Category: About us

If you were widowed, would you fire your husband’s financial advisor?

According to an article in Financial Advisor magazine,

Surviving spouses — statistically, wives — have a habit of firing financial advisors. Most sources peg the rate at about 50%, but the advisor-education website says the rate is closer to 70% if you wait a few years for the penny to drop.

Why is that?  It seems that most advisors have an “unbalanced advisor-client relationship.”  That means the advisor focuses on the half of the couple that seems to be more financially savvy.  This results in the surviving spouse, often the wife, not really thinking that the advisor is “her” advisor.

The article goes on to suggest that the advisor “provide basic, nuts-and-bolts financial advice to the surviving spouse.”

At Korving & Co. we go one better.  We have written a set of books “Before I Go” and the “Before I Go Workbook” anticipating the issues that the surviving spouse will face.

That’s why when our clients lose a spouse, we rarely lose the survivor.  They know that we focus on the family and the surviving widow trust us to take care of her.  In fact, we often find that when both husband and wife have passed on, the children come to us to manage their affairs.

For a personally autographed copy of both books, or more information on how we can help you, contact us.

What Rich People Need to Know

I ran across an article at Market Watch titled “Ten things rich people know that you don’t.”  It listed the usual things:

  • Start saving early
  • Automate your savings
  • Maximize contributions to 401(k)s
  • Don’t carry credit card debt
  • Live below your means
  • Educate yourself about investing
  • Diversify
  • Hire a qualified financial advisor

All of that is something to take to heart when you’re young and just starting in life.  But what do people who are already rich need to know?

Lots of people get rich without following the rules.  They may start a successful business, enter a highly compensated profession, climb the corporate ladder, win the lottery, become a sports star or inherit a fortune.   Once you are rich, the number one objective for most people is to stay rich.  One very successful financial advisor with just 28 very wealthy clients said

“People don’t come to me to get rich, they come to me to stay rich.”

That’s the role of a good financial advisor.   Their job is to  do more than manage their client’s portfolios, it’s to take care that all of the other boxes are checked off:  to diversify the client portfolio, to educate the client about investing, to see to it that they live within their means.  In many cases they take care of family issues, lifestyle issues; the kinds of things that family offices do.

It’s what we do.  It’s what our clients expect.

Have a wealth maintenance question?   Contact us.

Are you flunking the retirement readiness test?

A recent article in Financial Advisor proposed an interesting analogy: “Imagine boarding a jet and heading for your seat, only to be told you’re needed in the cockpit to fly the plane.”

That’s the situation many people are finding themselves in today.  Once upon a time, employers set up pension plans managed by investment professionals.  You worked and when you retired the pension checks began coming for the rest of your life.

That ended when 401(k) plans began replacing defined benefit pension plans.

Once, employers made the contributions, investment pros handled the investments and the income part was simple: You retired, the checks started arriving and continued until you died. Now, you decide how much to invest, where to invest it and how to draw it down. In other words, you fuel the plane, you pilot the plane and you land it.
It’s no surprise that many people, especially middle- and lower-income households, crash. The Federal Reserve’s latest Survey of Consumer Finances, released in September, found that ownership of retirement plans has fallen sharply in recent years, and that low-income households have almost no savings.

But it’s not only the low-income workers who lack basic financial wisdom.

Eighty percent of Americans with nest eggs of at least $100,000 got an “F” on a test about managing retirement savings put together recently by the American College of Financial Services. The college, which trains financial planners, asked over 1,000 60- to 75-year-olds about topics like safe retirement withdrawal rates, investment and longevity risk.
Seven in 10 had never heard of the “4 percent rule,” which holds that you can safely withdraw that amount annually in retirement.
Very few understood the risk of investing in bonds. Only 39 percent knew that a bond’s value falls when interest rates rise – a key risk for bondholders in this ultra-low-rate environment.

If you fall into this category and want to find out what help is available, contact us.  We’ll be glad to chat; no sales pitch and no pressure.

[contact-form subject='[Korving {030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}26amp; Company Blog’][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

It’s about making people’s lives better

It’s not just about money.

In most people’s minds the term “financial advisor” has all the emphasis on “financial” and very little about “advisor.” We disagree. We think of ourselves as advisors to the family, helping guide families with a whole range of issues. Some don’t have anything to do with investing.

We have gone car shopping for a client who didn’t want to deal with car salesmen. We have helped people choose the right retirement community.  We help educate young people about investing to make sure they get a good start in life.  We explore vacation destinations for our clients. We review our clients’ estate plans and beneficiary designations to make sure that they are in line with their wishes. We wrote a book designed to help people provide critical information to their heirs before they pass on (Before I Go).

And, of course, we have provided peace of mind to clients who worried about running out of money in their retirement years. This allowed them to do the things they wanted such as travel, spend time with their grandchildren or just relax with a good book.

We do more than manage portfolios. We assist the people who come to us for advice with the deeply personal things in their lives. Making people’s lives better is our goal.

[contact-form subject='[Korving {030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}26amp; Company Blog’][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

Benchmarking Inverts the Basics of Investing

The problem with “benchmarking”  – that is measuring your investment performance against market indexes (known as “benchmarks”) – is that it often leads to buying into asset bubbles.

During the tech boom of the last 20th century, billions of dollars went into internet stocks whose values became wildly inflated.  People who participated in this as a way of reaching for high rates of return, found that no one rang a bell when the party was over.  Many lost their retirement savings and saw their 401(k)s devastated.

Certain stocks become wildly popular, industries become wildly popular and investing styles become wildly popular, all of which leads to wildly inflated values.  This almost inevitably leads to financial pain.

But this does not only happen in the stock market.  In the first decade of the 21st century, real estate seemed to be a way of making outsized profits.  Of course, when the housing bubble collapsed, many not only lost money, but their homes.

The focus of serious investors is to align your portfolio with your personal objectives.  The focus should be on long-term – multi-year – performance.  The only benchmark that should concern you is the one you set for yourself.

At Korving & Company we keep our clients grounded and work with them to meet their personal benchmarks.  Contact us to do the same for you.

Active vs. passive investing

There is a great deal of misperception about the merits of passive vs. active investing.

First, let’s define terms for people who are not familiar with investment styles. Passive investing is buying all the stocks in an index, like the S&P500. Since there is no research involved and the only time an index fund makes a change is when there’s a change in the index, costs are kept low. Active investing, on the other hand, means that a fund manager looks at the stock market and buys those stocks he thinks will go up and avoids those that he believes will go down. Obviously he won’t be right all the time, but if he’s a good manager his selection will result in a fund that will do better than average.

That’s a simple explanation. It doesn’t get into factors such as value vs. growth, risk adjusted returns and other nuances. But it’s the basic concept.

Much is made about expense ratios and average returns. A lot of this confusion is the result of marketing by John Bogle, the founder of Vanguard Funds who made a fortune by promising his clients that they would never do better than average … and that was a good thing.

So why didn’t investing legend Warren Buffett give up stock picking and put his money in an index fund? Because he’s a good stock picker who can add value and get a better return on his money than a stock index. And Buffett isn’t the only one.

There are money managers who can add value to a portfolio, a better risk-adjusted return than the market. And there are managers who do worse. Knowing the difference requires years of research and expertise. That is what we at Korving & Company provide to our clients. We create a diversified portfolio of mutual funds tailored to the needs of our clients using funds managed by individuals who have demonstrated that they can add value over and above an index.

Without that, many investors are better off being average.

Do you have a Dusty Trust?

What’s a dusty trust, you may ask, or a dusty will? They are trusts and wills that are so old that you have to blow the dust off. It’s a term made up by David Richmond of Eaton Vance.

Many actually THINK they are speaking the truth. For them, the definition of estate planning is the will and trusts they set up at age 35 when their youngest kid was still in diapers. Doesn’t matter that they are now in their late 60s and have accumulated millions since those early hopeful days, including all sorts of treasures, especially the most precious ones … grandchildren

But it also applies to trusts and wills that are not very old. The estate tax laws have been changing almost every year for the last decade. That means that terms like “estate tax exemption” now have very different meanings than they did 10 years ago. It’s possible that you could accidentally disinherit your spouse unless you update your estate planning documents.

Beneficiary designations should also be reviewed regularly. I spoke with someone recently whose wife passed away earlier this year. He was forgetful, and his investment account still had his wife’s name on it. She was the beneficiary of his IRA as well as his life insurance policy. Her name was still on the deed to their home.

The role of a good Registered Investment Advisor (RIA) like Korving & Company is to review your estate plans and beneficiary designations, advising you about changes that you need to be aware of. Whether its changes in the tax laws or changes in your personal life, keeping you updated will keep your heirs from inheriting a tangled mess.

For more information, get a copy of our estate planning guide: Before I Go.

Investing like Bill Gates

Bill Gates’ fortune has ballooned to $82 billion according to the Wall Street Journal. It puts him at the top of the Forbes 500 list of the world’s richest people. And it’s not due to the price of Microsoft stock.

Over the years, Bill Gates has done what any savvy investor does, he’s diversified. He has sold about $40 billion of his Microsoft shares and has given $30 billion to charity. So what’s he done to get even richer? He has hired a money manager. The man’s name is Michael Larson and Gates has given him his “complete trust and faith.”

Gates gave a party in Larson’s honor, toasting him by saying that “Melinda [Gates wife] and I are free to pursue our vision of a healthier and better-educated world because of what Michael has done.”

The way Bill Gates has managed his fortune is a lesson for every investor. There are three distinct things that are worth noting.

1. Diversification. The first rule of risk control – making sure you don’t lose your money –  is diversification. This issue has been beaten to death, yet we still see people with portfolios which are concentrated in one or two stocks. This is often the case of an employee who has bought his company’s stock over many years. Small business owners are even guiltier. Often their single biggest asset is their business. It’s even more important for the owner of a chain of dry cleaners, fast food outlets or a real estate developer to build an investment portfolio that will be there if their business declines. Only about 15% of Gates’ fortune is invested in Microsoft stock. If Microsoft were to close up shop tomorrow, Gates lifestyle would not be affected. He would still be immensely wealthy. Many business owners can’t say the same thing.

2. Hire an investment professional to manage your money. Gates knows computers and computer software. He’s smart, savvy and knows that he lacks investment expertise. Gates hired Larson in 1994, realizing that if he was going to diversify he had to hire someone who was an expert investor to manage his money. The Gates fortune grew from $5 billion when he hired Larson to $82 billion today. Larson has autonomy to buy and sell investments as he sees fit. His portfolio includes stocks, bonds and real estate. He has a staff of about 100 people to help him do the hard work of managing the Gates fortune.

3. Focus on what you enjoy and do best. Because they have someone they can trust managing their money, Gates and his wife can pursue their vision. Most people’s interests revolve around their family, their work or hobbies. Managing the family investments is a distraction from what people want to do. Besides, few people are investment professionals. That’s why Gates example is worth following. Unless you have Gates’ wealth you can’t afford your own dedicated, private, investment manager. But there are investment managers – like Larson – who manage the assets of multiple families.  They can take care of your investments while you focus on the things that are important to you.

Gates gets an update on his investments every two months. Not every investment has been successful, but they are good enough to have returned Gates to the top of the wealth list.

If you are still managing your own money, or have an account with a broker who calls you with investment ideas from time to time, isn’t it time to think about the way the richest man in the world handles his money? Call Korving & Company and let us show you what we can do for you.

Creating a better investment portfolio

For many people, “investing their portfolio” means picking out some mutual funds and then leaving them alone. With tens of thousands of funds available most people find selection too confusing. As a result, they “outsource” their investments to a few well know names in the mutual fund industry. But there is a better alternative to turning your financial future over to an organization at the other end of an 800 number or an Internet connection.

The decisions you make as you grow your retirement portfolio has a profound effect on your future. It will determine how well you will live in retirement. It will determine whether you spend your retirement sitting on your porch in a rocking chair, or vacationing in Hawaii. It’s the difference between steak or hot dogs for your cookout.
There is lots of “professional” advice out there. Much of that advice is offered by people who are not trained investment professionals. They are salesmen for large investment firms. Their pay is based on how much they sell. Many of these same salesmen often fail to understand the products they sell, with disastrous results.

Korving & Company is different. We are a team of professional investment managers with decades of experience managing the portfolios of clients ranging from young couples to wealthy families and institutions. We do the “heavy lifting” for those who want professionally managed portfolios.

We’re a father-son team who care for – and take care of – our clients. We are fiduciaries; we put our clients’ interest ahead of our own. We specialize retirement investing, provide estate planning assistance, and help prepare the next generation for the challenges ahead. If your financial future is important to you, check us out. For more information, send us a message or give us a call. We would like to hear from you.

Choosing a financial advisor.

The current issue of Financial Advisor magazine has an article about the ranking of financial advisors. The issue they raise is an important one. The amount of assets that an advisor has is often used as a shorthand way of determining how “good” that advisor is. It’s a term called “assets under management” (AUM). To use an automotive expression, when you look under the hood, AUM often has no bearing on the quality of the advisor.

Some large firms, even those with over a billion dollars in AUM have one huge client and a bunch of little accounts. Under those circumstances you can imagine how much attention the small clients get.  In fact, it’s a common complaint of people who work with large firms, they don’t get much attention unless they have tens or hundred of millions in assets.

Other firms have one or several principals in their mid to late 60s. They could very well go out of business when they retire, leaving their clients looking for a new advisor. How would you feel if your advisor shut down when you are retired?

The bottom line is this: your advisor should be there for you for a long, long time. Check out the firm, ask about their clients; see if the people there will be there for you for the rest of your life.

Check us out. We stack up very well.  And check out our book on estate planning: BEFORE IF GO.

©  Korving & Company, LLC