Aim High
Financial goals differ from one person to another, but the investors who “hit the target” tend to share a common trait: They plan to succeed
by Bill Donahue

The month of January is among the busiest times of year for Brad Bernstein, CFP, a financial advisor and senior vice president of wealth management with UBS Financial Services in Philadelphia. He certainly understands why: Every year, when the calendar turns over from December 31 to the first day of the New Year, the masses wake to a clean slate in which they commit to doing things differently. This commitment to being a better version of oneself applies to shaping up the finances as much as it does to trimming the waistline, and it often cuts across all demographic and socioeconomic lines.

“The wealthier you are, the more you need help,” he says. “For us, when you’re competing for $5 million to $10 million relationships, it’s important to focus on plans rather than assets. We’re competing for people who want advice, and it’s hard to put a price on that. People want us there to preserve a legacy and protect them and their families. When you do that, it’s priceless and powerful.”

Investors’ financial goals for 2016 include everything from planning for retirement to saving for a child’s college education, from counting the ones and zeros to fund something else of significance to simply becoming a more informed investor. Regardless of the goal, financially speaking, Bernstein and other locally based financial professionals lend their perspective regarding strategies and tactics to help investors hit the target.

Become a More Knowledgeable Investor
“Consider hiring an investment advisor who is credentialed and has good experience,” says Bernstein. “I suggest someone with a CFP (Certified Financial Planner), which is an important designation; it’s the equivalent of "an MBA in financial planning," and it comes with a vast amount of knowledge. Having a good advisor who is willing to educate you is incredibly valuable.

“It’s good to work through an investor who has been through good times and bad times, because it gives perspective,” he continues. “I’m starting my 17th year [as an advisor], so I’ve been through things like 9/11 and the recession of ’07 and ’08. ... Even through the terrorist attacks, the events of the world really have no effect on an investor’s success down the road. It’s about not making rash decisions and not allowing events to ruin your long-term plans.”

For those who prefer to teach themselves, without the aid of an advisor, Bernstein suggests investors get a sense of “what’s going on in the world” by reading the Wall Street Journal daily. He also recommends three books, in particular: “A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing” by Burton G. Malkiel; “The Investor’s Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between” by William J. Bernstein; and “Unconventional Success: A Fundamental Approach to Personal Investment,” by David F. Swensen.

“It’s definitely not by watching CNBC,” says Charles J. McNamara III, LUTCF, CMFC, partner with McNamara Financial Group in Doylestown. “The best thing you can do to learn more about what you can do to fund your retirement is learning the practice or science of asset allocation.” He’s referring to modern portfolio theory, based on the Nobel Prize-winning work of economist Harry Markowitz. Boiling the theory down to layman’s terms, it’s essentially this: Minimize risk and maximize return by diversifying the components within an investment portfolio.

Plan for Retirement
Although retirement is often a far-off goal, advisors agree on one central tenet: Start saving early.

“There’s nothing you can do to make up time; it’s the most powerful factor,” says Bernstein. “Don’t put off the decision to start saving [for retirement] by five to 10 years. It comes back to the law of compound returns: The more wealth you have, the more you create. Contribute to your 401(k) and save 10 percent into a retirement plan. If you do that out of the gate, it creates a lifetime of benefit.”

Only 35 percent of workers with a retirement plan have at least $100,000 in retirement savings, according to a 2015 Retirement Confidence Survey conducted by the Employee Benefit Research Institute. In the same breath, the survey suggests, an astounding 60 percent of those without a retirement plan have less than $1,000 in retirement savings.

“There’s a real crisis in this country,” adds McNamara. “It gets back to the demise of pension plans, which put the responsibility of planning for retirement back on the employee. Clients often come to us who want to put their kids through school. Then they say, ‘OK, when can I retire?’ but they’re not even close to where they need to be. Education for your kids is important, but not at the expense of your own retirement plan. … Starting early makes a huge difference. If your employer offers 401(k) matching, take advantage of it by investing as much as you can, and every time you get a raise, put as much as you can into a retirement plan.”

Finance a Child’s College Education
Although most people might consider a college education among the best ways to improve their position in life, the cost that comes from earning a college degree bears an increasingly heavy price. More than 40 million Americans are saddled with student debt, which collectively now exceeds $1.2 trillion, according to a recent study from Experian. From 2008 to 2014, student loans have increased by 84 percent, a figure expected to continue to grow as the cost of tuition climbs at a rate faster than inflation.

For those who want to help alleviate the burden for their children and grandchildren, Bernstein suggests becoming familiar with a certain three-digit number: 529, as in a 529 plan. Named for Section 529 of the IRS tax code, a 529 plan can help families save for college. The Pennsylvania 529 College Savings Program offers two savings plans: the PA 529 Guaranteed Savings Plan, which is a lower-risk plan that helps savings keep pace with rising tuition; and the PA 529 Investment Plan, which lets investors choose from a number of investment options. Beneficiaries can use the money to pay for college and graduate school, as well as some technical and career schools, plus eligible expenses.

There are no yearly income limits for 529 plans, and the benefits are transferrable. In addition, Bernstein suggests 529 plans have significant year-end tax benefits for Pennsylvania residents: “Pennsylvania has one of the most generous deductions for contributions into 529 plans. As a single person, you can deduct up to $14,000 per beneficiary per calendar year.”

Plan for the Unexpected
Life is filled with unexpected, and often unwanted, surprises—divorces, sudden illnesses, job losses, etc. Such surprises can wreak havoc on even the best-conceived financial plan. That having been said, there are ways to build in some forms of protection, according to Loretta Hutchinson, CFP, CDFA, NCC, a financial advisor with InSync Financial Group in Yardley.

“Looking at your financial picture is not the first place you go when something like divorce is thrust upon you; it tends to be secondary,” says Hutchinson, who also has a master’s in counseling. “In matters of divorce or forced retirement or when a spouse or child gets sick, everyone seems to go into day-to-day mode, which is understandable, because there’s only so much brain space to deal with stress. The financial plan doesn’t come up till much later than it should.

“When you’re talking about unexpected transitions like these, you can’t always plan ahead,” she continues. “This is why it’s important to work with a financial advisor or some advisor on some level before you need them. If you have a relationship in place with someone you trust, it makes it much easier to have those tough conversations and then make decisions more competently.”

Each of these “unexpected transitions,” as she calls them, can he addressed by circling back to one common denominator:  cash flow.

“In divorce, I’ll have clients coming to me who might have been thinking about it for a while, so it’s not unexpected, but for those who have it thrust upon them, that’s a pretty big change,” she says. “A lot of people don’t plan for the cost of divorce, so you need to make sure you have enough cash on hand. There will be expenses incurred and downsized income, so the future will change financially.

“The decisions that are made at that point will make a major impact in the future, so you need to have someone you can trust who is educated in the process and can help you make decisions properly,” she continues. “That’s especially true for women, who are often the lesser-earning spouse. They need to see a long-term perspective for cash flow and retirement. I can show that to them in black and white, and when they see it in black and white, they usually feel much more comfortable about moving forward.”

Leave a Legacy
Death is a part of life, though few choose to willingly ponder their mortality. But plotting out one’s last wishes not only eliminates problems but can also create a legacy that will sustain a family for generations to come.

“I’m a big believer in life insurance,” says McNamara. “In a world where most people are not saving enough, you can buy life insurance for 10, 20 cents on the dollar that will ultimately go to their loved ones. … A lot of clients call it their ‘permission slip,’ where they don’t feel bad spending down their portfolios and their kids will still have a lump sum of tax-free money that is there and paid for.

“I have never had a client in their 50s, 60s, 70s or 80s ever say they have too much life insurance,” he continues. “Name any of the wealthiest families and I guarantee you they have mountains of life insurance. … It’s just another tool in your tool belt that, if used properly, can be used better and more efficiently than just about any other investment vehicle.”

Regardless of the investment vehicle used to fund a legacy, Bernstein suggests creating something called a “life document book” containing all relevant information in regard to family finances, complete with a to-do list, essential contacts and phone numbers: updated wills and power-of-attorney documents; life insurance information; bank statements, etc. This way, if a family member dies unexpectedly, the surviving family members will have an organized collection of documents to reference for any pertinent information regarding the family’s financial picture.

“There are billions of dollars in unclaimed life insurance, so there’s no point in having it if the people it’s going to benefit don’t know it’s there,” he says. “A family is going through so much emotionally in the event of a death, so by consolidating all the necessary information in one place, at the least the trauma of having to deal with the estate won’t be nearly as bad as the trauma of losing someone. You can also help them avoid probate,” used to resolve claims regarding the administration of the deceased’s estate.

Resource Guide
No matter the need, the Greater Philadelphia Area has an abundance of skilled financial professionals who can help, including:

Bala Financial Group

InSync Financial Services
215-302-3437 |

Key Financial Inc.
West Chester
610-429-9050 |

McNamara Financial Group
215-348-3176 |

Penn Wealth Planning
New Hope
215-862-7080 |

Brad Bernstein
UBS Financial Services
215-972-6832 |

Russell R. Valante
Janney Montgomery Scott LLC
Blue Bell