Common Questions for Financial Planners and Advisors

A financial advisor, above all else, helps you build wealth and feel secure financially. They use their experience and expertise managing finances, investments, and helping clients plan for various life milestones to provide advice and management specific to your financial situation and individual goals. This can apply to any aspect of your financial life – planning for retirement, managing investments, paying down debt, increasing savings, creating an estate plan, optimizing taxes, and more. A financial advisor gets a complete understanding of your financial situation and goals and creates a plan with concrete steps to reach them.

Just as financial goals vary from person to person, exactly where and how to invest is not a one size fits all approach. That being said, there are a few best practices that apply to most, if not all, investors. First, it’s important to understand that investing is not a get-rich-quick scheme but a way to consistently grow wealth over time. Mutual funds are a great way to invest because they keep your holdings diversified, which limits risk while providing the opportunity for long-term growth. The second is to determine an amount or income percentage you can commit to investing regularly and remain consistent with your contributions.

How much life insurance you should have varies based on a variety of factors. A good rule of thumb is that your policy provides ten-fifteen times your annual income. However, we typically recommend that people between ages 30 and 50 have more coverage than people who are older or younger. This is because they’ve generally started to take on larger amounts of debt (such as a mortgage, car payment, and student loans), but haven’t had enough time to build much equity in their assets yet. The goal is for your life insurance to give your loved ones enough of a cushion to account for any debts and liabilities you may have, as well as the loss of your income.

When determining the right retirement income withdrawal rates, it’s important to consider your age, portfolio size, and goals in retirement, as well as a variety of other factors. Age is a particularly important factor as it affects how long the money may realistically need to last. For example, if two people have identical portfolios in both size and structure, but one is fifteen years younger than the other, the younger retiree will have a longer time horizon, and their money will need to last for a greater amount of time.

It's also important to understand that the larger the withdrawal percentage is, the faster your account will become depleted. Should there be a market downturn, these losses can quickly become amplified.

That being said, we typically recommend that your retirement income withdrawal rates should be in the range of 3-5%, but consulting a financial advisor will allow you to understand the best percentage for your unique situation in retirement.

The goal of socially responsible investing is to invest money in companies that have positive social impacts and may lead to broad-scale social change while providing positive financial returns. From mutual funds, ETFs, and separately managed accounts, there are a variety of investment vehicles for socially responsible investing.

It sounds like a win-win situation. However, socially responsible investing isn’t necessarily black and white. Different investors have different values and standards, so what one person considers socially responsible may not fit the bill for another. Not to mention, companies may “greenwash,” or misrepresent, their portfolios as a strategy to gather more assets.

For investors who feel strongly about only allocating investments to companies that align with their values and beliefs, investing in a portfolio of individual stocks through a separate managed account will allow for a more precise allocation than pooled investments, like mutual funds.

At The Tranel Group, all of our portfolios are evaluated with an ESG overlay to account for societal-specific risks, like environment, social, and governance risk factors, as well as additional benefits. We encourage investors looking to create a customized socially responsible portfolio that aligns with your values and beliefs to reach out.

It’s never too late to start building your financial plan. Creating a financial plan is like building a roadmap to success – it helps point you in the right direction to reach your financial and personal goals. Of course, life is full of surprises, and there may be times when it is necessary to adjust your plan. However, it’s easier to stay on track when you already understand the destination and the important milestones on the way there.

The first step to building your customized roadmap is to meet with a financial advisor to go over your financial information and share your goals.

That’s why we’re here! No matter where you stand financially, what stage of life you are in, or what your long and short-term goals are, we can help point you in the right direction to start achieving your goals. Contact us today to start the conversation.

Simply put, a commission-based advisor gets paid a specific percentage of the assets they manage for a client. If the portfolio performs positively, the advisor will earn a higher fee. Consequently, if the portfolio performs negatively, the advisor will earn a lower fee.

Alternatively, a fee-based advisor gets paid a flat rate for buying and selling different securities, such as stocks, bonds, mutual funds, and more. This rate is not dependent on the performance of the holdings or how much time is spent with the client.

The Tranel Group is a fee-based, independent firm, which grants us greater flexibility, as we are not tied to proprietary products and do not have any conflicts of interest when giving financial advice.

Many people believe that investments are free, so long as they are held inside of a qualified plan, such as a 401(k), an annuity, or if they purchase a mutual fund or other investment asset on their own. Unfortunately, this is a very common misconception – nothing is ever totally free because there are costs associated with managing these investments.

For example, if your employer-funded 401(k) has fifteen holdings options, they are selected by a plan sponsor to be available to you, and there is typically an administrative cost from the plan sponsor. Each year, the plan sponsor is required to send you a prospectus (either digitally or through the mail) that explains all the details regarding each fund. Because of this, each mutual fund would have two underlying layers of expenses. The first, a 12b-1 expense, is built into the mutual fund and is commonly referred to as a marketing expense, which helps to cover the marketing materials, including the prospectuses, you receive. This nominal fee typically ranges from .2% to .5% - but it’s still present. Second, the fund will have an internal expense, as somebody is managing the underlying investments in the fund, which is in the same range as the 12b-1 expense.

The amount of money that is allocated to fees may vary based on the type of investment or specific fund, but all will have some associated fees.