Financial News

A tax professional can act similarly to a “conductor” in an orchestra.  They direct the tune, the instruments used and how the end product sounds.  They can make the appropriate changes as they see fit and understand how powerful their actions are in making the show.

There are very few concepts in financial planning that hold as much raw power to transform one’s life as systematic investing. But harnessing the potential extreme force behind this concept often proves tricky when it comes to actual implementation.

Investment professionals and entities alike should always ask “How Does This Tie In With the Rest of Your Finances?”.  It is an important enough question that even from service providers such as attorneys and CPAs, often does not get asked enough to their clients.

This notification for the week of 2/13/2018 is part of an ongoing series of updates intended to keep you informed about the changes occurring in your 4Thought Financial Group separately managed accounts (SMAs) each week. We may provide general commentary, as well as planning techniques and ideas. Make sure to discuss with your advisor whether these are applicable to your situation before taking any actions with regards to your financial plan or investment portfolio.

Longevity has always been a human fascination, but advancements in medicine and technology have transformed this fascination into a present-day reality.

Insurance Agent

Insurance agents sell life, disability, long term care, property and casualty, and other types of insurance products. They customize related plans and programs to cover a variety of risks that best suit clients’ needs. They weigh the advantages and disadvantages of these policies and promote the associated sales—oftentimes compensated via commissions based on those policies’ premiums. 

Accountant

Accountants primarily examine and prepare financial records, ensuring the accuracy and timely preparation and submission of tax returns to the Internal Revenue Service (IRS). They review the financial operations of businesses and fiscal matters of individuals, and assist in creating plans to improve efficiencies. Many accountants earn Certified Public Accountant (CPA) licenses from their respective state board of accountancy—a distinction denoting extensive education, experience and competency within the profession. 

Estate Attorney

Estate Attorneys, as their titles indicate, specialize in estate planning issues, such as, for instance, estate taxes and the effective distribution of assets to heirs. They provide advice to clients on strategies about how to best prepare for the possibilities of mental illness or incapacitation, and eventually, death. Advice on Wills, trusts, estate tax minimization, business succession, and strategies to ensure clients’ assets and savings are secure following their deaths are typical elements of such services. Estate attorneys can provide further legal advice regarding these areas, and also prepare related legal documents.

Stockbroker

Stockbrokers, as aforementioned, may sometimes refer to themselves as “financial planners” or “investment advisors,” but in fact are more accurately described as salespeople employed by brokerage firms (“broker-dealers”), who sell stocks, mutual funds, and other securities on a commission basis. Thus, the more products sold or transactions made, the more they benefit—and while professionals in this area are heavily regulated and are most often quite scrupulous, there is an inherent conflict of interests and an incentive structure here that could result in sales that may not necessarily be aligned with clients’ financial objectives. 

Investment Advisor

Investment advisors are typically focused on the management of client investment portfolios and planning issues directly related to the securities and accounts being managed for the client. Such advisors typically collect a fee for ongoing management of the securities portfolio based on an annual percentage of assets under management. Their firms are regulated by either the states or the SEC (depending on whether they are federal or state registered) as Registered Investment Advisers (RIAs). While such investing arrangements tend to provide a much better alignment of the goals of the investor with the incentives of the advisor than a traditional stock broker’s compensation, if the associated fees are too high, they may provide a significant drag on returns in the long term (if not kept in check). In addition, compensation solely by this means is likely to lead to an over-focus on investing and a neglect of other financial planning issues.

Financial Planner or Wealth Manager

Financial Planners and Wealth Managers who are compensated based on either a fixed fee, retainer fee, or hourly rate fee have perhaps the most optimal incentive structure to provide the broad, comprehensive, concept-based solutions needed for fully coordinated multi-disciplinary financial planning and wealth management. Such professionals are free to think from the multiple perspectives of Investment Planning, Estate Planning, Business Succession Planning, and Fringe Benefits Planning, and may focus their energies on crafting and developing purely concept-based (as opposed to product-based) strategies to help clients achieve their short- and long-term goals. Like investment advisors, their firms are also regulated as Registered Investment Advisers (RIAs), and as such they are both required to act as fiduciaries with clients’ best interests in mind, and may be monetarily incentivized to do so (depending on their exact fee structure).