Don’t Fail To Plan
Sometimes, it’s best to be in the hands of a professional. Ask someone whose father bought a Dremel drill to save on dentist bills - DIY isn’t all it’s cracked up to be. Just as we should probably let a specialist tackle complex medical maneuvers, our financial matters might be bettered handled by people in the know.

"Most people understand the obvious assumption of having a medical exam before surgery," says Aubrey Morrow, president of Financial Designs Ltd., and host of The Financial Advisors’ Money Talk Radio Show on KOGO AM 600. "However, people go through their lives making financial decisions without what I call a financial checkup. Just like a medical exam, the result of a financial examination will show areas where people need help."

Take taxes, for instance. Morrow maintains that 99 percent of the people he’s met over the years pay more in income tax than they need to. "If you look at what you paid last year in taxes, it’s the largest expense of your family’s budget. Bar none."

For the especially affluent, tax woes are compounded. The most overlooked area, Morrow says, is estate planning. The esoteric and ever-changing tax laws don’t make the after life easy. For a couple with more than $4 million, so-called death taxes can eat up almost half the estate.

If seeing a CPA once a year is leaving you lost in the crowd, having a person whose passion is making - and saving - you money might be the ticket, especially as your assets grow.

"I think everybody should have a financial advisor of some type," says Brian Stokes, JD, founder of Stokes and Associates, Inc. This holds true if you have 50-bucks or $50 million. "People who know how to make money do not necessarily know how to manage their money. There’s a significant difference between the two."

The level of management an individual chooses should be closely matched to their specific situation. Options range from a la carte services, to a fully integrated approach - comprehensive wealth management. A single source for all things financial, be it asset allocation, tax minimization, estate planning, or philanthropy.

"One issue that the wealthy have, is their money is scattered all over Christendom," Stokes says. If your assets are handled by multiple firms, there’s the risk of duplicative efforts, resulting in less diversification than you thought you had - blowing asset allocation out the window.

Besides providing cohesion, financial managers can create investment opportunities that you won’t find on the street -granting exclusive access to hot finds. Perhaps more importantly, advisors that charge a fixed, annual fee offer objectivity where it’s most needed.

"Emotion is the single biggest factor in bad investment decisions," says Kevin O’Roarke, president of Western Pacific Capital Management. "A real advantage is having someone who’s going to make solid decisions on what to buy and when to sell it, without having an emotional attachment to the assets." To boost the odds that you’re getting impartial advice, Trevor Callan, CEO of Callan Capital, says it’s imperative to consider how the advisor is compensated. Planners that are structured under a fee-based, registered investment advisory status eliminate inherent conflicts associated with commissions.

Morrow concurs, saying that the best structure is where the advisor is paid a fee. He recommends seeking out a Certified Financial Planner (CFP) who’s independent and "not associated with a big firm that dictates and limits investments."

"Most financial planners who work for large companies have a quota," he says. "If they do not satisfy the quota, they do not remain with the firm."

So, expect to pay a fee, but in shopping, maybe don’t put bargain hunting high on the list. O’Roarke says that the fee structure tends to be indicative of performance. "It’s a very competitive field, and if you’re going to go to a professional money manager, you’re not going to be overcharged...you cannot continually overcharge a client if you’re not performing."

What should raise red flags when interviewing potential advisors? Stokes says to beware of someone who starts out by quoting returns. "I can make you 47 percent in 12 months on this really easy deal," he laughs. "If I could make 47 percent in 12 months, I’d be on my yacht... I wouldn’t need you walking in and talking to me, I’d need my help."

Stokes stresses, however, that the first step is to make sure of what you want — before you ask for it. Think about what your goals are. "Once you establish your dream, or your desire, then you go and find that firm or whomever that can fulfill that specific need." — Paul Stuart

Financial Wisdom
The Bull Charges On
Investors continued to climb the proverbial wall of worry during the market’s second quarter, shrugging off sub-prime woes, a lackluster IPO from a large private equity firm, and another hedge fund blowup. One thesis: The bull market in stocks will continue.

Why? Well, to start, there is a global economic boom underway that is being driven by strong demand from emerging market economies. Also, bond yields remain low and stock valuations remain reasonable (i.e. this bull market is earnings driven unlike the tech bubble of 2000). On top of that, U.S. corporate balance sheets are in excellent condition, and record share buybacks continue to support stock valuations.

The risks are many and the party will most certainly come to an end — it always does. But many believe this won’t occur for some time as the supply and demand dynamics of securities still favor stocks. Many pundits believe that as the bull market continues, investors will need to be prepared for greater volatility.

To manage downside risk and interim market volatility, affluent investors focus heavily on asset mix (i.e. how much should be in bonds, stocks, etcetera). The asset allocation decision remains the first and perhaps most important decision in managing assets. Once you have developed the appropriate asset mix, look to reduce volatility through diversification. For instance, most of our growth oriented investors continue to have exposure to global markets, long-short strategies, income securities, and royalty trusts. Exposure to these assets will help reduce portfolio volatility and be beneficial to long-term wealth creation. — Gabriel Wisdom, host of Financial Wisdom on the Business Talk Radio Network (www.gabrielwisdom.com)