Wealth Management Blog

Posts published in June 2016

Women’s Finance: There’s a Difference?

By JJ Burns

June 29, 2016

It’s not that women are from one planet and men are from another. It’s just that women tend to end up with different life circumstances than men. Top that off with lower salaries, and there’s a greater need for taking a closer look at financial strategies.

In my 25 years’ experience serving women clients, I find that they can multitask far more than men. They make the family’s social plans, maintain relationships, take care of kids, parents and in-laws—all while juggling their careers. This presents enormous challenges to their time.

It’s true that women control about half of household finances. That means they are watching the bank account, paying the bills, making large purchases, putting something in the savings account, and paying off the credit card.

But they often don’t understand the inner workings of investing. Some of them do, but they just have a lot on their plates. Looking from the outside, investing can appear to be a world of complicated strategies and men making deals.

Seeing Things Another Way

Of course having kids changes everything—finances and all the other aspects of your life. But even without kids, women can have cultural biases toward money, who handles finances, and how to save.

When attending financial workshops, our firm has noticed many men often ask about the best tips for investing. Many women, however, ask about balancing saving for retirement, sending the kids to college, and taking care of elderly parents.

They want to enjoy life while their kids are younger. Women feel some of the most precious gifts are right now in the present.

We often see men wanting tips on when to buy and sell. Women want to know how to support their daughter who’s moving home from college, and their elderly father who needs assistance to stay in his home a few more years. They wish to live a richer life, and at the same time successfully manage the relationships that are important to them.

Saving More, Having Less

Women tend to save a larger percentage of their salaries. They also contribute to their 401(k)s in greater numbers than men.

Despite putting more money away, we often see women ending up with less at retirement.  Salary disparities can take a toll on investing over the long run.

But for those women who started saving early, the benefits of compounding can help make up some of the difference in the total amount saved.

Life Happens

We have found women who have children might take some time off during pregnancy or after the kids are born. For some families, they’ve had to make the difficult decision of balancing childcare vs. going back to work. Re-entering the workforce can often lower wages and position.

When parents get older and need help, women are often the ones to take on the added responsibility. When kids are also in the mix, that makes those women part of the “sandwich generation.”

Life expectancies are increasing for men and women, but women still tend to live longer. That means women need more money for living out their retirement dreams.

Women also are usually the ones initiating divorce. They’re willing to be on their own, and want to know what they can get for themselves and their children, and can they be happy with that.

Risky Business

Getting help from a professional can help in many situations. Developing a financial strategy is one.

Women are often not as comfortable taking risks with their investments. Sometimes this is because they view money a little differently than men. Other times, they haven’t spent as much time learning about investments.

It’s been our experience that women often take fewer risks with their money. They want to remain in a position of control. They might not mind our assistance, but they want to feel in charge of the situation. Circumstance like being in debt can weigh heavily on a woman’s conscience. She might feel like she needs to get that paid off before taking what she could perceive as the risk of investing.

It can be easy to let a husband take care of the household finances. It can be nice to let someone do the worrying, researching and planning for you. But if something happens and he is no longer there, some decisions will need to be made—and that will fall on her.

Worry More, Plan More

Many women have more control over the well-being of the family. This can make them worry more about finances. The balancing act of life can fall heavily on women.

Seeking advice from a professional can help teach her about investing, planning for retirement, and even saving for the kids’ college education. Seeking help from someone who has been trained can help alleviate uncertainty in many situations—whether the advice is from a financial advisor, lawyer, or accountant.

Getting help from the pros can help women feel like they are placed back in control. They can learn about investing strategies, plan for contingencies, prepare for retirement, set goals, and balance all the financial elements of life.

Despite often being good planners, we’ve seen many women don’t seek advice until something major happens. But once they engage our help, they tackle the plan like the other aspects of their life.

Someone “Gets” Me

You’ve decided you’d like to talk with a financial advisor. Don’t be afraid to ask them questions. When you start your search, you want to make sure it’s a good fit. When a match “clicks,” you feel more confident and ready to take what comes your way.

Don’t be afraid to explore how your relationship with an advisor would work. You may want lots of contact or just a little. You may want your financial advisor to give you a couple of choices to choose from, or a wide range.

See how comfortable you are with the way they explain things to you. Are things clear, or do you need more information?

You are building a relationship, and not just with an advisor but also a team. Make sure it feels good to you. It may be one of the most important decisions you make regarding your family’s future.

Brexit: What It Means For You

By JJ Burns

June 24, 2016

In an expectedly close but surprising vote, the U.K. has completed a referendum to endorse a withdrawal from the European Union (EU). Today’s market reactions are the usual result from market uncertainty around economic issues—sell-offs in “risk assets" such as stocks and currencies and a flight to quality in “safe-haven” currencies and bonds (e.g. the U.S. dollar and Treasuries). Early analysis of the results indicates, however, that the LONG-term results may not be as severe as feared.

HERE’S WHAT HAPPENED

U.K. and Commonwealth voters, by a slim margin, voted to leave the EU. Prime Minister David Cameron immediately resigned, and a new government will be installed in the fall.

WHAT HAPPENED IN TODAY’S MARKETS?

  • Stocks and other assets such as currencies, have sold off around the globe. The U.K. and other EU countries have been hard hit, while the U.S. decline has been muted. Leading up to this, the global markets were rebounding over the last couple weeks.
  • The U.S. dollar and Japanese yen have strengthened; the Euro has declined a bit, and the sterling has substantially declined against the dollar.
  • There has been a flight to quality in bonds, particularly U.S. Treasury Bonds.
  • Gold has been priced up, while oil has declined.

WHY WERE MARKETS VOLATILE?

  • Many believed that Britain would remain in the EU and short-term traders made heavy bets in currencies and other “risk assets.” In fact, markets rallied into the vote as the DJIA was up over 250 points yesterday. Interest rates were moving higher.
  • The markets were surprised once the votes were tallied and markets reversed their trend, giving back most of these gains. The behavior was violent as Britain leaving the EU is a significant event. 
  • The U.S. markets declined as the thought process that European companies are trading partners of the U.S. This could be negative for some businesses.

WHAT ARE THE LONGER-TERM EFFECTS?

  • Britain represents 4%-5% of global GDP. Net results may not be that significant. 
  • The U.K. will need to implement policies to provide liquidity and ease interest rates. 
  • The sterling will fall, U.K. inflation will increase due to increased import prices, and U.K. GDP will likely decline in the near-term. A recession is possible in Britain.
  • The U.S. will be relatively insulated. The Fed will likely delay interest-rate hikes.
  • Global growth may be affected to some degree. This event is not a ‘Lehman moment’ that accelerated the global Financial Crisis. As one pundit noted, “…markets adapt. Policymakers adjust.  Businesses will change course while they continue to seek profits. Prices will reset. Opportunities will emerge.”

WHAT SHOULD BE DONE IN MY PORTFOLIO?

  • Our principles of portfolio construction are based on each of our client's unique personal goals. Their plan is well thought out and balanced by diversified asset allocation. 
  • Changing your portfolio based on a reaction to market events rarely leads to productive long-term results. 
  • All of our plans are built upon the certainty that we will go through negative events and market fluctuations.
  • All of our portfolios contain an anchor of high quality bonds and bond funds, which help to limit declines in significant market events, and did so during the Brexit vote today. Our bonds are doing exactly what we want in uncertain times. 
  • We expect short-term stock volatility and will be partially offset by bond and commodities gains. Today’s market moves are short-term reactions, and most currency and bond markets have moved in orderly fashion (i.e. no extreme drops). And, as our pundit notes, “The long-term political, economic and financial repercussions of the ‘Leave’ vote are incalculable at this point.” 
  • While the Brexit vote has been surprising and unsettling, most of the effects will be felt in the U.K. and Europe. We don’t see any required portfolio moves at this point; most of the trading is just that—trading. Long-term investors should stay focused, and we’ll update you as events progress.

As always, if you have any questions or wish to speak to us directly please feel free to call us.

How Brexit May Affect Your Money and Investments

By Steve Mula

June 22, 2016

Securities markets around the world have been reacting to the politically charged environment in the U.K. over the fierce debate about whether it should leave the European Union. A so-called “Brexit” referendum vote will be held on Thursday this week. British citizens 18 years of age and older, citizens abroad who have been registered to vote in Britain within the last 15 years, and residents of Britain who are citizens of Ireland or the Commonwealth (53 countries) are eligible to vote.

A vote in favor of leaving the EU would likely trigger further volatility in stock, bond and currency markets around the world. U.S. stocks already proved they were sensitive to the situation in the U.K. when they gapped down at the opening two Fridays ago after a poll conducted by The Independent suggested that 55% of Britons were in favor of a Brexit. The result surprised many investors, and the murder of Minister of Parliament member Jo Cox last week by a man shouting “Britain first!” stunned people around the world.


Candlelight vigil in London for Jo Cox

During the mourning of Minister Cox, tensions eased and additional polls were conducted, many of which suggested that The Independent poll was inaccurate. One betting shop put the odds of the U.K. leaving the EU at just 27%, or about 1 in 4. If accurate, it appears that the conservative groups that support leaving the EU will not have enough votes.

Nonetheless, we find it interesting that the U.K. is dealing with many of the same political issues that are being hotly debated in the U.S. presidential election. Jobs, immigration, and reclaimed sovereignty are the main issues for Britons who favor leaving the EU. These issues are very similar to the “Make America Great Again” slogan of the Trump campaign.

The global boom over the past two decades has eliminated many manufacturing jobs in both the U.K. and U.S. Meanwhile, immigration into both countries has caused concerns for conservative groups ranging from perceived increased competition for domestic jobs to increased healthcare costs and a threat of terrorism. The long-term effects have resulted in rising wealth inequality and chronic under- and unemployment among the middle and lower classes in both nations.

On the flipside, many voters in the U.K. appear to be supportive of remaining in the EU, as do most independent economists and large corporations. If history is an accurate guide, the referendum vote this Thursday could be similar to the last referendum held in 1975, when Britain considered leaving the European Economic Community. Back then tensions were running high as well, but more than 67% voted to remain. That’s an indication of how difficult it is to change the status quo.

Regardless of Britons’ EXPECTED intentions to remain, it’s important to be aware of market risks that could develop this week if the vote goes the other way. U.S. investors are clearly in favor of the U.K. remaining; that’s why U.S. stocks surged on Monday after many news outlets suggested that the votes to remain would significantly outnumber votes to leave. That said, market risk would likely surge if U.K. voters decide to leave the EU. The reason is there are many more unknowns associated with Britain leaving the EU than there are for remaining. Also, risks to GDP in the U.K. and the EU after a vote to leave have been estimated to be as low as a 3.2% decline within the next few years before moderating in the next decade.

In fact, the governor of the Bank of England said the prospect of a Brexit is “the biggest domestic risk to financial stability because, in part, of the issues around uncertainty.”

It has been estimated that negotiations about how the U.K. would divorce from the EU will take up to 2 years. Ironically, some of the most disliked EU economic policies may end up remaining in force in the renegotiated trade and economic treaties with former EU partners.

Some influential business people still believe that leaving the EU is a better option than remaining. Edward Atkin, one of Britain’s most successful manufacturers, was quoted by The New York Times as saying, “Customs duties are completely irrelevant compared to fluctuations of the currency.” Interestingly, most economists believe that a Brexit could be devastating for the pound. They also believe that it would take 10-15 years to recover from leaving the EU.

Regardless of how the referendum turns out, we believe that investors who are diversified in long-term strategies will experience some volatility in their portfolios in the short term. If voters decide to remain in the EU, we wouldn’t be surprised to see stocks around the world enjoy a relief rally. Deutsche Bank provided this handy chart to help illustrate how currencies, interest rates and stocks could respond after the vote.

We are also interested in how this week’s referendum affects the Clinton and Trump campaigns and other conservative movements in Europe. This may be the subject of a follow-up post.

How to Choose a Financial Advisor: 8 Questions to Ask

By Anthony LaGiglia

June 16, 2016

Whether you're beginning to plan for your financial future—or have found yourself smack dab into making significant decisions that you didn’t anticipate—at some point you’ll need to consult with a financial advisor. However, it can be difficult to always know who the best person is to trust your finances to.

Choosing a financial advisor goes beyond working with someone who has the backing of a large brokerage firm or an impressive list of credentials behind their name. When you look around, there are a lot of alphabet-soup designations out there. Anyone can call themselves a financial advisor, but that doesn’t necessarily mean that they are highly qualified to advise you.

What to Look for in an Advisor

Professional credentials do not tell you everything you need to know about an advisor. You should also look at an advisor’s experience, investment style, and type of clientele. Use the following questions to help you in evaluating an advisor.

  1. What are your qualifications? Advisors must be registered with the Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA) in order to provide investment advice. It’s important to understand the two standards of care that advisors are held to by each. The fiduciary standard requires that an adviser put the clients’ interest first and is enforced by the SEC, while the suitability standard is enforced by FINRA and requires that a broker make recommendations that are suitable based on a client’s personal situation. You should also do your due diligence to find out if a potential advisor has ever been investigated or found guilty of an infraction.
  2. How does your firm operate? No great advisor goes at it alone so discover all you can about the team behind the principal advisor. The mix of the team speaks volumes about the firm. Ask what licenses, certifications and/or credentials members of the team have. For example, many top advisory firms will have a Certified Financial Planner (CFP) and a Chartered Financial Analyst (CFA) on their team. Go deep and investigate other members on their team as stated in the above. Ask what role they play and how this will benefit you.
  3. What services do you provide? Some advisors only offer investment planning, while others take a whole life approach. As an example, Certified Financial Planners (CFP) have a process that looks at your overall goals and creates a written plan that addresses the wealth gaps to get you where you want to go.
  4. What does a financial plan look like? Of course every plan is different and should be tailored to the individual investor. However, ask to look at a sample portfolio or investment plan. Find out how the advisor approaches the planning process and communicates with clients. Ask if or why you need a plan, you may not depending on your needs. Also be sure to ask for client references—and then check them.
  5. What is your investment approach and how do you choose investments? It’s important that advisors have a process of how investments are chosen and deployed in an asset allocation. Your advisor should be able to explain how and why a particular investment is chosen. Discover their buy, sell and rebalance disciplines. It’s easy to buy investments, it’s the discipline of when and why to sell that are keys to better performance.
  6. What is your communication style? Some clients are very financially savvy while others appreciate a bit of hand-holding and education. Will your advisor and his or her team take the time to thoroughly explain the markets, the investing rationale—and any other questions that you may have? At times of market stress, how does the advisor communicate?
  7. How are you compensated? Some advisors are strictly fee-based, while others earn their living by commission or from selling an investment product. Ask if there are any conflicts of interest which would motivate the advisor to do something that’s not in your best interest. Be sure all fees are disclosed and if you’re unsure about something—ask!
  8. What makes the investment team unique? We ask these questions when we buy a car, hire a contractor, or work with a personal trainer. An investment advisor should be no different. Ask them how they define a successful relationship. If your advisor can’t explain in clear language why they are different and how you will benefit from becoming a client, move on.

Know When It’s Time to Change Advisors

You may have been with an advisor for many years and have not been particularly satisfied. But sometimes it seems easier to stay with them because change can be just as difficult. Stop and take a minute to see if any of these points apply:

  • Lack of communication: A good advisor is always available for clients—by phone, email or appointments. If your advisor isn’t keeping you in the loop, it’s time to look for someone else.
  • Pushing products instead of giving advice. One size does not fit all. Your financial plan should be tailored to your specific goals. Avoid advisors who recommend cookie-cutter products or plans.
  • Not being proactive—or reactive. A year or two of lackluster performance isn’t cause for alarm. Those are things that an advisor cannot completely control. However, if your performance returns continue to be out of line with your risk tolerance or goals, be sure to discuss re-vamping your investment strategy. And, if you come away feeling that your advisor isn’t listening, consider making a change.

At JJ Burns & Company, we believe a good advisor is truly your partner in your long-term financial success. Talk to us about how we can help you reach your goals.

Exclusive Webinar: 2016 Mid-Year Economic & Market Outlook

By JJ Burns

June 1, 2016

[Update: For those who couldn't attend, you can watch the webinar video here.]

Will the Fed raise interest rates in June? How will the U.S. presidential election affect the market and your portfolio?

After a challenging start to 2016, the markets have improved. Issues surrounding a potential interest rate hike, U.S. elections, Brexit, and China continue to influence economic and corporate earnings growth. Find out how these challenges will impact investment portfolios in 2016.

Join JJ Burns & Company on Wednesday, June 8th at 1:00 pm EST for a complimentary webinar to discuss the 2016 Mid-Year Economic & Market Outlook. During this live presentation, CEO JJ Burns, Managing Director Anthony LaGiglia, and Chief Investment Officer Steven Mula will review our outlook for the next 6 months.

Bonus: All registrants will receive a link to the on-demand version of the webinar following its completion.

In this 30-minute webinar we'll talk about:

  • The recent market correction and our economic outlook for the rest of 2016
  • Issues affecting the stock market such as potential interest rate hike, U.S. elections, Brexit, and China
  • How we construct investment portfolios to take advantage of volatile markets

Plus we’ll also answer questions from attendees.

Don't miss this informative event! Reserve your spot today.