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The Truth You Need to Hear: The value of a Dutch Uncle

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Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

Recently, during a preliminary meeting with a new client, he told us that what he really wants us to be is his Dutch Uncle.  I vaguely recalled hearing the term before, but I asked him to clarify -- just to be sure we were on the same page.  The gentleman, in his 70’s, shared that what he really valued most was to work with someone who would give him frank advice, challenge his assumptions on some important financial issues he was wrestling with, and tell him what he needed to hear rather than what he wanted to hear – and do it with compassion. 

The interaction left quite an impression on me. I am glad that I asked for clarification, because if I would have just waited to Google “Dutch Uncle” after the meeting, I may have only seen definitions that address, “frank, harsh, blunt, stern and severe.” I might have missed out on the “with compassion” part; which is very important.

Frank, Candid & Compassionate

A few years ago I read “The Last Lecture” by Randy Pausch.  First, if you haven’t read it, get a copy now. Along with a box of tissue. Second, if you have teenage or adult children, get them a copy too. Third, if you’d rather watch the video, it’s here on YouTube with over 17 million views. You won’t be disappointed. Randy was a professor at Carnegie Mellon University in Pennsylvania. After being diagnosed with pancreatic cancer, he gave his last lecture titled “Really Achieving Your Childhood Dreams.” That was on September 18, 2007. He passed away on July 25, 2008. One of Randy Pausch’s experiences included a man he referred to as his Dutch Uncle. One day, this Uncle took him for a walk to share the truth that he needed to hear (that Randy’s arrogance was getting in the way of his long term success) in a frank, candid and compassionate way and it became a turning point in Randy’s life.

Sales vs. Advice

The Dutch Uncle analogy can also be used to illustrate the difference between sales and advice -- or perhaps, those acting in your best interest and those that do not.  An advisor, or someone interested in your wellbeing, will provide candid and frank feedback; because they want to see you succeed.  In my profession and from my perspective, this is the true litmus test of an advisor: Are you willing to lose a client relationship because you act as their Dutch Uncle (compassion included)?  If you are worried about losing a client because they might not like what you have to provide, share or recommend in your learned professional opinion; then you are really acting in a sales capacity and not an advisory role. Which is fine, just don’t refer to yourself as an advisor.

Nowhere is there a need more for a Dutch Uncle than in financial planning and investment management. Our brains, frankly, are wired to make the easy or wrong decision too many times.  Here’s one familiar example: Buy low and sell high.  But how difficult is this mantra to follow?  Studies suggest it’s extremely difficult. Can you think about what you were feeling and hopefully not implementing in March 2009 during the Great Recession? I bet a Dutch Uncle was pretty valuable.  Or, how about the question can I retire now? Sometimes the correct feedback is you are ready to retire – unfortunately your money isn’t!  A Dutch Uncle might suggest some tradeoffs such as continuing to work but at reduced hours, trading time for income. A Dutch Uncle might also say, sure, go buy X and accumulate additional debt; but also acknowledge that this action will have an impact on your financial independence.  It’s still your choice, but the funds need to come from somewhere.

If you don’t have a Dutch Uncle perhaps it’s time to seek one out – your success might just depend upon it.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a contributor to national media and publications such as Forbes and The Wall Street Journal and has appeared on Good Morning America Weekend Edition and WDIV Channel 4. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), mentored many CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Timothy Wyman, CFP® and not necessarily those of Raymond James.

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Health Care Dollars and Aging

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Contributed by: Sandra Adams, CFP® Sandy Adams

I ran across an interesting article recently by Howard Gleckman, author of the book "Caring for our Parents." The article “How we Spend Our Health Care Dollars As We Age” discussed current trends in health care spending for seniors and affirmed for me some of the key issues we discuss with clients regarding health care spending and aging in retirement.

Spending on Health Care Changes with Age

The article referenced recent research by the Employee Benefit Research Institute indicating that out-of-pocket spending for routine health care changes very little after age 65, and remains relatively unchanged even after age 85 for these routine expenses (trips to the doctor or dentist, medications, etc.). That’s mainly because Medicare covers the bulk of those expenses. The story changes dramatically when it comes to very high cost medical procedures/care or long-term support or services. As we age, we are far more likely to need these high cost services (about 27% of those age 65 - 74 had an overnight stay in the hospital during the period of 2010 - 2012, while more than 42% of those 85 and over spent at least one night a hospital during that same period). The key here is this: Medicare is the primary source of health insurance for those over the age of 65. MEDICARE IS NOT LONG TERM CARE INSURANCE.

How to Plan for Potential Health Care Expenses

According to a study by the Kaiser Family Foundation, out-of-pocket costs alone for someone spending two years in a nursing facility can run $24,000 - $67,000. If you do need skilled care for a period of time for either rehabilitation or long term care, the costs can be devastating to your finances. So what do you do to plan ahead for these potential costs?

  1. Discuss options with your financial planner for long term care insurance. There are ways to purchase policies as part of employer groups and associations or individually. There are also new hybrid life/long term care or annuity/long term care policies that may fit well in your overall financial plan.

  2. Discuss options with your financial planner to self-insure the costs for potential health/long term care costs using existing assets. You can earmark specific assets or income streams for those potential future costs in a way that least disrupts your overall financial plan.

  3. Discuss with your financial planner any possible future government benefits that you may be eligible for that might help to cover any future long-term care costs (i.e. Veteran's Aid & Attendance Benefits). Determine if you may be eligible and put the proper financial and legal planning in place for future eligibility when and if needed.

As always, planning now for the future what if's is always better than planning in a crisis. Have a conversation about your future health care and long-term care planning with your financial planner at your upcoming financial review.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Sandra Adams, CFP ® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Long Term Care Insurance may not be suitable for all investors. Please consult with a licensed financial professional when considering your insurance options.

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Volatility and Commodities (go together like a horse and carriage)

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Contributed by: Matt Trujillo, CFP® Matt Trujillo

There has been a lot of press lately about the recent volatility in the crude oil markets.  Every smart person with a microphone is making predictions about how low it could go or where it ultimately might end up. I can’t open a financial website, magazine, or journal without seeing some sort of headline declaring that Oil is going to $10 a barrel!

All of this sensationalism would lead one to believe that this price behavior is something unusual for commodities and oil specifically. It’s a constant reminder how short sighted the media is and why it’s best not to make financial decisions solely based on what you hear on CNBC or Yahoo Finance.

Historical Perspective on Commodities

In fact, try going back over the last 100 years and study not just oil, but all commodities. You’ll see that large double-digit gains and large double-digit losses are quite common and almost expected in these types of markets.  If you have that kind of time (and that level of interest) click here to browse through all the various commodity prices and historical price data.

For those of you that don’t have that kind of time, let’s focus mainly on the last 10 years.  For illustrative purposes, we’ll use the annual performance data found here. This interactive chart shows the historical pricing performance for oil as well as several other commodities over the last 10 years. Using this data, let’s say I invested a hypothetical $10,000, and earned the returns illustrated on the chart. My original $10,000 would have grown to $12,351 after 2014.  This is equivalent to roughly a 2.3% average annual rate of return.  Not really anything to get overly excited about, but the path to get that 2.3% was quite dramatic. A few notable years: 2005: +40.48%, 2007: +57.22%, 2008: -53.53%, 2009: +77.94%, and 2014: -45.58%.  Quite the volatile rollercoaster ride…especially if you end up with a paltry 2.3% for enduring all of the swings!

As you can see, when it comes to Oil price volatility is nothing new. Commodity markets are not for the faint of heart and might make sense as a part of a well-diversified portfolio. If you are considering adding oil or any other commodity to your overall investment plan, please talk to a qualified professional first to make sure that it is a suitable investment for your risk tolerance and time horizon.

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.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matthew Trujillo, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Past performance may not be indicative of future results. Hypothetical example provided in this article is for illustrative purposes only. Actual investor results will vary.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.

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Dan Boyce’s Ted Talk: On Becoming a Better Planner & Person

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Contributed by: Center for Financial Planning, Inc. The Center

In a matter of 18 minutes packed with self-revelation, Dan Boyce laid out his personal roadmap to success. The Center’s founding partner was picked to deliver one of three “Ted Talks” to thousands in the financial planning industry at the 2015 Raymond James National Conference in Las Vegas. Dan talked, not just about running a successful business, but being successful in life. Both, as it turns out, can be built on the same foundation. That realization, Dan says, was an eye-opener:

“The sheer audacity of this smacked me between the eyes.”

Among his “Ted Talk” key points, Dan emphasized the importance of growing through knowing. True wisdom doesn’t come from raw data, information, knowledge or judgment. To truly be wise, you must seek to understand.

Dan also delivered an inspiring message on being true to yourself. Sandy Adams, who says Dan has been one of her most important mentors, said his message really resonated. “To be a planner is to become a better person and that’s something I strive to do each and every day.”

Other important steps on the path to success include seeking and embracing feedback and developing intellectual curiosity. Both are things Dan said he personally values. Nancy Sechrist, The Center’s Office Manager, said the best thing she heard at the conference was Dan Boyce’s Ted Talk message about how to become your authentic self. “I think that resonates with everything you do career-wise, your home life, family, and just encompasses everything.”

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Center Team Back from RJ Conference with Ideas for the Future

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Though the sun was shining brightly over the pool outside our Las Vegas hotel, our team turned a blind eye each morning and dove into work. Of The Center’s 18 employees, 17 of us made the trip to the Raymond James National Conference for Professional Development. We make it a point every year to get as many hands on deck as possible. Not just for the learning opportunities, but because it’s a great chance for us to do some off-site team building. This year we went with a mission: Find take-aways we could put into action for our clients. In this video, we share just a few:

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Why Active Money Managers are so Unpopular Right Now

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Contributed by: Angela Palacios, CFP® Angela Palacios

Today, maybe more than ever, active managers are the unpopular kid on the block.  Over the past 5 years, very few U.S. Large cap managers have managed to beat the S&P 500.  Last year, according to Morningstar Inc., was the worst year in modern history for active management underperformance in the U.S. stock category.  Investors tend to be very harsh on money managers, giving more importance to what they have done lately as opposed to over longer periods of time.

This is an old chart idea that never gets old.  Investors need to be often reminded of this.  We hold Wall Street to very tight standards, encouraging them to try to outperform or provide positive returns over very short periods of time when this is very difficult.  Looking at the S&P 500 if your investment time frame (holding period) is one year the chances of achieving a positive return are 68%. That’s only a little better than a coin flip. You are at the mercy of the market’s craziness.  As individual investors we are usually lucky in the sense that we have time on our side.  If our investment time frame is 20 years or more, then the markets have been kind to us offering positive returns 100% of the time.

Source: Robert Shiller, author's calculations. 1-day returns since 1930, via S&P Capital IQ.

Source: Robert Shiller, author's calculations. 1-day returns since 1930, via S&P Capital IQ.

Unfortunately, so many investors are busy chasing a benchmark or their neighbor’s returns that they are rarely happy.  You do have the opportunity to focus on the long term and have the odds in your favor, but will you?

Angela Palacios, CFP® is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

http://www.ritholtz.com/blog/

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. The information obtained from sources is considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. 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.

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How to Know if It’s Time to Refinance Your Home

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

FIVE years ago we all heard that, “Interest rates won’t be this low for long!” Maybe someone told you to, “Hurry now!” to purchase or re-finance a home?  Well, fast forward to 2015 and 30 year mortgages are hovering at about 4% depending on your credit score, slightly lower than what there were back in early 2010.  It’s pretty incredible to think how long we’ve had such a favorable interest rate environment for homeowners.  Rates have come down even more since the beginning of this year and we’re hearing about the drop more and more in the media.  If you’re thinking about re-financing your home, below are a few items to consider before going through the process:

How long will you be in the home if you’re planning on re-financing? 

Sure, lowering your rate is great, but will you be in the home long enough for the interest savings to justify the closing costs of the loan (typically around $2,000 – $3,000)?  The typical rule of thumb is about 3 years, so if you plan on moving a year after you re-finance, it most likely makes sense not to make any changes.  

Just like investing – don’t try to “time” interest rate changes

Rates can fluctuate dramatically in a short period of time. Over the last few years we have seen a great deal of volatility in mortgage rates.  I believe a 30 year mortgage around 4% is a phenomenal borrowing rate, don’t get greedy and try to hold out to save .25% because you think you know what direction rates are going.  We’ve seen this happen before and rates have increased and clients have missed opportunities to lock in historically low mortgage rates.   

Consider combining into one mortgage

Many folks have two mortgages on their home.  The primary is typically the initial mortgage they took out when they bought the house and the second is often times a home equity loan or home equity line of credit.  I recently met with a couple who was paying almost 5% for their primary loan amount and almost 7% for the home equity loan!  My eyes got big when I saw these figures because I knew immediately this was a planning opportunity for them. They had no plans to move in the near future.  The couple was able to re-finance into one, fixed rate mortgage and they should save thousands in interest. Plus they should pay their home off about 3 years sooner than they would have with their prior mortgages.    

Think you’re still “underwater”?  Think again…

Coming out of the recession, many homeowners were unable to re-finance because their home was “underwater” – meaning what they owed exceeded their value.  Although there were some federal programs that helped these types of individuals, not everyone fit the mold depending on loan guidelines. Some folks are just now seeing their home values exceed their loan balances.  Home prices have risen quite a bit in most areas and you might be surprised at what your home is actually valued at now.  Don’t just assume you can’t re-finance because of your perceived loan to value ratio.  Reach out to your loan provider and get their take and see what your options are.

We always encourage clients to keep us in the loop when deciding to go through with a refinance.  We can be the second set of eyes to make sure, first and foremost, that your needs are being put first and that your personal situation and goals are taken into account when making these big financial decisions.  Please don’t ever hesitate to reach out to us if you’d like to run the numbers past us! 

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 Money Centered and Center Connections blogs.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. You should discuss any tax or legal matters with the appropriate professional.

KACY WYMAN 9TH ANNUAL FUN RUN/WALK BENEFITTING CYSTINOSIS RESEARCH NETWORK

Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

On Sunday May 3rd we will hold the 9th Annual Cystinosis Fun Run/Walk in honor of our daughter, Kacy Wyman.  In the past we have had over 350 walkers and runners support the event and Kacy.

Kacy will begin a new stage in her treatment as she is expected to have a kidney transplant in early June 2015.  She continues to be an inspiration to many each day. Her required medicine regime is challenging each day (37 pills a day, eye drops 8-10 times per day and 7 liters of water) – but she doesn’t let it stop her from living each day to the fullest.   

Your financial support is making a difference in Kacy’s life and all of the children enduring this rare disease called Cystinosis (Sis-ta-know-sis). Your support drives research and gives us hope that a cure will be found. We understand that there are many worthy causes and feel very fortunate that so many have supported Kacy’s cause in the past – and appreciate you considering attending or making a financial contribution for our event. Thank you again for considering.

With Love & Gratitude, Tim & Jen Wyman

Live YOUR Plan™