Things that Frighten Me... as an Advisor

Things that Frighten Me… as an Advisor

I hate snakes.  My wife hates spiders.  We make a great team.  I can save her and she can torture me.  Beth is extremely scared of spiders, even small ones.  She has a unique set of screams corresponding to the spider size that I have learned to decipher over almost 15 years of marriage.  A few weeks ago, Beth caught a snake in the woods behind our house and called me at work to tell me we had a new “family pet”.  Let me be clear, that “pet”, upon my arrival home from work, was quickly released back to the wild (by her).

Over the years, readers of Stewardship Cents have learned that I love the Fall season and also occasionally giving others a little scare around Halloween time.  Somehow my kids now, all throughout the year, regularly try to scare each other and their parents.  Who taught them that?!  There are a few things that scare me besides my 7 year old jumping out of his closet.

What Frightens me as a Financial Planner and Should Frighten You as Well

Not enough Life Insurance or none at all

This is a basic planning strategy but often lacking for most families.  Life insurance is affordable for most people and provides protection for your loved ones.  For many families, having $1 Million dollars of death benefit still isn't enough.  Really!  I can explain why.

Unsure where the Money Went

Whether you make $35,000 a year or $35 Million, everyone has to have a budget.  You have to know where your money went (expenses) and why the money was spent on that item(s).  This information enables you to be a good steward of the resources you have and allows you to live within your means.

Lack of a Good Financial Plan

So, where are you going financially?  A simple question, but often unknown by most families... that is SCARY.  Is the direction you are headed where you want to go and will you be happily or sadly surprised when you arrive?  Ask yourself these questions; what do you truly value and what is important to you today and what will be important to you tomorrow?  This is why a financial plan is necessary for everyone.

Avoiding Stocks

The media has done a good job of making people scared of stocks due to the volatility seen in recent years.  However, the truth is...volatility is a normal part of the market and other major investment categories like metals (gold/silver), bonds and currencies- can often be even more volatile than stocks.  Stocks over longer time-frames of 7+ years typically provide good returns and help maintain your purchasing power.  In my opinion, everyone, even retirees, need a healthy portion invested in a diversified portfolio of solid, large company stocks.  Good financial planning helps highlight this need over a lifetime.

An Estate Plan that only consists of Dying someday

If your only plans for your estate is that you will die, well it may be a little short-sighted.  Who do you want to inherit your money and assets?  Do you have specific wishes for your loved ones and charitable organizations to follow?  Have you ever heard of probate court?  You want to avoid it.

No Personal Disability Policy

Disability is more common than most people think, especially short term issues.  Often employers provide some coverage, typically 60% of salary but it is almost always never enough.  Sixty percent sounds decent but after taxes it is a far cry from your family's regular income.  You need a supplemental policy to fill this gap of lost income.

Expectation that Social Security will be your Retirement

Social Security is currently solvent and a major portion of most retirees' income.  However, 15 or 20 years from now social security will likely look rather different for new enrollees.  You can't count on it to be there and it will not provide a comfortable retirement.  You have to save for yourself and whatever benefit you may receive from Social Security can be the "icing on the cake."

Here is the Truth

The truth is that each of these frightening scenarios can easily be resolved through discussion and proper planning.  I understand that it can be hard to address these topics; sometimes it is hard to find time, gain agreement from your spouse, admit that these issues exist or simply it can be difficult to determine who you can trust.  It is my joy to assist clients and new people I meet with these issues and many more planning strategies.  With over 35 years in the business, our firm is well-positioned to assist you or someone you know. 

So don't be frightened any longer, let's face these fears together.  No snakes though.

Luke Fields, CFP®

READ more Stewardship Cents here... 

Any opinions are those of Luke Fields and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance may not be indicative of future results.

Do you have a Gap? ...in your insurance coverage

Do you have a Gap?

My question has nothing to do with your teeth, I am not a dentist.  It actually is about the coverage gaps in your insurance...which may be just about as equally exciting to you as a root canal.  Like it or not insurance of all types are required for a well-balanced financial plan of protection: home, auto, life, disability, business, dental...you get the point.

Insurance can cover a wide variety of activities and professions.  For example, Germany who just won the 2014 World Cup, has an insurable estimated value as a soccer team of over $1.01 Billion (Lloyds of London).       

Common Gaps 

Jokes aside, insurance is the foundation of your financial plan and protecting your family.  It serves as protection for your income, wealth, business continuity and estate plans.

Here are some important gaps to consider closing:

No life insurance beyond your basic group coverage.

Basic life plans offered thru work are usually 1x or 2x your salary.  You probably need close to 8-10x your salary in life insurance.

Not enough protection on your earnings.

If you are disabled and unable to work, your finances could suffer quickly.  Group Long Term Disability offerings thru work are usually only 50-60% of your salary and that benefit is then taxed, leaving you with a large income gap.

Not updating your Homeowners regularly.

Enjoying the recent home renovation or addition?  Your actual home replacement cost if damaged just increased.

No coverage on your valuables.  You can easily add jewelry, collectibles, furs, artwork and others as what are called "inland marine endorsements." This will provide the right amount of coverage whether destroyed, misplaced (lost) or stolen.

No Umbrella policy.

This is personal catastrophic liability coverage that protects you above and beyond your basic home and auto policies.  It is relatively cheap ($150 to $200/year) to add to your current policies.

No proper plans in place at your business.

Is there enough money for your business to cover overhead expenses if something happens to you?  What if your business partner passes or becomes disabled?  Drafting sensible business continuity insurance is a necessary protection for your business' value, your employees and your estate.

Addressing insurance gaps is an essential part of any good, comprehensive financial plan.  They need to be identified, reviewed and updated regularly.  Contact your property and casualty agent for the home and auto items (I am sure they will thank me for these thoughts...).  I will be able to assist with the rest.

As always, I am here for any questions.

To Your Financial Planning,

Luke A. Fields, CFP®

About Stewardship Cents  Stewardship Cents exists to Educate, Entertain and Enhance the financial wisdom of all who read it.  Everyone needs to be wise with what has been entrusted to them and common sense can help us be good stewards of all that we have.  Stewardship is a belief of responsible overseeing and protecting of important resources. Luke Fields is Vice President of Foley & Foley Wealth Strategies, An Independent Firm, that has been based in Worthington, Ohio since 1981.  A graduate from The Max M. Fisher College of Business at The Ohio State University, Luke is a CERTIFIED FINANCIAL PLANNER™, holding his Series 7, 66 and Ohio Life, Health and Variable Annuity Insurance licenses.  He resides in Columbus, OH with his high school sweetheart, Beth and their three children.  Luke is an active member of his church, serving in leadership and finances. Follow additional insights and connect on LinkedIn, Facebook, his blog or Twitter. You can always reach him with comments or questions at:luke.fields@raymondjames.com. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC

Buyer Beware... of the financial Salesman

Buyer Beware

I relish in opportunities to be a "big kid."  Halloween time is the perfect example of just that.  When else can you put on your favorite costume, use a whole can of hair spray to spike your colored hair like a rock star or don a Chewbacca mask?  My kids love seeing their dad act unlike his usual self....  It's the perfect time to pretend to be someone (or something) else.  You don't always know who is under that costume.  You know I had to include a picture of Chewbacca....

Beware... of the Financial Salesman

Costumes are also worn in the professional world of finance.  Have you ever been sold something to later wonder what did you just buy?  One of my favorite warnings for people is about "the financial salesman" (or saleswoman).  Beware, they can be scary.  Often they look, act and even say the same things as an advisor but there are some major differences.  Unlike a trusted financial advisor who should always seek your interests first, a salesman is usually controlled by a large corporation or investment firm that may encourage them to sell certain products by linking the sales of these products with compensation.  Thus many consider what benefits them first, before the client.  Many so-called "advisors" have worked this way their entire career, finding it difficult to change.  Today, at some firms similar training still continues of their employees, even if it is more discreet.  If a product is bought with them, a large commission is deposited to them and then there may be little ongoing incentive to advise that client.

Unfortunately Common

It is common to meet new people seeking an honest 2nd opinion after they have already bought a product.  Many of them were sold a product by a salesman which they really didn't understand and many find that the product was not really appropriate for them.  When this occurs, typically I find the products sold to them are annuities and/or various life insurance policies.  Don't get me wrong, not all of these products are bad and they definitely have their appropriate uses.  Annuities can be a good option for certain people, but it deeply depends on the guarantees offered as well as other benefits, risks, and the overall suitability of the product for the client.  Historically, there have been some good products in the past but I haven't really found many compelling benefit concepts since 2008.  However, if I found a good guarantee offer I would consider it for a portion of a client's financial plan.  Some newer products have very complex intra-workings for the average person to understand.  "If you can't sell them, confuse them" -into buying comes to mind.  Many annuities have very high annual expenses, limited investment options to choose from and they can carry significant surrender charges if you want to surrender early.  Here exposes a huge difference between the advisor and the salesman.  These types of products can often pay big commissions and this may lead a salesman to sell a product to many individuals for whom it may not be appropriate.  While a trustworthy advisor considers the big picture and provides all reasonable options with the pros and cons of each, followed by a recommendation for what is best for the client's goals.

A compelling and fair way for clients to work with a financial advisor is with a trusted advisor who is both independent and offers a fee based arrangement.*  This is so whatever investment or product is used, the advisor is not compensated by a commission on the sale of a product, but rather with a fee that is charged based upon a percentage of assets managed and also importantly is not required to sell proprietary products since they are independent.

Be In the Know

• Always make sure you ask and understand how an individual is being compensated (this holds true in any industry for that matter).

• If a product  does seem appealing, always make sure you understand what you are being asked to buy and why you need it in your overall financial plan.

• Make sure you know who may or may not influence an advisor's recommendations.

• Ask for help in the form of a 2nd opinion before you buy and even after.  Currently some insurance companies are offering contract updates to allow them to avoid paying certain benefits.

• Consider working with an independent, fee based advisor.

Luke Fields, CFP®

*Advisory fees are in addition to the internal expenses charged by mutual funds and other investment securities. To the extent that clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. A list of additional considerations, as well as the fee schedule, is available in the firm's Form ADV Part 2A as well as the client agreement. Any opinions are those of Luke Fields and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors. Guarantees are based upon the claims-paying ability of the issuing insurance company.

 About Stewardship Cents 

Stewardship Cents exists to Educate, Entertain and Enhance the financial wisdom of all who read it.  Everyone needs to be wise with what has been entrusted to them and common sense can help us be good stewards of all that we have.  Stewardship is a belief of responsible overseeing and protecting of important resources.

Luke Fields is Vice President of Foley & Foley Wealth Strategies, An Independent Firm, that has been based in Worthington, Ohio since 1981.  A graduate from The Max M. Fisher College of Business at The Ohio State University, Luke is a CERTIFIED FINANCIAL PLANNER™, holding his Series 7, 66 and Ohio Life, Health and Variable Annuity Insurance licenses.  He resides in Columbus, OH with his high school sweetheart, Beth and their three children.  Luke is an active member of his church, serving in leadership and finances.

Follow additional insights and connect on LinkedIn, Facebook, his blog or Twitter. You can always reach him with comments or questions at: luke.fields@raymondjames.com.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC

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Now This IS a Scary Story (Why you need insurance)

Now This IS a Scary Story By Stewardship Cents Newsletter, click here to subscribe.

First a funny story

Our family's favorite time of year is the fall, enjoying the crisp air, apple picking, kid's sporting events and the beautiful foliage.  We also like Halloween.  When else can you dress up completely ridiculous and not have to explain a thing?  I am always amazed how many neighbors you meet on trick or treat night.  I am a big kid at heart and enjoy a good scare.  For several years in a row I would scare my neighbor across the street with my Sasquatch mask.  One year was epic.  She had decided to stay inside her house because she learned from my prior 3 years' antics.  Her mistake was she decided to sit at her kitchen table with her back to their sliding glass door, unlocked.  With her husband's full permission, I quietly opened their door and perched my mask just over her left shoulder, waiting for her to turn her head just enough.... The scream was heard down the street even with doors closed!

Ok here is the real story

It's the scary story of an unprepared family, with a widow facing the recent death of a spouse, leaving a mortgage, debt and dependents to care for.  We are not guaranteed tomorrow.  Sickness or tragedy can sadly strike in the blink of an eye.  When a financial mess is left behind, the normal period of grief and stress from the passing of a loved one can be greatly compounded spanning a prolonged duration.

Life Insurance is a basic and essential principle of financial planning.

No one likes to discuss death, I get that.  However, it's important to be prepared for the uncertain.  Maybe you say "I'm single and don't have any children, so I don't need life insurance."  Think again.  Just a small relatively inexpensive policy of $25,000 is a blessing to help your family with funeral expenses.  It is true that some people reach a point in their lives that insurance is too expensive given their age or a particular health related issue.  Others may have done a great job accumulating assets and living debt free that they then can self-insure through their savings.  Unfortunately, the truth is many people if they even have insurance, are severely underinsured.  Insurance can be affordable especially when you consider the risk for your spouse and kids of not having it.

Insurance can provide an income stream for your spouse, money to pay off the mortgage/other debts, funding for your children's college education and even a financial legacy to pass on.

What to look for...

Buy Term. Typically (except for unique situations), term life insurance could be your best option.  It provides the most coverage at affordable level premiums and it can be re-shopped at any time for better rates.  Term also helps free up cash you could have spent elsewhere, such as investing.

Choose the proper coverage.  The proper amount of coverage on you and your spouse's life should be calculated based on your needs not simply a multiple of your current salary or on an employer's group plan.  It is flexible, but has to be selected appropriately.

Choose the right provider.  Life Insurance is offered everywhere from automobile clubs to alumni associations.  However, choose a qualified professional who will consider your unique situation and full financial goals.

Keep your coverage updated.  With new babies, a new mortgage, job change or retirement insurance plans need to be revised.

For more informaton on choosing insurance click here

Any opinions are those of Luke A Fields, CFP® and not necessarily those of RJFS or Raymond James.

About Stewardship Cents Stewardship Cents exists to Educate, Entertain and Enhance the financial wisdom of all who read it.  Everyone needs to be wise with what has been entrusted to them and common sense can help us be good stewards of all that we have.  Stewardship is a belief of responsible overseeing and protecting of important resources. Luke Fields is Vice President of Foley & Foley Wealth Strategies, An Independent Firm, that has been based in Worthington, Ohio since 1981.  A graduate from The Max M. Fisher College of Business at The Ohio State University, Luke is a CERTIFIED FINANCIAL PLANNER™, holding his Series 7, 66 and Ohio Life, Health and Variable Annuity Insurance licenses.  He resides in Columbus, OH with his high school sweetheart, Beth and their three children.  Luke is an active member of his church, serving in leadership and finances. Follow additional insights and connect on LinkedIn, Facebook, his blog or Twitter. You can always reach him with comments or questions at: luke.fields@raymondjames.com. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC

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