Making the decision to work with a financial advisor is a brave, but often daunting, step towards building wealth and financial security. Many people who’ve never consulted a financial planner before are overwhelmed with questions and don’t know where to start. Because of this, we’ve compiled a list of our most asked questions with thorough, transparent answers, as well as our philosophy for helping you reach your goals.
A financial advisor, above all else, helps you build wealth and feel secure financially. They use their experience and expertise managing finances, investments, and helping clients plan for various life milestones to provide advice and management specific to your financial situation and individual goals. This can apply to any aspect of your financial life – planning for retirement, managing investments, paying down debt, increasing savings, creating an estate plan, optimizing taxes, and more. A financial advisor gets a complete understanding of your financial situation and goals and creates a plan with concrete steps to reach them.
Just as financial goals vary from person to person, exactly where and how to invest is not a one size fits all approach. That being said, there are a few best practices that apply to most, if not all, investors. First, it’s important to understand that investing is not a get-rich-quick scheme but a way to consistently grow wealth over time. Mutual funds are a great way to invest because they keep your holdings diversified, which limits risk while providing the opportunity for long-term growth. The second is to determine an amount or income percentage you can commit to investing regularly and remain consistent with your contributions.
How much life insurance you should have varies based on a variety of factors. A good rule of thumb is that your policy provides ten-fifteen times your annual income. However, we typically recommend that people between ages 30 and 50 have more coverage than people who are older or younger. This is because they’ve generally started to take on larger amounts of debt (such as a mortgage, car payment, and student loans), but haven’t had enough time to build much equity in their assets yet. The goal is for your life insurance to give your loved ones enough of a cushion to account for any debts and liabilities you may have, as well as the loss of your income.
When determining the right retirement income withdrawal rates, it’s important to consider your age, portfolio size, and goals in retirement, as well as a variety of other factors. Age is a particularly important factor as it affects how long the money may realistically need to last. For example, if two people have identical portfolios in both size and structure, but one is fifteen years younger than the other, the younger retiree will have a longer time horizon, and their money will need to last for a greater amount of time.
It’s also important to understand that the larger the withdrawal percentage is, the faster your account will become depleted. Should there be a market downturn, these losses can quickly become amplified.
That being said, we typically recommend that your retirement income withdrawal rates should be in the range of 3-5%, but consulting a financial advisor will allow you to understand the best percentage for your unique situation in retirement.
The goal of socially responsible investing is to invest money in companies that have positive social impacts and may lead to broad-scale social change while providing positive financial returns. From mutual funds, ETFs, and separately managed accounts, there are a variety of investment vehicles for socially responsible investing.
It sounds like a win-win situation. However, socially responsible investing isn’t necessarily black and white. Different investors have different values and standards, so what one person considers socially responsible may not fit the bill for another. Not to mention, companies may “greenwash,” or misrepresent, their portfolios as a strategy to gather more assets.
For investors who feel strongly about only allocating investments to companies that align with their values and beliefs, investing in a portfolio of individual stocks through a separate managed account will allow for a more precise allocation than pooled investments, like mutual funds.
At the Tranel Financial Group, all of our portfolios are evaluated with an ESG overlay to account for societal-specific risks, like environment, social, and governance risk factors, as well as additional benefits. We encourage investors looking to create a customized socially responsible portfolio that aligns with your values and beliefs to reach out.
It’s never too late to start building your financial plan. Creating a financial plan is like building a roadmap to success – it helps point you in the right direction to reach your financial and personal goals. Of course, life is full of surprises, and there may be times when it is necessary to adjust your plan. However, it’s easier to stay on track when you already understand the destination and the important milestones on the way there.
The first step to building your customized roadmap is to meet with a financial advisor to go over your financial information and share your goals.
That’s why we’re here! No matter where you stand financially, what stage of life you are in, or what your long and short-term goals are, we can help point you in the right direction to start achieving your goals. Contact us today to start the conversation.
Divorce is often an emotionally complicated and painful experience – but it can also be a financially devastating one, largely because many people don’t know about the resources available to them when navigating it.
When making the decision to file or being served with divorce papers, you may find yourself wondering:
On the Tranel Financial Group team, we have a Certified Divorce Financial Analyst, or CDFA, to help answer these questions and more. A CDFA is a financial advisor with knowledge specific to the laws and intricacies surrounding the financial aspects of divorce. They start by analyzing your marital assets and debt, creating a plan to get you the best financial outcome possible and help you understand the long and short-term implications of any deal that is proposed. Your CDFA also partners with your legal team, as well as any other divorce professionals you are working with, to ensure everybody is on the same page throughout the divorce process.
A CDFA helps put you in the driver’s seat for your life after divorce and empowers you to make informed decisions about your future.
Divorce is often an emotionally complicated and painful experience – but it can also be a financially devastating one, largely because many people don’t know about the resources available to them when navigating it.
When making the decision to file or being served with divorce papers, you may find yourself wondering:
A financial advisor can help you answer these questions and more. Our team regularly partners with divorce attorneys to help clients navigate the financial aspects of their divorce and plan for a happy and fulfilling life after it. We start by analyzing marital assets and debts, creating a plan that gets you the best financial outcome possible in your specific situation. We also help you understand the long and short-term implications of any deal that is proposed, ensuring that you have a clear picture of what your finances will look like after the divorce is finalized.
A financial advisor helps put you in the driver’s seat for your life after divorce and empowers you to make informed decisions about your future.
Losing a spouse is indescribably difficult for you and your family, and we know that the stress of finances in the wake of a loved one’s death may be adding to your hardship.
From consolidating old accounts and re-registering them to the proper titles to managing life insurance payouts, replacing a potential income stream that is no longer present, and creating a new budget, the process is, understandably, overwhelming and is likely the last thing you want to think about while grieving.
Our team is here to support you through this transition and put together a plan that will make things easier for you in the months and years to come.
While this is a topic that is often worried over, it’s rarely discussed in many families, and it’s understandable why. Nobody wants to think about losing their spouse or the possibility of their own death, but it’s important to be prepared in case the unexpected does happen. Many families chose to invest in benefits, such as life insurance policies or short and long-term disability, either through their workplace benefit plans or on the private market. Either way, the key to making the most of these investments is to purchase them before you have any reason to suspect you may need them. The premiums on these plans will only increase with age and health concerns, so early investment will lead to lower price tags.
It’s also important to consider formal estate planning items, such as creating a will and a trust. These documents will ensure that your wishes are well known and will be carried out in the event of your death and can provide very specific instructions, even in complex situations, for the management and distribution of your assets. This is especially important if assets are being passed to a young adult who doesn’t yet have much experience managing money or to somebody whose judgment hasn’t instilled confidence in the past.
When you’re undergoing large life transitions, it’s the perfect time to meet with a financial advisor! Building a family is exciting, but it is expensive, and odds are there are specific life events and occasions that you envision a certain way. Birthdays, baptisms, celebratory parties, an eventual car, family vacations, extracurricular activities and equipment, college… the list goes on and on! Starting a family changes both your goals and your financial situation, and with that comes a lot of questions surrounding money and savings. A financial advisor will help set your family up for a successful future. The advisor will start by reviewing your goals, current budget, and estimated budget after the baby is born, accounting for the added expenses. All of that information will be factored into a customized plan that helps you save for your baby’s future and all of the events that matter to you. Proper planning will give you peace of mind as you move into the next phase of life and allow you to enjoy each milestone.
The best tool in funding your children’s educations is an eighteen-year head start – which is why we recommend that you start saving as soon as your child is born. The reason is simple: $100 that has been invested for eighteen years will be worth a great deal more than $100 invested for one year, or even ten years.
The next best tool for college investments is tax advantages. The most advantageous vehicle or program for that investment is a 529 College Savings Plan. Many states offer tax incentives to invest in state-sponsored 529 plans, which allow you to deduct a specific amount of your contributions on your taxes. These plans still grant flexibility, offering a variety of mutual fund investments to select from, as well as simpler, age-based options based on your child’s target graduation date. When it does come time to put the funds to use, your child will be able to take tax-free distributions to use towards college expenses, such as tuition, room and board, books, and more.
The combination of time and tax advantages ensures that your children get the largest benefit possible from your planning.
Simply put, a commission-based advisor gets paid a specific percentage of the assets they manage for a client. If the portfolio performs positively, the advisor will earn a higher fee. Consequently, if the portfolio performs negatively, the advisor will earn a lower fee.
Alternatively, a fee-based advisor gets paid a flat rate for buying and selling different securities, such as stocks, bonds, mutual funds, and more. This rate is not dependent on the performance of the holdings or how much time is spent with the client.
The Tranel Financial Group is a fee-based, independent firm, which grants us greater flexibility, as we are not tied to proprietary products and do not have any conflicts of interest when giving financial advice.
Many people believe that investments are free, so long as they are held inside of a qualified plan, such as a 401(k), an annuity, or if they purchase a mutual fund or other investment asset on their own. Unfortunately, this is a very common misconception – nothing is ever totally free because there are costs associated with managing these investments.
For example, if your employer-funded 401(k) has fifteen holdings options, they are selected by a plan sponsor to be available to you, and there is typically an administrative cost from the plan sponsor. Each year, the plan sponsor is required to send you a prospectus (either digitally or through the mail) that explains all the details regarding each fund. Because of this, each mutual fund would have two underlying layers of expenses. The first, a 12b-1 expense, is built into the mutual fund and is commonly referred to as a marketing expense, which helps to cover the marketing materials, including the prospectuses, you receive. This nominal fee typically ranges from .2% to .5% – but it’s still present. Second, the fund will have an internal expense, as somebody is managing the underlying investments in the fund, which is in the same range as the 12b-1 expense.
The amount of money that is allocated to fees may vary based on the type of investment or specific fund, but all will have some associated fees.
Take the first step towards building wealth and achieving your financial goals.
