Your retirement might depend on it.

2022 has been a rough year.  2023 might not be much better.

You cannot control what the market gives. But there is one important decision you have control over.

Can you still trust the professionals who are managing your money?  Ask them these tough questions:

1. 1. What did you do to cushion my gains from a market pullback?
      

      It seemed easy to “fall in love” with the bull market.

      Yet 2022 has been a bit different.  Not only were stocks expensive, but bonds also were overvalued.  Neither did a good job of protecting your nest egg from falling markets.

      Most advisors were scripted to tout “buy and hold” and not “think outside the box”, be it traditional stocks and bonds or being wed to too many mutual funds.

      If your nest egg fell like the stock market (regardless of how many investments you had), then your investments are not diversified.  Having “too many eggs in one basket” can damage your family’s future.

   2. Why am I paying so much tax even though my nest egg has declined?

      Too many mutual funds in a down market might be a double whammy. Mutual funds can decline in price, yet pay out capital gains that make you pay more in taxes. (Remember 2008.)

      It is not about how much money you make; it’s about how much money you keep.

   3.  Does the person managing my money know who I am (and do they really care)?

      Do they know you don’t have forever to wait for your money to bounce back? Do they call to give you ideas before problems arise in your family?

      Or is your advisor simply a “stock jockey” who ignores the big picture of your family’s needs?

      Does your advisor give you ideas on how to lower your taxes and care for yourself and your heirs? Does your advisor care enough about you to be honest about the challenges ahead?

Don’t be afraid.  Open your statements, review them, and ask your advisor (or yourself) the tough questions.  Hold them accountable.  Accountability can help you have a successful retirement.

If they are not giving you answers that satisfy, it might be time to consider a change. Don’t fall in love with certain investments or advisors. Do what is best for your family.

Give us a call if you want some straight answers and ideas to help.

The post When Should You Fire Your Advisor (Or Yourself)? appeared first on AWM.

Working with the wrong advisor or getting in over your head trying to manage your own investments might be costly.

So, “What should my financial advisor be doing for me?” Well, let’s look at some strategies that work for my clients.

1. Diversification

Forget the simple 60/40 approach. If your portfolio hopped on that bandwagon, chances are you’re suffering a hefty loss. Bonds are nearly down as much as stocks this year. (If we head for extended volatility and high inflation, stocks and bonds alone might still struggle.)

Your advisor has to come up with something more (and something you might not be able to do yourself). Liquid investments that have the potential to earn returns regardless of stock and bond bull and bear markets.  Commodities, even select active strategies, might play a role to anchor your investment portfolio.

We take a strategic approach to hedge, preserve, and grow principal over time.

2. Exclusive Investments

Large firms with billions of dollars often overlook niche investments that might provide positive returns less correlated to traditional investments. Niche investments have limited capacity for large new investments.  Responsible managers of these strategies understand they need to keep their promise to existing investors and not compromise their investment process with a glut of new clients.

Working with an advisor like us might give you opportunity for diversified investments not accessible to most investors.

3. Tax Planning

In the past, tax optimization strategies were saved for elites. Now, it’s more accessible to those with portfolios between $1-10M.

Active management in a volatile market can keep you invested with long-term investment goals and potentially provide tax savings (versus just sitting on various positions that go up and down).

Simply holding a bunch of mutual funds in taxable accounts potentially sticks you with someone else’s tax bill from prior years.

Skillful use of different investment toolkits allows us to harvest tax losses for you.  We also seek ways to minimize taxes even when you do have to take capital gains.

It’s been a choppy year, and I fear it’s far from over. If your investment approach isn’t working, it’s time for a new one.

You need an advisor who will fight for you and your future. My team is ready and happy to help.

Give us a call to schedule a free consultation.

The post What Should Your Financial Advisor Be Doing in a Volatile Market? appeared first on AWM.

If your elderly parents cannot take care of themselves or their house, it might be time for you to step in.

For nearly three decades, I have watched families struggle with this very thing. I want to share what I’ve learned and maybe help you too!

Do’s

1. Start The Conversation.

Start by expressing your concerns and give real examples. Sensitive talks like this need to be done with empathy and clarity. Consider inviting a professional to help you. Aging parents may be more receptive to an outside, objective party.

2. Have Empathy.

It can be difficult for our aging parents to change roles from caregiver to care-receiver. Put yourself in their shoes. Remember, it’s difficult for anyone to give up their independence. Looking at the situation from your parents’ perspective can help you find creative and sensitive ways to guide them through this transition.

3. Be Informed.

To take care of your aging parents, you need to understand their situation and expressed wishes. You should know their:

• • Primary Doctor (and specialists)
  • Medications and Supplements
  • Allergies

Next, find out where their medical and estate management documents are. This includes:

• • Medicare Card
  • Insurance Information
  • Durable Power of Attorney (POA)
  • Will, Living Will, Trusts, or other documents

Don’ts

1. Have A Single Conversation.

Be prepared to continue the dialogue with your aging parents. You might have to remind them why you are helping or make adjustments to your initial plan. That said, don’t force them to see things the way you do. Have open conversations and stay open-minded.

2. Carry This Burden Alone.

Invite siblings or relatives into the discussions. Typically, one person takes a lead role, but other family members can help support and relieve tension. This is especially helpful in the early stages as you figure out a plan going forward.

3. Wait Until Tomorrow.

Start learning and gathering information to prepare for future crises that might arise. When you have a good handle on their situation, monitor symptoms like changes in weight, failure to take medication, new health issues, and lack of social activity. The sooner you get started, the more prepared you will be.

This new chapter in your aging parent’s life can stir up family tensions. Pursuing open communication with empathy can help your parents adjust to this phase in life.

Let us help you to benefit from our experience with walking people through the issues of caring for aging parents.

Let’s Get Acquainted

The post Do’s and Don’ts When Caring for Your Aging Parents appeared first on AWM.

It’s understandable to feel financially obligated to your kids when they need a little extra help, but you also want them to become financially independent. Monetary support can provide a short-term lifeline, but I have also seen this approach backfire.

1. Paying Their Bills Will Cost You.

Don’t feel selfish for focusing on your retirement savings. Every dollar you give away adds up. The more you give to your kids, the less you will have for retirement. This could put a huge financial burden on your kids if/when you run out of money in retirement.

In addition, there can also be an emotional cost. Money can strain any relationship, especially with family. Your adult kids might feel guilty and inadequate when they ask for help. As time goes on, you may begin to feel taken advantage of or underappreciated.

The truth is, supporting your kids financially could be doing more damage than good.

2. Set Them Up for Success.

It’s never too late to teach your kids good money management.

Start with an open conversation. Explain that it’s time for them to take on more financial responsibility and it’s time for you to plan for retirement.

Next, help them establish a budget and brainstorms ideas to cut their expenses and keep costs low. Come up with a plan to ween them off of your household payroll in the coming months.

Once they’re on their feet, talk about managing debt, planning for taxes, and investing their savings.

3. Find Other Ways to Be Supportive.

You have so much more to offer than money.

Financial difficulties can be emotionally taxing. Sometimes all our kids need is a listening ear, a shoulder to lean on, and some encouragement from us.

There are so many ways to support your kids that don’t require a cash handout. Maybe you have an old car you aren’t using, you could pitch in with babysitting, or help them find the best deals when they need to make a large purchase.

Be proud of what you’ve accomplished. Raising kids is no easy feat. You’ve done well, and you can still do better, starting today!

It’s not too late to help your adult kids grow into financially independent and thriving adults.

Let’s Get Started

The post Helping Your (Adult) Kids Become Financially Independent appeared first on AWM.

Before we move on to 2022, there are a few steps you can take to make sure your finances are ready to ring in the New Year.

1. Guard Against Inflation

Inflation is on the rise and purchasing power is dwindling. How can you protect your family against the rising costs of goods and services? Focus on your budget, prioritize your family’s needs, and work with a trusted professional to collaborate on a game plan.

2. Reduce Your Taxes

One of the best things to do at the end of the year is tax planning. I encourage everyone to work with a Financial Planner who specializes in tax planning. Remember, your CPA or tax preparer is working to keep you in compliance with current tax law. You need someone to help you plan ahead, too.

3. Maximize Retirement Contributions

Contributing to a retirement account helps prepare for your future, and might even help lower your tax bill, no matter where you are in your career.  If you’ve been able to save some extra money this year, consider putting those funds towards retirement. You can contribute up to $19,500 (or $26,000 if you’re 50+) to an Employer Plan and up to $6,000 (or $7,000 for 50+) to your IRA. Those who are self-employed have many options as well.

4. Use Up FSA Funds

Depending on your health care plan, you might have extra funds in your flexible spending account (FSA). Unlike a health savings account (HSA), money set aside for your FSA typically does not roll over to the next calendar year. Generally, you will want to use up those funds by the end of the year. If you’re anything like me, you have some lingering dental work to help use up those funds.

5. Focus On 2022

December is a great time to review your Financial Plan. Look at the progress you’ve made. You might need to make some changes and correct course, or you might have some extra money saved up for a well-deserved splurge. 2022 might be more complicated and if you are not starting early, you could fall behind.

If you’re flying blind, I encourage you to find a Fiduciary Financial Advisor whom you can trust. Get started on a plan so you can have confidence in your future.

Here’s your list, so be sure to check it twice. Once you’re done, it’s time to sit back and enjoy the Christmas season with your loved ones!

The post Top Tips to Improve Your Finances This December appeared first on AWM.

This makes August a stellar time to work on your finances. My advice? Don’t put it off until December.

Here are a few year-end planning items to check off your list:

1. Get Ready for Upcoming Education Costs

For students: this is a great time to start looking at college scholarships. Find 3 or 4 you would like to win and start working to make yourself the perfect candidate and apply early.

For the parents: take a look at some college calculators to get a sense of how much your expected family contribution (EFC) will be and the best tax-efficient way to pay for it.

Even if college is a few years out, planning now can help keep costs down later. Make sure everyone is on the same page and only look at schools that you can afford.

2. Do You Need to Rebalance Your Investments?

Consider the market. Is your current asset allocation up-to-date and working for you? This is a good time to review your portfolio with your financial planner.

Also, consider the tax consequences of reallocating your investments. This might be a good time for a tax planning session.

3. Revisit Your Budget and Goals

Do you have dreams of buying a home, paying for college expenses, or ramping up your retirement savings?

Take a look at your budget. How are you doing? It might be time to trim down some costs by eating out less and ditching subscriptions you no longer use.

Write down your goals and how you plan to reach them. This is the first step in making those dreams a reality.

4. (Bonus!) Plan for Your Next Tax Bill

August is usually a slow month for accountants and other tax experts. This means it’s a good time for tax planning.

Don’t wait until December. Estimate your upcoming take bill, and start preparing for it.

If you don’t already have a team of professionals ready to help you through this planning season, consider talking to a certified financial planner who offers hourly consulting—and keep the conversation limited to tax strategies.

A 2-hour planning session could help you keep more of your hard-earned money.

The post Don’t Wait to Start Your Year-End Financial Planning appeared first on AWM.

Sound familiar?

Just last week we had another exhausting encounter with an annuity company.

Our client asked us to help him take money out of his annuity contract and transfer it to his investment account.

Should be easy, right?

Nope.  The annuity company messed up by giving out the wrong information and forms.  They also made our client jump through more hoops. To top it off, they even tried to sell him an additional annuity!

My client was so frustrated; he was willing to pay the penalties to get all his money out.

Our client asked, “Why does it have to be so complicated? There has to be an easier way. How can someone do this on their own?”

So, who is going to help you?

Not the person who sold you the annuity in the first place…

Unfortunately, most annuity salesmen have great incentives to keep your money locked up or even sell you another contract. This protects the insurance company, not you.

Instead, consider a Fiduciary Advisor who can advocate for your best interest.

What will that process look like?

At Ambassador Wealth Management, we break it down into three steps.

1. First, we get to know you, your objectives, and your concerns.
2. Then, we decipher the annuity contact to determine the best course of action for your family.

If it’s best for you to leave your money in, that’s what we’ll recommend. If it’s best for you to take money out, we collaborate on a plan to get it out and examine other investment options.

3. Finally, together we confront the annuity company. We know their lingo and the right questions to ask. We are with you, every step of the way, to help you regain control of your money.

Are you going to try to sell me some sort of contract?

Not us. We don’t sell annuities or illiquid products. We want our clients to be in control of their money.

Ambassador Wealth Management is an independent, fiduciary firm. Our goal is to remove conflicts of interest to better serve each of our clients.

If you feel frustrated and lost with your annuity, we would love to help you.

The post Are you fed up with your annuity? appeared first on AWM.

Robo-advisors are becoming a more popular choice for tech-savvy investors. Something to keep in mind, however, is that these bots are strictly mathematical. If you are looking for a relationship with your advisors, these robots won’t make the cut. Bots don’t know how to deal with the loss of a loved one, a child getting married, older parents needing your financial support, or your charitable desires.

Before you begin your search, think through your reasoning for finding an advisor and what you hope they can do for you. Never underestimate the seriousness of this task. Who you trust with your money and your future is a big decision that should never be taken lightly.

Once you’ve done some soul-searching, start off by asking your friends and family for recommendations. You can even reach out to other professionals that you trust and ask for a few names. Make a list, and start your research. Weed out the lousy candidates and prepare to set up a long meeting with each of the remaining prospects.

Here are five important items that you should know about your advisor before you hire them:

The Portfolio Management Process

Look at their asset allocation models and how they execute them. Do they use a home office, customized allocations, or a mix of the two? The more assets you have to invest, the more complicated and unique your plan might be. Think through your own situation. Do you have kids in college? What about a special-needs family member? Some couples have a large exposure to one stock. The more variables you add to your situation, the more customizable you need your asset allocation plan to be. Look for an advisor that will look at your portfolio holistically and one that has handled complex situations before.  

Financial-Planning Capabilities

While this item might not be your top priority, lots of people find it easier to tackle various financial situations once their foundational finances are sorted out. Complexities, like funding college, charitable giving, and planning for retirement can be overwhelming before the basics are taken care of. You don’t need an expert in each of these categories, but your advisor should be comfortable giving recommendations or referrals to others who are.

Custody Arrangements

Who is their custodian? This is an important one. You should know who is going to hold your money.

Registered investment advisors (RIAs) are required to use a third-party custodian like TD Ameritrade, Fidelity Investments, or Charles Schwab. For bigger firms like Bank of America and Morgan Stanley, advisors will use their company’s custodian. In some cases, this can create conflicts of interest as advisors promote and design compensation plans around their companies’ products. 

Fiduciary Versus Suitability Standard

Fiduciary advisors are bound to seek out and act in the best interest of their clients. They are also required to communicate any conflicts of interest that might not be the best option for their client. All RIAs are legally required to acts as fiduciaries, while other firms might choose to follow this standard voluntarily.

Advisors who follow the suitability standard do not have to disclose conflicts of interest to their clients. Nor are they required to mention cheaper or more tax-efficient options that might save their client money and heartache in the long-run.

Depending on your preferences and situation, both can be a viable option. When in doubt, however, always go with a fiduciary.

Fees

Financial advisors tend to use one of three pricing models. Either they will charge a percentage of the assets they manage or total asserts they advise, charge project-based fees, or earn a commission based on the number of products they sell.

Fee-based advisors generally charge a certain percentage of their client’s portfolios and often give discounts for family referrals or larger accounts. Advisors who use the project-based model generally charge an hourly fee for each project they take on. Commissioned advisors lean towards the salesmen’s side of pricing. Their goal is to sell mutual funds, annuities, and alternatives to generate large commissions.

You should fully understand the advisor’s billing method after your initial meeting with them. If they are unprepared to discuss billing, you should probably walk away and look at different options. If they pass the test in the first meeting, feel free to schedule a second one.

During your second visit, you will want to go over a detailed explanation of your finances. Who will manage your money? Go over any of your family’s financial planning issues. The biggest thing to watch out for is how much they know. Spending time with someone helps you to learn whether or not they are an expert and know what they’re talking about. Ask a lot of questions.

Closing Thoughts

Depending on how you perceive their explanations, you will need to determine if this relationship is going to work long-term. Consider your future generations in this decision. After all, they will need to deal with this advisor once you’re gone. Also, look into the technology and other resources they use. Are they investing in good technology to run their business and manage your affairs efficiently and effectively? Technology should be an important factor. The advisor should be excited about technological advancements and how it can benefit both of you.

The advisor’s approach and view of technology can say a lot about how he/she will approach your portfolio. As advisors age, their adaptiveness to technology is more difficult for them. Just like anyone, advisors also like to be comfortable and stick to methods they know. For advisors who have been successful in their practice, they might be unwilling to tackle your problems with the latest technology.

At the end of the day, you should choose an advisor whose management process, philosophy, fee structure, and business approach make sense to you. And most importantly, they need to be someone you can trust. In order for this relationship to work, you have to be open and honest with your advisor the way you would with a medical physician. Look for someone you are willing to build a deep relationship with and who will help you navigate your life with purpose.

Start the Conversation

The post What to Look For In a Financial Advisor appeared first on AWM.

Checking your client’s beneficiary forms can be one of the highest levels of service you give them. Not only will this deepen your relationship with the client, but also communicates that you are seeking out their best interest. This simple but crucial form can open the doorway to many discussions about your client’s loved ones and dreams.

Not keeping up-to-date with these forms can quickly turn into a costly legal battle and hurt your client’s family. Missing or incorrect beneficiaries are an irreversible mistake. Because it’s only discovered once the client has died, this problem is rarely fixed.

This is where legal, tax and financial advisors are brought into the picture. They must decide how to distribute the inheritance without clear instructions and many legal obstacles. This frustrating process quickly leads to very long and expensive family disputes. This mistake is so easy to avoid by simply checking the beneficiary forms before your client passes away.

As a financial professional, the last thing you want to do is have your client’s family waiting for their money or to find out they have been disinherited altogether because no one checked the proper forms. This is bad news for both of you—even if this wasn’t your fault.

The best times to review and update beneficiaries’ information are at annual meetings and around major events such as:

• A birth
• A death
• A marriage
• A divorce
• A remarriage
• A new grandchild
• A change in the tax laws
• Charitable inclinations
• Any other changes that influenced your client to select certain beneficiaries in the first place.

Any of these situations (or others) could prompt your client to change their mind and wish to eliminate a listed beneficiary or add a new heir to their IRA. You should have the kind of relationship with your client to know when these life-changing events occur and proceed to follow-up on their intentions.

The area’s most prone to problems with the beneficiary forms are divorce and IRA trusts.

Divorce:

A great example is the U.S. Supreme Court Case of Kennedy Vs. Plan Administrator.

The court ruled that a $402,000 401(k) should be paid to the ex-wife because she was never removed as a beneficiary after their divorce—even though she had reneged her claims for those assets during the settlement. This eight-year court battle ended with the daughter losing the inheritance her father had intended to give her all because the beneficiary form was not updated after the divorce was settled.

IRA Trusts:

1. Name contingent beneficiaries. Here’s what happens when you don’t:

   Your client’s children could potentially lose their inheritance to their step-family.

   A man and a woman, with children from previous marriages, joined their lives together. The father names his new wife as the primary beneficiary while neglecting to add his own children or a trust as a primary or, at least a contingent beneficiary. This scenario could go in one of two ways:

   Option A: The new wife dies first and he doesn’t change beneficiaries before he dies. Since the new wife was named the legal beneficiary for his IRA, his kid’s inheritance goes to his second wife’s estate.

   Option B: The man dies, leaving his IRA to his second wife. She then proceeds to write out his kids despite his original intentions.

   Again, this would have been easily avoided if the current forms had been kept up to date, the advisor understood the intentions of the client, and chose to make the proper recommendations.

2. A will does NOT replace the IRA beneficiary form.

   A common example is when a client assumes their IRA beneficiary is covered in the will. They go ahead and name one child (who is helping out with the paperwork or caring for the aging parents) with the intent of having their IRA split evenly between their three children.

   He states his wishes for the split assets in his will, but after he dies, the IRA beneficiary form overrides and the entirety of the IRA goes to the named beneficiary.

   Knowing the true intent of her parents, the named beneficiary wanted to make sure the inheritance was split fairly among all three siblings. This process exhausted time, legal fees, tax advice, nerves, and disclaiming other assets to make things even out. This chaotic situation could have easily been avoided.

3. Losing a Stretch IRA.

   IRA beneficiaries can easily extend Required Minimum Distributions (RMD’s) over their lifetimes with something called a “Stretch IRA”. However, a Stretch IRA is only valid if the heir was specifically named as an IRA beneficiary on a current form.

   If the heir receives the IRA through the estate, they forfeit the benefit of the Stretch IRA since the estate is not a designated beneficiary.  Thus, the heir is likely to end up paying higher taxes on the inheritance.

As you consider a new approach to helping your clients, remember that simply writing down a name and social security number is not all that an IRA beneficiary form includes. Consider the recommendation of a fiduciary financial advisor within your network to make sure all of these issues are covered:

• Keeping documentation that is current and accessible in the event of the loss of the account holder.
• Tracking primary and/or contingent beneficiaries (“beneficiaries of beneficiaries”) is also vital to client due diligence.
• Specifically designate the name of the beneficiary as an individual or qualifying trust. Make sure the estate is NOT named as a beneficiary.
• Make sure the most current IRA or retirement plan beneficiary form is on file and is up to date with current information.
• Finally, ask the client to update beneficiaries for investments (example: 401k, pension assets) not directly held with the advisor. Truly fiduciary advisors care about the client’s whole being, not just where they have a direct business relationship.

Don’t make this mistake. Show your client’s that you have their back.

Schedule appointment

The post Where’s the Beneficiary Form…? appeared first on AWM.

No one will take better care of your child than you.  However, with proper planning, you can make sure your wishes for the care of your special needs child are carried out even after you die.

You need to consider how to fund and plan the care of your special needs child after you depart this earth.  Wise parents think through key questions regarding how to take care of their child even when alive.

However, you also need to think through the financial planning aspects unique to special needs children.  Otherwise, you run the risk of your child suffering inadequate care.

Fortunately, you can take action to increase your prospects for success.

Faulty Planning Could Ruin Your Special Needs Child’s Life

Merely having enough assets to support your special needs child will not guarantee success.

Many families with special needs children receive government funding.  Programs such as Supplemental Security Income (SSI) and Medicaid fund adults with needs as well as children.

However, bequeathing your child an inheritance upon your death might actually do more harm than good for a couple of reasons:

1. Your child will lose eligibility for government benefit if their wealth exceeds minimum thresholds. That means your child might not be able to afford the quality of paid care you would like them to continue to receive.
2. There is a real risk that your special needs child could end up in poverty after you are gone. Expecting your special needs child to manage sudden wealth is a risk proposition, especially when so many of their peers end up blowing their money in a short period of time. Do not underestimate the risk of others with impure motives to try to steal your child’s inheritance.  Some greedy people, including relatives, caregivers, and new “friends”, might try to take advantage of your special needs child.   Safeguard your child from these predators.

Prudent Planning Can Help to Look after Your Special Needs Child Long after You Are Gone.

So what can you do?

1. Make sure you have a will and/or trust that is current.
2. Investigate whether you should open a special needs trust. You should confer your inheritance to the trust, not directly to your special needs child, as beneficiary.  The trust will provide for the child’s needs in accordance with your instructions.  Additionally, your special needs child is still likely to qualify for continued government assistance.[1]
3. Formulate specific instructions in the trust for your child’s future care. Some questions to ask include:
   • Will your special needs child require daily custodial care?
   • If your child will remain at home, will your home need special improvements (elevator, exercise gym)?
   • What about continuing medical treatments?
   • Should you child stay alone or in a group facility?
   • Can some other family member assist in care?
4. Identify other people (perhaps including other family members) who will be involved in the future care of your special needs child
   1. Guardian – identify someone who will be the primary caregiver for your special needs child. Outline their responsibilities under a “Letter of Intent”.
   2. Trustee – someone who is trustworthy and capable of making sure funds are managed properly and disbursed to fund the care of your special needs child.

Care for your Special Needs Child Now and Well into the Future.

Planning for your special needs child can be complex.  With proper planning and assistance from qualified professionals, you can gain hope that your special needs child will receive the care needed even well after you depart this earth.  That is a legacy worth living for.

Schedule appointment

[1] Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

The post How Will You Provide for Your Special Needs Child after You Die? appeared first on AWM.