regarding the investment and his or her customer’s finances prior to making the recommendation.

Suitability Standard and Conflicts of Interest

Clearly, the suitability standard doesn’t require the same level of discussion as the fiduciary standard. Moreover, it does not ensure that advisors put their clients’ best interests ahead of their own; it also does not preclude any conflicts of interest.

A nonfiduciary can direct clients towards products that line his pocket, as long as they could be suitable for them. A fiduciary, on the other hand, can’t recommend a higher commission product because paying more in fees wouldn’t be in the client’s best interest.

Although not every advisor under the suitability standard is putting their needs before their clients, it’s critical to know that they are allowed to legally. Furthermore, the compensation structure and incentives at their firm may result in conflicts of interest.

Anytime you involve someone in your personal finances, you are placing a great deal of trust in them. Thus, it’s important to know the type of financial services you need and to find the right type of financial professional to provide them. Regardless of the type of financial advisor you choose, you need to be clear about how they make their money and the value they offer for what you pay them.

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financial advisor
Financial Advisor, Financial Services, Investing, Personal Finance, Retirement

Should I Hire A Financial Advisor

Making long-term decisions about money can be difficult and even a little scary. But with the help of a financial advisor it doesn’t have to be. Many people turn to financial advisors for help with their financial decisions. Getting educated about your retirement and wealth-management options is a necessary part of planning your financial future. Advisors offer good financial advice but deciding whether they’re worth the price can be difficult. Before deciding to consult with an advisor make sure you are aware of the pros and cons, whether you’re looking for advice on paying off debt or investing your extra income.

What is a Financial Advisor?

Financial advisors are certified professionals who help their clients tackle some of the tough questions of personal finance. They can put together a retirement savings plan with a timeline or answer any questions you may have about life insurance. A Certified Financial Planner is often not only knowledgeable about investment accounts, but other things that could impact your finances, from taxes to insurance. A few of the things that a CFP can handle for you are: meet with you to assess your current financial situation and goals; develop a comprehensive plan that addresses major areas of concern, such as retirement, college planning, insurance, avoiding estate tax, and so on; coach you as difficult financial issues appear in your life; and help you avoid major mistakes that will derail your plans.

Risks of Self-Managing

When thinking about the need of a financial advisor, think about all that you must handle on your own when it comes to your finances. You will need to compare Roth IRA providers and fill out the necessary information to open a Roth IRA. Now that you have opened the account you need to stay on top of a wide range of information such as: changes in legislation that could affect your retirement planning; changes in mutual fund options at your brokerage firm; and changes in the amount of money you can contribute each year to a retirement account. You will also need to develop a long-term financial plan that includes considerations for retirement, paying off your house, funding the kids’ college education, estate planning and a timeline for when you retire. This is something that can be done, but to get it done right you’ll need to invest a lot of your time. It’s up to you to decide if self-managing is convenient for you.

The Help of a Financial Advisor

If you’re ever feeling confused, stressed or simply ignorant of various money-management topics, then professional advice from an advisor can be very handy. Most people can’t see far enough into the future to see retirement, much less plan for it. A financial advisor will ask you all the needed questions to put together a plan and offer you advice on investments, estate planning, tax liability and your kids’ college education. The financial knowledge of an advisor will make your difficult decisions easier.

How a Financial Advisor Can Hurt

Finding a great advisor can be just as easy as finding an incompetent one that can cost you a lot of money. A few of the many ways a financial advisor can cost you your money is by churning your investments; expensive investments; bad planning; and not responding. They can get you to buy and sell more than necessary in order to generate higher commissions for themselves. Point you to mutual funds with high expense ratios when a similar low-cost index fund or an Exchange Traded Fund (ETF) would be a better choice. A well-intentioned advisor who puts together a sketchy or holes-ridden financial plan is not helping you at all. Even an unbiased advisor is useless if he or she never returns your calls/emails or is MIA when your need arises.

You Should Always Get a Fiduciary

When hiring a financial advisor, you need to make sure they have a fiduciary duty to you. This means your advisor must put your needs above his/her own and always act in your best interest, offering you an unbiased view and opinion. In financial planning this guarantees that he cannot steer you toward investments that are expensive for you, just because their profitable for him/her.

How Much is the Cost of a Financial Advisor?

 Going to a financial advisor will cost you money. Some charge by the hour and some makes commissions from the investment products you buy. Others may do both. Most fee-only investment advisors charge a fee equal to a percentage of your invested assets. An unofficial industry benchmark is one percent, although advisors may charge slightly more or less. Some financial advisors earn their fees not from clients, but from banks and investment companies.

If you’re wondering if you need a financial advisor or if you should do it yourself, consider whether DIY investing is a realistic option. What changed so you now feel you can devote more time and energy to your investments than you have before? Do-it-yourself can easily turn into no-one-does-it. We all have a home project or two to prove it. So if your to-do list is endless and you never quite have time to tackle your personal finances, you might need a financial advisor.

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Insurance
Financial Advisor, Insurance Brokers, Investing, Personal Finance

What is Financial Advisor Job?

It’s hard to get your ducks in a row and set financial priorities when you are just getting started on a career, especially if you have huge student loans, which take a big bite out of your paycheck.  Plus there are other expenses that make it difficult to save for the future.  If you’re lucky, your employer sets you up with a 401(k) and continues to make contributions on your behalf – hopefully you are matching those contributions, and, if not, you’re setting a little money for the future, right?  Perhaps you’ve been savvy enough to plan for the future, and, have a nest egg above and beyond that small “rainy day account” for financial emergencies.  Or, maybe you live paycheck to paycheck and need someone to implement an investment plan for your future.  Finally, if you won that big Power Ball jackpot the last go around, it might be time to seek a consult with a financial advisor.  Whether your monetary status is too little or too much, a financial planner can assist you in planning for the future.
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Car Insurance, Insurance, Personal Finance, Types of Insurance

What Are The Types of Car Insurance?

Car Insurance
Nothing compares to your “first set of wheels”, no matter how many years that you are a vehicle owner.  Everyone remembers their first car, whether it was a hand-me-down from Dad, or an old clunker you got dirt cheap that ran.

The biggest downer about owning your first car, or your current car for that matter, is not the amount of money you must pay for maintenance and gas for the vehicle, but the funds you expend to insure it.

But today’s cars are not your Dad’s car from back in the day.  He may have just buffed out a mark where someone keyed the car or nicked the bumper.  Today, just a wayward grocery store cart that slammed into a tail light or a minor or major collision may not only mess up the exterior of the car, but the electrical system may also be in peril too, thus repair costs will skyrocket.  That is why you should be wise about what type of coverage you need for your vehicle.
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financial advisor
Financial Advisor, Financial Services, Investing, Personal Finance, Retirement

The Pros and Cons of Hiring a Financial Advisor

Making long-term decisions about money can be difficult and even a little scary. But with the help of a financial advisor it doesn’t have to be. Many people turn to financial advisors for help with their financial decisions. Getting educated about your retirement and wealth-management options is a necessary part of planning your financial future. Advisors offer good financial advice but deciding whether they’re worth the price can be difficult. Before deciding to consult with an advisor make sure you are aware of the pros and cons, whether you’re looking for advice on paying off debt or investing your extra income.

What is a Financial Advisor?

Financial advisors are certified professionals who help their clients tackle some of the tough questions of personal finance. They can put together a retirement savings plan with a timeline or answer any questions you may have about life insurance. A Certified Financial Planner is often not only knowledgeable about investment accounts, but other things that could impact your finances, from taxes to insurance. A few of the things that a CFP can handle for you are: meet with you to assess your current financial situation and goals; develop a comprehensive plan that addresses major areas of concern, such as retirement, college planning, insurance, avoiding estate tax, and so on; coach you as difficult financial issues appear in your life; and help you avoid major mistakes that will derail your plans.

Risks of Self-Managing

When thinking about the need of a financial advisor, think about all that you must handle on your own when it comes to your finances. You will need to compare Roth IRA providers and fill out the necessary information to open a Roth IRA. Now that you have opened the account you need to stay on top of a wide range of information such as: changes in legislation that could affect your retirement planning; changes in mutual fund options at your brokerage firm; and changes in the amount of money you can contribute each year to a retirement account. You will also need to develop a long-term financial plan that includes considerations for retirement, paying off your house, funding the kids’ college education, estate planning and a timeline for when you retire. This is something that can be done, but to get it done right you’ll need to invest a lot of your time. It’s up to you to decide if self-managing is convenient for you.

The Help of a Financial Advisor

If you’re ever feeling confused, stressed or simply ignorant of various money-management topics, then professional advice from an advisor can be very handy. Most people can’t see far enough into the future to see retirement, much less plan for it. A financial advisor will ask you all the needed questions to put together a plan and offer you advice on investments, estate planning, tax liability and your kids’ college education. The financial knowledge of an advisor will make your difficult decisions easier.

How a Financial Advisor Can Hurt

Finding a great advisor can be just as easy as finding an incompetent one that can cost you a lot of money. A few of the many ways a financial advisor can cost you your money is by churning your investments; expensive investments; bad planning; and not responding. They can get you to buy and sell more than necessary in order to generate higher commissions for themselves. Point you to mutual funds with high expense ratios when a similar low-cost index fund or an Exchange Traded Fund (ETF) would be a better choice. A well-intentioned advisor who puts together a sketchy or holes-ridden financial plan is not helping you at all. Even an unbiased advisor is useless if he or she never returns your calls/emails or is MIA when your need arises.

You Should Always Get a Fiduciary

When hiring a financial advisor, you need to make sure they have a fiduciary duty to you. This means your advisor must put your needs above his/her own and always act in your best interest, offering you an unbiased view and opinion. In financial planning this guarantees that he cannot steer you toward investments that are expensive for you, just because their profitable for him/her.

How Much is the Cost of a Financial Advisor?

 Going to a financial advisor will cost you money. Some charge by the hour and some makes commissions from the investment products you buy. Others may do both. Most fee-only investment advisors charge a fee equal to a percentage of your invested assets. An unofficial industry benchmark is one percent, although advisors may charge slightly more or less. Some financial advisors earn their fees not from clients, but from banks and investment companies.

If you’re wondering if you need a financial advisor or if you should do it yourself, consider whether DIY investing is a realistic option. What changed so you now feel you can devote more time and energy to your investments than you have before? Do-it-yourself can easily turn into no-one-does-it. We all have a home project or two to prove it. So if your to-do list is endless and you never quite have time to tackle your personal finances, you might need a financial advisor.

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Financial Advisor, Financial Services, Personal Finance, Retirement

When It Makes Sense to Hire a Financial Advisor

time is money

By now, many of us have seen the TD Ameritrade commercials with the bearded bespectacled financial advisor questioning his client about her plans and where she’d like to be when she retires. The client usually throws in some unexpected adventure or bucket list idea that has been in the back of her mind for a few years that nobody would guess just by looking at her. What many people need to consider before getting to this point, however, is whether their situation warrants hiring an advisor. In other words, before you wind up sitting on a couch speaking about running with the bulls someday, you should know when it’s worthwhile to seek the help of a financial professional.

My Finances Aren’t That Complicated

Understandably, many people have reservations about hiring someone to manage their money. Usually, they think that their finances aren’t complicated enough to justify outside help. While this is true for many people, it is certainly not always the case. Even a seemingly simple financial situation may be missing out on numerous opportunities to grow wealth and protect one’s assets.

For example, a widow in her late sixties with a sizable estate left to her by her husband may think that she should just continue with her husband’s financial choices because they yielded a pretty good return up to this point. However, life changes usually bring up an entirely new set of questions. Is she still paying for kids’ college educations? What kind of income does she need now to continue to live comfortably in retirement? Did her husband own a number of stocks which could be sold to offset other capital gains? Did he keep a large amount of cash in savings accounts earning very little, if anything? These are just some of the questions a person in her situation may need to consider.

The Big Picture

Have you ever heard someone talk about how they couldn’t see things clearly because they were too involved in the situation? Personal finances often fall along the same lines. Many people are uncomfortable talking or even thinking concretely about their own financial situations. One of the great benefits of a financial advisor is that he can see the big picture more clearly because he is outside the situation.

Since an advisor is not emotionally connected, he can look at your entire financial situation and figure out what challenges must be met in order to achieve your goals. For instance, he might notice when the interest on a car loan is greater than the interest you are getting on your savings account. In this case, he might advise you to pay off the loan with your savings, so you can start building capital right away without losing money by servicing long-term debt at higher interest rates than your savings account accrues.

Is an Advisor Worth the Fee?

This is one of the main questions people have when considering financial assistance nowadays, and I have to say it’s a valid concern. While there are different types of compensation models, many advisors charge a percentage of the assets under management. This fee usually ranges from 1% to 1.5% per year. Clearly, your advisor needs to add value over and above his fee to make his services worthwhile. After all, Warren Buffett has made no secret of how much fees matter to your bottom line and how you should keep your investing costs as low as possible.

The Financial Upside

The good news is that a Vanguard Alpha study recently uncovered that using a financial advisor may add as much as a 3% net gain over time to a portfolio. In other words, after paying their fees, the client winds up with 3% more than they would have had without using an advisor. This percentage may not sound like much but a 10% gain vs. a 7% gain in your annual return can result in a huge difference to your portfolio. While not everyone will see those exact gains, even a 2% gain can result in a healthy additional return over time.

In the End, It’s Personal

People often need help when changing jobs and moving retirement accounts, assessing long-term care insurance, or even deciding whether it makes sense to lease or buy your next car. These are just a few of the situations for which people are often not prepared or simply cannot deal with at the time. A skilled financial advisor, however, can look at your investment options objectively in order to plan for your future. Ultimately, the decision to hire a financial professional remains a personal one. You have to be honest about what your needs and your goals are at this point in your life, and whether the assistance an advisor provides is necessary to reaching those financial goals.

Reference

https://www.thestreet.com/personal-finance/when-is-it-worth-it-to-work-with-a-financial-advisor-14631145

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Homeowner's Insurance, Insurance, Insurance Brokers

Insurers under Critical Observation in Puerto Rico

As if Hurricane Maria hasn’t already taken a toll on most Puerto Ricans. Insurance companies are under scrutiny in Puerto Rico with 13,600 Hurricane Maria claims still open. This has resulted in thousands of Puerto Ricans being forced to close their businesses, drain their savings, or accept the idea of living with structural damage as they fight insurance companies over millions of dollars’ worth of claims. Claims that have gone unanswered or unpaid more than a year after Hurricane Maria.

What the Experts Have to Say

According to experts the Category 4 storm caught insurance companies off-guard and left them reeling financially after they were hit with nearly 279,000 claims. Real Legacy, a major insurer has already folded, leaving more than 1,500 claims worth a total of $70 million up in the air. It’s not a surprise that many worry other companies may follow. Commissioner Javier Rivera believes that it’s too early to say what will happen with Real Legacy. He also believes that the other company that exceeded its reinsurance limits, Triple-S, has enough capital to avoid the similar outcome. Executive Director of Puerto Rico’s Association of Insurance Companies, Iraelia Pernas, said “the industry has never faced such an astronomical number of claims.” “No one was prepared for that, not the federal government, not the insurance companies, no one.”

Hurricane Maria Caught them Off-Guard

Fines have already been issued by the Office of the Insurance Commissioner of Puerto Rico totaling more than $2.4 million against at least seven companies for delays in resolution and payment of claims. Exceeding reinsurance limits is highly unusual and indicates that even in the companies’ worst case scenario, Hurricane Maria was difficult for them to envision. There are two insurance companies in Puerto Rico that are also under review with negative implications.

The Aftermath of Hurricane Maria

Not only was Hurricane Maria the strongest storm to hit Puerto Rico in nearly a century, but it caused more than $100 billion in estimated damage, destroying the power grid and forcing businesses to remain closed. Hurricane Maria has taken a toll on the insurance industry, with losses amounting to $32 billion. Insurance companies in Puerto Rico have paid a total of $4.4 billion in claims, but more than 13,600 claims have not been closed.

Taking a Closer Look into Insurance Companies

An audit was recently launched into all companies by the commissioner’s office, and according to Rivera he is looking at some more closely than others. His office has received about 1,600 complaints, which is triple the amount of reports received in a normal year. Pernas says that the pending claims from Maria are complicated and involve mostly businesses, municipalities, government agencies and condominiums – which have to be reviewed with great care because they’re big.

Businesses that have Disappeared

Many people were forced to close their businesses due to Hurricane Maria. Among those was a 48 year old man who owned a restaurant in the northern coastal town of Dorado that he opened four years ago. He reported damages exceeding half a million dollars, but has only received $93,000 from the insurance company. Due to these circumstances he has used up all his savings, sold his home and transferred his daughter to a more affordable school. By December he will make the decision between staying or leaving Puerto Rico and joining the estimated 155,000 who fled to the U.S. mainland after such a catastrophic hurricane.

No Responses from Insurance Companies

Gov. Ricardo Rosello has already sued various insurance companies after officials said they did not respond quickly enough to claims filed after Hurricane Maria. These lawsuits help because they aim to prevent companies from dropping claims that have allegedly expired. The lawsuits seek $2.6 billion in damages for those who have not been compensated. Attorney, Francisco Amundaray is representing several clients pursuing a response from insurance companies. Among those waiting for full payment is a woman, who owns a pharmacy in the southern coastal town of Salinas. She reported $50,000 in total losses after Maria. She has called the insurance company several times about her claim but has only been told that it’s being processed. This has resulted in her being forced to refinance her house, cancel her daughter’s university housing, cut her staff at the pharmacy by half and reduce operating hours.

Planning for the Future

By law, insurance companies in Puerto Rico have 90 days to resolve a claim. Companies are now making contingency plans and expect to fly in claims adjusters ahead of any major storms in the future.

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