Gary Storie

Wednesday, 29 June 2005 20:00

Coach for life

If you've followed professional football over the past few years, you recognize the name Bill Belichick, coach of the New England Patriots. The Patriots have won three out of the last four world championships and are easily the most dominant team of this decade. Many experts believe that this success is due primarily to Belichick's coaching genius - assembling the best coaching staff and players possible, designing and executing the game plan, and making necessary adjustments during changing game-time situations.

During our lifetimes, we encounter various game-time situations, whether they be organizing and managing our finances, planning for college and retirement, running a business, receiving a financial windfall, planning our estate or a host of other things. In preparing for these game-time situations, it would be wise to hire a coach -- in other words, to seek the services of a qualified financial planner.

Like a coach, a financial planner designs your personal game plan and sees that it is properly executed, often with the help of specialists such as attorneys, investment managers, insurance agents and CPAs. An experienced financial planner is also able to make necessary adjustments during times of great change in your life. Selecting a financial planner may be one of the most important decisions you make for yourself and your loved ones.

A certified financial planner (CFP) can be a great asset in helping you reach your personal goals. CFPs have taken an extra step to demonstrate their professionalism by voluntarily submitting to the rigorous CFP certification process.

CFPs complete a comprehensive course of study and pass a two-day, 10-hour CFP certification examination that covers the financial planning process, tax planning, employee benefits, retirement planning, estate planning, investment management and insurance.

In addition, a CFP must have a minimum of three years of experience in the financial planning process and abide by a strict code of professional conduct, known as the CFP Board's Code of Ethics. This code sets forth their ethical responsibilities to the public, to clients and to employers.

When you share your goals with your financial planner, he or she can help you stay focused on achieving them by:

* Reviewing relevant financial information, including tax returns, investment statements, retirement programs, your will, legal documents and your insurance policies.

* Developing your net worth statement -- a balance sheet that examines your assets and debt load.

* Developing your cash flow statement. This is a great way to identify what income comes in and what expenses go out of the family budget.

* Helping you determine your personal investment risk tolerance. Your planner can then help develop a plan for investing in accordance with your goals, without you losing sleep.

* Providing a written financial plan -- the road map to success.

* Helping implement your financial plan, including advising you on investments and referring you to specialists.

* Reviewing your situation and financial plan annually and suggesting options to modify the plan when needed.

* Providing updates to track your progress on goals, including investment growth or debt reduction.

In the world of sports, behind every successful team is a competent coach. Likewise, a qualified and trustworthy financial planner -- your coach for life -- can play a central role in helping you meet your goals and achieve financial well-being.

Gary A. Storie, MBA, MS, CFP is a wealth adviser, NexTier Wealth Management for Citizens National Bank. Reach him at (724) 935-3461 or gstorie@nextierwealth.com

Tuesday, 29 November 2005 07:00

Your coach for life

If you’ve followed professional football the past few years, you will certainly recognize the name of Bill Belichick, coach of the New England Patriots. The Patriots have won three out of the last four world championships and are easily the most dominant team of this decade.

Many experts believe that this success is due primarily to Belichick’s coaching genius: assembling the best coaching staff and players possible, designing the game plan and seeing that it is properly executed, and making the necessary adjustments during changing game-time situations.

During our lifetimes, we encounter numerous game-time situations, whether they be organizing and managing our finances, planning for college and retirement, running a business, receiving a financial windfall, estate planning or varied others. In preparing for these game-time situations, it would be wise to hire a coach — to seek the services of a qualified financial planner.

Like a coach, the financial planner designs your personal game plan and sees that it is properly executed, often with the help of specialists such as attorneys, investment managers, insurance agents and CPAs. An experienced financial planner is also able to make necessary adjustments during changing times in your life. Selecting a financial planner may be one of the most important decisions you make for yourself and your loved ones.

A certified financial planner (CFP) professional can be a great asset to you in reaching your personal goals. CFP practitioners have taken the extra step to demonstrate their professionalism by voluntarily submitting to the rigorous CFP certification process.

CFP practitioners complete a comprehensive course of study and pass a two-day, 10-hour CFP certification examination that covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management and insurance.

In addition, a CFP practitioner must have a minimum of three years of experience in the financial planning process and abide by a strict code of professional conduct, known as the CFP board’s code of ethics. This code sets forth their ethical responsibilities to the public, to clients and to employers.

When you share your goals with your financial planner, they can help you stay focused to achieve them. CFP practitioners will:

  • Review your relevant financial information, including tax returns, investment statements, retirement programs, your will and other legal documents, and your insurance policies.

  • Develop your net worth statement <\m> a balance sheet that examines your assets and debt load.

  • Develop your cash flow statement. This is a great way to identify what income comes in and what expenses go out of the family budget.

  • Help you determine your personal investment risk tolerance. Your planner can then help develop a plan for investing in accordance with your goals without you losing sleep at night.

  • Provide a written financial plan <\m> the road map to success.

  • Help implement your financial plan, including advising you about investments and referring you to specialists.

  • Review your situation and financial plan annually and suggest options to modify the plan when needed.

  • Provide updates to track your progress on goals that might include investment growth or debt reduction.

In the world of sports, behind every successful team is a competent coach. Likewise, a financial planner — your coach for life — who is qualified and trustworthy, can play a central role in helping you meet your life goals and achieve financial wellbeing.

Gary A. Storie is a wealth adviser with NexTier Wealth Management, part of NexTier Bank.

Thursday, 29 September 2005 07:34

Monte Carlo projections

In 1999, George and Judy Brown had accumulated a respectable nest egg after working hard for 35 years. At the relatively young age of 57, they both were ready to retire so they could do the things they had always dreamed of: traveling across the country in a motor home, visiting their children and grandchildren and playing golf. They were confident that their assets — Individual Retirement Accounts, 401(k)s, joint savings and investments — would sustain their less-than-lavish lifestyle for the next 30 to 40 years. Just to affirm their beliefs, they employed a reputable financial planner to perform cash-flow analysis on their nest egg.

The financial planner was comprehensive, assessing all the Browns’ assets and current and future income sources, determining reasonable annual living expenses, and planning for expected and unexpected expenses. He was even conservative in assigning investment assumptions, plugging in a long-term rate of return of 8.5 percent on the Browns’ investments. “In my opinion,” stated the planner, “your nest egg will comfortably support your lifestyle, even if you live in to your nineties.”

As a result, the Browns retired that year, purchased a motor home, traveled around the country, visiting their children’s families and enjoying golf three days a week. However, in just two short years, the Browns awoke to the horrible realization that their nest egg was decreasing rapidly, to the point where they had to sell their motor home and start working again.

Although this scenario is fictitious, thousands of couples actually were confronted with similar nightmares following the horrendous bear market of the early 2000’s. So where did the Browns and their planner go wrong? Why were the cash flow projections so far off? The problem was with relying on average returns.

Traditional financial planning models, as used in this example, use rate of return assumptions that do not vary with time. These assumptions often reflect average historical rates of return earned by particular asset classes or combinations thereof over an extended period. Returns have historically fluctuated from year to year in an unpredictable fashion, and future rates of return cannot be guaranteed or even predicted with certainty. In essence, traditional financial planning models failed to account for one of the most important elements — uncertainty or risk.

Now a more sophisticated alternative is working its way into financial planning. Using computer software or a Web-based program, you can calculate the probability of achieving your goals through a Monte Carlo simulation. Monte Carlo is a mathematical model for computing the odds or probability of an outcome, such as the value of your nest egg at retirement, by testing thousands upon thousands of possible results or trials.

Monte Carlo simulations have been around for more than 50 years, but only with advances in low-cost computing power have they expanded beyond the scientific community. Of course, probability is a centuries-old computational technique. The mathematics behind Monte Carlo came out of the Manhattan Project to build the atomic bomb during World War II. The work is largely credited to Stanislaw Ulam, an Austrian-born mathematician, along with computer pioneer John von Neumann. Ulam named the method Monte Carlo after a relative fond of sneaking off to Monaco’s casinos.

Monte Carlo analysis projects cash flow and net asset values multiple times — each under a different set of conditions — to yield a range of possible outcomes or trials. Monte Carlo analysis is, therefore, able to incorporate uncertainty or risk into the planning process by demonstrating how different assumptions about the future can impact the likelihood of your meeting or exceeding clearly defined financial planning goals.

Monte Carlo represents an improvement over traditional methods of financial planning. Nevertheless, as with any financial model, the results are sensitive to underlying assumptions. In George and Judy Brown’s case, Monte Carlo analysis could have very well produced results that would have motivated them to work a few more years, which would have made all the difference in the world.

Gary Storie is a wealth adviser with NexTier Wealth Management. Reach him at (724) 935-3461 or gstorie@thebank.com