Monday, March 21, 2011

A Bridge to Your Future


Sometimes your career doesn't turn out as planned.  When this happens it's important to have a strategy to 'bridge the gap' to retirement.

Sometimes things don't turn out as planned.  For example, one of the most common situations that clients face is the early end to a career.  Whether through job loss or early retirement or simply because they want a new challenge, many clients need a strategy to 'bridge the gap' between today and their long term plans.

One option that many corporate high achievers choose is to start their own business.  This can be as simple as pursuing your current trade on your own or as ambitious as starting a completely new venture.  Regardless of the type of business, the transition from a corporate environment to the entreprenurial world is one that should be approached carefully.  We believe that there are several key steps that anyone considering striking out on their own should take:

Make Good Exit Decisions - corporations design their benefit packages to get people to stay, not make it easy to leave.  This means that special care must be taken to disentangle your benefits, 401Ks, stock options and other elements in a way that is most advantageous to you.

Conduct a Financial Reality Check - For most people, leaving corporate stability to be self employed increases their risk profile substantially.  This means that all aspects of your financial situation be they estate planning, insurance or asset allocation need to be inventoried, examined and if necessary modified to reflect the changed reality.

Craft a Winning Game Plan - Finally, it's critical that you create a realistic plan that takes into account self employment's less predictable cash flows.  There should be contingencies for the possibility that the new business takes longer to get off the ground or requires more capital that originally planned.

By taking these steps, being methodical and checking your logic with experienced advisors, you can minimize the stress and maximize the freedom that comes from being your own boss.

Thursday, March 17, 2011

The Next Phase of Retirement Security - Securities America


What happens if you outlive your retirement income?  How can you make sure that you don't?  Introducing NextPhase™ a structured investment program designed for retirement.

What happens if you outlive your retirement income?  How can you make sure that you don't?  These questions are always in the back of our minds.  But to answer them you need to know the unknowable:  how long will you live?  How long will your health last?  There are just so many uncertainties.

One way to reduce this uncertainty is to break your retirement down into many shorter time periods.   Shorter time frames are easier to plan for and you can set aside specific sums of money for each one.  By doing so, you can plan for the lifestyle and financial needs you expect to have in that period and  use that focus to structure your investing.

More certainty and better control are the goals of a program that I often recommend to clients.  NextPhase™ helps you meet your needs during retirement using pools of assets working for you over time.  Here's how it works:

While always focusing on your unique financial circumstances, we work with you to gather and divide your assets among a guaranteed income stream and up to six pools of investments that are tied to specific future time frames.  The guaranteed income stream and first pool give  you immediate, regular income, while the other pools of investments are designed to grow until they are needed. The more conservative pools are larger with shorter time horizons. The more aggressive investment pools are smaller with longer time horizons so they have the potential to grow. As time goes by, each pool is drained to fill the reservoir that provides your guaranteed, regular income stream. 

We use the NextPhase™ program because it offers you:
  • The confidence that comes working within a structured plan.
  • A guaranteed income designed to last for your entire lifetime.
  • Freedom to spend your retirement money as you wish within your plan’s guidelines.
  • A reduced level of uncertainty regarding the amount and regularity of your retirement income.  
  • The ability to plan a legacy for your heirs or charitable good works. 
For many clients breaking their plans into a series of shorter periods makes good financial sense.  And so does NextPhase™.

Graphic Elements:  The graphic above will simplified and animated with the various buckets rising and falling in sequence over an investors life.  Either bars or actual buckets will be used.

The 5 benefits of Next Step will be tied to 5 separate graphics or words that will emphasize the points of Confidence, Guarantee, Freedom, Certainty and Legacy.

Other video elements will be added as well.

Tuesday, March 15, 2011

Personal Branding in a Social Media Age

How do clients choose a financial advisor?  Specifically, how do they sort through the hundreds of options that they have and choose to engage you?  Well for starters, they must be in conversation with you - be top of mind and they must perceive you to be highly qualified - top shelf.  In this class we will show you practical techniques for building your personal brand and projecting it to your relationships.  Particular attention will be paid to how you can establish your identity in the age of distributed social networks where reputation and word of mouth are increasingly critical to success.

About the Instructor
Bill Reeves is a Partner in Comunicato.  Comunicato specializes in helping knowledge based service professionals like wealth managers and financial institutions to use technology and tools to broaden and deepen their customer relationships.  Bill has a background in leadership at a number of financial service technology companies, helping international and US brokerages and banks develop and deploy the infrastructure to better serve their clients. Prior to that he was a strategy consulting Partner at PricewaterhouseCoopers.

There is no magic number


Everyone talks about "the number" you need to retire.  In this message we explain why it is more important to focus on the cash you need than any specific asset number.

Everyone talks about "the number" -  you know:  the amount that you need to save by retirement so that you can have the lifestyle you want.  Brokerage financial models specialize in this:  you plug in a bunch of assumptions that may or may not be right and out 'pops' the 'right' number.

But the 'the number' is based upon many long term assumptions - guesses, really, that may or may not be right.  Some of these assumptions you have no control over, such as what investment returns or health costs will be.  Others are much more controlled by you such as when you choose to retire or where and how lavishly you live.  Change any of these assumptions and the 'magic' number changes - often by quite a bit.

The other problem with the 'magic' number is that it tends to push us towards more risk:  after all, if you can't save any more then the obvious way to achieve 'the number' is to get a higher rate of return which means more risk.  But it makes no sense to take more risk than your circumstances allow just to hit a number that is not much more than a guess.

We believe that you should focus not on a single asset number but on the amount of cash income you need to have at any given time.  The value of your portfolio will fluctuate as markets wax and wane so it's critical to keep focused on what you actually need to live:  income.

And taking more risk than is appropriate is the last thing you should do as you plan your retirement.  If you're concerned about having enough money, change the variables that you control.  Variables like how much you save, when you retire, where you live or whether you have a part time job.  These things are under your control and you can change them far easier than you can change your market rate of return.

Don't let 'magic numbers' dominate your retirement planning - focus on the cash you need and the things that you can control.

Monday, March 14, 2011

Is risk risky if we can't see it?


We face many financial risks:  some more visible than others.  In this message we explain why it is important for investors to have a balanced perspective on the risks that they are taking.

Ten years ago everyone knew the stock market was 'risky' and residential real estate was a 'safe' investment. Back then, no one would have borrowed to buy stocks but people were using "no money down" loans to buy condos - it was a sure thing.

Well now we know it wasn't. It turns out that for many investors residential real estate was more risky than the stock market. So how did we get it so wrong? It may have something to do with the internet. Starting more than a decade ago, we began using on line tools to monitor our investment portfolios. Instead of getting a monthly statement or searching the stock listings in the back of the business section, we were able to instantly see our entire portfolio every day. And what we saw shocked us: stocks soared and then plunged with stomach churning frequency. If the swings weren't enough, we were assailed from every side by 24 hour financial channels, websites and radio shows shouting confusing and contradictory advice. Most of us hated this emotional roller coaster. By comparison, our homes seemed like such safe, sober investments. That's not to say their value didn't fluctuate - it did - it's just that without the instant reporting provided by the internet we couldn't see what was going on.

Experts call this the 'information risk premium'. Investments that are actively traded and reported on feel more risky because we see their daily fluctuations. By contrast, less visible assets like Hedge Funds or real estate may seem less risky simply because there is less daily attention placed on them. But visibility by itself doesn’t tell you anything about the relative riskiness of an investment. All things being equal, lots of market data combined with easy trading may turn out to be more risky if it causes you to deviate from your plan and turn fluctuations into real losses.

So what does this mean for you? First of all, relax - don't focus on day to day fluctuations - they are almost always meaningless in relation to your long term goals, second, spread your investments over multiple asset types, third, when evaluating the relative risk of a given investment, trust your plan, not your gut.

And remember: what matters is not the risk you see but the risk you take.

How do you know if your life insurance is doing its job?

How do you know if your life insurance is doing its job?

Life insurance is a complicated subject, filled with hidden pitfalls to those that don't understand it's ins and outs, which makes it hard to know just what to do.

For example, there are many different types of life insurance.  The simplest product is 'Term' life insurance:  you pay a specific premium to insure your life for a specific period of time.  But as you age that premium rises sharply.

Other forms of life insurance combine insurance with an investment feature.  The idea behind 'Whole' or 'Universal' life insurance is that you make a higher but flat payment to the insurer.  The extra money you pay each quarter is invested so that it will accumulate in what is called the 'cash value' of the policy.  And then, when you are older that money will cover the higher insurance premiums you would have otherwise paid.  Whole life policies guarantee the premiums and benefits for the duration of your life and are more expensive, Universal life policies don't so they are cheaper.

But the devil is in the details.  Whole and Universal life prices are based upon rate of return assumptions made by the insurance company.  For whole life policies this doesn't matter because the insurance company has guaranteed the benefit but for universal life policies this can be a major issue because if rates of return go low enough, the cash value in your policy will be used to 'top up' the insurance premium.  In these types of policies the money that was supposed to be set aside for later in your life can be used up quickly, forcing you to pay much higher premiums to keep your policy.

Newer products give you more flexibility while keeping premiums low:  you can  lock in your benefit for a specific period of time or can choose different investment vehicles for the cash value portion of the policy.  These 'variable' policies offer buyers more flexibility while still achieving the core insurance goal.

The bottom line is that you have many premium, investment and benefit options to choose from.  Choosing between them is an integral part of your financial game plan.  It's our job to help you make the right choice.

So, how do you know if your life insurance is doing its job?