Tag

financial advisor

What is Regulation Best Interest?

By | 2020, Money Moxie | No Comments

By now, if you have accounts with SFS, you have received a new form called Customer Relationship Summary (CRS) from Securities America and an ADV Part 3 from Smedley Financial Services. So, why are you getting these forms, and what do they actually mean to you?

There is a new regulation that is designed to put your best interest first. It is called Regulation Best Interest, or Reg BI for short, and it went into effect on June 30th, 2020.

Reg BI requires an investment professional to act in your best interest and hold themselves to high standards of disclosing all important information, caring for their client, reporting any conflicts of interest, and maintaining strict compliance.

Form CRS is intended to explain the customer relationship with our Broker-Dealer, Securities America. This form clarifies the difference between investment services and advisory services and explains the difference between brokerage and advisory fees. It also details how the Broker-Dealer makes money and any disciplinary history for Securities America.

Form ADV Part 3 is specific to Smedley Financial. This form is intended to clarify the types of services we can provide, the fees you may pay, our fiduciary obligation to act in your best interest, any conflicts of interest, how we make money, and the fact that we do not have any disciplinary issues.

These forms are a good step forward towards putting a client’s best interest first. However, in my experience, most clients already expect this of their financial advisor.

The good news is that since the beginning, Smedley Financial has been a fiduciary and has always strived to put our clients’ best interests first. And we will continue to do so. For our clients, Reg BI should not have any meaningful impact. It should raise the bar for other “advisors” to make sure they hold themselves to the same fiduciary standard.

Reg BI also clarifies the sometimes-muddy waters of who can call themselves “advisors.” Professionals who just sell insurance or a product, or who only process trades as a stockbroker, cannot call themselves “advisors.” An “advisor” is someone who has the appropriate securities license to purchase stocks and bonds and is also licensed to give clients advice.

At Smedley Financial, we hold ourselves to an even higher standard by not only being investment advisors but also financial planners and life-centered planners. Our financial planning helps you figure out what resources you have, will have, and will need in order to meet your goals. Our life-centered planning helps you figure out how to live the life you want with the time you have left on this planet.

We appreciate you as clients, especially during these unusual times. If you have any questions regarding the forms provided or would like to review your plan, don’t hesitate to call us.

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Sharing Your Financial Stories With The Next Generation

By | 2019, Money Moxie, Newsletter | No Comments

We have the delightful opportunity to work with multi-generation clients. The difference in each generation surrounding what they value, how they view money, and where they place importance on things versus experiences is fascinating. Each generation has a different outlook on life and their opinions surrounding happiness.

In our work with multi-generations, we find it exciting to see how youth gain a different perspective when they hear what their grandparents or parents did to earn money when they were young. It provides them with a sense of understanding and appreciation for the sacrifices of older generations. I believe it also deepens the relations between the generations. I certainly value the stories I have heard about the financial challenges, successes, and failures of my parents and grandparents.

We are preparing for a youth financial summer camp next year. It will provide young people the opportunity to learn about money while they are still forming ideas and habits they can take into adulthood. One of our presentations will focus on ways they can make money through creative summer jobs. For this purpose, we are compiling information to share with the next generation and would love to learn about your experience as a youth. In the next month, we will be sending an email asking a few basic questions such as:

As a teenager, what did you do for summer work?
How much did you earn doing that job?
How many hours did you work each day?
What time did you go to work?
How did you get to and from work (walk, bus, parent, bike)?
What did you love about that job?
What valuable lessons did you learn?

Please help us by answering the questions. Your response will be anonymous unless you wish to be recognized. Thank you in advance for helping us guide future generations to financial success! Thank you for your business and your friendship.

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Early Retirement: A Lifestyle Change

By | 2019, Money Moxie, Newsletter | No Comments

Retiring early has a whole new meaning for Financial Independence, Retire Early (FIRE) adopters. With a goal to retire from the 9 to 5 rat race, those willing to make sacrifices can transition to a new lifestyle as early as
age 35.

The idea behind FIRE is living a frugal lifestyle so that you can create financial independence. This means living on much less and saving 50% to 70% of your income for the future. At the same time, the money you live on is focused on paying off debt as quickly as possible. Frugal habits would include eating in, shopping at thrift stores, buying food and supplies on sale, and enjoying at-home entertainment. It’s not as easy as it sounds.

Truth be told, most FIREs have had high-paying careers or were entrepreneurs. Their high incomes allowed them to save a great deal of money and still live comfortably while preparing for an early retirement. Not easy for the average American worker earning $60,000 or someone who lives in an area with high cost of living.

FIRE adopters are not retiring in the traditional sense. They are merely focusing their time on things that they enjoy and making a difference in the world. The majority have created income by blogging, teaching, or keeping a part-time job that offers lifestyle flexibility and health insurance benefits.

You may think this sounds great. How do you get started? Before you jump on board, there are things to consider. Most of us get insurance through a group plan where some of the cost is paid by an employer. For most, leaving the workforce before age 65 (Medicare age) means finding insurance in the marketplace. This can be costly because you pick up the full tab.

Leaving a lucrative job early also means you are missing out on your peak earning years. As we immerse ourselves in a career, we gain knowledge and experience, making us more valuable to employers and increasing our income over time. FIRE’s take the employer out of the picture. Their value is based on what they can market and deliver.

Saving for the future is also a concern. Without continued contributions to retirement-type accounts, like 401(k), IRA, or Roth IRA, your future income and lifestyle can be at risk. Forfeiting an employer match or profit-sharing contribution means you will need to bump up saving for future needs.
This can all be overcome with good planning and meticulous monitoring.
If you think the FIRE idea is for you, here are ideas to get you started:

(1) Determine why you want to achieve Financial Independence and Retire Early. What does that look like once you reach the goal?

(2) Figure out where you stand now. What is your net worth (total assets minus liabilities)?

(3) Where is your money going? You need to track how you spend every dollar.

(4) What expenses can be cut to reach a 50 percent savings rate?

(5) Pay off high-cost debts first.

(6) Build an emergency fund – six months’ worth of net expenses – in case you get in a financial bind.

(7) Take full advantage of tax advantaged savings accounts: IRAs and Roth IRAs.

(8) Find a side job to bring in extra money that can help pay off debt and build savings.

(9) Get advice from a Smedley Advisor to help develop a plan and track your progress.

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One-Trick Financial Advisors

By | 2018, Money Moxie | No Comments

It pains me to say this of a profession that I love, but too many financial advisors are just one-trick salesmen who want to make a quick buck.

How do you spot a one-trick financial advisor? Their answer to EVERY question is either life insurance or an annuity. However, they won’t tell you that is what they are offering.

You’ll hear phrases like, “If you invest with us you can take your money out TAX-FREE in retirement.” Or “Do you want double-digit returns with NO DOWNSIDE RISK?” These “advisors” are throwing out flashy fishing lures to hook you. Here is what those phrases really mean.

The way you can take out your money “TAX-FREE in retirement” is by using an insurance policy that is either whole life or indexed universal life. You build up cash value in the policy over years and you can take a LOAN that is potentially tax-free.

However, the “advisors” usually don’t mention upfront that this is a life insurance policy. They just want to get you hooked before they share all of the details. They also rarely mention that if you take out too much, then you surrender the policy and may be subject to a large tax bill, blowing up the possibility of tax-free income.

To “avoid DOWNSIDE RISK” you use an indexed annuity–also from an insurance company. You lose some upside potential to avoid some downside risk. Of course, the insurance company takes a healthy cut and the “advisor” gets a nice paycheck too.

However, the sales person usually glosses over the fact that your money will be locked up for 7-10 years and that there are hefty penalties to get out early.

Now, it may sound like I am against insurance and annuities, which is not true. I sell them when they fit a client’s needs. I am against how one-trick financial advisors use them as “the only thing you need.” They tout their products as the hottest-thing-since-sliced-bread, but there is no one-size-fits-all product.

In reality, there are many good opportunities to use life insurance and/or annuities as ONE PART of your plan. However, doing so should be tied back to meeting your goals.

Life insurance is essential to protect your family if you pass away too soon or great if you want to leave a larger inheritance. Indexed annuities are good as a CD replacement for money that you don’t need for 7-10 years. It should typically be 20% or less of your portfolio.

I’ve seen too many good people get stuck in products that they don’t understand and many times don’t even need.

To get what you really need, use a holistic planner with a CFP® designation, like the advisors at SFS. We understand the nuances of investment products and use your goals to determine which to use.

So, if you have any questions about something you heard on the radio or from a friend, call us. We are happy to talk about all investment products–how they work and if they fit your financial goals.

 

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, and CERTIFIED FINANCIAL PLANNER™, in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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When Do You Need a Financial Advisor?

By | 2018, Money Moxie | No Comments

Last week I attended the Silicon Slopes Tech Summit that celebrates the booming Tech sector along the Wasatch Front. As I spoke with vendors and attendees, a consistent theme came up: “When do I need an advisor?”

Here are my thoughts on this and other similar questions I was asked.

Do I really need an advisor? You may not always need an advisor, but you always need a plan. If you don’t have a roadmap, how do you know if you have reached your destination? Many people have vague ideas in their heads of what success looks like. Maybe it’s retiring at the age of 50 and sitting on a beach drinking lemonade. Maybe it’s starting up your own company. Maybe it’s giving back to the community.

It is important to sit down and write out your ideas of success. Then take one more step by defining the path that will take you there. Without creating the stepping stones, your ideas will only remain wishful dreams.

Do you need an advisor to create that plan? No, as long as you are willing to do the research. Nowadays there is so much information available on the internet that you can become an expert in any area…as long as you are willing to do the research. As our CEO Roger Smedley puts it, “You don’t know what you don’t know.” Even more dangerous may be the things you think you know with certainty.

So, if you want to create your own plan, but fear you are missing something, consult with a professional that can identify potential pitfalls and help turn your stepping stones into concrete, actionable ideas.

Don’t advisors cost a lot? At SFS, our initial consultation is free. I love to see young college graduates come in who are ready to conquer the world. I give them some time to help create a plan. I know that if I help guide them in the right direction, they will be more financially secure, and who knows, they may even become one of my top clients in the future.

If a person becomes a client, then there are fees that vary depending on the services provided. Comparing our fees and our in-depth planning, we are a far better value than our competition. I have had people question our cost, but I have never had them question our value.

What you don’t want to do is to get your advice at the water cooler. While good advice may not be cheap, bad advice will always cost you dearly no matter how little you pay for it.

Is it best to talk to an advisor before or after my company goes public? Anytime you are dealing with a potential windfall, you should talk to an advisor. As human beings we constantly overestimate how much something is worth. When I was young, I thought $100,000 for retirement was a lot of money. Now, I know it could disappear in a heartbeat.

So, if you get a windfall, reward yourself by using some of the money to take a trip or do something fun. Just don’t blow it all in one place. The world is full of once-rich people that are now broke.

Make sure your money helps you accomplish your goals according to your plan. And if you don’t get the windfall you were expecting, still talk to an advisor. We can help you reach your goals.

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Millennial Financial Success

By | 2017, Money Moxie, Newsletter | No Comments

Each generation seems to think the next generation is less prepared and doesn’t appreciate what they have. In reality, each generation is changing and evolving to its surroundings.

Time described generational issues, “The young seem curiously unappreciative of the society that supports them. ‘Don’t trust anyone over 30,’ is one of their rallying cries.”1 Surprisingly, this was printed in 1967.

Millennials–those born between 1981 and 2001–are the generation that will be required to forge financial success without a pension. As investors, they need to redefine their landscape. These are some common Millennial financial mistakes:

1. Not having a proper emergency fund: When you don’t have an emergency fund, every little unexpected event is a catastrophe. Paying with credit cards is easy, but hard to pay off. Avoid this trap by having an emergency fund of three to six months of living expenses readily available.

2. Forgoing the employer retirement match: About 75 percent of millennials are saving in their employer retirement plan; however, only 40 percent take advantage of the full company match.2 Those are free dollars that can help fund a retirement.

3. Holding onto debt: Student loans and car payments seem to hang around for way too long. Most people can afford to pay off debt faster than the minimum payment yet choose not to. Paying off fixed monthly payments frees up money that can work for you, instead of against you. Get aggressive and start to chip away at that debt.

4. Not using a financial advisor: A financial advisor can help you dream with numbers. Between work, social commitments, and family, most millennials don’t have time to focus on their finances. Financial advisors are here to help and work with all ages, incomes, and stages in life. We can create a plan and help you work toward making it a reality.

(1) Time Magazine, 1967
(2) http://www.benefitspro.com/2014/11/17/millennials-arent-meeting-their-match-in-401ks

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