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"Free" is not Free

FreeIsNotFree

We at Mitlin Financial always communicate the importance of having a financial plan. As I have said in the past, people spend more time, energy and money on planning their family vacations than they do their financial lives. It is important to make sure you have a guide, a roadmap, for how you are going to be able to successfully retire and reach the financial goals you have in the future. We rely on tools to guide us all the time, such as Waze for the car, and it is important to have this tool to guide your financial life; a financial plan.

Recently we met with a prospective client who found us from our robust online presence. Once contacted by this family, which we will refer to as the Doe’s, we introduced the firm’s process and began to walk them through it. On the initial call we scheduled our “Is There A Fit” meeting with both Mr. and Mrs. Doe. It is key to have both spouses involved in the planning process, so it is a must that both attend our initial meeting.

The initial meeting was a huge success, the couple clearly had financial planning concerns that needed to be addressed and a financial plan would be paramount to their success. Following our meeting we forwarded the couple a proposal which outlined the areas we would cover in the plan and the detail they should expect to see in their personal financial plan. In addition, we quoted our fee for the plan.

When we contacted the couple, as we had scheduled during the initial meeting, to see if they felt we would be a good fit for them and confirm whether or not they were a good fit for us, things became interesting. As a firm, we felt this family would be an ideal client for us. They were in need of a financial plan to help organize and outline their financial life as they approach retirement and also needed assistance in managing their assets. I must say their assets were everywhere and invested in many different ways without a unified direction. In speaking with the prospective clients we learned that they too felt we were a good fit for their family and would provide the services and attention they need to work towards their goals.

The couple had a few questions about the financial plan and the fee. They felt that the fee was too high. When speaking with them to learn more about their questions, I came to learn that they had decided to choose to work with another firm. The reason they provided us was because the firm they were going to move forward with was not charging them for the financial plan.

Have you heard this before? Do you think a financial plan has no cost? I can tell you from personal experience that a good financial plan can take anywhere from five to thirty hours to produce, depending on its complexity. The pitfall with a free plan is typically it is simply used as a “sales” technique to get your assets under management. The financial plan is used as loss leader in order to have you move your accounts to the firm. Unfortunately, in many instances this may have consequences that you may be unaware of and it particularly problematic if you are not working with a fiduciary advisor like Mitlin Financial, Inc.

When offered a “free” financial plan by a non-fiduciary advisor you will typically see several outcomes that may come as a result. This is not to say that this is the case in 100% of the circumstances, but it does happen often. Many times the “free” plan is one you could probably do in five minutes using an online calculator and get the same result, not providing you much guidance. We have also seen outcomes that produce plans that are two hundred plus pages that are designed to confuse you and presented in a way you would never be able to follow or implement. One additional result we have seen with the “free” plan is the broker, or non-fiduciary advisor, using investment vehicles that will pay them handsomely in order to compensate them for the lost upfront revenue for the “free” plan. The “advisor” in this case is looking at the financial plan as a loss leader. Essentially they are using the plan as a tool to get you to transfer their assets to you and once that is done they will look to have you invest in high commissionable products. This will allow the “advisor” to recoup the money for the time spent on putting your plan together. This may involve you buying products that may require you to hold on to them for several years before you can get out of them without a penalty and/or purchasing products that may be in the “advisors” best interest and not your own. They have put several hours into this plan and need to be compensated somehow, did you really think they were doing this for free?

It is very important that you do your due diligence in advance, especially when working with a non-fiduciary advisor. This scenario can ultimately cost you way more than if you actually paid for the plan. We have not even spoken about the follow through and implementation of the plan, which many times will fall to the wayside once they are investing the assets and this is the most important part. We feel it would make more sense to work with a fiduciary advisor and pay for the plan on its own. This will allow you to implement the plan and incur those costs separately. More importantly, because you are working with a fiduciary advisor they will be required to work in your best interest and disclose any potential conflicts of interest.

Working with a fiduciary advisor in this instance is paramount. As a fiduciary, these advisors must disclose any costs and make investments that are in your best interest and not theirs. We have seen fiduciary advisors offer the financial planning component for “free”, but typically these are cases where the client is having them manage in excess of a certain dollar amount; typically over one million dollars or some higher threshold. When you think about, in this case the plan is not free either but is being done as part of the services for your family because of the size of your account and the benefit it produces.

There is no free lunch or financial plan and it is important when hiring an advisor that you understand all the costs. There is an unwillingness, especially among the non-fiduciary advisors, to have a discussion about the costs of doing business with a financial services firm. As a firm, this is something we disclose at our first meeting. Unfortunately, the Doe’s have most likely fallen into a trap that will end up costing them far more in the long run than if they move forward and worked with us. Chances are that they will learn this at some point down the road and either we or some other fiduciary advisor will have to charge them even more to fix and unwind the mistakes that were made.

We would welcome the opportunity to speak with you about your own experiences with financial plans and help you, your family and friends in any way that we can. 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.

5 Credit Card Myths Hurting Your Financial Future

Five Credit Card Myths Hurting Your Financial Future

 

Convenience and risk all with the swipe of the wrist. Credit cards are a tool that many of us use in order to buy things in a convenient fashion, eliminating the need to carry cash. When used properly this tool can add value to our financial lives. Credit cards offer the ability to buy things now and pay later, build credit and accumulate rewards. However, they can also be used to accumulate debt, huge interest costs, and put you in a financial hole if not managed properly.

Recently, when sitting with a client they shared with us the situation their mother was in and I saw the need to share this information. The client was working with their mother in order to obtain a mortgage for a new home. As far as the kids knew mom should be in a good position to obtain a mortgage, but unfortunately the mortgage was declined. When they investigated further, it was discovered that mom had significant credit card balances which were having a detrimental effect on her debt to income ratio. The children approached their mom and asked her why she was carrying these balances and she explained that she was told her credit score would benefit from having an outstanding balance on her credit cards.

Luckily the children were aware that this was not the case and she was most likely causing a negative effect on her credit score, not to mention the significant interest expenses she was incurring. Mom is lucky to have her children on her side as they are working with her to become debt free and educate her on what the “truths” are regarding credit cards.

This experience ignited the need for me to help bring to light the truth about credit cards. Here are five credit card myths that may be hurting your financial future. 

  • Carrying a balance on my credit card will help my credit score. This is a complete myth and will actually do the opposite, it will hurt your score. The credit bureaus want to see that you can pay your debts and do so on time. The best way to utilize a credit card is to simply pay off the balance each month. This demonstrates that you have the ability to take on manageable debt and pay it off on time. There may be instances where you cannot pay in full and you will want to pay at least the minimum payment. It is always vital to pay on time, paying late will certainly hurt your credit score. Bottom line, not paying your credit card in full because you believe it is helping your credit score is incorrect and you should develop a plan to correct this. 
  • You should not have a credit card and only use a debit card. This myth was born from the idea that with a debit card you will only be able to spend what you have, where with a credit card you can accumulate debt beyond what you may have saved. Though this thought process makes sense credit cards tend to be safer. We are living at a time where data breaches and fraud is on the rise. It is true that both debit and credit cards offer protections against these issues, but credit cards tend to have stronger protections for the card holder. Should you have a fraud while using a debit card (even if you are swiping it as a credit card) the funds could be taken out of your bank account and it may take your bank a few weeks to clear it up. This could tie up the funds in your account and even result in bounced checks or insufficient funds while the fraud is investigated. Fraud on a credit card is not going to cause an issue with your bank accounts as they perform an investigation. Also credit cards often provide additional protections for your purchases that debit cards typically do not.
  • Interest begins to accrue right after my credit card purchase. This is another complete myth with no truth behind it. It is true that credit cards can come with significant interest rates attached to them, but they do not start accumulating until after your payment is due. Essentially by paying your bill on time, you will not incur any interest expense and the credit card will simply provide you with an interest free loan from the date of purchase until the payment is due. This is the ideal way to use a credit card for the consumer, not the ideal outcome for the credit card company.
  • Never pay an annual fee for a credit card. Paying an annual fee for a credit card is not necessarily a bad thing. This is a personal choice and you need to evaluate the cost benefit of the fee. Many cards available today have tremendous benefits attached to them. There are cards available that provide you with anything from additional purchase insurance or warranty coverage, airline credits, internet access on flights, baggage fees, travel insurance, access to premier lounges, access to a concierge, and many other benefits. You need to review what the benefits are, evaluate whether you will use them and decide if the card is worth the expense. The benefits for many consumers outweigh the cost.
  • Having too many credit cards will hurt my credit score. This is another common myth and having several cards can actually help your credit. The credit bureaus will look at the amount of credit you have available and how you are using it. Your score can benefit by having a lower utilization of a higher credit amount. One caveat here, this may not hurt your credit, but it may present a hurdle when obtaining a mortgage. The mortgage company will love your higher score, but they will not be fond of you having access to a larger pool of credit and this could present a challenge. The number of credit cards you have, or will want to have, may depend on the stage of life you are in and what your goals are at the time.

Credit cards can provide you with a great way to pay for things, build credit and ensure against fraud, but there are many myths out there and it is important to understand the facts. We have outlined what we believe to be the top five myths we have seen, but there are many more. It is critical to educate yourself on what is fact and what is myth. You will want to use credit cards in a way that they will enhance and not hinder your financial future.

Mitlin Financial assists our clients in addressing these myths and we would be more than happy to assist you with any questions. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in debunking credit card myths.

 

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

5 Habits You Should Start in the New Year

5 Habits Checklist

 

The New Year is underway, the holidays are behind us, and your financial situation is stabilizing now that you have paid all the bills.  Now it is time to begin to think about how you are going to help your financial future.  The New Year is always a good time to start new habits- realize I did not say “make resolutions”.  As a firm, we find that people who make resolutions typically end up retreating on them within 1 to 8 weeks of making them.  Habits, however, once started and continued will become a part of your daily life, and they tend to stick around for the long term.  Depending on the person, habits may take 21 to 60 days to become a part of your daily life.

There are five habits you should start today that will help you in reaching and attaining both your short term and long term goals.

1) Create a Budget

Take stock of how much income you have coming into your household each month and what expenses your income is paying each month.  You can do this by simply putting pen to paper or utilizing an online tool that will track this for you.  Each month, review the expenses and see if there are items that can be reduced or eliminated.  For instance, you may have forgotten about automatic monthly payments set up for services you no longer use.  This will put you in a position to review each expense and make sure it is a necessary one for your household.  In addition, you will have an excellent view of whether or not you are cash flow positive (having more income than expenses each month) or cash flow negative (having more expenses than income each month).

2) Start and Maintain an Emergency Fund

Years ago, our parents and grandparents frequently spoke about saving money for a rainy day.  The modern day term is an emergency fund.  Depending on your employment status, whether you are an employee or own your own business, and your level of comfort will dictate what size emergency fund you should maintain.  Each person is different, and we have recommended anywhere between a 6 month to 18 month emergency fund for clients.  This is money that should be kept in a separate account from the account by which you pay your monthly bills.  This account should be liquid, meaning you can use the money on a moment’s notice if needed.  A savings or money market account will work well for these monies.  You will want to determine what size your emergency fund should be and begin to accumulate funds until you reach that amount.  Once you reach the desired amount you should only use these monies for an emergency.  Things that may warrant you tapping into these funds may be the loss of a job or income, unexpected home or car repair, or simply any unexpected expense.  After the emergency is paid for, you will want to replenish this account at your earliest convenience.

3) Pay Yourself First

Ideally you want to pay yourself first each time you get paid, and then learn to live on the monies that are left.  There are a few ways to pay yourself first depending on your type of employment.  As an employee, you will want to take part in your company’s 401(k) or retirement plan.  A small business owner or independent contractor may want to consider setting up a retirement plan if they do not have one.  The last option would be for those that do not have, or cannot set up, a retirement plan and they would have to use either an IRA or brokerage account.  A good target would be to try and pay yourself 10% of your pre-tax earnings if you are deferring to a retirement account, which is preferred.  You may need to adjust this a bit if you are contributing after tax.

4) Review Beneficiary Designations Annually

We all face critical financial and life events that will impact us during the course of a given year.  You certainly would not want your assets to end up going to beneficiaries which you did not intend them to go.  Beneficiary designations should be reviewed at least annually, or if you experience a major life event or change.  Examples of times that you would want to review these designations would be: the birth of a child or grandchild, marriage, divorce, death, disability, or job change.  Whether you are digital or analog, place a reminder on your calendar to review this each year.

5) Rebalance Your Portfolio Annually

Rebalancing is something you will want to make sure you review at least annually; whether you manage your portfolio yourself or use an advisor.  Typically rebalancing has a tendency to get forgotten when markets are going up because people tend to get complacent and think there may be no risk in waiting.  Rebalancing will help you maintain your portfolio allocation and risk with its intended targets.  You may recall back in the late 1990’s, when technology investments were booming, the technology bust.  There were many investors that saw their portfolios assets allocation change from 10% allocation to technology stocks to 70% in a relatively short period of time.  In many cases this large allocation to technology was a huge overweight, meaning more money was allocated to that sector than you initially intended.  This was great while those securities were doing well, but what these investors did not realize was the risk they were imposing on their assets.  When the technology sector busted they had 70% of their portfolio at risk instead of the original 10%.  Had they rebalanced along the way, a good deal for this risk could have been avoided.

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

5 Tax Planning Steps to Take Before the Year Ends

As we enter the final quarter of 2017 (yes the last three months of the year are here), I am sure you feel the same way we do and cannot believe how fast this year has gone by. Keep in mind that the year is not going to slow down and there are several things you should be thinking about as the final days of the year pass us.

We are going to provide you with five things that you should review in the next couple of weeks to ensure that you are prepared for 2018 and filing your 2017 tax returns.

     1) Take caution before making investments in a non-qualified (or non-retirement) account(s). This time of year mutual funds begin to announce their plans to distribute capital gains to their shareholders. The last thing you want to do is make a significant investment in a mutual fund and then get hit with large capital gains after only owning the fund for a few weeks. Does this mean you should or should not invest in these types of accounts until January 1st? No, you can certainly invest between now and the end of the year, but you must be aware of the potential consequences. In addition, there are strategies that you can use to invest your funds now and avoid these capital gains distributions before the end of the year.

      2) Review your non-qualified account mentioned above. Take note of your year-to-date capital gains or losses due to sales of investments over the course of the year. You may want to sell some of the investments that are not performing well in your portfolio (take the loss) to offset gains you currently have in your account year-to-date. Another option may be to take some gains in your account if you have a net loss for the year thus far. This type of review will allow you to put yourself in a better tax position for the year.

      3) Do you have carryover losses from previous years on your tax return? You may want to take some profits in some of your holdings if you have carryover losses reported on your return. The IRS only allows you to take a loss of $3,000 after you net out your gains and losses, so utilizing this strategy will allow you to capture a gain without tax liability to the extent you have a carryover loss.

     4) Take a look at your retirement plan(s) and see if you are on course to maximize the benefits of the plan(s). Although you can make IRA, Roth IRA, SEP IRA contributions in 2018 for 2017, your 401(k) contributions (in most cases) need to be contributed in the 2017 calendar year. You should review the extent to which you have contributed this year vs. the maximum contribution allowed ($18,000 if you are under 50 years old, and $24,000 if you are over 50). You may want to increase this contribution towards the maximum if you are going to be in need of a tax deduction.

      5) Stay alert.....Tax reform is being spoken about on almost a daily basis at this point. There have been debates as to whether this reform will go through in 2017, retroactive back to January 1, 2017, or will we see it passed in 2018. It is important to stay alert because we do not know what tax reform will look like or what it will mean to you because it is so fluid at the moment. You will want to know what it means for you when (or if) it is passed. Pay attention because this may have an impact on your tax obligation for 2017.

Mitlin Financial, Inc. believes that working with a team is an important part of getting the best outcomes for our clients. It is important that the strategies above are reviewed and evaluated for your own personal facts and circumstances. Being that we do not provide tax advice, we welcome the opportunity to work with your CPA to review your situation and make sure that you are doing everything you should be in order to be prepared for your 2017 tax filing and mitigating the tax impact from your investments as well. Be sure to contact us regarding your own situation as we enter the end of the year. Feel free to give us a call at (844) 4-MITLIN x12 and allow Mitlin Financial, Inc. to facilitate your financial future!

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

Active Investing

As we had learned about the inner-workings of passive investing in the previous edition, we will now focus our attention on passive management’s counterpart, active investing (active management). Under this type of investment management, managers take a more proactive approach in effort to achieve optimal returns and to outperform the market.

What is active investing and how does it work? This investment strategy uses the human touch to actively manage an investment portfolio. Managers will utilize analytical research, forecasts, as well as their own investment experience, expertise and judgment in an effort to make the best possible investment decisions regarding what securities to buy, sell or hold. Active managers tend to believe that short-term price movements are significant and that these movements can often times be predicted. They are not bound by any single index fund’s performance potential and can deploy a multitude of strategies with the goal of outperforming an investment benchmark index. Some of the strategies used by active fund managers to construct their portfolios include risk arbitrage, short positions, option writing and asset allocation.

Are Your Adult Children Still On Your Payroll?

Are Your Children Still On Your Payroll

There has been a tremendous spike in financial support given by families to their adult children in the last twenty years. This can come in the form of a place to live, paying expenses like cell phone bills and care insurance and even paying off debt. We all want the best for our children, but at the same time this may present a tremendous burden to the parents if they do not have enough income or assets to continue this level of support.

The days of children leaving the home and being responsible for their own personal and financial wellbeing seems to have gone the way of the rotary phone. According to theU.S Census Bureau, 34.1 percent of people aged 18-34 lived under their parents roof in 2015. This is up from 26% in 2005. An astounding 25% of young people living in their parents’ home do not work or go to school. These are staggering statistics and yet another contributing factor to people working longer. The financial dependence of their children are draining resources that otherwise would have been available for their own retirement.

It is important for our kids to be prepared to take on the world and be financially prepared for it. Financial education is a key to their success and the earlier you begin the better. I remember when my kids were young we wanted to teach them about money. One of the best tools we used to help educate the kids was a piggy bank, but not your ordinary piggy bank. The bank we provided to our kids had three slots, instead of one. There were slots for savings, spending, and charity and when they would receive money they would portion out the funds to each of these areas. It created a great opportunity to discuss the concepts of needs, wants and helping others. Educational ideas like this will stay with a child for a long time. We find that many financial habits of adults come from what they learned as children and how they observed their parents with money.

The help provided to adult children come at a price, far more than the dollars you spend on their behalf, and have the potential to put them in a bad financial position for much of their adult life. What happens when you are no longer here? How will they be able to support themselves? Take a look at your household bills and see what type of support you are currently lending to your child. Sit down and provide them with a list of the current expenses you are paying and develop a game plan to shift those expenses from you to them. In addition, this will offer an opportunity to work to educate them about the importance of long term financial stability and independence for themselves. You will see that this is a gift that will help them immensely in their life going forward.

Helping your children become and remain financially independent will not only be a gift to them, but you as well. It will put you in a better position for retirement, remove worry and stress from your life and most likely help your marriage, if you are married. We find that usually when a child is being support by their parents one spouse is typically in favor, and the other not, of helping them out financially leading to stress in the relationship.   I think financial independence is summed up best by this proverb, “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”. Provide your child with support, and you help them now. Teach your child how to handle money, and you help them for a lifetime.

We would welcome the opportunity to help you get your children on the road to financial independence. 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.

Assets, Advocacy, and Attitude

 

 

Advisors Magazine recently interviewed Lawrence Sprung about how Mitlin Finanacial Inc. has positioned itself in the Wealth Management industry and how they work with clients.  Take a minute and read this interesting article that was published in their September 2018 edition.AssetsAdvocacy and Attitude AdvisorsMagazine 092018

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

Beneficiary Designation Review

Beneficiary designations are an important, yet often overlooked, planning item that should be reviewed on a regular basis. Having the correct, and most up to date, beneficiaries named on your various accounts could mean the difference in having your assets going to the right people or the wrong ones.

Build Relationships, Not Assets

 

 It was a pleasure to be a guest on the NetworkWise Podcast, Conversations with Connors

Adam and I have been friends for over twenty years and I truly enjoyed sharing my business, networking and philanthropic endeavors with him on the show. 

I hope that this gives people a better sense of what I do and why.

NetworkWise Podcast Lawrence Sprung Topics Covered

You can also listen via Apple Podcast, for free, by clicking here: 

Apple icon50

 

 

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

Dessert Party at Epcot® Walt Disney World® Resort, Florida hosted by Mitlin Financial, Inc.

Dessert Party at Epcot® Walt Disney World® Resort, Florida hosted by Mitlin Financial, Inc. on Norway's patio.

After enjoying dessert on the Norway patio in the World Showcase at Epcot® we enjoyed an up close and personal viewing of IllumiNations: Reflections of Earth; Epcot® nighttime spectacular and fireworks event! 

 This was an excellent night with great authors!

Does It Matter When I Start Saving for Retirement? Yes, it does…

Save Early It Matters

 

Many investors are curious as to when they should begin to invest for their retirement. You will often hear people saying that you should start as early as possible, but what does that mean and how will that help? I wanted to take the opportunity to explain when you should begin saving, if you can, and what the effects can be if you do not.

We would recommend that you start saving for your retirement as soon as you have an income. Income does not necessarily mean a full time job. You could be receiving income as early as you are able to get your working papers. Starting this early will help instill a number of great values in our kids: it will expose our children to the fact that they need to plan for their future, the benefits of investing, tax deferred or tax free growth, and a discipline to live below their incomes. These are all great life lessons that some learn too late.

In order to outline this, let’s look at a real life example. Let’s assume that you have two children; Jane and John. Jane will begin to save at the age of 25, and John will begin at the age of 35. Jane and John will each begin to contribute $5500 per year from their beginning age until the age of 70 and invest it in a way that will compound at an annual rate of 6%. So what would Jane and John have accumulated by the age of 70? Jane’s account would be over $1,200,000 and John’s account would be just shy of $650,000.

This large difference is predominately due to John’s late start. He was affected by the fact that he was not able to contribute as much money and therefore lost the benefit of the extra 10 years of compounding. Both these concepts significantly impacted his long term balance. Jane would have contributed $247,500 over the 45 years she invested, and John invested $192,500 (a $55,000 difference). The key here is that starting early really benefitted Jane and will benefit you too.

Keep in mind that our example does not account for fees, taxes or inflation. I would also like to point out that the likelihood of receiving a 6% return every year is somewhat unlikely and it is more likely that you would have a different rate of return each year.

As you, your children, or grandchildren begin to work (even on a part time basis), be sure to have the conversation about having them “pay” themselves first and begin to think about their future. Setting up a Roth IRA will really benefit them if they are younger and in a lower tax bracket.

In order to illustrate that I practice what I preach, I would like to share a personal example with you: my 14 year old son works for me during the summer months in order to have spending money for the summer and school year. We sat down and discussed what he would be earning and devised a plan that would provide him with the spending money he wanted and funded a Roth IRA as well. Think about how your financial position may be different if you began saving at the age of 14. Not only has this put him in a position to be ahead when planning for retirement, but it has taught him the value of saving and how to manage money. We discussed how to invest the money and he has the ability to monitor his account and see how it is performing. We need to get ourselves, our kids and grandkids retirement ready and this will surely help.

We are here to help you instill these concepts within your own family. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance getting started saving today.

 

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

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.

Follow The Leaders

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Our founder, Lawrence Sprung, had the honor of being recognized in Registered Investment Advisor magazine on June 20, 2019 in their Follow The Leaders article by Courtney McQuade.  Twitter is celebrating its 13th birthday next month and they highlighted 10 RIAs to follow on Twitter.

Over the past few years, Larry has worked hard to put out valuable content so it is truly an honor to have him recognized with other great voices in the RIA space.  Take this opportunity to read about why he was chosen and follow us too.

For those of you that do not know how to find us, here is where you can find us on social media, Twitter, Instagram, and LinkedIn.   We look forward to interacting with you on social media and having you a part of our community.

 

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

 

Happy Birthday! Be Sure To Review These 5 Things

Happy Birthday Be Sure To Review These Five Things

 

Using your birthday as a reminder to review and address things in your life is something we have been told to do from a very young age. As an example, I try and schedule my dermatologist and physical appointments around my birthday each year. I simply use this event as a reminder that I must take care of these things to maintain my health.

In the same vein, there are five things you should be reviewing each year financially in order to maintain your financial health. Using your birthday as a reminder for this is also a great way to make sure they get addressed.

  • Review your retirement plan contributions and see if you are in a position to increase them. Many people elect their retirement plan contribution amounts when they first start working for a company, and then hardly ever look at it again. Saving for retirement is now the responsibility of the employee, and it is important to make sure that we are doing our best to reach our goals. It would be a shame if you began contributing three percent when you started working for the company and still are today, but could afford to do more. Simply looking at and addressing this each year will allow you to make sure you are maximizing your retirement savings. 
  • Debt is something that is used when purchasing major assets, such as a home. It is vital to evaluate your debt to see if it is still working in the way you intended or if there are opportunities to put you in a better position financially. When used appropriately in a financial plan, debt can be a very useful tool. I would recommend that you look at the outstanding loans you have, and their rates and terms to see if they are still ideal for you. Would it make more sense for you to pay it off or continue the loan? Perhaps refinancing the debt would be a good move? This should be reviewed annually. 
  • Estate planning documents are key to making sure that your assets and wishes are carried out upon your death. These planning documents could include your will, trust, healthcare proxy, living will, and power of attorney. It is important to review the documents and make sure they are still relevant based upon your current circumstances. In many cases, you will find that these documents will only require updating every five to seven years, but by reviewing them each year, you will assure that they are properly addressing your current situation. 
  • Check the beneficiaries on all of your accounts. It is crucial that you make sure that your beneficiary designations are appropriately maintained. Many times, we establish our beneficiaries and never look at them again. We have encountered clients that are married with families who still have their parents named as beneficiaries. Checking them each year is a great way to make sure your financial assets will pass along to the people you want to receive them. 
  • Your financial plan should be reviewed annually to make sure it is accounting for any changes to your life circumstances or goals. In addition, it is important to review the plan in regards to the assumptions that are being utilized, such as inflation, returns, life expectancy, and savings. Once you have updated the plan, it is key to review the new outcomes and create an action plan for any items that should be addressed in the coming year. A plan is not static, but a living breathing document that needs to be updated and reviewed at least each year. 

Mitlin Financial assists our clients in addressing these five areas over the course of the year, but it is important to make sure you do address them yourself. A birthday is a great time to take a look, reflect, and make sure your financial health and wellbeing are being looked after.

Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in getting started on reviewing these areas today.

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.

Life Insurance Review

Life insurance can be very effective in providing financial insulation, security and peace of mind to those who elect to safeguard their loved ones from the financial travesty that can result from an unexpected tragedy. It is important to understand that just because you’ve implemented this layer of financial protection by securing an insurance policy does not mean that you can lock it away for decades and expect it to remain optimal for your ever-changing financial life.

            You may have full faith and confidence in your current insurance broker and the policy they helped you secure based on your facts and circumstances at the time. It is very important to ask yourself and identify any impactful life changes that may have occurred since you had this insurance policy written. As time goes on, it is likely that your financial facts and circumstances have changed. Based on these changes, it is important to review your own insurance coverage on a regular basis to make sure that it is still relevant.

Managing a Windfall

Managing A Windfall

 

Managing a windfall can be a blessing and a curse. It may be a blessing from the standpoint that you have received significant assets that will help you and your family. Receiving the windfall may be a curse in regards to the time and effort you will have to put into managing it.

We are currently in the midst of one of the greatest shifts in wealth from the Baby Boomers to the next generation. There will be an estimated $30 trillion in assets transferred between these generations, according to Accenture. Although that number is huge, the reality is that 70% of intergenerational wealth transfers will fail by the time they reach the second generation, according to a report presented by The Williams Group. Work will need to be done by the current generation in order to raise their level of success in maintaining the family wealth.

In addition to the generational wealth transfer we are currently experiencing, you could also be the recipient of a windfall through a business that takes off or even winning the lottery (I would not count on the lottery as a viable strategy). All in all, no matter how you receive your windfall many of the steps you should take are the same.

The first item on your to-do list should be hiring an advisor that can assemble a team for you and walk you through the steps and the process to manage this windfall. The type of money we are discussing in the framework of this article requires a number of key people including legal, tax, risk management and investment professionals-just to name a few. It is important that one of the advisors you work with take the lead, organize the team and keep everyone on the same page as you work to manage the new found wealth. The last thing you want to do is to collect the windfall and then lose it through poor management.

Once you have your advisory team in place and your designated quarterback, it is important to work with them and devise a plan. Do not rush this part as it is one of the most important steps you will ever take. The plan will be a roadmap to ensure you are receiving, spending, protecting, and handling your money in the best way possible. Building this plan and sticking with it over time will give you the best possible outcome for assuring these monies stay with you and your family for generations to come. Making a few wrong moves, simply deviating from the plan, could add you to the statistics mentioned above.

This windfall, in most cases, is more money that you have ever had or managed on your own. There is tremendous responsibility in making sure that it lasts. Working with an advisor and the proper team will certainly add to your success. Life is not static, markets are not either, and it is critical to revisit your plan on an annual basis. Each area of your financial life will want to be reviewed and discussed with your primary advisor. Adjustments may be needed along the way and that is normal. You should not equate adjustments with failure but simply a recalibration to ensure your windfall continues.

In addition to having the right advisory team, it is also important to educate the next generation along the way to help solidify your success. Ideally you want the next generation to have a full understanding of your wealth and your values. We often see that the next generation does not have the same principles when it comes to their family money as the previous generation did. This is often due to the fact that they have been sheltered and not brought into the “inner” circle. The next generation needs to see, understand, become acquainted with and learn how to work with the family advisors in order to raise the level of success for the next generation and those that will come after.

The success of handling a windfall and having it last for many generations lies in the families ability to align themselves with the proper advisor and team while educating the next generation on what this money means and how it will be best kept and used to help generations to come meet their financial goals. There is a tremendous responsibility when receiving a windfall and it may be a blessing to those that have received it. Go slowly, develop a plan, follow the plan, and educate the generations to follow in order to avoid the windfall being a curse and causing you to become a negative statistic.

We would be happy to speak with you or someone you know regarding a potential windfall. You cannot start planning early enough and why not now. 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.

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.