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Passive Investing

When it comes to investing, there is not one strategy that fits all. There are many different situations and circumstances that can call for different investment strategies, depending on the investor in question. It is important to make sure that as an investor you are vetting and determining which investments will best fit your particular situation, financial goals, needs, risk tolerance and time horizon. Where should you begin your search for the best investment for you? Most simplistically, investment strategies can be broken down into two specific categories; we know them as active investing (active management) and passive investing (passive management). In order for us to attain a better understanding of how each strategy functions, operates and performs over a longer period of time, we’re going to focus only on passive investing (management) in this article. In the next article, we will cover active investing and in the final of the three part series, we will compare passive investing versus active investing. With that, investors can discern the potential benefits and pitfalls between the two investment strategies prior to deploying such a strategy in their own investment portfolio.

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Business Owner Exit Strategy

You have worked many years and extremely hard to get your business to the successful level that it is at today. When the day comes for you to retire and ultimately exit your business, what is your plan of action? Do you intend to pass the business along to the next generation or will you look to exit the business entirely and monetize the value that you have built? More importantly, how will your exit strategy coexist with your personal financial plan? Will this strategy have adverse effects on your existing plans or future standard of living? These are all questions that cannot be left to the imagination as there is too much at stake. Preparing an exit strategy can help to insulate you from the many unexpected key factors and variables that may affect your financial future.

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Dying Without a Will: “The Prince Story”

What would the future hold for your family and loved ones if you were to unexpectedly pass tomorrow? Would they be in a position to handle all of your affairs in addition to the funeral arrangements and other stressors inherent with your unexpected death? What would happen to all of the assets you’ll be leaving behind? Who will be entitled to those assets? These are just some of the questions that must be answered prior to embarking on the estate planning journey. Although this is not a pleasant matter to discuss, it is a critical financial event that needs attention. The vital estate planning decisions you make today may have effects on those who survive you when that inevitable day does come.

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Corporate Retirement Plan Fiduciary

The forever changing regulatory environment within the financial services industry has brought about many significant changes and improvements over the years. It is evident that the industry’s ongoing evolution has been beneficial to individual investors. The governing and regulatory bodies that be were enacted to protect average retail investors. It is important for investors, both retail and institutional, to have an understanding of the scope of a fiduciary so that they can best protect and insulate themselves from fraudulent financial practice and other detrimental risks that could have adverse effects on their investments. A key area where many people tend to fall short of maintaining optimal compliance standards and practices is seen with corporate retirement plans.

A corporate retirement plan must have at least one fiduciary named in the plan documents as having control over the plan’s operation. Although many individuals are aware that corporate retirement plans are administered by the fiduciary to the plan, what many fail to realize is the fact that the financial advisor/ consultant selected to manage the plan should also be a fiduciary. Why is it so important to have a financial advisor in the fiduciary capacity manage your corporate retirement plan if there is a fiduciary responsible for selecting that advisor/ consultant in the first place?

The investment oversight provided by the financial advisor/ consultant hired to manage the retirement plan is directly linked to the workers participating in the plan as well as their beneficiaries. Although being a fiduciary is not indicative of an advisor’s ability or experience, it is a huge responsibility to administer a corporate retirement plan and hiring any old money manager is not an action in the best interests of the plan’s participants. Hiring an inexperienced, non-fiduciary advisor/ broker can result in devastating repercussions and financial loss if the advisor/ broker was not to act in the best interest of the retirement plan and its participants alike.

With responsibilities ranging from diversifying the plan’s investments to maintaining the plan at a reasonable expense, the fiduciary financial advisor/ consultant is required to carry out all duties with care, skill and prudence. Aside from the inherent ethical requirements, a corporate retirement plan involves many components and responsibilities that should be carried out only by an advisor with considerable expertise and experience with handling such plans. Some other key responsibilities of a retirement plan advisor/ consultant include assistance in the development of an investment policy statement, help in choosing a plan provider, plan design guidance, assistance with selecting the investment options that will be available to the plan’s participants, participant engagement and education and most importantly, plan monitoring and regular review.

It is important to note that not every advisor is capable of administering a qualified retirement plan (in a fiduciary capacity) and the plan fiduciary must be mindful of this fact when choosing the financial professional they think should manage the plan. It is crucial that all plan sponsors confirm that they have employed a financial advisor/ consultant who abides by the fiduciary standard as opposed to a regular financial services professional (aka broker).

Is your current corporate retirement plan advisor a fiduciary? This is a vital question that all plan sponsors must answer as they too are required to act as a fiduciary to the plan. If you are unsure whether or not you have employed an advisor whom is a fiduciary, it is crucial that you give us a call at (631) 952-4466 x12 so that we can help you answer this question and ensure that you are doing right by your company’s corporate retirement plan and its hardworking participants. To learn more on the importance of the hiring a financial advisor whom is a fiduciary to manage your corporate retirement plan, be sure to check out the latest edition of the Mitlin Minute. It is not worth assuming that your plan’s financial advisor is a fiduciary. Let Mitlin Financial help you be certain of this fact so that your financial future looks that much brighter!

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

The Fiduciary

Is your current financial advisor acting in your best interest? Does your advisor follow only the suitability rule to determine appropriate investments for your portfolio? Does he or she act in a fiduciary capacity? It is important for an individual to understand the regulatory standards and confines by which financial professionals work. In order to attain the best possible financial advice, guidance and client service, investors need to realize that there are great differences between how financial advisors and brokers qualify investments for their clients.

In order to determine which regulatory standard is the best fit for your situation, it is crucial that you understand each standard on its own. By definition, FINRA’s suitability rule states that firms/ brokers must have reasonable basis to believe that any investment strategy or transaction involving securities that they recommend is suitable for that particular customer. This belief is based directly on the client’s information as per only their investment profile. An investment profile includes information such as the client’s age, other investments, investment time horizon, investment experience, net worth and liquidity needs. As long as the financial professional believes the investment to be suitable for the client given their investment profile, the broker can then go ahead and recommend that security or strategy accordingly. Although this may sound like a thorough vetting process, it is not as in depth as the fiduciary standard.

What is the fiduciary standard? This standard requires advisors to always act in their clients best interests and put their client’s interests before their own. The fiduciary standard is similar to that of an attorney, CPA and medical professional. A prime example as to when this standard is important is when an advisor is purchasing securities. If acting as a fiduciary, the advisor cannot purchase securities for his or her account prior to purchasing them for a client. Additionally, the advisor must always disclose any potential conflicts that may exist. As you can see from the two, the fiduciary standard is significantly more client-centric and appropriate

Although there are rules and standards in place that help to govern both the broker-dealer and the Registered Investment Advisory world, it is evident that the RIA fiduciary standard is far more stringent. With an advisor always acting in the best interests of the investor, clients are significantly more insulated from fraudulent business practices as well as unsuitable investments that may result in avoidable loss. It is extremely important for every investor to discern whether their current advisor, or even one they are looking to hire, acts in a fiduciary capacity or if they are only obligated to make recommendations that are consistent with the underlying investment profile of the client.  

As an SEC Registered Investment Advisory firm, Mitlin Financial, Inc. acts in a fiduciary capacity. The fiduciary standard is a topic that should be discussed with your advisor, broker-dealer and/ or every financial services professional. Knowing who will be managing your financial future ahead of time can help an investor circumvent potential downside risk. Check out our latest edition of the Mitlin Minute to learn more about the fiduciary standard. Call us at (631) 952-4466 x12 to learn whether your financial advisor acts in a fiduciary capacity or not. Don’t leave it to your imagination, let us help 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.

 

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