Financial Success Isn’t Difficult
Written on March 25, 2010 at 9:22 am, by Allen
Financial success isn’t a hard task to master. It simply takes dedication, hard work and a little old fashioned commitment.
But it also takes a little knowledge. Too many consumers are ignoring what are financial truths. They run up large amounts of debt just to appear successful to those around them. They surround themselves with things that only make them feel better for a minute.
They ignore the fact that a debt-free and well managed financial life is a wonderful way to eliminate stress, which is all too common in today’s world.
What do you need to do to become financially successful?
First, you need to spend less than you earn. Sounds easy, but it really isn’t. It is easier to spend less than it is to earn more. You simply have to cut your costs. You have to stop charging on your credit cards and you have to stop shopping. Look closely at where your money is going. Look at what you already have around you. Get all those projects completed before you buy things for a new project.
You have to have a budget and stick with it. Budgets don’t tell you how to spend your money; they tell you how to save your money. You can easily see where your money is going. You can identify areas that you can cut back on. Then, you can set spending goals. A budget is a great way to challenge yourself. There is nothing better than saving more money than you thought you could. Surprise yourself with a budget that works.
From your budget, you should be able to find the money to start paying off that credit card debt. If you are severely in debt, you may need to get a second job and sell some things to get a head start. Stop using those cards and start paying them off. They are draining the life out of your finances on a daily basis.
You should be contributing to a retirement plan. Research your options and take advantage of them. Don’t wait until tomorrow, it will be too late. Start now. When you pay off your debt, put that money to your retirement as well. Who knows — you may be able to retire early.
Once you have your debt paid off you should have a savings plan. There are goals that you can set for your savings. You may want new furniture or to go on a vacation. You should also save at least three to six months of money to cover your monthly expenses in the case of an emergency. This will cushion your budget from any repairs, emergencies, illnesses or job losses that may happen.
Financial success isn’t difficult. It is simply a habit that you have to nurture and maintain. Take the time to sit down and get started. Work on it until it becomes second nature. The more you work on it, the better you will become at it.
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Allen Bronton, AIF, CRC, senior wealth consultant of Wealth Preservers, LLC can be contacted at (815) 788-6018 or via email at abronton@wealthpreservers.com.
The views expressed above are solely those of Allen Bronton, AIF, CRC.
Neither Wealth Preservers, LLC nor Cambridge provides tax or legal advice.
Securities transactions through Cambridge Investment Research, Inc., Member FINRA, SIPC
Investment Advisory Services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisory Firm.
Wealth Preservers, LLC and Cambridge are not affiliated
The Evolution of Investing
Written on February 7, 2010 at 11:40 pm, by Allen
In the beginning, there was the brokerage account. An investor opened a brokerage account with a broker who would recommend and/or take orders to purchase stocks and bonds for the owner of the brokerage account. Because it was important for an investor’s order to be completed on the floor of the exchange as soon after acceptance of the investor, the brokerage firm would have direct telephone lines that only rang to their trading desks on the brokerage floor. Because this was a direct wire, these brokerage firms became known as “wirehouses”. In those days, the exchange rules required that an investor’s order be completed within 15 minutes of acceptance by the investor. Settlement, or the time from trade to the exchange of the security for cash was generally about 7 business days.
Next, with the advent of the computer, came online trading access. At this time, online trading access was permitted only by licensed brokers and not the investing public. There were specialized computer systems specifically utilized for the trading of securities for investor accounts that were quite expensive but still less expensive than having all of the costs of a “wirehouse”. This advance brought more competition to the markets and caused the Securities and Exchange Commission to deregulate securities commissions.
Our next step came with the beginning of the independent broker model. Certain brokerage firms emerged that would trade for the investing public at discounted commission rates and other brokerage firms began to attract brokers away from the “wirehouse” firms with a noticeable absence of proprietary products. This all became possible with the advent of the personal computer after its introduction in 1981. The personal computer brought the cost of entry to investment trading down from the large firm model to a small firm model. This in turn increased competition and thereby lowering costs of trading for investors.
Now that the investing public could invest directly for them selves it became apparent to most that there was required some skill, strategy and most importantly experience to be successful. Since most investors lacked these qualities yet still wanted to benefit from the potentially greater returns that the various different investment markets offered, the Separately Managed Account started to evolve. This account, as opposed to a type of investment, allowed an investor to continue to directly invest in and own stocks, bonds and other various investments but managed by a professional investor. The problem was that the minimum account sizes tended to be very high allowing only high net worth investors to take advantage of them.
This brings us to today. Within the last few years the Unified Managed Account (UMA) has become the account type of choice for the serious investor. A UMA allows one single account to hold individual stocks, bonds, etc. that are professionally managed, as well as mutual funds, ETF’s and in some cases options. What does this mean to the investing public? Greater efficiency at lower costs. With a UMA an investor can hire globally prominent money managers to trade the equity portion of their portfolio and purchase Exchange Traded Funds (ETF) for the fixed income (bond) portion of the portfolio, generally at a significant savings to most packaged investment products on the market. Additionally, the huge minimums required to open the SMA accounts have dropped significantly with UMA’s . As a result of these new UMA accounts we have been able to reduce our account minimum down to $100,000 without sacrificing diversification.
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Allen Bronton, AIF, CRC, senior wealth consultant of Wealth Preservers, LLC can be contacted at (815) 788-6018 or via email at abronton@wealthpreservers.com.
The views expressed above are solely those of Allen Bronton, AIF, CRC.
Neither Wealth Preservers, LLC nor Cambridge provides tax or legal advice.
Indices are unmanaged and cannot be directly invested in.
Securities transactions through Cambridge Investment Research, Inc., Member FINRA, SIPC
Investment Advisory Services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisory Firm.
Wealth Preservers, LLC and Cambridge are not affiliated.
Protect Your Most Import Asset … You!!!
Written on February 7, 2010 at 11:34 pm, by Allen
Have you ever asked yourself what would happen to your family if you became disabled and couldn’t work? How would the bills be paid? How long would your savings last?
Many of us give little thought to these questions. We focus primarily on buying life insurance to protect our families from financial loss resulting from our untimely death and we buy homeowner’s insurance to protect our homes from disaster, and auto insurance to insure against an accident. When it comes to disability income insurance, well that’s another matter. We have insured the golden eggs, but not the goose.
Alive and healthy, anyone can replace lost possessions, even if they were totally uninsured. Upon disability, however, only insurance can compensate for the loss of a unique set of money-making abilities.
According to the 1980 Commissioners Standard Ordinary Mortality and 1985 Disability tables, a 40-year-old man has a 10% chance of dying within 15 years, while the same odds are 25% for a disability greater than 90 days. Many of us remember Christopher Reeve’s horrible accident that left him paralyzed from the neck down but what about a local man who, while playing in the snow with his children, landed wrong and became paralyzed? It can happen to anyone at any time. Even the seasonal flu can leave people permanently disabled.
Some people think the cost is too much for them to afford. Paying premiums year after year, with no creation of cash values, might seem a waste of funds – much like paying fire insurance premiums but the house doesn’t burn down. We should, however, measure how quickly the benefits from a disability income policy would equal the total premiums paid. Let’s assume that we pay a $100 monthly premium to receive a $35,000 annual benefit. If we paid two years of premiums and then became disabled, we would receive all two years of premiums payment back in less than one month. Even if we paid the premiums for 20 years and then became disabled, we would recoup all our premium payments in nine months and still have monthly income from the insurance company to replace the salary that we no longer have.
There are several economical ways to purchase disability insurance. If you are currently employed then check with your employer to see if group short-term disability is available. This type of coverage typically lasts for about 6 months and then stops. A popular optional benefit through many employers, who offer health insurance, is group long-term disability. This type of coverage generally starts in the sixth month and pays for a number of years or more commonly until at 65, when Medicare would presumably be available. If your employer does not offer a group disability program you may wish to enquire about an individual policy. While generally not as economical as a group policy, an individual policy is owned by you and not lost if you leave your current employer.
How would you replace income without disability insurance? The most common types of protection are:
Workers’ compensation. Injuries that happen on the job are covered under workers’ compensation. The state or an insurance company usually would pay an individual’s medical bills and pay a percent of their salary or hourly wage.
Social Security. Disability benefits could be available as early as five months after an injury. However, there are a number of stringent requirements.
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Allen Bronton, AIF, CRC, senior wealth consultant of Wealth Preservers, LLC can be contacted at (815) 788-6018.
The views expressed above are solely those of Allen Bronton, AIF, CRC.
Securities transactions through Cambridge Investment Research, Inc., Member FINRA, SIPC
Investment Advisory Services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisory Firm.
Wealth Preservers, LLC and Cambridge are not affiliated.
Waiting on Reality
Written on December 19, 2009 at 10:04 pm, by Allen
As of the close of the markets today, November 30, 2009, the S&P 500 index stands at 1095.63. According to Standard & Poor’s, with 98% of the component companies reporting, the operating P/E ratio of the S&P 500 stands at 27.66. That is a pretty big number considering that the median P/E for the index is 15.7. What is even worse is that this is the “operating” P/E and not the “reported” P/E. The operating P/E is the number that is normally bandied about on the financial airwaves by over zealous “market pundits”. I can see one yelling emphatically in my head that Lehman Brothers is a great buy and not to sell. When a company reports its operating earnings, at its most basic, it is stripping out the bad news that it hopes not to have to report again. For instance, if a company announces a huge layoff that will cost it $100,000,000 in severance pay that they will take a charge to earnings in the current quarter, that is removed from operating earnings because it is an unusual circumstance. Reported earnings are the real earnings that include the good, the bad and the ugly. This is the number that must be reported each quarter to the SEC.
As stated above, the operating P/E of the S&P 500, as reported by Standard & Poor’s, based upon this days close is 27.66 with the median to be at 15.7. That means that the operation P/E is 76% above its median and that is the number with the bad news stripped out of it. What is the reported S&P 500 P/E? How would you feel about 86.13? To put that into perspective, that is 449% above its median. When was the last time you rushed out to pay 449% of what something is truly worth?
Many of my friends and I were recently at a NAAIM (National Association of Active Investment Managers) conference here in Chicago. Frequently, market makers, floor specialists and financial exchange representatives attend these meetings because of the shear size of the advice market that the participants represent. The representatives from these various entities normally speak about efficient pricing and best execution for our clients but the theme had decidedly changed at this meeting. As we, the advisors were speaking about when the other shoe was going to fall, the representatives from the exchanges, the specialists and market makers were all talking about how they can provide liquidity in a volatile market. Several of us decided to look at other market indicators to see what information we might be able to glean from them. Interestingly there is large open interest volume in the S&P 500 index options for the 1st quarter 2010. This does not mean that the market will drop in the 1st quarter 2010 but it does show that there are quite a few institutions looking to hedge against the S&P with the expectations, again based on open interest volume, of between 600 – 700. That would mean a 30 40% drop from current levels.
So, while the markets are skipping along at unbelievable multiples, my friends and I are trying to best understand when and how far the markets may drop again. After all, unemployment has not gotten any better, bank failures continue at a steady pace, taxes are headed in the wrong direction and we have monetary policy that says spend, spend, spend like a shopaholic at the Mall of America.
Since the markets are only part science and the rest is raw human emotion we must resign to the fact that we can study all of the charts and statistics but may never see the true sign of impending market failure until it is upon us. This doesn’t mean that we will be standing idly by waiting for the next market downturn but we are taking appropriate action now to protect our clients from what we believe is the inevitable appearance of reality back to the markets. We suggest that you consider the same.
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Allen Bronton, AIF, CRC, senior wealth consultant of Wealth Preservers, LLC can be contacted at (815) 788-6018 or by completing the information request on the Welcome page.
Neither Wealth Preservers, LLC nor Cambridge provides tax or legal advice.
Indices are unmanaged and cannot be directly invested in.
Securities transactions through Cambridge Investment Research, Inc., Member FINRA, SIPC
Investment Advisory Services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisory Firm.
Wealth Preservers, LLC and Cambridge are not affiliated.
Your Right to Full Disclosure
Written on December 1, 2009 at 1:19 pm, by Allen
As an investment adviser, I also am a fiduciary.
That means, among other things, I must do what is in my clients’ best interests before my own. This is not unique to me. It applies to all registered investment advisers and advisor representatives. Sadly though, not all seem to take this obligation as seriously as they should.
When working with an investment adviser-fiduciary, you are entitled – and required – to receive full disclosure of all fees and expenses you will be charged, directly and indirectly. That includes transaction, advisory, distribution and custodial fees. I mention this because I am continually surprised by prospective clients telling me someone says they charge a 1 percent fee. That tells me that either the individual is a nonprofit investment adviser or the person is not providing full disclosure. I never have met a nonprofit investment adviser, so I suspect the latter.
The most common investment portfolios under an advisory contract are funded with packaged products, the name of which I am not allowed to write about without paying the regulators $500.00 so I will hope you understand what I mean. According to Morningstar, the Chicago-based research firm in its 1993 study titled “Unearthing Brokerage Costs,” the average diversified domestic equity packaged product investment has costs of about 1.63 percent a year, including .31 percent in brokerage fees and a 1.32 percent expense ratio. If my math is correct and the investment advisor is charging 1 percent then the fully disclosed fee should be 2.63 percent.
Remember, the above uses average trading costs and an average equity expense ratio. There are packaged product investments that have more trading activity and, therefore, potentially higher trading costs. Realistically, an advisory-based packaged product investment program’s expenses will vary from year to year, depending on market conditions.
For the an investor with about $250,000 and greater there is a preferred method, in my opinion, called the Separately Managed Account, or SMA, which is an area of concentration at our firm. With an SMA, you are hiring a professional money manager at a negotiated fee including trading, custodial, etc. expenses also pre-negotiated. This method can shave one half of one percent or more from your fully disclosed fee. The fee is known up front and remains constant each year.
The bottom line when working with an investment professional that charges on a fee basis, get a breakdown on the fees and expenses that you will be charged. These are investment advisory fees, transaction fees, investment expense ratio (if applicable), custody, clearing and distribution. Once armed with this information you can make an educated decision at to what firm, strategy, etc. is best for your circumstances.
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Allen Bronton, AIF, CRC, senior wealth consultant of Wealth Preservers, LLC can be contacted at (815) 788-6018
The views expressed above are solely those of Allen Bronton, AIF, CRC.
Securities transactions through Cambridge Investment Research, Inc., Member NASD, SIPC
Investment Advisory Services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisory Firm.
Wealth Preservers, LLC and Cambridge are not affiliated.
Hello world!
Written on December 1, 2009 at 10:42 am, by Allen
Welcome to our new blog, where you will find published articles, information of interest and general opinions.
We have been publishing articles in periodicals such as Wealth Manager Magazine, the Chicago Sun-Times, Money Magazine and the Northwest Herald, among others, since 1993.
Due to regulatory requirements comments are not allowed to be posted to this blog but we do welcome your comments by completing the email form.
Welcome,
Allen Bronton, AIF
Senior Wealth Manager
Managing Member