Financial Professionals: who is the right person for you?

By: Oxana Saunders

image courtesy of Wikipedia

image courtesy of Wikipedia

As I tell people what I do for a living, I’ve come to realize that few understand the difference among various financial professionals. I cannot blame them. Our industry has adopted ambiguous titles such as “financial advisor,” “wealth advisor,” and “financial planner,” none of which are properly defined.

Strictly speaking, there are only two categories requiring a license and regulatory oversight: “Investment Advisor Representatives (IARs),” and “Registered Representatives (RRs).” The main difference is that IARs must put their interests before yours, while RRs do not have to.

IARs work for Registered Investment Advisors such as Path Financial and are widely considered to have few conflicts of interests with the clients they advise. On the other hand, RRs work for Broker-Dealers and recent regulatory initiatives specifically address the fact that their advice is often in conflict with their clients’ interests. (Click here to read Path Financial President Raul Elizalde’s March 2017 editorial in the Sarasota Herald Tribune on this topic.)

Understanding the difference between both is very important when deciding who is best suited to your particular goals. The Forbes article linked below expands on describing the different kinds of financial professionals, and describes how each are compensated.

forbes logo image

Differences Between Stockbrokers, Investment Advisors And Financial Planners

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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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Changes in the settlements rules and how they may affect you

By: Oxana Saunders

Image courtesy of ThinkAdvisor.com

Image courtesy of ThinkAdvisor.com

Beginning September 5, 2017, the US Securities and Exchange Commission (SEC) will require the financial industry to shorten a standard settlement cycle for most securities to two business days from three. The SEC’s amendment is intended to reduce counterparty risk, systematic risk, and improve capital efficiencies.

If you often purchase stocks because of their dividend, then you should pay particularly close attention to these changes.

Starting September 7th, the ex-dividend date will be set one business day prior to the record date (instead of two originally), and therefore you would need to purchase the stock by September 5th.

Below is the link to a ThinkAdvisor.com article that provides more details on how your investments may be affected.

think advisor logo
Are You Ready for T-2?

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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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Do you need stocks in your portfolio?

rollercoasterMost financial professionals would tell investors not to focus on matching or beating market indices, but rather on making sure that they stay on track to meet their financial goals.

Some investors push back against this advice, perhaps thinking that it is an excuse advisors have for not being able to beat the market. Yet, the advice is sound. While some investors need full exposure to equities, others do not need to take that much risk and some would be much better off having no exposure to stocks at all.

How much risk one takes depends on personal circumstances. Unfortunately, investors are bombarded with 24/7 stock recommendations, and they become more receptive to them when the market has been strong and steady as it has been in the last few years. While bull markets make people feel more confident taking on risk, relying on your level of confidence to decide how much risk to take is the wrong way to pursue your financial objectives. The risk inherent in the stock market is high, and it should be handled with care.

Consider a 75-yr old widow (i.e. without a significant other, for simplicity) who wants to make sure that her $2.2mm in savings will be enough to pay for $100,000 of yearly expenses for the rest of her life. As that rate, she will spend $2mm by the time she reaches 95, leaving $200,000 to spare. Probably her best bet is to invest those savings in short-term, high-quality fixed income products to protect them against inflation. This ultra-low-risk strategy would be aligned with her goal, which is to minimize the chance of running out of money. It would have the important benefit of being highly predictable and likely devoid of unpleasant surprises.

What about a 75-year old single man who has the same expenditures but $1.5mm in the bank? Spending $100,000 per year will deplete his savings in 15 years, or sooner if he spends more due to inflation. Because there is 100% certainty that he will run out of money way before he reaches 95, he needs the extra return of stocks to make his portfolio last.

How much stock exposure does the less-wealthy investor need?

One way of answering that question is by simulating sequences of stock market returns and examining how his portfolio would fare under each sequence. This can give a sense of how his situation can be improved.

Without stocks, his portfolio will inexorably shrink by $100,000 per year. Because stocks are volatile, adding them to the portfolio will make it less predictable. The higher the proportion of stocks, the more it will depart from that steady declining path. To illustrate this, we ran a few possible ways his portfolio can depart from the no-stock scenario (see first graph).

portfolio paths 50% stocks

Adding stocks clearly makes it possible for this retiree to stretch his portfolio past year 20. But it can also make his portfolio run out of money sooner than 15 years, or subject it to a terrible start such as a 25% decline in the very first year.

How would he react to a bad start? If his tolerance for risk is low, he may close out his positions right away, book a loss, and end up worse off than before. Every investor should consider his or her risk tolerance carefully with the help of a professional.

Things can go very wrong when the volatility of stocks is not properly understood. Imagine that the widow in the first example, even though she has plenty of savings and little need to invest, becomes convinced that she is “leaving money on the table” by not keeping up with a rising stock market. She decides (or is encouraged) to deploy all her portfolio in an S&P 500 index fund.

portfolio paths 100% stocks

While her final portfolio could potentially be much bigger than without any exposure to stocks, she now has a small but very real chance that she could run out of money – a scenario that, before switching to stocks, she was virtually assured not to face (see second graph). In exchange for the chance of having more money at the end of her life (when it is least useful) she introduced the risk of being wiped out sooner, or experiencing distressing early losses that could prompt her to close out positions in a panic and lock her out of her goal.

It is tempting to invest in stocks when they seem to carry little risk. Investors should not rely on forecasts; instead, they should examine their own situations, understand their tolerance for risk, and develop an appreciation for what could go wrong with their investment strategies.

What now?

We are a Registered Investment Advisor held to a fiduciary standard of care. We believe that our portfolio management process, focused on measuring and managing risk, can be very effective at creating a sensible balance between risk and return, partly by measuring financial and investment conditions often and adjusting portfolios through a well-defined process. We implement this process for our clients and we tailor it for their specific circumstances, and we always put their interests first. That means we do not profit from transactions or by selling any products. Our only compensation is based on the assets we manage, which goes a long way of aligning our interests with yours. We can also help you evaluate your current goals and establish an investment plan aiming at achieving steady, long-term returns while managing downside risk. You can download our report describing our investment methods and goals, or contact us if you would like to know more about how Path Financial’s investment process can work for you. We’ll be happy to set up a confidential meeting to discuss your path to financial success. Read more.

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Tax Planning Steps to Take Now to Optimize Your 2017 Tax Returns

By: Oxana Saunders
tax time
An integral part of a comprehensive financial plan is tax planning. In order to maximize and preserve your capital gains, it is important to plan in advance for events that might have significant tax consequences like selling stocks with high capital gains or real estate properties that have been deeply depreciated over the years. There are also a few strategies one should consider for generating tax-efficient income.

In the Forbes.com article linked below, you’ll find ideas that can help you start taking steps towards optimizing tax returns.

forbes logo image6 Tax Planning Tips To Consider For 2017

For questions on most tax efficient financial investments for your particular situations, call us for a free consultation.
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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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Can Market Rally Continue Another 10 Years? Investopedia Shares Raul Elizalde’s Insights

investopedia smallerInvestopedia recently published “Can the Market Rally Continue Another 10 Years?” — the most recent contribution for Investopedia by Path Financial founder and president Raul Elizalde.

In his latest analysis, Raul Elizalde tackles the question “Can the market fall hard anytime soon?” and discusses possibilities, black swan events and historic crashes. Read the full article at the link below.

Can the Market Rally Continue for Another 10 Years?

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Raul cropped for facebookRaul Elizalde is the founder and President of Path Financial, LLC. He may be reached at 941.350.7904 or raul@pathfinancial.net.

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Seven Things Women Should Do Post-Divorce to Secure their Financial Stability

By: Oxana Saunders
birds on wire
Divorce can be a traumatizing experience for all the parties involved, but women are often more vulnerable to financial difficulties if they had not been actively involved in their family finances during the marriage. The emotional toll of the divorce can make it even more difficult for women to deal with the new reality of being on their own and facing the challenges of becoming a successful head of household.

While all this can be very overwhelming, there are certain steps women can take to secure financial stability. The Forbes.com article linked below has excellent tips on the seven things women should do post-divorce to secure their financial stability — one of which is to find a financial advisor or planner who has experience helping divorced women, whose goals and needs can be very different from those of a married couple.

forbes logo imageSeven Must-Do Steps for Women Who Want Financial Stability Post-Divorce

If you find yourself overwhelmed with managing your finances after a divorce and need professional help, please contact me for a free consultation.
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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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6 Common Myths about Revocable Living Trusts

By: Oxana Saunders
Image courtesy of TheBalance.com

If you have a Revocable Living Trust (RLT) or are thinking about putting one in place, it is important to understand what it does and whether it accomplishes the goals you are trying to achieve.

Some common misconceptions are that a RLT will always reduce your estate taxes or that it will absolutely avoid probate. Below is a link to an article that describes some of the myths associated with RLTs.
the balance website logo

Revocable Trust Myths

For a deeper look on whether your RLT is structured correctly or whether you need one in place, please contact us for a free consultation.

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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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The Basics of Planning for Retirement

By: Oxana Saunders

Photo courtesy of TheBalance.com

Photo courtesy of TheBalance.com


Younger people often think that retirement is too far in the future and see no reason to worry about it today. Others believe that a financially sound retirement seems impossible and therefore they will never be able to retire, or they can just count on Social Security.

While financial circumstances differ for people in different age and income groups, there is one thing in common – the sooner you start thinking about retirement planning, the better off you would be. This requires a comprehensive look at your situation and a well-prepared plan, which should be reviewed and modified regularly to adapt to developments in your life.

Below is a link to an article from TheBalance.com that can help you start your retirement plan. For more extensive analyses of your retirement goals and how they can be accomplished, please call us at 941.350.7904 for a free consultation.

the balance website logoThe Basics of Planning for Your Retirement

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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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Top 10 Reasons Why You Need a Financial Plan

By: Oxana Saunders

mazeMany people believe that a comprehensive financial plan only makes sense for the “super wealthy,” but this is a misconception. Financial planning can help people at all income levels and in all age groups.

A good plan shows how all aspects of personal finance affect one another, helps set up short, medium and long-term goals, and provides specific actions to achieve them. Whether you want to have a comfortable retirement, pay for college education, buy a house, or give to charity, a comprehensive financial plan makes it easier to achieve your goals.

Below is a link to a Forbes.com article that explores many reasons why it is so important to have a financial plan in place. Please contact us for a free consultation to help you plan your financial future.

Forbes.com: 10 Reasons Why Financial Plans Aren’t Just for the 1%.

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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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Best Strategy to Save for College: 529, UGMA, or UTMA?

By: Oxana Saunders

funding college Recently in our weekly blog post, we talked about 529 college saving plans. That blog prompted some of our readers to take a close look at what they were doing in preparation for college expenses. One of the questions that came up was how 529 plans differ from UGMA and UTMA accounts and which one is best for their particular situation.

Below is the comparison chart of these savings vehicles, but the short answer is if your primary goal is to help your children or grandchildren fund their college expenses and you want to control how that money is spent, then you may be better off with 529 plans.

Click on the image to view a savings comparison chart from SavingforCollege.com which summarizes and compares the features of 529 plans, ESAs, UTMAs, IRAs, and education savings bonds.

saving for college website image

For a detailed analysis of your financial situation and what ways of saving for college could be most appropriate for you, please contact us for a free consultation.

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Oxana Saunders Vice President Path FinancialOxana Saunders is the Vice President of Path Financial, LLC. She may be reached at 941.894.2571 or oxana@pathfinancial.net.

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