Michael Wiethorn

Wednesday, 02 November 2005 09:06

Investment tune-up

Back in the ’90s, it wasn’t hard to make money in the market. Just about everything worked, and not much thought had to go into diversifying investments.

Since the prolonged market correction from 2000 to 2002, many investors have rethought their investment approach and have chosen a more deliberate strategy of asset allocation.

Your own asset allocation (the mix of stocks, bonds and cash) is typically driven by how much time you have before you will use the funds, how much risk you’re willing to assume to reach your goals and, to some extent, how much you have to invest.

For example, a 40-year-old investing for retirement may choose to allocate 75 percent of his or her portfolio to stocks and 25 percent to bonds and cash in hopes of achieving long-term growth. A 60-year-old, nearing retirement but looking forward to many years of travel and leisure, may instead select a more balanced approach of growth and income, a strategy with an equal split between stock and bond investments.

Today, most investment firms, employer retirement plans and 529 college savings plan sponsors provide investment programs that do this automatically based on your answers to some simple questions. Good investment advisers will typically take a more comprehensive approach, customizing an investment strategy based on your unique circumstances.

But once you have determined your target mix, there may be situations in which changing it over time makes sense.

  • Market movements. The economy and financial markets are constantly changing. Some of your investments may have performed better than others. That means your original mix will be off, possibly exposing you to additional risk that you didn’t plan on.

Or perhaps your adviser sees opportunities in the market that call for increasing your allocation to certain investments while decreasing it in others. Either way, bringing your portfolio in line with your original mix, or to a revised mix, may help smooth the ride through these changing markets.

  • Life changes. New kids, caring for parents, receiving an inheritance or job changes are all situations that might warrant a review of your investment portfolio and possible changes to your investment mix. Many people’s portfolios are out of sync with what is going on in their lives.

Investment strategies that worked while you were single may not be appropriate with a new family. Or, an investment mix designed to provide long-term growth during your working years may not provide the income that you’ll need in retirement.

Whether you manage your own investments or use an adviser, rebalancing your portfolio in light of the economy, the markets and your own personal situation is a smart move.

Rick Wiethorn is a financial adviser at NexTier Wealth Management. Find out more about NexTier at www.nextierwealth.com.

Thursday, 20 November 2003 11:58

Avoid hiring heartaches

Recently, a company paid more than $10,000 in legal fees and expended a month haggling to resolve an employment problem that had taken less than 30 minutes to create.

The issue was the hiring of an individual with strong industry experience who was formerly employed by a competitor. However, he was bound by a restrictive covenant with his former employer, effectively prohibiting him from taking the new position.

The employee, eager to begin the new job, failed to inform the new employer. The new employer, in its haste to get the prospect on board, failed to ask the right questions and perform due diligence investigations during the interview process.

As a result, the former employer took legal action, interrupting and distracting the new company's business until an expensive solution was reached. It was an avoidable and frustrating waste of time and money for the company.

This scenario is not unusual for small and medium-sized entrepreneurial businesses that do not have a professional human resources staff. As a result, this type of problem occurs with troubling frequency.

Here are some guidelines for properly conducting pre-employment investigations and asking the right questions.

First, obtain a thorough prior employment history. If the employee had several jobs within the last two or three years, get information regarding each applicable employer, not just the most recent. A covenant can run for two or three years, and five-year covenants are not unheard of.

Ask the prospective employee if he or she has ever been subject to a restrictive. If the employee was subject to a restrictive covenant, request the employment agreement/contract.

Sometimes, however, because of confidentiality clauses within the employment agreement, the employee may not be at liberty to provide it. In that situation, one alternative is to ask the employee to seek independent legal advice. The lawyer can then represent to the new employer that there is not a restrictive covenant or that it does not apply to the proposed position.

A final alternative is to ask the employee to sign a document representing that he or she is not subject to a restrictive covenant. This would provide that if you are subject to litigation because the employee is bound by a restrictive covenant, the employee indemnifies you for any damages as a result.

Asking the employee to seek independent legal counsel and pay damages uncovered by the employer assure that you will not be in violation of the restrictive covenant. It provides a very strong defense against any prior employer suing the company for tortious interference with the pre-existing business arrangement.

While potentially expensive for the employee, these steps are in his or her best interest because they assure you that the individual is carrying no unwanted baggage.

By following these steps, businesses can move aggressively on hiring leading employees while protecting themselves and adding to their competitive advantage. Michael G. Wiethorn is a partner and small business adviser with the Pittsburgh office of Fox Rothschild, a firm with more than 250 lawyers in eight regional offices in Pennsylvania, New Jersey and Delaware. For more information, visit www.foxrothschild.com.