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.

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.

Who are the clients we work with best? 

Below we provide 2 sets of descriptions of clients who might work well with us – along with those that might be better served elsewhere.

Choose a Trusted Fiduciary Advisor if you care about these issues:

• You need help but don’t know what to do.
• You want someone to be there to give advice, implement, and make adjustments well after your first meeting.
• You value a relationship where the advisor cares about you first and foremost.
• You are willing to invest in a strategic relationship.
• You are open to having “heart to heart” conversations and making adjustments.

To be fair, there might be certain clients who might benefit from working with a broker held merely to a standard of product suitability.  As mentioned before, such a relationship is more like working with a product salesperson.

Choose a Salesperson if these issues concern you most:

• You are confident you know the specific product you want to purchase.
• You know how to use the product and need no one else’s help.
• You see no need for further “service” beyond when you make a purchase.
• “Good deal” to you means lowest price, not a relationship of meaningful value.
• Not ready to make other serious changes to achieve your goals.

Schedule appointment

The post Simple Checklist for Choosing to Work with a Fiduciary Advisor or a Suitable Salesperson appeared first on AWM.

When it comes to things where quality and depth of service do not matter, one might focus exclusively on price.  For example, consider health care.  If all you need is a bandage for a minor cut, then you might simply want to buy the cheapest generic bandages at your local supermarket.  (Or if you are a millennial, order it online and let a drone drop a box of 500 at your front door.)

However, what if your loved one needs critical surgery on his or her heart or knee?  Would you simply shop for the cheapest operation, not really knowing whether the surgeon does a good job or not?  What if the outcome of that surgery could impact the quality of your loved one’s life for years to come, maybe even a lifetime?

That is when you want to focus on value, not merely price.  You do not just want to spend the least amount of money for a product anyone can provide at satisfactory quality.  You want to find the best Doctor (or service) that will give your loved ones the highest chance for a successful outcome that will last for years to come.

People often confuse price with value. These are two different issues.

Or suppose you want to take your loved one out to eat?  Let us say you want to take them for tasty meat and salad.  You have a choice of two restaurants: Restaurant A and Restaurant B.  Restaurant A offers you such a meal for under $10 each.  Restaurant B offers the same meal for $100.

The buyer looking solely at price would opt for the cheapest deal at Restaurant A.  No questions asked.

However, the buyer of Restaurant A could have made a very bad deal.

Restaurant A is a fast-food burger joint.  It fulfills the basic requirements that the buyer sought in the first place.  Meat (hamburger), salad (lettuce in a bun), vegetable (French fries), and a drink (your favorite soft drink) were included in the package.  The buyer gives up quality of food to gain time. Whether you consider going through a drive-thru or eating in an open, noisy venue stuffed with kids as a romantic get together is open for debate.

Now consider Restaurant B, a high-end steak restaurant.  Several choices of the finest cuts of prime rib, salad bar, sautéed vegetables, and a mix of drinks make for a tasty menu.  A private, intimate dining atmosphere perhaps with music and a dedicated waitperson create an inviting ambiance. In this setting, the buyer is paying for a relaxing environment and understands the value of this high-end meal.

The buyer looking to treat his or her companion will gravitate toward Restaurant B.  B offers value.  The price might be higher, but the quality and level of service makes it a better value for what the buyer wants to do: to please his or her loved one.

Family wealth management is a value proposition, not a price transaction. 

Lots of confusion exists in the press about whether financial planning and family wealth management is merely a pricing issue or a value proposition.  Many writers (and cookie-cutter robo-operations) would have you believe that managing family wealth is simply a “price” issue.  They claim that the lowest price wins because all the buyer needs is a cheap portfolio that looks like everyone else’s and needs no specialized service.

At Ambassador Wealth Management, we cater to customers and their families who seek custom advice. They deserve more than being thrown into a “one size fits all” bucket of investments and services.  Our clients benefit from aligning with our firm that thinks globally but acts locally. They are people and families whose lives matter to us.

We work best with clients who can benefit from a long-term relationship that includes and extends beyond investments to their families.  You benefit by us helping keep you on track and step aside from emotional decisions that cost many of your neighbors dearly.

In other words, the press and their robo-friends would have us all eat fast food simply because of price.

But if you want to eat steak in the context of a comprehensive health and nutrition program that might empower you to live with purpose, seek value.

Schedule appointment

The post Value Vs. Price: The Difference Between Celebrating Your Anniversary at McDonald’s Vs. Morton’s appeared first on AWM.

The advisor has a responsibility to advise and act in the best interest of the client. Astute clients know they need to be active in driving value from the relationship as well.

So how can you realize the maximum benefits of working with a trusted finical planner? Put these 7 things into practice:

1. Share information.

   More often then not, prospective clients and even current clients choose to withhold information from their advisors. They are afraid or embarrassed to talk about the decisions they have made, how much money they have, or even what their goals are.

   Think about your doctor.  You want your doctor to give you the best advice to improve your health and your life.  In order for that to happen, you need to confide to your doctor details about your life, even if at times it might feel uncomfortable.  Your health history, current problems, how you live, what you eat, and future concerns are vital for your doctor to know.

   The more your doctor knows about you, the better job your doctor can do to take care of you.

   It’s the same with your fiduciary advisor.

   ---

   

2. Be honest.

   Relating back to number one, many times people will come in and share information. However, that information might be exaggerated or simplified at best.

   If you’re not being honest about your financial state, how can your wealth advisor accurately know how to help you? The answer is they can’t.

   You should expect your advisor to be honest with you, even when it might hurt in the beginning.  For that to happen, you need to be honest, too.

   ---

   

3. Have reasonable expectations (for outcomes).

   While a fiduciary will act in your best interest, they are not miracle workers. You have to be realistic about your situation, your investments, and the opportunities and risks of the current market environment (which can and does change).

   Astute clients collaborate with their advisors to set reasonable expectations over realistic timeframes.

   Another aspect of expectations is being real about what your advisor can and cannot do. Your advisor needs to clearly understand what you expect out of the relationship and their services. This opens the door for honest and realistic conversation. Your advisor can take the information you have provided, and help you better understand what you should be expecting with your outcomes.

   Clients and advisors who are intentional about defining expectations tend to succeed the most.

   ---

   

4. Be open to change.

   Because a financial advisor is one who gives advice, clients should be willing to make changes. Now, at the end of the day, you can choose what you’d like to do with your money. But if you are going to take the time to seek out expert advice, be open and willing to consider your advisor’s recommendations.

   A true fiduciary advisor cares about their clients enough to make sure they make appropriate adjustments, especially when their own lives undergo change.

   ---

   

5. Be engaged – care about your own success!

   Our best clients are those who have a true desire and commitment for us to work with them.  Conversely, clients most apt to suffer disappointment are those who do not really care themselves.

   A true fiduciary cares more about the client than their own paycheck. Advisors expect their clients to be as interested and engaged in these financial conversations as they are.

   ---

   

6. Listen to reality, not emotion.

   Your actions are not the only thing that should change. A lot of times, we need our clients to change the way they bring emotions into financial decisions.

   There are so many ways we can feel pulled by our money. Fear, envy, and love are the three emotions that drive most of the decisions we make. We encourage our clients to set their emotions aside when talking about investments and big financial decisions.

   ---

   

7. Have an open mind and don’t jump to immediate conclusions.

   If you walk into your financial planner’s office knowing you have already made up your mind, you’re not fulfilling your role as a client. You have hired your advisor to fill a role. If you resist information that goes against your preconceived biases, it will be difficult to help you.

   ---

When you’re feeling sick and meet with your doctor, they will follow a process of testing, questioners, physical exams and past health history to determine the best course of action. A prescription will only work for a condition that is properly diagnosed and appropriately carried out.

Your fiduciary financial advisor works the same way. They will do everything they can to help you, as long as you also know what your roles are.

Schedule appointment

The post How Doing Your Part in a True Fiduciary Partnership Benefits You appeared first on AWM.

According to the American College of Financial Services [source], nearly 1 out of 2 people were unaware or indifferent if their advisor was a fiduciary [term] or not.

Whether your advisor is a fiduciary or not makes a big difference in how that advisor works with you.

Fiduciary Is the Standard for Advisors Who Care about Relationships

Fiduciary advisors can choose to work with clients in one of two ways.

1. Advisors working as a fiduciary to put their clients’ best interests ahead of their own.
2. Advisors under a fiduciary standard seek to understand the full picture of their clients and base their advice on it.  Clients expect advice to consider their unique goals and situations and implemented at a reasonable cost.  The advisor receives no extra compensation if a client chooses one product over another.

Suitability Enables Broker-Advisors to Sell You Products

In contrast, suitability [term] places much less emphasis on relationship and more on a product.  In other words, can an advisor justify selling a client a product?

Under suitability, advisors can act more like brokers (or salespeople) than trusted advisors.  They simply need to show that a recommended investment is “suitable” for a given client.  There is much less emphasis on the client’s total financial picture.  Instead, products are allowed to be sold to clients so long as they are deemed not to harm their clients’ goals and circumstances.  “Suitability” permits those advisors to earn commissions on their product sales.

Ambassador Is a Fee-Only Fiduciary Trusted Advisor

Our approach at Ambassador is to focus on clients’ total picture (financial and personal priorities).  We are passionate about our clients’ success.  We seek to help you to the best of our abilities.

Yet, we are indifferent as to the solutions that might help our clients.  We do not make more or less money based on one solution versus another.

This is why we have chosen not to sell any commission-based products.  We prefer to care for our clients proactively by minimizing potential conflicts of interest.

There are other ways we strive to go beyond a minimum fiduciary standard.

Sometimes, our loyalty to our clients might even cost us potential further business.

For instance, there have been times when we have advised some clients not to invest additional money with us in order to pay down debt.  We thought it would be better for these clients to reduce their cash outflows to a manageable level before investing more funds.  Our concern for our clients’ well-being outweighs the opportunity for earning additional revenue.

Other situations might arise where a prospective client might want to work with us, yet we believe it is in their best interests to go elsewhere.

Learn more about what makes us stand out in caring for clients like you.

Schedule appointment

The post Why Ambassador Works as a Fiduciary Advisor Only appeared first on AWM.