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.

To Give or Not to Give: The Pros and Cons of Leaving an Inheritance

Successful retirement planning is as much about your goals for your golden years as it is about the legacy you want to leave behind.

I ask my clients a whole slew of questions as part of the retirement planning process, from how much money they believe they would need to feel financially secure, to what they would like to accomplish in retirement, and what they would do after their last working day if money were no object. Another crucial question: “Do you want to leave an inheritance?”

I get a broad range of answers to most questions I ask, and this one is no different. Some clients respond that they have already provided their children with so much—putting them through private school, a host of expensive extracurricular activities, and the best colleges. “I’ve already given them everything,” they say. “The rest is up to them.”

They are certainly not alone. Even Warren Buffett has said he is not leaving his kids jaw-dropping inheritances. Though I’m confident they’ll never be uncomfortable, he is insistent that they do something meaningful with their lives—on their own terms.

But leaving an inheritance doesn’t necessarily mean you’ll be encouraging your beneficiaries to live below their potential or to be irresponsible. Many people do it prudently, which, for many, is key—because they still have lives to live.

For most people, the amount they want to leave behind directly affects how much they can spend in retirement. For example, I have a retired client who is 50 years old, and takes 5 percent a year. She could live to 100 and be just fine. But if her goal were to leave each of her kids a half a million bucks, we’d be doing things very differently.

What if she wanted to leave her wealth to a cause she believed in, like a local animal shelter or a charity that provides families with clean water in developing countries? That plan would shift again, and we would address her spending with her legacy in mind.

When it comes to inheritance planning, there are so many things to consider, and my book, You’re Retired, Now What? can help you identify them, so that you can fulfill your goals in life—and beyond.

3D image of stock prices along the side of a building with the word 'Diversify' shown

The Value of Diversity

Diversity is crucial in so many aspects of life: things are often improved when variety comes into the picture—backgrounds, perspectives, opinions, even diets. The same is true for investments. And if you’ve talked to an advisor before, you’ve probably heard about the importance of diversifying your holdings. But what does that actually mean? 

Those focused on buying and selling stocks may say it’s about having both value stocks and growth stocks in your portfolio. They may also counsel you on the merits of diversifying across market sectors—tech, financial, energy stocks, and more. Bond marketers may recommend that you acquire a diversity of bond types: government, corporate, mortgage-backed, and municipal. Those who earn a living selling structured products and annuities may encourage you to buy several kinds of their products—which certainly sweetens the deal for them, since they typically work on commission. But apart from the interests of professionals looking first and foremost to make a bigger profit, what’s real diversification? It’s about acquiring a mix of holdings that makes sense for your particular situation.

What does that look like? It’s often about having a properly allocated combination of large-, mid-, and small-cap domestic and foreign equities for long-term growth; bonds for potential income; and liquid assets—such as money markets, cash, and short-term treasuries—to meet more immediate expenses and income needs. With that kind of diversity, your money has the opportunity to grow, while remaining protected from significant shifts in the market. And as a result, when you need it—whether to cover the cost of a big expense, like a child’s college tuition or a new home; to fund your retirement; or to leave behind a legacy you can be proud of—it’s there. 

The key, though, is that your diverse portfolio is specifically tailored to fit your needs. Optimizing your investments can’t happen with a one-size-fits-all approach. There’s no way that, say, the standard balanced funds strategy (60 percent equities/40 percent bonds), can account for what exactly you need, when and how you need it. That’s why an experienced advisor who is actively managing your portfolio allocation can be invaluable. For more information on my approach, visit debrabrede.com.

Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.

Closing laptop without passion

The Power of Dispassion

Passion. We almost always see it in a positive light. It’s an admirable trait, the driving force that brings us closer to our hopes and dreams, something that compels us—romantically or otherwise. But when it comes to investing, there’s real power in being dispassionate. However, it’s much easier said than done.

Just like the general news media, purveyors of financial information are trading on passion. Journalists know that people are more likely to listen, watch, or read (a real challenge in a world plagued by seven-second attention spans) when there’s something at stake—especially if that something is their money. The axiom holds true: if it bleeds, it leads.

Think about it. Are you more likely to buy a newspaper with a headline that reads, “Everything’s fine” or one screaming “THE END IS NEAR!!”?

Ultimately, though—at least as far as financial reporting goes—99 times out of 100 everything is fine. And even when it’s not, it’s rarely as bad as what the media leads the public to believe. And therein lies the problem: for investors, that media-generated passion often leads to panic.

So, what does the average investor do? They ignore every financial rule in the book including buy low, sell high and that which goes down comes back up. Rather than holding out when things get a bit hairy and prices start to drop, the panicked investor scrambles to get out with the rest of the crowd.

It’s one thing if they’re still working. In that case, they can eventually refuel with funds from future paychecks. Retirees end up facing a much darker scenario. When they make passion-driven plays, there’s a lot more risk involved; they can’t just put back what they’ve let go. But it’s the logistics of their current situation that often creates the issue: the combination of too much time and money on one’s hands quickly leads to less of both. 

So, how do you make it through with your sanity—and your savings—intact? The secret is to actually be a little less passionate in your approach— dispassionate, even. How do you do that? There are a few options. The first is to simply turn off your TV, get offline, or use that newspaper as lining for your birdcage. The second is to become familiar with market cycles, which serve as far more logical—and less fear-driven—indicators of where we are and where the market is heading (for a quick overview, click here). And the third is to get someone to do it for you—a bonafide professional with years of experience navigating ups and downs, someone who can be the voice of reason regardless of what the talking heads are saying. While these options certainly provide less of a thrill than today’s twenty-four hour news cycle, I can promise you that all of them are better than falling prey to it.

Couple enjoying retirement after hitting financial goals

Making the Most of the New Year: Hit Your Financial Goals and Get Closer to a Stress-Free Retirement in 2020

Close your eyes for a moment and imagine your ideal retirement. What does it look like? Are you living in a new home right next to the beach, spending summers with your grandchildren, or putting in hours at a local charity that you care deeply about? Thinking about what you’d like your future to look like is an important step in building the retirement you want, but the next one is even more crucial: you have to set goals to get there. 

Perhaps achieving the retirement of your dreams will take more saving and less spending, or shifting your allocations so that your money can grow more now, while you’re young, to allow enough funds to build up over time. Making changes to accomplish what you set out to do can be challenging, particularly if it requires a significant shift in your lifestyle or mindset. But the New Year is right around the corner, and with it comes a fresh opportunity to make strides toward your goals. With a little strategy and discipline, you can make 2020 your most productive year yet. 

We’ve covered a crucial aspect of establishing financial security time and again on this blog: finding a wealth manager who will familiarize themselves with your circumstances and aspirations, and help you make a plan to reach them. It may seem redundant, but I cannot stress how essential having a clear picture—a map of sorts—of where you’re heading is to actually making it to that destination, as well as a competent guide, of course.

Once you’ve found a wealth manager or financial advisor who knows what you want and has established a path to get you there, it is imperative to listen to him or her and stay the course. The market may do things that make you want to go all in or head for the hills, but if you’re working with a qualified professional, he or she has put a lot of thought into your strategy and there is a method to what may seem like madness. Often, the madness is actually demonstrated by investors themselves, who let fear, rather than logic and experience, drive their behavior. You’ve chosen to work with your wealth manager for a reason, so trust them. When you follow their instructions about saving and spending, and let them manage your account in the way they see fit (which is exactly what you’re paying them to do), you’ll find yourself on the road to meeting those goals—and maintaining something incredibly important along the way: peace of mind.

Are You Financially Prepared for a Relaxing Retirement?

If you’re still managing the daily grind, you may be dreaming of the day when your retirement rolls around. “When I retire, I’ll finally be able to relax,” you may be telling yourself, imagining that without a job to report to, relaxation will simply become your default mode—much the way stress is today. I hate to burst your bubble, but that’s not quite how it works.

The truth is, it’s not the ample time available in retirement that cultivates relaxation, it’s the preparation you do in advance. After all, if you find yourself without an income and more expenses than you had originally accounted for, your days certainly won’t be worry-free—no matter how many unscheduled hours you have on your hands. You also won’t necessarily be able to afford the luxuries that make retirement a walk in the park: golf, trips to see family and friends or to explore exotic locales, yoga and exercise classes, and more—you may be limited to the walk itself. 

Still, time after time, I see people bring a totally different mindset to saving for retirement than they do to living in retirement. While they can barely be bothered to come in for an annual review of their portfolio when they’re still working, after retirement they watch their account like a hawk, panicking with every market fluctuation.

But if they’ve been working with me for a while, we’ve been preparing for the inevitable ebb and flow of the markets—ones they have undoubtedly experienced over the years. They can breathe easier, because we’ve created enough of a cushion to allow them to actually enjoy their retirement, regardless of what the markets are doing.

However, their anxiety is only natural. Moving from work to retirement is a monumental shift. They’re transitioning from working to live, to living off a lifetime of work—all on a dime (though hopefully not literally), and it’s only logical to be concerned about whether they’ve done enough in advance.

But you can certainly assuage some of that fear and up the chances that retirement will indeed be as relaxing as you imagine. The way to do that is to put in the effort now, well before your last day on the job. And luckily, you can start making progress toward a less stressful future with two easy, but crucial, steps:

  1. find and work with an advisor your trust who upholds the fiduciary standard, and
  1. help that person understand what relaxation looks like to you, so that they can help you get there

It sounds simple, but it will make a tremendous difference in your future—and how you feel about it. For more insight on finding an advisor who can help you meet your financial goals, visit debrabrede.com.

Financial Management and the Holidays: How to Win the Fourth Quarter

You’ve likely worked hard all year long to save and spend responsibly. But with the holidays right around the corner, you may notice that it’s not only the temperatures that are dipping—it’s also your bank account. Chances are, your heating bills aren’t solely to blame for those dwindling dollars. With so many opportunities to get into the spirit and celebrate, it’s not unusual to find oneself indulging—and expending—a bit too much. If that’s the case for you, you’re not alone. According to a recent Gallup poll, 33 percent of Americans expect to spend at least $1,000 on gifts—and those numbers continue to climb, with last year’s holiday spending projections exceeding every year prior. But just because the rest of the country is upping the ante on the most expensive time of the year doesn’t mean you have to.

In fact, to keep your household balance sheet in check, it’s essential to be conscientious about the last—but certainly not least important—quarter. But you don’t have to be a scrooge about it. There are plenty of ways to celebrate and enjoy without going wild. And when all is said and done, your wallet will thank you. Here are a handful of tips to come out of the fourth quarter on top:

  1. Prioritize: What do you find most meaningful about the holidays? Beautiful meals? Time with family and friends? A big-ticket gift that will bring you joy all year round? When you identify what’s important to you, you can allocate your resources accordingly.
  2. Set a budget: Determining how much you can afford to spend is always a good idea, no matter how much cash you’re working with. With a dollar amount in mind, you can avoid excessive purchasing and ultimately sail into January feeling gratified rather than guilty.
  3. Make a list and check it twice: With advertising reaching a fever pitch as the holidays near, it’s a good idea to settle on whom you’ll be buying for and what you plan to get them. Having gifts—and corresponding prices—in mind can help prevent impulse buys and last minute dashes to the store (or a certain buy-with-one-click online retailer).
  4. Treat yourself: Avoid feeling depleted financially or otherwise by doing your best to take care of yourself. Walks around the block, an hour alone with a book, and even a haircut are all free or low-cost ways to keep your sanity during an otherwise stressful time.

With a little bit of planning, you can conquer the holidays and win the fourth quarter, without losing an arm and a leg. For more information on managing your money anytime of year, visit debrabrede.com. 

Retired man doing pro bono work on computer

Pro Bono Work: The “Active” Retirement

What would you like to accomplish in retirement?  It’s a question I always ask my clients. My goal is to help them create a plan that feels both emotionally fulfilling and productive. Retirement offers incredible potential. For many people, it’s the first time in their adult lives when they don’t have a full slate of responsibilities—a desk to report to or kids to shuttle to and from school. And that means they can pursue wilder dreams than they may have had time for previously: building a non-profit to support the cause closest to their heart, traveling to exotic locales, or mastering the art of béchamel in a French culinary program, for example.  

But more often than not, when I ask about what they’d like to accomplish once they clock out for the last time, the response I get isn’t very… ambitious. Instead, most clients respond with, “Absolutely nothing.” They picture themselves spending their days lazing on a beach, putting in long hours on the putting green, or sailing into the sunset—perhaps with a grandchild or two by their side. And I don’t blame them. 

It makes perfect sense to fantasize about endless hours of rest and relaxation when you’re in the thick of your working years. But what most people don’t realize is that just a short time in, all of that R&R becomes a little routine—and that routine quickly turns to boredom. It’s then that a key truth becomes evident: When it comes to retirement, purpose is crucial. 

What does purpose look like? It’s different for everyone. But many find that integrating a little pro bono work into their regularly scheduled retirement programming makes a tremendous difference in their lives. 

With your bills paid and kids out of the house, retirement can be the perfect time to lend the skills you’ve honed over the course of your career to a worthy cause for little to no cost—particularly if you love what you do. 

I’ve watched so many clients find fulfillment through pro bono work. Attorneys who take on cases for people in need. Accountants who offer tax advice to organizations dedicated to the public good. Contractors who collaborate with other members of their community to build houses for the homeless. In the end, they found that it was about more than just doing good. It also gave them an opportunity to connect socially and use their minds and their bodies. It gave them a reason beyond early tee time to get up in the morning. And that is just priceless. 

For more information on how to build a meaningful retirement, check out my book, You’re Retired, Now What?