Finding Results and Reassurance: The Importance of Hiring a Wealth Advisor | Debra Brede

Finding Results and Reassurance: The Importance of Hiring a Wealth Advisor

Those who know me are familiar with my bottom-line orientation. I always aim to cut to the chase and get to the heart of any issue at hand. As a wealth advisor and financial planner, my lone priority is to get you the best risk/reward ratio on your investments. That’s how I determine my success, and it’s the standard by which I expect clients to evaluate my work as well.

While it may sound simple and straightforward, there’s a lot that goes into achieving that lone priority. For one, my ability to do that is directly proportional to my knowledge of a client’s circumstances and goals. To gauge them, I ask clients to define peace of mind for themselves and their families—their “Act Two,” if you will (for insight on what this process looks like, check out my post “Retirement: Defining Peace of Mind”).

This is an important step for both of us. Without a plan in place, even if they have enough funds to make it through comfortably, people find retirement unfulfilling. Those empty hours become empty weeks, months, and years. And all that unproductive time becomes depressing. By the same token, I can’t develop a custom-tailored plan to meet a client’s interests and needs if I don’t know what they are. The bottom line? You need a purpose in retirement, and you need to share it with others.

So, how do I—or any experienced, client-focused advisor—achieve purpose-driven retirement success for my clients? In addition to creating a strategy with their unique circumstances in mind, I also help mitigate some of the issues individual investors tend to run into due to human psychology and emotion.

For so many of us, fear rules the game. As a result, investors sell when an issue is falling (fear of further losses); buy when a stock is already near its peak (fear of missing out); or fail to think about how a particular product or investment might affect their retirement strategy or portfolio before purchasing it (fear of doing nothing). But those fear-based actions are antithetical to what I’ve learned over more than three decades as an advisor: nothing is more important than creating a strategically diversified portfolio.

How do you trump those overwhelming fear-based urges? Find the right advisor. He or she will manage your wealth based on three crucial pillars: real diversity of investments, a safety net of bonds and cash, and buying on weakness and selling on cash—all in service of your ultimate goals in retirement. These efforts are tricky to carry out for the average investor, but the modus operandi for an experienced professional, making choosing the right individual an invaluable investment. How will you know that you’ve found the right financial advisor? Ask them about their experience and strategy—and ask whether they have any questions for you. If they demonstrate interest and concern for your unique circumstances, and those three pillars are part of their plan, you’ve probably found a winner.

ETFs exchange-traded funds

Risky Business—Making the Most of Your Financial Investment

We all approach investing with the goal of growing our wealth. And we know that achieving that growth comes with risks. But there’s a difference between taking on a reasonable amount of risk and stepping into a bear trap because you failed to read or didn’t understand the fine print. To highlight the impact of misunderstanding the vehicles in which you invest, let’s take a look at one popular product: ETFs, or exchange-traded funds.

An exchange-traded fund (ETF) is a marketable security that tracks a stock index, bonds, or a set of assets. ETFs trade like a common stock on a stock exchange and experience price changes throughout the trading day as they are bought and sold.

And while computers and algorithms can accomplish some pretty amazing things, there are many ways in which they fall short—and dial up risk—when it comes to your hard-earned money. To see why, let’s dig a bit deeper into how ETFs work.

Most index-based ETFs are weighted by capitalizations, or the size of the companies in the index they mirror. Those companies with the largest market caps carry the heaviest weighting. As such, as those companies’ stock prices increase, their weighting within the index tracked by a particular ETF increases too. As a result, just a few companies can account for a large percentage of an index’s weighting (think Apple, Google, Facebook, and the like). That concentrated stock position exposes an investor to more risk. Why? Any bad news about one of those heavily weighted companies will also weigh heavily on that ETF’s earnings.

And because index ETFs are passively managed, those holdings only change as their capitalizations change—which requires a significant drop in a company’s revenues, and thus in stock price (and capitalizations), or bankruptcy. We can look to market crashes to see the potential damage of passive management; just think about the tech bubble correction of 2000, and the blows suffered by leading tech companies (which composed a large portion of the S&P 500)—and their investors. 

Meanwhile, active managers have a lot more control. They can choose to sell off a portion or all of a stock holding at any time, meaning an investor isn’t locked into a particular holding if things begin to sour—or if they seem too good to be true.

Of course, active managers aren’t infallible. We all make mistakes. But those with experience have a solid chance of growing wealth while minimizing risk. Ask yourself, “Is it time to invest in an expert?”

An exchange-traded fund (ETF) is similar to a mutual fund that tracks a specific stock or bond index, such as the Barclays Capital 1–3 Year Treasury Index. ETFs trade on one of the major stock markets and can be bought and sold throughout the trading day, like a stock, at the current market price. And, like stock investing, ETF investing involves principal risk—the chance that you won’t get all the money back that you originally invested—market risk, underlying securities risk, and secondary market price.

Are You Financially Fit For Retirement? Let’s Check | Debra Brede

Are You Financially Fit For Retirement? Let’s Check.

You may be wondering if you’re financially fit for retirement, especially given the current volatility in the markets—and the world at large. But regardless of what’s happening outside your door, you can take steps to help ensure your financial future remains safe and healthy.

First off, it’s key to remember that everything is temporary, especially when it comes to the markets. And that’s actually good news as long as you remain dispassionate—avoiding a knee-jerk reaction when things seem to be taking a turn for the worse. The reality is that most stock market declines have been intra-year. That means it’s very possible to ride out even the worst-seeming situations, particularly if you keep enough bonds and cash in your portfolio. With that in mind, you can be confident that there will be sunnier skies ahead, and that, in the meantime, if you have a diversity of assets in your portfolio, you’ll be able to weather the storm.

With that said, that diversification has to be strategic. It’s not enough to simply allocate your assets into different baskets. You also have to set things up in such a way that you can withdraw the funds you’ll need to actually enjoy your retirement without depleting the investment capital that produces future growth. That’s what’s called active management, and it’s a lot of work. But it’s the best way to have a tangible impact on your investment portfolio.

Up for the challenge? If it seems overwhelming and you’re not quite sure if you can handle it, you’re not alone. And it doesn’t mean you’re out of luck. Unlike cultivating your physical fitness—which requires you to put in work day after day (even if you have a trainer, he or she can’t do those push ups and crunches for you)—you can outsource your financial fitness, leaving it to a pro. He or she can avoid the pitfalls of passion and panic alike, and keep your funds in the best possible condition, given the circumstances.

Of course, you certainly have a role to play in determining your future, and one of the most important things you can do is consider what you want life in retirement to look like. Ask yourself about how you envision every aspect of your existence in retirement: where you want to live, the passions you want to pursue, the causes to which you want to dedicate your time, and what you want your legacy to be. If you’ve determined the answers to questions like these, set goals, and started building financial plans, you’re on the right track. And if you’ve just learned that you have some work to do, that’s okay too. Make the commitment to get started now, and just take it one day at a time. After all, this is a marathon, not a sprint.