Listen to Me

Many of our new clients tell us they found out about fee only financial planning by listening to talk radio or watching their favorite financial pundit on television.  Media personalities such as Suze Orman, Clark Howard, and Dave Ramsey do a great service by inspiring consumers to take control of their financial lives. We also appreciate those who send clients our way by touting the benefits of fee-only financial planning.

While the work they do providing financial education and empowerment to the masses is terrific, there is one thing missing from their advice — YOU.  Every once in a while we shock clients by recommending a different strategy than the hard and fast rules preached by these financial celebrities.  This is because we take the time to get to know you, what your values are, and help you define your long term goals.  We appreciate that every client is different and can benefit from planning and investment strategies that address their unique needs.  Media personalities have to define systems intended to work for nearly everyone, so their methods tend to be extreme, from only using cash in envelopes for expenses to denying yourself purchases that may increase your quality of life.

Food for thought

Sometimes the methods used by financial celebrities remind us of the health gurus on TV that come to your house and throw away all the food in your pantry or promote juice cleanses and no-carb diets.  These measures may help you lose weight in the short term, but are not always realistic or appropriate for your specific needs.  A few of the financial strategies we have recommended against are:

Pay Off Your Mortgage Early

This principle is one that is so appealing, because interest costs over the life of a mortgage are huge when looked at in dollar terms.  However, we typically do not recommend neglecting contributions to your retirement accounts or emergency funds in order to pay off a mortgage early.  The reason for this is that, for borrowers with good credit, mortgage rates are at historical lows, plus the interest payments are tax deductible.  Therefore, the interest paid on this debt is likely to be lower than the rate of return earned on your investments over a 15 or 30 year period.  While debt can be a four letter word, using debt responsibly as part of a coordinated strategy can help you achieve your long term goals.

Pay Cash For Everything

This concept also makes sense and the goal is to keep you from living beyond your means.  After all, if you can afford something, you shouldn’t have to use a credit card to pay for it.  However, credit cards have made our financial lives easier by allowing us to visit the bank less frequently and carry less cash on us.  Unless you have struggled with credit card debt in the past, we find that many people can handle the responsibility of spending reasonably with a credit card and paying off the balance every month.  Typically only extreme cases warrant a cash only strategy.

Buy and Hold Only Index Funds

This is not bad advice for the average investor just starting out or going it on their own.  This comes down to whether you believe in active or passive investing and cost.  Index funds charge lower expense ratios than actively managed mutual funds.  Therefore, if you believe that no one can beat the market, it is pointless to pay more for active management.  We embrace a more active investment philosophy and acknowledge that while not everyone can beat the market, talented managers that can provide additional returns can be worth the extra cost.  Another problem with this advice is that most investors can not stick to a buy and hold strategy and tend to make portfolio changes based on short term market volatility and emotional biases.  This leads to sub-par performance over time.

Photo Credit: Steph Anderson

In the cover story “Reassessing Risk” by Olivia Mellan, Bill discusses his views on risk tolerance:

“My experience is that many people’s tolerance is directly correlated with recent market performance, so we shy away from questionnaires. I’m also wary of the way people can misjudge odds due to things like familiarity bias or the structure of questions.”

…

“We then discuss with clients how that [performed] under different market conditions, and look for their wince point to gauge whether their tolerance is lower than their capacity. If their tolerance is lower, we’ll lower the max equity exposure.”

Click here to read the entire story on InvestmentAdvisor.com.

The following is Will’s recent letter to our clients announcing his achievement.

When I joined Financial Symmetry a little over three years ago, I came in with a broad goal of using my extensive experience in accounting and taxation to help others achieve their financial objectives.  It soon became apparent to me, however, that having the CERTIFIED FINANCIAL PLANNER™ designation would enhance my hard earned skills and allow me to better serve our clients.  I am proud to announce that upon completion of an intensive preparation course and diligent self study, I successfully passed the comprehensive national CFP® exam in July.  In the months following I completed the remaining requirements to earn the CFP® designation and now possess the necessary credentials to move into a primary financial advisor role.

To earn the CERTIFIED FINANCIAL PLANNER™ designation, candidates must complete what the Board of Standards refers to as the “4 E’s”:

• Education
• Examination
• Experience
• Ethics

In addition to earning a bachelor’s degree, completing a board certified education program, passing the exam, and adhering to a strict code of ethics, candidates must also have completed three years of relevant work experience in an industry related field.  As a licensed Certified Public Accountant I was automatically eligible to apply for the CFP® Certification Examination in lieu of the education requirement.  Thirty hours of continuing education every two years is also required in order to maintain an active CFP® license.

Being part of the team here at Financial Symmetry has enabled me to build upon my experience as a partner in a local CPA firm.  Through working on plan development, personalized investment analysis, and implementing strategies in our high-level client service model, I have added the essential knowledge and skills to move into this new role with our firm.  I look forward to the new challenges and responsibilities that this opportunity presents.

For a complimentary initial consultation with Will Holt, CFP®, CPA,  please contact him at (919) 851-8200 ext. 203 or by email at wholt@financialsymmetry.com.

Can You Trust Your Financial Advisor?

Written by Chad Smith, CFP®.

” Anyone who did what Wall Street analysts advised last March has only losses after the biggest stock market rally in seven decades.

Citigroup Inc., Bank of America Corp. and more than a dozen other firms told clients to purchase European energy producers and U.S. drugmakers while selling banks and retailers, according to combined rankings compiled by Bloomberg. An investor who used $10,000 to buy companies in the highest-rated industries and bet on declines in the lowest since the advance began on March 9 lost everything and would owe as much as $6,000 to cover bearish trades, the data show… “

The lack of forward thinking by brokerage house research departments has been a constant theme in our research meetings over the years.  In fact, a central premise of our research process challenges us to explore the reasons why a source may be recommending a specific area of the market.  We attempt to evaluate the lens through which a source views the investing landscape.  This can help us understand whether they have a  motivation and/or bias that skews their opinion.  Digging deeper allows us to zero in on the “why”, which goes a long way in helping us identify opportunities for better returns.

Finding the motivation to save can be just as difficult as motivating yourself to diet and exercise. In both cases you know the outcome will be worthwhile — financial security and better health. However, taking the steps to get there is easier said than done.

If you have ever watched the show “The Biggest Loser,” you have probably heard the trainers say that being fit is not about dieting, but about making lifestyle changes that you can stick with over time. As the contestants participate in the challenge, their health gradually improves and their motivation to continue a healthy lifestyle typically increases. The hardest part is usually getting started.

The same is true with saving. While difficult at first, adopting a scheduled savings strategy and making budgeting part of your routine will increase your odds of achieving your financial goals. Identifying those goals is the first step to finding that motivation, so spend some time thinking about what you want your money to do for you. Maybe you are saving for a family vacation, your children’s education, retirement, or all of the above. Make a list prioritizing each goal and put time frames on them.

Next, work on identifying those triggers that keep you from saving money. Just as having chips and cookies in the house can derail your healthy lifestyle, so can mail order catalogs on your coffee table or even a clear view of your neighbor’s new BMW. Toss those catalogues in the recycle bin, put a limit on your Amazon or eBay habit, and start planning a savings strategy.

One of the best ways to stick to your financially fit goals is to make savings automatic. Hopefully you are already deferring money from every paycheck to your 401k. Think about increasing your deferral to put more toward your retirement goal. Then find other savings you can make automatic. Maybe you can set up a monthly transfer into your savings account, Roth IRA, or your child’s 529 plan. This strategy takes some of the work out of saving and automatically curbs spending, as your checking account appears less flush each month.

Lastly, remember that you are not alone. You probably have friends and neighbors who are also trying to stick to a financially fit lifestyle. Work together on finding low cost activities to do, and exchange tips and tricks along the way. You may also want to consider using a professional. A financial planner can help you develop a strategy specific to your needs in the same way a personal trainer can recommend the best exercises for your health and fitness goals. You can seek out a fee-only financial planner at napfa.org.

Membership in NAPFA is granted only to Fee-Only financial advisors who are paid directly by their clients. NAPFA members receive no commissions or other rewards for selling financial products. Those forms of compensation create potential conflicts of interest that may serve to undermine and advisor’s objectivity and fiduciary responsibility. It is for this reason that all NAPFA members must sign a Fiduciary Oath, in that they explicitly promise to “place the client’s interest first.”

In addition to tough standards on client-friendly compensation, NAPFA has some of the industry’s most rigorous education and training requirements. All candidates for membership are required to submit a complete comprehensive financial plan for a full-scale peer review.  Furthermore, NAPFA’s continuing education requirements exceed those of any other association of financial advisors.

“Allison Berger is a welcome addition to our organization,” said NAPFA Chair Richard Bellmer, a financial advisor in Indianapolis, IN.

“Membership in NAPFA denotes a real accomplishment for any financial advisor.  We recently surpassed 1,300 members, and are always pleased when we can strengthen our ranks with well-trained, highly-committed financial advisors.”

Bellmer continued: “Our mission for more than 20 years has been to provide comprehensive, client-centered advice to individuals and families. Our services are provided in a fee-only manner, with no sales of any products, and with full disclosure of any possible conflicts. The superior nature of this type of financial planning is widely recognized by the leaders of the financial services industry and the media.”

Read more about Fee-Only financial planning and NAPFA or call 1-800-366-2732.

Read more about Allison Berger, CFP, on the Financial Symmetry website.

Membership in NAPFA is granted only to Fee-Only financial advisors who are paid directly by their clients. NAPFA members receive no commissions or other rewards for selling financial products. Those forms of compensation create potential conflicts of interest that may serve to undermine and advisor’s objectivity and fiduciary responsibility. It is for this reason that all NAPFA members must sign a Fiduciary Oath, in that they explicitly promise to “place the client’s interest first.”

In addition to tough standards on client-friendly compensation, NAPFA has some of the industry’s most rigorous education and training requirements. All candidates for membership are reuired to submit a complete comprehensive financial plan for a full-scale peer review.  Furthermore, NAPFA’s continuing education requirements exceed those of any other association of financial advisors.

“Chad Smith is a welcome addition to our organization,” said NAPFA Chair Richard Bellmer, a financial advisor in Indianapolis, IN.

“Membership in NAPFA denotes a real accomplishment for any financial advisor.  We recently surpassed 1,300 members, and are always pleased when we can strengthen our ranks with well-trained, highly-committed financial advisors.”

Bellmer continued: “Our mission for more than 20 years has been to provide comprehensive, client-centered advice to individuals and families. Our services are provided in a fee-only manner, with no sales of any products, and with full disclosure of any possible conflicts. The superior nature of this type of financial planning is wideley recognized by the leaders of the financial services industry and the media.”

Read more about Fee-Only financial planning and NAPFA or call 1-800-366-2732.

Read more about  Chad Smith, CFP, on the Financial Symmetry website.