Archive for the ‘Wealth Management’ Category
They don’t necessarily overlap
I met Joseph in a startup networking event. He was trying to attract investors for his latest venture. He has an impressive resume: he founded a tech company that was later sold for tens of millions of dollars in the 1980s.
I was immediately struck by the “never say old” motto of this 75-year-old entrepreneur. But one thing did come across as odd: he was trying to raise a mere $500k for his new venture. Why didn’t he just fund the venture out of his own pocket?
A few months later, I invited him to a charity fundraising dinner where the ticket is $100 per person. He finally admitted to me: “Michael, I don’t have an extra $100 to spare.”
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10. An investment rule for young people
9. Irrevocable life insurance trust
8. Is P/E ratio a useful stock valuation measure?
7. Bill Gates: 11 Things You Don’t Learn in School
6. Recession and stock market performance
5. Variable annuity fees you don’t know you are paying
4. Why asset class diversification is superior?
3. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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10. Irrevocable life insurance trust
9. America’s top financial advisors: how they are made?
8. An investment rule for young people
7. Recession and stock market performance
6. Bill Gates: 11 Things You Don’t Learn in School
5. Variable annuity fees you don’t know you are paying
4. Why asset class diversification is superior?
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Maintaining Financial Wellness
Posted on: March 28, 2012
[By Tom Warburton] We view the primary component of ‘Maintaining Financial Wellness’ to be ‘Maintaining Access To Currency’. Think about this a bit. Wealth is really irrelevant if you don’t have currency!
Think about all of the companies that were Asset Rich, Cash Poor and ended up on the shores of Bankruptcy. Lack of currency sunk the ship.
Imagine that you owned $100,000,000 worth of land in the Brazilian Rain Forest – BUT – there were no buyers! Lack of currency is a huge impediment when it comes to paying the bills.
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Achieving Financial Wellness
Posted on: March 25, 2012
[By Tom Warburton] So…how do we achieve ‘Financial Wellness’?
This exercise sends us on an initial quest to ‘Figure out How Much Money We Need’ and how to ‘Accumulate That Amount’.
Maybe you’ve seen the advertisement on TV where the guy is ‘trying to figure out his number’. The neighbor has a number under his arm and the comic figure of the commercial thinks his number is ‘A Gazillion’!
Well – we think we’ve figured out what ‘The Number’ is for most folks. As a general guideline:
- Multiply Your Net Monthly Need By 300.
If you are 65, the above will be close. (Of course, individual age, health, facts and circumstances vary, so, we would need to meet with you to confirm the accuracy for you – which we are happy to do.)
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What is Financial Wellness?
Posted on: March 22, 2012
[By Tom Warburton] Our view for a working definition for Financial Wellness has been forged as a result of discussions with hundreds of folks. We start our discussions with this question:
- What Is Important To You About Money?
This leads to a variety of responses, and, frankly, there appears to be a strong correlation between age (or maturity or wisdom or whatever) and the answers our question solicits.
- Youngsters Often Say Things Like:
- I Like Money So I Can Buy Stuff
- Older Folks Often Say Things Like:
- I Don’t Want To Outlive My Money
- I Want To Take Care Of My Family
- I Like To Give It Away
- Money Gives Me Freedom
- Money Lets Me Live The Way I Want To Live
- Money Represents Security…However Illusory
So – when it comes to defining Financial Wellness, permit us to synthesize the responses of folks as the following:
- Financial Wellness Exists When A Family Or Person Can ‘Live Worry Free The Way They Want To Live For As Long As They Live‘
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[Guest Post by Christopher Guest] I have seen a number of articles declaring approximately 70% of all Americans do not have a will. If they died, that would mean the distribution of their estate would be controlled by intestate provisions. In my February 2010 Newsletter, I discussed the basics of intestacy. For those in second marriages, the importance of drafting an estate plan and not succumbing to the intestate provisions is very important, as demonstrated below.
As I mentioned in 2010, there is an order of priority in which beneficiaries inherit assets under intestate statues. Order of priority is governed by the familial relationship of the beneficiary to the decedent. In other words, family members related closer to the decedent generally get a share and cut-off those family members not as closely related. But, every state’s laws are different when determining this order or degree of familial closeness.
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10. Portfolio rebalancing returns
9. How to tell if you financial advisor is a crook? Very easy
8. America’s top financial advisors: how they are made?
7. Variable annuity fees you don’t know you are paying
6. Recession and stock market performance
5. Why asset class diversification is superior?
4. Bill Gates: 11 Things You Don’t Learn in School
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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“Only a fool invest without rules” – Jason Zweig
Young People
A client of mine asked me to teach his young son how to save and invest. The following are some rules I wrote down for him.
1. How much to save?
This is just a rule of thumb. If you start investing in your 20s, you need to put aside 10% of your income; if you start in your 30s, 15%; 40s, 20%, 50s, 25%.
The client’s son is a 26-year-old college grad, who is making about $48,000. Based on the rule of thumb, he needs to save $4,800 a year. That averages to $400 a month.
To make saving simple and painless, open a brokerage account, then set up an automatic bank payment of $400 a month to the account.
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Tax Form
Up until 2011, the burden for determining the cost basis of securities transactions for income tax purposes was shouldered by taxpayers.
In other words, the IRS was informed about how much investors sold securities for, but the tax agency relied on investors to provide the purchase prices.
Tax officials long suspected that many taxpayers overstated their cost basis in order to pay less tax. In response, the Treasury Department pushed for legislation that would require cost basis reporting by investment firms.
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10. Portfolio rebalancing returns
9. A roller coaster ride to a merry Christmas
8. Recession and stock market performance
7. Variable annuity fees you don’t know you are paying
6. Why asset class diversification is superior?
5. Bill Gates: 11 Things You Don’t Learn in School
4. What can happen when you have a life insurance salesman as financial advisor
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Healthy Lifestyle
Longer life spans, rising medical costs, declining retiree medical coverage, and Medicare and Medicaid insolvency all add up to making health care costs a serious challenge for folks preparing for retirement.
According to Fidelity research, a couple retiring today at age 65 will need current savings of $200k to supplement Medicare and pay for out-of-pocket health care costs in retirement. In another five years time, the number could balloon to $275k. And that’s before we talk about long-term care.
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Government Retirees Beware: Your Financial Advisor May Not Be Your Friend
Posted on: January 14, 2012
I have a client (Let’s call him John) who retired 12 years ago from the government. He had a pension, and he had the option of taking out a lump sum of about $800k or drawing a monthly check of more than $4,400 per month until death.
Lost Retirement Money?
John took his options to his financial advisor from Smith Barney (now absorbed into Morgan Stanley Smith Barney.) Guess what the advisor recommended? He recommended that John take out the lump sum and let him manage it instead.
By the time John came to me for a second opinion financial review four years ago, his retirement account had only $265k left. John decided to become my client, and I have been able to restore some of his money, but not all.
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If you are new parents, you are busy nursing, changing diapers, and dealing with the emotional roller coaster of having a new life in your household. If you put your finances in backburner, I don’t blame you.
As a new parent and a financial advisor, I can offer you a few absolutely necessary to-do items to safeguard the financial well-being of your family and your new baby.
1. Have a will.
Now that you have a baby, you don’t just live for yourself any more. You have the responsibility of seeing your baby grow up. What happens if both you and your spouse die in an accident? If you don’t have a will, the court will determine the baby’s guardianship. Do you want to leave that decision to the court without your input? If you don’t, get a will.
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Saving for College
My son is 6 weeks old. Today, he received his social security card. The first thing I did for him after receiving the card was to open two Maryland 529 plan accounts for him: one with myself as the account holder, and the other with my wife.
In Maryland, the 529 plan deduction limit per parent per child is $2,500. So I put $2,500 into each of the accounts, for a total of $5,000. I invested the money for a target date 2030 fund since that’s the time my child will be of college age. I further set up an automatic contribution going forward: $2,500 will be deposited into each account every year.
Why I am doing this?
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How Can I Help You in 2012
Posted on: January 3, 2012
A few days ago I got a call from someone who needs financial help. He is a typical middle class person, making a middle class wage, and has not saved a lot of money.
How Can I Help?
In the past, I would have gently turned him away: “Sir, my practice has a limited capacity of serving only 50 clients. To make the most of it, I only work with doctors and small business owners who have at least $500k in investable assets or a combined household income of $400k and above.”
Maybe it’s because of my newborn son’s sickness, but I did not say no this time. I took him through the discovery process to find out where he was financially, what he wanted to achieve, and how he planed to get there.
The Investment Scientist 