Confident Money - Fall 2017 by Confident Money

CONFIDENT

MONEY SPONSORED BY PERSONAL CAPITAL

FALL 2017

THE JOURNEY: MAPPING LIFEâ&#x20AC;&#x2122;S FINANCIAL DECISIONS

WHY A PERSONAL TOUCH MATTERS

Up Front FUEL Sponsor’s Letter

PARTNERING WITH THE RIGHT RESOURCES, STRIVING TO BE LIFELONG LEARNERS, AND KEEPING MENTALLY AND PHYSICALLY FIT ARE INVESTMENTS THAT PAY OFF EVERY TIME.

ife is full of moments and momentum. There are challenges and opportunities, along with all kinds of corresponding emotions. Most people aspire for love, success and adventure in their lives. They crave close friends and family while wanting to leave the world a better place after they are gone. They want to feel happy, excited for the future and confident. But confidence can be a funny thing. When things are going well, our confidence rises. It is almost as if we are injected with some sort of fuel to help us soar. But if there are setbacks, our confidence wanes, and the fuel gauge empties. It is that fuel (real or perceived) that enables us to move forward with courage. So, if we want our confidence to soar, we must ignite it for ourselves. How? We seek counsel from those with proven track records. We find people we can trust and thrust ourselves headlong into the future with an unlimited amount of energy. Most of all, if we want to confidently navigate the journey of life, we must continue to invest in the one instrument that stands the test of time – ourselves. Partnering with the right resources, striving to be lifelong learners, and keeping mentally and physically fit are investments that pay off every time. That’s why we are sponsoring a magazine committed to the idea of building confidence and creating the best you at every step of your journey. Confident Money endeavors to tackle the issues that matter to you by sharing stories and insights that will help you to stay poised and determined for life’s many challenges. Mapping out the future from a financial standpoint can be overwhelming, so our first feature, “The Journey,” gives milestone-by-mile-

SPONSOR

Personal Capital personalcapital.com MANAGING EDITORS

Anne Armento Jenn Kincaid

EDITORIAL & CREATIVE DIRECTION

Conduit Inc. www.Conduit-Inc.com

stone advice from our experts and Advisors. In our second feature, “The Blended Approach,” we gathered strategic insights about 21st Century financial issues. So, yes, confidence can be a funny thing, which makes keeping your energy up a difficult task. But when you feel like you’re running out of gas, we hope to be the fuel for you and your family. Our goal is to be your trusted resource in those times of need and decision. So, be confident, and welcome to Confident Money. Warmest regards,

Jay Shah Chief Executive Officer, Personal Capital twitter.com/@jayshah_pc

CONFIDENT MONEY

IN THIS ISSUE 03 Sponsor’s Letter 04 The Blended Approach Wealth management advisors discuss why a personal touch matters 08 The Journey Mapping life’s decisions 12 The Dossier News, updates, and statistics

14 It Takes Two Survey shows married is better than single for financial planning 15 Q&A with Bill Harris How Personal Capital founder Bill Harris changed the financial planning game

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THE BLENDED APPROACH WEALTH MANAGEMENT ADVISORS DISCUSS WHY A PERSONAL TOUCH MATTERS HAT ARE YOUR FINANCIAL GOALS?

Future ambitions? Where do you want to be financially and how do you plan to get there? When it comes to setting your path forward, there are lots of questions. Today’s financial landscape is filled with options to help you plan your future, from big firms to online wealth management tools. We believe that choosing a financial advisor who offers the unique combination of advanced digital technology, and personalized expertise and guidance, is the path forward. You’ll gain confidence with a digital platform and money tools that can put all your financial accounts in front of you, coupled with an advisor who can walk you through each and every step.

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“My clients are people, so the reasons they need a sound financial plan are very personal. It is important to understand that people are driven by emotion.” – GREGORY DEPALMA, SENIOR FINANCIAL ADVISOR

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certain amount of emotional and physical comfort that can be derived from having a financially stable situation. Working with individuals to help them understand the scope of their financial situations helps bring them, in many cases, peace of mind. That can be substantial. I enjoy helping individuals learn more about their finances so that they can direct their focus to what really matters to them.

What are the first steps someone should take in order to take control of their financial life?

That personal touch is critical. Through direct consultations and behind the scenes research, your financial expert can proactively identify the risks, target the opportunities and help you make the adjustments you need to achieve your goals. We asked several of our Personal Capital wealth management advisors to share their thoughts on how they approach their clients’ needs and why the personal touch still matters. Following are insights from Shannon Lynch, CFP, Senior Financial Advisor; Gregory DePalma, Senior Financial Advisor; and Paul Deer, CFP, Team Lead, Senior Financial Advisor.

Tell us about your personal motivation to improve people’s lives.

SHANNON LYNCH: I never really envisioned myself pursuing a career in finance because I was a cynic of the industry and its motives. As a young woman with altruistic dreams, I was hesitant to believe I’d find happiness in a world that, to put it simply, revolves around money. But when I started working in wealth management, I began to understand the role we play in our clients’ lives and how intimate a conversation about someone’s personal finances can be. Knowing that I’m helping improve people’s lives is why I find value in what I do. GREGORY DEPALMA: Helping people feels good and makes the world a better place. PAUL DEER: I don’t believe that money equals happiness, but there’s a

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“Money is a means to an end. Helping clients identify their goals, and managing their money and emotions requires personal interaction and qualitative conversations.” – Shannon Lynch, CFP, Senior Financial Advisor

SHANNON LYNCH: Understand your balance sheet: assets versus liabilities. Identify your goals and develop a plan. GREGORY DEPALMA: There are several steps. First, take inventory. It’s impossible to get where you want to go if you don’t know where you are. Our award-winning technology can help you accomplish this. The Personal Capital Financial Dashboard allows households to see their entire financial life in one place and identify what they have under control and what requires attention. Next, identify your goals. After discovering where you are, identify where you want to be in the future. When do you want to retire? What type of lifestyle do you envision then? Develop a plan. This will provide a reasonable probability of achieving your financial goals. And then implement that plan. Don’t forget to monitor your progress and adapt your plan as needed. PAUL DEER: Understand your financial situation. Are you cash flow positive? Negative? What do you need to do to ensure your long-term financial goals are met?

What keeps your clients up at night?

SHANNON LYNCH: Not having enough money in retirement or not living their life to the extent they can now because they’re too concerned with conserving their assets. GREGORY DEPALMA: The way clients articulate their fears may not necessarily be the

root cause of their fear. I often hear clients say things like, “I’m fearful U.S. equity valuations seem high,” or “I’m worried interest rates are going up” or “I fear there will be a bear market soon.” I don’t think P/E ratios or a bear market is what they truly fear. I think they fear the negative impact a bear market may have on their lifestyle. This typically means they’re fearful they may not be able to send their child to college, retire when they want to, or buy the home they want. PAUL DEER: Running out of money, by far. That’s the long-term concern. Most people also are worried about the markets on a frequent basis. We all want to be comfortable in retirement, but transitioning from the mind set that decades of saving money put you in, to a mentality of spending what you’ve saved, is a huge change.

What are the biggest trends affecting clients’ lives right now?

SHANNON LYNCH: Domestic bull market and/or high valuations. We see clients getting too aggressive chasing returns or too nervous to invest because they feel stocks are overvalued. Both are a form of market timing, which is a fool’s errand. GREGORY DEPALMA: I think it can be a mistake to focus too heavily on high-level trends. It’s much more important for each individual/family to focus on things that could have the biggest impact on them personally, rather than focusing on things that will impact other people. PAUL DEER: Behavior. I’d boil that down to either fear or greed. Some clients are overly greedy, putting too much risk in their portfolios. Others are afraid of the current markets, and possibly have been for years. They lose out on upside for fear of a downside that doesn’t always come when they expect it to. The markets go up and they go down. The best thing to do is to understand this, and plan accordingly. It’s our job to help clients get out of their own heads, and to try to remove as much emotion as possible from investing.

When it comes to financial planning, why does having a personal touch matter?

“There’s so much uncertainty in planning, that having a understanding of your client’s personality, emotions and personal opinions helps you tailor advice to them.” – Paul Deer, CFP, Team Lead, Senior Financial Advisor

SHANNON LYNCH: Money is a means to an end. Helping clients identify their goals, and managing their money and emotions requires personal interaction and qualitative conversations. Life can be complex, and it’s important to have a trusted person in your corner to help you navigate through the various decisions you face with your finances. GREGORY DEPALMA: My clients are people, so the reasons they need a sound financial plan are very personal. It’s necessary to have a human financial planner that understands the complexities of their situation. It is important to understand that people are driven by emotion. Most financial mistakes I witness are the result of people acting upon their emotions – typically fear or greed. Technology is great at analyzing a portfolio allocation, but it’s terrible at helping people avoid making fear-based decisions that are detrimental to their long-term financial success. A skilled human financial planner can help a client stick with their plan when times are tough. PAUL DEER: Emotion is a huge aspect of investing and planning. Understanding a client’s emotions helps you better work with them to plan for their financial success. There’s so much uncertainty in planning, that having a understanding of your client’s personality, emotions and personal opinions helps you tailor advice to them. You can always use simple math to show what financial situation is “best,” but those numbers may not account for factors that are seriously important to your clients.

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MAPPING LIFE’S DECISIONS

THE JOURNEY Planning. Execution. Repeat. If you want to talk wealth management planning, get ready. There are so many questions and so many variables involved with plotting a strategy.

The key to getting it right means putting all of your cards on the table – full disclosure. And that’s when it hits you – the magnitude of the process. Jacob Jaegle sees it in his clients’ eyes every time he sits down with them. Planning for what the future looks like from a financial perspective can be, well, daunting.

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“Financial planning is a marathon not a sprint. If you take a holistic view, partner with the right advisor to set a strategy, then all you have to do from there is to execute the plan.” – Jonathon Lore, Senior Financial Advisor

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f you want Jaegle’s advice, it’s start now. Jaegle, a Certified Financial Planner with Personal Capital, says the sooner you take action, the better. Sounds simple, right? Depends on the person, the situation and the timing. While Jaegle says the process is pretty straightforward, it’s the wrapping-your-armsaround-everything part that takes some getting used to. “Financial planning is basically walking your clients through all of their life cycles,” he says. “You’re creating bigger building blocks.” Marriage. Birth. College. Real Estate. Life Insurance. Retirement. Each is an important moment and decision in the lives of most Americans. But are they ready? “Most investors tend to procrastinate, and these planning items sneak up on them,” says Jonathon Lore, a Senior Financial Advisor with Personal Capital. “It is important to plan – to do the leg work ahead of time and avoid a last minute scramble, or worse yet, failure to be able to meet their goals in the most efficient way possible.” Lore says too many consumers underestimate the “real” future costs of financial goals. “Financial planning is a marathon not a sprint. If you take a holistic view, partner with the right advisor to set a strategy, then all you have to do from there is to execute the plan.” And that plan all starts with giving up some control. From where Senior Financial Advisor Scott Schleicher sits, that’s one of the biggest obstacles to getting into the game. “You have people who have never done this before, have not had success or, even worse, had some success. Over the past eight years, the success of the bull market has given a lot of people confidence that they can do this themselves.” The other obstacle is that most people cannot get past the fact that they might be spending beyond their means. “People who have money, spend money,” Schleicher says. “And people who don’t have money, spend too much.” The consensus to formulating a strategy that works is to break the life cycles into pieces you can plan for. Here’s a look at how you can put your plan into action:

MARRIAGE Creating unity between partners is one of the biggest and most important building blocks in the equation. The process requires combining households and making financial decisions about having two accounts or a joint one. It means getting to know each other’s families’ financial tendencies. The best thing to do is identify your expectations and competence, then tailor the conversation so that both parties are comfortable with a plan moving forward together.

BIRTH Review insurance coverage and options, employee benefits and leave policies, emergency funds. Look at daycare/early education programs to make sure you are prepared for cash flow planning/needs. Some families plan their childrens’ births around daycare accommodations. Once the above issues have been addressed, and after the

“Financial planning is basically walking your clients through all of their life cycles. You’re creating bigger building blocks.”

– Jacob Jaegle, Senior Financial Advisor

through everything that must be taken care of if someone is left alone. This may mean replacing your annual income to cover daily living expenses for your spouse and dependents, paying off a home mortgage or other significant debts (credit cards, car loans, etc.). Paying for childcare and/or future college expenses, unpaid medical bills or taxes should also be considered. You may want to consider creating an inheritance or providing extra retirement income with a tax-free death benefit.

COLLEGE Wait to start saving for college until you have other priorities, such as an emergency fund, insurance and your own retirement savings on track. It is important to ensure that your personal needs are met first. Providing for a child’s college education at the expense of your own financial well-being could mean you end up being a financial burden to your child in your retirement years. Once you’re ready, look at your options – 100 percent all in cost of attendance, Ivy League versus public institutions, etc. Identify strategies to get started (529 Plan and target savings amounts). Revisit the strategy on, at least, an annual basis.

RETIREMENT See college strategy. Understand your true spending and savings trends and complete your forward looking projections/ analysis. The bottom line is that people just do not save enough. See where you stand (never an easy picture to paint) and then what it will take to get where you need to go. Look at it like this – building a retirement portfolio is, essentially, the halfway point in the race. The second half is sustaining the retirement lifestyle you imagined. The key is to find a disciplined investment strategy that strikes a balance by providing the diversity, risk-tolerance, and flexibility you need. baby arrives, start looking at higher education and savings planning. To note, the average cost you will spend to raise your child ranges from $280,000-$300,000.

REAL ESTATE Understand, first, that real estate is just another illiquid asset class. Learn how much you can afford or, in the instance of an investment property, what is the return on investment. Does it generate enough return to compensate you for the illiquidity premium? Learn how real estate works and how to best view the asset as the illiquid investment it is.

LIFE INSURANCE While there is no “one-size-fits-all” life insurance policy, people need insurance for a variety of reasons. Adequate insurance coverage, or lack thereof, can have a huge impact on your financial life and long-term goals. While everyone’s circumstances are different, think

“People who have money, spend money. And people who don’t have money, spend too much.”

– Scott Schleicher, Senior Financial Advisor

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News | Updates | Statistics

DOSSIER

Advisors must be adamant and insist that ‘advice,’ as opposed to a product recommendation, entails professionalism, judgment, and empathy, among other human skills.” – Knut Rostad, founder and president of the Institute for the Fiduciary Standard, on why the human touch still matters in the wealth management game

THE LONG HAUL

STUDY SHOWS HALF OF AMERICANS RETIRE BROKE f you think these numbers are frightening, you’re not alone. According to a 2017 GoBankingRates study, more than 50 percent of Americans will retire broke, with another 19 percent holding less than $100,000 in the bank. Even if you plan on working during retirement, you’re most likely going to need money to cover medical care, travel costs, living expenses, etc. So, how are you going to make it work? Amin Dabit, Director of Advisory Services with Personal Capital, offers these five tips for a smooth transition into retirement:

1. Pick your date

If you love to work, work longer.

THE

2. Track your budget

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Get a realistic understanding of what you spend every month, which will help you understand what you’ll need in retirement. A general rule of thumb is

that in retirement, you’ll need approximately 80 percent of your current income to cover your usual living expenses.

3. Know your cash flow

Calculate what will come in and what will go out each month. Find out about Social Security and pensions – when and how much they will pay.

4. See the big picture

Look at all your investment accounts together. Understand exactly how much you have, both in tax-advantaged and taxable investment accounts. This will help you develop financial goals, measure progress over time, and stay disciplined.

5. Don’t be overwhelmed

Avail yourself of information out there, but don’t let it overwhelm you to the point that you do nothing. If you’re unsure of where you can start, speak with a financial advisor who can help you sift through the information.

Bookshelf

High Performance Habits: How Extraordinary People Become That Way By Brendon Burchard hat are the critical strategies to achieving long-term success? It’s a question that Brendon Burchard asked himself a lot. And after extensive organic research and a decade serving as the world’s highest-paid performance coach, the answers revealed themselves. Based on one of the largest surveys ever conducted on high performers, Burchard uncovered six habits that move the needle. Adopt them, and you win. Neglect them, and the struggle ensues. Seek clarity. Generate energy. Raise necessity. Increase productivity. Develop influence. Demonstrate courage. To

become a high performer, these are your new guidelines. In High Performance Habits, Burchard explains how it is about the art and science of how to practice these proven habits. Whether you want to get more done, lead others better, develop skill faster or dramatically increase your sense of joy and confidence, the habits will get you there. Each habit is illustrated by powerful vignettes, cutting-edge science, thought-provoking exercises and real-world daily practices you can implement right now. In your journey to plan a better future for you and your family, High Performance Habits is the kind of resource that can help set your course.

INSIDE THE NUMBERS

60%

The percent of American workers who feel confident about having enough money for a comfortable retirement, while just 18 percent feel “very” confident (Employee Benefit Research Institute’s “Retirement Confidence Survey”)

48%

The percent of parents who say they would prioritize saving for their child’s college education over their retirement (“Affluent Family Finances Survey” by ORC International and Personal Capital)

30%

The percent of American workers who report that preparing for retirement causes them to feel mentally or emotionally stressed. These stressed workers feel less financially secure and are far less confident about having enough money for a comfortable retirement than those who do not feel stressed (Employee Benefit Research Institute’s “Retirement Confidence Survey”)

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CONFIDENT MONEY

It takes two

Survey shows married is better than single for financial planning

ahead and pop that question. According to a TD Ameritrade “Employee Benefits Research Retirement Confidence Survey,” being single as opposed to having the support of a spouse may put you at a financial disadvantage. The report, which surveyed 2,000 adults ages 37 and older, shows that 63 percent of married couples are saving for retirement, while only 44 percent of single people are. Here’s a look at some of the advantages that “taking the leap” offers:

54%

The percent of married people who expect to be very financially secure

34%

The percent of single people who expect to be very financially secure

46%

❧of The percent single people who worry about running out of money in retirement

38%

The percent of married people who worry about running out of money in retirement

36%

The percent of single people who do not think they will be able to afford to fully retire

29%

The percent of married people who do not think they’ll be ready to retire when it is time

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THE DISRUPTOR How Personal Capital founder Bill Harris changed the financial planning game arlier this year, Personal Capital’s assets under management (AUM) crossed over the $5 billion mark. The number continues to be in line with what founder Bill Harris envisioned when he started the digital wealth management company in 2009. Harris, the former CEO of Intuit and PayPal, has spent his entire career at the nexus of the financial and technology sectors. He created Personal Capital as a way to connect all of a person’s personal financial accounts – banks, brokerage accounts, 401(k)s, mortgages, credit cards and loans – into an easy-to-read personal dashboard of charts and graphs – all for free. The goal being for people to see all their accounts in one place and lead better financial lives as a result.

Give us a snapshot of Personal Capital.

We are a digital wealth management company that’s both high tech and high touch. The things we are doing – combining digital analysis with human advice – are unlike traditional money management. Our wealth management clients typically come to us from other personal investment relationships and are in all age ranges - their 30s, 40s, 50s, 60s and older. On average, they have close to $400,000 with us. And anyone can use our free financial tools. Over 1,400,000 people currently use our free tools.

What should every one of your clients know about you?

What does Personal Capital look like compared to a robo-advisor?

People who are just starting out may use a robo-advisor, which offers assistance through computers only. That’s fine if you have very simple finances. People who use robo-advisors typically have about $20,000 to invest. We offer full financial planning and investments – advice that is to help plan out the rest of their lives. Along with offering financial technology, each client has a dedicated human advisor to work with them. That’s a really important part of the business.

Why were you such a disruptor?

What’s happening in this country is that people are

living unexamined financial lives. Money is so important – too important to ignore. That’s what our tools enable you to see. So we approached understanding your finances and the financial planning process differently. We offer free financial tools. We incorporate technology with human expertise into the financial planning process, making real time financial information accessible on the web, iPhones, iPads, Android phones and Android tablets, and the Apple watch. We don’t believe in stock picking or market timing. We don’t do mutual funds. We believe in creating a diversified asset allocation for the long-term.

WHAT’S HAPPENING IN THIS COUNTRY IS THAT PEOPLE ARE LIVING UNEXAMINED FINANCIAL LIVES. MONEY IS SO IMPORTANT – TOO IMPORTANT TO IGNORE.

We want them to know that money matters. There’s no getting around that. But I think we’d all like it to matter a little less. That’s what financial control is. It’s not a fixation on money, but freedom from it. Real financial control is not going to come from a random collection of 401(k)s, IRAs and stock options. It takes a dynamic, holistic plan that traditional financial services have not been able to offer yet, at least not a flexible one that takes into account your complete financial picture. We use technology to change that, to bring world-class financial services to people beyond the ultra wealthy.

Where does that process of financial control begin?

It starts by giving you the tools to not just see what’s happening with your finances, but to understand them. We show you all of your financial investments – everything that’s happening – all in once place. It’s simple, intuitive, and it’s private and secure. And best of all, it’s free. We aren’t brokers or bankers. We’re not trying to sell you anything. Our only agenda is your agenda.

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