Yearly Archives: 2017

Financial Planning: The Critical Role of Age and Risk Tolerance

In the financial planning world, the role of age and risk tolerance bears heavily on how a Certified Financial Planner™ might recommend you allocate your assets and diversify your portfolio.

Ideally, you should plan to reduce the overall risk level of your investments as you get closer to the age you plan to retire. The challenge for most investors is determining how much of their portfolio should be allocated to which types of investments in order to minimize their risk.

Financial Planning:

Asset and Risk Allocation in Financial Planning

Asset allocation refers to the mix of stocks, bonds and other investment vehicles in a given portfolio. As some types of investments carry a larger risk, asset allocation is a way to also apportion the level of risk a portfolio carries.

Economic theory — as well as some well-known research — suggests that asset allocation is the key to investment success. By diversifying the assets in your portfolio in a specific way, you have a much better chance of achieving your financial objectives.

Allocating your assets astutely is also the most effective way to avoid devastating losses as you approach retirement age.

The “100 Minus Your Age” Formula in Financial Planning

For many years, financial planning logic recommended that your portfolio be structured based on a formula of 100 minus your age.

In other words, if you were 55 years old, your portfolio should be allocated such that 45 percent was invested in riskier vehicles (i.e., stocks), with the balance invested in safer investments or assets, such as bonds or money markets.

Today, however, this formula may have changed somewhat, depending on the investor. As Americans are living longer, the need for retirement funds extends for many years beyond what it did when the “100 minus your age” formula was developed.

Depending on your personal appetite for risk, the number may be closer to 110, 115 or even 120 minus your age.

A Certified Financial Planner™ Can Help

Despite this and other formula-based methods of personal investment management, no one-size-fits-all answer exists to advise you how to allocate your risk.

When the financial markets collapsed in 2008, many investors lost almost everything — even those who had allocated much of their portfolio to low-risk investments. An entire generation of Americans was forced to delay their retirement for several years while they recovered from their losses.

The lessons learned from that experience can help older investors avoid a similar experience, should the markets falter again. However, having a Certified Financial Planner™ (CFP®) to assist you with your risk allocation and portfolio diversification can provide an extra layer of assurance that you’re making the right decisions with your investments.

Talking with a CFP® can help you explore the many different types of investment vehicles you have to choose from today, and assess the risk of each type. Based on your objectives, you and your investment advisor can come up with a financial plan that makes good sense for you — wherever you are in life.

Divergent Wealth Advisors provides personal wealth management services to clients throughout Utah. Contact us today to schedule an appointment with one of our financial planning experts.

DISCLAIMER: It is important to note that this information is not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, investment, tax, legal or accounting advice. You should always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.

Resolve to Make an Investment Advisor a Part of Your New Year

If you don’t have an investment advisor in your life, the New Year marks the perfect time to seek out a Certified Financial Planner™.

Busy professionals tend to put off those tasks that don’t fall into the “urgent” column of their to-do list. But as we move into 2018, add “find a Utah investment advisor” to your priority list.

A personal wealth management professional will help you develop a plan for your financial future and keep you moving steadily toward your goals, both in the short and long term.

Resolve to Make an Investment Advisor Part of Your New Year

An Investment Advisor Will Ensure You Have a Plan

Without a plan, you can only guess day to day how you should be managing your investment portfolio.

An investment advisor can help you put your goals, aspirations, wishes and dreams into an achievable action plan. Having a plan you commit to in writing makes all the difference for making your goals a reality.

Investment advisors understand how hard you work every day to build wealth, and they want to ensure that you never have to do it twice. That’s where a written financial plan can change your life. You’ll have a step-by-step guide to help you make all those unspoken, unwritten dreams come true.

Your Investment Advisor Will Help You Move Toward Your Goals

If you’re like most financially savvy investors, you have a pretty good idea where you want to be in the short, medium and long-term. But you may not have determined specifically what it will take to make those goals a reality.

An investment advisor will help you connect those dots and lay out a roadmap to ensure you reach your goals, now and in the future.

Developing a plan is the first step on this journey, but it’s never a one-and-done proposition. Your investment advisor will help you keep your eyes on the prize, even if that means adapting your plan to changing market conditions or changes in your personal wealth.

Let Your Investment Advisor Help You Protect Your Future

As the new year begins, we naturally reflect on the outgoing year and resolve to make meaningful changes in our lives.

This year, resolve to take steps protect your future and that of your family. No one is better equipped to assist you in that endeavor than a Certified Financial Planner™ (CFP®).

Your CFP® will assist you in assessing your financial risk and guiding you through the steps necessary to explore potential downsides. Working with your investment advisor, you will identify and develop strategies designed to ensure your future financial well-being.

If you have a family who depends on you, you owe it to them — as well as to yourself — to get your financial affairs and investments in order this year. The first step may be the biggest, but once you have a plan in place, you’ll wonder why you didn’t talk to a CFP® before now.

This year, resolve to call on the Certified Financial Planners™ at Divergent Wealth Advisors to help you achieve your financial goals. We provide investment advising, tax planning, and other personal wealth management services to clients throughout Utah. Contact us today to learn more, or to schedule an appointment with one of our experienced investment advisors.

DISCLAIMER: It is important to note that this information is not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, investment, tax, legal or accounting advice. You should always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.

Financial Advisors: Commission-Based or Fee-Based?

Today, most financial advisors are compensated on a commission basis or a fee basis — or sometimes both.

Financial and wealth management advisors all get paid, in one way or another. But this topic remains a constant source of confusion for investors. Even savvy, long-time investors don’t always understand how this works.

One reason for this obfuscation is the reluctance of many financial professionals to be forthcoming about their fee structure.

Financial Advisors

 

What Are Commission-Based Financial Advisors?

Commission-based financial advisors earn a commission whenever they buy or sell investment vehicles on your behalf. If your wealth manager works on a commission basis, they will typically provide their services at no additional cost to you. They are generally compensated when a transaction takes place.

Often times, especially with insurance products, the compensation is paid to the advisor by the insurance company, not the client. It is important to remember, however, the insurance company has the ability to pay these commissions because of the profits that are made by using their insurance and investment products. So while you may not be paying the advisor a direct fee, you are certainly compensating them indirectly.

The challenge here is that the inherent conflict of interest. When an advisor is compensated strictly through transactions, you may worry whether they have your best interest at heart when buying or selling portfolio assets.

What Are Fee-Based Financial Advisors

The term “fee-based” advisor refers to a compensation arrangement that eliminates the conflict of interest inherent in the commission-based model.

Fee-based financial advisors typically charge a much smaller set percentage of the total amount of your portfolio. You may see these wealth management firms describing themselves as using an assets-under-management (AUM) fee structure.

Generally, the more money that is being managed for you the lower the percentage fee can go.

Divergent Wealth Advisors is the first in the industry to create “referral pricing.” This unique pricing arrangement is for clients who trust them enough to introduce their family and friends to the firm. Divergent Wealth will view the client and their referrals as one large relationship for pricing purposes, thus allowing the client to receive fee reductions based on the new size of their “referral” household.

Choose a Financial Advisor Focused on Minimizing Investment Costs

Before choosing an investment advisor, broker or financial manager, make sure you understand exactly how that person and firm will be compensated paid. There is no right or wrong answer to this question. However, when you can determine how much your advisor is being compensated, it’s easier to determine if they are providing the necessary value to the relationship.

We believe a fee-based compensation structure most often benefits the investor. If your financial advisor is paid with the AUM approach, the only way for them to increase their compensation is to grow your portfolio. We feel this approach most closely aligns the advisor and the client on the same side of the table.

In Utah, Divergent Wealth Advisors provides personal wealth management, life planning, financial modeling, tax planning and estate management. We provide our services on a fee-based platform to minimize your costs and maximize your opportunities. Our team of credentialed advisors brings a diverse background and broad range of education and experience to help spread risk out and maximize growth. Contact us today to learn more about how our Certified Financial Planners™ can help you grow your portfolio.

Financial Planning for the Self-Employed

For self-employed clients, financial planning is especially important, thanks to the nature of their income stream.

Today, as more and more Americans decide to work for themselves, being prepared for retirement is more important than ever — especially because we’re living longer these days. But financial planning isn’t just about retirement. It’s also about protecting yourself (and anyone who depends on you) from unexpected events.

Financial Planning for the Self-Employed

 

Self-Employment Financial Challenges

Self-employment refers to an arrangement where you do not derive your primary income from an employer/employee relationship. The growing “gig economy” focuses on freelancing and short-term, independent contractor relationships. Entrepreneurs and micro business owners also fit into this category, in many cases.

Being self-employed is highly preferable for many Americans today. The primary challenge to this employment environment, however, is the potential lack of income consistency.

Financial Planning Focus for the Self-Employed

Financial planners encourage entrepreneurs and consultants to focus their personal wealth management efforts equally on specific short-, mid- and long-term goals.

Long-term goals mean investing for retirement — something many self-employed clients eschew, as they believe they’ll continue working late in life. In the short- and mid-term, self-employed people need to protect themselves against an interruption in their income stream and unexpected events like accidents and disability.

How to Get Started with Financial Planning

You may feel you don’t have time to bother with financial planning right now. But the longer you put it off, the more vulnerable your financial future becomes. If you have a family or others who depend on you, you owe it to them as well as to yourself to make this a priority.

Another common concern is that you may not be able to afford setting aside some portion of your income each month. This is especially true for entrepreneurs who are attempting to get their business started.

Fortunately, a certified financial planner™ can make help make the process of personal wealth management easy and affordable for almost anyone. You don’t have to start big — you just have to start.

In Utah, Divergent Wealth Advisors helps clients of all types identify and pursue the best possible goals for their financial future. We can assist entrepreneurs, small-business owners and other self-employed clients with retirement planning, estate management, tax planning and financial modeling. Knowing that you have a secure financial future for yourself and your loved ones will provide peace of mind and let you focus on building your small business or independent personal career.

To get started, contact us today to schedule a consultation with one of our financial-planning experts.

DISCLAIMER: It is important to note that this information is not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, investment, tax, legal or accounting advice. Always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.

5 Financial Planner Tips to Help You Prepare for Tax Time

As we approach the end of the year, your financial planner wants you to remember that things you do now can positively or negatively affect your tax liability. If you hope to have a positive experience in April, you may need to take quick action — before Dec. 31 — to ensure you don’t get caught with a larger-than-expected tax burden when you visit your CPA.

Financial Planner Tips to Help You Prepare for Tax Time

What can you do to ensure you’re prepared for tax time?

No. 1: Gift Highly Appreciated Stocks to Charity

If you have stocks or mutual funds that appreciated significantly over the year, take some time to consider whether you plan to keep those stocks as a part of your long-term portfolio. If not, consider gifting them now to a charity that qualifies for tax-free transfer.

You can transfer your stocks or mutual funds and receive a tax deduction in the amount of their fair market value. Even more important, you will be assisting a worthy organization during the season of giving — and the season of greatest need.

No. 2: Set Up a Donor-Advised Fund

You could also consider setting up a donor-advised fund — an ideal strategy for accumulating and growing your charitable donations, rather than giving to individual charities.

In the future, you can donate easily — and tax-free — to your donor-advised fund at fair market value. This includes more challenging assets such as partnership interests and real property.

No. 3: Give Your Children the Gift of Future Financial Security

Financial planners often encourage investors to revisit their investment vehicles for their children at this time of year.

The 529 college savings plan offers many significant tax advantages. These plans have high contribution limits and allow you ample control over the account.

If you want to contribute to a savings plan for purposes other than higher education, you may wish to consider a Uniform Gift to Minors (UGMA) or Uniform Transfer to Minors (UTMA) account.

It is important to note that these accounts do not provide the same generous tax benefits that the 529 does, and they could potentially affect your child’s ability to get financial aid when they apply for college.

No. 4: Revisit Your Retirement Savings Accounts

How are you progressing on your goals for retirement savings? If you aren’t where you hoped you be at this point, your financial planner may recommend that you consider contributing more to your IRA, SEP IRA, 401(k) or whatever plan makes the most sense for your long-term retirement savings strategy.

No. 5: Tax Loss Harvesting

If you can sell mutual-fund shares or stocks at a loss, financial planners suggest now may be a good time to explore this strategy.

You can deduct the loss and reinvest the proceeds in another fund that supports your investment strategy, as long as it’s not identical to the one you sold.

This is a great time to talk with the Certified Financial Planners™ at Divergent Wealth Advisors, to make sure your investment portfolio is structured to help you achieve your financial goals. We help clients throughout Utah with tax planning, estate management, financial modeling and personal wealth management. Contact us today to schedule a consultation with one of our experienced financial planners.

DISCLAIMER: These are just some suggestions to consider before year-end. It is important to note that they are not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only and is not intended to provide, and should not be relied on for investment, tax, legal or accounting advice. Always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.

Offering Participant Services Attracts Better Employees

Offering participant services — an important type of employee benefit — is a highly effective way to help your employees improve their financial well-being and confidence about the future.

Participant services also benefit the employer in several important ways. When you offer your employees a more comprehensive benefits package, you can attract top talent. This also helps reduce turnover and absenteeism — and it can even help you improve your company’s productivity.

participant services

Participant Services Provide Financial Security for Employees

Participant services are a part of the institutional wealth management package provided by investment advisors and financial planners.

When you provide retirement plan benefits to your staff, some financial planners offer — at no extra cost to you or your employees — group and one-on-one services for your employees who participate in the plan.

These can include education programs and a variety of investment-planning, tax-planning and financial-planning services. These bonus services are designed to ensure that each employee knows what they need to do to be prepared for retirement — and that they start now.

Adding Participant Services to Your Benefits Helps Attract Top Talent

Organizational research clearly reflects the value of employee benefits packages for helping to attract top talent.

Today, retirement benefits and financial stability-related benefits are important to employees of all ages. In fact, millennial employees are especially concerned about having good retirement benefits as a part of their job, based on the risk that Social Security may not exist when they reach retirement age.

When an employer provides value-added services to plan participants, they send a clear message that they care about their employees’ financial future and stability.

Improving Your Benefits Package Can Improve Your Company’s Bottom Line

Not only do the right benefits help attract employees, but they help reduce human resources costs by cutting down on turnover and absenteeism.

When employers provide benefits that employees truly value, employee engagement increases. Engaged staff members are less inclined to look for other jobs. They also miss work less and produce more. This, in turn, reduces the employer’s costs for hiring and training new staff and allows for higher achievement with reduced HR costs.

The best part is that, for the employer, providing these benefits can save money and reduce taxable income. Even the Internal Revenue Service reports that the tax credits and incentives employers derive from providing retirement benefits and participant services can benefit the company in a variety of significant ways.

The Certified Financial Planners™ of Divergent Wealth Advisors specialize in assisting businesses with institutional wealth management, particularly employee plan management. Contact us today to learn more about how your business can benefit from offering participant services for your employees.

Financial Planning: What Is the Process?

Financial planning can provide invaluable benefits, but the financial planning experience can vary greatly depending on the planner you work with.

The title “Financial Planner” is used loosely in the industry, making it difficult to truly find a planning professional. Choosing a Certified Financial Planner™ (CFP®) is one way to overcome this common frustration. Interviewing several CFP® advisors will increase your confidence and satisfaction.

financial planning process

With most planners, the financial planning process can be broken down into six simple steps. If you aren’t sure how this process might benefit you, it may be helpful to familiarize yourself with these steps.

Step 1: Identify Your Financial Status

When you first visit your CFP®, they will begin by getting up to speed on your status. This involves documenting your income, expenses, debts and assets.

Step 2: Identify Your Goals

Next, your CFP® will help you develop short-, medium- and long-range goals.

For example, if your family is expecting a new baby, one of your long-range goals may be saving enough money for your child to go to college when the time comes. Or you may want to start saving to buy your first home. Many people also seek financial planning to prepare for retirement.

Step 3: Identify Potential Courses of Action

During this step of the financial-planning process, you and your CFP® will evaluate all possible strategies for reaching your goal.

The specifics of this step will depend on your financial situation. However, some potential options might include making investments, setting up a trust, finding an alternative or secondary income stream, reducing expenses or depositing a certain amount of money each month into a savings account.

Step 4: Identify Alternative Courses of Action

Once you and your financial planning professional identify all your options, it’s time to select the one(s) that work best for you.

Your CFP® will talk through the pros and cons — and the potential risks and rewards — of your various options, and help you evaluate how each one will help you achieve your goals.

Step 5: Create a Formal Financial Plan

Once you choose the right path to your goals, your financial planner will formalize your plan and help you to make it a reality.

You may need to consult other professionals at this point, such as a tax or estate attorney, insurance broker, etc., depending on your action items.

Step 6: Revisit, Reevaluate and Revise Your Financial Plan

Financial planning is not a one-and-done endeavor. You must revisit it periodically to ensure you’re reaching your milestone goals. If any portions of your plan are not working, you and your planner can re-evaluate and update your plan accordingly.

As you can see, the planning process is fairly straightforward. At Divergent Wealth Advisors, our Certified Financial Planners™ understand how to help you identify and achieve your goals, now and for the future. What are you waiting for? Contact us today to schedule an appointment to get started on your financial planning.

Is Your Investment Advisor a Certified Financial Planner™?

Finding the right financial planner is one of the most important financial decisions you can make. If your investment advisor isn’t a Certified Financial Planner™ (CFP®), you may want to reconsider your choice.

A financial advisor with CFP® certification has one of the the highest level of experience, expertise and ethics available in the industry. Only 17% of financial advisors have attained the CFP® certification. This eliminates 83% of the field at the onset. The CFP® certification isn’t the only important factor, but it should serve as a valuable starting point.

certified financial planner

Savvy investors understand that choosing the best wealth manager is an investment in its own right. Your advisor will be guiding you through some of the most important decisions of your life and helping you reach your financial goals.

And that’s why you need to ensure that your investment advisor is a Certified Financial Planner™.

What Is a Certified Financial Planner™?

The CFP® designation is granted by the Certified Financial Planner Board of Standards, based on a rigorous set of standards and qualifications.

To earn this certification, financial professionals must meet exacting requirements in experience, education and ethics. They must pass a series of rigorous exams and pursue continuing education.

The CFP® exams are administered over the course of three arduous days. By comparison, the bar exam (to become an attorney) only lasts for two days.

Before certification is awarded, the board conducts an extensive background check on each candidate. Even if a candidate meets all the requirements for certification and passes the exam, the board can refuse to award certification for any reason.

If a CFP® violates any of the tenets of the Certified Financial Planner Board of Standards, the board can sanction them or revoke their certification.

Why Does a CFP® Make the Best Investment Advisor?

When you choose a CFP® for your investment advisor, you are choosing a financial professional with expertise in a variety of topics, including investments, insurance, taxation, retirement, estate planning and wealth transfer.

The experience requirement to qualify for certification means that your financial advisor has an extensive background in the topics that matter to you and your financial future.

Choosing a CFP® Investment Advisor

The financial-planning process is complex and unique to each investor. Consequently, choosing the right CFP® can make a big difference in the strength and growth potential of your portfolio.

Interview at least three different CFP® advisors. Every advisor and firm has a different approach, different values, and different strategies. At Divergent Wealth Advisors, we encourage clients to interview at least two other people before working with us. We never want you to wonder if you made the wrong decision. Interviewing multiple CFP® advisors can prove extremely beneficial in calming those fears.

To this end, we have assembled some of the most important questions to ask a potential financial advisor before you make a decision.

In addition to verifying their certification as a CFP® and ensuring they provide the services you need, be sure to clarify the wealth management firm’s compensation and fee structure.

If you would like to learn more about how to find your next wealth management advisor, Divergent Wealth Advisors can help. We are based in Utah, but provide professional wealth management services for individuals and businesses throughout the Intermountain West. Contact us today to learn more about why you should choose a CFP® to be your next investment advisor.