financial planner

5 Ways to Build Retirement Stability in Your 50s

Alicia Rose Hudnett — Tue, 22 May 2018 09:00:31 +0000

If retirement planning hasn't been at the top of your to-do list, your 50s are the time to make it your first priority. Wait 10 more years, and your only choice of retirement options may just be to keep working. Here's how you can prevent that from happening.

1. Take advantage of catch-up contributions

Whether you've been a responsible saver or not, this may be your last chance to really build up your nest egg. Beginning the year you turn 50, you can contribute $6,500 to an IRA (that's an additional $1,000 for 2018) and $24,500 to most workplace retirement plans (that's $6,000 more than the standard allowable amount for 2018). (See also: 6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future)

2. Get an HSA

If you have a high-deductible health plan (HDHP), you can open a health savings account, or HSA. Contributions to an HSA are made on a pretax basis and remain tax-free if used for qualified health care expenses. For the 2018 tax year, if you have an individual plan, you can contribute up to $3,450, and if you have family coverage, you can contribute up to $6,900. If you are age 55 or older, you can contribute an additional $1,000.

A health savings account is similar to other tax-advantaged retirement accounts: Once you establish an account, you don't need to use up the funds each year, and you may be able to invest the money within the HSA, allowing the account to grow. And even if you've established the account through your job, you can take the account with you if you leave.

Before age 65, if you take a distribution from your HSA for non-qualified medical expenses, you may owe income taxes and a 20 percent penalty. But after age 65, non-qualified distributions are penalty-free (but not income-tax free), making it structured like a traditional IRA. Qualified health care expenses are always tax-free at any age. (See also: How an HSA Could Help Your Retirement)

3. Check your Social Security benefit

This is the time to begin thinking about how you will establish a base foundation of guaranteed monthly income that will cover your necessary living expenses. And for many individuals, your Social Security benefit will be the first part of that foundation.

If you haven't already done so, you can start by creating a "my Social Security" account on the Social Security Administration's website, where you can check your work history and benefit summary. This can give you a good idea of how much other savings you will most likely need in order to cover the shortfall between your living expenses and your Social Security check each month.

You can receive Social Security benefits as early as age 62, with one major caveat: You will receive 70 percent of your full earned benefit. To receive 100 percent of your retirement benefit, you must wait until your full retirement age, as determined by the Social Security Administration. For anyone born in 1960 or after, that age is 67.

So if you think that your Social Security benefit is going to play a substantial role in your retirement equation, it's worth waiting until at least your full benefit is available. Each year you delay, up until age 70, your benefit may increase 8 percent. (See also: 5 Questions to Ask Before You Start Claiming Your Social Security Benefits)

4. Sit with a financial planner

Now is the perfect time to sit with a financial planner who can help you look at what retirement will realistically look like for you. You can go over your expenses, which is the first step to figuring out how much monthly retirement income you will need. That, in turn, will indicate how big of a retirement portfolio you will need to generate that income.

A financial planner can also evaluate your investments and make recommendations that can make a huge impact on the growth of your retirement savings. After all, despite the fact that you may be retiring within the next 10 or 15 years, your investment time horizon is still 30 to 40 years, so it's critical that your portfolio reflects that. (See also: 7 Occasions When You Should Definitely Hire a Financial Adviser)

5. Consider long-term care

When people hear "long-term care," they often think it has to do with an insurance policy. But it's a more pressing matter than that. This is the age when you should start reviewing long-term care insurance policies (which cover expenses that Medicare doesn't) and evaluate your own assets to see if you have the ability to effectively self-insure should you need assisted living. If not, a long-term care insurance policy may be a good idea. (See also: The Best Age to Buy Long-Term Care Insurance)

Your 50s are as much about increasing your net worth as they are about properly managing and protecting your current assets. This may be your last chance to get it right.

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This article is from Alicia Rose Hudnett of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Who to Hire: A Financial Planner or a Financial Adviser?

Damian Davila — Mon, 01 Aug 2016 09:30:34 +0000

Armed with Internet access and a DIY attitude, many Americans tackle all kinds of projects on their own to avoid paying a professional. When it comes to managing an investment portfolio, creating a detailed estate plan, or handling the sale of several stock holdings, most of us are better off hiring a financial professional. (See also: 4 Times You Should Splurge and Hire a Pro)

Financial literacy varies across generations. For example, only 24 percent of Millennials and 38% of Gen-Xers in the U.S. are able to answer four out of five financial quiz questions correctly. While the titles financial adviser and financial planner are often used interchangeably, they're not the same! Let's review the difference between a financial adviser and a financial planner, how you can decide which professional you need.

What Is a Financial Adviser?

In simple terms, a financial adviser helps you manage your money. Since most of the time this means managing your investments, a financial adviser has to complete the Investment Adviser Law Examination (better known as the Series 65 exam) to legally practice the profession.

A financial adviser is a broad title within the financial services industry. To specialize in a field, a professional often completes additional certifications. According to the National Association of Personal Financial Advisers (NAPFA), there are more than 100 professional designations within the industry. Here are three examples of financial advisers:

Certified College Planning Specialist (CCPS): Presents strategies to finance a college education.
Certified Divorce Financial Analyst (CDFA): Provides specialized accounting, financial, and legal advice in the field of pre-divorce financial planning.
Certified Income Specialist (CIS): Seeks to optimize income from retirement accounts.

What Is a Financial Planner?

A financial planner is a certified professional uniquely qualified to help individuals pull all their finances together, solve financial problems, and make a plan to achieve their financial goals. This particular type of financial adviser is proficient in the areas of financial planning, taxes, insurance, estate planning, and retirement planning.

The most popular credential among financial planners is the Certified Financial Planner (CFP), which is a rigorous seven-hour long exam only available a couple times throughout the year. Only individuals who have completed college or university-level coursework in major personal financial planning areas qualify to take the CFP exam. In order to retain CFP status, a professional must also complete continuing education requirements each year.

Depending on the work history and preferred area of expertise of the financial planner, he may hold additional designations, such as Chartered Financial Analyst (CFA) and Chartered Financial Consultant (CHFC).

How to Decide What Professional You Need

The main reason why these two titles can be confusing is that every financial planner is also a type of financial adviser, but not every financial adviser is a financial planner. Here are two useful rules to decide which professional to hire.

1. Define the Scope of Your Project

Just like you wouldn't hire an engineer to fix your clogged toilet, you shouldn't hire a full-fledged financial planner to just to buy a couple of bonds. The general rule of thumb is that you should seek the professional who holds the appropriate expertise and qualifications of the services that you require.

Consider two scenarios:

A financial adviser focusing on investment management may not be the best match for a client looking for comprehensive estate planning services. A CFP would be more appropriate in this case so that she can structure your finances to meet your financial planning goals.
If you're just trying to decide between several 529 college saving plans, then a CFP may not be necessary and a financial adviser would do.

2. Decide Whether or Not You Require Fiduciary Duty

Another key criterion to decide between a financial adviser and a financial planner is fiduciary duty. While all financial planners with a CFP designation are legally bound to put their client's interests before their own, not all financial advisers are.

Commission-based financial advisers may receive an incentive or kickback for pushing certain products, such as life insurance packages or mutual funds. Check with your prospective financial professional as to whether or not he receives ongoing income from any recommendations or how his fees may affect the success of attaining your financial goals.

Fortunately, starting April 10, 2017 all financial advisers handling retirement accounts will be required to serve as fiduciaries. Until then, make sure to check for fiduciary duty.

Tips When Choosing a Financial Adviser or Financial Planner

Before you sign a contract, do your homework and determine whether or not your potential financial adviser or financial planner is the most suitable for you.

1. Ask for Credentials and Affiliations

While some salespersons and representatives from insurance and investment companies may appear to provide financial advice and financial planning services, they may have compensation agreements that encourage them to suggest certain investments. Make sure to inquire about the credentials of any financial professional.

2. Verify Credentials and Affiliations

Virtually all governing bodies providing certifications provide a searchable database to look up members. For example, through the CFP Board's member database I can see that there are only five CFPs servicing my ZIP code. So, anybody else claiming to be a "financial planner" is lying. Besides confirming credentials, look for any disciplinary action posted on the database. If the professional didn't disclose them in advance, that's a red flag.

3. Review Client Eligibility Requirements

Some financial professionals require you to own a minimum of investable assets. For example, one of the CFPs in my ZIP code requires at least $500,000 in investable assets and another, $2.5 million!

4. Consider Pay Structure

Before entering a contractual relationship with a financial adviser or planner, request a detailed disclosure of all applicable fees. The objective is to spot potential conflicts of interest. Pay close attention to minimum fees for rendered services, commissions from investment products or securities trading, and referral fees from other professionals, such as accountants, insurance agents, and mortgage brokers. (See also: 4 Sneaky Investment Fees to Watch For)

5. Ask About Continuity Planning

In other words, "Who would handle my finances if you were to be hit by a bus tomorrow?" After investing so much time in finding the right professional, you don't want to find out that she's retiring next year. Also, inquire if you'll be working with the same financial adviser at all times. If you'll be working with another associate than the one you're interviewing right away or within a few months, request to meet that associate before signing a contract.

6. Inquire If You're the "Typical Client"

You'll get the most out of your financial adviser or financial planner when he's more used to clients at your asset level and financial objective. Working with a "superstar" financial adviser may sound amazing, but may cause a lot of anxiety if you keep being pushed for financial transactions outside your risk tolerance.

The Bottom Line

When deciding on whether to hire a financial planner or financial adviser, ask as many questions as you need to find out if the prospective financial professional is right for you. Finding out as much as possible in advance will allow you to minimize any surprises.

Have you hired or sought to hire a financial planner or adviser?

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ask the Readers: Have You Ever Hired a Financial Planner?

Ashley Jacobs — Tue, 14 Apr 2015 15:00:07 +0000

Editor's Note: Congratulations to Amanda, Jennifer, and MJ for winning this week's contest!

We learn about savings, investments, debt management, and other money topics so we can take charge of our financial situation. But sometimes, even the most money-savvy need help and guidance from a financial planner.

Have you ever hired a financial planner? What kind of financial help did you need? If you've never hired a financial planner, do you think you may in the future?

Tell us whether you have ever hired a financial planner and we'll enter you in a drawing to win a $20 Amazon Gift Card!

Win 1 of 3 $20 Amazon Gift Cards

We're doing three giveaways — here's how you can win!

Mandatory Entry:

Post your answer in the comments below. One commenter will be randomly selected to win a $20 Amazon Gift Card!

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Giveaway Rules:

Contest ends Monday, April 20th at 11:59 p.m. Pacific. Winners will be announced after April 20th on the original post. Winners will also be contacted via email.
You can enter all three drawings — once by leaving a comment, once by liking our Facebook update, and once by tweeting.
This promotion is in no way sponsored, endorsed or administered, or associated with Facebook.
You must be 18 and US resident to enter. Void where prohibited.

Good Luck!

Tell us whether you have ever hired a financial planner and we'll enter you in a drawing to win a $20 Amazon Gift Card!

This article is from Ashley Jacobs of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Occasions When You Should Definitely Hire a Financial Advisor

Aaron Crowe — Mon, 03 Nov 2014 13:00:04 +0000

Laying out a few hundred dollars for a financial advisor can seem like money down the drain if everything is going smoothly. (See also: 9 Signs You Need to Fire Your Financial Planner)

Until it isn't. Life's road bumps pop up, and good and bad things that happen can lead to financial problems or opportunities that you weren't prepared for. Here are seven occasions when a financial advisor should be called in to help.

1. Ruinous Debt

We're not talking about having payments for a credit card lapse for a month, but deep debt where you're having difficulty deciding which bills to pay and which to put off each month. This is a case where you don't want to have to pay a financial advisor — whether it's a one-time fee or percentage of assets that they manage. Instead, go somewhere such as the National Foundation for Credit Counseling or look for local nonprofit agencies for free help. At the very least, get help setting up a budget.

2. Career Change

Hopefully, this is an opportunity to earn more money and therefore put more money aside in a retirement account. A financial advisor can help you pick a retirement account that's right for you.

Young people with the potential for increasing their assets who are starting their careers should seek a financial planner, says Eric Roberge, a fee-only certified financial planner in Boston and founder of Beyond Your Hammock. This is especially true for a single person earning at least $75,000 a year or a couple earning $150,000 because they should have more money to invest, Roberge says.

3. Sudden Wealth

An inheritance, insurance payout, lump-sum pension payment, divorce settlement, lottery winning, or any other sudden influx of new money can burn a hole in a pocket, says Mike Sena, a certified financial planner at White Street Advisors in Roswell, GA. It can be tempting to splurge a little — or a lot. Instead, seek advice on how best to use your windfall now — and for years to come.

4. Death in the Family

The death of a close relative can be a key time to get financial help. You could face tax implications or need help with estate planning, for example.

Roberge had a client who didn't seek his advice after her father died with a $600,000 annuity she inherited, and she took some money out of the annuity. She ended up having to pay a $40,000 tax bill, which Roberge says he could have helped her avoid.

5. Passing on a Family Business

Your parents and grandparents may want you to continue running the family business when they die, but you may not. This is a conversation that a financial advisor can help with early, says Charles Kochel, a wealth advisor for a fee-only Registered Investment Advisor in Arkansas. Kochel specializes in helping farmers transfer the family farm from one generation to the next.

"A major concern of a large family farm is legacy planning," he says. "The issue is usually lack of communication. Multigenerational farmers assume the next generation will want to come back home, after college, and manage the farm or the assumption is that farming may prove too costly.

"A series of conversations needs to take place, often emotional and uncomfortable," Kochel says. "A family meeting and ongoing proactive conversations help monitor the wants and needs of the entire legacy."

The family will likely evolve over the years, and a financial advisor can help systemize the process and create an ongoing conversation that will move the estate planning beyond a one-time event.

6. Big Drop in the Stock Market

If your portfolio includes stocks, a financial advisor can help you come up with a financial plan, and stick to it.

"Most people think they can handle their own investments, but when the stock market drops, they start second-guessing their plan," says Tyler Gray, a financial planner at Sage Oak Financial in Tulsa, OK.

In 2008-09, for example, "you had a lot of people who pulled out of the market at the worst possible time because they didn't have an advisor to help them stay disciplined," Gray says. "The worst part is that many of these folks never got back in the market and have missed out on a lot of growth over the last five years."

7. Growing Family

Whether you're getting married or having children, it's best to have a financial conversation ahead of time, Sena suggests. New couples merging finances or planning for a baby and all of the costs that go into raising a child should have a financial plan.

"In general, anyone who is not meeting or exceeding their life and financial goals should work with an advisor," White says. "Most of us are simply too close to our money to be objective."

For better or worse, major life events can cause people to rethink their lives and plan for the future. Planning for a financial future should be part of many major events in life.

Have you ever sought advice from a financial planner? What prompted you? Was the advice worthwhile and helpful? Please share in comments!

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This article is from Aaron Crowe of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Difference Between Your Accountant and Your Financial Planner

Nora Dunn — Sun, 26 Sep 2010 19:42:08 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/the-difference-between-yo...

Many business owners surmise that their accountant can do the job of both accounting and financial planning (or vice versa) when in fact, the two roles complement each other. Neither professional can do the entire job of the other.

When I was a Certified Financial Planner (CFP), I prided myself on the designation which took me years of both study and professional experience to earn. I boasted a broad base of knowledge that included some pretty intricate tax planning idioms and strategies. When it came time for me to file my taxes, I obviously knew more than enough to get the job done well.

However, in developing a repertoire of accountants who I could recommend to my clients, I figured the best way to recommend a professional is to attest to their service from experience. I took my (already drafted) taxes to the accountant for filing and in 20 short minutes, he worked his magic to save me an additional $3,500 in taxes. I'm not sure what I missed or what he did, but it sold me on the concept that accountants and financial planners offer complementary roles to business owners.

What Your Accountant Can Do For You

Quite obviously, the buzz word for accountants is "taxes" and everything to do with taxes. From strategizing to sheltering to budgeting and tax preparation, this is their main focus. This is also quite a broad category that encompasses so much more than what appears on the surface.

If your business is still small, or if you are a whiz with numbers, you may wonder why you need to spend money on an accountant. Your tax preparation software is intuitive, and your situation is fairly simple, right? (Hey, I thought so too.)

What your accountant can also do is identify big picture opportunities and strategies that will help you get — or stay — ahead. Are you depreciating all the right assets in the most productive way? Is your business structure good for you now and in the long run? How does the fine print in the most recent changes to tax laws affect you, and are there any opportunities therein? Your accountant should have a deep knowledge of these issues.

Here are some of the issues an accountant can help you with:

Tax preparation
Financial statements
Depreciation
Breakdown of expenses
Appropriate tax shelter recommendations
Tax laws and how they affect you
Business structure recommendations and advice
Business growth and succession strategy in relation to taxes
Audit representation

Accountants generally charge an hourly fee for their advice, and thus are quite task-oriented. You will usually need to be specific about how you want your accountant to help you, but their breadth of knowledge can be deep.

What Your Financial Planner Can Do For You

If accounting is all about taxes, then financial planning is all about investments — but just as accountants can offer so much more than filing your taxes, so too can financial planners do more than invest your money.

Financial planners are also (ideally) focused on the big picture, but the picture in question is a little different from the one accountants look at. Financial planners are very goal-oriented and holistic, with an eye to building wealth in the most effective manner while taking into account the life goals and needs of clients as individuals. For business owners, financial planners often provide a more comprehensive look at how your business fits into your life overall — both from a logistical perspective as well as an emotional one.

Similar to accountants, financial planners are experts in their field and will identify opportunities that you might not know about even if you're well-read and financially savvy. Have you thought about how the dynamics of your family would affect your business in the event of an emergency or unforeseen circumstance? What is your business succession plan, and are you maximizing succession opportunities? Are you truly invested within your comfort zone while maximizing your opportunities for growth? Can you take the (sometimes irrational) emotion out of investing to make the best decisions for you and your family in the long run?

Here are some of the things your financial planner will focus on:

Budgeting
Investing (short, medium, and long-term, in a variety of vehicles)
Asset allocation
Estate planning
Insurance planning (disability, life, investment, shareholder protection)
Changes in the industry that affect you
Business structure and strategy tips
Wealth accumulation and protection

In contrast to accountants, financial planners can be paid in a variety of different ways. The three main forms of payment are commission-based, fee-based, and asset-based. Commission-based planners earn a percentage commission on money you invest with them or insurance policies you buy. This unfortunately means that not all commission-based planners may have your interests at heart, but not all commission-earners are to be judged as pushy salespeople. Fee-based planners will charge a flat fee for a set service, and asset-based planners charge a percentage of your overall assets invested with them. In choosing the best advisor for your needs, asking how they are paid is important but not solely pivotal.

Gray Areas

You may find a financial planner or accountant who seems to provide the whole enchilada. For example, increasing numbers of accountants are broadening their expertise to include additional designations in financial planning so they can do just that; separate advisers, financial planners and accountants have many overlapping areas of knowledge and advice.

While it may be appealing to have an adviser who can provide one-stop-shopping for you, your business, and your family, I still support the idea of creating a financial team to support you — specifically your accountant, financial planner, and lawyer. Each of these experts has a broad base of knowledge and will bring a viable perspective to the table that can also keep the other advisers in check. Each of these fields is an entire degree unto itself and should be respected as such. No one advisor can truly do the job of all three (or even two) without letting something slip through the cracks.

What to Look for in a Financial Planner and Accountant

When looking for a financial planner or accountant, the best way to find somebody you will trust is to get a referral. Ask family, friends, and colleagues who they use and schedule a meeting with that adviser.

They should provide the initial meeting free of charge and should take an active interest in getting to know your comprehensive situation — both personal and professional. Ask how accessible they will be when you need advice and what their proposed service strategy is.

Look for a professional with a designation or degree, such as the internationally recognized Certified Financial Planner designation. Ask how they're paid; if it is an hourly wage (as is often the case with accountants), get an annual estimate given their knowledge of your situation.

Also, make sure the professional in question is familiar with specific legislation that might be applicable to your situation. For example, if you have an international or location independent business, your accountant should be an expert on international tax law and your financial planner should know how best to structure your assets to be internationally accessible.

By building a team of experts who support you and your business, you stand the greatest chance of achieving everything you want, professionally as well as personally. You work hard on — and in — your business. Aren't you worth it?

This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How (and Why) to Buy Life Insurance

Nora Dunn — Wed, 08 Apr 2009 06:19:00 +0000

Buying Life Insurance seems to be one of those “I’ve finally grown up, I guess I need life insurance” sorts of decisions you make. It often comes into play when you buy a house, get married, or have children.

As it should.

But getting life insurance simply because you think you might need it, without really understanding how much to get or the options you have is a mistake – one that could cost you now in overbearing and unnecessary premiums, or one that will cost you (or your loved ones) later, when you realize that there wasn’t enough to cover your needs.

Here is a basic guide to get you started:

Term or Permanent?

Think of Term Life Insurance as “temporary” insurance – cheap and cheerful. It is good for a defined Term, the most common term being 10 years. At the end of the term, it automatically renews, but at significantly higher rates. If you were to instead cancel and apply for a new insurance policy at the end of your 10 year term, you could get it at much lower rates than if you renewed – assuming nothing happened to you medically to affect your ability to qualify. Either way, Term insurance will stop renewing around the age of 65.

Permanent Insurance (which takes the form of Whole Life and Universal Life), by contrast, is permanent. It stays with you (as long as the premiums keep getting paid) until you die, no matter how old you are. Some policies will pay out the insured amount if you reach the age of 100 (I guess they figure you deserve to have some fun with the insurance money yourself if you live that long). Permanent Insurance is also much more expensive (at up to eight times the cost), for a few reasons including the addition of investment or dividend components to the policy, along with the assumption of medical risk that the insurance company takes on board in providing a life-long quote.

Reasons to Buy Term Insurance

Since Term Insurance is for temporary needs, use it for amounts of money that would be needed now if you died, but that won’t be issues later. For example, your mortgage will eventually be paid off, and the kids will in due course grow up and their education will be paid for, and the need to provide income until retirement to a non-working (or lower income) spouse will be lessened. These are perfect examples of initially large needs for insurance that will deplete over time, making them ideal for Term coverage.

In fact, you may need $500,000 of term insurance now to cover off your mortgage and anticipated educational needs for the kids, but in 10 years’ time when your policy expires, your mortgage will be smaller, and maybe your kids will be through college. You may still need some term insurance, but can get away with a smaller policy, saving money in the meantime.

Reasons to Buy Permanent Insurance

Permanent Life Insurance (such as Whole Life or Universal Life), is for permanent needs. While this may seem simplistic, it is a fact that tends to escape many. Truth be told, permanent insurance needs are few and far between for many families. It is ideally used to cover off things like anticipated estate taxes which might be crippling, or leaving a legacy for children or charity.

There is also a forced savings investment component to permanent insurance that adds a tax-free benefit: After paying for a permanent insurance policy for a period of time, there will be a cash component to it that has grown and compounded tax-free. If, in retirement for example, you want access to this cash component, you can either make a withdrawal (or cancel the policy and get the cash), or you can borrow against this amount. Withdrawing or canceling the policy will involve paying tax on the growth of your investments, which can be cumbersome. But loans are tax-free; so if you borrow against the policy, you can gain tax-free access to money that has grown tax-free. You won’t have to make loan payments, because the insurance company will accrue the interest owing to the policy, which will continue to grow over time (since you didn’t actually make a withdrawal – you just borrowed against it), and when you die the loan will be paid back in full and any money left over is paid to your beneficiaries. Although there is a slight risk of the insurance company unexpectedly calling in this loan, you can decide if it is an acceptable risk.

How Much Insurance to Buy

This is where things get complicated.

What is your statement of current and projected assets and liabilities?
What is your earning capacity in relation to your spouse’s?
What standard of living do you like to maintain?
How many kids to you have, and what is your policy on paying for their college education?
What is your current cash flow?
What is your anticipated income over the life of your career?

These, and many other questions need to be answered before you can determine the proper amount of insurance for yourself. Some experts will guide you to multiply your gross annual income by six, but I find this to be simplistic and callous for such a serious purchase.

How to Buy Insurance

You can easily get online quotes from a variety of reputable sources, and you can even lodge some applications online, making buying insurance easy and time-efficient. BUT – a lot of undue risk lies with you; risk you won’t be aware of until it’s too late and you realize after that fact that you made ill and uneducated insurance decisions. You may not have properly understood the slight differences in jargon when comparing two apparently identical quotes from different companies. Or (as a lesser of the evils of ignorance), you may end up over-paying for a kind of insurance you don’t need (or for too much insurance), costing you the ability to pay off your debts or invest more money.

Moral of the story: don’t try to buy insurance on your own. It’s not worth it. It will ultimately end up costing you more in time, money, and possibly the ultimate financial security of your family.

Instead, consider using the services of an insurance broker or financial planner. Most brokers and planners will have access to bulk discounted rates from a variety of insurance companies – rates that you may not be privy to if you purchase it directly. They can also shop across the market for the product and rate that is best for you and your circumstances, and they understand how to equalize each insurance company’s unique jargon. Some insurance companies give preferential rates to males in their 40s (for example), but you would be hard-pressed to figure these idiosyncrasies out on your own.

But more importantly, a proper broker or financial planner will take the time to figure out exactly what type of insurance and what amount will be best for you. They will determine the answers to all the questions posed above and more, and after talking with you and learning about your ideals and values, will recommend an insurance policy that is customized to your needs.

I could go on for pages and pages about how to determine and calculate your Life Insurance needs, but it still would not suffice. And anybody who tells you otherwise is short-changing you on one side or the other: you’ll either end up short-changing your cash flow to pay for insurance you don’t need, or you’ll end up short-changing your beneficiaries by leaving them high and dry when they are most in need.

Do not take the selection and purchase of Life Insurance lightly. Find an expert who you trust and let them help you. You will end up saving money in the end, believe me.

This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Signs You Need to Fire Your Financial Planner

Nora Dunn — Mon, 06 Oct 2008 10:56:50 +0000

In tough economic times, financial planners are on the front lines. They are the gateway to investment returns when the markets are good, and are the buffer against financial disaster when the markets are bad.

When I was in the financial planning business and markets experienced corrections of sorts, my colleagues and I would brace ourselves for something called “statement shock." Clients would receive and open their quarterly or monthly statements, and regardless of whether they were keeping up with the news of market performance and understood the circumstances, they would experience a certain degree of shock when they realized how their own dollars and cents were affected.

There were three possible outcomes from this onset of statement shock:

They would realize that it is a function of the markets and not the planner and stay the course.
The would call their financial planner for some reassuring words of encouragement and possibly ask for a meeting to devise a new action plan.
They would look for a new financial planner.

I was lucky. Most of my clients fell into categories one and two. I worked hard to educate them, work within their tolerances for risk, and was there to hold their hands when they needed it. This also usually put me on the receiving end of new clients who were in category three and displeased with their old financial planners.

But in times like these, when terms like “Meltdown Monday” and (sshhh…the “R” word) are being tossed around, financial planners around the world are waking up in the middle of the night in cold sweats. Try as they may to buffer their clients against market downturns, statements will look bad. And they will be sure to hear about it. And ultimately through no fault of their own, they will lose clients.

Some planners though, will lose clients, and arguably deserve to. They will not have performed the proper amount of due diligence with their clients by assessing their investment personalities and time frames, and instead of facing the music when their clients call, they may instead choose to hide under their desks as a way to weather the storm. They will not have addressed their clients’ larger financial situation and dealt with issues like taxation, short and long term savings, and estate planning, and will instead have simply focused on returns – something which can never be promised and will never be predictable (unless you are invested solely in term deposits, in which case again I would suggest the advisor’s incompetence).

If you are experiencing statement shock, or are wondering if your financial planner is up to snuff, here are nine signs you may need to fire your financial planner:

They never ask you about your personal goals before recommending investments

There is no such thing as a one-size-fits-all investment plan. Although having a standard set of investment recommendations according to your stated time frame and tolerance for risk is acceptable, they must do the initial groundwork to determine who you are and what you want from your money.

Only one company’s products are recommended

As good as that company’s products are, true diversification includes not only a range of asset classes, but also a range of investment managers. Recommending only one type of or company-labeled product indicates that the advisor is not providing truly unbiased advice.

You received no written financial plan, prospectus, or documentation

Every investment product should be accompanied by a detailed written description of the investment, including its composition, historical performance, and inherent risks and rewards. This is generally covered in the prospectus, which is a bare minimum of what you should receive. Better yet though – you should also be given a written financial plan, which addresses your personal financial situation and outlines a financial road map to reaching your goals – both short and long term.

You are pressured into making investments

Although sitting on the fence forever is an advisor’s nightmare and sometimes clients need a little extra push, undue pressure into doing something you are uncomfortable with is not right. Even if the recommendations are sound, if you get bad vibes from high-pressure sales tactics, your ability to communicate with this advisor and for them to listen to your needs is going to be problematic going forward.

Your planner’s recommendations don’t match your financial goals

You say you want to save up to buy a house, and your advisor recommends high-risk long-term investments. Something is not jiving here, and it is likely that they are either not listening to your needs, or are not acting in your best interest.

They don’t return your phone calls

With an onset of statement shock, you need to talk to somebody. Often big problems and feelings of discomfort can be alleviated with a simple phone call and a reassurance that staying the course is the best thing to do. But if you can never reach your advisor, if they pawn you off on an assistant, or if they don’t return your phone calls promptly, they are not doing their job.

They constantly change your investments

Seeing a regular list of transactions coming through may lead you to believe your portfolio is being actively managed. However a true financial planner (and not a broker, who is transaction-oriented) should be focused more on the game plan and less on making money by moving it around. It’s a “slow and steady wins the race” approach. Too many transactions may also mean that they are making commissions on each move – a sign that they are not truly working for you.

The plan given to you seems too good to be true

If it seems to good to be true, it probably is. If that tax strategy seems a little lofty, or you are introduced to a strategy that you’ve never heard of that goes in the face of everything you know to be true and legal, then you may find eventually yourself in hot water. Although the advisor may be liable, you are ultimately the one who will have to clean up the mess if your financial actions were unruly.

They tell you they can time the market

I don’t care who your financial planner is – they can’t time the market. If they call you wanting to make drastic changes based on what they think the market is going to do, run. What they should really be focused on is you, your goals, and a plan (and portfolio) that will weather the good times and the bad. Sure – small adjustments here and there may be prudent, but moving everything in and out of different asset classes is a losing game. They may get it right a few times, but all it takes is one bad calculation to lose everything you have gained.

What to do if it is indeed time to fire your financial planner

Please do them a favour and give them a call. Sometimes things are lost in translation, or a breakdown in communication is accidental. In my experience, people can be short-sighted, focusing on returns and setting unrealistic expectations based on short term performance. When the markets are booming, people expect consistent double-digit returns and forget not-so-distant times when that wasn’t the case. And vice versa: after a stretch of poor performance, the same person may be convinced that the bad times will never end and want to stash all their money under the bed, forgetting to take the bad times with the good to achieve an overall rate of return that will help them attain their goals.

By calling your financial planner and giving them a chance to explain their actions, you may be able to save the hassle of moving your accounts and starting from scratch with a new planner.

Then again, don’t stick with a planner because it is the easy thing to do. If your financial planner is the culprit of any combination of the above mentioned blunders, it is a problem that needs to be addressed and fixed – either by finding another planner, or by tuning your existing planner in.

Statement shock sucks, through and through. But don’t take your eye off the ball because of the initial shock of seeing your investments lose value. If the markets are down overall, don’t blame your financial planner; they don’t have a crystal ball. And if they pass the acid test above, then keep communicating with them and together you will weather this market downturn, as with every other downturn. The media will sensationalize every market correction and somehow identify that this is the worst, the most dramatic, or the hardest whatever since whenever. But time and time again, slow and steady is what wins the race.

This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How To Choose A Financial Planner - Yes You!

Nora Dunn — Fri, 24 Aug 2007 01:57:18 +0000

I don't care who you are. (Well, actually I do, otherwise I wouldn't be writing this).

What I mean, is I don't care about your background, education, financial prowess, or absolute lack thereof.

You need a Financial Planner!

I don't care who you are. (Well, actually I do, otherwise I wouldn't be writing this).

What I mean, is I don't care about your background, education, financial prowess, or absolute lack thereof.

You need a Financial Planner!

Pursuant to Julie's article on Personal Financial Advisors Awaiting Your Call, there are a number of different credentials, titles, creeds, and pay-scales that flood the financial services industry and can confuse the heck out of the average bear.

In fact, even the idea of seeing a Financial Planner may be so daunting (or embarrasing?) that you find ways and excuses to avoid it altogether. Here are a few things to think about in your search, or to compel you to search depending on your current position.

1 - Everybody needs a Financial Planner. I feel very strongly about this one. I don't care if you have $70,000 in debts and $5 to your name (I actually had a client like this once), or the other way around. A Financial Planner is more than a money manager, and everybody can benefit from their services. And the younger you are when you start to take control of your finances with the help of a planner, the better off you will be in the long run.

2 - Call them what you will. I'm calling them Financial Planners here, but they can be Financial Advisors, Investment Advisors, Personal Bankers, etc. Technically anybody can hang a shingle out tomorrow calling themselves a Financial Planner. The trick is…

3 - What are their credentials? As Julie mentions, there are any number of letters and credentials and titles that people can carry. The hallmark for Financial Planning is the CFP (Certified Financial Planner) designation, which is internationally recognized, the requirements of which entail years of education in addition to extensive work experience.

4 - Where do they work? Check out the company the Planner in front of you is representing. Are they a major player in the industry, or a ma-and-pa shop? Some people don't mind ma-and-pa, some do. Are they limited to proprietary investments, or can they recommend what is truly best for you? A large firm generally lends some credibility to the Planner, although this isn't a sure and fast rule. Ask your friends & family who they use; most often referrals work wonderfully.

5 - What can I expect? True financial planning isn't investment management. It isn't banking or loan services. It isn't insurance. And it isn't taxes. It's everything. A real Financial Planner is going to take a personal approach to your financial situation. They should sit down with you and analyze your entire financial situation. Income, expenses, assets, liabilities, insurance, and even some of the intangibles like your personal approach and attitudes towards money. They should be interested in what you want to accomplish with your life, what major purchases you have in your future, what sorts of vacations you like to take, and how you envision your retirement years. They also need to know your personal tolerance for risk and fluctuation in your investments, and should coach you on it. If they don't do all these things, they can't properly advise you!

6 - Won't this cost a ton? Financial Planning actually doesn't have to cost you a penny out of your pocket, depending on the planner and where you go for your services. Many banks have a team of Financial Planners who are available to help the bank's clients. They are paid a salary by the bank, and often don't cost you a thing. You can also choose asset-based advisors who again, you won't have to pay for out of pocket, but who are only compensated by their employer based on the money you invest with them. Believe it or not this doesn't mean that you necessarily need a ton of money to invest; many of these advisors want long-term relationships and believe they can help you over the long run and will ultimately be compensated for it. And of course, there are also fee-based planners and those with other methods of compensation, which go beyond the scope of this article.

7 - Who is best for me? What you need to look for in a planner is somebody you like first and foremost. If you're going to share details about your financial life and dreams and expectations, you need to feel comfortable opening up to them and establishing a relationship of trust.

8 - Can't I do all this on my own? There are a ton of solutions out there on the internet. My response to that is: Do you have a life? The job of a Financial Planner is a full-time gig. They know a lot and need to stay up-to-date in the ever-changing world of finance. If you keep up with all the latest tax legislations, investment regulations, and insurance opportunities and lingo, then be my guest and give it a whirl. What you'll still be missing is a third party perspective, and possibly some creative strategies that you (or your research) didn't think of.

In addition, I believe in delegation, and the fact that time is money. You defer your legal matters to your lawyer, and tax matters to your accountant. You defer your medical matters to your doctor. You don't perform surgery based on an internet program's recommendation, do you? And if you are still asking why you can't just do it on your own, please refer to point 5 again. I've yet to find a financial planning program that is intuitive enough to do all that.

Your time outside of work is better spent enjoying life, spending time with your family, and chasing down dreams. Not toiling over your finances in a hap-hazard way. Really.

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This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Intimidated by Retirement Investing? Get Professional Help!

Sarah Winfrey — Wed, 11 Apr 2007 19:09:19 +0000

It might seem like something of a no-brainer to ask for professional investment advice, particularly about retirement. That said, there's still an astonishing number of people I know who don't. They either go it alone, wading through jargon that they don't understand and desperately trying to make numbers that don't mean anything to them mean something, or the guess and hope they get lucky, or they avoid the topic altogether.

I'm lucky. I work for a company that offers a very generous matching program for funds invested in a retirement account. It's a non-profit organization, so I have a 403(b) instead of a 401(k). There are some salient differences there and I'm not sure which I would choose if I could choose anything, but the 403(b) is my only option so I knew I was going with that. It seemed like it would be easy to figure out, given the amount of colorful brocheures full of smiling people that I was handed on my day of hire.

And the fact that I successfully avoided those brocheures for almost a year? Well, let's chalk that up to planning a wedding and the fact that the generous matching program doesn't start until I've worked here for a year, and not to fear or...yeah. Please?

Recently, though, the day came when I actually looked at the packets of information. Lo and behold, I felt intimidated. This in spite of the fact that I'm knowledgeable about personal finance, I have other investments, and I'm comfortable with the basics (diversify (but not too much!), look into growth when you're young, etc.). A big part of the intimidation came from the fact that the choices I make in this situation determine so much of my future. I felt so intimidated that I avoided it for a week. Then I called my dad. Then I actually read all of the material. Finally, I gave up. I realized that I couldn't do it myself, got the name of our rep from HR, and called him. Once again, I'm lucky. He was coming out today and still had appointments available.

I met with him this morning and it was wonderful. He was professional and friendly, and comfortable with eye contact (a must for me!). He was able to explain the funds and even recommend some. He gave me an outside source that I could check for other reviews and to corroborate his claims. He even brought a calculator so we could determine how much, exactly, I want to put into the account every paycheck. I feel so relieved. My money is in good hands, and he will be keeping track of the funds to make sure they continue to perform well.

I've heard the horror stories about shoddy or bad financial advisors. You've heard the stories. We've all heard the stories. So, in light of my experience today, here are some things to think about when you're choosing someone to meet with.

Make sure your financial advisor comes recommended. The man I met with today represents a major company. He graduated from the university I work at and also advises some close friends of mine. Their accounts have made money, and they like this man.
Get external support for what he says. A good financial advisor will tell you where you can see the funds he recommends tracked. If the source he gives you is his own company, ask for another one. You can find it yourself, but he should be willing to direct you there without a problem.
Ask questions that are important to you. Today, I confirmed with him that I can reallocate assets later, if fund performance changes or my investing goals change. I also found out that my 403(b) is easy to rollover to another company, to a 401(k) if I ever get a job in the public sector, and even to and IRA and a Roth IRA. Since I don't plan to work this job forever, that was important to me.
Get a feel for how truly prepared your advisor is for your meeting. Professionalism can cover a multitude of sins, but not ineptitude, ignorance, or dishonesty, especially in the world of finanicial advising. Look beyond what he wears and how he talks to you to other details. Is he familiar with any forms you fill out (mine was--he saw immediately that the ones HR had given me last year were out of date)? Does he know your company well? Does he have the tools he needs to do his job well (like a calculator, and an extra pen)?
Make sure he listens to you. An advisor can know all there is in the world to know about investing and still not be the person you want to deal with. Does he make time during his spiel to answer your questions? Is he willing to be interrupted when you have a question? Does he respond to how much you know about investing, or does he just go through his pitch? All of these are important when you're trying to find someone you may be working with for quite a while!

Happy investing!

This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: