Finance

The Benefits of Having a Financial Advisor on Your Side

May 31, 2019 by The Inside Press

In today’s complex and volatile markets, making sound investment and financial decisions is a challenge. Investing on your own can be complicated, overwhelming and risky. In fact, studies have shown that self-directed investors can often be their own worst enemies, entering and exiting the market at inopportune times in reaction to market movements that make them uncomfortable or emotional.

Steps to Successful Investment

Successful investing involves fortitude and a focus on the long term. The first steps you can take toward minimizing the likelihood of costly mistakes are:

1. Understanding the emotional and behavioral factors that contribute to investor pitfalls

Psychology influences the choices investors make, such as how often they trade and how they make buy-sell decisions. Common psychological blind spots include:

Overconfidence – assuming you know more than you do.
Mental accounting – consciously or unconsciously dividing your wealth into separate buckets.
Anchoring – fixating on past prices, such as what you paid for a particular stock.
Loss aversion – putting more emphasis on avoiding losses.

2. Defining your goals and developing a plan–and an asset allocation–that helps you reach them

Having a plan and sticking to it can help you avoid making emotional decisions.

3. Having the discipline to stay the course as markets fluctuate

Some investors try to time the market by moving in and out of it. Professional advice can help keep you focused by taking emotions out of the equation.

Your Financial Life Is More Than Just Your Investments

Over the past few years, the proliferation of robo-advisors that provide digital financial advice based on algorithms has received significant buzz. While robo advice offers a low-cost entry into investing, it also comes with little to no human intervention. Instead, an asset allocation is generated from an investor’s answers to an online questionnaire. But, how you value money–and what you believe about money–cannot be captured or solved by mathematical rules or algorithms.

The bottom line is that you want advice that connects with your thinking, experiences and beliefs around money.

If you’re deciding among traditional Financial Advisors or robo-advisors, consider the following:

What is most important to you at this stage of your financial life?
How confident are you in your financial knowledge?
Are you able to take emotions out of your financial decision-making?
What are the financial complexities that you currently face?

If there are complexities in your financial life–debt, children, employee benefits, major life events, estate and tax issues–you may want to consider choosing a traditional Financial Advisor who can help you customize a plan that is tailored to your specific situation.

And, keep in mind that reaching your goals often involves going beyond investment advice to include conversations about estate and wealth transfer planning, risk management and even your philanthropic aspirations.

By working with an experienced Financial Advisor, you can have the best of both worlds–the freedom to make your own investment and financial choices, but with the guidance of a professional who understands your unique needs, improving your chances of achieving your goals.

Disclosures

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Richard Bloom is a Financial Advisor in 1290 Avenue of the Americas, New York, NY 10104 at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at Richard.Bloom@morganstanley.com or by telephone at (212) 893-7597.

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Asset Allocation does not assure a profit or protect against loss in declining financial markets.

Richard Bloom may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where he is registered or excluded or exempted from registration, http://brokercheck.finra.org/Search/Search.aspx.

Top 10 Financial Tidbits

June 3, 2017 by The Inside Press

BY SCOTT M. KAHAN CFP®

Join your company’s retirement plan and try to contribute as much as you can. Make sure you are contributing enough funds to get the maximum matching contribution from your employer.
One of the greatest gifts you can give is to help pay the education costs for your grandchildren. Any gifts, regardless of how large, made to anyone for the purpose of funding education, do not incur gift taxes as long as the payment is made directly to the educational institution.
Update your estate planning documents. Protect your health and your wealth with a health care proxy and durable power of attorney. Make sure your will and trusts leave money to the correct people.
Maximize your tax deductions. Donate items you don’t need to charity. If you expect a large income tax refund, change your withholding tax so you get more per month in your paycheck and less of a refund.
Buying low and selling high is a lot easier said than done. Have a solid rebalancing strategy in place that helps take the emotions out of investing.
A shorter mortgage isn’t always better. Consider taking a long-term mortgage, and then make additional payments when you can. If things become financially “tight,” you can stop making additional payments.
Protect tangible assets with the right amount of homeowners, automobile and liability insurance for liability and disasters.
Withdrawing retirement plan assets before age 59½ may lead to a 10% penalty; not withdrawing enough after age 70½ may lead to a 50% penalty. Moral of the story? Know when to make withdrawals.
Pay yourself first. As you set your budget each month, set aside money for savings and fixed expenses first. What’s left over can be used for other purposes.
Like regular checkups with your physician, regular reviews with a Certified Financial Planner professional are important to your financial “health.”

Scott M. Kahan, is a Certified Financial Planner® professional and President of Financial Asset Management Corporation, a fee-only wealth management firm located at 26 South Greeley Avenue in Chappaqua. Call Scott Kahan at 914-238-8900.

Getting a Strong Start to 2017

March 5, 2017 by The Inside Press

BY SCOTT M. KAHAN

With the stock market hitting record highs, potential interest rate increases and the ongoing uncertainty as to what is going on in Washington, now is the time to organize. Here are a few quick things to address to get started.

Review your portfolio.

With the rally in equity prices, it’s probably a good time to review your asset allocation. A simple way to re-balance your portfolio is to first set what percent of your portfolio should be in each asset class. Then when reviewing your portfolio, the sectors that have gone up will be over weighted and should be reduced, while the underperforming sectors will be under weighted and can be added to. If you follow this practice, it forces you to sell high, buy low and take the emotions out of investing.

Review Your Taxes and Cash Flow.

If you are getting large tax refunds each year, review your withholding. Financially, it’s actually better to get a small refund or owe a small amount. When you get a refund, it’s your money being returned to you with no interest. In other words, you gave the government an interest free loan. Adjust your withholding or estimated tax payments to ensure you are not over or under paying your taxes by too much. Then look to see if you are fully funding your retirement plans. If not, use that extra money each pay check to fund your retirement plan. The retirement plan contribution usually is tax deductible thus saving you even more in taxes.

Review Your Estate Planning.

When was the last time you looked at your wills and other estate planning documents? Make sure all beneficiaries are in place in retirement accounts. Review to make sure you have named guardians for minor children. If you have avoided setting up your estate plans, now is the time to address this important issue.

Paying for College 101

August 25, 2016 by The Inside Press

By Scott Kahan

As a financial planner who has worked with many clients over the years figuring out how to pay for college, and as a parent who has sent two Greeley graduates to college, January 1st was never a date to look forward to. Just the uttering of the term FAFSA will send many parents into a panic.

For high school seniors who will be entering college in the fall of 2017, the quest for financial aid is beginning and FAFSA is a term you will get to know quickly.

What is the FAFSA?

The short answer is that the Free Application for Federal Student Aid forms, commonly referred to as the FAFSA, are the forms that are filed each year to be eligible for financial aid. Many parents tell me that since their child will not be eligible for aid, they don’t need to bother with the forms. Assuming that you have saved enough for college and will not need to borrow money, then you may not need to file the forms. On the other hand, if you are like many families that will either need financial aid and/or need to borrow, you will still need to file the FAFSA forms to be eligible for some of the loans offered for both parents and students.

Big Changes Coming

The main reason for the struggle each year is that when you file the forms in January, you have not even filed your tax returns, let alone received your W-2s, 1099s and other financial information needed from the prior year.

At the start of the 2017-2018 college year, the FAFSA forms can now be filed as of October 1, 2016. The good news is that since this is a transition year, you will use your 2015 financial information. For those with returning students, you will again use your 2015 financial information that you used when you filed earlier this year. If this is the first time you file the FAFSA, you should already have all the financial information you will need from 2015.

Going forward, you will use the prior year information. For example, for the 2018-2019 school year, the forms will be filed starting October 1, 2017, using 2016 information.

Get started early and don’t panic!

Five Biggest Financial Mistakes Made During a Divorce

August 25, 2016 by The Inside Press

By Ilene Amiel

Divorce is a stressful time. It’s hard to think clearly and be organized when your life is turning upside down. Once you decide to divorce, you begin a process new to you. I tell my clients that getting divorced is like playing a board game that doesn’t come with instructions. You’re not sure what to do, how the game works, what the rules are and how to win (or not lose).

You hire a lawyer or mediator and hope that he/she will help you get a fair settlement. From a legal standpoint, you may be in good shape. But from a financial standpoint, you really need to understand the game. Not understanding your finances can cost you a lot of money and affect you and your children for the rest of your life.

The five biggest mistakes that people make involve budgeting, taxes, medical insurance and credit score management. Here they are:

1. Underestimating Budgets

The most important documents that you will be required to prepare are the Financial Affidavit aka Statement of Net Worth and a monthly budget. Your attorney can help you put them together but, ultimately, it’s up to you to provide accurate and complete information in each category; these will be the basis for negotiations and for the courts. The challenge is to create detailed financial documents based on dozens of line items to properly reflect your assets, liabilities and monthly expenses.

You must include every single expense even if it occurs only once or twice a year. Unexpected expenditures that arise such as appliance, home or car repairs along with unforeseen medical expenses have to be included. Although the Statement of Net Worth and budget can be revised, once you have submitted your final documents, your lawyers will use them to negotiate a settlement. If you underestimate your monthly expenses, you will have to deal with it once the divorce is completed.

2. Misunderstanding Marital Status on Tax Returns

If you’re in the middle of a divorce on December 31, and you both agree to the filing, you can file a joint return. However, once the divorce is final, the IRS considers you divorced for the entire year. You must file as single or head of household (if you have custody of the children). The reason this is important is that generally filing jointly provides the most beneficial tax outcome for most couples. If one of the spouses owes taxes, it could be considered a marital liability. I highly recommend that you consult with your CPA or tax preparer. He/she can review your previous returns and evaluate the current situation to choose the best financial option.

3. Forgetting about a Maintenance Tax

The second issue that is often forgotten is tax on maintenance (aka alimony or marital support). Maintenance is taxable as income to the recipient and tax deductible for the payor. Many people neglect to save a percent of their monthly payment for taxes and then need to come up with a large payment on April 15. You do have a choice and for some couples, the tax consequences are more favorable if they make payments nondeductible and nontaxable because of tax consequences.
Taxes are an ongoing obligation and need to be planned for during the year.

4. Inadequately Researching Medical Insurance

Once your divorce is final, each spouse will be responsible for their own medical insurance. For those individuals whose spouse was insured by an employer sponsored plan, COBRA allows for you to stay on the same plan as you had when while married for three years post divorce. With the costs of insurance changing constantly, it is best to research the options before the divorce is final in order to determine the most cost effective plan to meet your needs.

5. Failing to Check Credit Rating

And now, the last but not least most important mistake that divorcing individuals make: not checking and understanding their credit rating.

Your credit rating is used to determine what rates you can get on loans, lines of credit, car leases and credit cards. While you were married, anything in a joint account or jointly owned will be reflected on your individual credit report and score. Before your divorce is complete, you should get a copy of your credit score and report from all three reporting bureaus–Experian, Equifax and Trans Union. If your credit score is low or contains errors, now is the time to fix it. If you have late payments on your report, they can remain on there for seven years.

You need to fix these mistakes on the reports and learn how to improve your score so you will have the highest rating possible as you move from a married person to a single person with your own identity.

Ilene Amiel is a CDFA (Certified Divorce Financial Analyst) who helps divorcing individuals with the financial aspects of their divorces. For more information about Ilene, please visit divorcefinancialconsultant.com or call (914) 980-0898.

Finance

Top 10 Financial Tidbits