Briggs A. Matsko, CFP
Tuesday, March 2, 2010

A recent article featured on MSN Money discussed the startling fact that as the first Baby Boomers begin to enter retirement, a great number of those 50 and older haven’t begun to save for this stage of life. As financial advisors, helping Boomers develop a strategy is of the utmost importance.

However, there are Boomers who have saved.  While we have historically focused on the accumulation, protection and transfer of wealth, a new dimension of planning has evolved: the distribution and enjoyment of wealth!

On Wednesday, March 31, (1:00 p.m. EST/noon CST/10:00 a.m. PST) I will present the next MDRT Web seminar, focusing on income distribution.  I will address the economic and life planning events that Boomers (and their advisors) face, as well as how to use my "EASE" process – Engage, Analyze, Solutions, Evaluate – to build a retirement distribution practice. The interactive presentation will focus on a process-driven approach to engage the client, perform analysis, propose solutions and provide ongoing evaluations.

Register today to attend the event right from your computer!  Participate in the conversation during a 15-minute Q&A session moderated by 30-year MDRT member and nominee to the MDRT Executive Committee Michelle L. Hoesly, CLU, ChFC. Ask questions during the live event, or submit them in advance during registration. 

Don’t miss it!

MDRT President Guy E. Baker, CLU, MSFS
Tuesday, February 16, 2010

Most attorneys readily admit a very low percentage of estate plans are actually implemented. I have been told the implementation rate by some of the very best attorneys is only 10-15 percent. Why? If a family goes to the trouble of giving all their information to their attorney required to draft documents, only then to refuse to sign them, something went terribly wrong. What was it?

Consider this – if a client spends hours gathering data so the advisor can formulate a plan to reduce their estate taxes, distribute their family heirlooms and maintain their family’s lifestyle, why then would they not pull the trigger and execute? Most often the reason is uncertainty and fear. The client has no confidence in the proposed plan and has concluded doing nothing is preferable.

This point was confirmed for me when I had the opportunity to discuss planning with a prominent client, a noted business psychologist. He asked me why I thought my team could deliver a plan, when five other teams had failed. I pointed out with the traditional method, a plan is given to him to approve. This plan is designed based on the information he provided.  My client agreed this was exactly how the other teams had worked.

So, what went wrong? He told me the other teams asked him to evaluate and decide if they were right.  Yet, he had no ability or basis for making a determination of that magnitude. “Bingo,” I said. “That is why it failed.”  Then I showed him our method. We gather all the facts and then collaborate with his most trusted team of advisors to come up with the best solution. What we present is the best thinking of the entire team, based on his circumstances.

When the final design is presented, it is not based on the question, “will it work?” but rather, “why it works”. There is a big difference here. My prominent client hired us immediately and we completed the plan.  

Fact-finders fail because we ask the wrong questions and the client often gives the wrong answers. Focus on collaboration. Provide a finished product that fits the client’s objectives and you will increase your results dramatically.

Are you using collaboration as a planning tool with your clients?  

Thomas J. Henske, CFP, ChFC
Tuesday, February 2, 2010

Step 4: The Plan - Drive the Values

In our third installment to this five part series, Step 3: Open for Business, we discussed the importance of knowing prospects before they become clients.  Conducting a two-way interview will reveal what is important to them, while allowing them to feel more comfortable with you.  This will also help you determine if they are a good fit for your firm.

Next, you must figure out your clients’ personal values about money and their life goals.  To do so, have them create a Personal Money Constitution - similar to a corporate mission statement - to serve as the basis for all planning decisions.  This document will significantly increase the likelihood that you will be bale to help them achieve their hopes, dreams and goals.  Once it is created, you can strategize with your clients by using the following four categories to balance competing priorities:

§               Save

§               Invest

§               Spend

§               Donate

Wealth management should be a process that offers your clients a different experience - one that is personal, exclusive and driven by results.  This unique method will differentiate you from other professionals and provide a competitive advantage.

MDRT President Guy E. Baker, CLU, MSFS
Tuesday, January 19, 2010

In a recent Blog post I discussed the supermarket approach to markets.  To remind you, I suggested most nutritionists tell us we need a balanced diet to be healthy and supermarkets provide submarkets of the basic food groups – protein, carbohydrates and fats.  The stock market does the same thing, only they are called asset classes – large cap and small cap, value and growth.  How you combine these sub markets is the basis for efficient and inefficient diversification.

These two kinds of diversification – efficient and inefficient diversification are the foundation for developing a healthy portfolio.  You might be asking yourself, “What is inefficient diversification?”  Simply put, your portfolio is either diversified or it is not.  However, that is not really correct.  With a little research, it is easy to see there are many different kinds of mutual funds all fishing in the same markets, looking for good investment opportunities, so they can bring value to their investors.  Active management drives these funds to select stocks based on their short term outlook and in many cases results in high turnover.  High turnover then means hidden higher trading costs.  Most importantly, since the analysts are all looking for the best stocks to hold in their portfolio, it is easy to end up with eight or ten funds with similar holdings.

Efficient diversification focuses on owning distinct asset classes that do not overlap in stocks.  Why?  Statistical analysis shows submarkets do not necessarily perform with the same characteristics.  These asset classifications (small, large, value, growth) have different characteristics and perform differently over time.  This is measured by what is called correlation coefficients.  If the CEs are negative, then the asset classes will act as counter balances to each other during economic cycles.  If they are all positive, there is no real diversification.  They are all moving the same direction at the same time, which will cause the diversification to be less efficient.

When you are helping clients manage money, it is important to have a philosophy and a way to execute your philosophy.  There is more to managing money than buying a diversified portfolio of mutual funds.  You must make sure the funds are equally and adequately diversified and don’t cause unexplained risk for your client.  Knowing the correlation coefficients of the asset classes is integral to building an efficiently diversified portfolio.

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