Elections Matter But Life Transitions Are More Important


Many folks are feeling as much anxiety about the end of this contentious presidential election as they were feeling during the long months of campaigning. It’s impossible to predict with 100% accuracy what a new president and a new Congress are going to do. That feeling of uncertainty can send out ripples through our financial and political systems until we get a clearer picture of the agenda for the next four years.

As important as elections are, we believe that a solid financial plan gives you the tools to keep improving your Return on Life no matter what’s happening with our nation’s politics. Instead of fretting about what may or may not happen starting in January, try to focus on these three areas of your life that will help you control major transitions.

  1. You can’t control the economy … but you can control your career.

Elections sometimes spark short-term volatility in the financial markets. But the economy is bigger than any one president, especially while Covid-19 continues to change everyday life and  global business.

As companies continue to adapt to the pandemic landscape, job opportunities are becoming less centralized and more diverse. You might be able to take your dream job on the other side of the country without leaving the home your family loves. Or you might spot an emerging market in the middle of all this displacement where you can open your own company.

  1. You can’t control taxes … but you can control your saving and spending.

Presidential candidates talk a lot about their tax plans on the campaign trail. The need for Congress’ cooperation to put that plan into action usually isn’t discussed quite as much.

Whether your preferred candidate won or lost, there’s no guarantee that your taxes are going up or down. But you can anticipate when your kids will be going to college, if you’ll need to replace the family car soon, or if you want to move to a beachfront condo when you retire.

Your tax rates will play a role in handling these transitions. But your levels of saving and spending have a bigger impact on your financial plan than any other factor. If you’ve never kept a monthly budget before, make 2021 the year that you start. Sit down with your spouse and weed out all those recurring subscriptions and memberships you’re not using. Make a weekly meal plan so you’re not eating out so often. The couple hundred dollars you economize every month could grow into a comfortable padding for your nest egg over time.

  1. You can’t control who’s president … but you can take control of your financial plan.

Per the clamor on social media, was this really “the most important election of our lifetimes?” It could be decades before we have enough perspective to judge. But as far as your financial planning goes, here’s another way to think about presidents:

A 67-year-old baby boomer eyeing retirement might have taken her first part-time job when Lyndon Johnson was president. As of 2020, that senior has lived and worked through ten different presidents.

It’s very doubtful that you’re going to love every single president who serves during your career. Yes, certain things that each one does might move the needle on your retirement accounts in the short term. But it’s folks who stick to their plans and continue to save and invest regardless of what’s happening in the outside world who build long-term wealth.

No matter how you feel about the election, you can take action today to keep your financial plan on track. Get in touch and we’ll schedule an appointment to start planning for 2021 and beyond.

Election Resources

7 Obstacles That Prevent People From Starting Businesses (And How To Overcome Them)

Millions of people dream of becoming entrepreneurs, but they never take that all-important first step. Too many things get in the way of their pursuit of business ownership, or they keep convincing themselves that their dream isn’t realistic. 

If you ever want to move past this phase and found your own business, you need to acknowledge the specific obstacles that are holding you back and work to resolve them. Here are seven of the most common challenges that may be standing between you and your entrepreneurial dreams—and ways you can kick them to the curb. 

1. Financial limitations

Launching a business takes money, and most people don’t have ample cash to throw at a startup. There are several options here. First off, you could begin saving now for the funds to establish your business. If you shop for a better mortgage and reduce your house payments by refinancing, you can sock the savings away in your startup fund. You can trim costs in other areas to put away a few hundred dollars each month or save even more by picking up a side gig.

Barring that, you can secure funding in a variety of ways, such as borrowing from friends and family, crowdfunding, seeking loans and grants or even working with angel investors and venture capitalists. There’s always a way forward. 

2. Inexperience

Becoming a successful entrepreneur typically demands experience; you need to understand your industry and business management in general if you want to earn a living from your venture. When you have limited experience, you may be reluctant to move forward, and understandably so.

You can make up for this, however, by actively seeking the experience you lack. Take an online course to gain a grasp of business management basics. Strive for a leadership position with your current employer so you’ll acquire strategic planning and people management skills. Work with a mentor or shadow an entrepreneur you admire. 

3. No standout idea

You can’t build a business if you don’t have a promising idea for a product or service you can sell. Without a solid business plan, you won’t be able to convince investors or partners to join you—and you won’t even know where to begin. Unfortunately, this is one of the least “fudgeable” obstacles on this list. Without a good idea, you can’t start a business, period.

Luckily, there are ways to stimulate better idea generation, such as talking to a broad range of people, reading entrepreneurial content and taking a more robust approach to brainstorming. Techniques like mind mapping and word banking can get your creative juices flowing. 

4. Current responsibilities

Some people avoid starting a business because of existing responsibilities or constraints on their time. Their current full-time job, their status as a parent or other personal responsibilities hold them back from their entrepreneurial ambitions.

Here the best approach is to determine how much of an impact these responsibilities have and consider ways to delegate or remove them. Could you realistically quit your day job, for example, or hire someone to help with household duties or childcare?  

5. Fear of failure

Lack of confidence is an entrepreneurship killer. It’s true that the failure rate for new businesses is relatively high, with half of new companies failing within five years. To buck those odds, you’ll need a healthy dose of confidence in yourself and your idea. 

The only solution to a fear of failure is to change your mindset. You have to see failure as an opportunity for learning and growth and stop seeing it as the end of the road, an indictment of your abilities or a stain on your character. Reading accounts by successful entrepreneurs will inspire you to see the possibilities rather than focusing only on the risks.  

6. Aversion to stress or hard work

Starting and running a business demands a lot of effort. You’ll likely be putting in long hours and dealing with stressful issues. On top of that, your first few years are apt to be highly inconsistent, with your business only making a profit some of the time. This can wreak havoc on your finances and peace of mind. If you’re not feeling up to this kind of pressure, or if you’re loath to work more than 40 hours a week, entrepreneurship may not be for you.

Again, the only way around this obstacle is to change your attitude. Remember that all this hard work will be in service to yourself, not an employer. While the risks are on you, so are the rewards.

7. Poor timing

One of the most common excuses you’ll hear (or hear yourself saying) is that it’s “just not the right time” to start a business. The truth is, there’s never a truly “right” time—you can always find some reason that today, or this month or this year isn’t ideal for launching your venture. 

But like beginning a diet on a Wednesday or joining a gym in February, the trick is to make your own right time. Microsoft was born during the oil crisis of the 1970s, while Airbnb and Uber were founded in the depths of the Great Recession. Remind yourself that the success of your business will depend not on “the times” but on you.

The Realities of Entrepreneurship

It’s true that anyone can become an entrepreneur with enough grit and persistence. Most entrepreneurs with solid ideas have a good chance of becoming successful if they remain adaptable. But it’s also important to realize that not everyone is cut out for entrepreneurship

If you’re intimidated by the stress, inconsistency and long hours associated with startup life, or if you truly love your day job and you’re afraid to leave, maybe business ownership isn’t right for you. That said, if you feel the pull of entrepreneurship but keep making excuses to avoid getting started, you owe it to yourself to challenge those excuses and try to move past them.

This article was written by Serenity Gibbons and published on Forbes.com.

How To Test Drive Retirement

Want to Retire? Take It for a Test Drive

There are many reasons why people who could retire are hesitant to do so. Some people think they need to wait until they’re 65 or older. Some are worried about running out of money. Many parents want to keep supporting their children through some major life transition, like college, marriage, or buying a first home. 

Maybe the most common reason we see for a retirement delay is folks who just can’t imagine their lives without work. That’s understandable. A routine that’s sustained you and your family for 30 or 40 years can be a hard routine to shake. 

But retirement doesn’t have to be all or nothing right away. If just thinking about retiring makes you jittery, use these tips to ease into retirement a little at a time. 

1. Talk to your family.

Clear, open communication is an essential first step to approaching retirement. Be as honest as possible about what you’re feeling. What worries you about retirement? Does the idea excite you? What do you envision your days being like? Where do you want to live? What does your spouse want retirement life to be like? 

2. Talk to your employer.

Many companies have established programs to help longtime employees transition into retirement. You might be able to trim back your hours gradually to get an idea of what days without working will be like. You’re also going to want to double-check how any retirement benefits you may have are going to work. Discuss any large outstanding projects with your supervisor. Make a plan to finish what’s important to you so that you can leave your job feeling accomplished. 

Self-employed? Give your favorite employee (you) less hours and fewer clients! Update your succession plan and start giving the soon-to-be CEO more of your responsibilities. Make sure you have the absolute best people working for you in key leadership positions so that your company can keep prospering without your daily involvement. 

3. Make a “rough draft” of your retirement schedule. 

What are you passionate about? What are some hobbies you’d like to develop into a skilled craft? Do you want to get serious about working the kinks out of your golf swing? Are there household projects, repairs, or upgrades you want to tend to? A crazy idea you kicked around at work you’d like to build into a new company? A part-time job or volunteer position you’d like to take at an organization that’s important to you? New things you want to try? New places you want to visit? Grandkids you want to see more often?

Try filling out a calendar with some of your answers to these questions. As you start to scale back your work hours, take a few lessons or volunteer shifts. Sign up for a class. Leave town for a long weekend. See what appeals to you and what doesn’t. 

Remember, you don’t have to get your schedule right the first time! A successful retirement will involve some trial and error. Learn from things you don’t like and make a point to spend more time doing the things you do like. 

4. Review your finances. 

This is where we come in! 

Once you and your spouse have settled on a shared vision for retirement, we can help you create a financial plan to help ensure you are financially fit for (semi)-retirement. We’ll go through all of your sources of income, retirement accounts, pensions, savings, and other investments to lay out a projection of where your money is coming from and where it’s going.

We can coordinate all aspects of your situation and collaborate with you on the best course of action. You don’t have to face retirement alone and make big decisions without expert guidance. 

Coming in and talking to us about your retirement is a great “Step 1” option as well. So if you are dreaming of those days when work is optional, give us a call and we can help you through this phase of life.

For more retirement resources check out some of our other blog posts.

For more help with retirement, the AARP website can be a great resource as well.

Navigating Life’s Transitions


Navigating Life’s Transitions By Rewriting Your Story

Your plans for the future are really a story that you tell yourself. Some of the chapters are easy to imagine and plan, like buying your first home, sending your kids to college, or picking out dream retirement destinations with your spouse. But life has a way of throwing unexpected plot twists at you, such as, say, a global pandemic that upends how you live and work. If you feel like your story has lost some of its most important plot threads, use this three-step method to find a new happy ending and navigate life’s transitions.

  1. Accept

An unexpected job loss. The death of a loved one. Losing your home in a fire. A major illness.

Life is never the same after you experience these kinds of unexpected transitions. Your lifestyle might change. Perhaps your relationships might change. Your daily routine might change. And your long-term personal, professional, and financial goals might have to change as well.

Letting in feelings like sadness, embarrassment, and fear can be very challenging. If you’re having trouble expressing yourself to your spouse or another confidant, try journaling. Getting your thoughts and emotions down on paper can help open you up for the conversations you’re going to need to have as you navigate through this new transition.

  1. Edit

Now that you’ve accepted this change in your life, you need to figure out how you’re going to adapt to it. Big transitions often feel so overwhelming that they can be paralyzing. Where do you start?

Start with today.

Break the new transition down into smaller parts. What is one thing on your list that you can accomplish today and that you can build on tomorrow? If your doctor says you have to start eating better, make a new shopping list. Need to exercise more? Buy a pair of running shoes. Brush up your resume so you can start a job hunt. Register for an online class that will help you make a career change. If it’s time to tighten the family belt, cancel that streaming subscription you never use.

Racking up smaller daily wins will make this new transition feel a little more manageable every single day. You might also create some new habits that will make you healthier, happier, and more productive.

  1. Rewrite

In the moment, unexpected transitions can feel like an end. But as you gain personal momentum from your new routine, you’ll start to see that there are opportunities ahead of you as well. And when you finally close this chapter, you can start writing a new one.

Some of the details in this revised chapter might be a little different than you imagined before. But not all change is bad. Maybe, instead of retiring to that beachfront condo, you remodel the family home and have your grandkids over more often. If you have to hang up your tennis racket, taking long walks with your spouse could be a new way to exercise, unwind, and spend time together. Now that one phase of your career is over, it might be time to promote yourself to CEO of your own company.

If you’re really struggling to see a way through an unexpected transition, here’s an easy daily win to get you started: get in touch with us. We can review your $Lifeline in-person or over a video chat to figure out if any of your anticipated transitions need to be edited. We can also coordinate with other professionals like your attorney or accountant to iron out any other major adjustments you might need to make.

No matter how your life story continues to change, we’re here to help you make the next chapter the best one yet.

You can also find some great resources for transition on the AARP website.

6 Easy Ways to Ruin Your Retirement

6 Easy Steps to Ruin Your Retirement

Many people I know have concluded that retirement was worth waiting for and worth planning for. Those who planned well (and who are lucky enough to have good health) are generally finding this to be a very satisfying time in their lives. But those who didn’t plan well or who couldn’t save enough are finding that retirement can be difficult.

My commitment is to help people, but this week I’m switching roles so I can give you some dynamite tips for having an unhappy retirement. (Of course, what I’m really advocating is that you do not do these things.)

Don’t save enough money.

Spend (and borrow) whatever it takes to keep yourself and your family happy. You can always catch up later when you get into your peak earning years, when the kids are gone, or when you’re finally finished paying for whatever else is more important right now.

The likely result: You could find yourself in “panic mode” in your 50s and 60s. You could have to work longer than you want. Another popular choice, you could have to reduce your living standards after your work life is through. You could fall prey to persuasive salespeople (see my final tip below) who do not have your best interests at heart. Or maybe even all of the above.

Be careless about how you plan and budget for retirement expenses.

When I was an advisor, I was amazed how many investors neglected to include taxes as a cost of living in retirement. If you’re living off of distributions from a non-Roth IRA or 401(k), the full amount of those distributions is likely to be taxable. For extra credit: Don’t spend any money on a financial advisor to help you plan.

The likely result: You may go into “panic mode” when your accountant hands you an unexpected tax bill.

Lock in your expectations about your life in retirement and make rigid financial decisions.

There are plenty of ways to do this. You could sell your house and move somewhere cheaper even though you don’t know anybody there. Another option, you could buy a fixed annuity to have an income that’s certain. You could fail to establish an emergency fund. (After all, what could go wrong?) You could get sick or need surgery that isn’t covered by Medicare or other insurance.

The likely result: Things will happen that you don’t expect, probably sending you once again into “panic mode” and making you vulnerable to the pitches from all manner of enthusiastic salespeople.

Ignore inflation, since it doesn’t seem like a current problem.

Assume that $1,000 will buy roughly the same “basket of goods and services” in 2026 and 2036 that it will today. Be confident that you know what the future holds. After all, the years of high inflation that are often cited happened a long time ago. Things are different now.

The likely result: You probably won’t be thrust into “panic mode” since inflation is usually gradual. But one day you will realize with a start that things are costing a lot more than they “should,” and your income can’t keep up.

Keep all your money where it’s “safe,” in fixed income.

You’ll have lots of company among current retirees whose “golden” years are being tarnished because they have to rely on today’s historically low interest rates. Don’t just blindly invest in equities, because, as we all know, you can lose money in the stock market.

The likely result: You may start retirement with sufficient income to meet your needs, but those needs will probably increase, especially for health care, in your later retirement years. Your fixed income may be safe, but it won’t expand to meet increased needs.

Attend investment seminars and trust the presenters, then make important decisions without getting a second professional opinion.

You could follow the unfortunate example of a couple I know who, in their 50s, attended a retirement seminar and got some bad advice. They met privately with the presenter/saleswoman, then rolled their entire retirement accounts into a variable annuity. They thought they were giving themselves good returns, future flexibility and saving a lot of money in taxes.

In reality, they gave themselves huge headaches and nearly lost half their life savings. I helped them fight the unpleasant (and ultimately successful) battle to get out of their contract and recover their money.

This couple could teach us all some lessons, but the terms of their settlement makes that unlikely. If they disclose that they got their money back, or if they disclose how they were deceived and cheated, they will have to give the money back to the insurance company.

The likely results: You will be disappointed in the decisions you make. You will have many reasons to never trust an investment sales pitch again. You will have less money in retirement than if you had never heard of that particular seminar.

So now you have it: Six easy steps to ruin your retirement. I hope, of course, that you do just the opposite of each one of these. Unfortunately, I think there’s a high likelihood that somebody you know has fallen into one or more of these traps.

My advice: Learn from their mistakes.

Financial Planning is About Making Your Life Plan A Reality

Many folks who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about IRAs, 401(k)s, or how much you’re saving. Instead, we begin by talking about you, not your money.

Putting your life before your financial plan.

As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.

Our job is to build a financial plan that will help you make your life plan a reality.

Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximize your return on investment.

But we believe maximizing your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.

Feeling free.

One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next dollar, you’ll start exploring what more you can get out of life than just more money.

Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.

Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.

The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.

And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.

What’s coming next?

So, when does the planning process end?

If you’re like most of the people we work with, never.

Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.

Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.

Some transitions we’ll be able to anticipate, like a child going to college, a big family vacation you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big out-of-state move for work, we’ll help you adjust for as necessary.

In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.

Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centered Planning can help you get the best life possible with the money you have.  Visit Our Website to learn more.

We also have some really great resources on our YouTube Channel, so head on over there to check it out.

What Is a Fiduciary Financial Advisor?


“A fiduciary duty is the highest standard of care,” according to the Cornell Law Dictionary. (istockphoto)

IN APRIL 2016, A NEW word entered many investors’ vocabularies: fiduciary. Even for those who’d heard it before, the term took on a whole new meaning when the Department of Labor’s Fiduciary Rule was released. All of a sudden financial advisors fell into two camps: fiduciaries and non-fiduciaries, adding a new level of confusion – and risk – to the advisor-client relationship for many investors.

Research by digital wealth manager Personal Capital found that nearly half of Americans falsely believe all advisors are legally required to always act in their clients’ best interests. Not only is this inaccurate, but it can also be detrimental to investors who unwittingly expose themselves to biased and potentially costly advice from advisors who put their own interests before investors.

“Not all advisors are required to put you first,” says Jay Shah, chief executive officer of San Francisco-based Personal Capital. “Only financial advisors who are fiduciaries are required to act in the best interests of their clients.”

What is a fiduciary? A fiduciary is a person or legal entity, such as a bank or brokerage firm, that has the power and responsibility of acting for another (usually called the beneficiary or principal) in situations requiring total trust, good faith and honesty.

The most common example of a fiduciary is a trustee of a trust, but anyone can be a fiduciary. If you undertake to assist someone in a situation where they place total confidence and trust in you, you have a fiduciary duty to that person. Corporate officers are fiduciaries for their shareholders, as are attorneys and real estate agents for their clients. Some, but not all, financial advisors are fiduciaries.

When you’re the beneficiary of a fiduciary relationship, you give that fiduciary discretionary authority over your assets. So a fiduciary financial advisor can buy and sell securities in your account on your behalf without needing your express consent before each trade. Because fiduciaries have this discretionary authority, they’re held to a higher standard than non-fiduciary advisors.

The fiduciary duty is the highest standard of care. According to the Cornell Law Dictionary, “A fiduciary duty is the highest standard of care.” It entails always acting in your beneficiary’s best interest, even if doing so is contrary to yours. For a financial advisor, this may mean recommending a product that results in reduced or no compensation because it’s the best option for the client.Play VideoPlayUnmuteLoaded: 0%Progress: 0%Current Time 0:04/Duration 1:39

According to the Securities and Exchange Commission, which regulates registered investment advisors as fiduciaries, the fiduciary duty also entails:

  • Acting with undivided loyalty and utmost good faith
  • Providing full and fair disclosure of all material facts, defined as those which “a reasonable investor would consider to be important”
  • Not misleading clients
  • Avoiding conflicts of interest (such as when the advisor profits more if a client uses one investment instead of another or trades frequently) and disclosing any potential conflicts of interest
  • Not using a client’s assets for the advisor’s own benefit or the benefit of other clients

The commission concludes by stating that “departure from this fiduciary standard may constitute ‘fraud’ upon your clients,” which could result in the firm’s or investment advisor’s registration being revoked, the advisor getting barred from the industry or multi-million dollar disgorgement’s, among other penalties.

Fiduciaries have a “duty to care.” That means these obligations extend beyond the first meeting. A fiduciary will continually monitor a client’s investments and financial situation and adhere to best practices of conduct for the duration of the relationship.

“I think most investors would expect their advisors are doing that anyway, but that’s not always the case,” says Shelby George, senior vice president of advisor services at Manning & Napier, an investment manager in Fairport, New York. Non-fiduciaries are held to the suitability standard, a lower standard of care.

Fiduciary standard versus suitability standard. For advice to be considered merely “suitable,” the financial professional must only have an adequate reason to believe a recommendation fits the client’s financial situation, needs and other investments. For that to be the case, an advisor must obtain adequate information about the investment as well as the customer’s financial situation before making the recommendation.

The most common difference between “a fiduciary and an advisor acting under a suitability standard is the decision-making process,” George says. Before making a recommendation, fiduciaries undergo a prudent process designed to determine their client’s best interest. After making a recommendation, they discuss it thoroughly with the client to ensure there’s no misunderstanding about the recommendation and the fiduciary’s rationale for making it.

“Advisors acting under the suitability standard may, but are not required, to have the same depth of discussion,” George says. As a result, their duty to a client’s investments and financial situation ends once the trade is placed. These advisors aren’t obligated to monitor client accounts or financial situations on an ongoing basis.

Instead, the suitability standard only calls for fair dealing and best execution, which means the advisor must do the following:

  • Execute orders promptly and at the most favorable terms available, determined through “reasonable diligence”
  • Disclose material information
  • Charge prices reasonably related to the prevailing market
  • Fully disclose any conflicts of interest

The suitability standard does not require advisors to put their clients’ best interests before their own, nor must they avoid conflicts of interest.

“If your advisor isn’t a fiduciary, he can steer you into products that put more money into his pocket, as long as they’re considered suitable for you,” Shah says. For instance, when faced with two comparable investments, one of which has a higher commission, a fiduciary couldn’t recommend the pricierinvestment because paying more in fees isn’t in the client’s best interest. An advisor held to the suitability standard, however, could recommend the more expensive product provided it’s “suitable” for the client.

“Of course, not all non-fiduciaries are bad guys hoping to eat your financial lunch, but it’s important to understand that, legally, they can,” Shah says. “What’s more, their compensation structure could inherently make it difficult for them to act without conflicts of interests.”

How advisors are compensated. Generally, you pay for financial advice in one of three ways: advisory fees for fee-only advisors, commissions, or a combination of fees and commissions for fee-based advisors.

Fee-only advisors are either a flat or hourly rate, on a per- service basis or as a percentage of assets under management. They do not earn commissions or trading fees so their compensation is independent of the investments they recommend.

Commission-based advisors are paid from the sale of investments. They may also receive a fee from their financial institution for selling a particular product, collect a percentage of the assets a client invests or be paid per transaction.

The Financial Industry Regulatory Authority requires that commissions and fees be “reasonable” and disclosed at or before the time of investment. The organization’s 5 percent guideline considers any markup at or above 5 percent seldom reasonable and any commission near that threshold is subject to regulatory scrutiny and must be justified.

An advisor who receives both a flat fee and commissions is considered fee-based. Fiduciaries must be fee-only or fee-based. Non-fiduciaries can be commission-based or fee-based.

The commission structure opens the door to conflicts of interest between advisors and their clients. An advisor who is paid based on the products recommended would have an incentive to steer clients toward investments that generate a higher commission. If an advisor is compensated per transaction, clients may be encouraged to trade excessively, a practice known as churning accounts.

“Many advisers do not provide biased advice, but the harm to investors from those that do can be large,” writes the Department of Labor in the Federal Register Vol. 81, No. 68. The Obama administration’s Council of Economic Advisers estimated that advice from advisors with conflicting incentives costs IRA investors about $17 billion per year. The council estimated that recipients of conflicted advice earned 1 percent lower returns each year.

If conflicted advice is given when a 401(k) is rolled over into an IRA, it can cost the investor an estimated 12 percent of his savings over 30 years, with those savings running out more than five years sooner as a result.

These findings, coupled with investors increasingly seeking investment guidance for retirement savings outside of an employer-sponsored plan, particularly with rollovers, provided the impetus for the Department of Labor’s Fiduciary Rule.

The DOL’s Fiduciary Rule “is not moot.” The goal of the rule was “to encourage more transparency of fees, close certain payment loopholes, simplify retirement advice and improve investor education,” says Jason Schwarz, president of Wilshire Funds Management and Wilshire Analytics in Santa Monica, California. But the Fifth Circuit Court of Appeals found the rule “inconsistent with governing statutes” and said the department was “overreaching to regulate services and providers beyond its authority.”

President Trump told the department “to re-examine the Fiduciary Rule and prepare an updated economic and legal analysis” of its provisions. The department could then ask the Fifth Circuit Court of Appeals could be asked to review the rule again or it could be taken before the Supreme Court.

As the Fifth Circuit Court of Appeals writes in its decision, the case “is not moot. The Fiduciary Rule has already spawned significant market consequences.” Many firms have removed products like high-fee, low-cost mutual funds that don’t meet the fiduciary standard, Schwarz says. The result for investors is higher-quality investments and an easier investment selection process. “I think it’s not unreasonable to expect the fees advisors charge will come down along with the fees of the underlying products they use,” he says.

“It’s impossible for the industry to roll back the change that’s taking place, as much as some institutions would like to,” Shah says. Investors are demanding more objective, transparent advice and fee structures. “Smart advisors will realize this change is coming and that advice that is ‘good enough’ is no longer good enough for today’s investor.”

Meanwhile, “among the over 300,000 brokers and advisors across the industry, the delivery of fiduciary advice is uneven, erratic and irregular,” says Knut Rostad, founder and president of the Institute for the Fiduciary Standard, a nonprofit advocate of the fiduciary standard in McLean, Virginia.

*This article was written by Coryanne Hicks for U.S.News

Where Not To Die In 2019!

After Trump’s estate tax cut, the federal estate tax is reserved for the richest of the rich, but in the 17 states and the District of Columbia that levy estate and inheritance taxes, it’s another story. These taxes can kick in on the first dollar and have other sneaky provisions, and the tax bills often come as a surprise to unsuspecting heirs. Yet, in many cases, taxes can be avoided or at least minimized with legitimate planning.[Is the bull market in U.S. stocks over or merely taking a pause? Regardless, Forbes’ Smart Money Moves For 2019 package has you covered.]

In New York, for example, if an individual were to die in 2019 with an estate of $5.74 million, no estate tax would be due, but with an estate of $6.027 million, the tax would be $514,040! “In other words, an increase of $287,000 [in the value of your estate], will cost $514,040, for a tax rate of 179%,” says Bruce Steiner, an estate lawyer with Kleinberg Kaplan in New York. For individuals with estates on the cusp of this dreaded cliff, they could leave the excess to charity, or thanks to a new provision that kicks in in 2019, they could make deathbed gifts. Gifts within three years of death will no longer be included in New York estates after this year, so that will favor gifts of high-basis assets such as bonds and cash, Steiner notes.

Inheritance tax laws are equally onerous, but the problems hinge more on relationships and reek of inequity. Leave assets to your grandkids and they pay zip, while a nephew could pay a 16% inheritance tax, for example. In a case in Iowa, the state Supreme Court stuck a widow with the full $19,000 inheritance tax bill levied on a brokerage account she inherited from her father-in-law, despite having handed over half of the account’s balance to his grandchildren (from her late husband’s first marriage) in a settlement.

In a case in Nebraska, the state Supreme Court ruled that a woman who cared for her late mother’s live-in boyfriend of three decades (after her mother’s death, she helped him once a week with grocery shopping and home maintenance, and he referred to her as his stepdaughter), failed to prove he was like a parent to her, so she wasn’t eligible for the state’s reduced 1% inheritance tax meant for that class of heirs on the assets he left her.

Of the 17 states and the District of Columbia that levy an estate tax or inheritance tax, Maryland is the sole jurisdiction with both levies. For 2019, the map hasn’t changed, but eight states and D.C. are ushering in changes.

Explore estate and inheritance taxes in 2019.

The backdrop for all of this is the federal estate tax, which is assessed at 40%, and is expected to hit fewer than 2,000 estates in 2018, according to Tax Policy Center estimates. The federal exclusion amount—the amount you can leave to heirs exempt from tax—was set at $5 million in 2010, indexed for inflation. The Tax Cuts & Jobs Act doubled the tax break through year-end 2025, making the federal exclusion amount $11.4 million per person ($22.8 million for a married couple) for 2019.

In some states that tied their state exclusion amount to the federal numbers, the states rebelled this year, saying $11 million was too generous. See States Rebel, Won’t Conform To Trump’s Estate Tax Cuts. A Maryland fiscal and policy note related to the legislation showed how the number of Maryland taxable estates would have plummeted from 188 in 2018 to 40 in 2019 if the higher exclusion amount wasn’t halved. (By comparison, when the Maryland exclusion amount was $1 million in 2010, there were 1,057 taxable estates in the state; see Exhibit 1.)

The outcome is more inconsistency in state exclusion amounts for 2019. New York’s exclusion amount is $5.47 million. Hawaii’s is $5.49 million. Maryland’s is $5 million. And in D.C. and in Maine, it’s $5.6 million. D.C. will use a local CPI for indexing, so those will diverge soon. Maryland added a taxpayer-friendly provision called portability that lets a surviving spouse use an unused portion of the first spouse’s break.

Inflation adjustments bumped up Rhode Island’s exclusion amount to $1,561,719 for 2019. In Washington State, it appears to be staying at $2.193 million, the same as 2018, because indexing is based on the consumer price index for the Seattle-Tacoma-Bremerton metropolitan area, which no longer exists (the federal government changed the consumer price index areas this year).

In Minnesota, the exclusion amount has been going up steadily. It’s $2.7 million for 2019 and is scheduled to top out at $3 million in 2020.

Connecticut is the one state that could potentially have an exclusion amount that’s higher than the federal exclusion amount—in 2026. For 2019, it’s set at $3.6 million, then scheduled to increase to $5.1 million in 2020, $7.1 million in 2021, $9.1 million in 2022, and to match the federal exemption amount in 2023.

*This article originally appeared on Forbes.com.

**This article was authored by Ashlea Ebeling.

6 Steps to Prepare Your Finances for a Mortgage


However intimidating entering–or re-entering–the housing market may feel, the benefits could be huge if you approach it in a sensible way.

Following the housing crash in 2007, recovery in the market has been uneven, with many buyers held back by stricter lending standards.

But there are signs of life. Banks are beginning to loosen minimum requirements, with several lenders now offering mortgages with down payments as low as 3 percent.

To anyone buoyed by an improving economy and considering taking the leap, I’d recommend the following steps to prepare.

1. Find a mortgage that makes sense for your financial situation.

Look closely at the fine print of the mortgage you’re applying for. Buying a home can help you build equity and qualify for tax deductions. Unlocking these benefits depends on getting a mortgage that makes financial sense for you. For instance, a fixed-rate mortgage typically gives you a higher starting rate but also the security that your monthly payments will remain the same, whereas an adjustable rate mortgage’s interest rate often starts lower but could spike sharply and leave you scrambling. If you can’t find a mortgage that suits your situation, it is best to hold off and revisit the situation at a later date.

2. Student loans aren’t a mortgage deal breaker.

According to a report from the National Association of Realtors, almost 60 percent of first-time homebuyers said that student loans delayed their saving for a down payment. Student debt is commonplace enough now that in general, lenders will view it as they do any other debt obligation. Having student debt may not prevent you from obtaining a mortgage if you have used it responsibly.

3. Reduce your debt-to-income ratio.

When considering your mortgage application, lenders often look closely at your debt-to-income ratio. For them, your monthly debt obligations mapped against your monthly income is a good indicator of how comfortably you can take on more debt. As you consider whether to buy a house, it helps to get your credit card balance down as low as possible and to examine consolidating your debts into lower monthly payments.

4. Slow down your borrowing.

Applying for a new credit card or loan initiates a hard pull on your credit report that can lower your credit score, which can then impact your eligibility for a mortgage, or the final interest rate you’re offered. If you’re thinking of applying for a mortgage, it’s best practice to hold off on applying for other new lines of credit in the six to 12 months beforehand. Too many recent credit inquiries can be a red flag, sending the message to lenders that you’re desperate for credit.

5. A little self-reflection helps.

Banks have a range of formulas and calculations that they look at when examining your mortgage application, but above all else, they’re trying to make an assessment on how well you can be trusted to pay back a loan of potentially hundreds of thousands of dollars. Lenders will review your credit history closely. How you’ve handled previous debt is the best indicator they have of how responsible you would be with future debt. Think about how reliable of a borrower you’ve been. Missed payments or accounts in collections are going to give lenders pause. You need to be on your best credit behavior.

6. Educate yourself on your credit situation.

Having a good credit score is crucial to getting a mortgage at a good rate. You may still be able to get a mortgage without good credit, but the structures and rates available to you might leave you paying more than you should. Because of how closely it will be scrutinized, you should definitely look at your credit score and report before a lender does. An FTC study in 2013 showed that as many as 25 percent of consumers have an error on their credit report that could affect their score. Your credit report will help you identify areas of improvement. For instance, credit card utilization rate–the ratio of your credit card debt to available credit–can be a major impact on your score. Something as simple as increasing your credit limit could improve your score before you apply for a mortgage.

*Article by Ken Lin

**Article first featured on Inc.com

What is a Stock Market Correction? And a few other facts you need to know.

stock market correction is coming, will you be prepared?

What is a stock market correction? And a few other facts you need to know

It’s been a crazy few days on Wall Street.

 

On Tuesday, the Dow plunged 567 points at the opening bell and briefly sank into correction territory before roaring back. On Monday, the Dow took its biggest single day point plunge in history.

Here’s what you need to know about what’s going on in the stock market.

What is a stock market correction?

A correction is a 10% decline in stocks from a recent high. In this case, that was less than two weeks ago, when the Dow closed at a record high of 26,616. A correction is less severe than a bear market, when stocks decline 20% from their recent highs. The stock market’s last correction began in the summer of 2015 and ended in February 2016.

Why is this happening?

The most immediate reason is a fear of inflation.

 

Last Friday’s jobs report was strong. Wages are rising, and unemployment is historically low. That’s great news for Main Street. But on Wall Street, it raises fears that inflation will finally pick up, and that the Federal Reserve will have to raise interest rates faster to fight it.

How are global markets reacting?

Overnight, world markets followed the United States’ lead and dropped. The Nikkei in Japan closed down 4.7%, China’s main stock index closed down 3.3%, and Australia’s closed down 3.2%. European markets were lower, but not as much as Asia. Stocks were down about 2% in Britain, Germany and France.

What does this mean for the rally?

From Election Day to the record high on January 26, the Dow climbed more than 8,000 points — a remarkable 45%. Many factors were behind the rapid rise: The ever-improving economy and job market, business optimism, record corporate profits, and the big business tax cut, which Republicans made law. The losses in the market since the beginning of last week wiped out about a quarter of that gain. The Dow began Tuesday up about 6,000 points since the election.

Is this the worst decline ever?

No.

Monday’s decline of 1,175 points on the Dow was, by far, the biggest point decline in history. The Dow had never lost more than 777 points in a single day. But in percentage terms, the declines of Friday and Monday are nowhere near the worst. On Black Monday in 1987, the Dow dropped an incredible 22%. That’s the equivalent of a 5,300-point decline today. And on several days during the financial crisis in 2008, the Dow dropped 6% or 7%. Monday’s decline was 4.6%. That was the worst for the Dow since August 2011.

 

Does all of this mean we’re entering a recession?

Stock market declines don’t cause recessions, and they do a pretty poor job of predicting whether one is coming. So while the market plunge might rattle investors and ding consumer confidence, it is not a sign that the economy is in trouble. Unemployment is at a 17-year low. Average hourly wages went up last month the most in eight years. Consumer and business confidence are near record levels. Economists say it would take a much bigger stock market move than Monday’s plunge to change that.

For more information visit us at Heritage Financial Advisory Group and check out the latest episode of The #AskTheAdvisor Show.

Stock Market Sell-Off: Heartburn, Not A Heart Attack