The Seven Deadly Sins Of The Wealth Management Industry

The Seven Deadly Sins Of The Wealth Management Industry

John Jennings  Contributor 

In his investment book “Where are the Customers’ Yachts?” Fred Schwed opens with the story that gives the book its title:

Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York Financial District. When the party arrived at the battery, one of his guides indicated some handsome ships riding at anchor.

He said, ‘look, those are the bankers’ and brokers’ yachts.’

‘Where are the customers’ yachts?’ asked the naïve visitor.

Although the wealth management industry has evolved since Schwed’s book was published 81 years ago, the underlying issue remains: it is first and foremost a money-making machine for those who work in the industry. This doesn’t mean the wealth management sector is made up of bad people (I’m one of them!) but rather that their incentives aren’t usually aligned with acting in clients’ best interests. Like Upton Sinclair says, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

According to Roman Catholic theology, the seven deadly sins are the primary feelings or behaviors that inspire further sin. The misaligned incentives of the wealth management industry roughly correspond to those deadly sins, and knowing them is essential to being a wise consumer of financial services. Once you understand what drives the wealth management industry, you can better choose which advisors to work with, evaluate their advice with clear eyes, and push back as necessary.

The Seven Deadly Sins Of The Wealth Management Industry Are:

1.    Advisors are incentivized to provide the least amount of service possible (sloth). An investment professional I know who works in the trust department of a large bank told me that a common refrain at their bank is “don’t wake the dead.” In other words, don’t call clients unless they call you first.

There’s a fundamental tradeoff in any business between customization and scalability. And it’s particularly acute in the financial services industry. Wealth management firms are incentivized to scale rather than customize because the more clients they can serve with limited people and resources, the higher the profits. By ignoring clients and being reactive rather than proactive, advisors can handle huge client loads, collect more fees and increase firm profitability.

2.    Advisors spend most of their time looking for their next client (lust). Years ago, I interviewed an advisor from a global investment brokerage who was looking to change jobs. When I asked why he was interested in our much smaller boutique firm, he told me he went into the financial services business to help people but doesn’t get to do that much. “About 80% of my time is spent on business development, and only 20% on actually advising and helping my clients,” he said.

Unfortunately, this is common in wealth management firms because they’re structured so that advisors “eat what they kill.” To make more money, they must constantly obtain new clients. As a result, most advisors spend most of their time wooing new clients instead of caring for those they already have.

To continue reading, please go to the original article here:

https://www.forbes.com/sites/johnjennings/2021/05/26/the-seven-deadly-sins-of-the-wealth-management-industry/?sh=1877636a6a14

7 Little Changes That’ll Make Your Money Last for Generations

7 Little Changes That’ll Make Your Money Last for Generations

Ken Eyler CEO, Aquilance  Thu, July 27, 2023

I’m an Advisor to Wealthy Families: 7 Little Changes That’ll Make Your Money Last for Generations

You may have heard of the third-generation curse, which causes 90% of wealthy families to lose their money by the third generation. But some individuals manage to deplete their wealth even sooner, especially if they came into a lot of money quickly. For instance, athletes, entertainers, executives and entrepreneurs who achieve runaway success after years of financial hardship may suddenly find themselves with seven-figure bank accounts and no idea how to carefully spend and manage their money.

The same thing can happen to people who inherit a lot of money. In fact, money mismanagement is one of the primary factors in the third-generation curse if sound financial values and solid money management strategies weren’t passed on through the generations.

Many of these families did not start off wealthy, and had already developed sub-optimal money habits by the time they became wealthy. Often, it’s hard to change those habits that have been formed over a lifetime. But when you have money, you, unfortunately, become a target. Your behavior needs to change if you want to preserve your wealth.

GoBankingRates spoke to Ken Eyler, CEO of Aquilance, a financial administration company focused on bill pay, bookkeeping, and complex entity and investment reporting for wealthy families. He shared with us seven tips to preserve generational wealth, whether you are a new heir, a social media influencer who hit it big, or an entrepreneur who’s struggled for years before finding that business idea that set you up for life.

Tighten Your Security Profile

As an advisor to high-net-worth and ultra-high-net-worth families, I often encounter those who make easily avoidable mistakes with their fortunes. Many of these families did not start off wealthy, and had already developed sub-optimal money habits by the time they became wealthy.

I see security as one of the biggest vulnerabilities for families. One of the common pitfalls are folks who were accustomed to posting about their travels on social media, especially if they first made it big in the public eye.

But when they are traveling on private jets and leaving their multimillion-dollar homes, they open themselves up to threats when they reveal their whereabouts. My recommendation is to post after the fact instead of in the moment. Also, take seriously the importance of anonymity when checking into hotels or visiting tourist attractions.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/m-advisor-wealthy-families-7-203337535.html

I Downsized for Retirement and Regret It: Be Aware of These 6 Pitfalls

I Downsized for Retirement and Regret It: Be Aware of These 6 Pitfalls

Andrew Lisa  Updated Thu, July 27, 2023

Generations of Americans have leveraged their homes to fulfill their retirement dreams by downsizing.

Buy a house fit for a family when you have one and build equity over the years. When the nest empties and retirement nears, sell it to buy something smaller, cheaper and more manageable, and use the difference to finance your glorious golden years.  Downsizing can come with hidden financial and emotional costs, however. It can also diminish both your nest egg and your peace of mind. Here are some examples of downsizing regrets and how to avoid them.

In the Post-Pandemic Era, Even Small Houses Come With Big Price Tags

In the 2010s, annual home appreciation reached a high of 8.9% in 2013 but typically hovered around 5% to 6% per year. Then, COVID ushered in the era of unaffordability.

According to Freddie Mac, prices rose by 11.3% in 2020, 17.8% in 2021 and 6.7% in 2022.

It’s good to sell when prices are high, but retirees looking to downsize will then have to buy in an under-inventoried housing market with a median sale price of $416,100, according to the St. Louis Fed. According to Money.com, prices rose fastest and highest in the Sun Belt, where retirees have flocked for generations.

Borrowing Is Burdensome

Some retirees might earn enough from the sale to buy their smaller home outright, but because of today’s sky-high prices, many will have to take out mortgages to avoid being house rich and cash poor. With rates near 7%, home loans haven’t been this expensive since 2002.

High Prices Could Mean High Taxes

Profits of up to $250,000 for individuals and $500,000 for joint filers are exempt from capital gains taxes. Those are fairly easy thresholds to meet in a normal housing market, but today’s downsizers are selling near the market’s peak, and if they breach those limits, they could owe as much as 20% on the profit.

Real Estate Transactions Aren’t Cheap

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/downsized-retirement-regret-aware-6-110017144.html

Stealth Wealth Secrets: 10 Tips for Living a Rich Life in a Low-Key Manner

Stealth Wealth Secrets: 10 Tips for Living a Rich Life in a Low-Key Manner

Crystal Maye  Thu, July 27, 2023

Stealth wealth, as explained by Experian, is all about financial privacy. In today’s society, broadcasting wealth on social media or even just among coworkers and friends can make you a target for exploitation. Whether bad actors attempt to hack your accounts or loved ones come with their hands out, showcasing your earnings may have unfortunate consequences.  Keeping information about your income and assets private can help protect you from a wide range of uncomfortable and potentially unsettling situations. Individuals who practice stealth wealth often have significant amounts of money, but few people know about it. They keep it under wraps in order to safeguard their assets.

For many people, stealth wealth may be one of the best ways to handle your money and create a stable financial future. Here’s what you need to know about the money trend.

What Is Stealth Wealth?

It’s unclear when the trend started, but in 2008 at the height of the Global Financial Crisis, the Tampa Bay Times reported on the effect that the downward economy had on recently minted millionaires.

As it noted, millionaires weren’t as ready to flaunt their riches as their predecessors. Many of them were living more reserved lifestyles, patiently waiting for the economy to turn around. They held onto their wealth instead of spending it on material things and those that did were greatly rewarded.

Fast forward 15 years and many of the OG stealth wealthers have kids who are coming of age or entering adulthood. They have likely learned from their parents’ financial practicality and played coy with their net worth. Whether they have established a name for themselves in business or simply live off of family money, they aren’t as willing to showcase their wealth to the world.

Why More People Are Choosing Stealth Wealth

As during the Global Financial Crisis, we currently find ourselves in a period of economic instability and uncertainty. To avoid financial hardship, people must take a long look at their lifestyles and how they spend money. By living a more fiscally responsible life, they can ensure stability in the future when the economy begins to turn around.

Practicing stealth wealth now can help you withstand any market fluctuations. It can help you provide for your family and allow you to live comfortably without the worry that people will come to you when they need money. Stealth wealth takes a different mindset, but it is not impossible to achieve.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/why-stealth-wealth-best-way-120024782.html?_fsig=6LkBa.nDz8XFigH1wSXJQA--%7EA

Top 3 Family Money Disputes — And How To Solve Them

Top 3 Family Money Disputes — And How To Solve Them

Heather Taylor   Wed, July 26, 2023

I’m a Will and Trust Attorney: These Are the Top 3 Family Money Disputes — And How To Solve Them

As the United States enters one of the greatest wealth transfers in history, it is not unusual to hear about families experiencing money disputes. Family members may let their emotions get the better of them and find themselves stuck in arguments, fights and disagreements regarding a wide range of financial issues. In worst-case scenarios, these disputes can lead to acts of physical violence or never reach a resolution.

GOBankingRates spoke to Mitch Mitchell, associate counsel, estate planning at Trust & Will, about the primary sources of contention that lead to money disagreements among family members. Here’s how families can solve these top money disputes.

Distribution of Inheritance

Money disputes often arise during the estate planning process, particularly with the distribution of an inheritance. If a loved one passes away and leaves behind assets, family members and siblings may disagree on how to divide an estate. And if there’s no clear will or estate plan, it only adds to the confusion and increases overall disputes among family members.

Another aspect to consider is the role of family dynamics. Mitchell said siblings might have different interpretations of their parents’ intentions, which can lead to disagreements and conflicts over how assets should be properly managed and distributed. Some parents also distribute their assets unequally among their children. Even if they have their own reasons for doing so, Mitchell said unequal distributions can create tension and animosity among family members.

Incapacitated Family Members

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/m-trust-attorney-top-3-184913381.html

CFPB Fines Bank of America What That Means For You

CFPB Fines Bank of America What That Means For You

Tue, July 25, 2023

The Consumer Financial Protection Bureau on July 11 fined Bank of America for three types of transgressions against its customers, each costing consumers money and time. We've seen similar transgressions at many other banks over the years, and we are likely to see more in the future.

Here are a few simple steps consumers can take to help them avoid being victimized by their banks.

Avoid NSF/Overdraft Fees

The first BofA transgression cited by the CFPB involved non-sufficient funds (NSF) fees. An NSF fee occurs when there's not enough in an account to cover a transaction. Banks will typically decline a transaction because of insufficient funds and charge the customer an NSF fee.

The problem with what BofA did wasn't that it charged an NSF fee, but that is charged multiple NSF fees for the same transaction. BofA's NSF fee was $35. When this charge was unfairly applied multiple times, the total fee amount quickly rose to a burdensome level.

NSF charges and overdraft charges — the fee applied when an account is overdrawn and the bank covers the transaction charge on the customer's behalf — are common fees at banks.

The good news is that many banks, including BofA, have made their NSF/overdraft fee policies more consumer friendly in the last few years. So if you make a mistake by not having enough in your account to cover a transaction, the fees shouldn't be as costly as what BofA customers experienced. Nevertheless, NSF/overdraft fees can still be costly, and it's important to avoid them.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/cfpb-fines-bank-america-means-172224126.html

If a Family Member Dies, Which Debts Will You Be Responsible For?

If a Family Member Dies, Which Debts Will You Be Responsible For?

Vance Cariaga  Mon, July 24, 2023

One thing to know about debt is that it doesn’t go away — even after the death of the person holding it. When someone dies, their debts and assets typically pass to their estate, according to the Consumer Financial Protection Bureau (CFPB). The estate is responsible for paying any unpaid debts.  If there is no money or property left, then under most circumstances the debt will not be paid. As a general rule, no one else — including family members — is required to pay the debts of someone who died, according to the CFPB. That’s not always the case, however.

In some cases, surviving family members might be responsible for paying certain debts of the deceased. This largely depends on the type of debt and where you live. For example, shared debts might fall on the shoulders of survivors in the following scenarios:

You were joint account owners.

You borrowed the money as a co-signer.

You are a surviving spouse and live in a community property state where spouses share responsibility for certain marital debts.

Your state has “necessaries statutes” that make parents and spouses responsible for certain necessary costs such as healthcare.

In community property states, spouses are “considered joint owners of nearly all assets and debts acquired in marriage,” according to a 2022 blog on the Experian website. The vast majority of states use a different “common law” model that allows spouses to own property individually. The type of law your state follows dictates how property is divided upon divorce or death.

Experian lists only nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Three states — California, Nevada and Washington — also have community property law for domestic partnerships that might not involve marriage.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/family-member-dies-debts-responsible-121502138.html

The Dark Side of Money

The Dark Side of Money

Jacob Schroeder  Jul 24, 2023

What we can learn from the ways money brings out the worst in us

Last year, the YouTuber Mr. Beast posted a Twitter poll that revealed an evilness lurking in our relationship with money.

As you can see, almost half the respondents said “Yes.” Yes, to the death of a person – who could be a devoted parent, an innocent child, the world’s leading cancer researcher, or Tom Hanks – for $10,000, about the worth of a used Honda.

It’s proof that money has power. The power to take our lives – with diligent saving and patient investing – to great heights. But also the power to lead us to some dark places.

Perhaps, that’s where the best financial lessons lie.

When discussing how dark experiences acted as life’s greatest teacher, endurance athlete and former Navy SEAL David Goggins said: “There are no answers in the light… knowledge comes from the muck.”

The same rings true for money; financial knowledge often comes from unfortunate events — job loss, market crashes, bankruptcy, fraud, et al. Most finance books and articles tell us we deserve financial success. Less frequent are those that help people identify their own toxic relationships with money as a route to personal growth. Fortunately, we can learn from the experiences of others.

For instance, I’ll briefly tell you why I don’t gamble. It’s not that I think gambling is a waste of money (which I do), or that I think the “games” are boring (which I do), or that I think of casinos as pitiful dungeons soiled with the stench of stale cigarette smoke and desperation (which I also do). It’s because it reminds me of the tragic death of a family.

When I was 18, my best friend called me one day to tell me that a family had been found murdered in their home nearby. This was a quiet, upper-class neighborhood where such tragedies never happened. Out of shock, we drove by the family’s once comfortable home that now resembled the set of a cop show with telltale props and extras – yellow tape, detectives, reporters, coroners.

It turned out the killer was the father. He had been a successful businessman who started to gamble and gamble some more, and then he started to lose and lose some more, until he inevitably lost almost everything. Distraught and at rock bottom, he decided to cash in the last thing he had left, the lives of his family and his own.

The experience taught me how a potentially big financial windfall could influence our psyche, like a siren call toward the rocks and cliffs of financial ruin. And at times, much worse.

I don’t believe money is not inherently evil. But research shows that it can trigger the worst parts of our nature if we let it.

The surprising thing? Unfortunate consequences can arise through both financial strain and abundance. Go too far in either direction, and you end up in the same miserable place.

So, when does money transform from an illusory store of value to an accessory to evil? How do we keep it from ruling over us?

How does this relate to our own financial lives?

Humans may have an inherent sensitivity to fairness, which explains why inequality can feel so stressful and damaging.

Consider a video of an experiment with two capuchin monkeys, our distant relatives often used in psychological tests as human stunt doubles. The capuchins perform the task of giving the experimenter a rock in exchange for a slice of cucumber.

To continue reading, please go to the original article here:

https://rootofall.substack.com/p/the-dark-side-of-money?utm_source=substack&utm_medium=email

https://www.youtube.com/watch?v=meiU6TxysCg

First Year of Retirement: 7 Money Moves You Absolutely Must Make

First Year of Retirement: 7 Money Moves You Absolutely Must Make

July 13, 2023 By Nicole Spector GoBankingRates

If you’re near retirement or fresh in it, it’s critical to understand how to manage your financial life, and how it differs from when you were making a salary. To do this, you should make these seven money moves in your first year of retirement — per the suggestions of experts. 

Start Tracking Your Expenses

Hopefully, you’ve already made a strict budget and have been tracking expenses leading up to your retirement. Now is the time to really pay attention.

“Take the first few months of your retirement to diligently track your expenses, so you understand where your money is going, and how much you need a month,” said Mark Henry, founder and CEO of Alloy Wealth Management. “It will likely be much different than your pre-retirement expenses, especially if you move. There may be places you can cut back and others where you want to splurge a little more.”

Secure Healthcare Coverage

You may have already sorted out your healthcare coverage, but if not, you need to figure that out sooner than later.

“If you are not eligible for Medicare yet and your employer does not offer continued access to healthcare coverage, you will need to look into alternative options,” said Larry Roby, president and CEO of SFA Wealth Management. “For example, you may use the Health Insurance Marketplace to find a new insurance plan or you might qualify for Medicaid coverage. No matter which route you go, it’s important to get your healthcare coverage in order. Otherwise, you may be one emergency away from depleting your retirement income savings.” 

Make Sure Your Retirement Money Is Allocated Properly

To continue reading, please go to the original article here:

https://www.gobankingrates.com/retirement/planning/first-year-of-retirement-money-moves-you-absolutely-must-make/?utm_term=incontent_link_3&utm_campaign=1238055&utm_source=yahoo.com&utm_content=9&utm_medium=rss

The Math That Explains Why Lifestyle Inflation is a Wealth Killer

The Math That Explains Why Lifestyle Inflation is a Wealth Killer

Lifestyle Inflation Is A Wealth Killer  By Zach  January 24 2019 Four Pillar Freedom

Investopedia defines lifestyle inflation as:

 Lifestyle inflation refers to increasing one’s spending when income goes up. Lifestyle inflation tends to continue each time someone gets a raise, making it perpetually difficult to get out of debt, save for retirement or meet other big-picture financial goals. Lifestyle inflation is what causes people to get stuck in the rat race of working just to pay the bills.

 Two of the most common reasons for lifestyle inflation include:

​​The desire to impress peers and flaunt your success. After that big pay raise or promotion, it’s common to upgrade your house, car, wardrobe, dining habits, etc. to show your peers how well you’re doing in life.

​The feeling of “I worked hard so I deserve this.” After all that time spent studying in the library or putting in extra hours at the office, it’s common to feel that you “deserve” to treat yourself with your increased income.

No matter what you believe is the true reason (or combination of reasons) for lifestyle inflation, one fact remains undeniable: lifestyle inflation is a wealth killer.

 Here’s the math that explains why.

 The Math That Explains Why Lifestyle Inflation is a Wealth Killer

Consider our friend Bob. In his first year out of college, Bob has a net worth of $0, a yearly income of $35,000, and yearly expenses of $30,000.

Let’s assume Bob is able to increase his income by 6% each year while only increasing his expenses by 2% each year.

Here is how Bob’s net worth will grow over the course of 20 years:

To continue reading, please go to the original article here:

https://fourpillarfreedom.com/the-math-that-explains-why-lifestyle-inflation-is-a-wealth-killer/

4 Best Money Lessons From Elon Musk

4 Best Money Lessons From Elon Musk

July 10, 2023 By Yaёl Bizouati-Kennedy

Paris: 2023 Elon Musk Vivatech, France - 16 Jun 2023JEANNE ACCORSINI / SIPA / Shutterstock.com

Elon Musk — still the world’s richest man, with a $243 billion net worth as of July 10, according to the Bloomberg Billionaires Index — is at the helm of several companies. From Tesla to SpaceX, and from Neuralink to The Boring Company — and most recently, Twitter — Musk is no stranger to controversy and is known for speaking his mind.  Not everything Elon Musk has done, financially speaking, has been exemplary. However, Musk’s best money moves are at the center of many commentaries, however, and four follow.

PayPal: An Early Mind for Bold Investing

Musk founded X.com, later named PayPal, and sold it to eBay for $1.4 billion in 2002, according to The Wall Street Journal. He collected $100 million from the deal.

“One of Elon’s best financial moves was placing most of his net worth into Paypal, at a time where the ‘.com’ world was seriously taking off,” said Sebastian Jania, owner of Ontario Property Buyers.

Upon successful growth of this company, he sold it and was paid handsomely — but instead of cashing out of the “entrepreneurship game” and living on the proceeds, he recycled his money into three more businesses which also took off as successes, said Jania.

“This was a very wise decision as he was able to take his successes in the tech industry and diversify across solar, automotive, and space industries. This move protected him in case the tech industry or other industries would crash.”

Musk Reinvests Profits Into his Visions

Elon Musk has made billions of dollars from his ventures but doesn’t all profits on lavish lifestyles or frivolous things, said Anna Koval, co-founder and CMO at Tarotoo.

“Instead, he reinvests his profits into his vision of making humanity a multi-planetary species and advancing clean energy and transportation. This shows his passion, dedication, and long-term thinking, which are essential for any successful entrepreneur.”

https://www.gobankingrates.com/money/wealth/4-best-money-lessons-from-elon-musk/?utm_term=incontent_link_3&utm_campaign=1237686&utm_source=yahoo.com&utm_content=6&utm_medium=rss