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Congress Set To Pass SECURE Act

 CapitalBuilding

The SECURE Act, Setting Every Community Up for Retirement Enhancement Act, has been in the news for many months now. Since the House passed this earlier in the summer there has not been much heard about it until recently. This piece of legislation has been attached to the spending bill that Congress is looking to pass before they break for the holiday. The House has already passed it and it is on to the Senate.

This is a complex act with many working parts. We will cover some of the highlights that will affect the largest majority of people.

We see one of the most sweeping changes in the way beneficiary IRA’s will be handled. The SECURE Act will eliminate the ability of the beneficiary (unless they are a spouse or fill another exception) to stretch the payments from the IRA over their lifetime, the well-known stretch IRA. Instead, beneficiaries will be forced to withdraw all the assets from the beneficiary IRA no later than 10 years after the account owner passes away. This will have significant impacts on the tax status, especially those in high brackets and their prime working years, of the beneficiary and could have other adverse consequences as a result too. This provision will have the potential for a negative impact over time.

The act does contain some provisions that will be helpful. Those who have IRA assets will not be required to take RMD’s (required minimum distributions) until the age of 72. This will only apply to those that have not attained age 70 ½ before the end of 2019. In addition, those who are working past the age of 70 ½ who currently cannot make IRA contributions will be able too.

The SECURE Act is being touted as the most sweeping piece of legislation in the retirement area since the passage of the Pension Protection Act of 2006. There are additional aspects of the act that will affect retirement plans which will potentially provide access to more people to save. In addition, the insurance industry has been a big proponent of this legislation because it will provide the ability for insurance products, specifically annuities, to be purchased inside of 401(k) plans. This is a big win for the insurance company, but I am not sure it is equally as beneficial for the general public looking to save.

The SECURE Act contains 29 new provisions and changes, far too many to cover in a blog post, but I believe we have covered the most important ones. It is going to be more important than ever in 2020 to make sure that you are working with a fiduciary advisor, who is working in your best interest, who understands how this act is going to affect you. There may be additional planning needed from an estate planning perspective if your current assets include a large retirement plan and/or IRA assets.

It looks highly likely that this legislation will pass later this week and you will want to make sure you know how this is going to affect you in 2020 and going forward. We will be addressing this with each of our clients in their upcoming meetings and suggest you make sure you are reviewing it too. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you would like to discuss the SECURE Act and what effect it could have on your family’s financial situation.

Be sure to share this article with friends, family and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there. 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Finally, Consumers Are In The Driver's Seat With Financial Advisors

Pam Krueger
Pam Krueger: CEO of WealthRamp 

If you follow the news on personal finance-related matters at all, you’ve probably heard about the delay in implementing the third part of the Department of Labor’s fiduciary rule. This is the rule that mandates financial advisors who offer retirement investments—no matter who they are—must act in the “best interest” of their clients. It’s a code of ethics anyone would presume is already required, even though in reality, 90% of financial advisors are not legally required to follow this basic standard. That’s because 90% of financial advisors don’t work for you. They work for the brokerage firms who pay them to sell their products.

Here’s how to know if the delay in the rule affects you

Advisors at brokerage firms sell investments and strategies that typically cost you a lot more in hidden fees and then those investments tend to underperform the benchmark indices. That also goes for insurance companies that offer retirement investments. Take a look at this graph to see how much money you can lose by overpaying to invest using a typical big brokerage firm.


Performance calculated is an assumed 7% average annual return, compounded monthly for 240 months (20 years). “7% with 1.3% “All In” Fee” assumes a 5.7% average annual return while “7% with 2.5% “All In” Fee” assumes a 4.5% average annual return. For illustrative purposes only. This is a simple example and is not indicative of an actual account or composite at Shorepine Wealth Management. Investment Products are Not FDIC Insured. No Bank Guarantee. May Lose Value. Investing involves risk. This is neither a solicitation of offers to buy securities nor an offer to sell securities. Past performance is no guarantee of future results. Shorepine Wealth Management does not guarantee the validity of the data or performance calculations presented here.

Source: SHOREPINE WEALTH MANAGEMENT 

Worse than high fees and lousy advice, according to Harvard Business Review, too many, 1 in every 12 advisors at brokerage firms have complaints and serious violations on their background records.

Delaying the full implementation of a rule that protects consumers from subpar advice means clients who rely on the big name broker-advisors for serious investment advice for their retirement savings are leaving themselves wide open to conflicts of interest and more potential risk. The conflicts includes aggressive sales tactics, but most of all, these brokerage clients may not even realize when they opened their brokerage account, they also waived their legal right to sue the advisor (or his firm) if the advice turns out to be totally inappropriate and the client loses money.

“Please, excuse me from working in your best interest”

If you’re working with a salesperson or representative at a brokerage firm right now, you especially need to know about something called the “best-interest contract exemption,” or BICE. This clause sounds like some kind of joke, but it’s not. This is a contract that does exactly what it says. By signing it, you’re giving your advisor permission to sell you an investment that may not be in your best interest, and the DoL’s fiduciary rule allows brokers can ask you to sign one. It’s a loophole for brokerage firms and insurance companies and also a concession the rule is allowing for brokers who want to call themselves “fiduciaries” but still plan to do business as usual by selling investments with hefty commissions that are only “suitable” rather than “best” for their clients—adhering to the lower suitability standard instead of being a true fiduciary.

Unfortunately, this ‘best-interest contract exemption’ may give some investors a false sense of security at a time when they need to continue being just as vigilant as ever, and the fact that the rule’s implementation was delayed doesn’t change this.

Consumers don’t hear as much about the 50,000 or so independent financial advisors who aren’t salespeople or insurance agents. These are investment advisors, wealth managers or financial planners who register with the SEC and therefore, must strictly follow the higher fiduciary standard. With or without the fiduciary rule in place these independent advisors have to put your interests first, and they typically have access to every available investment product. The difference is, they work only and directly for you so it is in their best interest to find the best performing investments at the lowest possible cost.

Here’s how to put your knowledge to work right now

  1. Demand full transparency so you can easily see and understand all fees and expenses.
  2. Only choose an advisor who follows the fiduciary standard and is willing to put that oath in writing.
  3. Go over every page of the contract with your advisor before you sign any of it so you can understand what each page means as far as your rights and your advisor’s responsibilities. This will also protect you from signing any ‘best-interest contract exemption’ without being aware of it.

Consumers should always be entitled to the protections the fiduciary standard sets forth without needing a new rule or pressure to force an advisor into a fiduciary role. If a financial advisor doesn’t want to bother acting as a fiduciary, why would you bother with him?

Pam Krueger is the founder of WealthRamp, and co-host of MoneyTrack on PBS and here is a link to her full article: https://wealthramp.com/content/finally-consumers-are-driver%E2%80%99s-seat-financial-advisors

Financial Markets and The Media

Financial Markets and The Media

 

One of the most prolific changes in the financial markets, since I started my career, has to be the onslaught of media outlets reporting on the financial markets and the speed by which information is released. Today we are inundated with financial information on a daily basis from national broadcasts that are solely dedicated to financial news 24/7, posts on social media, down to your local television and radio stations that are providing financial reports and information.

Looking back over the last thirty-plus years there has been a tremendous shift in how much and the medium by which information is shared about financial markets. In the beginning, information was primarily disseminated through a few financial institutions, brokerages houses, and the brokers that worked for them. Investors were reliant on speaking with their broker in order to obtain the most up-to-date information about what was taking place. Brokers were provided with Quotron machines that were available for them to check stock prices and tickers were used to keep on top of news for their clients. It allowed them to share the most current information with their clients on a somewhat real-time basis. The only other place to receive information regarding your portfolio would have been the nightly news or the financial newspapers the following morning.

Fast forward to current times and we have a much different world. Essentially we are bombarded by financial data and information in a 24/7 news cycle and it is broadcast live and disseminated online as it takes place. This information is no longer simply available to brokers or financial professionals, but it is readily available to everyone. The amount of information and the places by which it can be received can become somewhat overwhelming and confusing. Having this information available and the transparency is key to the success of financial markets, this is a positive, but overall it is a distraction to many.

Is this information, or the access to, it helpful or a detriment to our portfolios? People have access to financial information through many channels, including social media, 24/7. The lion’s share of this information is giving you an in the moment view of what is taking place. A trader, someone who is investing for a short term profit, may find this information very useful, actionable, and help to their performance. However, an investor who is positioned for the long term may find this information confusing and troublesome. Long term investors who subscribe to making changes to their portfolios based upon the news at the moment can have long term dramatic effects to their portfolios and reach their goals. The power of staying invested vs. timing the markets can mean the difference between a positive and negative return, as seen inJP Morgan Asset Management’s 2019 Retirement Guide.

Perfromance Chart

Think about it, does it really behoove an investor with a long term time horizon to make major portfolio changes based upon interest rate changes at the moment or if GDP is higher or lower than expected? Making changes for the long term, based upon short term events is really counterproductive to the investment process.

The keys to being a successful investor over time have not changed much, build an asset allocation strategy and take on the amount of risk you are comfortable with, know what your goals and time horizon are, and build a strategy that will work towards this. The newest key is to either turn off the barrage of financial information or listen and filter it with the fact that you are a long term investor and not a short term trader. Long term investors that act as traders are typically not successful in reaching their goals.

Due to the plethora of financial information available, having a financial advisor that is a fiduciary will be a huge help too. They will be able to help you stay on track if you are tempted to deviate from your plan based upon something you heard on television or read on social media. Many advisors are a tremendous help to their clients during volatile times where the news media tends to take advantage. They get investors quite agitated and to a point, they feel like doing something, and this is where a good adviser can earn their stripes and put things in perspective.    

The news media, social media, and all financial outlets can be convincing. They are in the business of entertaining and keeping you glued to their programs and they are not concerned about your portfolios. Do not be swayed by what you are reading and hearing and be sure to build a solid plan. Feel free to give us a call, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you are feeling overwhelmed by what you are reading, listening to and watching so we can help put it all in perspective for you. Be sure to share this article with friends, family and business acquaintances who might be experiencing this too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Finding My Tribe at Wealth/Stack

I recently had the opportunity to attend theWealth/Stack Conferencein Scottsdale, Arizona. There are so many conferences for our industry that it is sometimes hard to determine what will be a good one to attend and which will not be a good use of your time. I must say, Wealth/Stack was a great conference and worth the time I spent away from the office. This conference, being held for the first time, brought 700 plus attendees who represented a “Who’s, who” of the #FinTwit and Fintech community. It was also the first conference that I have gone to where the vast majority of attendees were advisors.

The sessions were all informative, helpful and interesting, hands down, but I want to spend my time sharing with you the sense of community that was projected at this event. Some would say that many of the attendees were competitors to a degree, but that was never felt. What I did feel was a community of likeminded people coming together to help, support and bring each other’s respective businesses to the next level while providing the best level of advice and service for their clients.

During the few days I was at this conference I connected with people I knew, met others I had never met previously in person and those that I met for the first time. Each conversation I had allowed me to learn something new or build a relationship with someone that I wanted to stay in touch with so we could continue the conversation. This conference allowed me to find my tribe and put us all in a position to learn and grow together.

As we go through life it is important for us to find our tribe, community, which helps build you up and inspire you. Wealth/Stack did that and more. I have a community of experts in all different areas of financial services following this trip, from all over the country. This community will be valuable to me and my clients as time goes on. I have seen this in a few other areas of my life, the author and hockey communities. Like the financial services community, the author and hockey communities also serve to build up, inspire and help those that are part of it.

It is important to find your community and become active in it. Once you find the right community you will know as you will feel inspired, feel great about what you do and know that you have a network of others like you there to help in a moment if needed. Thank you Wealth/Stack for providing a great opportunity to learn and grow!

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Five Biggest Mistakes of New Business Owners

Mistakes of New Business Owners

 

A new business is typically an endeavor that comes with many challenges. Businesses are usually started by people, entrepreneurs, who have come across a great idea or provide an excellent service. This venture entails many working parts and has many risks/rewards. According to the Small Business Association (SBA) Office of Advocacy’s2018 Frequently Asked Questions, eighty percent of small business will survive the first year and about half will survive beyond five years. Only about one third of businesses will survive to celebrate their ten year mark.

Taking a mathematical look at this, these numbers are quite discouraging and one must think why this is the case. In our view, there are five key things that have a tendency to get overlooked by new business owners. Those new business owners that focus on these five areas will have a higher level of long term success for their companies.

  • Not having a plan comes in at number one and is the largest contributor to company failure. Would you ever think about driving cross country to a specific destination without a roadmap or Waze by your side? I think it would be extremely difficult to hop in the car and start driving West (we are located on the East coast) without any tools to guide your trip. Essentially, starting a business without a plan is the same thing. As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”
  • Having a great advisory team in place is paramount to the success of your business. Your advisory team should include a CPA, attorney, banker, insurance advisor and financial advisor. This would be the bare minimum I would start with on your team. As the business grows in size and success there will be a need to add additional professionals to the team. This core group will be sufficient to ensure you get off to the right start, have people in place to turn to for advice and rely on those that have been successful helping people and companies like yours.
  • You will want to have goals and metrics to benchmark your success against. These metrics may be very different from one company to the next and will change over time as well. The key is to have a direction in place to keep you on track while running the day-to-day of the business. You will want to make sure that you have SMART goals (Specific Measurable Attainable Relevant Time-Based). Using the SMART process will allow you to then break the goals down into bite size pieces to track your progress and success.
  • Being impatient in a new business can be deadly and comes in as one of our biggest mistakes. New business owners have a tendency to think and want things to happen much more quickly than they do, everything takes time. Our optimism and vision will typically allow us to envision the business moving forward far more quickly than it will in reality, and that is fine. Optimism is typically a common trait found embedded in the entrepreneur. This is a new business and it will take time and effort to get the word out there about your product or service. A new business owner will need to be patient and have the ability to wait for their success to arrive.
  • Keeping a cash safety net is key to the success of any business. There are always events that can take place while owning a business and they typically cost money. You will want to make sure that you have a sufficient emergency fund for these instances. Many new business owners find themselves with their back against the wall if a financial event takes place and they do not have a sufficient cash reserve. This may cause the owner to get a loan, borrow money from friends and family, utilize credit cards or even give away significant equity in their growing business for an insignificant amount of capital. Making sure that you have a cash reserve will be paramount to your success.

Beginning a new business is a rewarding experience and can be a life changing event. It is imperative to make sure that you are doing everything in your power to ensure your success. We have included what we believe are the top five mistakes of new business owners and this is by no means and exhaustive list. Having a handle on these items will put you in a position to be far more successful than if you had not addressed them. We encourage you to contact us if you are considering beginning a new business or are already in business, but have questions about where you may be overlooking important concerns. We would be more than happy to have a discussion to see if we can be of assistance and help you towards being one of the businesses that passes the ten year mark!

Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Great News!! Join Us in Congratulating Jorrell!

Please join us in congratulating, Jorrell Bland! 

Jorrell is beginning his studies to obtain his Certified Financial Planner (CFP®) designation via the American College of Financial Services African American Diversity Scholarship which was obtained through a competitive application process. 

 
Please join me in congratulating Jorrell  and feel free to contact him at (631) 952-4466 x13 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it..  Jorrell looks forward to speaking with you and meeting you in the near future.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Last Minute IRA Contributions: Traditional & Roth IRAs

We at Mitlin Financial hope that you had a healthy and successful 2016. As we move full steam ahead into 2017 and into tax season, we want to make sure that you are all set when it comes to saving for your retirement. Contributing to an Individual Retirement Account, better known as an IRA, can be a powerful retirement saving tool. It is important to understand your time and contribution constraints for making last minute contributions. In addition to the inherent benefits of contributing to your IRA, staying informed of the correct contribution limits and deadlines can be the difference between contributing to your account correctly and incurring unwanted penalties or fees.

Last Minute Small Business IRA Contributions: SEP & SIMPLE IRAs

Although tax season may not be a crowd favorite, there are instances where individuals and employers can benefit. Taking preemptive measures and planning year-round in anticipation of everyone’s favorite day, Tax Day, there are situations that allow for lowering taxable income. In our previous edition, we discussed strategies for individuals and in this edition, we are going to delve into the strategies geared towards small business owners. Business owners have the opportunity to lower their taxable income and to motivate and entice their already hardworking employees.

Mid-Year Financial Check

Mid Year Financial Check

 

Almost three quarters of the year is now behind us and before you know it the holidays and New Year will be here. I am not trying to rush things, but at the same time, we want to make sure that you are prepared for what the year will bring in terms of your tax situation. It is important to take a look at your financial situation for the year thus far and make sure you are positioned properly for your 2019 tax filing. You do not want to wait until the last week of 2019 or even April to learn of potential issues you may encounter.

It would be a great idea to reach out to your financial team to discuss any financial events so far this year that were out of the norm. The financial events that have taken place may, or may not, have an impact on your tax standing, but it is easier to review, guide, plan, and protect if they are discussed well before the end of the year. Once your team is aware, of what has happened, they can advise you on your options and propose the best course of action. You are much better off planning for this on October 15th than March 15th when some of your available planning options may no longer exist

As a firm, Mitlin Financial makes it a habit to ask our clients on a regular basis, at least two times a year, if there has been anything in their financial life that would warrant us to make any changes or adjustments to their plan. You would be amazed at some of the things we have been informed of at these meetings. Everything from, “I lost my job three months ago” to “I sold my house and we are moving across the country” have come out of this simple question. You would think these would be things they would be calling us right away to discuss and review the impact on their financial standing; but, unfortunately, life gets in the way sometimes. This simple question has allowed us to review, correct, and advise our clients to the best course of action knowing this new information.

Asking this simple question during our review meeting with clients has had a positive impact on our practice and our ability to help our clients. In many cases, it has allowed us to address potential issues that may have been unintended, but life just got in the way. This will also provide you with peace of mind knowing you have addressed the issues and will not need to wait until the last minute to come up with a solution. This would also be a good time to review year-to-date capital gains and interest income from your portfolio to make sure it is in line with previous years. Should there be a significant discrepancy from the prior year, this is something that should be addressed so you are not surprised with a larger than normal tax bill. This will save you significant time when it comes to the end of the year because you will be able to have a good idea of your current standing and then plan accordingly.

The last thing I want to leave you with, as we enter the end of the year, is to be careful purchasing mutual funds in non-qualified accounts. This has been something that has really caused many clients, and their accounting professionals, a lot of grief. As mutual funds begin to announce capital gains distributions for the year-end it is important to know what the distribution is and when it will be taking place. We have seen clients purchase mutual funds in late October, November, and December and receive huge capital gains distributions, which are taxable because they purchased a fund just prior to the distribution. Imagine owning a fund for a couple of weeks and getting a $10,000 capital gains distribution. This is not a surprise that you want to have, so just be cognizant of any mutual fund purchases before the end of the year that you are making in a non-qualified account. It may be ideal for you to hold off on investing new funds or use an ETF until the distribution has been completed.

The importance of having a review with your financial team is to make sure that you both are on the same page and no surprises will come at tax time. The year-end is crazy enough for most, you might as well make things as easy and problem-free as you can. It goes back to the old adage, an ounce of prevention is worth a pound of cure. 

I would highly suggest that you hold a mid-year check-in with your financial team. This could save you hours of grief towards the end of the year or at tax time next year. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you are not having these reviews with your current financial team. Be sure to share this article with friends, family and business acquaintances who might be experiencing this too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Financial Nominated for Long Island Business News Reader Rankings as "Best Wealth Advisers"

 Mitlin Financial, Inc. is please to annouce that it has been nominated for the Long Island Business News Reader Rankings as "Best Wealth Advisers" for their 2019 Reader Ranking Awards.  We would really appreciate your vote and hope you can take the few seconds out of your day.

We do not take nominations like this lightly and really appreciate your support.  You can vote simply by clicking this link: https://mitlin.us/VoteMitlinLIBN or by clicking the photo below.  You can also have the opportunity to win $250 from Long Island Business News. 

 

LIBN Reader Rankings

 

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.  Mitlin Financial, Inc. did not pay a fee to be considered for this award, nor will it win any form of compensation if they win.

Mitlin Financial Welcomes Jorrell Bland to the Team

 Bland Jorrell ProfessionalPhoto Web

Mitlin Financial, Inc. is pleased to announce that Jorrell R. Bland has joined us as the newest member of our team.
 
Jorrell comes to us with over four years of experience in the financial services industry with New York Life.  Jorrell will be responsible for servicing clients of the firm and making sure they are "WOW'd".  He is committed to providing our clients, and all those that interact with our firm, a high level of service.
 
Please join me in welcoming Jorrell to Mitlin Financial and feel free to contact him at (631) 952-4466 x13 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it..  Jorrell looks forward to speaking with you and meeting you in the near future.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: "Write Your Financial Future" at RT Booklovers Convention

In this edition of Mitlin Minute we provide you with a replay of our presentation of "Write Your Financial Future" at the RT Booklovers Convention in Atlanta, GA.  This was presented to a group of successful authors in which we discussed what they should be thinking about when trying to write their happily ever after.

  

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: Syosset HS Presentation

In this edition of Mitlin Minute we provide you with a replay of our presentation to the Syosset HS Investment Club.  We discuss how we became involved in the financial services industry and how we assist people every day.
 
Feel free to recommned our presentation to other schools clubs and organizations.

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: Turkey Day Conversation

In this edition of Mitlin Minute we discuss how Mitlin Financial has communicated with their clients through this period of volatility.

These are times where it is important that your advisor is communicating with you.  Have you heard from your advisor?  Are they communicating with you?  Do you have a plan? 

Be sure to share this Mitlin Minute with your network.  They can feel free to contact us if they are not hearing from their advisor for a free no obligation consultaion. 

Many times minor adjustments can lead to major improvements. 

 

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Passive vs Active Investing

Now that we have a working knowledge of both passive and active investing, let’s compare the two. While some individuals may be best suited for a passive approach, others may find active investing to be a better choice. There are many different components that must be analyzed and assessed before deciding whether actively managed mutual funds or passively managed index funds are the best fit for your own facts, circumstances and financial future.

            There is no such investment or strategy that can possibly fit the needs of every investor. It is crucial that you, as the investor, work with a seasoned financial professional who can educate and guide you appropriately. An individual that would be best suited by passive investing is someone who is looking for a simple, cost effective method of investing. As a passive investor, you must be content to perform as well or as poorly as the index. Meanwhile, an active investor believes that portfolio managers can add value to their portfolio by discovering opportunities in the markets that will allow them to outperform their appropriate benchmarks.

Three Main Contributors to The Student Debt Crisis

 CollegeDebtCrisisAs many of you know, I am knee-deep in the college planning process for my oldest who is a junior in high school and student debt has been a hot topic. The student debt issue in this country is real and a$1.5 Trillion Dollar one at that. This exceeds the outstanding debt for consumer car loans and credit cards too. So how are we here? Why are the future leaders of our country and economy racking up debt to such a large extent?

The way I see it, there are three parties at fault for this crisis and it needs to be addressed before it becomes a larger issue for the economy at large. In looking at this issue I see three main contributors, the schools, parents and students, and the government. Let’s address each one in further detail.

1) Schools have become one of the largest contributors to the crisis. They are higher learning institutions that have become marketing machines. They inundate potential students with information, enticements and many times inaccurate information regarding their institution to get you to attend and fork over the huge tuitions. Universities have also uncovered a way to keep you longer, the five-year program. It used to be college students would be on the five-year program if they could not find their way while attending, now the schools simply have designed programs to keep you longer.

What is the ROI for a student that spends the fifth year instead of entering the workforce after four? Is it that much higher to make it worth the time and money? I would argue that, unless you are entering a specific specialty that requires the fifth year, the return on that investment is very low.

 

2) Parents and students certainly are contributing to this crisis too. We all want the best for our kids, but does it make sense for us to put our families in financial strain and/or our children in debt. I have seen numerous instances where kids have attended Universities, that have caused this type of financial strife, just because they had a sports team they wanted to root for or because they wanted to go to warmer weather. I thought going to college was to get ready and prepare you for the real world and a career. Based upon that, shouldn’t we be evaluating schools on their ability to provide your students with the greatest return on investment for their chosen area of interest?

We, as parents, must educate our children on what the cost-benefit of going to school is and put guardrails on what can be spent. Each family is different, based upon their income level and savings, but there should be some parameters put into place. Encouraging our children to take loans, without educating them on the long-term effects on their financial situation, is the equivalent of putting them in a boat without a life vest. Not many seventeen or eighteen-year-olds comprehend the true cost of taking on $100,000 in loans for their education. It is our job to help them understand what it means.

 

3) I blame the government for this problem too. They are too quick to provide loans to our young people without having them understand what they are committing too. Loans are an important part of the education process and they should be available to those that need them and understand the ramifications. There has to be a way that there could be a requirement that these students receive some type of education showing them what the effects will be. Offering a student a loan to get their education and deferring their payments until they graduate sounds fantastic, even better to a young person. Many do not realize that these loans, although no payments are being made, are accumulating interest from day one and will be much larger when they begin payments. We must show them what the loan is going to cost them in the long run and how long it could take for them to potentially pay it back.

 

The student loan crisis is a complicated one but needs to be addressed. It needs to be attacked from several angles and not just one. As you embark on the college planning process please keep these issues in mind and think twice before you take on a great deal of debt for your family and your child. I would be happy to discuss your situation with you or anyone that you know. Justcontact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you would like to discuss the college planning process and the effect it could have on your family’s financial situation.

Be sure to share this article with friends, family and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Wedding Bells and Your Wallet

 Wedding Bells and Your Wallet

 

One of the best times of our client’s life is when they or their kids have decided to get married. It means they are embarking on a new chapter in their life, either their own or through their children. This life event typically comes with a hefty price tag. According toValuePeguin, the average cost of a wedding in the US ranges from $12,000 (in Mississippi) to $88,000 (in Manhattan). The cost of a wedding can certainly take a bite out of your financial life.

Traditional wedding ceremonies and celebrations can be hugely expensive, as outlined above, and detrimental to your financial plan. We would recommend that you take a few minutes with your advisor and have them assist you through this financial juggernaut. It is key to determine what type of celebration is in your budget or to what degree you would be able to help your children. This is an expense that you would want to have as part of your overall financial plan. Hopefully it is part of your overall plan and you have a separate savings where you have been setting aside money for this momentous occasion. This would certainly help you reach your desired expectations while not forcing you into debt and hindering your financial goals.

Helping out children tends to be a bit more difficult conversation than speaking with a client that is planning their own wedding. We all want to help our kids and provide them with the best. We have seen some parents sacrifice their own financial stability for the pleasure of their kids. It is important to educate yourself on what you can and cannot afford. We have had our clients use us as the bad guy and inform their children that they only have a certain amount of financial resources, a dollar amount, available to contribute. These are not easy conversations, but ones that will help keep you from making a financial misstep.

There are many ways to celebrate a wedding and it is definitely a matter of preference. Spending tens of thousands of dollars for a several hour celebration may not be the best use of your financial resources. It is important that the happy couple or the parents and children sit down and outline what the expectations are for the cost of the wedding or what they will contribute to the event. Recently, we had a client who asked if they could take a deduction for the expenses they are incurring for their son’s wedding. This is not an option, but it makes you think if they would spend more if it were deductible. There are certainly ways to make a memorable event without bankrupting the family’s financial situation.

Every marriage should start out on the right foot and being in a financial hole does not help a marriage one bit. Please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know is planning on paying for a wedding, their own or for a child. We look forward to helping you, and them, make the decision that is best for all.

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Zero Commissions, Does Not Mean “Free”

 

zero

 

Recently several brokerage firms, including our primary custodian TD Ameritrade, have announced they are moving to zero commissions on online trades involving equities, exchange-traded funds (ETF’s) and options. This move is a result of pressure from investment firms like Robinhood who have made this move in recent years.

At first glance, this seems like a win for the investor and it is to a degree. This will eliminate a nuisance fee of, around, $10 to place orders to buy and sell these securities. Let’s be real though, in some instances these little fees added up to a hundred million or more of revenue for some of these firms. Do we really believe that they are simply going to let go of this revenue without trying to recapture it somewhere else? I surely do not!

The brokerage firms are going to be hard-pressed to replace the lost revenue in other places. I believe this may lead them to recover the revenue through less transparent methods. When you were paying $6.99 a trade (or whatever your brokerage was charging) you knew the inherent cost of the trade or at least thought you did. In many instances, although you were paying $6.99 per trade the brokerage firms were deriving additional revenue from these trades in other places. The $6.99 was clear and transparent, while the other costs were not.

Zero commissions, I believe, will not mean zero cost to the client. Just as $6.99 did not necessarily mean that was the total cost. There are several ways these firms will be able to ascertain revenue, such as widening the bid/ask on securities, selling their order flow and requiring certain cash balances in client accounts.

The first two methods cited above, widening the bid/ask and selling order flow, are techniques used by the brokerages to add revenue through trading. These are methods used by the brokerage firms and custodians in order to increase their revenues generated based upon the sheer volume of orders that they are placing on an ongoing basis. The client is typically getting a fair price but it enables the firms to generate more revenue at the same time. In a perfect world, the client would pay nothing for the trade and potentially receive a better price for the transaction. As we know, nothing in life is free.

We also may see the brokerage firms start requiring clients to maintain a certain amount in cash balances to receive “free” trading. Cash balances have a tendency to be a huge source of revenue for firms. These balances are currently receiving a paltry amount of interest and the brokerages are able to lend out funds, based upon these balances, at much higher rates. The revenue generated to them is the difference between what they are paying the client and what they are receiving in interest. In many cases, this could be several percentage points of interest. Should firms require a certain amount of cash balances be maintained in an account for “free” trading, is it really free then? In my view you are simply underwriting your own trading by maintaining the balances they require with the revenue being generated.

The takeaway here should be, “free” is not free, there is typically a cost somewhere. It is important that you work with a fiduciary advisor that will review, share and discuss these potential issues with you and disclose those conflicts of interest too. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you would like to discuss “free” trading further and how it might affect you and your portfolio.

Be sure to share this article with friends, family and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.