Last week I was at the NAPFA National conference in Philadelphia. I was invited to be a part of a panel presentation on working with clients remotely. Close to half of the clients I work with don’t live near Milwaukee or Bozeman, so we meet virtually. Even for clients that do live near an office, virtual meetings can be a much more convenient way to meet. Liz Skinner, a reporter with InvestmentNews, was in the audience during our panel presentation, and wrote a great article on the different points made concerning meeting with clients in a non face-to-face way.
“Every year, more and more clients are adopting the idea that we don’t need to meet face to face,” Alan Moore, founder of Serenity Financial Consulting LLC”
Conducting client meetings online, where clients can view the adviser and the adviser’s computer screen, is more efficient than in-person meetings, which require one or more participants to travel to the meeting spot, Mr. Moore said.
For instance, Mr. Moore has a client who lives three miles away from him whom he’s never met face to face. The client is a stay-at-home dad who doesn’t want to pay $50 for a babysitter just to come into the office.
“This isn’t taking a step back in client service,” Mr. Moore said. “I can give clients the same, if not better, client experience using virtual technologies.”
Mr. Moore is attracting the type of clients with whom he prefers to work — those who are “lifestyle-focused” and value their free time and family time. Many clients like it so much, he said, that “now I can’t get them to come to my office.”
If you are ever interested in having a future meeting virtually, instead of having to drive to our office, just let me know! You can read the rest of the article by clicking here.
“What are the financial choices Millennials are struggle to make?” is a question that Maggie McGrath, reporter for Forbes, recently called to talk with me about.
No matter the situation, an emergency fund is almost always the first step:
“One of the biggest things I tell people: there’s no right answer,” says Alan Moore, a certified financial planner, founder of Serenity Financial Consulting and a Millennial himself. (He’s 26.) He says that avoiding compounding interest on debt is the same as getting a return in the market, and prioritizing one over the other depends on your financial situation. Assuming, of course, that you have first built that emergency cushion.
“The non-negotiable for me: that they’ve got cash reserves,” he says. “It’s amazing, the number of situations that can come up that we just can’t see coming that we need that cash available.”
Even though paying off debt is a great financial decision, I don’t usually recommend doing so until the emergency fund is fully funded. Once you start paying off debt, the question becomes which debt to pay off first, and if it makes sense to do so before saving for retirement?:
Once the emergency cushion is funded — preferably with enough to cover three to six months’ worth of expenses — Moore says deciding where to allocate any extra cash is a choice made easier by comparing rates: the interest rate on the debt you carry, versus the expected rate of return for money you’re investing in the market.
“I do have clients that are Millennials with student debt with one percent interest. Others are at 6.9%,” Moore says, noting that if a loan carries a one or two percent interest rate, it’s okay to make minimum payments and allocate extra funds towards a 401(k) or IRA. If you hold student loans at six or seven percent– or worse, high interest credit card debt — you might want to consider throwing extra money their way rather than looking towards retirement savings.
“If I had to say a bias, I lean towards debt payoff,” Moore says. “It’s like getting a guaranteed rate of return of 6.9 percent.”
What about buying a home? While it may make sense for Millennials to buy a home, I have seen many situations where clients regretting doing so:
“This is the first generation that has figured out that homeownership should not be a part of the American Dream. It’s not about owning a piece of real estate you can’t pack up and move. I am a big proponent of maintaining flexibility while you have it and while you need it. You lock up huge amounts of your net worth in a home that’s not an asset,” he says. Plus, he adds, “You don’t want to worry about whether you are going to get a ticket for not shoveling your sidewalks.”
After debt is being paid off, and some money is being saved for retirement, where should the extra dollars go? Buying experiences and even some time off is a great place to start:
“At the end of the year, let’s say you buy 20 dinners out with a significant other or friends, or a plasma screen TV. At the end of the year, you’re going to appreciate those dates (more),” Moore says. He says he’s seen clients so value time over goods that they pay their employer for extra vacation days.
“I’ve had clients buy up to a month. What would you do with an extra week’s vacation?” he says. “That’s huge in terms of actually using your money wisely to make yourself happier.”
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Most investment experts agree that you can’t expect much return without taking some risk when it comes to your investment portfolio. However, investors usually look at the potential return of an investment without considering how much risk they are taking. And what is risk? It is the chance your investment will lose money, or even go to $0. While most investors need to take risk with their investments to meet their financial goals, there are ways to lessen the ups and downs of your portfolio – mainly diversification. I recently spoke with Marcie Geffner, finance reporter for Bankrate, to discuss how proper diversification can help manage the risk in your portfolio.
A separate challenge is figuring out how risky various financial strategies are, says Alan Moore, a Certified Financial Planner professional at Serenity Financial Consulting in Milwaukee.
“It’s impossible to calculate projected risk,” Moore says. “We can say that historically stocks have been this volatile and bonds have been this volatile, and we can calculate that, but how relevant is it really? It’s about as relevant as looking at last year’s returns. Any time we base (an assumption) on historical data, we know we’re wrong. We may be better or worse off than our assumption, but we know it’s just an assumption — a guess.”
So how can anyone manage risk?
The answer is diversification, the classic strategy of “don’t put all your eggs in one basket,” Moore says. Moore says some of his clients’ portfolios hold as many as 18,000 different companies through multiple mutual funds. That way, if one company goes bankrupt, it doesn’t have much effect on the entire portfolio.
“Diversification is the only real way I know to manage risk,” he says. “Buy stocks in as many countries and companies as you possibly can, and do the same with bonds. Spread that risk out.”
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