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10 Questions (and more) to Ask Before Choosing Your Financial Advisor

  1. What do you think is a reasonable, real after-tax return for an investor with average risk tolerance? For one with a low risk tolerance? How have the portfolios of your existing clients performed since the credit crisis began? Over the past five years?

  2. How do you get paid?  Do you offer breakpoints?  What does a typical fee structure look like for one of your A – Clients?

  3. How do you find the best deal on insurance? Do your brokers deal with a number of insurance companies, or do they tend to do business with only one? How often should I put my insurance business out to bid?

  4. What did you advise your clients to do as the credit crunch unfolded? At what point – if ever – did you recommend that they modify their portfolios? How have you positioned them to withstand further deterioration in the financial sector and in consumer credit

  5. What should I do with my real estate holdings? Is there any way to hedge my exposure to any future downturn in the real estate market? Should I try, or is this futile?

  6. What’s your view on inflation? What would be the consequence for me of a resurgence of asset-price or consumer-price inflation? How do I hedge my portfolio against such an eventuality?

  7. Who should be my main point of contact among my financial, legal and accounting advisors? Will you coordinate with my lawyers and accountants, or do I need to make three calls when I only want to make one?

  8. Where will my money reside? Do you hold client’s funds in your company’s accounts or do you use a bank as a custodian?  Who will create the statements for my portfolios?

  9. How often will I meet with you? How often will I receive performance reports for my portfolios?  Is there a charge for scheduling review meetings?

  10. Should I hedge my concentrated stock positions? My exposure to my own company? Is there any way to do so on a tax-efficient basis that doesn’t attract too much attention from the Internal Revenue Service?

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How to Determine if We are a Good Fit

“Rick, you said that one of the things Warren Buffet looks for is someone he enjoys spending time with. How do you know whether it is going to work out when you meet a new advisor?” asked Mr. Giaconda, a retired CEO.

That’s a very good question. Here’s what I know: there must be a good fit for long-term success. While you are evaluating an advisor for a good fit they must be evaluating you as well.  We reviewed our most enduring relationships and have identified Seven Key Characteristics.

They Live Their Life by Principles

Principles like honesty, integrity and hard work—to name just a few—are the foundation of everything that they do. They do not sacrifice principles for results… the ends never justify the means.

They Know the Value of a Dollar

Mr. “Plimpton,” a successful family business owner, said it best when he said, “Every dollar that I have is valuable to me. It came by the sweat of my brow and I risked everything I owned to start this business and keep it running. I don’t want to pay one more dollar in taxes than I am required.” They have worked hard to earn, save and accumulate their money.

They Believe Wealth is More than Money

They know that True Wealth has many dimensions… it is more than just “money.”  It includes personal, social, spiritual, familial, and intellectual capital. They believe all wealth is worth preserving and nurturing“Relationships are more important than my money. Of course, I want to have enough to secure my lifestyle, but I want to positively impact my family and my community,” confided Dr. Lynnfield, a long-time widow.

They Are Open to New Ideas

They know there is no monopoly on ideas, no corner on the creativity; therefore, they approach new ideas with an open mind. Many have a reasonable plan and good advisors… yet, they want to move to the next level and live impactful lives.

They Know Strategy Trumps Tactics

Their experience has taught them the value of strategy first: aim before you fire. Even though strategy requires more time up front, it pays off handsomely in the long run.

They Know What They Do Well

By implication, they know what they don’t do well. “I tried the do-it-yourself route with my money. What a disaster! I know enough to be dangerous … besides, I can make more money with my time than it costs to delegate,” shared Mr. Watts, a business owner who recently converted the wealth in his business to cash.

They Care about Value and Quality

They agree with John Ruskin when he said, “There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.”

They hire, respect and reward talented specialists… and desire win-win relationships with people they enjoy.

These Seven Key Characteristics have been the foundation for every enduring relationship we have… and we look for them in everyone we work with… whether business owners, retired professionals or women on their own.

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Debunking Common Retirement Assumptions

Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security.  They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference.

A retirement strategy directly addresses the “when, why, and how” of retiring. It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps.

This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had planned, and according to a 2019 study by the Employee Benefit Research Institute, about 43% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself.1

Some people dismiss having a long-range retirement strategy, since no one can predict the future. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements. It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines tax implications and potential tax advantages. It takes possible health care costs into consideration and even the transfer of assets to heirs.

A prudent retirement strategy also entertains different consequences. Financial advisors often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the advisor and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time.2

Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When you have such a strategy, you know what steps to take in pursuit of the future you want.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – ebri.org/docs/default-source/rcs/2019-rcs/rcs_19-fs-2_expect.pdf?sfvrsn=2a553f2f_4 [2019]
2 – investopedia.com/terms/m/montecarlosimulation.asp [6/10/19]
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Succession Planning In A Family Business

Katlyn Graham:  Hello, I’m Katlyn Graham, here with Rick McDonald, the president of US Advisory Group. Welcome, Rick.

Rick McDonald:  Hello, Katlyn.

Katlyn:  Thanks for joining us here today.

Rick:  My pleasure.

What does US Advisory do?

Katlyn:  Rick, would you mind starting off just explaining a little bit about what US Advisory Group does?

Rick:  Sure. US Advisory Group was a New England‑based wealth management company. We work primarily with family business owners and individuals who have collected a fair amount of assets and are looking to put the money to work in a way that supports what’s important to them.

How do people get to be successful business owners?

Katlyn:  Let’s talk about family business owners here. How do people get to be successful business owners?

Rick:  Most family business owners ended up where they are today by one of a couple of different ways. Either they inherited the company and they’re in the second, third, maybe fourth generation in running a family business. Or they basically, once upon a time, realized that they wanted more freedom and flexibility. They thought starting a business would be a good way to do that, to be their own boss. Lo and behold, they were successful.

Obviously, some weren’t, some are. But through trial and error, you find yourself years later running a company that’s been successful. It’s working for you. You’re at a position now where you’re trying to figure out, what are we doing with this business? Where’s it going and what’s its role in the family?

What is important about succession planning for family businesses?

Katlyn:  I see. Now, about succession planning. What is important about succession planning for family businesses?

Rick:  Well, that’s a good question. A lot of people are looking back at as they get older and trying to figure out, where’s the exit plan? Is there any exit plan? For many people, there isn’t one.

But the point is, most folks will find that 80, 90 percent of their net worth is tied up in the bricks and mortar of the business. The question is, how do you transition that from illiquid net worth into something that’s investable or something that’s able to be repositioned in the areas and places that will better support what’s important to you as you get older, as you retire.

The issue then becomes, where are you going with the business and what role is the business’ net worth to you? Particularly, it might be giving you a fine earning or a fine lifestyle. But if you’re going to slow down, if you’re going to retire, if you’re not going to be showing up at work on Monday morning and putting 60 and 70 and 80 hours of work a week in. How are you going to recreate your income?

Is the business capable of paying you the kind of lifestyle you want by having interim or non‑family member, someone else manage the company other than you? What risks are associated with you not being there if you’re the most important person in the company? Alternatively, is it time to start looking at an exit plan, a succession plan?

Katlyn:  Some deep questions for owners of family businesses for sure. I could see why they would need some advisers during that critical period. Thank you so much Rick for explaining all this. I really appreciate it.

Rick:  You’re very, very welcome.

Photo credit: FutUndBeidl / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

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