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Linnard Financial Management & Planning, Inc.
Fee-Only Financial Planning and Investment Advisor
More and more people are restricted from receiving professional investment advice. At one time, years ago, an individual's investments typically consisted of stocks and bonds to build and maintain wealth. Often the investor was advised by a stock broker or investment advisor. Retirement was secured by company defined-benefit pension plans. Today's savings and retirement landscape is different. Employer sponsored 401(k) and 403(b) plans have replaced the pension plans. Employees use the tax-deferred nature of these plans for the bulk of their long-term saving. Some also buy variable annuities for a similar tax-deferral.
Employer plans and annuities usually have a restricted menu of investment options. They typically offer generic investment and planning advice and do not support the needs of participant who would like their account managed by an outside advisor. This leaves participants with 1) incomplete information, 2) often a lack of knowledge of how they might effectively diversify their selections, and 3) a major exposure to the occasional significant market declines. Some people may give their account logon credentials to an advisor, but that is a major security risk.
Additionally, "target-date" funds, which are designed to become more conservative as the target date (usually a retirement date) approaches are often selected or are designated as a default choice. From a planning perspective, it is clear that a person should become more risk-aware when nearing retirement, but not necessarily more conservative. It may be that a more aggressive strategy is necessary to generate the additional returns that are required to build sufficient retirement funds.
Because of our risk-management orientation, LFM&P is most concerned about this lack of available advice, and the lack of a strategy to protect savings against market risk, particularly today when investment valuations are very high. Humans have a built-in mental blind spot called "recency bias". If the markets have been generally going up recently, they tend to give little thought to what might happen if values drop (and vice versa). Less recent times should be kept in mind as well. In 2008 the joke was, "My 401(k) has become a 201(k)". LFM&P can help savers address these problems.
Investment Advice adapts LFM&P's MarketAwareSM strategy for participants of employer 401(k) and 403(b) retirement plans, variable annuities and other accounts where the investor would like to have the final decision on investment changes. This is accomplished by using the same investment strength and market risk evaluation rules as the Investment Manager uses, but LFM&P's Investment Advice makes recommendations periodically rather than managing continuously. Every 3-6 months we provide clients with our recommended allocation based on current strength, diversification, and risk measurements, developed specifically for the client's own investment menu options and tailored to their own individual personal and financial considerations. The client evaluates the recommendation and submits the updated allocation to the employer plan.
At its essence, financial success in retirement is based on building and preserving wealth. Managing investments, explicitly considering both returns and risk, is part of that process. Planning is also important. Our Wealth Advisor service combines continuing Comprehensive Financial Planning and Investment Advice. Investment Advice is a natural follow-on as the implementation of a retirement plan. The lower cost component, either advice or planning, is provided at no additional charge.