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Are you dealing with a fiduciary, someone you trust?
Aging Issues Radio is the station that will help you age into and through retirement. We bring advice and education on all of the issues that we face as we get older, offering financial and life strategies. Hope you enjoy the subject matter and our down-to-earth and simple solutions to the problems we all eventually face. While the issues are not unique, the solutions are for you.
You are listening to Aging Issues Radio and Joe Soricelli. This is the station that will help you age into and through time. We bring advice and education on all of the issues that we face as we get older, offering financial and life strategies. Hope you enjoy the subject matter and our down-to-earth and simple solutions to the problems we all eventually face. While the issues are not unique, the solutions are for you.
The goal today is to talk about what's bothering you. And what are some of the best practices to maybe make that a little bit less stressful. I don't care what anybody says; the market is driving everybody nuts, the stock market. Everybody's worried. There's stress. Well, the goal at Aging Issues Management and the goal for all of you is to try to take that stress level down if you can, utilizing best practices. And that's all we're going to talk about. I'm not going to make any market predictions. I'm not going to talk about anything like that. That's a one-on-one situation. But in this forum, if everybody just says, "I do that...oh, I didn't think about doing that..." THAT'S what this 15 minutes is going to be about.
First question in first best practice: Anybody understand the word fiduciary? You know where it comes from, don't you? The Latin word fiducia. And all that fiducia means is trust. I give continuing ed to attorneys, to trustees, to all sorts of people about this simple phrase--that you are a fiduciary. So if you're dealing with somebody, especially on financial issues and on legal issues, make sure they recognize that they are a fiduciary, that you trust them, they're in a position of inherent trust. And if they are in that position, the government has adapted laws that say everything always has to be in YOUR best interest. That's the key from a financial planning or financial perspective.
There were laws enacted about 8-10 years ago that were called the "Best Interest" laws. They spun off of a couple of other things which we're going to show you that, if you're dealing with an advisor, you have to understand they have your best interest, they recognize themselves as a fiduciary, which is always important. But then there's a second stage of that. Right? It's called the Customer Relationship Summary. If you or your advisor talks to you about anything to deal with your finances, and especially if there is a recommendation attached to it, not just a review--if they come back and hand you: here's your portfolio review or anything else, great. But if they sit back and say that you should maybe make some changes, they need to deliver what they call a Customer Relationship Summary. And all this summary does and it's based upon the law--this is mine, my financial services company is LPL Financial, that's my broker deal. It's JP Morgan, it's the equivalent of any of those. But there's a specified form that they have required that they filed with the SEC and the NESD to say we're explaining what's going on.
Now what's in it? It's the services that they're offering and how they get paid. Have you ever realized that? Everyone wonders. "Oh, it's free." Anybody know much that's free in this world? No. So these are best practices. Make sure the person you're dealing with is a fiduciary. Make sure he hands you--if it's a financial issue--they hand you what they call the CRS. It's going to look something like this. But it's going to be usually one or two pages, three pages, and it's going to list services and all. But that's so important because if they charging you for something, you should know what they're charging you for. Next slide.
What worries you? All right, as I said, I'm not going to focus on any of this. But everybody is aware that the stock market is going up/down and you turn on the radio and so-and-so predicts we're gonna go into a recession, so-and-so predicts we're done with it, so-and-so predicts that...I'm not going to talk to you about the future. I am going to talk to you about something that I call the best practices to alleviate the stress that we talked about with this. Next slide.
The next thing...everything's costing more, the only thing that's gone down recently, but it costs more, is gas. Although it's gone back up, and everybody's noticed that. I paid $3.39; now I'm paying $3.69. I can't tell you what gas is going be. I can tell you there are issues internationally with energy. And they're now becoming political issues, which I hate when things get politicized. But it's just the way it is. So what do we have? We have a stock market that's like a roller coaster, we have inflation that's significantly higher than it was last year, so everything's costing more. So how do you overcome these two major objectives? Next slide.
What is the yield? Worry. Worry. If I look around the room right now, I can't see...a lot of people have masks, a lot of people will put their hands up just like this and say, "I don't know what to do." Well, swing back to the first slide, find a trusted advisor. It doesn't have to be one, it doesn't have to be two...just find a person that you trust, that you will take advice from. And if they tell you they know everything, they usually don't. So go to a second person. Next slide.
All right. I talked about the roller coaster. Does anybody in this room know what is known as a risk tolerance? It goes back to-- Great! That's the key: What is your individual risk tolerance? Because while stocks are down, and maybe you should make some changes, but if your risk tolerance says you have a time horizon of 5-10 years, or in this room, maybe you're investing for the next generation, maybe you should own certain growth stocks, which have higher risks. But if you are constantly like this, and worrying and worrying about anything else, well, guess what? Your risk tolerance is all the way down here in the 20s, and 30s. There are investments that match it. Now you sit back and ask to somebody, whether it be your advisor or anyone else, does your portfolio where you have your money match your risk tolerance? Because if it doesn't, you've got a problem. You've got a problem, because all that's going to happen is you're going to be rubbing your face more and more and more, because if you had a growth portfolio and it's going down, you're worried about it. Next slide.
Let's talk about inflation. Everybody here should have some form of a financial plan, some form of a financial plan. And what I mean by that: It could be simply a monthly budget. Big, big, best practice. So far, best practices: Know your risk profile and know if your portfolio matches it; that's a best practice. Second piece: Have a budget. Have a budget. Because as things get more expensive--and they are--you need to understand the money coming in, and the money going out. And if the money going out is much higher than the money coming in. It's not bad if it's short-term. But if it's long-term, then in quotes, we all sometimes again, "worry," worry about running out of money.
You see, one of the things that I talk about is financial and life strategies. A life strategy may be: "I want to go on vacation, I want to go travel the world." Well, anybody think there might be some financial ramifications to doing that? A life strategy may be: "I want to gift my kids enough money to buy a house." Well, guess what? It could affect your retirement or your life. So there are these financial and life strategies that are merged, but it if you do analysis, if you invest appropriately, and you have a budget, you start to have two major pieces of a financial plan. Next slide.
When you have a financial plan, it's relatively easy to do projections. We have an idea of what your investment portfolio should return--lately it's negative--but should return in the long term, right? And we have what your expenses are going to be. So any decent financial planner or advisor or fiduciary should be able to produce some form of projection.
I took out a slide in between this. And this is the next major issue. But I took out a slide--on my table outside you'll see a thing called a "snapshot." This goes with the financial planning piece, because I only have the 15 minutes, I don't see my flags coming up anywhere yet, which is good. But with a financial plan, you can get usually a snapshot that's simply going to summarize your assets, summarize your liabilities, give you a projection of where your assets should be, give you a projection of where the expenses should be, and then give you a probability of success.
The only thing I tell every client of mine is--they say: "Oh, wait a minute, in 2035, I'm only going to have this." I tell them with 100% certainty that the numbers will be different. They could be better; they could be worse. So you don't look at a financial plan every 10 years. He should have updates. Most good software with good fiduciaries, good planners give you access. You could look at it every day. I don't recommend it, but you could look at it every day if you wanted to. Next slide.
And you'll see with most planners and most people, that probability of success has what they call "standard deviation." It's very simply: here's the line with the assumption. Here's one--if it moves one time this way or two times this way, it gives you an idea. But what it sometimes, and I'm not going to tell you it does it all the time, just many, many, many times--I do this sort of analysis for a person and unfortunately, it becomes an issue that they're going to run out of money. So, they have to make changes. And this is one of those changes.
I had a conversation with somebody earlier, that this is the decision they're making. Should I stay or should I go? I keep it relatively simple. I've been doing this, for close to 40 years, I have refined it, I've been working within this community for 20-plus years; I was one of the founders of the Senior Law Day Committee, back in the late 90s. But in this community, this becomes a major decision. And there's multiple parts of this decision. One is the financial part. One is the quality of life part. And what I mean by the quality of life part is: "I want to age in place; I want to stay in my house." So over the years, I have developed other parts and I have made affiliations with organizations, like you'll see One-on-One Mobility because you know something? You can get creative and make your house a safe environment. But that last word that I just said, "safe environment" (two words), but more importantly, "safe." Where you live has to be safe. I'm not talking about the neighborhood. I'm talking about simply getting in the house getting around the house, and whether or not you are by yourself. Because in this room, I can promise you, there are two or three people that know somebody that fell in their house and didn't get found for hours, if not days. That's a different piece of the puzzle. So we talk about creating a safe environment.
We then talk about how do you--once you've created that safe environment--how do you add to it? And one thing that comes up, guess what? These strategies, they cost money. And when you work with planners, elder law planners, sometimes you can figure out how to get somebody else to pay parts of the bills, maybe not all the bills, but parts of the bills. Right. And what I mean by that is sometimes there are programs, government programs that you can eventually qualify or qualify currently that will help you pay. But I go back to that plan, the financial plan. If I have to spend--I'm using simple numbers--I spent $3,000 a month on my house. My house is worth $500,000. I can invest my money at...right now, you can go to T-bills, get 4-5%. So, $500,000 will generate $25,000 of income...and there's my sign by the way, that's what I was waiting for. $25,000 of income, and if I dip into the principle, maybe the money will last by a projection 15 or 20 years. If I'm 85 years old, I've got to make it to 100.
Personal experience: The way I got into this business was my mother needed care in her late 60s, early 70s. We arranged it to be at home, she eventually was in a nursing home because we had to provided it. She passed away at 82. My father lived to 99. He had great quality of care, because we did a lot of planning. Next slide.
When you talk about the home, there's all sorts of financial issues: Did you transfer the home to the kids? There are so many different...bottom line is implications. And then: Is it the right choice? One thing I tell everybody: If you are going to think, think about selling your house and moving, know where you're going. Know where you're going. That's priority, no disruption of life. I have a client right now, everybody says, "Oh, you didn't do simultaneous closings?" Hell no. We took two months to move out of one location to another location. Stres! Bring it down. Next question.
Trusted contact person: Again, I can always talk from financial services. So important to have that on every account that you have, whether it's at the bank, wherever. A trusted contact. There are other pieces that the next speakers will talk about, but this is just to simply say, "Hey, nobody can get in touch with you." There's a trusted contact.
The other thing which is coming up more and more now: Unfortunately, people pass away with accounts only in their names. Only in their names. That's gonna get tied up for a while and guess what? If you owned Peloton stock (and I'm going to use it because I physically owned it), if you owned Peloton stock when it was trading at $70, it's now trading at 70 cents. A broker, if they know you have passed away, legally can not trade the account. So those equities, wherever they may be in a brokerage account, if it's in a down market, just keep going down. So two answers. All right, I've gotten the yellow; I've got one more. Okay. So, trusted contact and look at who owns your account and how it's titled. Next question. Next slide.
Simple! Have a plan. Because everybody knows this phrase, right? Remember? "Those that fail to plan, plan to fail?" Hey, I did it exactly on time. If you have questions, if you just want to get a second opinion, stop by the desk because that's the key. This is 100% volunteer and for your benefits to answer the questions for you. But best practices: Deal with a fiduciary. Know your risk tolerance, right? Have a financial plan or a budget of some sort. And as I said, there's all levels of financial planning but just simply a budget is the first level. Right? And then understand your housing options. That's it for me. Thank you so much for your time.
You been listening to Aging Issues Radio and Joe Soricelli. This podcast has been for informational and educational purposes. It is not to be construed as financial or legal advice specific to your circumstances. If you need help with any matter, be sure to consult with an advisor regarding your specific needs. Thank you and tune in again.