Live Your Plan: Dan Boyce

Contributed by: Center for Financial Planning, Inc.®

We spend our whole lives planning and preparing for retirement. Here at Center for Financial Planning, helping to plan for a comfortable lifestyle while entering this phase of your life and career is one of our main priorities. But what happens when the planning is done and retirement has finally arrived? You actually get to LIVE your plan! It’s no longer figurative language or some fantasy off in the future, it’s here and all your hard work has, hopefully, paid off so you can live the life you’ve envisioned for so many years.

We recently checked in with founding partner and recently retired, Dan Boyce, CFP®, to see how he is living his plan. 

Will Social Security be Around When I Retire?

Contributed by: Matt Trujillo, CFP®

If you're retired or close to retiring, then you've probably got nothing to worry about—your Social Security benefits will likely be paid to you in the amount you've planned on (at least that's what most of the politicians say). But what about the rest of us?

Watching the news, listening to the radio, or reading the newspaper, you've probably come across story after story on the health of Social Security. Depending on the actuarial assumptions used and the political slant, Social Security has been described as everything from a program in need of some adjustments to one in crisis requiring immediate and drastic reform.

Obviously, the underlying assumptions used can affect one's perception of the solvency of Social Security, but it's clear some action needs to be taken. Even experts disagree, however, on the best remedy. So let's take a look at what we do know.

According to the Social Security Administration (SSA), over 64 million Americans currently collect some sort of Social Security retirement, disability, or death benefit. Social Security is a pay-as-you-go system, with today's workers paying the benefits for today's retirees.

How much do today's workers’ pay? Well, the first $118,500 (in 2016) of an individual's annual wages is subject to a Social Security payroll tax, with half being paid by the employee and half by the employer (self-employed individuals pay all of it). Payroll taxes collected are put into the Social Security trust funds and invested in securities guaranteed by the federal government. The funds are then used to pay out current benefits.

The amount of your retirement benefit is based on your average earnings over your working career. Higher lifetime earnings result in higher benefits, so if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily.

Your age at the time you start receiving benefits also affects your benefit amount. Currently, the full retirement age is in the process of rising to 67 in two-month increments, as shown in the following chart:

What Is Your Full Retirement Age?

You can begin receiving Social Security benefits before your full retirement age, as early as age 62. If you retire early, however, your Social Security benefit will be less than if you had waited until your full retirement age to begin receiving benefits. For example, if your full retirement age is 67, you'll receive about 30% less if you retire at age 62 than if you wait until age 67 to retire. This reduction is permanent—you won't be eligible for a benefit increase once you reach full retirement age.

Even those on opposite sides of the political spectrum can agree that demographic factors are exacerbating Social Security's problems—namely, life expectancy is increasing and the birth rate is decreasing. This means that over time, fewer workers will have to support more retirees.

According to the SSA, Social Security is already paying out more money than it takes in. By drawing on the Social Security trust fund, however, the SSA estimates that Social Security should be able to pay 100% of scheduled benefits until fund reserves are depleted in 2034. Once the trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 77% of scheduled benefits. This means that in 2034, if no changes are made, beneficiaries may receive a benefit that is about 21% less than expected.

So the question still remains, with trouble looming on the horizon, how do we fix the system?  While no one can say for sure what will happen (and the political process is sure to be contentious), here are some solutions that have been proposed to help keep Social Security solvent for many years to come:

• Allow individuals to invest some of their current Social Security taxes in "personal retirement accounts"

• Raise the current payroll tax

• Raise the current ceiling on wages currently subject to the payroll tax

• Raise the full retirement age beyond age 67

• Reduce future benefits, especially for wealthy retirees

• Change the benefit formula that is used to calculate benefits

• Change how the annual cost-of-living adjustment for benefits is calculated

The financial outlook for Social Security depends on a number of demographic and economic assumptions that can change over time, so any action that might be taken and who might be affected are still unclear. No matter what the future holds for Social Security, your financial future is still in your hands. Focus on saving as much for retirement as possible, and consider various income scenarios when planning for retirement.

It's also important to understand your benefits, and what you can expect to receive from Social Security based on current law. You can find this information on your Social Security Statement, which you can access online at the Social Security website, socialsecurity.gov by signing up for a “my Social Security” account. Your statement contains a detailed record of your earnings and includes retirement, disability, and survivor's benefit estimates that are based on your actual earnings and projections of future earnings. For more details on how to sign up for an online account see our previous blog post for step by step instructions.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc.® Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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(Source: Fast Facts & Figures about Social Security, 2015)

(Source: 2015 OASDI Trustees Report)

This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matthew Trujillo and are not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor the third party website listed or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Financial Planning: Creating a Road Map for your Future

Contributed by: Laurie Renchik, CFP®, MBA

Setting the stage for a comfortable retirement can start with your first paycheck and continue through every stage of life. Whether you are at the beginning of your career or well on your way to reaching financial goal milestones, one of your options along the way is to develop a relationship with a financial planner.

Why partner with a financial planner?

When you establish a relationship with a financial planner you start with a customized financial plan and pair it with ongoing investment advice. That way the plan leads investments rather than the opposite. By pairing a plan—informed by long term goals—with your investment strategy, investment decisions are based on you rather than a starting point of past performance or beating the market. 

If we could simply lay out a plan, set it on autopilot and land on time at our destination it would take all of the financial wondering and stress out of planning for the future. Life, however, is no ordinary journey from point A to point B; it is likely that unexpected turns happen at the most inopportune times. Turns like career changes or getting close to retirement are inflection points in life where your financial planner can make a big difference. 

I have found that the most successful financial planning relationships are focused on real life advice, in real time managing change as it happens. Looking forward helps allows for a more proactive approach, reducing the importance of relying on the rear view mirror for perspective. While it may be tempting to start with investments and lay out your plan later, it is not a complete solution. Without financial planning investing alone may not produce the results you are counting on. 

Here are my top three route changers that can add value in your journey with a financial planner:

1. Financial planning doesn’t mean planning for the day your health begins to fail; it means asking where do I want to be in three years? Ten years? Twenty years?

2. Steer your financial plan by making investment decisions based on your goals and current circumstances. It may be tempting to jump straight to investments. Resist the temptation for a more focused journey.

3. Tracking your progress through every stage of life is an effective accountability check and helps increase the likelihood of reaching your destination on time and prepared.

So whether you’re beginning your financial journey or nearing a big inflection point, feel free to call us and ask how we can help create a plan and map out your future to better align your investments with your goals.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc.® In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie is a member of the Leadership Oakland Alumni Association and is a frequent contributor to Money Centered at The Center.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Laurie Renchik and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Life Planning: When Real Life Trumps Technical Financial Planning

Contributed by: Matthew E. Chope, CFP®

A meeting I had recently with the daughter of some long-time clients reminded me that sometimes what matters most in what we do with clients isn’t the dollars and cents and the detailed tax analysis, but what we call life planning. What am I talking about? Well let me tell you a little bit about the kind of planning we did.

The client’s daughter, a successful, single 30 year old woman, came in for a basic financial check-in after finding out that her job was being discontinued with her employer. She seemed somewhat relieved, because her job was not challenging her intellectually and she needed a change. She wanted to make sure she was making the right financial decisions, and needed some guidance on planning for her next stage of life. What she really wanted to know was if it was okay to take four to six months off from working, and what the financial implications would be on her short and long term goals. It seems that her primary objective at this point in her life was to find someone to spend her life with and to ultimately build a family, and taking the time to do this was a higher objective than saving for retirement—if she could swing it financially.

This young woman had been on the path of multi-generational financial planning for years.  Her parents had been guiding her based on their good habits, and we were able to provide some financial education before she went off to college to help build a strong base of financial knowledge and etiquette. In addition, she was able to get a solid college education and had been earning a good income, saved very well, and had lived below her means up until this point. Upon termination from her employment, she would be receiving a severance and health care for a couple of months, and had built a very comfortable nest egg in taxable, Roth and traditional IRA’s. She had a home with over 50% equity and was very flush with liquidity and confident in her financial situation.

After reviewing all the things in her financial life, we came to the conclusion together that she was in a strong enough financial position to pursue her primary objective of finding a life partner and building a family.

What’s Next?

We came up with a temporary travel budget for the next four to six months so that the sabbatical could take place and she could feel comfortable with it. She could travel abroad and around the United States, visit different places and experience new adventures; all while being creative to find someone that she could spend the rest of her life with. We talked about the things that needed to be done during her time off:

1. A Belief Statement:  Write down at the top of a blank piece of paper, “What Do I Believe.” By writing this down, capturing at this moment in time how she felt, she’d be able to return to it in the future. This will help her realize when she is close to finding her partner—does this person fit her values and belief systems. Or she can decide if it's crucial that they do or don't believe in the same things as she does.

2. 100 Thing List:  List of the 100 things she wanted to experience in life so that the money, she has spent all this time earning and saving, has some reason and goal behind it in order to be used for experiences that matter to her. Ideally we don’t just work to grow a big pot of money, but grow it and use it for life fulfillment. We want no regrets later in life. 

3. Vision Statement: Her idea of where she wanted to be in one year, three years and in ten years. Vision statements help guide current choices and offer a great reflection tool to check personal progress.

So, while we talked about some financials at this meeting, it was only enough to know that she was going to be okay to take time off from work. The majority of our time was spent on things that were not financial topics but were life planning issues—those non-financial issues that were most important to her at this point in her life. Sometimes we have to look at the big picture and go beyond money in order to dig deep into life planning issues, because how you chose to live your life and use that money in meaningful ways trumps the financial nuances or details of taxes, savings, and investing.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

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Any opinions are those of Matthew Chope and are not necessarily those of Raymond James. This case study has been provided for illustrative purposes only. Individual cases will vary. Every investor's situation is unique; prior to making an investment or withdrawal decision; please consult with your financial advisor about your individual situation. It is not known whether the client referenced in this case study approves or disapproves of Matthew Chope or the advisory services provided.

Focusing on what you Can Control

Contributed by: Nick Defenthaler, CFP®

“Don’t stress about the stuff you can’t control, doing so will ruin the present.” Simple but powerful advice my dad gave me nearly a decade ago which has always stuck with me. Personally, I’ve always been a bit of a “worry wart.” Those words of wisdom, however, provided by my dad—that I probably already knew, but needed to hear from someone I loved and respected—have proven to dramatically reduce the things I lose sleep over because that I know deep down that I have virtually no control over them. As I had to remind myself of this recently, it made me think of a graphic J.P. Morgan put together that we often times share with clients:

Often times, the major area that we as investors become fixated on (and rightfully so!) are market returns. Ironically, this is an area, as the chart shows, we have no control over. The same goes for policies surrounding taxation, savings and benefits. As you can see, employment and longevity are things we do have some control over, by investing in our own human capital and our health. The areas that we have total control over—saving vs. spending, and asset allocation and location—are what we need to focus on, in my opinion. Consistent and prudent saving, living within (or ideally, below) your means, and maintaining a proper mix of stocks and bonds within your portfolio are what we try to have clients be laser focused on. Over the course of 31 years of helping clients achieve their financial goals, The Center has come to realize that those two areas are the largest contributors of a successful financial plan. 

With so many uncertainties in the world we live in today that can impact the market, it’s always a timely reminder to focus on the areas that we have control over and make sure we get those things right.  Chances are, if we do, the other things that we might be stressing over today, will potentially fall into place. If you need help focusing on the areas of your financial wellbeing in which you CAN control, give us a call! We’re always happy to help.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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Opinions expressed are those of Nick Defenthaler, and are not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss regardless of the strategy or strategies employed. Asset allocation does not ensure a profit or guarantee against loss.

529 Plans: Saving for your Child’s Education

Contributed by: Nick Defenthaler, CFP®

Doesn’t it always seem like you blink and summer is over? For some reason, this glorious season seems to go by especially fast when you live in the state of Michigan! Hopefully you all took advantage of the hot and sunny weather and had a chance to explore all of the great things our state has to offer with your family. 

If you have children, your focus has probably shifted from weekend getaways to getting back into a more structured routine now that school is back in session.  Since school is top of mind for many, I felt it was a good time to touch on education planning and saving for college. 

Below is a brief refresher of the 529 plan, a popular type of account you can save into for future college expenses.  Many people refer to the 529 plan as the “education IRA” but there are some caveats:

Advantages:

• State tax deduction on contributions up to certain annual limits

• Tax-deferred growth

• No taxation upon withdrawal if funds are used for qualified educational expenses (such as tuition, books, room and board, computers, etc.)

• Parents have control over the account and can transfer the account to another child

• Not subject to kiddie tax rules, unlike UGMA accounts (Uniform Gift of Minors Act) and UTMA accounts (Uniform Transfer to Minors Act)

Disadvantages:

• No guaranteed rate of return – subject to market risk

• Certain taxes and penalties will apply if funds are withdrawn for non-qualified expenses

Items to be aware of:

• Keep records of how money was spent that was withdrawn from the 529 account in case of an audit

• Review the asset allocation/risk profile of the account on an annual basis – typically, the closer the child is to entering college, the more conservative the account should become 

Just like saving for retirement, the sooner you can start saving for college the better. With that being said, if your children are only a few years out from college and your savings isn’t where you’d like it to be, there is still hope. Chances are you still have options and this is where good financial planning can come into play. There are also nuances with financial aid and completing the FAFSA that you want to be aware of—check out our webinar on the topic! If we could provide guidance in this area, don’t hesitate to reach out, we would be happy to help!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler and are not necessarily those of Raymond James. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. Asset allocation does not ensure a profit or guarantee against loss.

What is a Non-Qualified Stock Option (NSO)?

Contributed by: Center for Financial Planning, Inc.

A stock option is a right to buy a specified amount of company shares at a specified price for a certain period of time, as Matt Trujillo, CFP® introduced last month in his blog on ISOs. Unlike ISOs, NSOs (also sometimes referred to as NQSOs) do not receive special federal tax treatment and are more commonly granted by employers. Often preferred by established companies, NSOs granted to an employee will result in ordinary income when exercised and are easier to administer as they do not have to adhere to rules specific to ISOs. Like any stock option, the intent is to give extra incentive to focus participants on increasing the company’s stock price. They are a flexible tool that can allow companies and participants to take advantage of stock price growth at a fairly low cost.

The Basics:

• Initiation date of the contract is known as the grant date. This is not a taxable event.

• Employees must comply with a specific vesting schedule to exercise.

• Exercise date is the date an employee is allowed to take full ownership of the specified lot of shares.

• After the expiration date, the employee no longer has the right to purchase the company stock under the agreement terms.

Taxation:

• In contrast to ISOs, NSOs result in additional taxable income to the recipient at the time of exercise, which is the difference between the exercise price and the market value on the exercise date.

• To determine the amount of tax to be paid, the exercise price is subtracted from the market price on the date the option is exercised. This is called the bargain element which is considered compensation to the employee and is taxed at their ordinary income rate.

• The sale of the security results in another taxable event. If sold less than a year from the exercise date, the transaction is considered as a short-term capital gain and is subject to ordinary income tax rates. If the employee waits a year or more from the exercise date, the transaction is considered a long-term capital gain (LTCG) and taxed at the applicable tax rates (which are much more favorable than ordinary income tax rates).

Planning Opportunities:

Some plans may allow participants to exercise unvested options when they are no longer “subject to a significant risk of forfeiture.” This may be referred to as “early exercise” or “exercise before vest.” This can allow the exerciser of the options to realize ordinary income at a more favorable time when the difference between the exercise price and market value of the stock is low.

Ideally, if you know that you are going to be exercising NSOs that will generate a large amount of ordinary income tax, you can look to lower your income in other ways to reduce your tax burden (ex: maxing out your contribution to your employer’s retirement plan, accelerating charitable contributions, utilizing deferred compensation if available).

Perhaps the most important planning consideration is the effect that stock options will have on your overall asset allocation. It often makes sense to pay the taxes on your stock options to make sure your portfolio is properly diversified.

Hopefully this information is helpful if you are new to NSOs or even if you’ve held them for years but don’t fully understand them. Many employees may not fully understand their stock options. Here at The Center we are always looking at your entire comprehensive financial plan, and stock option strategy is a small but important part of your total financial picture. Consult your financial planner and/or tax specialist to determine the best execution strategy for your stock options.

Any opinions are those of the author and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

http://www.investopedia.com/articles/optioninvestor/07/esoabout.asp
http://www.payscale.com/compensation-today/2013/01/non-qualified-stock-options-are-much-better-than-they-sound
https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Non-Qualified-Stock-Options/INF12046.html

How to Make Grants from Donor-Advised Funds

Contributed by: Matthew E. Chope, CFP®

I talk to a lot of clients who have set up Donor-Advised Funds or family foundations and are confused. They’ve figured out how to put money in, but how to make grants isn’t always as clear. The IRS prohibits using these funds to satisfy a pledge. That doesn’t prohibit you from supporting organizations like churches, but it does mean you need to follow certain steps.

The first step is to talk to your attorney and your CPA. They can give you tax and legal advice about making a grant. Carla Hargett, the Vice President of Raymond James Trust, told me if you’re planning on giving to your church, for example, she believes the best way to handle the Donor-Advised Fund Grants is to start by discharging any pledge made in the past. Donor-Advised Funds cannot be used to satisfy a pledge. You can let your church know you intend to provide General Support for a certain amount of money and year(s) going forward. The amount can be close to an amount you’ve given in the past – that’s up to you. But any legally enforceable pledges must be cancelled first. This should stop the audit trail if the IRS ever decides to get into the particulars with a grantor. So make sure the grant requests from your Donor-Advised Fund should say something like "2016 General Support.”  

When pledge time comes around, I recommend that you write on the pledge card something like, "I intend to request a distribution of $XXXX.XX from my Donor-Advised Fund during the 20XX fiscal year." Your church or charitable organization will be familiar with this language and can use it for budget planning similar to a pledge.

We just want to make sure that Grantors of donor-advised funds are doing things as accurately as possible and if an IRS auditor someday digs into your grants, you’ll have nothing to worry about.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

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The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matt Chope and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Rio Olympics: A Lesson in Commitment

Contributed by: Nick Defenthaler, CFP®

If you’re like me, you spent the majority of your nights this month tuning into the Summer Olympics held in Rio de Janerio, Brazil. I’m more of a football and hockey type of guy but I must admit, watching some of the best athletes in the entire world compete for their respective countries, even in sports I wouldn’t consider myself a die had fan in, was captivating. The level of competition was incredible and you could truly feel the passion each athlete had as they competed for gold. 

While watching the actual games and being engaged in the competition is very entertaining, what hit home the most to me was the level of commitment each athlete had, especially those who are dominant in their respective sport. Athletes like Usain Bolt, Michael Phelps, Katie Ledecky, and Simone Biles are in a league of their own when it comes to training, execution, and their overall commitment to their goals. Training is rigorous and is often times 6 – 8 hours per day 5 – 6 days a week for nearly 4 years in preparation for a 2 week competition. Just think about that for a moment. That’s over 1,000 days of hard work, persistence, consistency and probably ten additional adjectives necessary to describe what it takes to be an elite Olympic athlete. 

As you hopefully already know, setting and committing to goals are at the core of what we help clients with here at The Center. We need to know what’s important to you and what you want to accomplish to help you with your own unique situation to ensure your financial plan is aligned with what’s important to you. Often times, some might perceive this as too “touchy feely” or you might ask yourself, “Why do they want to know this stuff? They’re financial planners, aren’t they just concerned about the numbers?” Simple answer – absolutely not. Committing to goals, whether they are for your family, career, personal life or financial well-being, are critical for your success, just as they are for Olympic athletes. 

As you start to think about the goals you might have, keep in mind what Michael Phelps had to say about them – “Goals should never be easy; they should force you to work, even if they are uncomfortable at the time.” If goals were simple, they wouldn’t be fulfilling. Personally, watching the Olympics re-energized me to better commit to my own goals. Do you have a clear vision of what your goals look like? If so, are they challenging? Commit to the things that bring real value to your life and work hard to make them a reality. Life is too short not to. As always, feel free to contact your financial planner to help prioritize and strategize when it comes to these goals. 

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

3 Reasons Discretionary Investment Management could be Right for You

Contributed by: Angela Palacios, CFP®

We all have busy lives. Whether you are getting down to business or enjoyingyour retirement to the fullest who wants to worry about missing a call from their advisor because something in their portfolio needs to be changed? Perhaps cash needs to be raised to meet that monthly withdrawal to your checking account so you can keep paying your traveling expenses. Or money has to be deposited to your investment account, if you are still saving, and needs to be invested. Regardless of your situation, many investors find it difficult to make time to manage their investment portfolios. We argue this is far too important to be left for a moment when you happen to have some spare time. 

What is Discretionary Management?

It is the process of delegating day-to-day investment decisions to your financial planner. Establishing an Investment Policy Statement that identifies the guidelines you need your portfolio managed within is the first and arguably the most important step. Investment decisions are then made on your behalf within the scope of this statement. It is kind of like utilizing a target date strategy in your employer’s 401(k). You tell it how old you are and when you are going to retire and all of the asset allocation, rebalancing and buy/sell decisions are made for you.

3 reasons this can be a suitable option for investors:

1. Frees up your time to do what you love most. Time is the resource we all struggle to get our hands on. Need I say more?

2. Markets move quickly and sometimes portfolios must also to respond. Changes can happen in a timely fashion whether you are within reach on your cell phone or not.

3. May reduce the potential for poor investor behavior. Let those not emotionally charged by fluctuations in the market make decisions on your behalf.

If you have questions on whether or not this is right for you and your portfolio don’t hesitate to contact us.  We’d be happy to help!

Angela Palacios, CFP® is the Director of Investments at Center for Financial Planning, Inc.® Angela specializes in Investment and Macro economic research. She is a frequent contributor The Center blog.

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The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.