Money and technology are so closely related that if a
financial advisor isn’t employing the latest technology, how will it equate to
risk for you and your money? When it
comes to managing your money, you expect your financial advisor to have the
best technology resources available to do the job.
Since the last recession, the financial services industry is leading the way in technology development, with healthcare second and other sectors closely following. Among the new technologies, Artificial Intelligence (AI) and machine learning are in first place for the top development trend in financial services. The acceptance of AI at large financial companies has still deemed a threat to the old system of money management, but continues to be widely accepted by established advisors (ages 35-44) even more so than advisors that are new to the industry. New technology is helping clients and advisors to be more efficient in managing assets and their risk.
One of the new developments using AI is in behavioral
finance software that determines client behaviors and their adversity to risk
before selecting funds, ETFs and other assets to be managed inside
portfolios. No longer should selection
be done manually when AI can search funds with precision based on client
behavioral perimeters. Without an
assessment of client behaviors before market activity, potential losses may
impact the client and be more difficult to recover.
When behavioral finance software combines with risk profiling, the assessment of misaligned investment choices can be overridden helping to build better portfolios based on scientific data and not solely on past performance. Without behavioral considerations, misaligned investment choices aren’t just possible, but likely.
Investment managers must continuously upgrade their technology infrastructure to keep up with client expectations and best practices to continually improve the client experience and make advisors better at their jobs. While robo technology, or portfolio automation, continues to become an accepted part of the investment equation for younger clients with fewer assets, to clients transferring wealth to future generations, artificial intelligence and machine learning are the next great frontier.
One thing that has plagued the financial services industry
is ‘trust’ of the industry.
Unfortunately, there are many reasons that some people have developed a
distrust of financial companies and the individuals that work for them. It may be due to the media, entertainment
(movies), or a personal situation that has happened in the past. When advisors work with clients, they take on the role of a Fiduciary, which involves acting in the best interest of all clients. Serving as a
fiduciary helps clients reach their financial goals.
Working within our business model, we take ‘fiduciary
relationships’ seriously. A ‘Fiduciary’ is a company or a person
who holds a legal or ethical relationship of trust with one or more parties
(person or group of people). A Fiduciary
has a legal responsibility to take care of money or other assets for another
individual. Part of being a fiduciary
and working with clients involves transparency, full disclosure, and 24/7 access
for clients to have all relevant information regarding their assets at any
time. It also includes giving clients
information that advisors have access to prior to making an investment
decision.
Part of the ‘distrust’ that has plagued the industry can be summed up with the storylines of two movies, The Big Short and The Wolf of Wall Street, in which clients are taken advantage of for a ‘salesman’ to profit. Unfortunately, this happens in real life when there is no disclosure and no ‘fiduciary standard’ enforced at the firm, or by the individuals working for the firm.
Our processes are client-centric, and based on a conflict-free financial advice model. We welcome your inquiry, as well as you questioning and understanding our advice as we work with you.
Taking Social Security Benefits can be a guessing game unless
you do your research to figure out what age to take benefits the best for
you. Do you receive benefits at the
earliest age or wait until your full benefit age? Will you die in early retirement or live a
longer life than you imagined? These are
the challenging questions many pre-retirees ask because it can add up to
thousands of dollars over your lifetime.
Most people want to get their benefits sooner than later, not realizing
that the odds are in their favor for living longer than they thought. Pre-retirees need to plan for the long-haul,
or so to speak each generation, on average, is living longer than the previous.
Finding out your ‘break even’ age for Social Security is
important to determine what age is best to start taking benefits. Once you make the decision and start benefits
at a specific age, you can’t change your decision since it is essentially
‘locked-in’ for life. Benefit amounts
will not increase, aside from the occasional small cost of living
increases.
The best way to determine when to start taking benefits is
by running a break-even analysis to find your break-even benefit age. The break-even age is when an
individual’s total lifetime Social Security benefits received would be equal to
the benefit amount, but using a different claiming age. When doing your pre-retirement income
planning, the break-even analysis is a crucial piece of information to
consider.
Deciding to start Social Security benefits at the first
opportunity or delaying benefits is a personal decision. Factors to consider are other retirement
assets available and their value, genetic health factors, and outstanding debt
and lifestyle considerations. If you
would like more information on social security benefits and implementing it into your financial plan along with other assets, contact our office for a
meeting.
Planning is valuable for many reasons and helps to
‘normalize’ things when you find yourself in the middle of an unexpected life
event. A death, a critical illness, job
loss, new family member, an inheritance, divorce, or a catastrophic event that
can cause a major financial detour. How
you plan will help determine how you survive and normalize after these events.
Planning can be as simple as making sure you have the right
insurance coverage, from personal insurance such as medical and critical
illness insurance, property insurance and an emergency fund. All insurance is to offset risk, cover
expenses, and to protect other assets such as retirement accounts that you’ve accumulated. An additional item is to have a will in case
something happens to you so that your loved ones carry out your wishes.
Some people consider financial planning to include risks that
are health related. If you or a family
member had a major medical event or condition, would you have the financial
assets to cover all the expenses and cover your loss of income related to the
medical event? How would it impact your
portfolio and ability to accumulate assets?
Which assets would you choose to liquidate first?
With life’s always changing events, planning for the
unexpected when experiencing a significant life event is essential. It is possible to run scenarios within a
financial plan to see outcomes of specific circumstances and how they may
impact you. If you get detoured by an
event or wrong investment decision, planning can help you to recover quickly to
a ‘new normal.’ Life can be messy and
what you do now will make the difference in what may happen later. No one can predict the future, but it helps
to prepare ourselves now as much as we can.
If you would like to visit regarding planning for potential
risks and how it may impact your portfolio, please contact our office.