Have you ever heard the proverb about the cobbler’s children? It essentially states that the cobbler’s children, although surrounded by well-made shoes, have the most worn out shoes. Or that doctors are the worst patients? The same can be said for wealth advisors. We’re not immune to the common mistakes that exist in the financial world, and even we can benefit from the financial guidance we provide for others.
As a new advisor, I had an epiphany. Yes, an epiphany, as corny as that sounds. I realized that although I could adequately pick investments, decide on a savings plan and develop a strategy for myself, I wasn’t following through with it. While at a client meeting, my coworker explained it best by saying, “We help hold you accountable to your goals.” Duh! That was the thing I was not giving myself. I could make the best laid plan, but I wasn’t following through and doing the actions I needed to do to be successful. I had the knowledge, but needed accountability. The very next day I hired my first advisor. (more…)
I recently met with a prospective client, looking to hire a financial planner. She saw a TV ad from the CFP Board about hiring a professional planner. She visited their website and realized she didn’t know how to differentiate between them all. She wanted to ensure that the planner would help her look at all aspects of her financial life, and she realized that just because someone was a CFP® it didn’t mean they all operated in the same fashion. Her search was proving to be more difficult than she had anticipated.
It’s true, not all CFP® professionals are created equal. This article discusses why you might want to seek out a CFP® and some common differences to help you in your search. It’s important to educate yourself on what financial planning really means and to ask a lot of questions before deciding who to hire.
When looking to hire a financial professional, one of the most desirable credentials is the Certified Financial Planner™, or CFP®, designation. The CFP® mark indicates the highest standard in financial planning because CFP® professionals must meet certain educational requirements, pass a lengthy examination and have at least 6,000 hours of work experience for the standard pathway to certification. They must also adhere to specific standards of ethics and practice as outlined by the CFP Board.
Sounds great, right? The problem is that many financial professionals who have the CFP® designation use it as a marketing tool. There’s been a big marketing push to hire those with a CFP® by the CFP Board, and consequently financial firms are encouraging more of their advisors to obtain the CFP®. While there’s an educational benefit to anyone with the CFP®, it doesn’t always carry over into the work they do for their clients. (more…)
Benjamin Graham’s famous book, The Intelligent Investor, offers insight into the most important trait in investing, discipline. Graham explains you don’t have to be smarter than the rest, just more disciplined than the rest.
We often think investment success is achieved by picking the next hot stock or manager/fund that’s been beating the market, but that is a flawed approach. In the words of Graham, “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”
While all advisors and managers strive to outperform the markets over time for their clients, the single biggest thing a good advisor can do is be there to act as your behavior coach.
Many studies show investors are often their own worst enemy, letting emotions drive their financial decisions. This ultimately means doing the wrong thing at the wrong time for the wrong reasons. Advisors are there to work with you to help you determine your goals and craft a long-term plan funded with a long-term portfolio. Together, you continue working the plan through all the cycles of the economy, and all the fads and fears of the market. (more…)
So you’ve decided to hire a financial professional to help you navigate your future. You’ve talked to friends and family members, and while you trust their recommendations, putting your financial future into the hands of someone else is a very big deal. You need to do your own due diligence, but where do you start? Not all financial firms/advisors are created equal. And with all the options available to us, many people decide to go it alone out of fear. They fear they could be hiring the next Bernie Madoff, or that they might end up being a number in a long list of clients. The task can seem so daunting that it’s often easier to hire the first advisor you meet, or do nothing at all.
It’s a big decision and many don’t know what questions to ask and what to look for. The below can help provide anyone looking to hire a financial professional a place to start. The questions are not meant to sway anyone in a certain direction, but rather to help ensure you hire someone you feel comfortable with and confident in.
Understand how the advisor is compensated.
Find out exactly how your advisor is paid and make sure you understand any fees and charges – and have them in writing – before making any final decisions. Fee-only means the advisor does NOT earn any commission, while fee-based advisors can earn commissions.
I believe fee-only advisors are best. I formed this belief working for firms that were fee-based and fee-only, and witnessed the practices at each. Fee-only advisors do their best to align their interests with their clients. They don’t make money off the investments they recommend. In a fee-only structure, anything that comes out of your bottom line in turn comes out of the advisor’s bottom line. Therefore, it’s in the advisor’s best interest to only recommend investments they truly believe are in your best interest.
Fee-based advisors might have incentives to sell certain products. (Have you ever heard: “If you want to buy your financial advisor a new Mercedes, buy an annuity?”) Fee-based advisors can fall prey more easily to their clients’ views and emotions, especially during volatile markets. You want to make sure you are hiring someone that will give you the best advice, even if it isn’t what you want to hear. “The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffet. You don’t want a “Yes” man. (more…)
Merriman CEO, Colleen Lindstrom, was recently quoted in an article from CNBC about women in the advising industry, giving three simple ways to help women make progress and close the profession’s gender gap. Check it out here.
It’s tax season, and like last year, you received a corrected 1099 in the mail from your account’s custodian, such as Charles Schwab. If you already filed your taxes and are just receiving the corrected 1099 online or by mail, there’s no need to panic.
Revised 1099s are commonplace, and in the majority of cases, the custodian isn’t causing the revisions or holding up the process. Custodians are, however, required to issue a corrected 1099—no matter how insignificant the changes are—so they can give account owners the most accurate, up-to-date information for filing their taxes before the April 15 tax deadline.
To produce a 1099, custodians receive and aggregate all available information relating to distributions made from investments in an account during the previous calendar year. This information includes the character of distributions, such as dividends, qualified dividends, interest, capital gains or return of principal. One such investment is a mutual fund, which is often composed of 100s if not 1000s of securities. A diversified portfolio is often made up of 10 or more mutual funds, and if just one of these securities within a mutual fund issues a correction, the 1099 may need to be revised.
If you received a revised/corrected 1099 and already filed your taxes, you may not have to do anything. The revisions might not be meaningful enough to require filing an amended return. The 1099-DIV, related to the characterization of dividends, is the most commonly revised 1099 form. If the revisions end up being significant enough to impact your tax return, then you can always file an amended return with the correct information. If this leads to a refund, then you have three years from your original filing date to file an amended return to receive the refund. If the revision leads to owing more taxes, filing an amended return as soon as possible will save you on interest and penalties.
Waiting until closer to the April 15 deadline to file your taxes reduces the risk of receiving a corrected 1099 and having to file an amended return reflecting the changes.