Tough Questions You Need to Have Answered First – Choosing a Financial Advisor in Tucson, AZ – Part 3

There are loads of articles out there about “questions to ask your financial advisor,” and those are really helpful. However, sometimes the tough questions are the ones that are the most important to get answered before you hire someone. Unfortunately, not everyone knows the right questions to ask. This can lead to some big mistakes.

Several years ago I ran into someone who had hired a financial advisor at a big bank. They had asked lots of questions about qualifications, the safety of the custodian, types of investments etc.

Unfortunately, the client didn’t ask was what brand of products the bank would invest their money in. The bank put all of their money into proprietary products owned and managed by the bank. A couple years later, the client wondered why his performance was lacking and realized that the bank hadn’t picked what they thought was best or even investments with the best track record, but rather what would make the bank the most profit.

This person’s theory was that you can’t go wrong with a brand name. While this might be true with tires, I would argue that bigger names in the financial advice industry actually have more conflicts of interest than smaller firms which can be bad for the client.

To help you out, here is a list of tough questions you need to ask. I call them tough questions because many financial advisors will squirm when you ask them.

Check out our video as well. In it, we go over some basic and some tough questions you need to ask.

The financial industry is REALLY good at hiding compensation. To me the first question you should ask is,

“How do you get paid?”

Don’t accept a vague answer to this one like, “I’m like a travel agent, If you buy this investment from me or straight from the company, there’s no difference, they just pay me a finder’s fee.”

You need to know whether the advisor gets paid on commission, by fee, or what?

“Do different products pay you differently or more?”

If some of the products pay the advisor more than others, how do you know you’re getting unbiased advice?

“Do you have proprietary products?”

I see this all the time. Someone has a portfolio with “insert big name investment company here” and every one of their holdings is in a company owned fund. There is no one company who is the best at everything in the investment world. That would be like saying Chevy makes the best pickup, sports car, hybrid, electric vehicle, midsize sedan, semi truck, etc. They may be great in one or two areas, but other companies are better in other areas.

“Are there any complaints about you or your firm?”

Just having a complaint against them should not disqualify an advisor. Even the best restaurants have negative reviews. However, you should be aware of the circumstances and the resolution of the complaint.

“What are your qualifications?”

The test I took that allows me legally to charge for financial advice took me less than a day of study to pass.

Just because someone is a financial advisor does not mean they know more than you. How do you know they’re qualified? In another article in our series, we go over some designations in the financial industry that show a commitment to further education in the field.

“How do you pick your investment recommendations”

If the guys back at corporate just make the recommendations and the advisor blindly follows them, what value really is the advisor? Why add a middleman?

“What is your investment strategy?”

This one makes me chuckle. A lot. More than half the people who come into my office with an existing advisor or doing it on their own cannot answer this question. And no, “To make money!” is not a strategy, it’s a goal. It’s like saying, “I’m going to Tahiti.” And not figuring out how to get there.

“Do you have sales goals/competitions/quotas?”

If your advisor will win an all-expense paid trip to an exotic island if they sell enough of product “X,” or if they don’t keep their job unless they make enough commission in a particular product every month, I would be very worried about how unbiased they will be.

“Are you acting as a fiduciary?”

This is a big one and in my opinion, it is the most important. A fiduciary has to put your interests ahead of his own and minimize conflicts of interest. It doesn’t mean they’re educated, or good at picking investments, but at least it means they’re on your team.

Even if you get satisfactory answers to these questions, it’s not unheard of for people to lie. Check out our other articles and videos for ways to double check these answers and make sure you can be confident of your choice of financial advisor.

In the next installment in “Choosing the Right Financial Advisor for You,” we cover some top questions you can ask potential advisors that will help you understand their business model and philosophy in detail.

See you there.

Understanding Designations – Choosing a Financial Advisor in Tucson, AZ – Part 2

It’s time to understand what those letters at the end of an advisors name really mean and if they matter…

Would you blindly trust just anyone to operate on you?

I sure wouldn’t.

If I was going under the knife I’d want to check out the team who had my life in their hands.

  • I’d want to know if they were qualified?
  • Did they have a history of success?
  • Is this even their area of expertise?

I might be fearful before going under, but the last thing I would want to worry about is whether or not I trusted their skills…

Can you imagine getting put under with that on your mind? No thanks!

The test I took that allows me to legally give financial advice took me about 3 hours of study to be able to pass. That’s it!

Just like that, a few weeks out of college, with no experience, I was able to call myself a financial advisor.

It takes more to become a barber!

So how do you know that a financial advisor even knows more than you?

This is where what I call “alphabet soup” comes in. There are many non-required courses and tests that professionals can take to earn designations and learn more about financial topics. These designations show that they are serious about their career. Not everyone takes them, but those that do, are at proving and enhancing their skills.

There is a popular Ad that came out recently. You can see it here.

It’s the one where the CFP® board has a DJ present financial plans to people to see if they would let him manage their financial life. And guess what? People do!

Yes, you heard me right, a DJ.

The tagline at the end goes “If they’re not a CFP® pro, you just don’t know…”

That’s why we made this video. To help you understand that it’s your responsibility to do research on the advisor’s you’re interviewing to see their history and qualifications.

We’ve all heard the horror stories from friends and coworkers about terrible financial decisions they or people they know have. What’s worse, many were led to those decisions by financial “professionals” whose advice they trusted and followed.

That’s why you need to do your research and make sure they’re qualified.

Though it isn’t always that easy.

It can be difficult to find good insight into someone’s qualifications without knowing where to go.

For instance, at The American College you can see just a few of the many different designations available.

No wonder it’s confusing.

To make things worse, not all designations are equally respected, and they certainly don’t mean the same thing.

Open Book Testing? Really?

I recall a designation I pursued over ten years ago that was focused on working with people in retirement.

If you read the study materials and prepared for the test like you were supposed to, there was good knowledge to be gained that would help you make better decisions for your clients. Unfortunately, it turned out that the testing procedure wasn’t as stringent as it should have been and many people were not studying at all and in fact were taking the test “open book.” They just looked up the answers as they took the test without actually learning anything.

While I thought that designation was in fact useful for the knowledge I gained, the people who took the test open book had as much right to use the designation as I did, but without having the underlying knowledge. That designation was eventually discredited, and I don’t believe it exists anymore.

Designations to Look For

Of the more common ones are the CFP® or Certified Financial Planner, the CFA® or Chartered Financial Analyst, and the CLU® or Chartered Life Underwriter.

But what does that mean? As I said before, not all designations are created equal!

For instance, the Certified Financial Planner mark requires a bachelor’s degree, college level financial planning specific coursework, and a 6-hour long exam. It also carries an experience requirement of either 4,000 hours of apprenticeship or 6,000 hours of professional experience related to the financial planning process. That’s a pretty hefty requirement no matter how you look at it.

The CFA® or Chartered Financial Analyst is a globally respected designation that requires a bachelor’s degree, 4 years of financial experience, and 3 tests that require over 300 hours of study each. In addition, the first test is only offered in June or December, and the second and third ones are only offered in June. It takes a commitment of several years after college to earn this designation.

But let’s also look at the course explanations.

The CLU® is all about:

“Protect clients, their families, and their business with the premier designation for insurance professionals”

Versus what it says on the CFP® Board’s site:

“The CFP® Board Center for Financial Planning seeks to create a more diverse and sustainable financial planning profession so that every American has access to competent and ethical financial planning advice.”

One’s about insurance, the other about financial planning.

Yet both will often call themselves financial advisors…

That’s why we create blog posts and videos like the following: “Should you hate annuities or love them.” We want people to understand the difference between insurance focused “advisors” and professionals focused on financial planning.

Does that mean they aren’t qualified? Not necessarily. But to us it’s synonymous with the “Law of the Instrument” by Abraham Maslow.

If all you have is a hammer, everything looks like a nail…

Insurance commissions are often much larger than those on other investments… what do you think they will push?

But I digress, in my opinion, I would argue that in most cases, any designation is better than none.

But it’s time to do your research, know your advisor’s history, and not just hire the first one you meet.

Look around, meet many, and choose the right one for you.

In the next installment in “Choosing the Right Financial Advisor for You,” we cover some top questions you can ask potential advisors that will help you understand their business model and philosophy in detail.

Start With Research – Choosing a Financial Advisor in Tucson, AZ – Part 1

It’s time for a better approach to finding an advisor. That’s what this post is all about.

We met an older lady who was interviewing another financial advisor and was impressed with his presentation and seriously considering hiring him. He had told her he had 11 years of experience, all satisfied customers, and was even going to manage her money for free since she was a friend of his mom.

Since she was a trusting person, she didn’t do any research and simply hired him based on what he said and the fact that he worked for a name brand firm.

Thankfully, her son was receiving copies of her statements and was monitoring her account. After a couple of months of the account going down, he became suspicious.

He did the research.

It turns out this advisor was working as a waiter less than 2 years ago, had several complaints on his record, and had charged his mother over $50,000 in commissions in just three months.

This shouldn’t happen to anyone.

That’s why we made this video. To help you understand that it’s your responsibility to do research on the advisors you’re interviewing to see their history and qualifications.

It can be difficult to find good insight into someone’s qualifications without knowing where to go.

A great place to start is Finra’s Broker check tool. https://brokercheck.finra.org/

Here you can look up a firm or an individual and see their work experience and licenses held if they’re a broker. You can also see if there are any complaints and often the results of those complaints.

If they’re not a broker, but an investment advisor, you can look them up at the SEC’s site. https://www.adviserinfo.sec.gov

If they don’t show up in either of those places, I would really worry if they are actually a financial advisor.

Just making those few clicks would have alerted this lady and saved her all of that strife.

Unfortunately, just that one step isn’t enough. Knowing that someone is properly licensed and doesn’t have a disturbing disclosure record isn’t enough to make sure that advisor is right for you.

You need to know more.

This is where you need to ask questions and research their background.

But it’s time to do your research, know your advisor’s history, and not just hire the first one you meet.

Look around, meet many, and choose the right one for you.

In the next installment in “Choosing the Right Financial Advisor for You,” we cover all about designations and what they really mean.

Take Advantage of Today’s Tax Rates with the Mini-Roth Conversion

In today’s blog post and video, we break down the correct way to take advantage of Roth conversions using today’s tax rates.

In our last video on Roth’s we talked about how doing large Roth conversions can be a disaster as it can severely increase your taxes.

Today we wanted to talk about when it actually makes sense.

The reason is simple, with today’s tax rates being the lowest we’ve seen in a while it may be advantageous for you to use the Roth conversion up to your current tax bracket.

If there is one nice thing to have it’s multiple buckets of money to pull from with different tax implications.

Ready to break it down? Watch the video to learn more.

Let’s recap:

Roth conversions can make sense to “make the gap” between your current income and the next level up when tax rates increase. For example, if you’re income was at $70,000 it might make sense to convert $30,000 in order not to bump up your tax rate.

You most likely can’t touch the money for 5 years but it can be beneficial down the road to have a tax free bucket of money to spend or pass along to your heirs.

Today’s tax rates could be going away soon. Don’t wait until it’s too late to take advantage of these conversions and make sure they’re done right.

  1. Planning for taxes is one of the most overlooked areas of financial planning and we want you to take advantage of it whenever possible.
  2. Roth conversion could be that advantage in today’s tax environment.
  3. If you need planning your retirement income and need to learn an often underutilized strategy, then head on over to our eBook and download it today.

You can go pick up a free copy by using the link below:

http://ironwoodfinancial.com/ebook-01-new

Like always, if you’re facing retirement and need a second opinion learn about what makes us different, we’ll audit your entire strategy to make sure you have the right tools to make your retirement as low risk as possible and still drive in a good income.

And if you want a further dive into some of the biggest risks with retirement planning then check out our webinar or download our ebook on taking income in retirement.

Annuity Case Study and What to Look Out for…

In today’s blog post and video, we break down how annuities can be abused by agents not held to a fiduciary standard. If you’ve ever wondered if you should be buying annuities on a regular basis then this video is for you.

If there is one thing that we see all the time it’s annuities being used incorrectly.

Maybe it’s just a product of the suitability standard, but this post today is to help guard you, your friends, and your families from situations that are usually not in their best interest.

What are we talking about?

Let’s break this down.

First off, we want to remind you that we don’t love annuities or hate them. It’s about when they get used and how.

Like we discussed in our last video on annuities, in today’s low interest rate environment, the internal rates of returns on these products can be pretty dismal even with all the riders and contract bonuses the insurance company is offering. So, you have to be careful about what you buy and how it’s used for your retirement.

And second, we want to show you some of the strategies being used that are often times not in your best interest and hope this isn’t happening in your portfolio.

It all comes down to “layers” of annuities using the free withdrawal provision

Let’s break an example down that sheds light on that subject and why we’re so passionate about this.

Let’s recap:

  1. Are you buying new annuities every year with your free withdrawal provision? This can destroy liquidity and create longer surrender periods than may have originally been planned.
  2. Is your advisor or agent a Fiduciary and doing this because it’s in your best interest? Or because it’s in theirs?
  3. WFiduciary advisors are required to do what’s in your best interest regardless of pay or commission. In the suitability standard brokers and agents are held to the best interest of their company. Which one would you rather have advising you?
  4. Audit your contracts and portfolios for these conflicts of interest before you make any more big decisions.
  5. Annuities perform the best in high interest rate environments which might not be happening any time soon.

Low interest rates are making retirement planning very difficult in today’s environment. Not only can fees eat you alive you need you need to avoid making emotional decisions. It’s up to you to go beyond “trusting” someone to help you. You also need to get proof and education on what strategies can work, how they can fail or backfire and what options you really have.

Annuities can be great and they can be terrible depending on your situation. But there are other options:

That’s why we created our free ebook.

It covers ways to drive income without relying on interest rates, annuities, or other high-cost and high-risk strategies all too common in today’s environment.

Like always, if you’re facing retirement and need a second opinion learn about what makes us different, we’ll audit your entire strategy to make sure you have the right tools to make your retirement as low risk as possible and still drive in a good income.

And if you want a further dive into some of the biggest risks with retirement planning then check out our webinar or download our ebook on taking income in retirement.

Should you hate annuities, or love them?

In today’s blog post and video, we break down how most annuities with all the fancy riders and big promises really work. Watch below to learn the truth.

Oh annuities…

If there’s one thing most financial experts are passionate about, its annuities.

And no matter if they love them or hate them, annuities always seem to drive controversy.

It makes sense, most of the marketing surrounding them is filled with misinformation and over simplified explanations that leave the consumer no better off than when they started. It’s like a magic trick. While they wave their right hand and make all the fancy promises they don’t show you what the left hand is doing.

We’re on a mission to change that.

At Ironwood we don’t love them or hate them. It’s about when they get used and how.

In today’s low interest rate environment, the internal rates of returns on these products can be pretty dismal even with all the riders and contract bonuses the insurance company is offering. So you have to be careful about what you buy and how it’s used for your retirement.

Let’s break an example down that sheds light on that subject.

In today’s video we’re going to break the basic types down then get into an example of why an annuity, in today’s environment, may not be the best thing for you.

Let’s recap:

    Annuities are usually broken down by deferred or immediate.

  1. Fixed and variable “deferred” annuities often come with Riders and other income provisions
  2. When they promise guaranteed growth rates the long term internal rate of return you can get over time is often glossed over.
  3. For instance: while you might get 6% for 10 years growing your “income value” to $160,000. That can leave you with a 5% guaranteed income rate of $8,000 a year. If you took $8,000 a year for 20 years after letting it grow for 10 first, your internal rate of return could be as low as .5%. Don’t let the long term interest rates get glossed over and do your research.
  4. Annuities perform the best in high interest rate environments which might not be happening any time soon.

Low interest rates are making retirement planning very difficult in today’s environment. Not only can fees eat you alive you need you need to avoid making emotional decisions. It’s up to you to go beyond “trusting” someone to help you. You also need to get proof and education on what strategies can work, how they can fail or backfire and what options you really have.

Annuities can be great and they can be terrible depending on your situation. But there are other options:

That’s why we created our free ebook.

It covers ways to drive income without relying on interest rates, annuities, or other high-cost and high-risk strategies all too common in today’s environment.

You can go pick up a free copy by using this link:

Like always, if you’re facing retirement and need a second opinion learn about what makes us different, we’ll audit your entire strategy to make sure you have the right tools to make your retirement as low risk as possible and still drive in a good income.

And if you want a further dive into some of the biggest risks with retirement planning then check out our webinar or download our ebook on taking income in retirement.

Will Interest Rates Stay Low Forever?

Are you losing money on your savings accounts and CD’s because of low rates and inflation? Then this video is for you.

Do you know how low interest rates affect you?

If you’re like most retirees or future retirees at some point you’re most likely going to have to drive income with your savings.

And in today’s low interest environment that can be tricky. When rates are low it not only becomes hard to drive a livable income from your investments, but in many cases, you can actually lose money in terms of purchasing power.

Losing purchasing power isn’t something many retirees living on a fixed income can handle and facing that burden can seem overwhelming. But we’re on a mission to change that and give you the tools to feel confident again.

If you’ve ever asked yourself:

Where interest rates are headed?

Will they stay low for the foreseeable future?

Can anything be done?

What are the risks?

Then this video is for you.

We’ll break down the current interest rate environment, what’s causing the situation and cover the pros and cons, so you can be more informed on your situation.

Let’s dive in:

Let’s recap:

  • Quantitative easing is all about driving up demand to keep interest rates low.
  • It’s being phased out over time, but we won’t know the long term affects until it runs its course.
  • You need to understand this environment because you don’t want to lose your purchasing power because of inflation.
  • It may be a good time to have a mortgage as rates are lower than they’ve been in a long time.
  • If you need income you have to start thinking outside the box as many “traditional” strategies aren’t working like they have in the past.
  • 2 dangerous products in low interest environments: fixed annuities and long-term bonds.
  • Make sure you review your long-term strategy to see what would happen if interest rates start to increase.

Low interest rates are making retirement a very difficult and tricky adventure for millions of retirees. When you can’t just live off of the interest you might be left wondering what strategies can help?

That’s why we created our free ebook.

It covers ways to drive income without relying on interest rates, annuities, or other high-cost and high-risk strategies all too common in today’s environment.

Like always, if you’re facing retirement and need a second opinion learn about what makes us different, we’ll audit your entire strategy to make sure you have the right tools to make your retirement as low risk as possible and still drive in a good income.

And if you want a further dive into some of the biggest risks with retirement planning then check out our webinar or download our ebook on taking income in retirement.

New Charitable Contributions Strategy For Minimizing Taxes Using Your Required Minimum Distributions

Did you know that the way charitable contributions are claimed for retirees is changing?

With the new tax plan in place, many people could soon lose the tax advantages of their charitable contributions.

Why?

Just check out this article: under the Trump tax bill, you’ll probably stop itemizing your deductions (http://nymag.com/daily/intelligencer/2017/11/under-the-trump-tax-bill-itemizing-deductions-will-drop.html)

But don’t fret, we have a strategy for retirees so they can most likely still get the tax deduction.

It all comes down to the way you take your RMD.

In this video we explain the strategy, so let’s dive in.

Let’s recap:

  • Remember this only works if you don’t receive the money directly,
  • Talk to your advisor and tax planner to see if this is possible for your situation.
  • If it is, make sure you coordinate your RMD with your custodian (who holds your investments) to tell them how you want your RMD’s distributed.

If the new tax plan has gotten you worried that it might negatively affect your retirement then we recommend you meet with your advisor and tax planner to see what options you have.

It’s better to know and have a plan than wait until it’s too late. So take action now.

Like always, if you’re facing retirement and need a second opinion learn about what makes us different, we’ll audit your entire strategy to make sure you have the right tools to make your retirement as low risk as possible and still drive in a good income.

And if you want a further dive into some of the biggest risks with retirement planning then check out our webinar or download our ebook on taking income in retirement.