Russell Bailyn

Often I notice clients focusing heavily on the investment aspect of financial planning without giving adequate consideration to estate planning. It tends to be clients under 35 and those who are unmarried who often don’t think they need estate planning. In many cases they do and should spend the time and small amount of money required to establish a will and do a few other things which I’ll discuss below:

Continue reading " Estate Planning: When do I need a Will? " »

Posted by Russell Bailyn at 05:02 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

My clients frequently ask ‘when is the right time’ to start taking Social Security. The most correct answer which is given by both advisors and the Social Security Administration is that you should turn on this income stream when you reach your Full Retirement Age (FRA). Collecting at your FRA is the first opportunity at which you can collect your full benefits and continue to work if you so desire. If you collect your benefits before your FRA they will be reduced and, depending on your earned income, they could be reduced even further. Even so, some people are buzzing about the idea of taking benefits early. After some careful pondering I’ve concluded that this isn’t necessarily the worst idea for some people in certain situations:

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Posted by Russell Bailyn at 04:49 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

Why don’t we teach personal finance in high school? When I was 17 I learned about double shifts in the supply and demand curve in AP Economics before I was formally taught the difference between a stock and a bond. I learned how to mathematically determine how a business should set its price points based on consumption patterns before I knew how to balance a check book. Do you see where I’m going with this? I truly believe that teaching personal finance to children and teenagers could have positive, long-term effects to both the economy and the general population. Perhaps some of the crippling financial errors people make (such as buying homes they can’t afford) can be avoided in the future with some simple education.

Continue reading " Teaching Financial Literacy to a Younger Generation " »

Posted by Russell Bailyn at 01:28 PM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

I had lunch over the weekend with a fellow money manager specializing in municipal bonds. Because of the growing volume of municipal bond business, I like to gather opinions about where the best opportunities are right now in this space. It’s no secret that the current yield spread between treasuries and municipal bonds is totally out of whack. In case you don’t know the historical norms, here is some background: Because municipal bonds purchased by state residents are often free of state and federal taxes, they typically yield less interest to investors than treasury securities with comparable maturities. Lately, treasuries yields have been abysmal in light of the recession. The ‘flight to safety’ play has treasury prices sky high and yields very low. Similarly, the highest rated municipal bonds (AAA) are paying much less interest than municipals bonds in the A and BBB space. I asked my friend if the depressed prices of these highly graded (but not highest graded) muni bonds are accurately reflecting a serious risk of default, or if this could potentially be an opportunity for investors to get paid while the market recovers. I was told that short-medium term treasury prices are ‘unsustainably high’ and quite possibly nothing more than a hiding spot which may disappear if investor’s appetite for risk continues to climb. We also went through a variety of trading strategies which may be profitable if treasury prices continue falling and municipal bond prices (mid-spectrum) continue to rise.

Continue reading " Tax-Free Munis: Respect the Yield Curve " »

Posted by Russell Bailyn at 02:11 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

Retirement plans are a mystery to many. It’s no surprise that many small business owners can have a difficult time funding a retirement plan that perfectly fits their needs and does not have them asking, “Is this as good as it gets?” One of the services my firm provides is identifying and implementing customized retirement plan designs for business owners who need something a bit more sophisticated than a one-size-fits-all retirement plan. We tailor to your financial situation after a thorough discovery process. Here’s an example of what a customized retirement plan can accomplish:

Continue reading " Custom Retirement Plans Can Build Income " »

Posted by Russell Bailyn at 04:54 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

I did an interview over the weekend for a Columbia graduate student seeking both professional and participant commentary about the state of the 401k industry. He wasn’t expecting to hear a whole lot of positive considering the recessionary environment, but he genuinely wanted to know how attitudes and advice regarding 401k investing had changed. He even asked: “had I learned (as an advisor) any lessons from the recent and precipitous market declines?” The answer to that question is a resounding yes and I’d like to share what has changed in my practice and comment on the realities which have surfaced in the planning profession in general as a product of the recession.

Continue reading " Clients & Advisors Learn Lessons from Recession " »

Posted by Russell Bailyn at 04:34 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

The issue of how to practice is a big one for financial advisors. Regardless of whether you’re starting a business from scratch or moving an existing client book from one firm to the next, the decisions you make will impact your earnings potential and the mood of your office. Is it better to work on a commission basis or collect fees? Will your business grow faster if you join a large brokerage firm or an independent broker/dealer? Should you consider starting your own Registered Investment Advisor (RIA)? A young person entering the financial planning profession will likely be overwhelmed by these choices. All of the recent financial turmoil has only added to the confusion by causing big shifts within the industry. Some of the older and more established firms are disappearing through consolidation and bankruptcy while newer and more current business models are taking over. This hasn’t gone unnoticed by the financial media. Nearly every publication which is specific to the financial planning profession has been doing feature stories on business models for financial advisors. So I figured, why not chime in?

Continue reading " The Exodus from Wirehouse to Indepedent " »

Posted by Russell Bailyn at 02:37 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

Even though the stock market has been showing signs of stability over the past few weeks, the recession is ongoing and plenty of investors may remain paralyzed and shocked over the events of the past six months. Some maintain the attitude that stocks and even bonds are too volatile and sticking with cash investments is the best idea at this point. Others believe the market is headed lower in the short-run so it makes sense financially to keep plenty of cash on hand. Regardless of the reasons, here are some tips for cash-heavy investors who want to stay relatively safe and perhaps earn a little interest on their money.

Continue reading " Cash is King: Ideas for the Ultra-Conservative Investor " »

Posted by Russell Bailyn at 07:14 PM | Permalink | Comments ( 2 ) | TrackBacks ( 0 )

The recent recession is somewhat unique in that the credit markets have been dragged through the mud with the equity markets. Bondholders, generally considered to be in a safer position than stockholders, aren’t feeling so at ease. Over the past year bonds across the risk spectrum have declined in price amidst speculation that default rates could skyrocket in 2009 and 2010 to levels unseen since the Depression. As a result, investors with a few years on their time horizon may have a real opportunity right now if they pick and choose their investments carefully. Bond prices are down overall and yields are relatively high. The potential payoff could be even greater if the default rates remain contained and the credit spreads start to narrow.

Continue reading " Opportunities in the Bond Market " »

Posted by Russell Bailyn at 04:30 PM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

Over the past few months I’ve fielded more questions than usual regarding overhauling 401k plans and switching providers outright. The concerns have come from employees and business owners who have found that all or most of the investments in their 401k plan correlate too closely with the major stock and bond indexes. Participants are having a hard time finding ‘hiding spots’ during the turmoil. At a time when most of the major indexes are suffering badly, workers are seeking access to alternative asset classes such as gold and special minerals, energy, fixed accounts and even inverse or ‘bear market’ investments. So what makes a 401k plan good or bad? What can you do to get a better plan in the door at your company?

Continue reading " How does your 401k plan stack up? " »

Posted by Russell Bailyn at 03:58 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

A recent InvestmentNews survey finds that the majority of money managers in the US don’t think Obama’s economic recovery plan will achieve its stated goal. Frankly, I’m yet to hear any one plan which I’m jumping for joy over. In my understanding of Obama’s plan, the economy would be stimulated using a bottom-up strategy rather than the Republican favored, top-down strategy of across-the-board tax cuts. Obama believes creating jobs through state-government mandated infrastructure projects will jump start consumer spending and pull the economy out of any further immediate danger. It’s nearly impossible to know if this will work. And if it does, will it be a temporary, shot-in-the-arm stimulus which ultimately fails due to excessive debt burdens and mounting inflation? I don’t think across the board tax cuts would work any better if we’re truly aiming to stimulate the economy and get more dollars circulating. Politics will undoubtedly interfere with the Obama plan and marginal tax rates will ultimately increase to balance future budgets and service debt. I am somewhat intrigued by the idea of government assistance for past-due mortgage payments and renegotiations of mortgage rates and terms. This concept would at least chip away at the housing problems which are at the heart of the financial crisis. I also think eliminating mark-to-market accounting is crucial along with restoring the uptick rule. A real concerted effort is needed right now to mitigate the economic problems and restore some badly needed consumer confidence.

Continue reading " Reflections on the Obama Economy & Stimulus " »

Posted by Russell Bailyn at 11:43 AM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

This post is inspired by the endless string of questions I receive each month regarding “in-service” 401k rollovers. As any competent financial advisor or retirement plan sponsor will reply: in-service rollovers before a qualifying event such as reaching retirement age or separating from service are rare and scarcely permitted. The underlying logic is that employers have a fiduciary responsibility and overall moral obligation to their employees when it comes to their retirement plans. Allowing a client to invest their nest-egg in individual stocks and/or other asset classes would present the possibility of that nest egg disappearing quickly. However, because 401k performance has been so dismal over the past six months anyhow, why not give employees the flexibility they so desire? A good solution may lie in a 401k feature which many people don’t talk about: self-directed brokerage accounts commonly referred to as an SDBA feature.

Continue reading " Thoughts on Self-Directed Brokerage Options in 401k Accounts " »

Posted by Russell Bailyn at 12:08 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

Some of my clients have baulked at the idea of making a contribution to their traditional or Roth IRA accounts for 2008 before the April 15th deadline. The idea of pumping more money into stock and bond investments in the midst of this ‘economic storm’ is an eerie proposition for some. I’d like to remind anybody still pondering their IRA decisions for 2008 about a few things:

Continue reading " Contributing to your IRA for 2008/2009 " »

Posted by Russell Bailyn at 04:58 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

Twelve months ago, not many people expected 2008 to end in an economic downturn so severe that it would take many of the great 20th century financial institutions with it. Most of us had a basic understanding that a bubble was forming in the housing market, fueled by low interest rates and other pro-growth fiscal and monetary policies. However, the high level of risk within the financial sector was difficult for most investors to detect due to the inherent complexity of securitized assets. Like many things in life which seem too good to be true, people focus on the benefits without giving adequate consideration to the risks. Why rock the boat, right? Well, as the financial bubble continues to burst and scandals like Bernie Madoff's come to light, investors are realizing that due diligence is more important than ever. This applies not only in a broad sense as a wake-up call for Wall Street and its regulators, but in our personal financial lives. 2009 is a good time to re-evaluate investment objectives, investment assumptions, and liquidity needs. In today's column I'd like to consider whether cherished portfolio strategies such as diversification, asset rebalancing, and dollar-cost averaging should remain as fundamental to our investment philosophy as they were a decade ago. I'd also like to review some of the 2009 retirement plan contribution limits. Even if your investment choices become more conservative this year, taking advantage of tax-deferred investment accounts can be important to your longer-term financial success.

Continue reading " Investing in 2009: Have Fundamental Rules Changed? " »

Posted by Russell Bailyn at 01:14 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

The student loan industry is a giant scam if you ask me. Parents and students alike don’t realize the slanted arrangement they are about to take on when applying for these loans. Society places such a strong emphasis on education (for good reason) that the education industry and especially the lenders behind it stand to benefit tremendously. It’s a shame that so many of these organizations view a young person’s desire to better educate themselves as an opportunity to rip them off, but I can’t say I’m surprised, not after listening to the news for the past six months. The only way to come out on top and not cost oneself a fortune in interest and penalties over the years is to never miss payments on student loans and, when possible, pay considerably more than the minimums. This can be hard to do at a time when jobs are scarce and higher education is wildly expensive.

Continue reading " The Student Loan Crisis: How Bad Is It? " »

Posted by Russell Bailyn at 04:45 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

I often explain financial planning to my clients as a science whose applications aren’t terribly difficult. It boils down to creating a savings and investment program within the framework of your income and assets. Discipline is undoubtedly the most difficult component to implementing one’s long-term financial plan. Further, the more emotion we can remove from the investment process, the better off we will be. Buying low and selling high is rarely what happens when emotion meets the stock market. Lately, however, emotion has taken on a different and more important purpose as the economy dips into recession and investors are witnessing an unprecedented amount of volatility.

Continue reading " Financial 'Life' Planning " »

Posted by Russell Bailyn at 04:00 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

As you may have imagined, the past few months have been stressful not just for individual investors but for financial advisors as well. Many advisors get paid a percentage of the assets they manage so when asset prices cheapen, as they have recently, it indicates pay cuts for advisors, portfolio managers, insurance professionals, etc. One change which has been widely commented on in industry publications lately is the movement of assets away from large wire house firms such as Merrill Lynch and Smith Barney into smaller, independently owned advisory firms.* This move is not strictly the result of clients seeking a better relationship with their advisors. It’s also the result of advisors working at firms which have been plagued by the credit crisis looking for a change of scenery.

Continue reading " A Discussion about Independent vs. Wire House Brokers " »

Posted by Russell Bailyn at 04:09 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )