Being Smart With $$ - Don't Let Your Get Adviser Get Cute with Your Money

Does your financial adviser time the market? Many do believing they can avoid losses when the market is falling or grab profits right before the market will rise. The problem is that so much research shows that market timing fails more than it wins. A new client of mine showed me their portfolio before they moved from another adviser and I asked why their stock allocation was so low compared to an appropriate position for someone with their profile. The answer was that their soon-to-be former adviser was predicting a market decline. Well guess what? The market is now at all-time highs and substantially higher than when that adviser sold all their clients’ stocks and that decision has cost the clients a fortune. Can the market crash in the weeks or months ahead? It’s always possible. But what if it doesn’t? Over the long term, the market marches higher as companies keep generating new profits.  The adviser is hoping to pick up a few percentage points in the short term but instead may potentially be costing their clients a quadrupling of their stock values over the next couple of decades if they keep waiting for a crash that never comes. Don’t let your adviser get cute with your portfolio. A steady and consistent long-term plan is the path to success.

Larry Pike, CFA

Client Priority Financial Advisors LLC

www.clientpriority.com 

Being Smart with $$ -- Unnecessary Investment Fees Can Cost You a Fortune

Three quarters of a million dollars!  That’s about how much you might lose on a million-dollar starting portfolio over 15 years if your fees are around a mere 2%.  More correctly stated, that’s about how much less you’ll earn, all else equal, if you earn 5% investment returns annually (after 2.2% in fees) instead of 7.2% without unnecessary fees.  2.2% may not seem like much until you realize it may cost you three quarters of a million dollars.  Keep your investment fees low!  They matter more than you think.  Investors hate to lose money.  But what about losing the money you should have earned?  Don’t let an investment salesperson dazzle you with tales of big performance in exchange for a few percent in annual fees.  They are usually false promises that line the salesperson’s pocket at your expense.  Did I mention it may cost you three quarters of a million dollars? 

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Best Laid Plans

Best Laid Plans.  So often I hear from clients that a big part of their retirement plan is to work forever, or at least until 70.  Maybe they should have a Plan B.  A recent survey showed 8 out of 10 believe they’ll work in retirement but in reality, less than 3 in 10 do.  It’s usually due to a health or disability issue or an unexpected job loss.  Perhaps the advice of hoping for the best but planning for the worst is a good approach here.  If not working until 70 means cat food in retirement, best to make adjustments today to be safe.  (Source: Retirement Confidence Survey by Employee Benefit Research Institute 4/23/19.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Advisers Want Too Much of Your Money

“I WANT YOUR MONEY!” was what my new client heard from many financial advisers when he came into some new wealth.  Some wanted to sell him annuities which would likely generate commissions for the adviser of over $80,000.  Some had “great load funds” that would generate commissions for the adviser of over $50,000.  Some wanted to manage the assets for 1% per year which would likely generate fees for the adviser of over $50,000 in the next 5 years.  All of the above also usually have an additional $10,000 or more in annual fees inside the investments.  All these fees and commissions come right out of the client’s portfolio and severely restrain his long-term growth.  How is the poor guy going to make any money with all these commissions and fees?   Fortunately, a professional contact sent him to me where he gets advice on an hourly basis that is not affected by what product pays the highest commissions and where he doesn’t pay fees so large the adviser could buy a Tesla with it.  You may think doubling your money sounds good over 20 years until you learn that you could have tripled it without all the fees.  (Numbers above are based on a $1 million portfolio.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Roth or Traditonal IRA?

It’s tax day for most of the country. It’s the last chance to contribute to your IRA for 2018.  But should you choose a Roth IRA, where you don’t get a tax deduction for last year but all money grows tax free, or should you choose a Traditional IRA where you get a tax deduction now but all the money in the account will be taxable later when you withdraw it for retirement?  There are some different considerations but in simple math terms, it all depends on whether your tax rate will be higher or lower in retirement.  If your tax rate will decline, you may want to choose the Traditional IRA and get the deduction now.  If your tax rate might be higher in retirement, then you may choose to pay the taxes today and contribute to the Roth IRA.  But contrary to what people often tell me they believe, if your tax rate will be the same, then you come out equal.  It does not matter how long you own the assets.  If you assume the same investment in each account with the same returns, and assume that you can put the full pre-tax amount into the Traditional IRA but only the after-tax amount into the Roth IRA (because that’s all the cash you have left after paying taxes), then only the tax rate can cause a different result.  But hurry.  You’re almost out of time.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ - Firing Your Financial Adviser

When you fire your financial adviser, do you expect to be treated with respect and gratitude considering you likely paid him/her tens of thousands of dollars in fees over the last few years?  You may be surprised by the childish reaction you receive.  I have had multiple clients decide to work with me once they came to appreciate my hourly advice model where they are never sold a commission-based investment and they will not pay higher and higher automatic, annual adviser fees.  On multiple occasions when clients let their former adviser know they are moving to my client-friendly model, the adviser tells them to go…well, I can’t say it in polite company.   In some cases, these former advisers were considered good friends.  But if this is their reaction, are they really your friend or do they just like the $5,000 to $50,000 they take out of your account every year?  If you are paying thousands of dollars to have your account managed by a friend, but don’t think you are getting anything but average results, you may ask yourself whether you are maintaining this relationship just because you were classmates in high school.  But then ask yourself, how many other friends do you write a check to each year for $5,000 or more and since the answer is 0, you may consider that it’s time to move your account to a model that favors you rather than your adviser.  Then you will find out if this friend just sees you as an ATM machine.  And I promise you that if you fire me in the future, I will still want to be your friend.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Hourly Advisers Can Help You Manage Your Own $$

Most people manage their own money according to CNBC/Acorns/SurveyMonkey with no help from a professional or online tools.  I understand the hesitance when many advisers want to take $5,000 from your half million dollar portfolio every year or sell you some suspect financial product.  But what if you could self manage your portfolio but still get advice?  That’s one of the great benefits of working with an hourly adviser.  Many of my clients love maintaining control over their money but having someone who can answer their questions and keep them out of trouble.  Most people realize the benefits of getting financial advice from a professional are greater than they expected but that doesn’t mean they want to be “sold” something or pay exorbitant fees.

https://www.cnbc.com/2019/04/01/when-it-comes-to-their-financial-future-most-americans-are-winging-it.html

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com
Blog: clientpriority.blogspot.com