Sarah Kordon | Merriman

What Women Need Know About Working with Financial Advisors | Tip #3

by Sarah Kordon | Nov 3, 2020 | Advisors, Goal Planning, Risk & Reward, Sarah Kordon, Tech Focus, Wealth Preservation, Your Professional Team

I want to acknowledge that all women are wonderfully unique individuals and therefore these tips will not be applicable to all of us equally and may be very helpful to some men and nonbinary individuals. This is written in an effort to support women, not to exclude, generalize, or stereotype any group.

I was recently reminded of a troubling statistic: Two-thirds of women do not trust their advisors. Having worked in the financial services industry for nearly two decades, this is unfortunately not surprising to me. But it is troubling, largely because it’s so preventable.

Whether you have a long-standing relationship with an advisor, are just starting to consider working with a financial planner, or are considering making a change, there are some simple tips all women should be aware of to improve this relationship and strengthen their financial futures.

Tip #3 – Know the Difference Between Risk Aware & Risk Averse

Countless studies have shown that women are not necessarily as risk averse as they were once thought to be. As a group, we just tend to be more risk aware than men are. Why does this matter? First of all, I think it’s important to be risk aware. If you aren’t aware of the risk, you can’t possibly make informed decisions. But by not understanding the difference, women sometimes incorrectly identify as conservative investors and then invest inappropriately for their goals and risk tolerance. Since most advisors are well-practiced in helping people identify their risk tolerance, this is an important conversation to have with your advisor. During these conversations, risk-aware people can sometimes focus on temporary monetary loss and lose sight of the other type of risk: not meeting goals. If you complete a simple risk-tolerance questionnaire (there are many versions available online), women may be more likely to answer questions conservatively simply because they are focusing on the potential downside. Here is an example of a common question:

The chart below shows the greatest 1-year loss and the highest 1-year gain on 3 different hypothetical investments of $10,000. Given the potential gain or loss in any 1 year, I would invest my money in …

Source: Vanguard

A risk-aware, goal-oriented person is much more likely to select A because the question is not in terms they relate to. It focuses on the loss (and gain) in a 1-year period without providing any information about the performance over the period of time aligned with their goal or the probability of the investment helping them to achieve their goal. A risk-averse person is going to want to avoid risk no matter the situation. A risk-aware person needs to know that while the B portfolio might have lost $1,020 in a 1-year period, historically it has earned an average of 6% per year, is diversified and generally recovers from losses within 1–3 years, statistically has an 86% probability of outperforming portfolio A in a 10-year period, and is more likely to help them reach their specific goal.

A risk-aware person needs to be able to weigh the pros and cons so when presented with limited information, they are more likely to opt for the conservative choice. Know this about yourself and ask for more information before making a decision based on limiting risk.

Having a conversation about your risk tolerance, the level of risk needed to meet your goals, and asking for more information is always easier when you follow tip #1—work with an advisor you like. There are many different considerations when hiring an advisor: Are they a fiduciary? Do they practice comprehensive planning? How are they compensated? What is their investment philosophy? They may check off all your other boxes, but if you don’t like them, you are unlikely to get all you need out of the relationship. If you’re looking for an advisor you’re compatible with, consider perusing our advisor bios.

Be sure to read our previous and upcoming blog posts for additional tips to help women get the most out of working with a financial advisor.

What Women Need to Know About Working With Financial Advisors | Tip #2

by Sarah Kordon | Oct 6, 2020 | Advisors, Goal Planning, Sarah Kordon, Tech Focus, Wealth Enhancement, Your Professional Team

I want to acknowledge that all women are wonderfully unique individuals and therefore these tips will not be applicable to all of us equally and may be very helpful to some men and nonbinary individuals. This is written in an effort to support women, not to exclude, generalize, or stereotype any group.

I was recently reminded of a troubling statistic: Two-thirds of women do not trust their advisors. Having worked in the financial services industry for nearly two decades, this is unfortunately not surprising to me. But it is troubling, largely because it’s so preventable.

Whether you have a long-standing relationship with an advisor, are just starting to consider working with a financial planner, or are considering making a change, there are some simple tips all women should be aware of to improve this relationship and strengthen their financial futures.

Tip #2 – Tell Them What You Want

Studies have shown that women tend to be more goal-oriented than men. I have found it to be true that women are more likely to focus on goals like maintaining a certain lifestyle in retirement, sending children to college, or making sure the family is protected in the event of an emergency, while others may focus more on measuring investment performance.

At Merriman, we believe all investing and financial planning should be goal-oriented (hence our tagline: Invest Wisely, Live Fully), but many advisors still set goals that focus on earning a certain percentage each year. This can be especially difficult if your partner focuses on this type of measurement as well. Women (or any goal-oriented investor) can sometimes feel outnumbered or unsure of how to direct the conversation back to the bigger picture. You made 5%, but what does this mean for your financial plan? Can you still retire next year? The issue is not that you don’t understand performance or lack interest in market movements, whether or not this is true. The issue is that the conversation needs to be refocused on the things that matter to you. All of the truly excellent financial planners I have worked with have known this and do their best to help clients identify their goals, create a plan for obtaining them, and then track their progress. If you’re not experiencing this, it’s either time to look for a new advisor or to speak up and tell them what you want. Also, note that speaking up is more easily done when you work with an advisor you like (see tip #1).

There are many different considerations when hiring an advisor: Are they a fiduciary? Do they practice comprehensive planning? How are they compensated? What is their investment philosophy? They may check off all your other boxes, but if you don’t like them, you are unlikely to get all you need out of the relationship. If you’re looking for an advisor you’re compatible with, consider perusing our advisor bios.

Be sure to read our previous and upcoming blog posts for additional tips to help women get the most out of working with a financial advisor.

What Women Need to Know About Working with Financial Advisors | Tip #1

by Sarah Kordon | Sep 8, 2020 | Advisors, Goal Planning, Sarah Kordon, Tech Focus, Wealth Enhancement, Your Professional Team

I want to acknowledge that all women are wonderfully unique individuals and therefore these tips will not be applicable to all of us equally and may be very helpful to some men and nonbinary individuals. This is written in an effort to support women, not to exclude, generalize, or stereotype any group.

I was recently reminded of a troubling statistic: Two-thirds of women do not trust their advisors. Having worked in the financial services industry for nearly two decades, this is unfortunately not surprising to me. But it is troubling, largely because it’s so preventable.

Whether you have a long-standing relationship with an advisor, are just starting to consider working with a financial planner, or are considering making a change, there are some simple tips all women should be aware of to improve this relationship and strengthen their financial futures.

Tip #1 – Work with an Advisor You Like

You may think this is obvious or that this shouldn’t matter. Unfortunately, it isn’t obvious to many people, and I would argue that it may be the most important factor. If you don’t like someone, you are unlikely to trust them; and if you don’t trust them, you are unlikely to take their advice, even when it’s advice you should be taking. You’re also more likely to cut your meetings short or avoid them altogether. Chatting with my clients is one of my favorite parts of my job, and it’s also when I usually find out about the important changes in their life that they might not even realize impact their financial plan. It’s an advisor’s job to identify the financial impacts of your life changes, and your advisor can’t help if they are not aware of the changes. The better your relationship with your advisor, the more likely you will keep them updated—and the more likely they can help you make smart financial decisions.

Take some time to consider what’s most important to you when building a trusting relationship, and don’t be afraid to ask an advisor about their personality traits or communication style. You may need someone who is approachable and compassionate, or it may be more important to you that they are straightforward and detailed. I’ve worked with enough advisors to know we come in every shape and size you can imagine, so don’t settle for someone who isn’t a good fit.

This chart can be an extremely helpful tool for identifying your preferred communication style(s). Once you’ve identified your preferred style, you should be able to easily tell whether your advisor is communicating effectively according to your personality. If they aren’t, send them the chart! Strong communication skills are essential in financial planning, so they should be able to adapt to fit your preferences.

Aside from communication style, it may be important to you that you work with an advisor who shares certain values that you hold dear. I recently met with some new clients who I could tell were not completely at ease even though I thought we had hit it off. They were squirming in their seats when they finally got up the courage to ask me about my political leanings. When they learned that we felt the same way, they were visibly relieved. It was important enough to them that I don’t think they could have had a trusting relationship without this information. If you feel this strongly about anything, ask about it when interviewing advisors.

If you find you are having a hard time getting to know your advisor, ask to go to lunch. Once you get away from the office and their financial charts, it will likely be easier to build a connection. You may even get a free lunch out of it!

There are many different considerations when hiring an advisor: Are they a fiduciary? Do they practice comprehensive planning? How are they compensated? What is their investment philosophy? They may check off all your other boxes, but if you don’t like them, you are unlikely to get all you need out of the relationship. If you’re looking for an advisor you’re compatible with, consider perusing our advisor bios.

Be sure to read our upcoming blog posts for additional tips women need to know in order to get the most out of working with a financial advisor. You’ll notice that all of the other tips are much easier to follow when you work with an advisor you like!

Dementia – An Unpleasant Topic Everyone Should Plan For

by Sarah Kordon | Dec 17, 2019 | Caring for Dependents, Family Talk, Sarah Kordon, Tech Focus, Wealth Protection

The idea of losing ourselves to dementia is a distressing prospect that people often don’t like to consider, let alone plan for. When we think about retirement we like to imagine the fun things: grand vacations, new hobbies, travelling to visit family, and spoiling the grandkids – not the exponentially rising cost of medical care and long-term care facilities. It’s an unpleasant reality that many financial advisors don’t like to address with clients, because they don’t want to be the bearer of bad news and they don’t have any easy answers.

I might not address these difficult considerations if Alzheimer’s didn’t run in my family. I lost my father earlier this year. He no longer knew who I was before he passed away, just as his father forgot him when he was my age. As a financial planner, I think about my own finances and eventual retirement more than the average person, and along with my retirement planning, I must ask myself uncomfortable questions and plan for a future I hope not to have. I help my clients tackle these concerns too, because one in three seniors currently die with some form of dementia and there are steps we can take to ease the burden on ourselves and our families.

Developing a comprehensive plan with a financial planner is one key step that is better taken sooner rather than later. Waiting until dementia has taken hold, like my father did, can lead to uncertainty and lingering doubts during an already stressful time. A comprehensive plan will include estate planning, investment recommendations, insurance coverage, and a cash flow analysis that incorporates factors such as the rising cost of medical care. These are all important factors for anyone who plans to live into old age, whether dementia is a specific concern for you or not.

Nearly as important as looking at the numbers is building a relationship with a financial planner you meet with regularly. The more I am able to get to know my clients and their unique situations, the better I am able to identify concerns and help make sure their wishes are carried out if they can’t advocate for themselves. Having dementia also puts people at greater risk for elder abuse, which regular meetings with a trusted financial planner can help uncover or prevent.

At Merriman, we regularly work directly with our client’s other professional advisors, such as accountants, estate planners, and insurance agents. Having a team of professionals that can work together on your behalf is valuable for everyone, but it’s vital for people who can no longer recall the specifics of their financial situation. We also help clients identify family members and other trusted individuals that we can contact in the event that they no longer seem able to make important financial decisions. Many people chose to proactively include their loved ones in financial planning meetings, so their loved ones develop a trusting relationship with their financial planner, and have the peace of mind of knowing who to call if they need help.

We at Merriman want our clients to know that families struggling with dementia have our support. If you have questions about how best to prepare yourself or your family, please don’t hesitate to contact us.

Getting Smart with Your 2020 Benefits Enrollment

by Sarah Kordon | Nov 12, 2019 | 401k, Healthcare, Life & Disability Insurance, Sarah Kordon, Tech Focus

What could be the cost of ignorance? For some mistakes it could be a couple of dollars; for others, it could run into hundreds or thousands of dollars every year. Not paying attention to your enrollment benefits falls under the latter.

Recent research indicates that more than half of employees spend 30 minutes or less reviewing their enrollment benefits and 93% of people make the same enrollment selection without evaluating their options. While it may be easy to re-enroll in the same options every year, I recommend grabbing a cup of coffee or a glass of wine and setting aside a couple of hours to consider your options thoroughly. With the open enrollment deadline approaching soon for many, consider this essential advice to help you take full advantage of your employer benefits.

Medical, Dental & Vision

Many employers offer different medical plans to choose from. With insurance premiums, deductibles, and out-of-pocket costs on the rise, it’s crucial to evaluate your choices every year and make sure your plan still makes sense for you. If your spouse has coverage that will cover you or your dependents, don’t forget to compare these options with your employer’s plans as well.

It’s common for risk-averse people to choose a plan with a higher monthly premium in order to have a lower deductible and out-of-pocket maximum, but this isn’t always wise. If you are young or in good health, selecting a high-deductible plan and bolstering your emergency cash reserve by at least the amount of your annual deductible can save you money in the long term. This is especially true if you have the ability to contribute to a Health Savings Account (HSA) in combination with the high-deductible plan. All contributions to HSAs are pre-tax and all withdrawals used for eligible medical, dental and vision expenses are tax-free. For people in high income tax brackets this can be a significant savings. If you don’t end up needing the funds for medical expenses you can invest them to grow tax-deferred until needed, which can be a considerable help in retirement.

Flexible Spending Arrangements (FSAs) are another common benefit option that can provide tax savings. Similar to HSA plans, contributions are made pre-tax and withdrawals for eligible healthcare expenses are tax-free. Be sure to check the fine print on these plans, because contributions not used during the calendar year are often forfeited! It’s important to consider your expected medical expenses carefully before enrolling. Some FSA plans can also be used for dependent care expenses, which is a fantastic benefit given that daycare costs are not only expensive, but generally consistent and predictable making the “use it or lose it” feature of FSA plans less daunting.

We generally have fewer choices with our dental and vision plans, but make sure you consider enrolling since the cost of annual coverage is often significantly less than one filling or pair of glasses. If you do have plan choices, compare the copays in addition to the monthly premiums.

With all plan options pay attention to “out-of-network” restrictions and check to see if your favorite doctor is considered “in network” if you are unwilling to make a switch.

Retirement Plans:

At the very least, you want to be sure you are enrolled in your company retirement plan and contributing enough to receive the full benefit of any employer contributions. This is free money, so don’t leave it on the table! If you really want to take advantage of your retirement benefits, it’s best to take a careful look at all of the options, evaluate whether you are contributing enough to provide for your future retirement, and analyze your investment allocation at least once a year. Many people find this process overwhelming, but this is an area where a financial planner can prove their worth, so don’t hesitate to ask for help. Even savvy investors can miss out on significant benefits by overlooking options in their retirement plan such as mega back-door Roth contributions or discounts in an employer stock plan.

Life Insurance:

Many employers automatically provide a certain amount of life insurance for you, generally a multiple of your salary. For a lot of people this is not enough coverage, but you often have the ability to purchase additional coverage through your employer’s group plan. This insurance is generally less expensive and can make sense for a portion of your insurance needs, particularly for people whose health may preclude them from qualifying for an individual policy. However, it’s important to keep in mind that the premium will likely increase every year as you age and the policy often terminates when you leave the company. It’s therefore important to consider whether you should obtain additional outside coverage, either because you have a long-term need or to lock in a rate while you are young and healthy.

Disability Insurance:

People often protect their loved ones with life insurance, but fail to plan for a disability which is statistically much more likely to occur. Make sure to enroll for both short-term and long-term disability coverage.

Life Changes:

As part of your annual benefits evaluation process it’s always a good idea to double-check that your beneficiaries and dependents are correct and up to date.

Get Advice:

If you’re working with a financial planner, make sure to bring them your enrollment packet and get their advice before you finalize your enrollment. It’s surprising how many people don’t truly understand or take full advantage of their employer-sponsored benefits, and your financial planner can’t give you proper advice without knowing everything you have access to.

The Bottom Line:

Benefits enrollment might appear to be a trivial task, but it could have substantial financial implications if done incorrectly. Be smart about your choices and do the necessary homework to maximize your benefits.