The term “wealth management” can be somewhat intimidating for people and it can often prevent them from seeking out financial planning services.
“There is no defined amount of wealth or assets you need to begin planning for your future. It’s important for you to always have a plan no matter what the amount is, and in fact, the smaller the amount, the more important it is to have a plan,” says Stan Molotsky, president and CEO of SHM Financial.
He stresses that there is no set age to begin planning, either. “It’s never too late to start, but the earlier you start, the better it can be. Think of when you’re not feeling well. You try to take medicine at home but it’s not enough and eventually you go to the doctor because you want to hear from someone who is trained in this. It’s the same for wealth management: You can only do it yourself for so long until you need a professional,” Molotsky says.
Starting at a younger age puts you at an advantage, suggests Amy Begnaud, CFP, CDFA, CPFA, first vice president/wealth management, financial advisor at Begnaud Wealth Management Group of Janney Montgomery Scott LLC. “Someone who is right out of school and gets a job with an employer savings plan such as a 401(k), especially with a match, has a much better chance or probability of building wealth along the way and being able to retire when they choose to retire because they have the gift of time,” she says.
Jason Braatz, CFP, senior vice president of Braatz Pizoli & Associates, Merrill Lynch Wealth Management, says most people think wealth management is about the number they have, but it’s actually about the number they spend. “You have to figure out how much you need to live the way you want to live and that’s how you set your trajectory,” he says. “Once you know what you spend, that determines your surplus, so it’s never too early to figure out that side of the balance sheet, and that’s where most Americans make mistakes because they overspent.”
Planning for the Expected and Unexpected
The best financial planners get to know their clients personally, and the relationship between the two sides is developed over the course of their life.
“Clients want a wealth management team that’s structured and able to take them through the rest of their life cycle,” says Braatz. “I’m proud to say I have clients who started with me when I was 26. We have almost 20 years of history. I’m able to give better advice because I understand their emotional cycle and how their minds work.”
These relationships can even span generations. “The way I see it, if you’re a client of mine, then your child is a client, so I want to meet with your children when they are college aged,” says Braatz. “A lot of financial planners won’t give young adults the time of day, but they need advice.”
Begnaud sees this as well in her practice. “We don’t often have clients in their 20s and 30s who come to us already with a significant accumulation of wealth, but what we do see is our middle-aged clients who ask us to meet with their young adult children, and we love doing this because we’re educating the next generation,” she says. “They don’t have to reinvent the wheel and try to learn about investing on social media, but instead they form a relationship with someone who actually has credentials who has worked with their parents and even grandparents in some cases.”
The more information a financial planner has about your personal situation, the better equipped they are to create a successful strategy for your goals. Whether it’s world events or a personal event, a financial planner is there to help navigate the impact, says Begnaud. “Someone might be considering buying a second home, investing in a startup company or helping their child with a large expense,” she says. “Those are the ‘what-if’ scenarios that we can run through software to look at the impact long-term. It’s not just throwing a dart at the board or hoping for the best.”
Begnaud says those who are on the younger side and further from retirement are in what is called the “accumulation” phase, as they save whatever money they can for their kids’ college funds and retirement. “Once you’re 60-plus, you’re getting closer to the spending phase and your priorities will be different and the investment strategies will reflect that.”
Braatz says the younger brackets can be broader in their investments. “You want to put as much as you can into your 401(k) and put it into the S&P 500 or very diversified growth type indices and just let it go,” he says.
It can be tempting for families with kids nearing college to dip into a retirement plan for a loan. Begnaud advises against this. “We don’t want clients to sacrifice their retirement in order to pay for college, and our children have a lot more runway and earning power ahead of them,” she says. “We remind clients to be smart about those retirement accounts and let them continue to grow because if you deplete them, it’s hard to get yourself back on track later in life.”
The uncertainty of the economy is a bit more concerning for the age bracket nearing retirement, says Braatz. “The world is crazy and it does seem to shift daily. If you’re 15 or 20 years away from retirement, you might not look at it too much, but if you’re closer to wanting to retire, you may be getting nervous about having enough cash on hand.”
This is when cash puts you in a great position, he continues. “People are afraid to look at cash as a true investment position,” Braatz says. “In this day and age, you can get a nice return on cash, between 4 and 5% in short-term treasuries that are guaranteed by the government.”
Begnaud adds, “We encourage clients to not just sit on cash. If it’s just sitting in the bank, the only one benefitting from that is the bank,” she says.
Financial planners are there to be level-headed in any situation, managing any rash decisions a client may want to make when the stock market is shaky. “One of the biggest hats we wear is behavioral finance, because we don’t come at it from an emotional standpoint,” says Begnaud. “Clients count on us to be as steady as a rock when it comes to talking about the market.”
Coming off 2022, bonds and stocks were low, making 2023 an ideal time to buy. “We’re encouraging people to add money to their stock and bond portfolios this year, because as we look out two years from now, things are going to look very good, and we want to catch that rebound market,” she continues.
Molotsky concurs. “There are great opportunities now when things are in somewhat of a turmoil. Certain stock-related things are getting clobbered, but if you have the guts and fortitude and the company is decent enough, you can take advantage of that,” he says.
Top Tips for 2023
We asked each of these financial professionals for their best tips for the rest of 2023.
- Know your fees. SHM Financial’s Stan Molotsky says most people are putting money into their 401k or 403b plans without any idea of hidden fees. “Let’s say you’re putting $100 into that plan every paycheck, but the plan itself may have five or six little fees connected to it which eat into the amount you’re depositing. The fees are connected to what you’re actually investing in and we can go through and do an analysis,” he says. “Many people are shocked when they see how many fees they’re paying that they don’t need to pay.” He says folks may want to consider the alternative of having their own IRA or Roth IRA plan that cuts out the costs and hidden fees.
- Earn money on your cash. “We’ve heard from clients who have money in banks that are only paying pennies, and we’ve told them, ‘Go to the bank, tell them you want better money market rates and ask what their CD rates are,’ because if they can’t pay you to keep your cash there, then you will find somewhere else that will,” says Amy Begnaud , Begnaud Wealth Management Group of Janney Montgomery Scott LLC. “At a minimum right now, you should be earning 3 percent on your cash.”
- Have cash on hand. “People need to have cash to take advantage of the opportunities coming in 2023,” says Jason Braatz, of Braatz Pizoli & Associates, Merrill Lynch Wealth Management. “There’s going to be a dip, an asset class that drops dramatically somewhere and you want enough cash on hand to buy into those opportunities and not be afraid to do it.”
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Published and copyrighted in South Jersey Magazine, Volume 19, Issue 12 (March 2023)