Tuesday, January 31, 2017

3 Trends For 2017

Now that the elections come and gone and the market has had time to digest some of the initial policies and executive orders President Trump has put into action allow me to assess some of the predominate trends I see going into 2017.

Deregulation

Trump believes businesses and GDP growth will boom under his administration and he attributes much of this to deregulation. What does that mean? Regulations that have been placed on businesses of all sizes have been slowing them down to the point where their profit margins have diminished severely. Loosening the strangle hold of these regulations and all the additional costs associated with them is going to allow these businesses to reallocate that money in a far more efficient manner. The logic behind all this is quite simple; deregulation cuts costs thereby increasing profit, when businesses increase profits they take on additional work, when they take on additional work they need additional employees to service that work, when more employees are hired jobs are created which puts more money into the pockets of consumers to go out and spend in the economy. It's unknown how far President Trump plans to take this deregulation but I have heard him say a 75% reduction isn't all too farfetched. Such a drastic cut would have a significantly positive impact on any businesses bottom line.


Tax Reform

Did you know the U.S. has the highest corporate tax rate in the world among industrialized countries? Furthermore, did you know that our current tax code has more than 70 THOUSAND pages? Perhaps this is why tax reform is the next area Trump has been looking to help businesses boost profits. By and large one of, if not the most expensive cost to any business is the amount of taxes they are required to pay. By lowering the corporate tax rate in the United States we make it more attractive for corporations to do business here and it will add to the bottom line of businesses who already are. We want to increase competition in our country and incentivize corporations all over the world to come here and conduct business. Lowering the tax rates have a very similar impact as deregulation. Less money paid into taxes will allow businesses to invest more in other areas that will produce greater growth and in turn create more work that will require additional workers. Trump has said previously that he believes the tax code is far too complex and that complex nature is what allows the large multinational corporations to find and exploit loopholes.

Volatility

It would come as no shock to anyone if I said that Donald Trump is the most controversial, politically incorrect president we've ever had. He himself has even remarked that he considers himself to be unpredictable. Unfortunately, the equities markets hate uncertainties. The markets would much prefer a more status quo type of President in office because they know what to expect. President Trump has CEO's of major corporations proactively eliminating any potential reason he could find to call them out specifically. While I do believe it's good to have these executives on their toes I also don't want it to hinder them from doing what is best for their company and shareholders. Volatile markets could very much become the norm over the coming months/years. Wall Street loves a sure thing and Donald Trump is the polar opposite of that. With a simple tweet he has the ability to send any major corporation's share price and potentially the US economy into a free fall. So while I still believe the equity markets continue to deliver the best bang for your buck it's a, "proceed with caution" approach as we watch how he'll handle this new found power. Overall, I see President Trump as a pro-growth leader and believe the economy can fair quite well under him but his unpredictable nature certainly creates cause for concern.

I'm giving my blog readers exclusive access to my 5 Point Financial Plan completely FREE. The concepts in this plan are one's that I utilize in every new client meeting and set the foundation for proper financial planning. It's loaded with value and not something you'll want to pass up on. Click below to get  your own PDF version!



Tuesday, January 17, 2017

3 Reasons To Work With An Independent Advisor

As I'm sure most of you subscribed to my blog and email newsletter know, I'm an independent financial advisor. What this means is that I hold no loyalty to any company in particular. I'm free to use any investment companies, funds, or investment tools that I see fit. Furthermore, what this allows me to do is go out into the financial marketplace and select the best possible investment for you, your risk tolerance and the goal(s) you're trying to achieve.

There are other advisor out there who don't have the same freedoms that I do. They work for the big banks such as; JP Morgan, Bank of America and Citi or large wire houses such as; Merrill Lynch, Fidelity and Vanguard. While there's nothing wrong with being appointed exclusively with one company I believe it to be more advantageous to have the freedom of working with all of them as well as others. That's the luxury I have by being an independent advisor instead of representing one large company.

This leads me into the 3 main reasons I believe it is to your benefit to work with an independent advisor as opposed to one appointed by a large bank or wire house.
  • Unlimited Options: Why would anyone prefer to be limited in their investment selection when working with an independent allows you to choose from anyone? Sure, these large banks and wire houses have brand recognition and a war chest of money to reach any audience via advertisements but that doesn't mean they're delivering you the best investment product. As an independent I have the ability to use funds from; Fidelity, JP Morgan, Merrill Lynch, Vanguard and others but the most important part is; I'm not limited to them and only them! I have the ability to pick and choose the cream of the crop from every company and create one master account.
  • You're More Than a Number: Lets face it, if you walk into a big bank or major wire house with less than $250K in investable assets most won't even look at you twice. They're not interested in helping the common investor plan for retirement, fund a new home purchase, or save to put their children through college. Their ultimate goal is to get you in sell you their latest product with the highest margin and send you on your way. Wells Fargo was recently exposed for behavior in line with this, opening accounts without client consent, cross-selling investors on products they didn't need, so on and so forth. All of which was done to ensure profit margins continued to rise and sales quotas were always being met. In fact, a good friend I graduated with recently left a big bank where he was instructed to go after clients with no less than $200K to invest and if someone had less than that they were told to not "waste their time" dealing with them.
  • Personal Touch: If you work with a large institution or bank and do not know your advisor personally, try reaching them outside of business hours. More often than not they'll be nowhere to be found and wouldn't take your calls even if they were. Having a much smaller client base allows myself and the advisors in my firm to get to know each and every one of our clients on a personal level. We hold client appreciation events and bring in industry experts to speak directly with clients to help clear any uncertainty they may have over a particular investment. We aim our events at specific demographics as well thus ensuring the material or activity is found interesting and has value.

In summation, my intention is not to bash or talk badly about anyone working for a large bank or wire house. It's simply my opinion that there are better alternatives out there hence the reason I chose to go the route of an independent as opposed to representing a large outfit. If I had to make the decision again I would choose to do so 10 / 10. I enjoy getting to know each and every client; their hobbies, their families, their personalities and more.

I'm giving my blog readers exclusive access to my 5 Point Financial Plan completely FREE. The concepts in this plan are one's that I utilize in every new client meeting and set the foundation for proper financial planning. It's loaded with value and not something you'll want to pass up on. Click below to get  your own PDF version!


The views expressed are not necessarily the opinion of Woodbury Financial Services. Individual circumstances vary. Investing is subject to risks including loss of principal invested.  No strategy can assure a profit against loss.

Wednesday, January 4, 2017

3 Money Moves to Make in 2017

Being that we just rang in the new year I thought it would be appropriate to discuss a few ideas to help propel you forward into 2017. We've all heard the old adage "new year, new me" but it's my hope that this blog will give you real-life tips that will you allow you to start 2017 on the best financial footing possible.

#1 Pay Down Credit Card Debts
Yes, the holiday season tends to put a burden on all of us and more often than not we may make a few extra purchases on our credit cards that we wouldn't have otherwise. As I've discussed before the high interest rates associated with credit cards makes them a top priority as it pertains to your financial health. On average, a credit card will have an interest rate of 16% per year. This means, on a $5,000 balance you're paying $800/year just to carry that balance. There's no excuse to throw away $800 per year especially when you can redirect that money into other, more efficient areas. If you have no outstanding credit card debt then kudos to you but do consider other outstanding debts such as car and student loans and focus your time there. This was my reasoning for making this the first concept, I urge you to aggressively pay down any credit card balances you may have to start the new year off right.


#2 Open a Roth IRA
I hope if you've read some of my prior blogs you have done this already but I continue to meet new clients who still have not set one up yet. I want you to make this a top priority for 2017 and moreover I want you to make every attempt you can at maxing out your first years' contribution ($5500). Whether you have a 401k/403b or other savings plan at work is irrelevant this is something that absolutely needs to get done in 2017 if you haven't done so already. IRA's weren't always as important as they are today. While very few of us today are afforded the luxury of a pension plan, pensions did used to be the norm not so long ago. Once you couple your pension with your employer sponsored plan and social security most investors looked pretty good in retirement. Unfortunately most pension plans have disappeared and even if you do have one currently there's no promise that it will be around in 10/20/30 years when you retire, so please do not rely heavily on it. A Roth IRA is about taking your investments into your own hands with the freedom to select funds and diversify as you wish, so as to not be confined by the fund line up in your 401k plan. I've said it before and I'll say it again, this is a BIG deal and should be another top priority for you in 2017.

#3 Build Your Credit Score
Most people don't see it this way but your credit score can be a serious money saver when it comes time for you to finance a major purchase. While an 850 (perfect) credit score is certainly attainable it's far from necessary. The exact FICO credit score formula isn't certain but we do know the 5 categories that make it up.
  • Payment History (35%) - I know this isn't a shock to anyone but knowing that it constitutes more than 1/3 of your credit score should prevent you from making delinquent payments.
  • Amounts Owed (30%) - This is another big category and also one that I have a quick tip to share. The amounts owed looks at more than the total sum of all credit card payments due. It looks at the ratio of the amount you compared to the amount you're allowed to borrow. My tip is, open a few extra credit card limits that you don't plan to use (ones without annual charges) and cut them up. Why? This is a little trick that makes your ratio appear far more favorable than it would otherwise. This is because FICO sees that you have a total credit limit of $20,000 lets say, yet they also see that you never charge more than $2,500 a month. Now if you didn't have those extra cards opened up your credit limit may only be $10,000 making your ratio appear much less favorable. Do not go on an account opening spree though, you'll see why not further down.
  • Length of Credit History (15%) - This one is self explanatory and a factor that you have little control over. The longer you've been borrowing the better your rating will be in this category.
  • New Credit (10%) - This is determined by the amount of new accounts you open as well as how many you apply for. One or two inquiries won't do damage but if you're consistently opening new accounts or applying it could bring down your score.
  • Credit Mix (10%) - While many do not know this 1/10 of your score comes from the allocation of your credit. Student loans, credit cards, a mortgage and car loan could actually boost your score slightly as compared to only have one or two of those.

I hope that I've given you a few ideas that can help put you on firm financial footing for the coming year. Small changes are all it takes to break old habits and even something like putting $100 a month into an IRA could have a big impact on your financial health in the future.
credit: Matthew Frankel