Steven Merrell, Financial Planning: Am I financially prepared for retirement?

Q: I am 67 years old and I am finally getting ready to retire. I have been pretty good about saving money in my IRA and 401(k) over the years and I now have about $600,000 in retirement savings. In addition, my home is paid off and I have another $150,000 in the bank. I want to be sure I am financially ready to retire. I’m especially interested in how much you think I can safely take out of my IRA each year.

A: Congratulations on your upcoming retirement. It sounds like you have been diligent in your savings over the years. Paying off your mortgage is a great benefit, too. As you move into this next phase of life, you will be glad you prepared yourself so well.

Your financial readiness for retirement is difficult to determine given the facts you provided. You are clearly in a better position than many, but I have no idea what your cost of living looks like or if you have any other debts or ongoing financial obligations to children or aged parents. Retirement, like so much else in day-to-day economic life, is all about cash flow management. You have built up a nice portfolio of assets. Now you need to make sure your cash flows work. I recommend you seek out a financial planner who can run some projections for you. The confidence the financial planning process will bring to you will be well worth what it should cost in time and effort.

Your question about how much you can safely take out of your IRA is also difficult to answer without more information. However, here are some important principles for you to keep in mind as you figure out what is right for your situation.

First, you want to be careful with how much you pull from your savings in the early years of retirement. Compounded returns are a key to retirement security. The more you take out early in retirement the less compounding can work for you in later years.

Second, you should test your withdrawal assumptions in a number of possible environments. The safe portfolio withdrawal rate is a topic that has been hotly debated in financial planning circles for many years. The rule of thumb has long been that portfolios can withstand a 4 percent withdrawal rate without depleting the real portfolio over time. That is a good place to start, but you really need to look at it more closely. Under some scenarios, 4 percent may be overly conservative; in other scenarios it may be overly ambitious.

For example, a 4 percent withdrawal rate makes sense if you earn a 7 percent portfolio return. If you earn 7 percent and withdraw 4 percent, then your net growth rate on the portfolio will be 3 percent, just about right to cover inflation. However, if your portfolio earns less than 7 percent, you may find your portfolio’s real value eroded over time by inflation.

Unfortunately, the real world rarely conforms to straight line return assumptions. Markets go up some years and down others. When you are withdrawing money from a portfolio, the sequence of portfolio returns makes a big difference in how much you can afford to withdraw.

When looking at withdrawal rates, I have found it best to consider several strategies under a wide range of possible return assumptions. The best tool I have found to help with this is something called Monte Carlo simulation. Monte Carlo simulation takes its name from the casinos of Monte Carlo and uses statistical methods to help gauge the impact of uncertainty on portfolio outcomes. This is another area where a financial planner can be of great help to you.

Steven C. Merrell is an investment adviser and partner at Monterey Private Wealth Inc. in Monterey. Send questions concerning investing, taxes, retirement or estate planning to Steve Merrell, 2340 Garden Road Suite 202, Monterey 93940 or

Financial advisors offer portfolio strategies for caretakers

Like any fan of nostalgic TV can attest, the middle child often feels neglected (“The Brady Bunch,” anyone?) Whether middle-child syndrome is sound science or pop psychology, clients of a certain age can still feel the way young Jan Brady did in the early 1970s — held captive between older and younger generations.

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Dubbed the sandwich generation, clients between 40 and 50 years of age can be pressured from two sides with financial and emotional burdens that involve caring for older, possibly ill, parents while also supporting their children, whether they are grown or not.

“When planning for the sandwich generation we spend a lot of time on conversations about who else they are caring for? Who else are you helping pay expenses for? Who else is important in your life?” says Angie O’Leary, head of wealth planning at RBC Wealth Management. “Asking these questions and finding out who else is a financial impact to the client is really important.”

These conversations can be difficult and clients may not be willing to discuss topics relating to their parents’ old age or letting their kids fend for themselves. But they’ve just got to “embrace the awkward,” says Jen McGarry, head of client risk prevention at RBC.

About 19% of adults currently assist an older family member in some way, according to a recent poll from RBC and Ipsos. Additionally, 21% of respondents say they offer financial assistance to a child over the age of 18. And parents in higher income households are most likely to be supporting adult children at 25%.

“Parents tend to underestimate by a long shot how much they still financially support their kids,” O’Leary says. “When you dig into it a little bit more, really understanding how much [clients] are going to need in retirement for their own expenses, you find out that some of that gap between what they’re spending on themselves vs. what’s not getting saved is going to their kids.”

Clients need to know it’s okay to say no to a family member if helping them out financially is going to be damaging to the client’s own retirement. But when it comes to family, emotions run high and loyalties run deep.

With that in mind, there are steps advisors can take to help secure their clients’ futures. First, contemplate developing an estate plan with structured considerations. This can include specific ages for distribution of funds, specific reasons or expenses for distribution of funds prior to said ages.

Advisors can also implement protections of funds for specific beneficiaries for special needs considerations — disabilities or substance abuse — “especially if there is a need to preserve the right to potential government benefits,” says advisor Sandra Adams of Center for Financial Planning.

Estate planning considerations for older adult parents could include the same special needs trusts language to allow access to eligibility for Medicaid and/or veteran’s benefits, Adams notes. Should the need for-long term care arise, paid caregiver contracts allowing for the adult child to provide care to a parent would be helpful for both parties.

Advisors should assure clients confirm any aid given fits into their financial plan. From an estate planning or tax planning perspective, clients will want to give only as much as the annual gift exclusion each year, Adams says. She advises this as a way to provide boundaries and limitations in order to protect everyone involved.

This approach keeps “the parents from harming their own financial plans and from feeling guilt for not giving more. It also keeps the children from demanding more and from leaning too much on their parents, when they need to learn to be independent and learn to make it on their own,” Adams says.

Emphasizing flexibility within the retirement plan is another way to go, RBC’s O’Leary says. Having liquid assets, or for the high-net-worth client a line of credit against the portfolio, can help alleviate some of the pressures of financially supporting family members.

Clients can generally borrow between 60% and 70% of their after-tax portfolio, O’Leary says. But this depends on the portfolio’s composition. For instance, it may be higher if the portfolio is more conservatively allocated, or lower if there are riskier assets involved.

“We recommend staying well below these limits, particularly if borrowing long-term,” O’Leary says. “If borrowers have a need that requires borrowing closer to the maximum limits, we recommend it be for more shorter-term liquidity needs and that there’s a clear financial plan in place with the advisor for how the client will pay it down.”

A clear understanding of the risks to the portfolio is a necessity whenever a client is borrowing against it, she says. “This is a conversation that borrowers should be having with their advisors.”

Planning for the sandwich generation is a game of financial offense, says advisor Rob DeHollander of the DeHollander and Janse Group. He has clients prioritize retirement planning first, then kids’ college and finally elder care.

“The three elements of that are making sure [clients] have enough resources for themselves, planning for college education with a 529 plan or similar vehicle, and third, making sure they’ve had that awkward conversation with their parents to make sure their affairs are in order and including their assets in a conversation around long term care insurance, or another type of hedge against cost of care,” DeHollander says.

Another issue to consider: when it comes to elder care, advisors and clients have to be vigilant around abuse and fraud, which is rampant in the U.S. Elderly Americans are losing $37 billion a year, according to one Bloomberg report, as a result of targeted scams. Another thing to keep in mind is the possibility of cognitive decline, not just for someone a client is caring for, but for the clients themselves.

There is a push in the industry right now, DeHollander and the other advisors say, to make sure clients have a trusted contact for each account.

This way if a client makes decision about some funds that the advisor finds unusual or out of character, they can then call that trusted contact and make them aware of the situation in case there is something medical going on. Tying in the emotional element of all this is what creates and engages action on the part of the client, DeHollander says.

“Clients don’t make decisions based on numbers, Sharpe ratios and alphas and betas, they make it based on emotion and then they justify it with the numbers,” DeHollander says. “Especially when you’re talking around these really sensitive issues. You need to put the client in a context where they are sort of in that moment: “How are you going to feel when your son walks across the stage with a college degree in his hands?” and maybe there is a six-year-old in the house. “How are you going to feel when your parents age and diminish and they can’t care for themselves anymore? What do you want to happen at that time? Well, you need to plan for that today.”

Private equity interested in financial advisory investments

The flow of private equity capital into the financial advisory business isn’t about to slow down anytime soon, according to a prominent PE executive.

“I absolutely do see more private equity investment in wealth management,” says Brad Armstrong of Lovell Minnick. “Private equity has seen success in similar industries like insurance brokerage, where you also have recurring revenue, scalable infrastructure, high margins and low capital expenditures.”

PE firms are particularly excited about the “consolidation opportunity” in wealth management, Armstrong told Financial Planning after a presentation at Investments Wealth Institute’s annual investment conference in New York.

He also expects valuations to remain high —easily into the double digits — as a multiple of EBITDA for firms with a true platform. “Wealth management valuations are as strong as they’ve ever been,” says Armstrong, a partner in Lovell Minnick’s Philadelphia office.

Favorable industry trends, including increasing personal wealth, an aging population cohort needing advice and the increased popularity of independent advice providers are also attracting strong private equity interest in RIAs, IBDs, TAMPs, service providers and fintech firms, according to Armstrong.

Robo advisors are lagging because there’s “not enough proof of concept in the business model,” he says. “Nor is there the presence of — or the near-term prospect of — positive cash flows sufficient to make it a suitable standalone private equity investment.”

By contrast, fintech firms are “breaking out of silos” and garnering more private equity interest, Armstrong says.

“The common theme seems to be disruption, but that shouldn’t be narrowly confined to a few pockets of the financial services industry,” he explains. “[Fintech] should be viewed more like a horizontal slice across financial services subsectors.”

Lovell Minnick’s financial service investments have included stakes in Mercer Advisors, HD Vest, First Allied, AssetMark and Kanaly Trust. Notable private equity investments in the past few years include KKR and Stone Point Capital’s stake in Focus Financial Partners, THL Partners’ shares in HighTower Advisors and Hellman Friedman taking a majority ownership in Edelman Financial Engines.

What are PE firms looking for in a financial advisory firm?

More than $3 billion in AUM, access to capital or a partner with capital and brand awareness, Armstrong says. PE firms also search for firms with scaled infrastructure, an ability to integrate and a track record of organic growth, acquisitions and being able to recruit high quality advisors.

Key factors for valuating an RIA or IBD include practice compatibility, client concentration and identifying key producers who aren’t owners, according to Armstrong.

Firm owners who sell should expect restrictive covenants that protect buyers from sellers setting up a competing business, Armstrong says. Because PE firms are buying cash flow, they are paying close attention to replacement costs for an owner who is responsible for bringing in — and retaining — business.

Owners shouldn’t underpay themselves on financial statements to boost a firm’s EBITDA in search of a higher multiple, Armstrong warns.

“It’s all about replacement costs,” he says. “If you’re only paying yourself $100,000 but it costs $600,000 to replace you, that’s $500,000 you have to add back.”

Charles Paikert

Financial planning in Pawleys Island: ‘Everything is on the table’

Property taxes on Pawleys Island? No way– that’s been the basic idea of paying for government for the coastal Georgetown County town since its incorporation more than two decades ago.

But now, things have changed markedly and an ad hoc Financial Planning Committee for the Town of Pawleys Island has decided that “Everything is on the table.”

During a Feb. 6 meeting in the new town hall, committee members learned more about the town’s budget process, sources of revenue and the costs of services for the town.

Town Administrator Ryan Fabbri reviewed the budget.

The primary source of income for the town has long been the local accommodations tax. People who rent beach houses pay the tax which is remitted to the state. The major portion is then sent back to the town.

Much of that money has gone to build up funds for beach renourishment, with a portion also helping to pay for the town’s operating expenses.

A multi-million-dollar beach renourishment project is expected to begin this coming November. The Town’s beach fund will help cover a significant portion of the cost of the overall project, with federal and state dollars paying a major portion of the project cost.

Until now, Fabbri noted, the town’s operating costs have been relatively low.

Donations for the new town hall paid for most of the cost of construction. Ongoing costs for utilities, maintenance, insurance and the like will be new costs.

Salaries for the Town’s police officers have gone up, though one full-time position is being changed to part-time.

While committee members considered various figures, they came to agree that a likely scenario for the future is that if nothing is done to raise revenue, Pawleys Island could face about a $100,000 to $150,000 annual shortfall in operating costs in coming years.

In addition, former Mayor Bill Otis said, beach renourishment in an expected nine years could be short by several million dollars.

Otis is among those who has said for his more than 20 years’ service on Town Council and as mayor that he didn’t want to hear any discussion of local property taxes for the Town of Pawleys Island.

Now, he said, it’s time to face the expected costs and find a way to cover them.

Revenue sources considered

With everything being on the table, committee members explored the idea of recommending a local property tax.

Otis said an across-the-board aggregate property tax of 13 percent would generate about $880,000 annually.

That is the amount of money it would take over nine years to meet the anticipated cost of the next beach renourishment project.

Other ideas discussed include some sort of assessment, though that would be difficult to enact.

An annual parking fee for residents, visitors, tradesmen and service workers and companies was also discussed. A comment made in that discussion was that homeowners would get a free pass, but renters would pay the fee.

A business license fee could be implemented, as well, committee members said. Possible ideas would include all houses that are rented, construction workers, tradesmen and service workers, similar to possible parking fee users.

Fabbri explained that current court fees and fines generate about $15,000 for the town.

That generated discussion, and Otis said, “To simplify, if you get a ticket for $100, the Town gets about $20.”

Other possible fees could include a broker’s fee, an insurance tax, and telecommunications tax. Those are excise taxes, Fabbri said. For many communities, the Municipal Association of South Carolina collects them, keeps a percentage and remits the rest to municipalities.

Co-chairs for the committee are Josh Ricker and Town Council member Sarah Zimmerman.

Ricker said, “I keep reiterating – an idea on the board is not an advocation. Let’s hear everything out, all the way through. We will find ways to make it work.”

As the 90-minute meeting wound down, Ricker said, “After the ideas, we’ll begin the vetting process. Our next step is simply, put some ideas, begin thinking about those.”

The committee’s next meeting will be in the new town hall conference room on Monday, Feb. 25 at 5 p.m. Members will work to list ideas, consider priorities and discuss how to recommend to council that the various ideas could be implemented.

Joan M. Light, financial planner and wife of former Buffalo News editor

May 4, 1929 – Feb. 12, 2019

Joan M. Light, a financial planner and wife of former editor and vice president of The Buffalo News Murray B. Light, died Tuesday in her home in Buffalo. She was 89.

The former Joan Marie Cottrell was born in Buffalo. She was a 1946 graduate of Amherst Central High School and attended the University of Buffalo and the Rochester Institute of Technology, where she studied marketing.

“Mom was somebody who was a very smart, sharp, witty person,” said her son, Jeff Light, who is publisher and editor of the San Diego Union-Tribune.

“And opinionated,” added her daughter, Laura Light Arbogast, for many years a medieval scholar at Harvard University, cataloging ancient manuscripts in the Houghton Library.

“She was very politically educated. Really, the whole household was. We were people who argued at the dinner table,” Light Arbogast said.

“I think she was known in many circles. At a time when women weren’t supposed to say what they thought, she was not overshadowed by my dad. She had her own opinions and she wasn’t intimidated by other people. She said she knew what she believed in and she was very happy to argue in a public way, though, politely. I mean, she was also a lady,” Light Arbogast added.

While she was willing to be outspoken, her children said their mother projected an air of elegance and being fashionable.

Mrs. Light met her future husband, Murray Light, not long after he came to Buffalo from Brooklyn in the late 1940s, according to Jeff Light.

Out on a blind date, they went bowling, he said. They were married in 1954.

Jeff Light said his mother started out as an accountant for a couple of small firms. In 1984, Mrs. Light – by then a certified financial planner – became a tax analyst for Sovran Self Storage, now Life Storage, a real estate investment trust in Williamsville. Previously, she had been a senior tax specialist with Main Hurdman accountants.

In 1987, Mrs. Light was promoted to vice president of operations and investor relations for the firm. She retired in 1996.

In 1986, she was elected president of the Western New York Chapter of the International Association for Financial Planning.

She was a Buffalo Club member and served on the board of the American Red Cross Western New York Chapter.

“She was a very good golfer. She belonged for years to the Wanakah Country Club in Hamburg,” said Jeff Light. “She also was a really good bridge player.”

Her husband, who rose through the ranks at The News as swing editor, assistant makeup editor, assistant news editor, news editor and managing editor for news, was promoted to editor in 1979, a post he held until he retired in 1999. He died in 2011.

Another daughter, Lee Light Monier, a supervising nurse for blood collection for the American Red Cross, died in 2003.

Survivors, in addition to her son and daughter, include six grandchildren and three great-grandchildren.

A memorial Mass will be offered at 9:30 a.m. Feb. 16 in St. Anthony of Padua Catholic Church, 160 Court St.

Financial Planning 101: Safeguard Your Biggest Asset

Photocredit: GettyGetty

Many of my clients initially come to my office to talk about investments, budgeting, college savings, retirement planning, risk management and other topics related to financial planning.

Conversations typically run the gamut of issues related to financial confusion due to hearing unfamiliar jargon from an industry that thrives on the allure of wealth and success.

When it comes to obtaining financial security, too many people ignore their biggest asset: their career.

Yup, it’s your biggest asset in most cases. After all, it is the source of your income that pays the bills, provides you with cash flow, and gives you the ability to make important financial decisions. This all hinges on your job.

Yet when engaging in a conversation about their financial life, all too many people choose to discuss topics like asset allocation, risk management parameters, estate planning considerations and potential college costs.

But rarely is there a focused conversation about the root of such a great risk.

Recently, I had the following discussion with a new client, I’ll call him Tom (not his real name).

Me: “What are some of the big risks to your financial stability?”

Tom: “Well, certainly I know that if I die or become disabled at an early age, my family could be in serious jeopardy. But, as we discussed, I do have life insurance and my company disability plan.”

Me: “Yes, you do have life insurance that pretty much covers your needs, right now. The disability policy is a group long-term disability policy that requires Total Disability in order to qualify. It’s not great. Perhaps we should be investigating your ability to procure individual coverage. What other risks do you see?”

Tom: “I have health coverage and my property and car are adequately covered. I am fairly comfortable with market risk, so I don’t see that as a big risk. Am I missing anything?”

Me: “Tell me about your job, Tom. I know you work for a Fortune 500 company, with lots of benefits. But what about your particular industry? Are jobs going overseas? Are business units being eliminated? Are you hearing, reading or suspecting anything that might indicate that there are changes on the horizon?”

Tom stared at the surface of the table, searching for an answer. He took a breath and looked up.

Tom: “I know there’s no such thing as ‘job security’.” He made air quotes around ‘job security’. He continued. “One of our companies was sold and another unit on the West Coast has been cut in half. I guess I’ve been so busy working, taking care of my family and all the other things that absorb my time that I haven’t really thought about it.”

Me: “It’s completely understandable. Most people don’t take or have the time to look beyond their busy lives. So, consider taking a career inventory and focus on it. After all, without a job, your financial plan is not very meaningful.”

Tom: “Can you offer some idea on where to start?”

The areas that I suggested Tom investigate are as follows:

1. Know your industry. What changes are occurring and how sensitive is it to such issues as interest rates, unemployment statistics, foreign currency, technological changes, stock market changes, etc.? In other words, understand what’s going on, who the players are in your industry and the industry forecasts.

2. Know your skills sets. You might have had hot shot skills seven years ago, but have you kept up? Do you need to invest time and resources to sharpen skills, knowledge, and abilities?

3. Try and get insight as to what skills will set you apart. You might need to learn a language or emerging technology. Whatever you need to do to ensure your value, go after it with full commitment.

4. What are your company’s competitors doing? Who are the new players in town?

5. Are you building your network? You should never get too comfortable and stop meeting others and creating relationships that might lead to mutual benefit.

Certain aspects of your financial life can be put on autopilot, such as contributing to your company 401(k), automatic investment plans, auto-bill pay and choosing inflation protection for your risk management where appropriate. But this aspect of your financial life cannot be a “set it and forget it” mode. It needs your thoughts, attention, action and continuous monitoring and focus. After all, it represents your biggest asset.

LPL Financial recruits advisors from Cetera, Wells Fargo

When advisor E. Martin von Känel left LPL Financial, he felt it had lost its way. Now, roughly a decade later, welcome cultural changes have lead him back to the No. 1 independent broker-dealer, he says.

Von Känel of Patriot Wealth Management decided to look for a new IBD after several shifts in ownership at Cetera Financial Group, the parent of Summit Brokerage Services, he says. He left Summit for LPL, which he says is treating advisors like clients again.

The firm aims to convince more advisors that its resources and more personalized approach can best support them. Three newly unveiled teams bringing six advisors with $575 million in combined client assets amid record recruiting in 2018 show that some are buying into the vision.

Patriot Wealth Management, LPL Financial

From left to right, Carly Shafik, advisor E. Martin von Känel, Elizabeth Martinez and Director of Operations Monica Herrera make up Torrance, California-based Patriot Wealth Management. “Without them, I would not be here,” von Känel says of his team.

As evidence of the better approach, von Känel brings up the fact that Head of Business Development Rich Steinmeier greeted his team and “had a very genuine conversation” with them on their visit to LPL’s San Diego office in August. Steinmeier had only joined the firm roughly a week earlier.

Von Känel and Torrance, California-based Patriot — which manages $120 million in client assets and also includes Director of Operations Monica Herrera and staff members Elizabeth Martinez and Carly Shafik — joined the firm on Oct. 30, according to FINRA BrokerCheck. Patriot spent nine years with Summit.

Von Känel describes Summit as a “wonderful boutique firm” he joined after looking for a firm “that would allow me to be recognized and have a voice” the year before two private equity firms took LPL public in 2010. LPL “had outgrown its ability” to serve its fast-expanding headcount of advisors, he says.

The 14-year LPL veteran enjoyed a close relationship with the executive team after coming to the firm when it had only about 1,000 advisors, compared to more than 16,000 today. Von Känel felt treated like a number by LPL in the past, but he began to hear from advisors who stayed with the firm, he says.

“They said, ‘Martin, you know, you should reconsider LPL because there have been changes,’” von Känel says, mentioning LPL’s transition team as helpful in the movement of the practice’s assets. “I do see it, I do feel it. They are genuine about helping us out.”

New day at LPL? 20 advisors describe changes under Dan Arnold

Tobias Salinger | Lists

In his first interview since leaving his chief digital officer role at UBS Wealth Management USA to replace the retiring Bill Morrissey, Steinmeier laid out how his team of 130 recruiters, field staff and transitional employees is using technology and services to woo advisors in an increasingly competitive space.

LPL has learned it “can never move away from the advisor,” Steinmeier says, referencing CEO Dan Arnold’s repeated calls for transformation of its culture. Identifying organic growth as the firm’s main metric of focus, Steinmeier sees no conflict in the publicly-traded firm’s need to satisfy investors and advisors.

“If we don’t provide the personalized service to where advisors are advocates for our firm, we will never hit those growth numbers,” Steinmeier says. “It is all we talk about. If we cannot be the best firm for advisors to join, it is irrelevant what those discussions are with the analysts.”

Steinmeier’s new approach is winning converts: In the past three weeks alone, LPL has announced Patriot and two other major teams coming to the firm from competitors.

LPL recruited assets

Karl Preheim’s Team Preheim Advisory — which is based in Fresno, California and has $105 million in client assets — left Wells Fargo for LPL in December, BrokerCheck shows.

Michael McCarthy, Andrew Pincus, Gregg Gottlieb and Fred DaVeiga of Regal Wealth Advisors also joined LPL from Kestra in early January. The practice’s offices in New Jersey, South Carolina and Florida manage some $350 million in client assets.

“After looking at the integrated platform, concierge level of support and client-facing capabilities that LPL Financial provides, it was a simple choice,” McCarthy said in a statement. “We believe that LPL can help us meet the demands of our growing firm and help us take our firm to the next level.”

A spokeswoman for Wells Fargo declined to comment on Preheim’s exit, and representatives for Kestra didn’t respond to requests for comment on Regal’s departure. Cetera spokesman Sean Mogle issued an emailed statement on Patriot’s decision to go.

“In today’s marketplace, it’s critical that advisors find a partner that is best suited to their needs,” Mogle said. “We certainly wish them continued success in their new circumstances.”

Incoming recruits with $8.6 billion in client assets came to LPL (or made the decision to do so) in the fourth quarter, Arnold said in prepared remarks on the firm’s earnings call. LPL set a record in 2018 with a total haul of $27.3 billion in recruited assets. Its headcount increased 6% to 16,109 advisors.

A sequential loss of a net 65 advisors from the previous quarter resulted from a major employer-plan focused network’s departure, exits by hybrid RIA practices and moves by low producers, according to the firm. LPL’s acquisition of the assets of National Planning Holdings brought some 1,850 advisors, though.

Rich Steinmeier is head of business development at LPL Financial.

Both the NPH deal and organic growth of $5.9 billion in net new assets in the fourth quarter pushed up client holdings 2% to $628 billion, despite fourth-quarter volatility in equities. Advisory inflows, which were $5 billion, are growing by an annualized rate of 6.5%, and total inflows are increasing by 3.5%, annualized.

Steinmeier’s team is “bullish” on organic growth, which LPL sees as a measure of the “core health” of its business, he says. Noting the firm’s employees spent 33,000 collective hours at advisors’ offices in 2018, Steinmeier says about 10% of the recruited assets came from advisors referred by their peers.

Capabilities including a newly launched goals-based planning tool, enhancements to the firm’s long-developing ClientWorks platform and proposal generation resources from the $28 million acquisition of AdvisoryWorld in December are making a difference, Steinmeier says. IBDs with 500 representatives typically generate about $100 million annually, he says.

“We spend more than that on technology every single year,” he says.

“With a changing regulatory environment and more complex needs and higher demands from end investors, it’s hard for firms to compete against us,” Steinmeier continues. “If we’re willing to be humble and disciplined and deliver, I think you see those things coming together at a time when, as advisors are demanding more, we’re stepping up with more.”

Tobias Salinger

Pitfalls for breakaways when picking their first independent office

As more financial advisors strike out on their own to build an independent practice, they can easily overlook a big part of the move: finding the right office space.

Pamela Stross is CEO of the consulting firm TruClarity.

The process is challenging for any new business, but for financial advisors leaving larger firms, there are unique issues that need to be carefully considered. Finding an office that fits their day-to-day physical needs is only half the battle.

Here are three ways emancipating financial advisors can avoid common pitfalls that crop up when seeking new office space as part of a transition plan.

First, don’t breach your duty of loyalty or any confidentiality clauses with your current firm.

If an advisor has a client in the areas of commercial real estate business, office furniture, interior decorating, it may feel completely natural for the advisor to ask for help locating in creating their new office space. Unfortunately, this kind of disclosure their intentions may very likely violate the advisor’s duty to his or her employer.

Advisors must not inform clients of any plans to move. If they do, not only will they breach a confidentiality owed to their current firm, but it can mean that their firm inadvertently discovers their plans to leave. If a firm can argue that the advisor has been disloyal while actively employed, this can open the door to a number of potential legal headaches and liabilities.

Advisors are obligated to work solely for their employers. They breach this loyalty when they spend work hours preparing for their move. That could include looking for real estate, watching new software demos and working with lawyers to iron out the details of a move.

Using a third party experienced in supporting advisors through the transition to independence, including the search for office space, can help them maintain integrity in their move. This support can include helping them find the right location, negotiating the lease terms and overseeing buildout of that space, including the selection of furnishings and artwork.

Second, select office space with attention to detail: The office where a financial advisor chooses to launch a practice can play a vital role in their long term future success. Location is very personal to the advisor and their clients. Other factors including size, layout, interior design and accessibility all matter.

At the outset, deciding how much space your practice will need along with a preferred location are the most important physical factors to consider. A team comprised of two advisors and one support person generally needs approximately 1,500 square feet. Each additional advisor would require an additional 150 to 250 of square feet, while an extra a support person would add 100 to 150 of square feet.

It is likely a landlord will require a five-year lease term — normally due to any buildout considerations. Three-year leases are out there, but not as common, so advisors need to plan carefully for their growth. In other words, the right space needs to accommodate a firm’s growth over potentially the next five years.

Lease rates throughout the country can range from $30 to $80 per square foot in a major metropolitan market. So if you anticipate needing more space down the line, keep in mind that for every 250 square feet you add, you would be paying another $7,500 a year, at a minimum.

Projecting space needs over a five year look ahead can be daunting, but this is where working with a third party skilled in this area is extremely valuable. All may not be lost. Whether it is having the ability to sub-lease if an advisor over estimated or having a first right of refusal on additional space they under estimated, there are possible solutions that can be taken in to consideration.

What an advisor does NOT want to have happen is to be hunting down new office space sooner than expected. This could mean incurring the cost of professional movers, downtime for the team as they relocate and the cost of updating regulatory filings and all printed material to reflect the new address.

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Third, choose the right interior design.

Finally, interior layout is crucial. The look, feel and design of an office defines the brand of the practice. With that said, I’ve seen too many breakaways try to recreate a traditional Wall Street design in their new workspaces, mistakenly assuming this is the right way to create an image of legitimacy.

Instead, we recommend that advisors create a welcoming environment that reflects their brand, culture and the personalities of their team. In other instances, it makes sense to capture the essence of the community in which you are based.

For example, one team of advisors in Fort Lauderdale wanted a very South Florida look and feel, so they opted not to buy dark banking-style furniture. Given that they are great supporters of the local arts, they decided to showcase various artists in their community and rotate their art collections regularly.

Another team we have worked with in Florida is more conservative. As a result, they went with a traditional look, with a personal twist. One of the advisors repurposed the furnishings her father had custom made for his medical practice for use in her own business.

Overall, the space you select should be a statement about who you are as a firm. The preparatory work you do to find the right size and price space should make the most of your abilities as a planner. Lastly, the look and feel of the interior should make your clients feel comfortable. The care you take in establishing your new independent workspace offers an opportunity to set your new practice on the right path.

Pamela Stross

National Survey Reveals Retirees in Relationships Have Fewer Financial Planning Regrets

NEW YORK–(BUSINESS WIRE)–In some good news for lovebirds this Valentine’s Day, new data from Global
Atlantic Financial Group
’s Retirement Spending Study shows that
retirees who are married or living with a significant other have fewer
financial regrets than those who are single.

While two out of three single retirees (64%) report having retirement
planning regrets, fewer than half of retirees in relationships (49%) do.
Nearly half (45%) of single retirees regret that they did not save
enough money (compared to 30% of those in relationships). Nearly three
in ten retired singles (28%) regret relying too much on Social Security
(compared to 15% of those in relationships).

“The findings may speak to the human tendency to want to plan better
when the wellbeing of a loved one is involved,” said Paula Nelson,
President, Retirement at Global Atlantic. “Regardless of relationship
status, individuals who are saving for retirement would benefit from
working closely with financial advisors to assess their retirement
income needs and consider different strategies for generating that

One differentiating factor is that retirees in relationships appear to
have more diverse income streams than single retirees. One in four (24%)
retirees who is married or cohabiting reports having an annuity,
compared to only 15% of single retirees. Those who are married or
cohabiting are also more likely to collect income from pension plans
(50% vs. 34%); 401(k)s or other defined contribution plans (33% vs.
17%); investment portfolios (39% vs. 19%); and savings accounts (58% vs.

Perhaps reflecting the benefits of diverse income streams, the survey
found that retirees in relationships are more likely to maintain their
lifestyles, with fewer cut backs on discretionary expenses during
retirement, such as:

  • Restaurants and entertainment (39% vs. 56%)
  • Travel and vacations (33% vs. 43%)
  • Charitable giving (23% vs. 28%); and
  • Housing (14% vs. 33%).

“While those in relationships may have some financial advantages, single
people can absolutely thrive in retirement,” Nelson added. “They can
mitigate the risk of facing financial regrets by diversifying their
income streams. For example, they may consider annuities to add
protected income streams that they can collect for the rest of their

To view more data, insights and interactive graphics from the Global
Atlantic Retirement Spending Study: Perception vs. Reality, including
data referenced in this press release, please click


The Global Atlantic retirement study was completed online among a random
sample of the general U.S. population aged 40 and older, including an
oversample of 10 of the most populous states: California, Texas,
Florida, New York, Illinois, Pennsylvania, Ohio, Georgia, Michigan, and
New Jersey. North Carolina was included in the national sample but not
oversampled due to effects of Hurricane Florence on the state.

A total of 4,223 consumers participated, equally representing retirees
and individuals not retired. Fieldwork was led by independent global
market analytics firm Echo Research between September 12 and 24, 2018.
The margin of error when reporting on the total sample of retirees and
individuals not retired is +/- 2.1 percent at the 95 percent confidence

About Global Atlantic

Global Atlantic Financial Group, through its subsidiaries, offers a
broad range of retirement, life and reinsurance products designed to
help our customers address financial challenges with confidence. A
variety of options help Americans customize a strategy to fulfill their
protection, accumulation, income, wealth transfer and end-of-life needs.
In addition, Global Atlantic offers custom solutions and responsive
service for the capital, risk and legacy-business management of life and
annuity insurance companies around the world.

Global Atlantic was founded at Goldman Sachs in 2004 and separated as an
independent company in 2013. Its success is driven by a unique heritage
that combines deep product and distribution knowledge with insightful
investment and risk management capabilities, alongside a strong
financial foundation of $75 billion in assets, as of September 20, 2018.

Global Atlantic Financial Group (Global Atlantic) is the marketing name
for Global Atlantic Financial Group Limited and its subsidiaries,
including Forethought Life Insurance Company and Accordia Life and
Annuity Company. Each subsidiary is responsible for its own financial
and contractual obligations.

Variable annuities are sold by prospectus. The prospectus contains
investment objectives, risks, fees, charges, expenses, and other
information regarding the variable annuity contract and the underlying
investments, which should be considered carefully before investing
money. You can obtain a prospectus from your financial advisor or by

Annuities are issued by Forethought Life Insurance Company, 10 West
Market Street, Suite 2300, Indianapolis, Indiana. Variable annuities are
underwritten and distributed by Global Atlantic Distributors, LLC.


The need for a new retirement plan

Our daily roundup of retirement news your clients may be thinking about.

Forget the 401(k). Let’s invent a new retirement plan
Lawmakers and policymakers should make retirement savings plans universally available if they want to help Americans secure their golden years, according to this article on The Wall Street Journal. Converting retirement savings into regular income should also be made easier for seniors, more products should be offered to make retirement income last beyond the age of 65, and retirement savings plans should be made portable, according to the article.. Employers should also be allowed to establish rainy-day savings plan for their employees to prevent workers from tapping their retirement funds.

Many tax deductions are likely to disappear once Congress passes the tax reform bill into law.

Bloomberg News

Tap an IRA tax-free with an HSA rollover
Clients who want to cover their medical expenses using retirement money have the option of doing a one-time rollover of tax-deferred assets from a traditional IRA to a health savings account, according to this article from Kiplinger. The fund transfer will be tax-free if the funds are used for qualified expenses and allowed if their high-deductible health plan is in effect. Clients with single insurance coverage can move as much as $3,500 from an IRA to an HSA this year, while those with family coverage can roll over up to $7,000, with an extra $1,000 for workers aged 55 and older.

Why paid family leave is about more than taking care of babies
Giving paid family leave to workers will not only allow female employees to take care of their loved ones; it will also help them achieve retirement security, writes an expert on MarketWatch. Most women are compelled to leave the workforce temporarily or permanently to look after their babies and family members, usually at a time they start building a career, writes the expert, citing a director of income security at the National women’s Law Center. “Such a move could cut their potential earnings growth drastically.”

3 ways to destroy your retirement without realizing it
Not making an accurate estimate of expenses is one of the mistakes that clients should avoid to live comfortably in the golden years, according to this article on personal finance website Motley Fool. Clients should also determine how much income they can derive from their retirement portfolio after deducting taxes and other costs. Another mistake that many seniors make is deciding on when to claim their Social Security benefits without considering their financial circumstances.

Lee Conrad