Common Financial Planner Questions

Finding the right financial advisor is oftentimes the key to success. That’s why we’ve outlined our most commonly asked financial planner questions and provided thoughtful, transparent answers. All of the information below is provided in an effort to give you a clearer picture of our process, goals, and methods for helping you reach your financial goals.

Questions About Your Financial Goals

When it comes to investing there are a couple of things you should keep in mind to be successful. Decide on an amount or percentage to invest regularly, stay consistent with it and understand investing is not a get-rich-quick scheme, but rather a way to consistently grow your wealth over time. With that philosophy, utilizing the stock market in general or more specifically mutual funds is a great way to invest. By doing so you can keep your money diversified, limiting some of the down side risk and give yourself the opportunity for great upside long term.* The S&P 500 index has averaged over 9% per year over the past 90 years.

*Although past performance is no guarantee for future results.

How much life insurance you should have and the type you need varies from person to person depending on your circumstance, but a rule of thumb is to have 10-15 times your annual income. In general people between ages 30-50 will need more coverage than people younger or older. This is because we have generally started to take on some larger debt and have not had enough time to build our assets yet. Think about all of the debts/liabilities you will be leaving behind including the mortgage, car loans, student loans, end of life expenses and the income that you will no longer be able to provide for your family and make sure you have enough life insurance to cover that and also give your loved ones a cushion.

Learn more about our insurance services here.

The way to fund your child or children’s education is early and with tax advantages. The most powerful advantage any parent can have in funding education costs, specifically the expense of college, is an 18-year head start. The power of time is your number one ally when starting early. $100 invested for 18 years will almost certainly be worth much more than $100 invested for one year, so don’t wait. The most advantageous vehicle or program for that investment is a 529 College Savings Plan. Many states offer a tax incentive to invest in their state-sponsored 529 plan, meaning that some amount of your annual 529 contributions may be deducted off the income reported on the state level at tax time. These plans will offer a variety of mutual fund investments to select from as well simpler age-based options. However, the biggest and most powerful advantage of the 529 plan itself is the ability to take tax-free distributions to use toward college expenses such as tuition, room and board, books, etc. You fund the account with after-tax money (though your state may allow you to deduct the contribution off your state income taxes,) your funds grow in the market until your child goes off to college at which point you are able to take distribution of the initial principal invested and the growth achieved in the market tax-free to be used for college expenses.

We recommend that your retirement income withdrawal rates should be in the range of 3-5% based on your age, portfolio size, and other contributing factors that you should consult with your financial advisor about. The key to this rate of withdrawal is remembering that the larger of a percentage withdrawal that you make, the faster your account can become depleted, and in the case of a market downturn could amplify your losses. Another important factor is take all aspects of your life into consideration. For example, if two people have an identical portfolio size and structure, but one person is 15 years older than the other, the distribution rate should be different. The younger of the two people will have a longer time horizon that needs to be account for, therefore, his/her money will need to last longer and have less pressure from withdrawals.

Learn more about our retirement planning services here.

You can invest in a variety of investment vehicles that dedicate their investment mandate to socially responsible companies and sectors which include investment vehicles like mutual funds, ETFs, and separately managed accounts. However, socially responsible investing is not as black and white as it seems. Because investors uphold different values and standards on what constitutes as “socially responsible”, caution is warranted on investment companies that “greenwash” their portfolios simply as a strategy to gather assets. Additionally, investors who are looking for a more precise allocation to companies that closely align with their values and beliefs should look into investing in a portfolio of individual stocks through a separate managed account structure instead of pooled investments like mutual funds and ETFs to gain the most customization. Finally, all investment managers should consider the additional benefit to their portfolios when including environmental, social, and governance (ESG) risk factors in their portfolio evaluation. These risk factors are part of the evaluation process of socially responsible investing. At The Tranel Financial Group, all of our portfolios are evaluated with an ESG overlay to account for societal specific risks. We encourage you to reach out to learn more about how you can create your very own customized socially responsible portfolio that aligns with your values and beliefs.

Helping You Navigate Life Events

We have a dedicated divorce financial analyst that can help you navigate a tough situation.

A Certified Divorce Financial Analyst or CDFA, is a professional that is trained on all the financial aspects of a divorce. Divorce can be an emotional and confusing time. You may be questioning,

  • How am I going to survive financially?
  • What happens to my savings/ retirement?
  • Can I still retire on time? Can I stay home with my kids?

There are many decisions that need to be made and the most critical decisions are around your finances. Being fully informed and having complete understanding how the financial decisions you are making, puts you in the driver seat of your financial future. A CDFA as part of your team can help set you up for success in your new life. We will partner with your other divorce professionals to help set up the best outcome for your situation. We help educate, analyze, and build your unique plan. A Certified Divorce Financial Analyst can analyze your marital assets and debts and provide you a plan for your financial options for the best outcome.

Yes, if your spouse has just recently passed away we can help you. This is obviously a very difficult time for you and your family and dealing with everything financially is a huge component of that.

Consolidating old accounts, re-registering them to the proper titles, managing life insurance payouts, replacing a potential income that is no longer there, putting together a new budget; are all important pieces of the puzzles that will have to be mapped out for you and we can definitely put together a plan that will help make things easier for you.

This is an often worried over, yet not often discussed, topic for many, many families. There are many ways of ensuring that needs of your family are met should such a situation arise. Life insurance as well as short-term and long-term disability can be a key component. These types of insurance plans are often available to employees through workplace benefit plans but can also be found on the private market. The key to either of these investments is get them before you begin to suspect you may soon need them. The premiums that will be commanded for any of these types of plans will only increase as our age increases or our health decreases. Getting them early and while healthy can result in much friendlier price tags.

Other important aspects to consider are more formal estate planning items such as a will and perhaps a trust. These documents not only work to ensure that your wishes are known and carried out but a trust can provide very specific, sometimes complex instructions for management and distribution of assets after you’ve passed or in the event you become incapacitated. These can be very important when passing assets to someone who’s judgement you may not be entirely confident in or, very commonly, when passing assets to young adult without much experience with managing money.

Congratulations on this exciting time! Life transitions are the perfect time to meet with a financial advisor and review your financial situation and goals. Starting a family can bring up a lot of questions especially around money and savings. It is important to meet with a financial advisor to set up a successful future for you and your family. You and your financial advisor will review your goals, your current budget, after baby budget, and build a unique plan on how to save for your baby’s future. Building a family is exciting and expensive. Proper planning for the events important to your family, birthdays, baptisms, Quinceanera, a car, vacations, and kid’s activities can give you peace of mind and let you enjoy all the milestones. You baby is little right now, and it is true that time goes by too fast. It’s never too soon to start college planning and start a college savings like a 529 plan. As a financial advisor I love to help you plan for your family and meet all your goals.

There is never a wrong time to start your financial plan. Planning builds a map for success and helps point you in the right direction so you can reach your financial goals. Life is full of surprises and it is easier to stay on track when you have your own tailored financial roadmap. The first step is to meet with a financial advisor to gather your financial information and goals.

That’s why we’re here. No matter where you stand financially, we can help point you in the right direction and get you on a path that helps you achieve your goals. Contact us today to get the conversation started.

Transparency Regarding Fees, Payments, & The Advisor Role

A commission based advisor gets paid for buying or selling different securities like stocks, bonds or mutual funds. This commission is paid to the advisor regardless of the performance of the underlying holding or actual time spent working with the client. A fee-based advisor gets paid a specific percentage of the assets they actually manage for a particular client. If the portfolio being managed performs positively the advisor will earn a higher fee in dollars and consequently if the portfolio performs negatively the advisor will earn a lower fee.

Many people have the common misconception that investments are free if held inside of a qualified plan (401k), an annuity, or if they purchase a mutual fund or etc on their own.

Please know there are still costs associated with these, as nothing is ever free. Let’s look at a hypothetical example of a qualified plan (i.e. 401(k)). Let’s assume that you have 15 or 20 choices inside of your 401(k) to help diversify your account further. These holdings are selected by your plan sponsor to be available to you. Each year they are required to send you out a prospectus either digitally or through the mail to explain all of the details regarding that fund. Most plans utilize mutual funds to help further diversify your account. In this example a mutual fund would have 2 underlying layers of expenses that you would not see unless you dig for them. The first is what is called a 12b-1 expense. This is an expense that is built into the Mutual Fund, and is commonly called a marketing expense (this helps cover the marketing materials and prospectuses that you receive). This can typically range in cost from .2% – .5% depending on the company. In addition to this the mutual fund would have an internal expense, an expense charged for managing the underlying investments (a mutual fund will typically have 30-50 investments that are managed by an internal money manage)r, this is also an expense that is built into the holding that you will have to dig to find (this is typically in the .2 -.5% range as well). Add your administrative cost from your plan sponsor on top of this and it is definitely not free