April 14, 2014

Debating the Capital Gains Tax

It’s exciting when you buy a stock which goes up. Some of that excitement dies down when you sell the stock and realize that you didn’t hold it for at least 1 year and therefore are paying a 40%+ tax rate on your gain, especially if you live in a place like New York or California. The Capital Gains tax has been a volatile and debated tax going back nearly 100 years. Because the majority of capital gains taxes collected are on assets held more than one year, the long-term capital gains rate is at the center of this tax debate. Up through 2012 we had a somewhat friendly rate of 15% due on long-term capital gains. However, that amount jumped to 20% recently and is even higher (23.8%) if you earn a decent living and are subject to the Affordable Care Act surcharge. Capital gains taxes are collected at the state level as well, adding another layer of pain if you live in a state which imposes this tax. At the heart of the capital gains debate is the question: do capital gains taxes harm economic growth and reduce the rate of savings and investment?

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April 10, 2014

Creating Personal Financial Statements

My clients know that one of the first steps in my financial planning process is creating personal financial statements - specifically a net worth statement. I think that knowing and accepting your current financial situation is a necessary step in the path to making it better. The easiest way to view your current financial situation is to lay out your assets, liabilities and current net worth on a sheet of paper or screen and save it. If you do this every few months, it will reveal patterns about what is going right and what is going wrong in your financial life. I can't tell you how much people enjoy this exercise and how few people have thought to do this on their own. Occasionally people think they are rich because they live in a 1.5M home, but then they reveal a 1.2M mortgage and 200K in student loans. When the net worth statement is barely positive, it reflects a very different reality.

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April 09, 2014

Financial Advisors and "Dual Registration" - Understanding the Jargon

When people ask me what I do, it's easy enough to respond "I'm a financial advisor." But the technical explanation as to how my organization operates is more complicated. I figured why not write an article about it because it reflects an industry trend and may be interesting to my clients and other readers. My firm (Premier Wealth Advisors, LLC) is an RIA (Registered Investment Advisor) which provides fee-based advisory services. However, we are also licensed as registered representatives of First Allied Securities, Inc., an independent broker/dealer firm. Through First Allied we are able to offer an additional array of commission-based products including life insurance and annuities. While fee-only advisors are the rage these days, I thought it was important to be dually registered so that I can continue to offer a full slate of investment and advisory products and services to my clients. Why send my clients to another advisor to buy insurance when we can do it here? As a comprehensive wealth management firm, our clients should be able to get everything they need here from investment and insurance services to tax and estate planning.

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April 07, 2014

The Financial Planning Process

Many people want to develop a relationship with a financial planner but don't really know what that relationship entails. It will likely vary a bit from advisor to advisor but here is a general idea of how it works. I learned this process in the first module of the Certified Financial Planner program several years back and, for the most part, I'm still using it. The only differences would include that the process has become more electronic and also a bit more 'holistic' in the past few years, something I've written about on this blog.

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March 26, 2014

What I've Been Reading -- Economic Commentary for March

Below is a list of reading which may shed some light on topics which have been moving the market. As can be expected, these articles cover the Fed, China, and incoming economic data. Some believe the market volatility over the past few weeks is primarily the result of tensions taking place in Russia, but I feel that its more of a normal reaction to a strong 2013 for stocks.

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December 04, 2013

An Update on Variable Annuity Benefits & Drawbacks

The variable annuity market experienced tremendous growth over the past decade. The introduction of a product which guarantees lifetime income payments while providing the opportunity for market growth was precisely what many investors were looking for. Companies such as Prudential, MetLife, AXA, Nationwide, Jackson, and Transamerica rolled out product after product which generated billions of dollars in sales through financial advisor channels. The purpose of this article is to determine if these products are still working well for investors and to point out the challenges which the current market environment presents to the insurance companies which issue these variable annuity products. In essence, are the product offerings at the current costs worth purchasing? Or should investors be looking at other products and strategies to augment their retirement income?

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October 28, 2013

Year-End Ideas for Owner-Only Businesses

There is still time to establish a plan for the current tax year and take advantage of deductible contributions, but the deadline is very close. Owner-only businesses have until December 31 to establish 401(k), Profit-Sharing, or Defined Benefit Plans. Funding may be completed next year, by the business’ tax filing deadline, including extensions

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October 08, 2013

Baffled by College Costs? Me Too

It's a conversation many of us have over the dinner table or with our colleagues at work: "I can't believe the cost of college." It is a very reasonable statement when you consider that many private colleges cost $40,000+ per year. My alma mater, New York University, is now over $50,000 per year. The question I keep coming back to is whether or not it's worth it. I think the answer was a resounding yes up to the point when I graduated college (2004) but since then, a college education seems to be doing more harm than good for many, many people that I speak with. That's not to say it's wrong for everyone, but perhaps the decision to attend college, especially a private college, deserves a lot more contemplation than it has in the past. A recent article in Money Magazine ponders some similar questions and covers some specifics that I think my readers may find interesting.

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September 24, 2013

Jumping Back into Municipal Bonds

It's hard not to notice the slamming endured by the municipal bond market over the past few months. Many advisors discussed with clients a scenario in which bond pricing would gradually decline as interest rates gradually moved up. The reality was that the 10-year Treasury yield jumped over a full percent from May to June and municipal bond prices plummeted quickly. Fund investors who don't hold bonds till maturity likely felt the pain even worse as high levels of redemptions combined with lower prices caused some municipal funds to drop 10% or more, particularly those that own longer-dated bonds. Factor in the Detroit bond crisis and cover story by Baron's a few weeks ago slamming Puerto Rico and the picture for municipal bonds becomes even bleaker. But savvy investors must always be tracking struggling asset classes to find the point at which value starts to present itself.

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August 07, 2013

Holistic Retirement Planning

I had a client in yesterday who asked me how much money he would need to retire comfortably. It's probably one of the more common questions which people ask their financial advisor and each of us has a different way of handling the process. For years my answer has revolved around quantifying goals and having a savings/investment plan to reach those goals. Depending on the success of the client over time to meet their savings goals, combined with any help offered by the market, we continuously amend the retirement goals and go from there. I've always been half comfortable with this system. The upside is that it encourages people to save and invest, and that can never hurt. The downside is that retirement is a very subjective goal and it's very difficult to define its price decades in advance. So I've decided to change my approach to something which strikes me as a better solution for most people.

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March 25, 2013

Financial Milestones: Keeping Your Emotions in Check

This post really hits home for me right now. My wife is due any day with our first child and we're currently balancing our New York City apartment with a new home which we bought and are renovating in the suburbs. At the same time, my wife has left work for a few months, cutting out a chunk of our income. We find ourselves at a point where we have lots to buy but we need to be more cautious than ever not to fall into the trap of getting everything we want now and leaving ourselves financially vulnerable later on. This inspires today's post about how to get through life's major financial events including weddings, home buying, children, etc, without letting your emotion force you into decisions which you may regret down the road.

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January 22, 2013

Do you own Life Insurance?

Recent studies show that life insurance ownership is at a 35-year low with only 44% of US households owning some form of life insurance.* That statistic likely reflects the fact that families feel the need to drop their insurance coverage ahead of other items when times get tough. People need to understand that life insurance isn't strictly a luxurious method used by wealthy people to pass funds along to the next generation. Rather, it's a strategy employed to avoid potentially awful scenarios in which the loss of a loved one results in financial hardship for others. Even a basic, inexpensive term policy can help avoid such a situation from ever taking place. As a comprehensive wealth manager, I plan to go over my clients life insurance coverage in more detail during 2013. Most people are primarily concerned with the management of their investments but not with potential risk exposures in the form of lost income/wages and what coverage should be in place to minimize that risk. More on this below...

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December 11, 2012

Between the Lines: Suggested Reading from First Allied Asset Management

This post includes a list of recent articles which are suggested reading from First Allied Asset Management, my broker/dealer firm. You will find a link to each article followed by a brief synposis of what the article is about. If these headlines and others don't look all that optimistic, that would certainly be a reflection of the current economy and investor sentiment.

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November 29, 2012

Advisors: A Conversation to Have with your Clients

There was another great article in Financial Advisor magazine this month which highlights the sort of fears and concerns that plague many generations of today's investors, specifically those nearing retirement who are trying to better preserve capital. It's no longer just about the magic number one needs to retire comfortably or which financial product you can buy to protect your future income against long life spans. Today's concerns are often about the potential of current events to cause another market retreat along the lines of the tech bubble or housing crash, the sort of thing which can further jeopardize a comfortable retirement. The article suggests that some of the top concerns that clients/investors have at the moment include: 1) the debt issue and whether that may ultimately cause the US to lose its status as the world's reserve currency; 2) the likelihood that we'll experience severe inflation in the coming years which could dramatically impact purchasing power; 3) what are the potential ramifications of Obama's large and complex health care plan? So let's briefly touch on each of those and then see if we can back those concerns into some sort of investment opportunity.

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November 06, 2012

Saving for Retirement: The Numbers

There was an article in Financial Advisor magazine this month which talked about how much money people ought to save if they wish to retire comfortably. I've found people enjoy these simplified, rule-of- thumb type systems as they allow people to break down complex, hard-to-reach goals into smaller, more manageable pieces. The article suggests that saving 8x your final salary should, along with social security, prevent a situation in which one outlives their assets. Obviously this isn't an exact science as the retirement picture looks a little different for everybody, but based on standard spending ratios (typically 85% of pre-retirement income will be needed) these numbers should work. The ways in which one may reach such a large lump sum goal will vary but below are the suggested guidelines for doing so.*

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August 28, 2012

Wealth Transfer Rules Expiring December 31st

Clients and advisors alike are wondering what will happen to the favorable tax rates that are set to expire at the end of this year. One consideration within this broader discussion involves the expected changes to wealth transfer rules. If Congress doesn't act in the next few months, transfer tax rates will revert back to 55% and the lifetime exclusion for an individual will move from $5.12M down to $1M for individuals and $10.24 down to $2M for couples. That poses a big potential estate planning blunder just down the road, one which can be avoided with some basic planning.

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June 22, 2012

FINRA’s 2012 Product ‘Watch List’

On January 31st, FINRA put out a publication intending to highlight new and continuing areas of significance to their regulatory program. As an advisor, I can see why some of these areas may be of concern to regulators as opportunities to either overuse or misuse these products does exist. I also found it interesting that this list includes many of the most popular investment products currently being offered by advisors. The reason for their popularity, at least how I see it, is that these products offer non-correlation to the markets, income protection, speculative potential, or some combination of those elements offered in some kind of complex shell. I applaud FINRA for putting out this kind of publication. In my experience, many investors haven't taken the proper time to read up on regulatory warnings about financial products so that they understand where the risks of misuse may be. Advisors, broker-dealers, etc, should read these sorts of notes and hopefully will think twice about suitability and appropriateness before recommending something which may be misunderstood by a client, causing a problem down the road.

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June 07, 2012

The Variable Annuity Market is Shrinking

It seems like every time I turn around another variable annuity (VA) provider is closing its doors. Sun Life, John Hancock, AXA, Genworth, and ING are among the companies which have either limited new contributions to one of their VA products, taken some other step to minimize exposure to the VA market, or completely exited the market. Meanwhile, that has translated into more premium dollars for big players like Prudential and Jackson National which have increased market share over the past year, according to Bloomberg Financial. The irony here is that VA sales in Q3 of 2011 hit $8.8B which was the highest level since Q3 of 2007.* One would think companies would want to enter this arena and compete for new dollars, not run the other way.

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May 22, 2012

A Mutual Fund Share Class Discussion

There is a tremendous amount of money invested in mutual funds in the United States. In some cases people own mutual funds for their personal investments. In other cases people own mutual funds in their employer retirement plan, whether it be a 401k, 403b, Simple or Sep IRA, etc. I’ve found that the majority of people whom I meet, whether clients or otherwise, don’t know the difference between A, B, C, and other less common share classes. I find that odd considering the investor is often the person who must choose which share class they own and therefore should have at least a basic knowledge of each. However, many people leave that decision to their advisor and don’t learn the differences until after their account has been open a while or worse, when they need money and find out they are subject to some sort of deferred sales charge. Let me elaborate below so that, in the future, you know exactly what you are buying and why:

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May 17, 2012

Are Exchange-Traded Funds Really Ruining the Market?

In my opinion, no, that’s ridiculous. As I wrote in my book back in 2007, I believe ETFs are one of the best financial innovations to hit the market in decades, perhaps since the mutual fund made its debut. ETFs allow investors to own broad, diversified portfolios at low annual costs. That’s what mutual funds offered back in the day but people ultimately realized that some fund expenses weren’t so low and the performance wasn’t so hot. I believe ETFs offer a solid way to own a passive portfolio which covers a broad cross-section of the market. Couple that with the fact that they are transparent, trade on exchanges like stocks, and are tax-efficient. Now to clarify, when I refer to ETFs, I am referring to large, popular indexes such as the S&P 500* which do not employ leverage. Please read on to hear some professional opinions about how ETFs may have contributed to market volatility:

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May 08, 2012

Understanding the SIMPLE IRA Plan

In the world of small business retirement plans, there are many options. Some plans give the employer sole authority to make contributions, others are contributed to by employees only, and some are a hybrid of the two in which employees make contributions and employers can make matching payments or make random contributions to the plan. The SIMPLE IRA is an interesting option for small and mid-sized businesses (up to 100 employees) which allows a mix of employer and employee contributions. Some would say IRA plans like the SIMPLE are becoming obsolete as the 401k vehicle has become more flexible but that’s not entirely true. 401k plans still have more onerous rules on business owners in terms of tax reporting requirements and the fairness surrounding contribution levels. For that reason many people stick with plans like the SIMPLE IRA which have lower contributions limits but are easy to administer and achieve the goal of socking away tax-deferred funds for retirement.

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April 13, 2012

Featured in Financial Advisor Magazine!

I don't usually blog about my press mentions, but this month I had a pretty cool feature in one of my industry's most prominent publications. Financial Advisor Magazine interviewed me for a story on social media and how advisors are dealing with the opportunities and challenges it presents. As a blogger, I've always been an advocate of using the Internet as a tool for helping advisors grow their business. However, the social media movement takes web marketing opportunities well beyond that of a traditional website or blog. Advisors who follow the new and very specific rules about how to use social media may have a leg up on those who rely strictly on more traditional methods of client acquisition and retention. The only problem is that it can be time-consuming to sort through all the information about becoming more Internet-savvy. You still have a business to run, after all. One effective option is to consult a social media expert for help growing your business. He can show you the tricks of the trade and help you attract more clients.

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