As we all live longer, we need to rethink our approach to retirement planning

Long-term medical costs can be a scary thing to think about as you get older, so many people simply cross their fingers and hope they won’t have to deal with it. This can be a costly mistake both for you and your family if you encounter serious health problems in retirement, says Daniel B. Cotter, a Financial Consultant for Investment/Insurance Strategies at AXA Advisors, LLC.

“Most people say it won’t happen to me,” Cotter says. “But 72 percent of all individuals turning 65 will need some form of long-term care during their lifetime, according to the U.S. Department of Health and Human Services report, ‘Medicare & You 2015.’ It’s a reality. People think that Medicare and Medicaid will have them covered. It won’t.”

The national average for a one-year stay in a nursing home is $97,000, according to Lincoln Financial Group’s Cost of Care Survey, says Cotter. Very few people have the wherewithal to manage such an expense.

So what’s the answer?

“It’s important to save money, but we also need to face up to the fact that we’re going to live longer,” Cotter says. “You need to plan a stream of income that you can count on, no matter how long you live.”

Smart Business spoke with Cotter about steps you can take to reduce the risk of running out of money in retirement.

What are the risks everyone faces in retirement?

The No. 1 risk is longevity. The way these situations evolve is people get to a point where they need care and they believe that their investments and savings will be able to cover the costs. The problem is that this care could go on for several years and the expenses can spiral out of control. The prospect of long-term care is a difficult conversation to have and even people with a high net-worth worry about their spouse or the cost of nursing homes.

Other risks are inflation, the potential volatility of your retirement plan and the withdrawal rate of your money or securities. Again, how will what you have today look in five, 10 or 15 years?

When you don’t account for these factors in your retirement planning, it can lead to big problems.

What can you do to reduce your risk of running out of money in retirement?

The following are the most important steps you can take to protect your future:

  • Have a plan — Develop a financial plan that is tailored to the realities of what you want to do in retirement. What are your hobbies? Where do you plan to go on vacation? What is your base income and your income from Social Security? Work with a trusted financial adviser to craft a plan that works for you.
  • Understand how to maximize Social Security benefits — Talk to an experienced professional to understand the difference between taking Social Security at 62, 66 or waiting until 70. What is your break point? This is extremely important, especially with surviving spouse benefits.
  • Calculate inflation into your plan — This is probably the most important. If inflation averages 3 percent and you need $10,000 a month to survive, that amount will double at some time in the future. Your savings plan needs to account for inflation as you determine how much you’ll need.
  • Identify a source of guaranteed retirement income — The foundation of all retirement security and the elimination of emotion is securing some form of guaranteed retirement income. One strategy you can use is to use your life insurance to transfer wealth and take care of any shortfall that may occur. If you have a pension, that’s a tremendous advantage since most companies are moving away from pensions. You need a source of guaranteed income to account for unexpected costs. These sources can be derived from Social Security, pensions and annuities. All guarantees that come with an annuity are based upon the claims paying ability of the issuing company.
  • Plan for long-term care costs — It’s a gray area since no one knows what the future will hold. Develop a plan and then be prepared to adjust as needed.

Securities offered through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC.  Annuity and insurance products offered through AXA Network, LLC. AGE 123651 (2/17)(Exp 2/19)

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

Take steps to be a more responsible retirement plan sponsor

Companies that offer employees a 401(k) retirement plan need to recognize their responsibility as a fiduciary of the plan and take steps to help meet that obligation, says Joseph C. Granzier, AIF, a Financial Consultant at AXA Advisors, LLC.

“You need to work with an experienced financial professional with a focus on retirement plans who can guide you in the construction, management and monitoring of the plan platform,” Granzier says. “It is imperative that you create an investment committee to conduct this management/monitoring process. You must have an understanding of the needs and goals of the company, management and the participants in relation to the goals of your company’s retirement plan.”

While larger companies typically have an investment committee to manage this process, smaller businesses sometimes view their role as a retirement plan sponsor as a nuisance.

“It can be complicated; it’s heavily regulated and it’s getting more regulated every day,” Granzier says. “It’s virtually impossible to stay on top of it if you’re not in the industry. If you’re a small company of 50 to 100 employees and you’re running your own plan without any guidance from a group of professionals, you’re going to have a difficult time keeping in line with government rules and regulations.”

Smart Business spoke with Granzier about what a professional can do to guide you through your duties as a retirement plan sponsor.

What’s the best way to assess your performance as a retirement plan sponsor?

You can begin by gathering feedback from plan participants. Get a sense for their level of satisfaction with the plan in terms of what’s working and where improvements could be made. If participants don’t understand or appreciate the plan you are providing, it’s not doing anyone any good.

A successful retirement plan can be a useful recruiting tool for potential employees. But you need to understand what participants are seeking within the plan platform in the way of options or provisions such as a Roth 401(k). You are taking on the responsibility of providing a mechanism that your employees can use to help them grow their retirement portfolio that will serve them well and help to provide for their life needs within their retirement. The benefit to your business is that a happy, positive plan participant is more likely to be a strong and loyal employee.

How can a group of professionals help you be a better sponsor?

When you take the time to work with a professional, he or she can help you develop a platform that participants both understand and appreciate. You should work with a team that is not only knowledgeable, but understands and is engrossed in the retirement plan industry. Put them in contact with your company’s financial team so that they can work together to construct an effective plan management process.

As the plan sponsor, you should have a process in place to monitor the platform and manage the documentation of this process. Documentation is beyond critical. You need to be able to demonstrate that you are fulfilling your duties as a fiduciary and a plan sponsor.

As part of these duties, you need to be transparent about the fees that are part of the plan so that participants have an accurate understanding of how their plan functions.

What can you do to encourage retirement plan participation?

If you place a priority on the interests of your employees, you’re going to put together a solid plan. If your cash flow and profitability warrants it, you can implement a company match that encourages employees to participate in the plan and can serve as a tool to attract and retain employees.

The degree to which you promote these points of encouragement and talk about the importance of saving for retirement is up to each individual employer.

Joseph C. Granzier 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 annuity and insurance products through AXA Network, LLC. AXA Advisors and AXA Network do not provide tax or legal advice, and will not assume fiduciary responsibility, or protection from any action, for your plan. AGE 121568 (12/16)(Exp 12/18)

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

Take steps to be a more responsible retirement plan sponsor

Companies that offer employees a 401(k) retirement plan need to recognize their responsibility as a fiduciary of the plan and take steps to help meet that obligation, says Joseph C. Granzier, AIF, a Financial Consultant at AXA Advisors, LLC.

“You need to work with an experienced financial professional with a focus on retirement plans who can guide you in the construction, management and monitoring of the plan platform,” Granzier says. “It is imperative that you create an investment committee to conduct this management/monitoring process. You must have an understanding of the needs and goals of the company, management and the participants in relation to the goals of your company’s retirement plan.”

While larger companies typically have an investment committee to manage this process, smaller businesses sometimes view their role as a retirement plan sponsor as a nuisance.

“It can be complicated; it’s heavily regulated and it’s getting more regulated every day,” Granzier says. “It’s virtually impossible to stay on top of it if you’re not in the industry. If you’re a small company of 50 to 100 employees and you’re running your own plan without any guidance from a group of professionals, you’re going to have a difficult time keeping in line with government rules and regulations.”

Smart Business spoke with Granzier about what a professional can do to guide you through your duties as a retirement plan sponsor.

What’s the best way to assess your performance as a retirement plan sponsor?

You can begin by gathering feedback from plan participants. Get a sense for their level of satisfaction with the plan in terms of what’s working and where improvements could be made. If participants don’t understand or appreciate the plan you are providing, it’s not doing anyone any good.

A successful retirement plan can be a useful recruiting tool for potential employees. But you need to understand what participants are seeking within the plan platform in the way of options or provisions such as a Roth 401(k). You are taking on the responsibility of providing a mechanism that your employees can use to help them grow their retirement portfolio that will serve them well and help to provide for their life needs within their retirement. The benefit to your business is that a happy, positive plan participant is more likely to be a strong and loyal employee.

How can a group of professionals help you be a better sponsor?

When you take the time to work with a professional, he or she can help you develop a platform that participants both understand and appreciate. You should work with a team that is not only knowledgeable, but understands and is engrossed in the retirement plan industry. Put them in contact with your company’s financial team so that they can work together to construct an effective plan management process.

As the plan sponsor, you should have a process in place to monitor the platform and manage the documentation of this process. Documentation is beyond critical. You need to be able to demonstrate that you are fulfilling your duties as a fiduciary and a plan sponsor.

As part of these duties, you need to be transparent about the fees that are part of the plan so that participants have an accurate understanding of how their plan functions.

What can you do to encourage retirement plan participation?

If you place a priority on the interests of your employees, you’re going to put together a solid plan. If your cash flow and profitability warrants it, you can implement a company match that encourages employees to participate in the plan and can serve as a tool to attract and retain employees.

The degree to which you promote these points of encouragement and talk about the importance of saving for retirement is up to each individual employer.

Joseph C. Granzier 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 annuity and insurance products through AXA Network, LLC. AXA Advisors and AXA Network do not provide tax or legal advice, and will not assume fiduciary responsibility, or protection from any action, for your plan. AGE 121568 (12/16)(Exp 12/18)

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

Both parties need to be upfront when it comes to financial strategies

Expectations need to be set on both sides when you enter into a relationship with a financial professional, says Brad A. Dickman, CFP®, ChFC, Managing Partner at Stonebridge Wealth Strategies.

“As your financial professional, I might think I’m doing a great job by meeting with you two times a year,” Dickman says. “But in your mind, I should be reviewing your plan four times a year. You believe I’m falling short and are therefore disappointed in the level of service I’m providing. If I don’t know that, I can’t fix it and you’ll continue to be frustrated. This is why it’s so important to have consistent communication and to take steps to ensure that you and your professional are on the same page.”

Wealth management and retirement planning is a fluid process that requires regular monitoring to account for changes in your life, your job or your family. When you build a strong, trusting relationship with your financial professional, it becomes that much easier to keep up with these changes and account for them in your planning process.

Smart Business spoke with Dickman about keys to building a better relationship with your financial professional.

How do you know if a financial professional is right for your needs?

Find someone you like and trust who you can build a rapport with. Knowledge is also key. This person should be working on continuous education and taking steps to stay current with investment regulations. You want someone familiar with your investment strategy who can offer sound advice on the best way to help maximize the return on your investments.

What can you do to make it easier for your advisor to help you?

People will often enter into a new relationship with a financial professional in a very guarded state. It might be out of concern that this person is going to try to sell you something.

But most advisors and financial professionals are not in the business of trying to sell you a product or service. Their primary goal is to offer advice that fits your specific circumstance and then help you craft a strategy that meets your needs.

Be open about your current status, both the good and the bad. If you just got a great return on an investment or some other income boost, you obviously want to share that with your advisor. At the same time, if you have $50,000 in credit card debt, you’ll want to share that too. Otherwise, it’s going to be extremely difficult to build a strategy that enables you to meet your goals.

What if you have concerns about your advisor?

Own your situation. You may make a personal connection with your advisor, but at the end of the day, it’s a business relationship. You owe it to yourself to address and resolve any concerns that might be hurting your financial strategy. Often, problems start with a small misunderstanding. It’s something that either wasn’t understood in the beginning or something you forgot to ask about before preceding to the next step.

If you can stop a problem early, it becomes a small bump in the road and you continue forward. But if you let it fester because you don’t want to rock the boat, it can create bigger problems that could leave you in a tough spot.

If you believe it’s time to make a change, request an apples-to-apples comparison with another advisor who can look at your plan and identify any holes that might exist. Talk about the pros and cons of your current account versus what the new advisor can to offer. The key to success with any advisor, new or existing, is communication.

Financial Professionals of Stonebridge Wealth Strategies are registered representatives who offer securities products through AXA Advisors, LLC, a registered broker-dealer and member FINRA/SIPC, investment advisor representatives who offer financial planning and investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC. Annuity and insurance products offered through AXA Network, LLC. AXA Network conducts business in CA as AXA Network Insurance Agency of California, LLC, in UT as AXA Network Insurance Agency of Utah, LLC, in PR as AXA Network of Puerto Rico, Inc. Stonebridge Wealth Strategies is not a registered investment advisor and is not owned or operated by AXA Advisors or AXA Network. AGE 120531 (11/16)(Exp 10/18).

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

How to structure your company retirement plan for long-term success

Your small or midsized business is unique, with unique challenges and needs. So why would you incorporate an “off-the-shelf” or “401(k) in a box” retirement plan, and expect to get results?

If your retirement plan is structured right, you can use it to attract and retain top talent, maximize owner and key employee benefits, increase employees’ financial wellness and/or help employees save and invest wisely in order to have a timely, dignified retirement.

“But the majority of employers continue to work with a friend, colleague, the adviser who manages their individual assets or someone at a 1-800 number who works for a plan provider,” says Robert Yelenovsky, vice president and manager at Fragasso Financial Advisors.

Smart Business spoke with Yelenovsky about setting up a retirement program that contributes to a business’s long-term success.

Where do organizations make mistakes with their retirement plans?

They don’t work with a financial adviser or consultant with enough experience — someone held to a fiduciary standard with independence from service provider bias. Find an adviser whose exclusive or primary business model is focused on retirement plan services. If the adviser has two to three plan clients or cannot be held as a fiduciary to the plan, continue your search.

With new Department of Labor fiduciary rules and regulations, starting in April, some advisers who don’t focus in the retirement space will begin to defer or partner with those who do. This will benefit the adviser, employer and ultimately employees.

What structures are available?

There are many different ways to structure a retirement program. Employers can have the traditional qualified defined contribution plan, like a Simple IRA or 401(k). They can also add a non-qualified deferred compensation plan for select key employees, a defined benefit or cash balance plan, or even an Employee Stock Ownership Plan or ESOP. Which plan(s) they choose to offer will be determined by factors like corporate structure, number of employees and highly compensated employees, profitability, growth and owner exit plans, to name a few.

How much does flexibility matter?

Flexibility matters for most plan design strategies and needs to be discussed prior to making the final recommendations. You want consistency and a pattern of improved benefits to employees; you don’t want to offer a benefit, to later reduce or take it away.

Is it ever too late to change the structure? How can employers discover whether a change is worth it?

It’s never too late to change the structure or design, although specific times of the year may have regulatory constraints that cause the implementation to be pushed to the next year. The only way to determine the impact is to perform a cost benefit analysis and review multiple scenarios. These aren’t difficult and typically there is no cost to do them. However, you’ll need competent guidance to assist with and coordinate the many service providers needed to achieve the proper results.

What can be added as the company grows?

All plan options mentioned previously can be added, changed or terminated, based on the current or future needs of the organization, ownership and workforce demographic. Plan design should be evaluated annually, and a cost benefit analysis performed periodically — every four to five years according to best practices.

What else would you like to share?

Most small to midsized plans aren’t thoroughly vetted against the organization’s goals, challenges, strategic initiatives, profitability and employee demographics. The majority of advisers who are paid by the plans typically aren’t focusing on the retirement plan space, aren’t held as fiduciaries to the plan, and therefore don’t have the experience to understand how to use retirement plan strategies to contribute to the long-term success of the organization.

Ask yourself whether or not you can receive unbiased advice from a provider who has everything to lose if you want or need services they do not offer. Employers should interview and hire experienced advisers who are capable of helping them achieve their goals, are held as fiduciaries and provide independent and unbiased advice.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

A diversified approach to investing can safeguard your retirement plans

Financial investment is a risk that offers no guarantee of success. Even the most experienced financial professionals miss from time to time and are forced to adjust their thinking in response to an unexpected development in the stock or bond markets, says Adam R. Lulow, a Retirement Benefits Specialist at The DMG Group.

“The truth is we don’t know what’s going to happen,” Lulow says. “We can make assumptions and we can put a plan in place, but the first thing we tell investors is that something is going to change with that plan.”

The fear of the unknown can drive some people to avoid making any investments, which can make it very difficult to accumulate enough money to fund your retirement.

“The most important thing is that you start saving,” Lulow says. “You can change your investments inside a plan. But if you don’t have enough money to retire, the only solution is to work longer.”

Smart Business spoke with Lulow about the importance of diversity when building out your retirement plans.

What are the most important things to keep in mind when trying to diversify your investment portfolio?

There are numerous risks and rewards when investing, and each asset class reacts to economic events differently. If you select from multiple asset classes, you can help minimize the risk and the volatility in your portfolio. If you own a stock, it is usually going to come with a much greater risk than a bond portfolio. But as the company does better, your stock price rises and you have a greater return on your investment.

Conversely, a bond is going to have lower downside risk, but also a lower growth ceiling. The reward of a bond is usually going to be much lower than the reward of a stock.

Ideally, you want a mix of both types of investments to spread out your risk and keep adding to your retirement savings. Early on, you can be more aggressive and look at stocks that offer the potential of a higher return. The risk is greater, but you have more time to make up any losses. As you get closer to retirement, bonds become more attractive since they are less prone to those steep declines.

Why is rebalancing your portfolio so important?

If you have a portfolio that is 60 percent stocks and 40 percent bonds and the market is going down, you may feel pressure to sell. What you should be doing is taking some of your cash or some of those bonds and buying the market while it’s down. The opposite is also true. As the market goes up, you may think now is the time to buy, when most likely, you’ve already missed the ideal time to buy. That is why being disciplined about rebalancing your portfolio on a regular basis is so important. It gives you a more reliable and objective plan with which to build your wealth.

If the market is up and your portfolio is 65 percent stocks, 35 percent cash or bonds, you may want to rebalance back to that 60 percent stock/40 percent bond mix. You take that 5 percent of growth in the stocks and move it into the bond or cash equivalent to lock in the gain. On the other side, if the market takes a drop and you’re now 55 percent stocks/45 percent bonds, you may want to take that 5 percent of the bonds or cash equivalents and move it over to stocks or mutual funds and buy when the market is low to take advantage of the potential market rebound.

What are some tips for selecting the right stocks to make an investment?

There are large cap stocks, which are going to be your large, well-established blue chip companies in the United States, and then small and midsized companies. Those well-established companies could lead to more stability, while the small and mids take a little more risk. But it’s a good way to diversify. Everyone is going to be different, which is why it’s a good idea to contact a financial professional who can help you make a more informed decision.

Investments in stocks, bonds, mutual funds, and variable annuities are not FDIC-insured and are subject to fluctuation in value and market risk, including loss of principal. Adam R. Lulow is a registered representative who offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC, and an agent who offers the annuity and life insurance products of AXA Equitable Life Insurance Company (AXA Equitable) (NY, NY) and those of affiliated and unaffiliated carriers through AXA Network, LLC.  AXA Advisors, AXA Equitable and AXA Network are affiliated companies and do not provide tax or legal advice. The DMG Group is not owned or operated by AXA Advisors or its affiliates. AGE-118019 (8/16)(Exp. 8/18)

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

A diversified approach to investing can safeguard your retirement plans

Financial investment is a risk that offers no guarantee of success. Even the most experienced financial professionals miss from time to time and are forced to adjust their thinking in response to an unexpected development in the stock or bond markets, says Adam R. Lulow, a Retirement Benefits Specialist at The DMG Group.

“The truth is we don’t know what’s going to happen,” Lulow says. “We can make assumptions and we can put a plan in place, but the first thing we tell investors is that something is going to change with that plan.”

The fear of the unknown can drive some people to avoid making any investments, which can make it very difficult to accumulate enough money to fund your retirement.

“The most important thing is that you start saving,” Lulow says. “You can change your investments inside a plan. But if you don’t have enough money to retire, the only solution is to work longer.”

Smart Business spoke with Lulow about the importance of diversity when building out your retirement plans.

What are the most important things to keep in mind when trying to diversify your investment portfolio?

There are numerous risks and rewards when investing and each asset class reacts to economic events differently. If you select from multiple asset classes, you can help minimize the risk and the volatility in your portfolio. If you own a stock, it is usually going to come with a much greater risk than a bond portfolio. But as the company does better, your stock price rises and you have a greater return on your investment.

Conversely, a bond is going to have lower downside risk, but also a lower growth ceiling. The reward of a bond is usually going to be much lower than the reward of a stock.

Ideally, you want a mix of both types of investments to spread out your risk and keep adding to your retirement savings. Early on, you can be more aggressive and look at stocks that offer the potential of a higher return. The risk is greater, but you have more time to make up any losses. As you get closer to retirement, bonds become more attractive since they are less prone to those steep declines.

Why is rebalancing your portfolio so important?

If you have a portfolio that is 60 percent stocks and 40 percent bonds and the market is going down, you may feel pressure to sell. What you should be doing is taking some of your cash or some of those bonds and buying the market while it’s down. The opposite is also true. As the market goes up, you may think now is the time to buy when most likely, you’ve already missed the ideal time to buy. That is why being disciplined about rebalancing your portfolio on a regular basis is so important. It gives you a more reliable and objective plan with which to build your wealth.

If the market is up and your portfolio is 65 percent stocks, 35 percent cash or bonds, you may want to rebalance back to that 60 percent stock/40 percent bond mix. You take that 5 percent of growth in the stocks and move it into the bond or cash equivalent to lock in the gain. On the other side, if the market takes a drop and you’re now 55 percent stocks/45 percent bonds, you may want to take that 5 percent of the bonds or cash equivalents and move it over to stocks or mutual funds and buy when the market is low to take advantage of the potential market rebound.

What are some tips for selecting the right stocks to make an investment?

There are large cap stocks, which are going to be your large, well-established blue chip companies in the United States, and then small and midsized companies. Those well-established companies could lead to more stability, while the small and mids take a little more risk. But it’s a good way to diversify. Everyone is going to be different, which is why it’s a good idea to contact a financial professional who can help you make a more informed decision.

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

Investments in stocks, bonds, mutual funds, and variable annuities are not FDIC-insured and are subject to fluctuation in value and market risk, including loss of principal. Adam R. Lulow is a registered representative who offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC, and an agent who offers the annuity and life insurance products of AXA Equitable Life Insurance Company (AXA Equitable) (NY, NY) and those of affiliated and unaffiliated carriers through AXA Network, LLC.  AXA Advisors, AXA Equitable and AXA Network are affiliated companies and do not provide tax or legal advice. The DMG Group is not owned or operated by AXA Advisors or its affiliates. AGE-118019 (8/16)(Exp. 8/18)

How the DOL fiduciary rule transforms retirement management

This past spring, the Department of Labor (DOL) released a rule to address conflicts of interest when it comes to retirement advice, which will have far-reaching effects on the fiduciary landscape.

“It’s been in the works for years, and it wasn’t a surprise when it came out. The only surprise was that it was watered down, because there was a level of panic that was setting in over the past year. A lot of models haven’t adjusted,” says Daniel J. Dingus, president and executive director of portfolio management at Fragasso Financial Advisors.

Previously, advisers and brokers managed individual investor’s retirement accounts under different standards. Brokers followed a “suitability” standard for retirement accounts; they were required to offer a suitable product, not the best product.

Under the new rule, all money managers will be mandated to abide by a higher “fiduciary” standard, which means putting clients’ best interests before their own profits at all times. This attempts to keep brokers from steering investors to products where the broker receives a higher commission.

All fees, even commissions, will have to be disclosed, and a contract that states the adviser is acting in the client’s best interest will have to be submitted.

The rule is slated to go into effect April 10, 2017. There was an attempt to stop it, but Dingus believes it will go forward as planned.

Smart Business spoke with Dingus about the DOL fiduciary rule and the impact it will have on investors.

Do investors know the difference between a broker and an adviser?

The distinction has never been clear to the general public, which doesn’t really know who is what. It’s typically not based on credentials — but by how you act. However, investors are starting to ask about this, and as the rule gets closer to implementation it may open eyes even further.

Right now this only impacts retirement accounts, not personal accounts. The DOL was determined to rule on retirement accounts first, but at some point this may apply to all accounts.

How do you expect the fiduciary landscape to change?

Every day there are more advisers than brokers, and that trend will continue, as brokers go the way of the horse and buggy.

Firms that have always promoted brokerage products will have to learn what it takes to be a fiduciary. There’s a learning curve because they’ve never adhered to the true spirit of that standard — and been held liable to it. If you offer illiquid, proprietary or commission-based products and believe you’re acting in the client’s best interests, you will be hard pressed to prove that to a judge.

With firms taking on more risk — and they are definitely nervous about the legal consequences — there’s likely to be industry consolidation. That won’t just be with the brokers themselves but also with the providers. For example, Mass Mutual acquired part of MetLife earlier this year.

The rule will probably drive fees down a little bit, now that there’s a focus on fees, which is good for everybody. Because the brokerage world is going to be marginalized, mutual funds that have a litany of share classes will likely keep the cheaper ones, versus the more expensive ones.

What should investors be doing differently going forward?

You’ll need to ask yourself if you want to continue in a brokerage relationship, now that you understand the differences. However, for a minority of investors, brokerage products still make sense because of what’s available.

If investors aren’t being taken care of once the rule goes into effect, attorneys will certainly step in and educate people.

Business owners who sponsor retirement plans through their company also need to understand how the fiduciary responsibility works with their plan design, because, like individual investors, they typically don’t understand the difference between a broker and an adviser. If their provider or broker won’t take on the fiduciary responsibility, the trustee or board of directors is solely responsible. This is particularly important in the nonprofit sector, where they often spend their time on the foundation and endowment, ignoring the 401(k) plan.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

How to find the right mix of assets in your investment portfolio

Diversification in your investment strategy is all about managing risk, says Brandon Strong, Managing Partner at Stonebridge Wealth Strategies.

“When you’re building a portfolio, you need to understand how each investment fits in with your overall goal,” Strong says. “You need to understand the correlation of different asset classes and how they diversify a portfolio. Diversification is about managing risk. It’s not a strategy to make more money.”

The complexities of diversification can easily lead investors to have a false sense of security about their wealth building strategy. The long-term effect of this disconnect is it becomes more difficult to meet long-term goals such as putting your kids through college, planning your retirement and passing on your wealth to your heirs.

“You have to pay attention to what you own as an investment, why you own it and how it all fits together,” Strong says.

Smart Business spoke with Strong about the best approach to diversifying your investment portfolio.

How does the use of multiple asset classes help you diversify your investment portfolio?
An asset class in its simplest form could be equity, or any stock that you might own. It could be fixed income, which could refer to an entire bond market. From there, you can break those two categories down even further.

For stocks, you can look at it in terms of international versus U.S. asset classes and then small, medium and large companies that you’re investing in. Each one of those asset classes reacts in its own way to different economic data.

When you blend them into a portfolio, you are often helping to address your overall risk because you have assets that react differently to what is happening in the economy. On the bond side, you could break it down to U.S. government bonds, corporate bonds, municipal bonds, foreign government bonds and a variety of other categories beyond these segments.

What people often forget to add to their portfolio is investment in asset classes outside of these categories. Real estate and commodities are two segments not highly correlated to those asset classes that could bring down the overall movement or volatility of your portfolio. As an investor, you need to regularly balance the level of risk in your portfolio.

There’s a big difference between saving money and putting it into an investment account versus when you get to retirement and you now need to distribute money out of the account. Your strategy can be driven by two philosophies: What’s your risk tolerance? What level of risk do you need to achieve your goal?

Where do people get into trouble trying to achieve investment diversity?
You might hold one brokerage account with 15 different mutual funds, but each one of those funds is fairly similar. Even though you’re diversified in the number of mutual funds, they all basically do the same thing, so you’re not diversified within that asset.

Conversely, it’s typically unwise to use one mutual fund or one money manager to fit into every different asset class. Another risk would be to have your entire net worth and future income tied up with one particular source, such as your employer through stock ownership and a pension plan.

Diversification is not as much about the assets you own as it is about how those assets fit together to help you meet your long-term wealth building goals.

What’s the key to having a good investment strategy?
You always start with a financial plan and make sure you know where you need to be at the end of your goal.

Do your homework and understand where you are in relation to your goal before you make any changes. Talk to a financial professional who can help you understand next steps and determine how environmental changes could affect your asset allocation or diversification strategy. ●

Financial Professionals of Stonebridge Wealth Strategies are registered representatives who offer securities products through AXA Advisors, LLC, a registered broker-dealer and member FINRA/SIPC, investment advisor representatives who offer financial planning and investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC. Annuity and insurance products offered through AXA Network, LLC. AXA Network conducts business in CA as AXA Network Insurance Agency of California, LLC, in UT as AXA Network Insurance Agency of Utah, LLC, in PR as AXA Network of Puerto Rico, Inc. Asset allocation, diversification and rebalancing do not guarantee a profit or protection against loss. Asset Allocation is a method of diversification which positions assets among major investment categories. This tool may be used in an effort to manage risk and enhance returns. AGE- 116266(06/160(Ext.06/18)

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

A look at best practices for managing your company’s 401(k) plan

Companies that offer employees a 401(k) plan must recognize their responsibility to act in the best interests of those employees, says David C. Barth, AIF, a financial consultant at AXA Advisors, LLC.

“Regulators such as the IRS and the Department of Labor are not as concerned about whether you made a perfectly timed investment decision or have the absolute lowest cost plan for your employees,” Barth says. “It’s more about having a process that confirms you are satisfying your fiduciary duties, acting on behalf of your plan participants, and offering a menu of prudent investment choices at a cost that is reasonable for the services you’re receiving. Is there documentation that offers evidence that it’s not just a roll out the plan and forget it type of mentality?”

The challenge for many businesses, especially the smaller ones, is finding time to address these important fiduciary duties. Fortunately, there are professionals with experience with retirement plans who can provide support.

“You need a process in place to manage your plan and if you don’t have one, you should reach out to a qualified professional and figure out the steps to help ensure you’re doing the appropriate due diligence,” Barth says.

Smart Business spoke with Barth about best practices when it comes to managing your company’s 401(k) plan.

What is a fiduciary best practices approach?

The biggest part of this approach is forming a committee with multiple people inside the company who work with your 401(k) plan and make decisions that pertain to it. Typically, you’ll have the owner or president, a financial person such as the CFO, an HR representative and in some cases, a member who represents the rank-and-file employees to represent the other side of the organization. Consider hiring an outside advisor with fiduciary credentials who can help you through the process of forming the committee and managing your duties. Then it’s a matter of ensuring that the committee meets on a regular basis and documenting what is discussed at those meetings. Create and follow an investment policy statement that guides your company’s investment decisions. The goal is to create structure, regular dialogue and documentation around your 401(k) plan.

How does this process serve the best interests of individual 401(k) plan participants?

The committee needs to realize that it is making decisions on behalf of the masses and not on an individual basis. The goal is to structure an investment menu that provides aggressive investment options for the participant who wants to be more aggressive along with more conservative options for the conservative investor, as well as a vehicle to assist participants in making choices that are appropriate. It’s giving the participant population the ability to have quality choices in different categories so they can structure their plan to meet their own unique needs. Employers typically want to do right by their employees. But if they are lacking the right guidance from an outside fiduciary consultant, it may not be happening simply because they don’t know what they don’t know. If you develop and follow a process to review and monitor funds that is guided by a professional, you’ll have a diverse investment menu. You’ll have a mechanism in place to swap out an underperforming fund and possess the data you need to negotiate fee reductions from your service providers when appropriate, thereby reducing the fees for your participants.

How can you evaluate your plan advisor?

Work with somebody who spends a lot of time in the qualified plan world. If they are experienced specifically in retirement plans and fiduciary needs, that’s important. Make sure there is a through and regular review to evaluate the advisor team, what they do and who they service. Ideally, your advisor will help you work with your plan provider to better understand your participant demographics and target investment education in a way that enables your people to maximize the value of their investments, and, ultimately their retirement readiness.

This article is for informational purposes only and is not intended as legal or tax advice. David Barth 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.  AGE 115601 (6/16)(Exp 6/18).

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