Tag Archives: Personal Finance

Retirement, Stock Markets

Retirement: Key Traits of Successful Financial Advisors

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Retirement Planning: Key Traits of Successful Financial Advisors

For many people, the active management of investment finances often becomes an overwhelming challenge.  Significant pitfalls can be encountered when mistakes are made, and this is the primary reason a financial advisor strives to provide the guidance that is needed to achieve long-term financial goals.  

The term financial advisor is generally used to describe someone that helps with investment management, taxes, retirement strategy, and general financial planning.  Of course, not all investment strategies are created equal, and there are many different types of financial professionals. Depending on the type of specialty that is needed, some financial professionals may not be sufficiently qualified to meet the requirements of every investment situation.

This is why it’s always a good idea conduct research beforehand so that it is possible to learn about what’s available and decide on the type of financial advisor that will be best-suited to deliver favorable results. Under ideal scenarios, investment advisors can help navigate the treacherous waters of economics and money management to offer support on the journey toward achieving financial freedom during the later stages of life.

What exactly is a financial advisor?

First and foremost, a financial advisor works as a coaching mentor to help explain when it’s best to make certain financial decisions.  Most are experienced in analyzing what’s happening in the financial markets and translating that information into actionable strategies which positively impact individual financial circumstances.  Some financial advisors will have more expertise in one area rather than another, so it’s critical to assess individual needs first and then pair those requirements with an advisor’s strengths and abilities.  

For example, one advisor may specialize in stock recommendations while others might create an entire financial plan that includes estate recommendations, tax strategies, and insurance planning.  This is why financial advisors are often separated into two different categories: investment advisors and financial planners.

We sat down with financial advisor coach Stan Mann to ask questions and learn about which strategies tend to work best for high net worth clients.  

What are three important traits seen in successful financial advisors?

Stan Mann: From a marketing standpoint, three characteristics of successful financial advisors are:

1. They understand that effective marketing is crucial for their success. A financial advisor who is a competent marketer will be much more successful than an excellent financial advisor who is not a good marketer.

2. Successful financial advisors implement their knowledge. They go out in the field and put it into action. Knowledge is not power. Knowledge is potential power.

3. They have a marketing plan that they follow step-by-step. It is based upon the fundamentals of marketing: strategies and tactics. They adopt specific strategies and implement tactics to achieve their goals.

For instance, a webinar strategy would include tactics like:

  • Writing a direct mail letter or email inviting prospects to a presentation
  • Making a website to maximize conversions
  • Creating a powerful presentation that employs powerful video marketing techniques
  • May decide to place an ad in their local paper

What challenges do financial advisors face in this year’s market environment?

Stan Mann: One big challenge financial advisors face in this year’s market environment is the flood of marketing messages. This makes it very difficult for an individual financial advisor to be heard. Therefore, a financial advisor needs to be unique and different from its competitors, so he stands out from the crowd. Another challenge is that people want to work with specialists, so advisors need to specialize in solving a particular problem for a specific group of people. They need to choose a niche.

What is one easy step financial advisors can take to attract more clients?

Stan Mann: Create a headline for your business that concisely tells who you help and how they benefit from your services. Some examples are: Helping families and business owners develop a sound financial strategy; Agent with New York Life offering personal and retirement protection; I help Ford Motor Company executives make the best use of the retirement options.

Is there anything else struggling financial advisors should know to achieve better success rates?

Stan Mann: Marketing alone will not sell big-ticket items that are provided by financial advisors. The goal of marketing is to get a sales interview. At that point, the advisor takes over and needs to convert the prospect and eventually enroll them in all their financial planning services, from investment management to estate planning.

Role of Financial planners

Financial planners tend to offer broader specialties, which can vary widely in scope.  Some financial planners are able to create personalized financial plans for clients that cover everything from investments to household budgeting and estate planning.  

As a result, these services are typically more comprehensive in nature. But they can also vary widely from one financial planner to another. Other financial planners may only be able to offer a limited number of services, so it is important to be clear availability before entering into contractual agreements.

One formal distinction many find preferable is the Certified Financial Planner (CFP) designation, which requires a bachelor’s degree (or higher) from an accredited college, extensive coursework confirmed through a board-registered educational program and successful completion of the CFP certification exam.  CFP certification status can also be verified through the Certified Financial Planner Board of Standards.

Role of Investment advisers

In contrast, an investment advisor tends to be more specialized in terms of the advice and services that are made available.  Investment advisors help clients to understand the true value of securities and construct strategies for developing an asset portfolio.  Investment advisors can be a firm or an individual person, and they typically analyze the value of stocks, bonds, mutual funds, and other market instruments.  

A good investment advisor can assess a client’s financial goals and give recommendations to buy, sell or hold certain assets depending on current market conditions.  Some individual investment advisors hold certification as a Chartered Financial Analyst (CFA), which is a highly regarded classification in the field of economics.

When is financial advice needed?

Over the course of a person’s lifetime, financial goals will often evolve and change in ways that can be unpredictable.  Events like a death in the family or major career change can negatively influence personal finances.

When big changes occur, it can be helpful to get an expert’s perspective and to get a second opinion before making any important financial decisions. Here are some examples of life situations which could benefit from expert advice from a finance professional:

1. Starting financial planning in early career

In the early years, it might feel as though the future is infinite and that there is no rush to begin financial planning.  But the reality is that it is never to early to start building a financial strategy for the road ahead, and a financial advisor might be able to help avoid many of the pitfalls and mistakes commonly encountered by newbies.  

Creating a personal budget, securing a mortgage, or preparing an investment portfolio can all be made easier with the help of a seasoned professional.

2. Getting married

Properly dealing with touchy money issues could turn out to make all the difference when developing the financial future with a new spouse.  New household unions can create a completely different set of financial challenges, and it is always a good idea to gain advice from people that have encountered those challenges themselves.

3. Entering middle age

Entering the period of middle-age can present its own set of challenges, and these are the years many people must pay college tuition for their children.  In addition to this, the period of middle-age is also when many people begin to look at new savings strategies for the retirement years.

4. Preparing for retirement

Reaching the pre-retirement years can be a transformational period in a person’s life.  Most people don’t know how much money will be needed in order to achieve security after a career is finished.  These are critical questions which can have dramatic ramifications if things are not planned correctly, and a financial adviser can help make preparations to achieve security in the years that follow.

5. Planning for later years

Once a person finishes a working career, it is time to start asking some critical questions.  Will it be possible to continue living comfortably on savings? Are potential health expenses adequately covered?  Will children, family, and loved ones be secure in the event of an untimely passing? Checking in with a financial can help with the answers to these questions and keep things on track for a secure future.  Retirement comes with its own unique set of “what-ifs” but proper financial planning can help to reduce the number of potential uncertainties.

The Bottom Line

No matter what stage of life a person has reached, a little support and guidance can always be valuable and there are many options available when it comes to selecting a financial advisor.   Financial experts are able to assess complex economic situations and devise strategies to benefit from the natural ebb and flow of the market.

Partnering with an investment expert can provide the guidance needed to avoid the stress and uncertainties that are often encountered in various stages in life, and the best financial advisors are able to offer hands-on support and individually tailored strategies to help achieve a strong financial future.  

For this article, we interviewed Stan Mann, Financial Advisor Coach and Founder of StanMann.com.

Retirement, Stock Markets

Financial Planning: Choosing Between Stocks or Bonds for Your Retirement Account

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Financial Planning: Choosing Between Stocks or Bonds for Your Retirement Account

“Behold the turtle. He makes progress only when he sticks his neck out.” — James Bryant Conant

If you are planning for retirement, you have probably felt the pressures involved when looking at all of the different places to park your money.  The financial landscape can be a complicated place, and the task of choosing between asset classes can seem daunting during the early stages of the process.  Two of the most popular asset classes are stocks and bonds, and many newer investors often wonder which is best for a long-term retirement portfolio.

In any retirement portfolio, investors must understand the concept of market risk as it relates to their positions.  This essentially refers to the possibility of losses relative to the potential for reward (gains) in the investment. These factors work hand-in-hand, but a seasoned financial advisor can help understand the nuances which are present when planning for retirement.  We sat down with Adam Anderson, CEO of MRA Capital Partners to identify new strategies to turn the odds into our favor on the path toward building wealth. Below, we can find some tips we uncovered along the way.

Measuring Potential Returns

As a general rule, greater potential for gain tends to be associated with larger levels of risk.  These factors can be understood when comparing the historical returns generated by investments in both stocks and bonds.  When a retirement portfolio is designed by an industry expert and assets are properly allocated, risk is generally a short-term phenomenon.  The potential for returns differs when we are comparing the advantages of stocks and bonds, and the appropriate selections for your retirement portfolio will depend heavily on your individual goals and needs.

Over the last century, U.S. Treasury Bills have acted as a proxy for money market accounts (generating yields of roughly 3.7% annually).  Longer-term government bonds returns about 5.7% over the same period. Put in simple terms, if you invested $1 in long-term bonds in 1926 your investment would be worth about $100 in 2008.  Stock investments, on the other hand, would have produced very different results (generating annual returns of 9.6% during these same periods). In this case, a $1 investment in large-cap stocks in 1926 would be worth about $2,000 just prior to the financial turmoil of 2008.

Stocks and Bonds

In the chart above, we can see the more recent trends in stock markets as they relate to the bond markets.  Interestingly, there are some cases where the traditional correlations to not match the current tendencies. These asset classes have had periods characterized by similar returns (both small and large).  This is precisely why retirement investors will consult an experienced financial advisor, so that it is easier to spot the differences in any given market climate. 

“As a CFP and Financial Planner, I’ve practiced the principles of asset allocation and diversification through both bull and bear market cycles as well as expansion, contraction, and recessionary economic climates.  Diversification between asset classes is paramount to a successful investment strategy,” Mr. Anderson explained. 

“At the most broad level, the mix between stocks and bonds is most commonly debated especially among retail investors and their advisors.  In my opinion, the most heavily overlooked asset class for individual investors are alternatives.  Alternatives can be commodities, futures, real estate, private equity, art and other non stock or bond investments. Alternatives should make up between 10%-20% of a well diversified portfolio for the average investor but is much higher for some institutional investors, endowments, pensions and high net worth individuals. While I don’t personally endorse this, some even choose to invest only in non market based alternatives ignoring stocks and bonds completely,” Mr. Anderson explained.   

“The benefit to alternatives is that when managed correctly, they should be non-correlated to stocks or bonds. Private equity and Real Estate tend to do a very good job at this. The challenge is finding the right managers and strategies that fit the investors goals and comfort level. Another challenge is investment minimums are generally very high and transparency is generally low when investing directly in real estate for example,” Mr. Anderson explained. 

MRA Capital Partners seeks to remove these barriers by offering limited partnership interests in a variety of single asset real estate investments as well as its Lighthouse Fund which is a diversified pool of high yield asset backed loans.  The individual accredited investor can access these private non-correlated investments for as little as $50,000 and has full transparency via our secure investor portal at www.mracapitalpartners.com.

Limiting Risk in Retirement Portfolios

More broadly, stock markets have generated much higher average returns, and this is why retirement portfolios tend to be more heavily-centered in these areas.  Of course, this added potential for return comes with added risk for the investment. But since the stock market tends to post positive results during the vast majority of market scenarios, any losses tend to be removed over time.

These are all risks which must be understood but when we have a well-constructed investment portfolio it becomes possible to turn the odds in our favor.  Markets will always experience -boom-and-bust type periods in the broader economic cycle. But when a retirement portfolio is well-constructed and diversified, these risks can be mitigated and substantially reduced.  Stock markets move higher during the vast majority of the time, and this is why buy-and-hold strategies tend to work best in generating returns and investment income.

“Heading into 2019, it’s no secret we are in the later stages of the current economic expansion and the federal reserve has made it very clear they plan to continue on their current path of raising rates.  This along with the uncertainty surrounding the current political and trade headline risk is likely to continue to cause volatility in the stock and bond markets,” Mr. Anderson explained. 

“If rates rise more rapidly than anticipated, bonds may prove to be less of a safe haven or diversifier than investors expected.  Additionally, as the world economy continues to become more integrated, many of the more liquid asset classes like stocks, bonds, REITS, and even liquid alternatives like those access via ETFS or Mutual Fund may prove to be more correlated to each other then they have been in the past. In my opinion, carefully selected privately held investments are the best way to gain non-correlated exposure,” Mr. Anderson explained. 

Understanding Time Horizons

Time is another important factor in any investment.  Will you be retiring 10 years from now? Twenty years?  Maybe much sooner? It is never too late to start planning your retirement portfolio.  But the time you have until you stop working your regular job can be an important factor in determining which types of assets to include in your investment portfolio.  If you have an extend time period before your retirement, there is often better opportunity for capital growth through stock investments. Conversely, if you are looking for short-term stability and income, bonds may offer advantages given your individual needs.

“There are risks associated with all investments.  At MRA Capital Partners, we focus on privately held investments back by the hard asset of real estate.  While these types of private equity and debt investments are not immune recessions, rising rates and other market forces, they very rarely behave like traditional stocks or bonds which may be a great complement to a balanced portfolio. Additionally, investments offered by MRA Capital Partners have a strong income component, many distributing 10% or more annually which make them a great complement or even alternative to bonds,” Mr. Anderson explained. 

Of course, these are all factors which should be discussed with your investment advisor, and the answers will differ depending on your individual needs and goals.  There is no substitute for individual attention and it must always be understood that “patience pays” in any financial markets investment.  As the sage wisdom of James Bryant Conant tells us “Behold the turtle. He makes progress only when he sticks his neck out.” This suggests a certain level of risk can be taken, as long as those risks are measured and characterized by patience that is well-researched in the current market environment.

For this article, we interviewed Adam Anderson, CFP®, CRPC® CEO – Managing Partner of MRA Capital Partners.