Retirement Thought Leaders (eBook)

A Modern Guide To Retiring In The New Economy

Mark Edward Gaffney (Autor)

Henry DeVries, Don Sevrens (Herausgeber)

eBook Download: EPUB

2020 | 1. Auflage
200 Seiten
Indie Books International (Verlag)
978-1-947480-99-5 (ISBN)

Infos

In this modern economy, retirement planning can be a complex task. Every retirement plan needs to be unique. When you meet with a financial advisor, what are the right questions to ask? This book is designed to be food for thought. The information is for retirement education purposes only. Naturally views differ amongst professionals, and these eight authors do not necessarily agree with each other and do not necessarily endorse the views of the other authors in the book. If expert retirement assistance is required, the services of appropriate financial, accounting, and legal professionals should be sought.

Textauszug

1

The Firm With A Different Approach

By Billy Evans

Everything about the way I entered the investment management field and how I created my firm was different—from the very beginning.

I don’t get bogged down in details; I want to spend all my time helping clients. The approach is not something you will find elsewhere, to my knowledge. It makes our firm distinctive—and successful.

I’m Billy Evans, head of Evans Financial Services based in Marion, Virginia. My firm consists of four friendly support staff and myself.

Consider what makes Evans Financial Services distinctive:

My background. I grew up on a cattle farm in southwestern Virginia and my family owned a wholesale beer and wine distributorship. (That made me quite popular in high school for about six weeks until the kids realized I could not show up at parties with ten cases of beer). I had been interested in finances and planning but suddenly I inherited the process and details of selling the family business and investing the proceeds. That evolved into a career path with an industry veteran becoming my mentor.

My timing. I opened in 2008 during the Great Recession. People were fearful, even panicking. The task at hand was to calm them down and to reduce the volatility decimating their portfolios.

My business model. I wanted to spend my time helping and educating clients and creating customized portfolios for them—portfolios based on their needs and risk tolerance, designed to meet their goals in good times and bad. I found a Registered Investment Advisor who shares my philosophies and takes the compliance specifics off my plate, leaving me more time to spend with my clients. I researched many portfolio managers, talked with them and narrowed down to about one dozen whom I liked. They used a tactical investment style I feel is important in portfolio management. I am constantly monitoring them, and their strategies, and I keep abreast of new managers who come along. It’s amazing what one man can accomplish starting with a blank canvas and not being bound by any “we’ve always done it this way” constraints.

Baby boomers (those born between 1946 and 1965) are the bulk of our client base. They are at two stages: the ones pondering retirement and wondering if they can afford to, and the ones having made the decision and wanting a game plan.

Those who come in for preretirement interviews often walk out with something they did not expect. The interview is a good opportunity for us to create a plan for when they do retire. Some joke about being just one bad day away from choosing retirement, so most need several scenarios to choose from, and different routes to take if life changes.

We have found that after we have done the planning, we often can tell them that with their lifestyle they can retire next year. Yet, these people often end up working two, three, or four years longer than they planned. We have given them peace of mind. They can work because they want to, not because they have to. It takes the stress out of their situation.

Of course, some have not saved enough to retire. We tell them they may have to work a year or two longer than anticipated. Or, they may consider maximizing the income potential within their plan or making a change in their lifestyle and retirement spending.

Boomers who already have decided to retire go through a two-step fact-finding and interview process similar to the norm. We don’t have an account minimum—I have a hard time saying no to someone in need—but the bulk of our clients have $400,000 to $600,000 in assets up to a couple of million.

The interview process and the emphasis on their goals and their risk tolerance are close to the norm. As for the products we choose and as for conforming to established formulas—well, there we go again being different.

You’ve probably heard that portfolios should be split between so much bonds, so much stocks, and adjust the proportion as you age. The standard thinking is that different asset classes, say bonds and stocks, may move in different directions or with varying intensity as the economic cycles change. We have concluded from our research, however, that in times of severe economic stress, say the twelve to fifteen months around the dotcom crash in 2001 and the Great Recession in 2008, bonds have not been the safe haven everyone expected. Bondholders suffered too.

As a matter of fact, bonds may not be our first choice among fixed-income products, but that is a separate conversation.

We educate clients that the conventional wisdom of holding certain assets through good times and bad may not be the best course for them. Baby boomers, you see, are going to be the first generation to live statistically twenty to thirty years in retirement. Some may actually spend more years in retirement than they worked.

Clients want to know if they will have enough money to last through retirement. A simple flash test that some advocate is to take a figure, say 80 percent of their current income, and see if a retirement portfolio can be created to match or exceed that level.

We get to that number in a different way. We ask clients about what they are spending their money on and their sources of income. We are trying to pin down how much money they need month to month. Does the plan meet their risk tolerance? Will they have the core cash they need and a way to get funds for emergencies? We don’t want them to have to change their lifestyle just because of finances.

As I mentioned, boomers will be spending decades in retirement. By the time they quit working, many have paid off the house and their cars. But when you look at the prospect of living for another twenty-five or thirty years, you are going to be buying replacement cars, you are going to face home repair or remodeling bills. Not to mention travel expenses when you have the freedom to go where and when you want. Statistically, we know that people will spend a lot more money annually from sixty-five to seventy-five, the go-go years, than they will from seventy-five to eighty, the slow-go years.

By now, you know that I want to spend my time with clients, not tending to details and distractions. That is why I came up with the concept of using portfolio managers to handle client accounts according to strategies—usually rule-based strategies—that are flexible enough to adjust if markets take a sharp downturn.

Here’s how the process works.

I favor eight to ten strategies of the hundreds available. Often the managers we use already have created a rule-based system. Sometimes there are algorithms involved in the system. The analogy I use is that we operate like a nurse or doctor in a hospital, checking the patient’s vital signs constantly. So, we are simply checking the vitals of the securities we hold versus the whole market daily. Most days there is nothing to change. But we check anyway.

When interviewing a prospective manager, I look at how they performed in the past when the wheels fell off the bus. Typically, they did not lose nearly as much money as the market. And that’s why our firm is using them now.

I do due diligence and basically stress test the manager’s performance style. Later, if a new strategy comes along that I like, we may embrace it to make the overall portfolio stronger.

These managers handle the securities side of the market. Which brings us to the fixed-income side.

I like bond alternative vehicles where the principal is protected, preferably ones without fees. I do not consider a vehicle safe or safer unless it is guaranteed. The guarantees I want are from a third party. I want more than just the backing of the bank or institution issuing the product. Recall that in the Great Recession one large institution went under and others were forced into marriages with healthier partners.

We believe that our policy takes away some of the full-blown market risk. In addition, we believe that the way we manage securities takes away additional market risk.

What are some of the products we use? Certificates of deposit guaranteed by a third party. Some insurance products meet that standard.

We use two of the five types of annuities. We use a straight fixed annuity that works basically like a certificate of deposit, but the money and the interest are deferred from taxes and there is seldom a big fee or payment associated with that. We use market-linked certificates of deposit, and fixed index annuities, and we are constantly looking for the best opportunities for clients from high-rated companies. You can have those products and not pay a fee.

I feel like the industry as a whole has a bad taste in its mouth from anything that smells like an annuity. That’s because of the variable annuities popular in the nineties and early 2000s. The high fees involved really benefitted the sellers of the products, not the clients.

You will notice that I did not fall into the trap of saying the fixed-income side should be a certain percentage of the overall portfolio. That varies with the client, depending upon their income needs and especially their risk tolerance.

There is a concept in the industry known as sequence of returns risk. Meaning that if you retire and put most of your money into stocks just before the market tanks—say 2008—you are in trouble and may spend years trying to claw your way back. If you put money in just before a bull...

Produkt-Details

• Erscheint lt. Verlag: 23.6.2020
• Sprache: englisch
• Themenwelt: Sachbuch/Ratgeber ► Beruf / Finanzen / Recht / Wirtschaft ► Geld / Bank / Börse
• ISBN-10: 1-947480-99-5 / 1947480995
• ISBN-13: 978-1-947480-99-5 / 9781947480995