Category Archives: Resources

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Is a Robo-Advisor Right For You?

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There is a lot of information and opinions on the concept of so-called Robo-Advisors. So what exactly as we talking about when we use the term “Robo-Advisor”? While the term is becoming a catch-all phrase for all  technology enhanced investment advice it typically breaks out into four distinct categories – direct channel advice providers, online investment management firms, technology enablers, and traditional RIAs powered by the web.

What started out as a pure technology play is now evolving or should I say morphing into another value-add feature for financial planners and RIAs. In other words the Robo-Advisor can be standalone or part of a comprehensive financial planning relationship.

So far, about $19 billion dollars have flowed into these Robo-Advisors such as Betterment, Wealthfront, Personal Capital and Motif Investing. While that figure seems impressive, consider the $33 trillion of investable assets in the US today. While the original intent may have been to tap into the tech savvy Gen Xers the concept is now viewed as a way to tap into the Mass Affluent. We are also learning that it isn’t only the youngsters who are attracted to a tech based investing platform.

Their Moms and Dads are also interested in a technology based platform. When LPL Financial launched its NestWise financial planning service in 2012 it was looking to capture the underserved Middle Class market which is traditionally shunned by most large investment companies as they are perceived to not have much money to invest. Although the project was shut down in less than a year after launching for reasons largely still unknown, one takeaway from the experiment was that Baby Boomers made up a large part of the clients taking advantage of many of the automated features.

What impact will the Robo-Advisor technology have on the financial planning industry and how can you use that information to decide if it’s right for you? Well, there are three ways the technology is impacting our industry. Putting it simply:

  1. Robo-advisors may actually be drawing out more consumers who are interested in getting financial advice. This increased awareness is making the “pie” bigger in a sense. So it is expanding the playing field and forcing financial planning firms to “up their game” and improve their service.
  2. The Robo technology is providing a tool for advisors to incorporate into their practices to help invest client funds. Kind of a best of both worlds approach.
  3. It is taking away the excuse that the so-called small investor is too expensive to serve. These new platforms can accommodate investors of all sizes at a competitive cost, as low as .20%. The Mass Market now can get advice alongside the Mass Affluent. It’s a leveling of the playing field.

So back to the question of, “Is it right for me”. If you are a relationship oriented person, in other words, you want the human interaction then I recommend that you seek out a CERTIFIED FINANCIAL PLANNER™ with whom you can build a solid working relationship. If you are tech savvy and still want the personal relationship then one of the hybrid models should work for you – where you get the personal service with the tech tools added on. If you are a complete do-it-yourselfer then a pure Robo-Advisor may be just right for you. Need more information? For a more in-depth look at the Robo-Advisor phenomenon, click here.

052614_2244_1FearisRunn2.jpgTime Out! Does the idea of Robo-Advisor technology appeal to you? Why or why not? You can leave a comment here.

 

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5 Key Characteristics to Look for When Choosing a Financial Advisor

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I have trained and coached financial advisors for many years. I have worked with some of the best and a few of the worst along the way. Some of the stories I can tell may not rival The Wolf of Wall Street yet they would definitely raise a few eyebrows. I have made my share of hiring mistakes in search of the best financial advisors.

So I believe I have the insight to help you avoid the pitfalls when it comes to finding a financial advisor you can trust. Here are my top 5 characteristics you should look for when you go searching for a financial advisor.

  1. Patience – You will have a lot of questions and you deserve answers that make sense to you. A good advisor understands this and will take the time to explain (minus the jargon) what you need to know. It’s not unlike going to a doctor. The good ones will sit knee to knee with you and answer your questions instead of making you feel like it’s the NFL draft and you are “on the clock” so hurry up.
  2. Sincerity – Yes, you represent potential income to any financial advisor but the best ones will put your interests first. We’ll get to commissions in a minute. Here I’m referring to the sincere interest in helping you solve your financial problems. I remember getting my tonsils out when I was 14. I was awake in the doctor’s chair. He had tools hanging out of my mouth with a clamp on my tongue. I can still remember the big smile he had on his face as he snipped out my tonsils. At one point he said to me, “I just love doing this.” I didn’t mention that he was about 70 years old at the time. That’s what you want. Someone who smiles and acts like they really love what they do.
  3. Competence – You are interviewing the advisor as much as they are interviewing you. When all is said and done your “gut” will tell you whether or not it’s a good fit. Having a CFP certificate on eh wall is assuring. 20 years in the business is great too as long as they aren’t 20 one-year experiences. Obviously a successful track record is important but a newer advisor that you feel a connection with can do just as good of a job if not better than someone with all of the credentials but you don’t have a good feeling about. Trust your instincts.
  4. Fee Simple – Sounds like a real estate term doesn’t it (it is but it fits here too). What I mean is, can you understand how the advisor gets paid and does it make sense to you. You will talk to people who say, “Oh, only work with a fee-based advisor”. As if that is a guarantee of honestly and fair dealing. Yes, fee-based puts you and the advisor on the same side of the table. The advisor’s fee goes up when your portfolio goes up and goes down if your portfolio goes down. Yet, there are times when a commission-based product may be the right fit for your specific needs.                                                                                                                                                                                                                                          A commission reflects the value of the advisor and the product solution that is being used. It doesn’t automatically represent greed and not having your best interest at heart. A good advisor will explain why a particular solution is being recommended and…you can and should ask about how the advisor gets paid. Full disclosure should be the name of the game in this type of business relationship, especially when it’s your hard-earned money at stake.
  5. A good listener – I subscribe to the motto coined by Stephen Covey, author of Seven Habits of Highly Effective People – Seek first to understand. When I train new salespeople I explain that during the meet and greet step the ratio of listening to talking should be 80/20 i.e. you should be listening 80% of the time and talking 20%. How else can I get to know you and your financial issues? If it’s the other way around that should be a “red flag”. Beware the advisor who talks to impress you and/or recommends a solution before understanding your needs.

There you have it, my top 5 things to look for in a financial advisor. Are there more than 5? Sure. You will know what is most important to you when it comes time to shop for an advisor. Think of it as a doctor’s visit. You want the best care wrapped up in a person you feel comfortable confiding in and, in this case, who has your financial versus your physical well-being at the forefront. Plan well. Live better!


Time out! What is the most important characteristic you want in a financial advisor? You can leave a comment here.

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6 Questions Baby Boomers Need to Answer Before Planning for Retirement

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So you have some money in your 401(k) and you are concerned about how long it will last once you retire. It’s an important question for sure and one that you should ask. But that is just one of several questions that need to be addressed as you start on the path to a successful retirement.

What exactly does that term mean; a successful retirement? Well, that is the one that you envision for yourself. It’s not one that some advertisement on TV suggested i.e. that you should own a vineyard once you retire. Unless, of course, a vineyard is what you envision and you have the means to get there.

Here’s my definition of success in retirement planning. It’s the day-to-day realization of your retirement goals. That’s right it’s a journey, not a destination. Education and planning are the keys to a successful journey.

To help you on your way here are 6 questions that you will need to come to terms with sooner or later. I suggest that you think about these sooner so you can plan and not be in crisis mode down the road.

  1. Can I continue my current standard of living into my retirement years? The answer to this takes some real introspection. It’s not, “do I want to?” but “can I?”. You will need to do some number crunching and put a current budget together for starters. Check out this budgeting tool if you don’t have one of your own.
  2. When can I retire without running out of money? In order to do this accurately you should work with a CFP®. He or she will use a financial planning tool to analyze your current and future assets along with any pensions you might have as well as Social Security to project how long your money will last. I use a terrific tool, Retirement Analyzer, to come up with the answer to this question. In any event you have to know the answer to this question. This is not a time to guess.
  3. How could my situation change during turbulent economic times? The great economic meltdown of 2008 taught us a lot about contingency planning. Among other things it taught us (although this is no secret) that the stock market doesn’t always go up. Yes, we have to plan for worst case scenarios and many possibilities in between. A good planer will help you do some contingency planning and the help you “put a stake in the ground” and make a decision as to where to start; what rates of return will you use pre and post retirement. What adjustments will you make base on various scenarios for example.
  4. How would it affect my family if I die prematurely? When we are young we think we are invincible. Life insurance seems like a waste of money. As we age life happens as they say. We hear of tragic deaths and illness as well as horror stories of people who died without life insurance. 30% of US households have no life insurance. If you don’t like the answer to this question talk to your financial planner about life insurance.
  5. How would it affect my family if I enter a nursing facility? This question brings up a couple of issues. Do you have sufficient disability insurance? Yes, it is more common than you think for “younger” people to have to go to a nursing facility. Think stroke, Parkinson’s disease or some other malady that can strike at any age. Long-term care insurance is not just for the elderly although most people don’t buy it until they are in their 50’s when of course it costs more and can be more difficult to qualify. As with question #4 if you don’t like the answer then talk to a pro about disability and long-term care insurance.
  6. What are the possible solutions if my situation changes? OK, this is where we get down to the proverbial “brass tacks”. We call these the “Red Line Solutions”. The red line represents the point where you run out of money in retirement. We try to push that red line out beyond age 100 to be safe. But what if your red line is at age 75 or 80. Will you gamble that you won’t live beyond that or will you consider some possible solutions? Here are 5 examples of those solutions:
    1. Work longer – retire later
    2. Work a second job or part-time after retirement
    3. Reduce your monthly expenses
    4. Increase your contributions to your retirement accounts
    5. Sell an asset – maybe a vacation property or the family boat

There is no right or wrong answer to each of these 6 questions. Actually there is a right answer and that is the one that you come up with. Yes, these are personal questions and the answers should be shared with your life partner and your Financial Planner partner. Now is the time to find a financial solutions partner and start collaborating on your plan for a successful retirement. Remember, it’s a journey not a destination. Plan well and live better!

 

Time Out! : Which question concerns you the most? You can leave a comment here.

 


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Get Your Free Healthcare Estimate Today!

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What will your healthcare costs be in retirement? How much should you plan for Medicare, long-term care, deductibles and copays? Download the Healthcare Estimator form and return it to us to receive your complimentary healthcare expense estimate today!

Click Here to Get Your Form