What’s your financial IQ?

Imagine you’re on a TV quiz show. The host turns to you and offers a list of topics, one of which is “Your Personal Finances.” Based on your knowledge, is this a category you would choose?

If you answered no, you’re not alone. Four out of five Americans admit they know more about a variety of topics other than their own finances. That’s about the same share that would choose to answer questions about subjects far less personal, such as current events, entertainment or science and technology.

These results were gathered as part of a research study, sponsored by Northwestern Mutual, to help gauge the American public’s overall financial knowledge — as measured by a financial IQ index — and its understanding of insurance products.

“For me, the results were a powerful reminder of the reason why financial advisers need to make it a point to help clients — even those in the business world — fully understand their personal finances, so they can make the informed choices that are right for them,” says Michael Byrne, a managing partner at Northwestern Mutual.

It’s also helpful for employers to help ensure their employees are educated on personal finances because it can affect their ability to retire.

Smart Business spoke with Byrne about the online survey, which was conducted by an independent research firm, of 1,664 Americans, ages 25 to 65, in 2010.

What financial concepts did Americans understand, according to the study?

The survey found that some basic financial concepts are well understood, including the best way to minimize losses in investments (88 percent answered correctly), asset allocation (79 percent) and dollar-cost averaging (57 percent).

Likely because of their self-explanatory names, high numbers of Americans also recognize what disability income insurance and long-term care insurance are designed to do.

Where did the survey respondents’ knowledge fall short?

More often than not, Americans fail to understand many key financial concepts like the average inflation rate over the past decade, which was known by about 1 in 3. Also, less than one-third knew the product that has traditionally mitigated inflation risk the best.

This lack of financial knowledge appears to be particularly acute when it comes to permanent life insurance. Only a small percentage of Americans seem to know even the basics of this type of risk protection.

What else did the survey results reveal?

Knowledge is power — and Americans recognize it. Nearly eight out of 10 consumers feel the need to learn as much as possible about their personal financial situation.

As to where they find that information and whom they trust, it was good to hear that when asked to rate the reliability of several sources of financial information, Americans rate financial advisers as the most reliable source.

A successful long-term investment strategy is a process that evolves as your needs and goals change at different points in your life. An experienced financial professional can be invaluable in helping you continually educate yourself on your personal finances — taking an objective, unemotional approach to investing and keeping your overall performance and goals in sight, even during market ups and downs.

In addition to talking to a financial adviser, be sure to check out this retirement savings calculator that can be used to show how contributions affect your ability to fund your retirement, as well as a lifespan calculator to estimate how many years you may live past retirement.


Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities) and its subsidiaries. Byrne is an insurance agent of NM and Registered Representative of Northwestern Mutual Investment Services, LLC (securities), a subsidiary of NM, broker-dealer, registered investment adviser, member FINRA and SIPC.


Insights Wealth Management is brought to you by Northwestern Mutual

Tips on assembling New Year’s resolutions for your finances

As you’re thinking about what you’d like to achieve in 2015, something to consider is your long-term financial future.

January is a time for pledging to make changes, so if you haven’t taken a hard look at how you’ll fund retirement, or even what you’d like your life to be like when you’re retired, now is a good time to put a plan together.

Smart Business spoke with Peggy M. Ruhlin, CEO of Budros, Ruhlin & Roe, Inc., to get tips on setting long-term financial goals.

What are some financial moves or considerations people should make at the beginning of the year?

There are a few financial resolutions to consider making as we enter 2015.

  • Resolve to write down your financial goals. That’s called a goal planning statement, and its abbreviation, GPS, is intentional. Writing down goals is like using a GPS to find your way to your destination, but even the best GPS won’t work if it doesn’t know where you want to go. Determine the position you want to be in financially, when you want to be there, and what you want to accomplish once you’re there. That will give you the road map you need to achieve your goals.
  • Resolve to pay yourself first. Instead of waiting to see if you have money left over at the end of the month, plan to pay yourself first. You could ask your employer to send a portion of each paycheck to a savings or investment account instead of your checking account. Paying off your credit cards is a simple way to save money in finance charges. Contribute the maximum amount to your 401(k) or retirement plan. It’s especially important to increase the contribution to get the maximum employer match, otherwise you’re throwing away free money. Also consider funding an IRA, and a 529 plan for your children’s or grandchildren’s education.
  • Resolve to check your investments. Make sure your investments are still in line with your asset allocation and that that’s still appropriate given your financial circumstances and risk tolerance.
  • Resolve to check your credit report. Get your free report at annualcreditreport.com and not one of the other so-called ‘free’ sites.
  • Resolve to review your estate planning documents. Make sure your beneficiaries, durable power of attorney and health care directives still name the people you want making decisions in the event that you are struck by disability, serious illness or death.
  • Resolve to talk with a wealth management professional if you need help setting long-term financial goals.

How often should people review their financial goals throughout the year?

Be cautious when reviewing your long-term financial plans too frequently. If you try to review your plan to see if it’s still feasible, it can give you an excuse to not do what you set out to do. We’re talking about a long-term plan, the success of which requires the fulfillment of many short-term goals. Unless you decide not to ever retire, it’s not likely that your long-term goals will change that much.

It’s wise to review your plan annually because new financial opportunities might arise during the course of a year. For instance, new tax savings opportunities could be come available through new legislation, new investment opportunities could be present that didn’t exist last year, your family circumstances might drastically change — birth of a child, marriage, death in the family — all of which could justify making adjustments. If nothing has changed, at least an annual review reminds you of what you’re working toward and the progress you’ve made so far.

Your long-term goals are personal, so it’s not up to someone else to set them for you. Professional wealth managers, however, can help you select the best tools and tactics to achieve your goals, especially if you’re having trouble or are ‘paralyzed’ when trying to set them yourself.

Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.

How to build, and be a part of, a powerful nonprofit board of directors

The Pittsburgh region is nonprofit rich, which helps make the area a special place to live and raise a family. But it also makes it incredibly competitive for funding, which means nonprofits need to build powerful boards of directors who can help advance the mission of the organization and ensure its perpetuity.

Getting involved with a board is a great way to give back to a cause you care about because nonprofits are looking for passionate people who advocate for the group as part of their normal networking.

“You should look at me, because you’ve heard me talk about them enough, and say, ‘Here comes Dotti, I wonder if she’s going to tell me about the Pittsburgh Vintage Grand Prix or the Vintage Senior Community Center in East Liberty,’” says Dotti Bechtol, fiduciary asset business development officer at Fragasso Financial Advisors.

Smart Business spoke with Bechtol, who has served on nonprofit and for-profit boards and as a nonprofit executive director, about how nonprofits and boards can work together to create a strong organization.

What is the biggest misconception of executives who join nonprofit boards?

If you’ve joined a board because you think it will be good exposure to have your name on the website, you’re not being a strategic partner who can help guide the organization. It’s really not about you. It’s about the benefit you can bring to the nonprofit. And it really isn’t the place to market yourself; that’s not why you were invited to join, and it’s not what your focus should be.

You will have a number of expectations put on you as a board member, so it’s critical to join an organization where you have a particular interest. For example, if you have a child or family member with autism, you care about and are experienced with it and, therefore, will make a better board member for an autistic society.

Are nonprofit boards different from serving on for-profit boards?

It depends on whom you ask, but not really. They have the same problems. Just because you’re a nonprofit doesn’t mean you don’t pay attention to your budget. You can’t be losing money constantly and keep your doors open. The expectation of profit is just a lower amount of money with nonprofits.

So, what kinds of fiscal problems should board members be on guard against?

You need to thoroughly understand the financial statement, as a board member, in order to have the foresight to see problems. You can’t just rely on your finance committee.

As a board member, you are a fiduciary and have personal liability for what happens to the assets you’re charged with guarding. That fiduciary responsibility doesn’t just apply to the endowment and board directed funds, it also applies to the retirement plan.

In your experience, what are best practices for creating a strong board of directors?

Nonprofits should recruit board members carefully, and then vet them through LinkedIn, Google and referrals. Fill board seats with people who have the skills to fill a gap, and then be honest about why they are being asked to join. If an organization can’t afford an attorney on staff, find an attorney willing to give general guidance pro bono because he or she is on the board.

It’s a good idea to have a written job description so everyone understands the expectations and limitations. It’s better if board members know upfront the attendance policy, if they need to join a committee and if they are responsible for a certain amount of fundraising.

New board members should go through a thorough orientation. They need to learn about the organization’s history, get a tour of the facility, understand all of the programs and meet the people the nonprofit serves.

The executive director needs to run an efficient meeting that gives an overall view of what’s happening. Board members should contribute time beyond the scheduled meetings, including reading board packets in advance. It shouldn’t be something board members just think about when seated at the table for the meeting.

Finally, senior staff and board members should celebrate the successes. Boards don’t need to just be present for the problems. Celebrate your shared successes, acknowledge each other’s contributions and say thank you.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

Why you can find time in your busy schedule to plan for a great retirement

Fear can be a significant factor in the retirement planning process, hanging over every discussion you have about when you want to retire, what you want to do in retirement and how you’re going to pay for it all.

What people often lose sight of, however, is that they don’t have to iron out every detail of the next phase of life in a single session.

“It’s the ability to take small, manageable steps,” says Angela Anderson, a financial professional at AXA Advisors LLC. “Every person manages the process differently. Maybe you take a step back and focus on understanding how your pension works. Or you look at what’s involved in setting up an IRA. Find an advisor who will work with you and create a user-friendly process that moves at a pace you’re comfortable with, removing the fear.”

Smart Business spoke with Anderson about how to calculate your needs so you can plan to retire with the lifestyle you expect.

Where do you begin in planning your retirement?

Visualize an ideal day for you in retirement. What does that day look like? Let’s say you want to travel to Hawaii once a year. How much is that going to cost? If you haven’t thought about things in that much detail, consider more open-ended questions. Do you want to travel? Do you want to go back to work? Do you want to volunteer?

Start with broader questions and you can at least start to formulate a picture of what you want retirement to look like. Once you have that, you can begin thinking about how to make that happen.

The biggest thing is to not be scared of the process. Think of it like going to a doctor. You don’t expect the doctor to write you a prescription before an exam has been done. It’s a process of discussion and examination to figure out what you want and what you may need to do in order to get there.

How do you find an advisor you can trust?

Good retirement planning is always centered on the relationship. Sometimes a client won’t become a client for years. You become friends with an advisor through a business relationship, a networking opportunity or just by being involved in the community. You build trust with that person. And quite often, that trust leads to, ‘OK, let’s sit down and talk about what you do and plan for your future.’ It’s not a one- or two-year conversation. It can be three or four years, or more, of just having those conversations.

How does the retirement conversation differ for women?

There are generally three major obstacles facing women. The first is that women typically live longer than men and that places more strain on cash flow in instances in which they are living five, 10 or 15 years longer than their spouses. What about long-term care when your husband is gone and your children have moved away?

Second, some women just assume that their husbands will take care of everything to secure their futures. It’s important to take care of yourself as much as you take care of your household.

The third obstacle is divorce. Most women have benefits on their own record like Social Security or a pension. So it may not be a lack of financial resources, but a lack of responsibility to take those assets and learn to manage them when you’re living independently from a former spouse.

What’s the key to achieving your retirement goals?

The sooner you plan, the better it will be. It’s never too late to help make those long-term goals come true. But you need a plan just like anything else. There are a lot of things that pull on people and quite often, it’s a challenge to find the time to sit down and think about your retirement. Find an adviser you feel comfortable with and talk about those goals. And then find opportunities to knock out a few steps along the way and give yourself the time so you don’t have to rush the process.

Securities are offered through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC.  Insurance and annuity products are offered through AXA Network, LLC.  AXA Advisors and AXA Network do not provide tax or legal advice.  AGE 99808 (12/14)(Exp 12/16)


Insights Wealth Management is brought to you by AXA Advisors LLC 

Last-minute investment strategies, and how not to make them next year

There is nothing magic about year’s end when it comes to wealth management. It is, however, a time that coincides with tax planning, so it’s often an opportunity to consider financial planning moves.

John Schuman, chief planning officer at Budros, Ruhlin & Roe, Inc., says there are considerations to make at year’s end, but none that couldn’t have been decided much earlier.

“Consider your year-end opportunities, but find an adviser to work with so your planning isn’t crammed into the last month or quarter of the year. Advisers can make planning a lot easier and less stressful,” he says.

Smart Business spoke with Schuman about year-end wealth management tips and how to avoid an end-of-the-year rush in 2015.

What should be done before the calendar turns?

From a wealth management perspective, the end of the year is a time to think about maximizing contributions to qualified plans, making sure you’re putting away money in your 401(k) plans and other retirement planning vehicles such as Roth IRAs.

The general rule is to defer income and accelerate deductions. Following that logic, retirees experiencing a low income tax year, who are not withdrawing from their IRAs and have little or no earned income, can convert IRA accounts into a Roth IRA. Basically, you’re paying your tax early, but you’re choosing to pay your tax in the low bracket when having a low bracket year.

For those still in the workforce, there’s an opportunity to move money into a Roth IRA. A nonworking spouse can make a nondeductible IRA contribution and convert it tax-free to a Roth IRA.

It’s also a time to accelerate any tax deductions to offset income, like paying real estate taxes in December rather than January, and paying any local or state taxes in December and not waiting until the next year.

What else might be to an investor’s advantage at the end of the year?

Since 2006, qualified charitable distributions (QCDs) from IRAs have allowed people aged 70.5 or older to make up to $100,000 in charitable contributions and have that count toward their required minimum distribution. The benefit is that instead of having to take the distribution into income and then taking a charitable deduction, the QCD excludes it from your income altogether. This, in turn, eliminates state income taxes on the distribution and reduces the various phase-out limits. QCDs have not been extended for this year, but are expected to be. It’s advisable to make a QCD this year anyway, in anticipation of the legislation being extended.

On the estate planning side, we now have portability, which allows a spouse to inherit a deceased spouse’s unused estate tax exemption. Historically, each individual had to use their own estate exemption (currently $5.34 million). Now, any unused exemption can be passed on to the surviving spouse.

Further, the IRS says it’s permissible to go back for those who have died between 2011 and 2013 and retroactively take advantage of this portability election, but that has to be done before the end of the year.

Lastly, Congress has been focused on compliance with disclosing foreign-owned assets and accounts. A new amnesty program, which allows disclosures with reduced penalties, opened in July of this year. Failure to make a disclosure during the amnesty period can result in penalties larger than the account balance itself.

What would help people avoid having to make a year-end push?

Planning should be an ongoing process, not an event-driven reaction. If your investments get most of your attention during the last quarter, you’re being transactional, and probably not making the best decisions. It’s best that investors have an ongoing dialogue with their wealth management adviser throughout the year.

It’s common for people to procrastinate. But deep within procrastination is confusion, and that can freeze decision-making. People often aren’t aware of the full landscape of investing factors to form a strategy, so they get stuck. Most wealth managers do this for several hundred people every year, and know how to gather the facts and perform the analysis that help their clients avoid confusion, correct misinformation and make better decisions.

Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.

How to set goals that increase your business’s value before you exit

It’s estimated that 3 million small business owners in the U.S. will sell in the next five years. Yet one-third of those owners don’t have a business or retirement plan to prepare for the transition.

“That’s a million businesses that are really vulnerable to debt, disability, economic downturn, competitors, external and internal strife, and more,” says Deborah F. Graver, high net worth asset development officer and chief compliance officer at Fragasso Financial Advisors. “If they don’t pay attention to it, everything they worked so hard to build could disappear, and then all their dreams of retirement are gone.”

If you fail to plan, you can end up unprepared to sell, she says. And if you have to have a fire sale, you won’t be able to convert what you’ve built into a liquidity event that really represents the true value of your small or midsize company.

Smart Business spoke with Graver about what to consider when you’re seeking to transition your business to the right people at the right time, and for the right price.

What’s the first step to planning a business transition?

First, sit down with an adviser to describe what you want to achieve. You need to work with a financial professional who can help you envision and plan for the transition.

An experienced, knowledgeable financial adviser can help create a transition plan in coordination with your CPA and attorney. While planning for the sale, your adviser should also work with you to create a customized personal plan to ensure financial security during your lifetime and beyond.

When do you need to get started?

Start planning for the transition at least five years out. Planning with foresight gives you time to prepare yourself and your business for the change. Proper business valuations on a routine basis are also vitally important.

What’s critical to prepare internally?

Make sure you have the right people in place. Strengthen your leadership structure, considering long-term goals and the intended succession plan. Are the managers’, directors’ and other employees’ strengths properly aligned with the roles they play in operating the business? Would changes in key employees improve operating efficiency?

If you are unsure of how to evaluate that and restructure where needed, or if you’re simply too close to the subject matter, consider hiring a consultant. A business transition specialist can help interview key stakeholders to determine strengths and weaknesses in the organization and provide guidance on strategic changes.

How else can you get ready?

Create a written business continuity plan, in the event of the death or disability of yourself or key employees. Various types of insurance can also help guard the business against loss of key personnel and protect the future of the company and personal wealth. For example, a key person life insurance policy can help protect the business from the adverse effects of losing essential personnel, and a more comprehensive buy/sell agreement can help provide greater financial protection for business continuity.

What can you do to make the company financially stronger before the transition?

Review the company’s fringe benefits, including the retirement plan. A quality retirement plan is key for retention and ranks as a top priority for job candidates. Many employer-sponsored plans also offer significant tax advantages to the company. A properly structured retirement plan helps to round out a solid business, making it more attractive to potential suitors, which can help you retire with a larger nest egg.

In addition, clean up the balance sheet. Managing assets and liabilities properly with disciplined accounting practices shows prudent financial control systems are in place. Employ cash management and debt reduction strategies to maximize value well in advance of an intended exit.

Planning a business transition can be like another full-time job. That’s why it’s critical to find a financial adviser who can help translate your vision into a plan, help execute the plan on that vision and work systematically with you to get the right people and processes in place. If you haven’t worked with an adviser before, or feel you’ve outgrown your current adviser, schedule an appointment with a seasoned professional more suitable given this stage in your life.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

What to do when you suddenly find yourself flush with new income

Proper prior planning is essential when it comes to dealing with financial windfalls such as bonus money and royalties paid out for oil drilling rights.

Your failure to do so could cost you a lot of money and even the land that brought you all that income if you don’t take the time to prepare, says Broderick N. Haer, a financial consultant at AXA Advisors LLC.

“This is like winning the lottery,” Haer says. “A common mistake with bonus and royalty money is that people don’t know how it’s treated in terms of taxes. In most situations, the bonus payment, as well as the royalty income stream, is considered taxable income. So when you’re getting tremendous amounts of dollars in terms of ordinary income, it obviously has a dramatic effect on your effective tax rate.”

Haer says the oil and gas drilling boom in Ohio has been a learning process for financial professionals as much as the people getting the money.

“The key is to talk about it in more simplistic terms and handle it in a methodical, step-by-step process,” Haer says.

Smart Business spoke with Haer about how to manage a sudden surge of income in a way that helps to protect you, your family and your property.

What’s a common mistake made with a sudden infusion of income?

Often, the first thing you want to do with a windfall of money is start paying off debt on the farm or purchase assets such as a new tractor or tiller or a new truck. You have this bonus money and you’ve spent the majority of it without leaving enough for the expected taxes that you’ll need to pay on it. Step back and plan how you’re going to distribute the income and properly save for taxes.

How comprehensive is the planning process?

It can help you understand whether the income may be extensive enough to support future generations, which would involve legacy and estate planning strategies such as trusts, limited partnerships or even family limited partnerships.

An advisor can sit down and run a financial plan and look at the bonus and/or royalty money you expect to receive. When your land is drilled and the wells are productive, you can start seeing extreme income that becomes very lucrative.

In this case, you’re going to need a more professional approach with a team of advisors. This includes an estate and contractual attorney, a good CPA and a financial professional that can head up that team.

How important is estate planning?

The value of your property before royalties may be below the estate planning limits for estate taxes. But after drilling, within a very short period of time, the value of that property and the value of that lease could dramatically exceed the estate planning tax exemption.

If that happens and you haven’t planned for it, the result could be devastating.

Let’s say something happens to you and now estate taxes are owed and there’s no liquidity coming in because that tax bill is going to be evaluated based on all the future cash flows of that well.

The IRS is going to have someone come in, a geologist, and find out what is expected in terms of future income. Then they are going to go to a present value calculation and they’re going to put it in today’s dollars and that property can be worth $15 million or 20 million.

Maybe you have just gotten a couple royalties. Now there is an estate tax bill that is due by Oct. 15 of the following year and it’s a $3.5 million to $4 million bill. What’s going to happen to the farm?

You’ll probably have to sell it to the highest bidder. If you haven’t saved enough for estate tax or put a product in place such as a life insurance policy that is liquid upon death to pay those estate taxes, the IRS is going to want its money. The most valuable asset in that situation is the lease, so the lease might be sold and now the family loses the lease or the farm might be sold. That’s a scary notion.

Broderick Haer offers securities through AXA Advisors, LLC (NY,NY 212-314-4600), member FINRA/SIPC, offers investment advisory services through AXAAdvisors, LLC, an investment advisor registered with the SEC, and offers insurance and annuity products through AXA Network, LLC.

Broderick Haer, AXA Advisors and AXA Network do not offer tax or legal advice. Please consult with your professional tax and legal advisors regarding your particular circumstances.

Make the effort to manage 401(k) plans responsibly and earn loyalty

A growing number of employers automatically enroll employees in 401(k) plans based on evidence that shows it’s simply a more effective way to get them to save for their retirement.

People are 14 times more likely to save money on a regular basis if it’s automatically deducted from their paycheck than when they are left to their own devices, according to research by the National Association of Plan Advisors, says Jeffery Acheson, managing partner, advisory services at Corporate and Endowment Solutions Inc.

“The stick rate of people who are automatically enrolled in their company’s 401(k) plan is close to 90 percent. People are often just as apathetic about opting out of a 401(k) plan as they are about opting in,” Acheson says, citing a 2012 Blackrock Retirement Survey.

Smart Business spoke with Acheson about how employers can responsibly manage their 401(k) plans.

What is the biggest challenge to managing a 401(k) plan for employees? 

The Employee Retirement Income Security Act (ERISA) of 1974 requires plan sponsors and fiduciaries to carry out their responsibilities prudently and with a duty of loyalty to the participants. Down deep, employers know they need to pay a lot of attention to their retirement plans, but many times they are too busy with other aspects of their business. It needs to be a higher priority. The Department of Labor enforces the many fiduciary requirements that businesses need to adhere to.

What are some best practices for employers to manage their 401(k) plans? 

Develop a detailed investment policy statement that lays out the process and procedures you follow in providing fiduciary oversight of the plan you are managing. Be sure that if the Department of Labor ever does come knocking on your door, you have documented evidence of your adherence to the many requirements mandated by ERISA.

Second, make sure the fees in your plan benchmark well against alternatives in the marketplace. You don’t have to hire the lowest cost providers, but as a plan fiduciary overseeing your plan, you have to be able to ascertain and document that you have deemed your plan’s fees fair and reasonable for the services provided.

How often should a company compare its plan against what is offered by other firms? 

The rule of thumb is every three to five years you should re-evaluate your existing plan against market alternatives. Most ERISA attorneys would agree that is an acceptable length of time to show responsible fiduciary oversight. When you do look at other options, three things can happen. The data will come back and tell you that you are doing all the right things and there isn’t much of anything you should be doing differently. The data may come back and say that you’re doing OK, but highlight improvement potential that if addressed in a few small areas, would allow you to do even better. Or, the data could tell you that your plan is not up to acceptable and defensible standards.

From a plan sponsor standpoint, these are all good outcomes. Either you’ve validated that you’re doing a good job, received some good tips on how to do it even better or gotten a much-needed alert to provide a stronger plan for your employees.

What do employees want in a 401(k) plan? 

It takes a lot of money to get through retirement and with people living longer and the better we get at health care, the more it exacerbates the retirement income security problem. If you want your employees to consider your retirement plan a real benefit, you have to show it’s an important part of your overall compensation package. That starts with how much attention you pay to the plan in trying to make it the best it can be at your company’s intersection of human and financial capital.  

Jeffery Acheson offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC, offers investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC, and offers insurance and annuity products through AXA Network, LLC, which conducts business in California as AXA Network Insurance Agency of California, LLC, and conducts business in Utah as AXA Network Insurance Agency of Utah, LLC. Corporate and Endowment Solutions, Inc. is not a registered investment advisor and is not owned or operated by AXA Advisors or AXA Network. 

GE 98715 (10/14)(Exp 10/16) 

Insights Wealth Management is brought to you by AXA Advisors, LLC 

Navigating the misconceptions that surround wealth management

There is no universally accepted definition of wealth management, which can lead to misconceptions about what the practice involves. The term may refer to investment management, private banking, stock picking, even estate planning. To many, it can mean all of these. To some it can mean none of these.

“Those who call themselves wealth managers may each provide a different service,” says Jim Budros, chairman and founder of Budros, Ruhlin & Roe, Inc.

This has led many to form false impressions of the practice, which keeps them from using services that can be helpful to their financial well-being.

Smart Business spoke with Budros about the general misconceptions associated with wealth management and how the practice can be better defined.

What are some misconceptions about access to wealth management services?

It’s a commonly held belief that access to wealth management services is just for the wealthy. But wealth management decisions can be about a person’s first 401(k) deferral, buying a life insurance policy or budgeting.

Some people believe it’s expensive. There are, however, many wealth managers whose relationships with clients are on a project, per hour or percentage of assets under management basis. Each of those payment scenarios can make access to services available to those with greatly different levels of wealth.

What’s inaccurate about who wealth managers are and the services they provide?

Wealth managers often specialize in different aspects of wealth management. Some may focus on investments, some deal mainly with financial planning and others represent banks or brokerage firms. It’s important that those seeking these services determine what they require and find a person who can help. Generally, the scope of service should be clear from the outset. That clarity should be found in the contract that is signed at the start of the relationship.

Wealth managers should not make promises they can’t keep, so look for a proven track record of success. A good wealth manager will tell his or her clients that the process is the solution.

One thing to look out for is conflict of interest. Wealth managers who classify themselves as fiduciaries must work with their clients’ interests above their own, and recommend products and strategies in their clients’ best interests. Those who are not fiduciaries may recommend any product as long as it’s suitable. It’s a subtle distinction, but an important one.

What is a more accurate description of what wealth managers can do?

The description is based on one’s point of view. Generally, the phrase wealth management suggests a scope of services that’s relatively broad based and includes financial planning and investment management.

Financial planning is an activity that seeks to articulate one’s goals in a procedural way, and then determine a course of action to achieve them. Investment management happens once money has been accumulated — it’s what you do with the money to achieve the goal financial planning has defined.

When is a good time to begin working with a wealth manager?

One of the misconceptions is that wealth management starts when a person retires. If the whole process starts at retirement then it’s often too late for it to be most effective.

Wealth management can start very early in life and include decisions such as building a current income stream with jobs and education, providing insurance coverage, managing and reducing debt, and building an emergency fund.

For those who wonder about their financial future, the sooner they get connected, even in a temporary way, with someone who can give them financial advice without conflict the better.

When you retire, you don’t turn all your money into cash, spend it and die. Most people have a lot of living left once they stop working. There are wealth managers who provide services for those planning later in life, so there’s someone for everyone regardless of life stage. Bear in mind, however, that working within a wealth management process is like compound return: The outcomes improve with time.

Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.

How to start along the right track to retire with the lifestyle you expect

When it comes to saving  for retirement, people can be their own worst enemy. Worldwide, 82 percent of people worry about how they will fare financially during retirement, but they don’t adequately plan, spending more time planning vacations than preparing for retirement.

“Many employees aren’t putting any money in their 401(k), which is often matched. That’s low-hanging fruit that they aren’t taking advantage of,” says Ray Amelio, family assets development officer at Fragasso Financial Advisors.

Often, getting started is the hardest step because people don’t understand their current expenses and what they might need in the future.

“Usually when people join 401(k) plans and start to put money away, they see how it grows and it opens up their eyes,” he says.

Smart Business spoke with Amelio about saving early and often, while monitoring your current lifestyle and spending.

At what age should people start saving?

Form the habit of saving early in life, while in your 20s and 30s, because those extra years of compound interest pay handsomely later. And if you couple that with some sort of company retirement plan and Social Security, the whole equation can generate a nice retirement package.

The younger generation seems to be savvier about this as they’ve seen their parents struggle. However, as the economy improves, some people have started to save less again.

What are the first steps to calculating your retirement needs?

Set your goals. What do you want to accomplish? The answer might be different in your 20s and 30s than in your 40s and 50s, but establishing what your retirement will look like, when you’d like to retire and with what lifestyle is key. Even though it’s far in the future, it’s similar to when you graduated high school and thought about what you’d like to do. You really didn’t know, but you had to start putting a plan together.

As you move through your career, get married, have children, etc., you can adjust your plan as necessary. Ideally, you should review your monthly statements, talk to your financial planner quarterly and meet with him or her face-to-face at least annually.

At the same time, it’s important to honestly think about your lifestyle. Keep track of how much you’re spending on things like food and entertainment, while questioning your major purchases and ensuring you don’t use credit cards too much.

Does saving for retirement start to become habitual?

If you can instill in yourself that you should be thinking about it on an ongoing basis because it will impact your future, it does become somewhat of a habit — just like you go to the dentist twice a year, have an annual physical and get your car inspected. You just need to work it into your lifestyle and keep track of where you are as far as saving goes, how you’re tracking towards your retirement goals, etc.

When should you determine that you must save X amount each month to reach Y goal?

A financial adviser can work with you to help you plan at that level. Your retirement goals will help you determine the aggressiveness and allocations of your wealth portfolio.

As an employer, how can you encourage your people to start along this path?

Education is always important to help ensure people understand and are taking advantage of any match.

A group of people may say they cannot afford to take any money out of their paycheck. But that’s really another discussion — analyzing their current lifestyle to see where they can cut back a little to at least capture those match dollars.

Also, you can automatically enroll everyone in the 401(k) plan. Employees have the ability to opt out but most don’t. This has been generating more interest from organizations that want to help their employees start their nest eggs.

A study several years ago found that 50 percent of baby boomers didn’t have $50,000 saved for retirement. Even if you fear you may fall short, giving it your best shot is better than doing nothing.

Insights Wealth Management is brought to you by Fragasso Financial Advisors