MoneyGeek Feature: Women’s Guide to Making Financial Moves After College

Leanne Rahn had the privilege to be featured in MoneyGeek to talk to readers about “Women’s Guide to Making Financial Moves After College”.

Leanne discusses challenges women face as they begin their financial journey after college and what they can do to set themselves up for a fruitful financial life.

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

---

Is A Financial Advisor Worth It?

If you have extra time, are interested in finances, and are willing to research the actions needed to become successful financially; then you might not need a financial advisor. There are a lot of great free resources available if you are willing and able to put in the time and effort. That being said, there are also many reasons why you might choose to work with a financial advisor. 

You might:

• Be too busy with work/life to complete research on your own

• Deal with analysis paralysis and need some guidance on how or where to invest

• Get nervous during periods of market volatility and need someone to give you reassurance and prevent you from making an emotional investing decision that could cost you a lot of money

• Need someone to help keep you accountable and consistent with investing

• Not be interested in finances/investing and would rather pay someone to help so you can spend more time on things that you enjoy

Whether you are currently working with a financial advisor or looking to work with a financial advisor, here is a review of some ways financial advisors could add value to your investing plan according to Vanguard. If you do not need/want a financial advisor you may still want to focus on these areas as you manage your own financial plan. (Source: Vanguard Advisor’s Alpha; link below)

Value a Financial Advisor Could Bring

As I review the seven modules that Vanguard presents, please keep these quotes from the paper in mind.

“Paying a fee to a professional who follows Vanguard’s Advisor’s Alpha Framework described here can add value in comparison to the average investor experience, currently advised or not. We are in no way suggesting that every advisor—charging any fee—can add value. Advisors can add value if they understand how they can best help Investors.”

“We do not believe this potential 3% improvement can be expected annually; rather, it is likely to be very irregular.”

“Some of the best opportunities to add value occur during periods of market duress or euphoria when clients are tempted to abandon their well-thought-out investment plans.”

(Source: Vanguard Advisor’s Alpha; link below)

1. Suitable Asset Allocation Using Broadly Diversified Funds/ETFs     Value: >0.00%

Asset allocation is the percentage of investments you have in stocks, bonds, cash, and alternative investments. Factors to help determine your asset allocation are your risk tolerance, risk capacity, and the goals you have for that particular sum of money. Having the right mix of investments for your specific situation and goals is very important. Vanguard found this value add to be significant but stated it was too unique to quantify.

2. Cost-Effective Implementation (expense ratios)     Value: 0.30%

After determining your asset allocation, the next step would be to decide what investments to invest in. One thing that you have a lot of control over is how much you pay to be invested in the stock market. The difference between the returns you achieve and the cost you pay is your net return. Vanguard recommends keeping your expense ratios low, and I agree. A high expense ratio for a fund could be greater than 1% whereas a low-cost index fund could be as low as 0.04%. Vanguard found this value add to be 0.30%.

3. Rebalancing     Value: 0.14%

Your asset allocation can drift over time. Let’s say you originally invested 80% in stocks and 20% in bonds. One year later if stocks perform better than bonds, you might now be 90% stocks and 10% bonds. If you want to control your risk and stick within your risk tolerance, then rebalancing back to the original 80% stocks and 20% bonds may make sense for you. Rebalancing can also help you buy low and sell high. It forces you to buy the investment that underperformed and sell the investment that overperformed. This is easier said than done. If you had an investment that did really well, emotionally you may not want to sell some of it and buy the investment that underperformed. A financial advisor could do this automatically for you. Vanguard found this value add to be 0.14%.

4. Behavioral Coaching    Value: 0.00%-2.00%

As human beings, we all have emotions. During periods of market volatility and downturns, having an advisor to help prevent you from changing your investment strategy could be very valuable. When COVID initially started, the market took a huge dive as the economy shut down. I know a few people who sold completely out of the stock market because of fear. Then when the market recovered they missed out on the huge gains that followed. They let their emotions get the best of them and ended up locking in their losses by selling. If they would have had an advisor to help them stick to a financial plan they might be in a better position today. Vanguard found this value add to be 0.00%-2.00%.

5. Asset Location     Value: 0.00%-0.60%

There are three main types of accounts where you can keep invested assets: Tax-deferred accounts, Tax-free accounts, and Taxable accounts. Having the right investments inside of the correct accounts could help you pay less in taxes, which would leave more money left over for you. Here is a figure from the Bogle Heads forum which reviews which funds might be better for the three different account types. A financial advisor could help you decide which investments should be inside which accounts. Vanguard found this value add to be 0.00%-0.60%.

(Source: Bogleheads Wiki; link below)

6. Spending Strategy (withdrawal order)     Value: 0.00%-1.20%

If you only have investments inside of one account type then this module wouldn’t bring any value to you. On the other hand, if you have some investments inside of a 401(k), a Roth IRA, a Health Savings Account, and a taxable brokerage account then which account you withdraw money from first could add a lot of value and help you save on taxes.

You might withdraw from your 401(k) for your required minimum distributions for that year first, then you might consider taking money out of your taxable brokerage account, after that you might decide to withdraw money from your Roth IRA, saving your HSA for later. Having money invested in different account types can allow you to adjust how much tax you pay during your retirement years. Withdrawing money in a sub-optimal order could cause you to pay more taxes! Vanguard found this value add to be 0.00%-1.20%.

(Source: Vanguard Advisor’s Alpha; link below)

7. Total Return Versus Income Investing     Value: >0%

This includes helping investors decide what kind of bonds to include in their portfolio such as short-term, long-term, and high-yield. Guiding investors to not focus solely on retirement income with bonds but to also consider capital appreciation that could add value over the long term. This could also help decrease risk and increase tax efficiency. Vanguard found this value add to be significant but stated it was too unique to quantify.

So Is Having a Financial Advisor Worth It?

That is a value judgment, so only you can decide if having a financial advisor is worth it. Vanguard has shown that advisors can add up to, or exceed, 3% in net returns by following their Advisor’s Alpha framework. Over a long period that could add tremendous value to your financial plan. That’s if you are being charged reasonable fees for the services provided. This figure shows the median advisory fees based on account size.

• If you want to do it on your own, make sure to do your research so that you can invest well

• If you currently work with a financial advisor, make sure you what they are charging you and evaluate if they are following Vanguard’s best practices in wealth management

• If you want to work with an advisor then feel free to reach out to as I would happily meet with you to explain how I would be able to help you with your financial plan

(Source: Kitces Blog; link below)

Sources:  https://advisors.vanguard.com/content/dam/fas/pdfs/IARCQAA.pdf

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

https://www.kitces.com/blog/financial-advisor-average-fee-2020-aum-hourly-comprehensive-financial-plan-cost/

Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.

MoneyGeek Feature: How to Start Saving and Investing

Leanne Rahn had the privilege to be featured in MoneyGeek to talk to readers about “How to Start Saving and Investing”.

Leanne answers the questions of how much should you invest, how you choose the best stocks and bonds, how to start investing while living paycheck to paycheck, and her take on investment apps.

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

---

MoneyGeek Feature: Finding the Right No Annual Fee Card

Leanne Rahn had the privilege to be featured in MoneyGeek to talk to readers about “Finding the Right No Annual Fee Card”.

Leanne discusses the pros & cons of no annual fee credit cards and what consumers should consider when paying for an annual fee credit card.

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

---

THE STEWARDSHIP PODCAST // Stewarding Your Money with Leanne Rahn and Connor McDowell

Stewarding Your Money with Leanne Rahn and Connor McDowell

Episode Description

On this episode I am joined by my friends, colleagues, and fellow financial advisors Leanne Rahn and Connor McDowell. We tackle all things stewarding your money. Don't forget to join the SP community on Facebook.

What Should I Do With A Large Lump Sum Of Money

Did you just win the lottery, receive a large inheritance, or win a lawsuit settlement? If you just won the lottery I would recommend being wise with that money since 70% of lotto winners lose or spend all their money in five years or less (Source: Reader’s Digest; link below). Being smart with an inheritance or lawsuit settlement is just as important. Here are some steps you may want to consider when deciding what to do with your newfound wealth.

1. Don’t Do Anything

   You might want to buy a fancy new car, go on an expensive vacation, or be generous by sharing the money with friends and family. There will be plenty of time for those things, but you should take a month to let everything settle first. Carefully consider who you are going to tell about the money. Don’t quit your job. Don’t go around bragging or posting about it on social media. Don’t put all of it into the hot stock of the month based on a Reddit forum. Continue living your life as if you never received the money. You will make better decisions once your endorphin levels have settled back to baseline.

2. Contact a Certified Public Accountant (CPA)

   The IRS loves when people receive large sums of money, and you can bet that they want a piece of the pie. Often, that piece ends up being much larger than you’d prefer, so finding a CPA that specializes in taxes should be a top priority. They could help you strategize a plan to reduce the tax burden and leave more money available for other things.

3. Contact an Attorney

   An attorney is able to explain the benefits of having a will, a trust, and a DPOA for finances & healthcare. They should be able to help you complete these if needed for your particular situation. If you already have these in place, this might be a great time to review and update any if needed. Having these in place will save your family many headaches when you eventually pass away.

4. Contact a Financial Advisor

   A financial advisor is able to help create a written plan for your money. This could include paying off high-interest debt, opening and/or maxing out retirement accounts, funding a brokerage account, evaluating the need for term life insurance, building out a net worth statement, starting a donor-advised fund, and determining your risk tolerance to create your ideal asset allocation. When searching for a financial advisor you want to make sure they:

   • Are a Fiduciary: Which means they have to put your best interests first!

   • Are a Fee-Only Advisor: This means they do not have a conflict of interest with potentially selling you certain investments to get a large commission.

   • Have a Clear Investment Strategy: Do they have an investment strategy that can be clearly explained to you and matches your investment philosophy?

     I am proud to say that I check all 3 of these boxes in my financial advising practice.

5. Implement Your Plan

   While creating your financial plan might sound like the hardest part, implementing your plan may be more difficult. A written financial plan of how you want to direct your money is great but if you don’t take steps to implement that plan then it was all for nothing. When implementing your plan keep in mind:

   • Not to let emotions control your financial decisions.

   • Don’t let the news media tempt you into making quick, spur-of-the-moment decisions during periods of market volatility (Remember the main goal of news media is to attract viewers, not to give solid financial advice).

   • Stay consistent and reach out for help if needed. Investing is a marathon, not a sprint.

   A patient going for physical therapy could perform all their therapy on their own if they knew the correct exercises. Having a physical therapist guide which exercises will be the most effective and support/encourage the patient in completing them, could help the outcome tremendously. Partnering with an excellent financial advisor is similar.

6. Finally, Treat Yo Self!

   If you have made it to this point and are implementing a well-thought-out financial plan, you should congratulate yourself. You did the hard work and made the tough decisions to set yourself up for success. Now might be the time for you to use a small portion of that money to Treat Yo Self as a reward!

Sources: https://www.rd.com/list/13-things-lottery-winners/ https://rochesterlawcenter.com/services/durable-power-of-attorney-michigan/ https://www.youtube.com/watch?v=gSjM5B3QNlw

Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.

7 Facts About 529 ABLE Accounts→