MONEY Estate Planning

Why My Grandparents’ Home Got Torn Down

Empty residential lot
Shutterstock

Estate planning can prevent a lot of heartache.

My family loves get-togethers—we find any reason to gather and eat. We credit this wonderful trait to my grandparents. They were gracious hosts with amazing culinary skills. Their home, built with my grandfather’s hands, was a sanctuary for family, friends, and welcome strangers.

My grandparents didn’t just leave legacy of memorable gatherings; they also left their home to their children, expecting regular family reunions after they were gone. My grandparents would not have it any other way!

My grandmother died in 1994, eight years after my grandfather’s death.

Their children tried their best to embrace my grandparents’ vision of maintaining the family home. But time, distance, and money wreaked havoc on implementing the plan. Our hearts sank as the house slowly fell into disrepair. It took almost 14 years before the children agreed that one sibling would buy out the other childrens’ shares of the home.

By then, however, the damage to the home was done. Now, only the land and memories remain.

I believe that if my grandparents had addressed certain questions about the house, they might have been able to protect it after their death with some thoughtful estate planning. Here are those questions:

  • Who wants to keep the home?
  • Who would prefer their inheritance to be cash instead?
  • Who can afford to buy the home?
  • How will the children handle multiple owners now? How would they handle ownership upon their own divorce or death?
  • Who will pay the property taxes?
  • Who will ensure upkeep?

One option might have been an estate-planning provision requiring the home be sold, with the first rights to buy given to the children. Or maybe the home could have been left to one or more children, and other assets left to other children to equalize inheritances. Maybe they could have established a trust in order to fund perpetual care of the home, and to manage generational ownership.

These considerations and others in the estate planning process might have allowed the children to preserve both their wealth and their legacy.

A significant amount of wealth is transferred through real estate. According to a 2014 study by Credit Suisse and Brandeis University’s Institute on Asset and Social Policy, the primary residence represents 31% of total assets for the top 5% of wealthy black families in the U.S. and 22% for the wealthiest white Americans. The percentage of wealth embodied in a primary residence is even greater for less well-off households.

Now it’s up to my aunts and uncles to get it right for the next generation. Will wealth be lost again or will it transfer for the benefit of their descendants? It’s a great question for the next family gathering…at a place to be determined.

———-

Lazetta Rainey Braxton is a certified financial planner and CEO of Financial Fountains. She assists individuals, families, and institutions with achieving financial well-being and contributing to the common good through financial planning and investment management services. She serves as president of the Association of African American Financial Advisors. Braxton holds an MBA in finance and entrepreneurship from the Wake Forest University Babcock Graduate School of Management and a BS in finance and international business from the University of Virginia.

MONEY financial advisers

Why Financial Advisers Need a Good Bedside Manner

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Getty Images

It's not just what you say, it's how you say it.

We financial planners are a bit like doctors: In both professions, how successful you are early on in managing people’s health, whether financial or physical, can have a big impact on how well those people live later on.

Like doctors, we financial planners also benefit from having a good bedside manner when communicating with the people we’re helping. That’s particularly true when the news we have to deliver is not so good—especially if the bad news stems from a self-inflicted wound.

Not too long ago I read a financial advice column in which the person seeking advice shared how his financial decisions, his health challenges, and macroeconomic events resulted in him and his family being in a very tough financial situation.

As I read the writer’s request for guidance, I could feel his stress. He was obviously seeking help and didn’t know where to turn.

The columnist’s response was unsympathetic. There was harsh judgment of the person asking for help and the financial decisions he had made. To say the response lacked empathy, would be an understatement. As for the advice itself, you might call it “tough love,” but I thought it was minus the love.

I’m sure we’ve all experienced some degree of poor service, but chances are it was a transaction that started and ended in that moment. Many of us have encountered a health professional who has been cold and aloof, and I’m sure it didn’t feel good.

I have had the pleasure of seeing doctors who were very empathetic, but I’ve also talked with doctors who shared undesirable news in a matter-of-fact manner then simply walked away. I wasn’t sure what hurt more—the news itself or the manner in which it was delivered.

Financial planners are not doctors, but we are entrusted professionals who look after our clients’ financial well-being. When financial stress hits the people we serve and they seek our assistance, we have to ask ourselves whether the advice we’re giving is judgmental or empathetic. Are we focused on the person’s financial need, or are we being more critical of the person in need?

While I don’t view any of my clients as children, I’ve learned in raising my sons that tough love isn’t always effective. Encouragement can be just as effective as wagging a finger.

Suffice it to say, I believe having a good bedside manner can make a huge difference in helping our clients achieve better financial health.

Frank Paré is a certified financial planner in private practice in Oakland, California. He and his firm, PF Wealth Management Group, specialize in serving professional women in transition. Frank is currently on the board of the Financial Planning Association and was a recipient of the FPA’s 2011 Heart of Financial Planning award.

MONEY

4 Qualities a Financial Adviser Ought to Have

Yoda in Star Wars Episode V: The Empire Strikes Back
Lucasfilm/20th Century Fox—The Kobal Collection Yoda in Star Wars Episode V: The Empire Strikes Back

Clients want a leader... but not the stereotypical kind.

It’s not surprising that, according to a 2014 study, almost 90% of clients want their financial planner to be a strong leader.

What is surprising, however, is the way those clients described leadership.

In the study, conducted by the Financial Planning Association’s Research and Practice Institute—and which Julie Littlechild of Advisor Impact discussed in a recent speech—clients said a strong leader should have these four qualities: expertise, skill as a guide, deep understanding, and vulnerability.

Let’s examine those qualities.

1. Expertise: Leaders typically have a strong base of professional expertise that goes beyond general knowledge of their field. This is why continuing education is paramount to good financial planning.

Even more important, leaders have wisdom: the combination of knowledge and experience. A new college graduate has knowledge. A 30-year planner has a high probability of having wisdom.

Clients want planners to be experts, to have knowledge about all things financial, and to know how to apply that knowledge to clients’ unique sets of circumstances.

2. Skill as a guide: Guiding is the ability to use expertise and wisdom to help clients go where they want to go, not where the planner thinks they should go. An effective guide first finds out where clients want to go, devises the safest, most effective route to get them there, and leads the way.

I don’t know of any academic courses that teach financial planners how to guide. It’s learned experientially. Planners learn it by walking the walk, treading the same path for themselves that they will lead their client on.

3. Deep understanding: What’s surprising about this quality is the word “deep.” Certainly, leaders need to understand their followers. But to understand someone deeply is much more intimate and encompassing than a superficial understanding of a person’s general needs, intentions, or desires.

Deep understanding comes through hours of genuine listening, asking probing and thoughtful questions, and having a genuine concern for the client’s well-being. It establishes a deep sense of belonging and acceptance.

For most financial advisers, the capacity and skills to understand someone deeply are not intuitive. They need to be acquired by learning and especially by experientially applying the principles of Motivational Interviewing, Appreciative Inquiry, and Positive Psychology. This training is rarely part of financial planning or finance programs.

4. Vulnerability: This was the most surprising quality. My image of a leader is that of a General Patton or President Lincoln: strong, resolved, visionary, courageous. Not vulnerable. Yet, in truth, vulnerability requires incredible strength of character, vision, and courage.

Financial advisers who are comfortable with their vulnerability are able to expose their humanity and failings. All of us can relate to someone who has screwed up. None of us can relate to someone who hasn’t. Planners willing to admit their errors beget trust and confidence in those around them. The strength to be vulnerable comes from spending a lot of time in self-reflection and personal growth.

Of the four qualities people look for in a strong leader, only one, expertise, can be learned academically. The other three—skill as a guide, deep understanding, and vulnerability—are learned experientially. Anyone who completes the course of study to obtain a financial planning degree has gained only 25% of the necessary skills to become what their clients are looking for in a planner. Someone who adds a degree in counseling conceivably has 50% of the skills.

Becoming a trusted leader and adviser goes further. It requires us to develop and apply in our own lives the relationship skills and leadership we want to offer to clients.

==========

Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the former president of the Financial Therapy Association.

MONEY stock market

A Financial Planner’s Investment Advice for His Son — and Everyone Else

family on roller coaster
Joe McBride—Getty Images

Father's Day has a financial adviser thinking about important lessons to be passing along.

A friend recently asked me to recommend a book for his son on buying and selling stocks.

As I pondered his request, I started thinking about the various books I’ve read or skimmed over my 24-plus years of working in financial services. Initially, I was overwhelmed with titles. Then I started thinking about my own teenaged son and the difficulty I was having getting him to think differently about his money—that he won’t always be able to depend on his parents to help him out. Anyway, I thought if I couldn’t compel a 14-year-old to change his ways, what could I say to my friend’s son, who’s in his 20s?

Finally, I asked myself what would I say—not bark, I promise—to my own son if he were in his 20s and came to me for investing advice? This is what I came up with:

You can go to just about any investment site (e.g. Vanguard, Schwab, or Fidelity) to learn the fundamentals of investing. You need to know, however, that the process of buying and selling is not hard. The real challenge is knowing what to buy, when to buy, and when to sell. If you plan to make investing a career, there is a lot more you need to know than you can learn from a website or book. That would require another conversation.

For now, I would advise you to think long and hard about why you want to invest. In other words, take time to map out your life goals for the next three to five years and the financial resources you will need to achieve them.

Simply saying you want to invest “to make money” will not work when you are invested in a fluctuating market. Short-term volatility can be a bear (pun intended). You have to be willing to ask how much money you can withstand losing when the market goes down, as well as how much profit is enough. As the old Wall Street saying goes, bulls make money in up markets, bears in down markets, and pigs get slaughtered. You also have to be willing to ask yourself how long you plan to stay invested, no matter how much the market fluctuates or falls.

Why am I focusing on declining markets and roller-coaster, up-and-down markets? It’s because people tend to fixate on rising stocks and profits, but pay very little attention to the markets’ inevitable declines. Everyone loves bull markets, which are great for the average investor. But when the market heads south quickly or takes a long, slow journey to the cellar, someone who was looking to make a quick profit can suffer a lot of stress.

Finally, I hope this short note does not come across as too preachy. I congratulate you on your interest in investing, and I will end by saying you are way ahead of the game because you’re thinking about investing now instead of later. Good luck.

Read next: The 3 Most Important Money Lessons My Dad Taught Me

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Frank Paré is a certified financial planner in private practice in Oakland, California. He and his firm, PF Wealth Management Group, specialize in serving professional women in transition. Frank is currently on the board of the Financial Planning Association and was a recipient of the FPA’s 2011 Heart of Financial Planning award.

MONEY Kids and Money

The 3 Most Important Money Lessons My Dad Taught Me

father letting son swipe credit card at cash register
Monashee Frantz—Getty Images

Many of our financial dos and don'ts are instilled by parents at an early age. Here's what my father passed along to me.

One of the responses I often hear from clients toward the end of a financial planning meeting is, “This sounds good. I’m going to talk to my dad about it.”

For many of us, our mothers and fathers have played a profound role in shaping our financial habits—so much so that we still discuss our plans with our parents well into our adult lives. Whether it’s deciding where to invest retirement savings, how much to pay for a first home, or how much of each paycheck to invest in a 401(k), we sometimes go to our parents to help make decisions and to doublecheck we’re on the right path.

These conversations with many of my clients have me thinking about the values and habits my father instilled in me at a young age. Three very powerful lessons come to mind:

Live Within Your Means

On my eighth birthday, my father began to teach me how to live within my means. As I write those words, it sounds funny, even to me. He sat me down and taught me about an allowance. He was going to provide me with a weekly stipend that I would later come to realize was my means. I was going to have a set amount of money that I could spend on anything I’d like. The only catch was that once I spent it all, I couldn’t buy anything else until the following Friday when I received my next allowance. At the age of 8, I began to learn how to budget, how to save, and how to spend wisely.

Plan For the Future

At 14, my father took me to his bank’s local branch to open my first savings account. We sat down at the desk with the bank manager and I shared that I had saved $370 and I needed a place to keep it so it would grow. Entering high school, I knew I wanted two things on the day I turned 16: a driver’s license and a car. If I was going to make them both happen, I was going to need a plan. Dad and I worked out a savings plan to help me save the money I earned from a part-time tutoring job. It took me a bit longer to save up for my first car than I anticipated, but planning and saving to reach a future goal is a valuable life lesson—one I share with my clients every day..

Start Today

When I was 16, I sat down again with Dad to learn about a Roth IRA, retirement planning and perhaps, most importantly, compound interest. I learned that by starting early and investing, my money could grow. By opening an investment account and saving into my Roth IRA with the possibility to earn compound returns, I could potentially become a millionaire when I was older—a crazy thought for a 16-year-old. We charted out a simple savings plan to invest a portion of each paycheck I earned—a savings and investing program I follow to this day.

On the occasion of Father’s Day, I thank you, Dad, for instilling many of my financial values and habits at a young age—habits that will continue to shape the decisions I make for years to come.

Read next: 3 Financial Lessons For Dads on Father’s Day

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Joe O’Boyle is a financial adviser with Voya Financial Advisors. Based in Beverly Hills, Calif., O’Boyle provides personalized, full service financial and retirement planning to individual and corporate clients. O’Boyle focuses on the entertainment, legal and medical industries, with a particular interest in educating Gen Xers and Millennials about the benefits of early retirement planning.

MONEY College

6 Financial Musts for New College Grads

New college grads on procession
Spencer Grant—Getty Images

Nail these moves and you're on your way to financial success.

You did it! You passed your finals, you graduated from college, and you even landed the coveted job you have been working so hard to get. So now what?

Many grads are carrying student loans that will be weighing them down for years to come. Since you’re facing plenty of new expenses—moving, rent, furniture, a suitable office wardrobe—now is a great time to make a financial plan. Here are six things every new graduate should do:

1. Make a budget

A good starting place for your monthly budget can be easily remembered as “50-30-20.” When you receive your first paycheck, sit down and figure out what your monthly take home pay will be. Out of that, put 50% toward needs such as rent, utilities, and groceries. Thirty percent goes toward “wants” such as shopping, entertainment, restaurants, and fun. The final 20% goes to your savings and debt repayment. If your student loans are substantial, you may have to flip the percentages so that 30% goes towards debt repayment and 20% toward wants. By following this plan, you can quickly put a dent in those loans.

2. Manage your debt

Student loans often have multiple tranches with varying interest rates that can be fixed or variable. Your best option is to pay off the loans with the highest interest rates first, though that practice is far less common than you might think. When the time comes to start repaying, access your student debt details online to figure out the interest rates for each tranche. Pay the minimum towards the balances with the lowest interest rates and make your largest debt payments on the balance with the highest interest rate. The biggest mistake you can make is paying the minimum into each loan and waiting until you “make more money when you’re older” to deal with them.

3. Prepare for emergencies

An emergency savings account is the best way to plan for the unexpected. What would you do if your car breaks down and you need $800 to get it fixed? If your laptop stops working and you need one for work, how will you buy a new laptop? What would you do if you lost your phone? People often go into debt to cover unexpected expenses, but it’s a problem that can be solved with a little planning. By contributing a small amount of each paycheck into a conservative investment saving account, you can be better prepared to pay for life’s inevitable emergencies.

4. Take advantage of a 401(k) match

Most employers offer 401(k) retirement plans and many offer some form of a match. A traditional 401(k) is an employer-sponsored retirement plan that allows you to save and invest a portion of your paycheck before taxes are taken out, thus decreasing your tax liability. When an employer offers a match, they are matching your contributions, often up to a certain percentage of your income. By choosing not to fully participate in these programs, you are effectively turning down free money from your employer.

Some employers also offer a Roth 401(k), where your contribution is made with after-tax dollars (meaning that you pay the taxes now) and the funds grow tax-free for retirement. The Roth 401(k) is often seen as the better option for younger investors who are typically in a lower tax bracket and who would not get as much benefit from a tax deduction today as they would in retirement.

5. Open a Roth IRA

Similar to a Roth 401(k), a Roth IRA is an individual retirement account allowing you to invest up to $5,500 for the 2015 tax year. These accounts are often considered ideal for younger investors, who may benefit from decades of tax-free compounded growth. Investing $5,500/year from age 22 to age 30 may create an account of more than $1 million when you’re using those funds in your retired years. If you invested the same amount annually but waited until your 30s to start, your account might be worth half as much. For Roth IRA contributions in the 2015 tax year, your modified adjusted gross income must be less than $116,000 if you’re single (or a combined $183,000 if married.)

6. Automate your savings

By setting up automatic transfers from your checking account to your Roth IRA and emergency savings, you’re effectively drawing money straight from your paycheck. This allows your plan to be put into action with minimal maintenance and oversight on your end.

Congratulations, graduate! With these six tips you could be on your way to a successful financial future.

Voya Retirement Coach Joe O’Boyle is a financial adviser with Voya Financial Advisors. Based in Beverly Hills, Calif., O’Boyle provides personalized, full service financial and retirement planning to individual and corporate clients. O’Boyle focuses on the entertainment, legal and medical industries, with a particular interest in educating Gen Xers and Millennials about the benefits of early retirement planning.

MONEY financial advisers

Cleaning Up After Another Financial Adviser’s Bad Advice

broken piggy bank fixed with tape
Corbis—Alamy

Explaining to clients that another financial adviser has given them bum advice can be awkward. Here's how I do it.

Average Americans have a poor opinion about financial advisers, and with good reason. Too many “advisers” are just salespeople for products that generate commissions for the adviser but rarely deliver the promised investment returns to the client.

As a financial adviser myself, I often see unsuitable investments in prospective clients’ portfolios. I can’t just badmouth those clients’ current adviser. If I point out how this adviser has abused their trust, how are they going to trust me? What can I tell the prospect about another adviser’s bad advice without dragging myself down to his or her level?

Recently I reviewed the investment statements of a prospect family who owned about $1 million in assets in joint taxable accounts and IRAs. The IRAs were invested primarily in variable annuities. The family had already shown me that their retirement income needs were covered by pensions. Their primary interest was in asset transfer to their children.

There’s nothing wrong with variable annuities if used for the proper purpose. For example, clients may have already maxed out 401(k) contributions but still want to set aside additional cash in tax deferred investments. However, there is no reason, in my opinion, why you would ever put a variable annuity inside an IRA. There is no additional tax benefit, but there is an extra layer of cost and complexity and there is a loss of liquidity due to surrender charges. If you don’t like the investment returns of the annuity, it could cost you up to 11% or up to 11 years to get out.

There’s a wrong way and a right way to deliver bad news. The wrong way is a declarative statement along the lines of, “You idiots were totally taken advantage of.” The prospects tend to grab their papers and stomp out the door.

The right way is to engage the prospect in a series of questions and answers; that educates clients without making them feel stupid.

“Tell me about your thought process when you purchased these annuities,” I asked.

“Our broker explained that the annuity would grow tax-free with the stock market, and then at a certain point we could convert to a term annuity which would pay out a level payment for the rest of our lives.”

“Did he note that your assets are already in an IRA?” I asked. “Where growth is tax-free already?”

“No,” they replied.

“Did he tell you that you could also achieve growth by investing in a basket of mutual funds?”

“No.”

“Did he advise you that once you convert to a fixed annuity, there’s no residual value for your children?”

“No.”

“Did he explain that, because of the various fees loaded onto your investment, you were likely to have sub-par returns?”

“No.”

“Did he explain what the surrender charge is?”

“Sure!” they replied. “That’s the insurance company’s way of making sure we stay committed to the annuity.”

“That’s the marketing department’s answer to what a surrender charge is,” I said. “What the insurance company doesn’t tell you is that they paid a commission of up to 11% to your broker on the sale, which the insurance company amortizes over the next 11 years at one percentage point a year. So if you exit in year five, there’s still 6% of that 11% commission to recover, hence the 6% remaining surrender charge.”

By this point, the couple was looking distinctly uncomfortable.

“Look,” I said, “there may have been some other reason why he recommended this strategy. All I can say is that for the needs that you have described, I would have invested you in a plain vanilla basket of fixed income and equity mutual funds. We would have complete flexibility to adjust the asset allocation over time. If for some reason you weren’t happy, you could cancel your relationship with me with an e-mail, no surrender charge. We apply a monthly advisory fee to the assets in this plan, which is 1/12 of 0.75%. The fees you pay me are computed and disclosed to you in our monthly report. As your assets rise in value, so does our monthly fee, so no mystery about my incentives.”

Nobody likes to find out that their current adviser isn’t focused on their best interests — that is, a fiduciary. I provide information, let the prospects draw their own conclusion.

We turned to other topics, and I followed up with a formal investment proposal a few days later. I was not surprised that the family decided a few weeks later to move their accounts to my firm, nor was I surprised that the annuity accounts would trickle in only after the surrender charges had expired. Even though the family had concluded that they had received a raw deal from their current adviser, those annuities still were locked in for a few more years.

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David Edwards is president of Heron Financial Group | Wealth Advisors, which works closely with individuals and families to provide investment management and financial planning services. Edwards is a graduate of Hamilton College and holds an MBA in General Management from Darden Graduate School of Business-University of Virginia.

MONEY Financial Planning

The Hazards of Financial Advisers Who Are ‘Just Like Family’

Andrew Olney/Getty Images

Trust should be a byproduct of skill and integrity — not a marketing tool.

We financial planners may know more about our clients than their doctors do. We are often among the first to know when clients’ families are affected by significant life events such as engagements, pregnancies, career successes and setbacks, or serious illnesses.

Does that mean clients should think of their planners as part of the family? According to a recent article by Deborah Nason for CNBC, some planners would like clients to see them in that light.

I was one of the professionals interviewed for the article, which discussed planners providing emotional support for clients and building long-term relationships with them. It also addressed the impact these services have on client retention rates.

My firm’s client-centered services focus on clients’ emotional as well as financial well-being. Still, I was uncomfortable with the tone of part of the piece, especially statements like: “. . . advisors are serving as thinking partners, therapists, surrogate family members and community organizers” and “Some advisors set out intentionally to become part of the client’s extended family.”

Some of my unease came from one essential word that was missing from the article: integrity. My guess is that for the advisers quoted, integrity is such a given that they didn’t think to mention it. Supporting clients’ well-being with services like financial coaching only serves clients well when it is built on a solid platform of professional skill and integrity. The only way to build the trust that is such an essential aspect of comprehensive financial planning is by being trustworthy.

Both clients and planners need to be fully aware — not just at the beginning of their professional relationship, but as they work together over time — of the importance of that essential foundation of integrity and skill. It has to be maintained through transparency and professional safeguards. Otherwise, a “family” relationship could obscure an adviser’s lack of knowledge in a particular area or make it very hard for a client to question advice that may not serve them well.

To take this one step further, it’s wise to remember one of the reasons unscrupulous con artists are able to fleece unwary customers out of millions of dollars. They have honed the ability to manipulate people’s emotions to persuade customers to trust them, and they then abuse that trust.

Also a matter of integrity is the question of whether it’s even appropriate for planners to “set out to become part of the client’s family.” This has the potential to lead to a manipulative and patronizing view of clients.

Serving clients’ best interests in a fiduciary relationship is the opposite of viewing them as customers to be sold a service. Planners who “sell . . . the relationship,” as one adviser quoted by Nason put it, run the risk of putting their agenda and their goal of creating a relationship ahead of the clients’ agenda and goals. There is nothing wrong with wanting clients for life; such long-term relationships can certainly serve clients well. But those relationships are built, not sold.

One of my clients who read the article told me: “I don’t want a planner to set out to ‘become part of my family.’ I want a planner to provide an impeccable level of service and trustworthiness that invites me to start thinking of him or her as ‘family’ — eventually, if that is comfortable for me.”

This, I think, is at the heart of client-centered fiduciary planning. Over time, advisers might become ‘family’ because of their integrity, advocacy, or chemistry, but such close relationships should always originate with the clients. Moving into such a position of trust has to be earned and only comes by invitation.

———-

Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the former president of the Financial Therapy Association.

MONEY financial advisers

The 3 Biggest Money Worries of First-Time Parents

first time parents
Ashley Gill—Getty Images

Good news, explains a financial planner: They're easily addressed.

Over the last 13 years I’ve worked with countless millennials preparing to embark on their journey to parenthood. First-time parents are concerned about many things, starting with feeding their newborn, keeping the little one healthy, or just sleeping through the night (for both parent and baby).

Amid the whirlwind of emotions a single parent or couple may go through leading into the birth of their first child, I’ve found that first-time parents all find themselves confronting the same three financial questions:

  1. How will we afford this baby?
  2. How will we pay for college?
  3. What if something happens to us?

As a financial adviser, I often find myself counseling first-time parent trying to process it all. The great news is that all three of these questions can be answered with a little bit of planning.

1. How will we afford this baby?
You can count on new and unexpected expenses with your little one on the way. Many of my new-parent clients have found that three of the most significant expenses in the first year are daycare, diapers, and baby food. By increasing your monthly contributions to a liquid investment savings account, you can get a head start on changing your spending habits and begin to prepare for costs you know are coming.

2. How will we pay for college?
College is getting more expensive every year. If you want to put your money to work, start saving early and take advantage of time and compound returns. A 529 college savings plan offers you 100% federal tax-free growth for qualified higher-education expenses. (State tax advantages vary from state to state and may depend on whether you are a resident of the state sponsoring the plan.) As the parent, you retain complete control of the assets. To help bolster their child’s college fund, many parents encourage family and friends to contribute to their child’s 529 plan instead of giving toys or other presents for major events like birthdays and graduations.

3. What if something happens to us?
It probably isn’t going to hit you in the first trimester, or maybe even the second, but it’s a realization so many parents reach by the time their newborn comes home to the nursery: What if something happens to us? Most new parents have never had to sit down and plan for contingencies like death. But the moment you have someone depending on you — both financially and emotionally — for the next 20-plus years, it hits you: “I need a plan.” For many, this plan has two major pieces that ultimately answer two questions:

a. Who will take care of my baby? An estate planning attorney can help you gather information and consider some important issues designed to protect your family. Through your estate plan you can dictate guardianship instructions for your baby, control over the distribution of your assets, and medical directives.
b. Who will pay all my baby’s expenses? Life insurance can provide your child, or your child’s guardian, with a lump sum payout upon your death. Term life insurance is typically the least expensive, and thus the most common, option; you pay a set amount each month over a certain number of years, and in turn are guaranteed a death benefit should you die during that term. The policy’s lump sum payout can help your beneficiaries cover the costs you would have otherwise paid.

By starting your planning early, you can set aside the extra cash you’ll need when your family’s newest addition arrives, split the college bill with your old pal “compound returns,” and prepare for the unthinkable. Once you have these pieces in place, you’ll have your mind clear to focus on what is most important — your family. (And your sleep.)

Joe O’Boyle is a financial adviser with Voya Financial Advisors. Based in Beverly Hills, Calif., O’Boyle provides personalized, full service financial and retirement planning to individual and corporate clients. O’Boyle focuses on the entertainment, legal and medical industries, with a particular interest in educating Gen Xers and Millennials about the benefits of early retirement planning.

MONEY financial advisers

A Good Financial Planner Is Like This Year’s Hot Pitching Prospect

150511_ADV_Pitcher
Nick Turchiaro—USA Today Sports/Reuters Toronto Blue Jays starting pitcher Daniel Norris throws a pitch during first inning in a game against the Atlanta Braves at Rogers Centre.

Like the Blue Jays' Daniel Norris, a good financial planner is true to him- or herself.

“Stop asking questions, Maurer, and do what I tell you to do,” said the general agent for the Baltimore region of a major life insurance company.

At the time, early in my career, I was sure this guy watched Glengarry Glen Ross every morning before work. His lines were a little different, but they were no less rehearsed.

“I made over a million dollars last year!”

“I buy a new Cadillac every two years — cash on the barrelhead.”

I was told how to dress: Dark suits, white shirts, and “power ties” that weren’t too busy. Light blue shirts were allowed on Wednesdays. Never wear sweat pants, even to the gym. Enter and exit the gym in a suit. Your hair should never touch your ears or your neck. Facial hair was strictly forbidden. Jeans, outlawed.

When you have a “big fish on the hook,” invite them to the Oregon Grille, one of the nicer restaurants in the rolling horse country north of Baltimore. Get there a half-hour early and tell the maître d’ your name so that he can use it when you return shortly with your guest. Ask where you’ll be seated and pre-greet your waiter. Also let him know your name — along with your “regular” drink, so that you can ask for it momentarily.

As one in a class of newly minted “financial advisers,” who was I to argue with this six-foot-five collegiate lineman as he passionately outlined his method of perception manipulation? Who was I to argue with a million-dollar income and cash on the barrelhead?

Who was I to be original in a world that ranked sales and profit above, well, everything? Who was I to be myself?

This is the old school, and, thankfully, a new school is emerging. The new school doesn’t eschew teamwork, but it questions uniformity. The new school doesn’t worship individuality, but it also doesn’t fear personality. The new school isn’t anti-profit, but it refuses to elevate sales above the personhood of the advisor or the best interest of the client.

While the old school is proprietary and exclusive, the new school is open-sourced and inclusive. The old school insists while the new school nudges. The old school deflects questions and denies suggestions for improvement while the new school welcomes both.

The old school crafts a narrative to which it requires conformity. The new school sees the benefit in allowing advisers to tell their own story and attract the clients who resonate with it.

The financial services industry is not the only realm where this is true. Insistence on conformity may be even more evident in professional baseball, where one of the MLB’s most promising young pitchers is putting convention to the test.

Daniel Norris is a 22-year-old surfer dude who lives in a WalMart parking lot. His ride, a 1978 Volkswagen Westfalia, doubles as his residence. His manner and method might cause any prospective employer to hesitate before bringing him into the fold. But his ability to mow down major league batters with a fastball consistently in the mid-90s earned him a $2 million signing bonus and a spot on the Toronto Blue Jays’ roster. Of course, he’s instructed his agent to limit his allowance to only $10,000. Per year.

Here are three reasons why nonconformity is working for Daniel Norris and could also work for you:

1. He’s authentic. He’s not being different just for the sake of being different. He’s not rebelling against convention as much as he’s being true to himself and his values.

The point isn’t to not be everyone else, but to be yourself. This means that if dark suits, white shirts, power ties and Cadillacs are your thing, that’s what you should wear and drive. But if you prefer no ties—or bow ties—and Levi’s, well, you get the idea.

2. He’s a great teammate. There are certainly players who’ve questioned his unorthodoxy, but no one questions his dedication. “He’s in great shape. He competes on the mound,” says Blue Jays assistant general manager Tony LaCava. “He has great values, and they’re working for him.” And for Toronto.

Being yourself doesn’t mean being on an island. Some, like Norris, might thrive off of extended periods of solitude, but our greatest work often complements and affirms the great work of others.

3. He’s good. Really stinkin’ good. His 11.8 “strikeouts per nine innings” ratio was the best in the minors last season, according to ESPN. And he’s competing for a starting role in the majors ahead of schedule. If Norris were just another dude living down by the river in an old VW bus, we’d never have known about it. That he throws a 96-mile-an-hour fastball low in the strike zone — while doing so in a way that is true to his values — is what makes him special.

If you do things differently, especially in the financial industry, you may well encounter some resistance. You’ll likely have to work harder to prove yourself. But if you do so with a high degree of excellence, you’ll earn the respect of your peers.

There are a growing number of financial advisers who have diverted from the conventional path, and to good effect.

Carl Richards drew criticism from many in the industry when he confessed his greatest financial sin, but a willingness to acknowledge his imperfection endeared him to those skeptical of the industry’s propaganda campaign regarding adviser infallibility (read: everyone).

Carolyn McClanahan gave up her career as a medical doctor when she failed to find a financial adviser who would focus on her as much as her investments. She went back to school and started a planning firm that centers on clients’ values and goals. She’s also become a recognized expert in all things money and medicine.

Recognizing the dearth of women in the advisory realm, Manisha Thakor seems to personify much that the field is lacking, this imbalance considered. Manisha became an industry thought leader, a voice for women advisors and clients.

Michael Kitces is, at heart, a nerd. He struggled with individual client interaction, but turned his passion for education and teaching into a thriving business as the adviser to advisers. “To do anything other than what I do, given my story, would feel like a violation of myself and who I am,” he told me.

How might your life and work look different if you took the same conviction to heart?

Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

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