RIA | Financial Planner | Retirement Planning | Korving & Company Suffolk & Virginia Beach

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.

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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.

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.

Financial Planning in the Shadow of Dementia

Alzheimer’s, the most common form of dementia, is an epidemic. More than 5 million Americans are living with Alzheimer’s. It’s irreversible and fatal although some may linger for up to 20 years. And the number is expected to soar.

The Alzheimer’s Association has created a list of the 10 warning signs. These range from memory loss, through confusion to severe mood changes.

Because of the widespread nature of this disease, for people with Alzheimer’s and their families there are a number of things that should be done. Plans should be in place well before the onset of the symptoms.

• Review your insurance policies, especially your Long Term Care policies.
• Talk with your family and your financial advisor to make your wishes known.
• Review your wills and trusts.
• Appoint an advocate who has the legal authority to act on your behalf.
• Make sure you have provided for an appropriate Power of Attorney.

Research shows that declining financial skills is one of the first symptoms of the early stages of Alzheimer’s. This includes anything from difficulty in balancing a checkbook to being victimized by criminals who prey on the elderly. This usually leaves family members to take responsibility for the individual’s finances.

In some cases, people assume these responsibilities without having experience handling money or dealing with financial issues. This is the time to bring in a trusted financial advisor. We can provide practical guidance on both day-to-day and long-term financial decisions.

For a report on this subject, contact Korving & Company – the Financial Planning and Investment Management experts.

How To Invest 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.

The Biggest Problem for Wealthy Families

I recently visited a house that was once the largest private residence in the country: the “Biltmore” mansion. It was built by the grandson of the founder, “Commodore” Cornelius Vanderbilt, who built the original family fortune. His son doubled the fortune which, in today’s dollars would be worth $300 billion, making the family one of the ten richest in human history. But the heirs managed to run through this immense wealth.

Within just 30 years of the death of the Commodore no member of the Vanderbilt family was among the richest in the US. And 48 years after his death, one of his grandchildren is said to have died penniless.
In less than a single generation the surviving Vanderbilts had spent the majority of their family wealth!

No one today is that wealthy, but there is a lesson here for those who have accumulated multimillion dollar fortunes. While families today will openly discuss formerly taboo subjects like same-sex marriage and drug use, talking about family wealth seems to be harder to discuss.

Most wealthy people have wills and trusts but a substantial number of children have no idea of how much money their parents have. I have experienced this frequently in our practice when we disclose to heirs how much money they are actually inheriting. This applies not just to the wealthy but also the moderately “comfortable.”

According to a recent study, approximately 80{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} to 90{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} of families who have inheritable wealth have an up-to-date will. Only about half have discussed their inheritance with their children.

The reasons why parents don’t talk about money with their children range from not thinking it’s important, don’t want children to feel entitled, or they just don’t talk about money.

The problem is that the receipt of sudden wealth can have a deleterious affect on people. Too often a family fortune that has been created with great effort is squandered by people who have no idea that their inheritance is finite.

What can be done? Creating an environment and venue where family wealth can be discussed can be facilitated by a family’s financial advisor, ideally a Registered Investment Advisor – rather than a broker – who has the best interest of the family at heart.

If you need someone who can help you talk about money with your heirs, give us a call. We’ll be happy to help.

Why employees need 401(k) investment advice

Employee Benefits News has an article with the headline explaining why employees need investment advice. Here’s their reasoning:

While American employees appreciate having a 401(k) plan, the majority will likely spend more time planning for a new car purchase or vacation than researching their plan’s investment options.
This retirement disconnect is not surprising, according to Schwab Retirement Plan Services, which released a survey this week of more than 1,000 401(k) plan participants. “We often see that participants are hesitant to take action when they’re not completely comfortable with the matter at hand, and this is especially true when it comes to financial decisions,” says Steve Anderson, head of retirement plan services at Charles Schwab.
Aside from health coverage, the survey found nearly 90{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} of workers agreed that the 401(k) is a “must-have” benefit, more than extra vacation days or the ability to telecommute. However, employees said they spent more time researching options for a new car (about 4.3 hours) or vacations (about 3.8 hours) than researching their 401(k) investment choices (2.1 hours).

The article goes on to mention that more people get help having the oil in their car changed, mow their yard or prepare their taxes that planning how to invest their 401(k). This is a problem because changing your oil, mowing your yard, even doing your taxes, is easier than making wise investment decisions. For many people, their 401(k) is their biggest source of financial security for their retirement.

If you want to get the best out of your 401(k) think about getting the guidance of a professional. Contact an RIA.

Preparing for the unexpected.

What happens if you have to live on less income because you lost your job or your spouse died? The economy has not been kind to many people and job loss can happen before we’re ready to retire. That’s when a financial advisor can help.

It can be tough to find a good paying job if you’re within a decade of retirement age. Companies are reluctant to hire you. You may be wondering what you should do when you realize that the best path is early retirement. Where can you cut back? How should your money be invested for an extra-long retirement? These are all questions that you should not tackle on your own because the wrong decision at this age can haunt you a few years down the road.

If the major breadwinner in your family dies how will the survivor cope? One 61-year-old woman left work to care for her dying husband. After his death she could not return to work but had a lot of decisions to make. Decisions about social security, insurance, where to cut back (fewer trips, sell the motorcycle and the RV), as well as decisions about her investments.

Each case is unique, but a financial advisor should be more than a money manager. He should advise his clients about all aspects of their lives that impact their financial well-being. Ideally you will have developed a good relationship with a financial advisor before an unfortunate event occurs. But if you have not, this is definitely the time to find one.

How To Choose 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.

What to do when couples disagree on investing

It’s well known in the investment business that women are more risk averse than men. There are, of course, exceptions and I should qualify that by saying that’s true of “most” women and men.

In most cases this does not cause problems when couples invest. That’s because there is usually a division of labor with one spouse making most of the investment decisions. However, when spouses collaborate on investing, a significant difference of opinion can cause a lot of stress in a marriage. Differences in money management styles between two partners can ruin a marriage.

That’s the time for the couple to meet with a trusted financial advisor who can provide unbiased advice and professional expertise. Getting an intermediary involved in what could be a serious dispute usually helps. This often allows a couple to come to an understanding that both can agree works for them.

If you and your partner have disagreements about money and investing, get in touch with us.

And don’t forget to read the first three chapters of BEFORE I GO. It’s free.

What is the retiree’s biggest fear?

The retiree’s biggest fear is running out of money.

According to a recent survey, six out of ten retirees say they’re worried about their finances. Their two biggest fears are getting sick and losing their assets to pay for medical care. Their next greatest fear is that they’ll stay healthy and outlive their money.

And little wonder. Interest rates on savings accounts have been near zero for years. The stock markets remain scary to many potential investors. And while the official inflation numbers are low, anyone who has shopped for food, filled their gas tank or visited a doctor knows that prices are going up rapidly.

This is a daunting environment for people who are managing their investments on their own.

Still others think they have diversified by having several “financial advisors” and accounts at several major investment firms. What they actually end up having are accounts with several investment salesmen who make their money by selling them investment products.

How do high-net-worth families manage their finances? Most prefer to work with a single firm to manage all their financial needs. It’s a mistake to depend on stock and bond salesmen when it comes to providing planning and guidance. They want someone who acts as a fiduciary. A fiduciary is someone who puts your needs and ahead of his own. That describes a fee-only RIA (Registered Investment Advisor) like Korving & Company. Our concerns are your concerns. Our goal is to alleviate people’s fears of running out of money in retirement.

Check out our website and see what we offer to families approaching retirement and those already in retirement. And download and read the first three chapters of BEFORE I GO, free.

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