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A Monthly Newsletter Source of Financial Sources • Five Top Financial Planning Tips for Women
Who are New to Personal Finance Issues • Elimination of Estate Tax in 2010 Triggers Possible Need for Changing the Language of Your Will • Do Your Research: Refinancing Because Mortgage
Rates are Low May Not Be Advisable • Residential Real Estate Investors Must be Willing
to Raise Their Rent • How Long Term Care Insurance Benefits May be
Affected by the New Health Care Law • Recycle Your White Papers, Client Letters, Website and
Marketing Materials into Social Media ---------------------------------------------------------------------------------------------------------------------------- Five Top Financial Planning Tips for Women New to Handling Personal Finance Issues Whether you are newly divorced or newly widowed, you may need some assistance with personal financial planning beyond your budget, and possibly even your budget. This is not an unusual situation for many women whose husbands handled the bulk of the finances. There are several key areas where good advice from a financial advisor can set you on the right road to managing your finances yourself, with periodic assistance from a financial advisor. -- You will want to ask questions and get answers about your cash flow, your investment portfolio, your savings, and the implications of your taxes. Often, this is simply talking with your advisor and learning more about what you have or do not yet have (such as long term care insurance that you may need now that your spouse cannot become your caregiver at some time in the future.) -- You will benefit from reassurance that your financial advisor can give you. Depending on your level of financial comfort, an advisor can tell you that “this is not rocket science,” and that it’s O.K. not to understand everything yet. -- Quite soon after you become responsible for your own finances, you may want to ask your advisor to visit your estate planning attorney, your accountant, and a broker who had a relationship with your husband, but perhaps not with you, so that the estate plan can be updated. -- After making any necessary financial changes, invite your children to meet with your advisor. He or she should be enthusiastic and willing to interact with your children or other tax or legal advisors and explain what has been done. -- Meet the team at your financial advisor’s office. It’s important to have more than one individual to rely upon. It is their business and their desire to be there to assist you in any way they can, and they want you to feel that they are a resource. If you do not get that vibe from a financial advisor chosen by your husband, perhaps it is time to look for someone more compatible. Andrew J.
Sohn, MBA, Sohn & Associates, Ameriprise Financial
Advisors, works with individuals, families and small business owners, to
help them achieve their financial objectives through a long-term relationship
based on knowledgeable advice. Sohn & Assoiciates offers financial strategies,
products and services -- and delivers them when, where and how you want
them. It's your choice.. The firm has offices in Boxboro, and Yarmouth,
Massachusetts. Sohn can be reached at ajsohn@gmail.com or 978-263-3336
x202. Elimination of Estate Tax in 2010 Triggers Possible Need for Changing the Language of Your Will An honest mistake can significantly disrupt an estate plan. Estate planning is a crucial part of financial planning. The government has not done people any favors by treating the estate tax like a yo yo. Congress has failed to create a lasting solution to the estate tax issue creating headaches for people trying to plan. The current situation makes long-term planning difficult. With rules changing year-by-year, people are forced to spend more time and effort reviewing and revising their wills. The temporary elimination of the estate tax in 2010 can trigger confusion if wording in wills is not accurate. Some wills were written 20 years or more ago, and some wills written even 5 to 10 years ago may contain out-of-date language. People may want to review their estate planning documents for potential problems. If a person dies in 2010, their will may explicitly direct that assets be placed in a family trust up to the existing taxable exclusion. With the exclusion not around in 2010, you could interpret the will to mean that no assets should go into the family trust. Such a reading is reasonable and potentially goes against the wishes of the deceased. With all the short-term changes occurring with the estate tax law, the potential for confusion is high. Individuals should consult with an estate planning attorney to review their documents to ensure they properly reflect current law and the individual’s wishes. Donald L. McCoy, J.D., CMFC -- Planners
Financial Services, Inc., 952-835-9000. Minneapolis, Minnesota. Registered
investment adviser and subsidiary company Montgomery Investment Management,
specialize in the management of no-load mutual fund portfolios for individuals
and retirement plans designed to protect capital by reducing risk. 952-835-9000 - pfshim@usinternet.com. Do
Your Research: Refinancing Because Mortgage Rates are Low May Not Be Advisable The value of your house and the equity it holds is key to whether you should consider refinancing. With the recent drop in valuations, there may not be enough equity in the house for the bank to say yes without asking for additional equity. When that happens, the owner must assess what happens to the rest of their financial goals, cash flow and reserves, if assets are used to add equity to the house for the refinancing. Cash Position: Given the instability in the job market, will drawing down available cash for the refinancing leave enough emergency money for an extended unemployment period. Servicing: It is at times like these, when rates are low, that homeowners must pay particular attention to the honesty and competency of the mortgage broker, their accuracy and their servicing history. There are many horror stories about homeowners getting to the closing table and not finding the rates or terms they thought they were getting and being “forced” into the poorer terms because they needed to get the mortgage done. Closing Costs: If you are refinancing to save $200 month, but closing will cost $4000, it will take nearly two years to break even, after which time, the savings can accumulate. Mortgage Terms: Is the new mortgage flexible enough if you lose a job or become ill. Some homeowners go for the 15-year rates to get the lowest rate they can, but find the payments onerous when a job loss or illness intervenes. Refinancing can be quite alluring – the idea of lower payments every month because of currently low rates -- but do the work and do the math. Find out if going through a refinancing will really work for you and your family. Andrew J. Sohn, MBA, Sohn & Associates,
Ameriprise Financial Advisors, works with individuals, families and small
business owners, to help them achieve their financial objectives through
a long-term relationship based on knowledgeable advice. Sohn & Assoiciates
offers financial strategies, products and services -- and delivers them
when, where and how you want them. It's your choice.. The firm has offices
in Boxboro, and Yarmouth, Massachusetts. Sohn can be reached at ajsohn@gmail.com or 978-263-3336
x202. Residential Real Estate Investors Must be Willing to Raise the Rent It is not a good idea to be your tenant’s best friend. It leads to a relationship that fosters poor business behavior. “They are such nice people who take good care of the rental. I don’t want to scare them away with an increase in rent.” Informal surveys of families who own rental property cite the above quote as the number one reason for maintaining their rents year after year. Compounding this, an estimated thirty to fifty percent of small real estate investors do not systematically increase rents and rental income. Experts say that increasing your rents is the only way to protect the wealth you have tied up in a real estate venture. The Consumer Price Index over the past 12 months is 2.02%. Although low in recent years, the longer-term averages range from three to four percent. For example, an item that cost $1,000 in May 1990 will cost $1,688.70 on May 2010. That is a substantial erosion of the value of a dollar. While most rents have increased at some point during this time, many landlords do not make changes until tenants change. This means that for many years, landlords are losing purchasing power. But it gets worse. The cost of doing business (the rental expenses that end up on a Federal Tax Return Schedule E) increases with inflation. So the landlord ends up subsidizing the increasing cost of living for the tenant, a further erosion of wealth. Real estate is a business, not a charity and if you cannot look at it that way, you perhaps may want to think twice about a residential real estate investment. When you purchase groceries or gas or maintain your car, notice that the cost of these good and services inch up over time. Not only does the manufacturer want to keep up with their cost of goods sold, but they are also interested in making a profit for their shareholders. As a real estate investor, you are most likely the only shareholder in an important investment that probably holds a large portion of your wealth. You are entitled to a good return on this investment. The absence of rent increases guarantees a low return rate on this important asset. At the end of the year when you add up the gross income collected and offset it with a complete accounting of expenses, you are entitled to a return rate that should be well above the safe rate of the Treasury bill and higher than a comparable investment option. This is called a Risk Adjusted Rate of Return… a benchmark used to get compensated for the additional risk you take by direct ownership of real estate. Rent increases can foster a stronger relationship with a tenant. Think about good parenting. Ground rules are in place. The behavior is consistent. The children are looking for leadership and guidance. Land lording is no different than parenting. It is not a good idea to be your tenant’s best friend. It leads to a relationship that fosters poor business behavior, like making exceptions to allowing animals in the house, keeping rents flat, allowing tenants to pay late. Being a good landlord is being on top of all matters, managing them quickly, efficiently, and professionally. Rent increases should come every year at the same time each year. They should be fair and earnest. Tenants should be notified per the terms of the rental agreement and held accountable for prompt payment. Anything short of this process can set false expectations of the tenant, and can diminish your impact as landlord and investor. Market intelligence is critical in this business. Unfortunately, most people lean on Craig’s List for a snapshot of comparable rents in the area based on the same size and configuration of the rental, and then tag their rent at five or ten percent higher to start. There is a more effective approach. Consider that the listing on Craig’s List, or any directory for that matter, are asking prices of rent. They do not represent actual rents in the area. Consider the following sources: Remember that how you set your rate will determine how well you attract the right tenants. Once you have done your research, then you have the data and some of the insight necessary to set a fair rental price. Rental income is only one part of the investor experience. The other is the quality of tenant, which is often even more important. With your rental price in hand, set your price slightly under market. After all this work, why settle for less income? Because you will have more opportunity to identify a stronger, longer term tenant with excellent credit ratings and recommendation. It is this type of tenant who you can work with for the long term, and who will see the value of your rent increases when they are made each year. Rich Arzaga, CFP® CCIM, is Founder and President, Cornerstone Wealth Management, San Ramon, California, a life planning company. He is also an instructor in the nationally-recognized financial planning certification program at U.C. Berkeley. Rich can be reached at rich@cornerstonewmi.com or toll free (888) 290-9900. Rich Arzaga is a registered representative with, and securities offered through, LPL Financial Member FINRA/SIPC. How Long Term Care Insurance
Benefits May be Affected by the New Health Care Law. On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act into law. One of the provisions of this law is the Community Living Assistance Services and Support (CLASS) Act, which provides for a national long-term care program. It’s too soon to tell all of the impact that this new law will have on the purchase of Long Term Care Insurance. Many details still need to be ironed out regarding the new provisions for long term care coverage under the CLASS program, so don’t go canceling your Long Term Care Insurance policy just yet if you already own one. In fact, you may well find that individual Long Term Care Insurance policies will still be the coverage of choice for many Americans even after the CLASS program goes into full operational effect. Keep these highlights in mind: The CLASS program isn’t expected to be “open for business” for possibly two years. Most of the program’s details have not yet been determined and will be developed through future government regulation. Its provisions will be fully voluntary ; {note to agent – it’s an opt out program} you will need to pay premiums out of your own pocket for the coverage. Initial estimates suggest that monthly premiums could be around $200 for a benefit of approximately $50 to $75/day. With average home care costs higher than $75 per day, never mind assisted living or nursing home costs, this plan could be a drop in the bucket for many, especially those who reside in locales where long term care costs are really pricey. There will be a waiting period of 5 years before benefits become payable. Translation: you’ll have to pay a full 5 years of premiums up front before you could collect any benefits. Furthermore, you are required to be employed for at least 3 of those 5 years. It could be very difficult for those who are already retired or likely to retire soon to be able to meet this work requirement. Also, the scope of the work requirement has not yet been determined. Coverage will be offered on a guaranteed issue basis. In other words, an applicant will not have to answer any health questions to sign up for the government CLASS plan and this provision could be very helpful to certain consumers. How can you evaluate all of this given the uncertainty that exists about the health care legislation at this time? If you were thinking of looking into purchasing individual Long Term Care Insurance, you’ll want to take into consideration the parameters outlined above with the knowledge that many details still need to be finalized. What is also likely, is that the first benefits for anyone who signs up may not even be payable until 2017 or thereabouts. That said, you may not want to put off purchasing an individual policy especially if you’re healthy and can qualify for private coverage now. There are some important distinctions that may factor in as well. Private long-term care insurance policies rarely have a waiting period like the CLASS program. In other words, an individual who buys a private policy could conceivably have a long term care illness within days after purchasing a policy and apply for benefits right away. Benefits could be payable after fulfilling the policy’s elimination period (commonly 90 to 100 days). Secondly, given the projected level of benefits, many people may still want more coverage than the CLASS program will offer. Also remember that many individual private policies offer features that are not likely to be part of the government plan including care advisory services. Perhaps the best advice is to consult with your financial advisor to determine your best approach to long term care insurance coverage today and the best strategy for you going forward even after coverage under the CLASS can be purchased. 501-04292010-17403286 Stuart H. Armstrong,
CFP®, CLTC, a John Hancock Life Insurance Company (U.S.A.) agent with Centinel
Financial Group, a Boston Massachusetts area firm. He can be reached at
617-424-0005 or sharmstrong@jhnetwork.com Recycle Your White Papers, Client Letters, Website and Marketing Materials Into Content for Social Media Investment and wealth managers, you can get a lot more mileage out of your white papers today. How's that? Don't forget about the content once it's up on your website. Reuse it using social media. For example, white paper content can be recycled into blog posts. In some cases, you can pluck a few paragraphs and drop them into your blog "as is." However, most of the time, you'll need to frame and re-write the content. Become
a guest blogger Some blogs publish their submission guidelines, so you know exactly how to apply to be a guest blogger. Others don't. But there's a simple process you can follow to propose a guest role. Step 1. Study the blog to figure out its audience and topical focus. Step 2. Come up with a topic. Your description of your topic should identify the main point you're trying to make and why readers will care about it. Step 3. Email the blogger to suggest a guest post. A strong proposal will include the following:
It isn't necessary to send your completed blog post right away. In fact, I think it's better not to send it unless requested by the blog's “owner submission guidelines.“ A proposal lets the blog owner give you suggestions about how to adapt your idea to their needs. There are a number of investment blogs that accept guest posts. The granddaddy of investing blogs is www.SeekingAlpha.com, which publishes its submission guidelines. To be considered you must "Write about a stock, sector, ETF or theme that is actionable for U.S.-based investors." Advisor Perspectives isn't a blog. But it publishes blog-like--and much longer--commentaries from registered investment advisors on "the market, the economy, or investment strategy," according to its submission guidelines. There are also personal finance blogs that accept guest posts. www.WiseBread.com, which reports receiving one million page views monthly, provides its writers' guidelines on its "Guest Writer Showcase." Jeff Rose of www.GoodFinancialCents.com likes Wise Bread, too, and suggests other blogs that receive guest contributions. www.GetRichSlowly.org Your business niche may also have blogs that will accept your posts and help you educate your target audience. @Fiduciary360 of the fi360 blog says that guest posts may be possible. However, its editor says, "I should say that we'd want exclusive content from a guest blogger. We'd rather just link if it's on their blog as well." Another potential target: your local newspaper's blog. Its reach may be small, but it could yield some great prospects close to your office. Other social media Remember, tweets are also great fodder for LinkedIn updates. While you're over at LinkedIn, you may also want to raise a question in a Group related to your white paper topic. Go multimedia Susan Weiner, CFA, is a writer-editor specializing in working with financial professionals to increase the impact of their writing on clients and prospects. She writes and edits investment commentary, white papers, articles, web pages, and other communications for leading investment and wealth management firms. Her work can be found at www.investmentwriting.com and her blog at www.investmentwriting.com/blog. She can be reached at 617-969-4509 or susan@investmentwriting.com. Save Your Practice Money
by Outsourcing Most advisors believe that they practice excellent customer relations. Communicating with clients is a top priority and an anchor in the best practices they seek to establish. But all normal firm activities and standards take a significant hit when the firm must change broker dealers and deal with a tsunami of paper work during a transition, or when their office is simply backed up with paperwork, forms and documents that must be created, filed or mailed. At this point, it is customer service that takes a back seat and customer relations that can be compromised. Today, a new service is available for financial advisors, stock brokers or insurance agents that can serve as a business back office. One such office is My Office Gurus providing document management and business processing for their target market. “What we do is scalable and specialized,” says Glen Shepherd, founder of My Office Gurus. “We have specific industry knowledge of the paperwork and the equipment to lighten any advisor’s load, no matter whether they are a large or small operation that only processes five investment or insurance applications a month.” New account information and follow through to make sure the accounts are actually open and funded must be done correctly the first time, says Shepherd. A business back office can provide the following services for existing clients:
For new clients, a business back office can manage the following processes:
When paperwork bogs down, most advisors are likely to hire new staff and increase their overhead and benefits load, a costly decision. New hires can leave and the rehiring and training process in addition to increasing expenses, can impact the orderly flow of an advisor’s business. Customer relations is too important to let lapse because of a paperwork bottleneck. When an advisor has a new client who cannot see their account online quite soon after they feel the transaction has been completed, they become uncomfortable. A business back office can solve problems before they impact customer relations. If it is an insurance transaction, agents rely on case managers to make sure that the insurance business is properly documented. Most such documents are on a 15 to 18 day cycle after they are submitted to the insurance company by the agent. When the follow through lapses and the application is rejected, two weeks can go by before the advisor checks to find out. A back office can stay on top of the business details and successfully advocate for its client’s business because they deal with the vendors all the time and are acquainted with many of the case managers at the large firms. You can save money and save your customer relations and the sanity of your staff by outsourcing some of your firm’s most tedious business transactions. Use a specialist firm to handle the hundreds of details that can routinely sabotage your business. Free up your time for good customer relations and new prospecting calls. Glen D.
Shepherd, My Office Gurus LLC, provides the expertise, resources, and solutions
that give the financial professionals the freedom to successfully capitalize
on their own talents and strategically overcome their firm’s challenges.
He can be reached at info@myofficegurus.com or 402-359-1452. Go to www.myofficegurus.com for further information.. |
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