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Wealth Management in Cincinnati: A Comprehensive Guide for 2020

Retirement realities can be alarming, especially when, according to Bloomberg, “Almost half of all Americans have no retirement savings whatsoever.”  If you’re in the other half, but you don’t know where to start when it comes to planning for your retirement and your family’s legacy, you’re not alone. Whether your intention is to grow wealth as fast as possible, or to invest for a comfortable retirement, HCM has experts you can work with and a comprehensive Retirement Roadmap™ to help you on your way to financial freedom. 

This guide covers the latest tips for creating a retirement roadmap, enhancing your wealth now and in the future, planning for taxes, and how you can set other personal goals regarding wealth and investments.

What is Wealth Management?

Wealth management is the most comprehensive type of financial planning services. It is the process of coordinating your family’s investment, tax, estate, insurance, and retirement plans to effectively build your family’s wealth. Clients are able to access these comprehensive services to meet their needs whether that falls under managing estate or business taxes, financial needs for retirement, advising charitable funds, or investing taxable, tax-deferred, and tax-free assets related to personal wealth. 

All wealth management services should be consultative rather than sales-based, making the process truly client-centered. Rather than simply selling financial products, wealth management involves a team of professionals who understand you and can grow wealth according to your diverse needs.

How “Wealthy” do you need to be for Wealth Management?

The amount of assets you need to work with a wealth manager varies.   Many advisors insist clients meet minimum account balance requirements. Higher account minimums do not necessarily mean higher quality advice and certainly do not guarantee higher returns.  It’s important to find an advisor who is both a teacher and coach that can provide the complex services needed to reach your family’s goals. 

What is Included in Wealth Management?

Wealth management is a coordinated set of comprehensive financial services which are customized to help you reach your family’s personal and financial goals. It includes advisement and direction that addresses your specific needs. This often results in complex investment portfolios, legal and tax situations. Generally speaking, wealth managers can help clients handle:

  • Growing more wealth over time
  • Charitable fund management
  • Retirement planning and investments
  • Wealth transfer and estate planning
  • Advising for the sale or purchase of a business

Creating a Retirement Roadmap

Many people don’t think about their retirement goals and financial preparation until retirement is just a few years away. This procrastination can lead to a host of complications. Ideally, you will start designing your retirement roadmap with plenty of time to think about your goals and build up a nest egg to pay for them. An early start means you’ll be able to determine how much you will need to properly fund your retirement and make adjustments based on the lifestyle you wish to have. Once you’ve decided what you want your retirement years to look like, it’s time to design a plan that both optimizes your tax and financial opportunities as well as protects your dreams as much as possible from the volatility of the market.

When to Start Planning

The best answer, like planting a shade tree, is thirty years ago. If that did not happen, then the next best answer is now. If you have ten years or more before retiring, it’s much easier to get your plans in order and your savings on track. Retirement can mean some near-term sacrifice when it comes to saving enough for the future, so the more time you give yourself, the more flexibility you’ll have in the way you spend and save money today.

How to Design Your Ideal Retirement

Retirement goals should focus on what matters most to you and your Family, as well as future accommodations you may need later in life.  It helps to think about what you enjoy most about where you are now so you can build a future where you can travel, enjoy leisure activities, spend time with family, and, if necessary, receive the level of quality care you need.  Some basic questions to start with when are:

  • What kind of daily routine do you (and your spouse if married) want once work is no longer required to meet your income needs?
  • Are you retiring to something and not just from something?
  • How does your family and their location factor into the life you want after retirement?
  • What interests and hobbies do you have now that you want to expand upon after retirement?
  • What accommodations might you need to make for declining health later in life?
  • Do you want to live in the same place as you do now when you retire?
  • How much do you want to travel, and where, after retirement?

Balancing the Numbers

The textbooks all say that you will need less income in retirement if all you want to do is maintain your current lifestyle.  And, generally speaking, that is true because your commuting costs will disappear, you will be no longer be paying social security taxes and you won’t be piling savings into your 401(k).  You will also be able to make you income go further by reducing your annual income tax bill through more tax efficient income planning.

But let’s be honest.  What fun is just maintaining your current lifestyle?  Once you are retired, you have something that you haven’t had since spring break forty years ago – TIME! Can you remember how much fun spring break was? If you have done your planning there are no doubt people to meet, things to do, places to go, projects to take on, and so on.  These things will cost money.  At HCM we have found that the first few years of retirement can be more expensive than the last few years of full-time work.  Then, after a few years when things settle down (how often do you want to go to Italy?) the budget will go back to normal.  These things take proper planning in all facets of your financial world.

Differing life situations and desires can easily be planned for with a good wealth manager who will help you design the strategies that will put your savings to the best possible use while minimizing your tax burden.  Once you’ve determined your ideal spending amounts and how they will ebb and flow with your retirement plans, you’ll be better able to fine tune your planning and safety-net implementation during the years leading up to retirement.

Wealth Enhancement

Wealth enhancement goes far beyond the typical retirement planning and asset allocation services provided by most financial planners and financial-product salespeople. 

HCM’s Wealth Enhancement Team involves specialized professionals who utilize a coordinated approach to address wealth optimization goals as well as the emotional and financial impact of lifetime transitions and wealth transfers.  Many clients come to HCM for the first time with significant assets but no structure in their retirement plan, old estate documents (if any), no tax plan, no legacy plan, no safety net, neither an investment nor distribution policy statement and a portfolio invested in expensive funds and annuities. It is also very common for a new client to have a variety of account types that are taxed differently and at different rates without a plan to optimize after-tax withdrawals so their family receives the maximum after-tax wealth from their lifetime of hard work and value creation.   The Wealth Enhancement Team works with these situations to create coordinated and comprehensive plans that enable our clients to fulfill the plans we have designed together.

Just a few of the ways HCM’s Wealth Enhancement Team can bring order to your financial life as your Family CFO, to help grow your wealth include:

Personal Goals: Creating specific plans around your goals so that everyone know what need to be done to achieve success.

Understanding the WHYUnderstanding your WHY provides the motivation that will ensure success in achieving you dreams.

Investment Policy: Understand how much investment risk you are taking before times get difficult 

Portfolio Coordination: Approach all of your financial assets with a single unified approach rather than account by account which can lead to tax inefficiencies and premature liquidation.

Scenario Simulations:  Model a variety of potential outcomes throughout life to be sure you have all your bases covered and always have a “B” Plan.

Tax Planning: Building strategies that reduce the tax burden of assets through advantageous investments, sales, and other intelligent methods.

Distribution Policy: Understanding in advance where adjustments may need to be made should the markets take an extended dip.

Cash Flow Planning and Protection: Accurately documenting the inflow and outflow of income so all needs are properly funded and safeguarded via the HCM™ Safety Net.

Investment Portfolios: Structuring portfolios that are designed to meet you long term retirement-income needs rather than chase the markets.

Risk Management:   You have worked hard to build your nest egg, you want to take all reasonable measures to protect it.

Creating a Wealth Management Plan

Wealth management is an intensive process that benefits substantially from an expert’s knowledge in the areas of taxation, estate planning, portfolio management, cashflow and banking. When you sit down with a wealth manager, you’ll be able to set goals and build strategies for every financial aspect of your life, whether you’re looking at retirement, predictable growing income, tax strategies, business transition or planning and risk management surrounding your portfolio. We have further details about common types of plans and how they work to suit the individual needs of each client:

 

Financial Planning

Your financial plans start with your dreams for your future, but this is a more personal process that will help you understand where you are now and what your financial situation could look like five, ten, and even more years into the future if you take the necessary steps to execute.  It focuses on the WHY behind your dreams, because that is where the motivation will come from to get them done.  Remember, plans don’t work unless you do. Where your investment portfolio provides the resources for your desired lifestyle, your financial plan provides the blue prints for, and allows you to track progress toward your ultimate success. Where you could end up living, the causes you could end up helping, how often you’ll be travelling now and in the future, is all determined by successful financial planning.

A strong, comprehensive financial plan will give you all the details about your financial world. Cash flow details, recommendations for how to get the most out of your income, how to grow your income in the future, tax planning, executive compensation planning, estate planning, income protection, scenario analysis of various financial outcomes, spending policies for difficult markets, charitable bequests, safeguarding your income, risk managed portfolio plans and more depending on your specific needs . All these planning elements are customized based on your situation with the help of your dedicated financial advisor.

Your financial plan shouldn’t be a one-time document. At HCM Wealth Advisors, a change in plans is always part of the plan.  As you experience transitions in life, your financial goals will certainly change. With proper planning you will have the ability to welcome those new dreams by altering your course to meet them head on. 

Investment Planning

Investment planning begins by taking a complete assessment of your financial situation and determining what portion of your financial asset base should be set aside for long-term investments and how much should be allocated to shorter term holdings and risk management.  An important element of investment planning at HCM is to build a stream of income that is in cash, dependable, diversified and growing.   HCM believes that a big portion of this income comes from dividends.  

Executing a sound investment plan at HCM Wealth Management involves leveraging disciplined repeatable investment processes. You receive transparency about that process so that you always understand what is happening with your money. You receive seamless proactive service and full-time access to your advisor to answer any questions that you may have. Your Financial Advisor works with the Investment Committee who oversees your portfolio daily. 

Balancing risk and reward is one of the most difficult aspects of planning and executing a portfolio strategy.  It’s here that professional assistance can help bring peace of mind. Generally speaking, more volatile (risky) assets are used to fund portions of the portfolio that will serve longer time horizons. Less volatile (safer) assets, along with predictable portfolio income, are typically used to provide for periods of safety that helps protect clients’ ability to spend during periods of market unrest. 

Once your goals are set and you have decided on your risk targets, portfolio asset allocation tax locations objectives, the final steps of the process are populating the portfolio with specific securities, monitoring the portfolio for necessary tactical adjustments, rebalancing opportunities and tax harvesting events. 

Tax Planning

Taxes impact every aspect of our financial lives.  In fact, taxes have the biggest impact on your net worth of any controllable factor in your wealth planning.  Therefore, it makes sense to do everything you can to manage your tax burden for the good of you and your family. Our professional tax team of CPAs can work with your Financial Advisor at part of your Wealth Enhancement Team to complete your tax planning and tax returns or they can work with your accountant to review your recent tax returns and identify potential savings or restructuring opportunities, giving you proactive ideas to save money in the future.

The U.S. uses a progressive system, which means that higher incomes are taxed at a variety of higher rates.  Your top rate is known as your marginal tax rate.  HCM’s tax advisors attempt to leverage planning opportunities around your marginal rate by managing income and deductions to avoid higher income, Medicare, capital gain/dividend and other investment income.  Knowing where you fall in the bracket system is a key part of managing your tax burden

Estate Planning & Future Planning for Loved Ones

Most people do not want to think about death and dying -- so they don't, until they are forced to. Having current estate documents in place is a requirement to be a Wealth Management Client of HCM.  Preparing wills and trusts is a difficult task for many people because it causes them to face their own mortality.  However, these documents are a critical part of any comprehensive wealth plan. Surprisingly, a survey done by Caring.com found that, “57 percent of U.S. adults do not currently have estate planning documents such as a will or living trust.” The millennial portion of the population has even lower rates. 

The transfer of wealth from one generation to another is rarely simple: a will you wrote ten years ago may not account for changes that have happened in your life since that time. Remarriage, the birth of new children or grandchildren, the death of a family member, the acquisition or loss of significant assets—all of these are events that have an impact on your planning. That’s why it’s important to not only create and update an accurate will, but to also a full set of estate documents to plan for wealth transfer. 

There are many different options you can use to preserve the fruits of your life’s labor. A wealth manager can lead a team to advise you on the best path, based on your goals for your family and your philanthropic desires. Legacy planning, for instance, surpasses the capabilities of a will to create a definitive plan that manages your wealth both while you’re alive and after your death. It goes a long way to pass on your legacy and your wealth exactly as you intend so beneficiaries aren’t overwhelmed and the provisions for your wealth are maintained.

At the very least, your estate plans should include a will that’s been kept up to date, a revocable trust, a health care directive, and a power of attorney. We’ve detailed out why these documents are so important below:

Will: A will that’s been kept accurate and up to date will ensure that your inheritors receive your assets as intended, rather than leaving the decision up to state law.

Trusts: Trusts are beneficial if you become incapacitated.  It appoints someone you choose, a trustee, to make decisions for you, until you are back on your feet. At the time of your death, trusts can be used to minimize estate taxes (although taxable estates are rare these days when proper planning has been done) and allow a third party to manage your estate, determining when and how your assets are distributed. These can be ideal for inheritors who may be too young to manage wealth or other situations where inheritance should come with stipulations for how wealth should be used and preserved.

Health Care Directive: Spells out your preferences about certain kinds of life-sustaining treatments. For example, you can indicate whether you do or do not want interventions such as cardiac resuscitation, tube feeding, and mechanical respiration.

Health Care Power of Attorney: is a document in which you designate someone to be your representative, or agent, in the event you are unable to make or communicate decisions about all aspects of your health care.

Financial Power of Attorney: Depending on the language, this documentation allows the handling of your affairs to go to another person or organization when you want to delegate that responsibility or you are no longer able to manage them yourself.

 

Finding Reliable Wealth Management in Cincinnati

Depending on the complexity of their financial situation, every individual has unique and diverse needs for the proper planning for and management of their wealth.  Whether you’re looking for specialty advice with retirement, tax, investment, education, charitable or business accounting issues, you can find all of these services at HCM Wealth Advisors.  Trusting the right people to understand your situation and have the resources to help you build and maintain your wealth is no easy search, but there are certain benchmarks you should look for.

Team Approach

Wealth management is a complex process involving many technical subject areas.  We believe that is impossible for any one person to poses all the skills necessary to properly and completely deliver all the services necessary in the construction of a comprehensive wealth plan.  For this reason, HCM Wealth Advisors utilizes service teams for all planning engagements.  Typically, each team will have two relationship members, an operations team member and several technical specialists as part of your Wealth Enhancement Team.  Also, we make it a point to build the relationship team with advisors from different generations so that you get the benefit of Advice from different perspectives.   Also, with two advisors on your team there should always be someone available to you who is completely familiar with your personal situation. 

Locating the Right Expertise and Service

While the best wealth management firms generally handle clients with a higher-than-average-net-worth, they will have have different approaches to their clients based on their specialties. Look for wealth management firms large enough to have a bench of skilled professionals whose ideal clientele matches your needs.   This is true whether you have $600,000 in assets or $60,000,000. Knowing who the firm is built to serve will help you understand where their specialties lie and how close those specialties are to what you actually need to be successful.  HCM’s two primary focuses are helping individuals prepare for retirement by making smart tax and financial decisions in all aspects of their lives. 

Certifications to Look For

Some of the most important certifications to look for in a Wealth Management Consulting Firm are Certified Financial Planners (CFPs® – for comprehensive planning expertise) Chartered Financial Analysts (CFAs – for investment expertise) and Certified Public Accountants (CPAs - for tax expertise) .  Obtaining these certifications require extensive study and intense preparation as well as passing challenging examinations.  These individuals must also meet rigorous education and work experience requirements before being licensed. These strong qualifications are some of the most sought out by professionals who want to expand their careers into the comprehensive financial planning realm. You’ll want to look for these qualifications in your wealth management team’s professional staff to ensure that they will have the best experience and continuing education to stay on top of the ever changing financial and tax trends.  In addition to certifications, look for advanced degrees and designations in relevant areas such as retirement, education planning, taxation and estate planning. 

How do Financial Advisors Get Paid?

That is a great question and is often a big difference between true Wealth Management Firms who accept a fiduciary role with their clients and advisors who sell financial products and charge both fees and commissions.  Transparency is the goal here.

Unfortunately, most individuals working in the financial services industry are affiliated with large companies such as stockbrokers, banks, or broker dealers.  These affiliations often make it difficult for these people to function as independent fiduciaries who always place their client’s best interest before their own. Their clients often have no idea how or what they get paid. This is because they serve multiple masters. They must answer to their employer and its shareholders in addition to serving their clients’ planning needs.  These conflicting objectives can result in the sale of expensive financial products that yield the highest commissions (mutual funds and annuities would be examples) to benefit the firm, products that impose penalties if you sell before a certain date years in the future, or paying for additional layers of management that ultimately provides no additional value (wrap fees for separate portfolio managers would be an example).  As a result, it is important to ask questions and make sure that you fully understand if you are working with an independent wealth advisor fiduciary or a commissioned salesperson serving other interests before you.  It is best to avoid firms that are dually registered, fee-based, or that charge commissions.  There is a good chance that you are either overpaying, not being told about all the fees you are paying, not working with a fiduciary and very possibly, all three.

A fee-only advisory independent firm is the best type to work with to receive a transparent fee structure.  These advisors only receive the consultation fee paid to them by their clients for the services rendered. The most common way for fee-only advisors to charge is based on a percentage of the net worth they oversee and the planning services they provide. They do not receive any commissions or payments from third parties.   Their fee structure will be reported in their form ADV filed with the Securities and Exchange Commission and should be in the management agreement you sign with them.  Again, full transparency around fees is the objective. 

The least expensive options are online services that provide basic investment services.   Because they don’t have a personal relationship with you, they can’t provide reliable financial planning or comprehensive wealth management services.  However, if you do not want any planning and all you need for your portfolio is an allocation service, this can be a good place to start.  The amount a fee-only wealth manager will charge is based on the services and value they provide to you.  The services can be quantified and compared.  You are the ultimate judge of the value that is provided.   However, it is common for Fee-Only Wealth Managers to charge between 1% and 1.25% per year of the assets they manage for you.  There will typically be minimums of $1,000,000 or more to obtain a full suite of planning services.  Some managers offer a reduced level of service for lower minimums while others simply turn the smaller business away.

Independent Fiduciary

The only way to be sure that you are working with someone who is obligated to put your interests before their own is to work with a full time fiduciary.  This means working with a Registered Investment Advisor who is not “dually registered or hybrid” as this business model can be rife with conflicts.  On an individual level, the wealth manager’s commitment to his or her fiduciary duty is of utmost importance. This is because fiduciary duty describes the legal obligation of your wealth manager to act in your best interests, and you should look for this level of dedication with every single client they have served. Knowing that your wealth advisor is willing to accept a fiduciary duty while working with you is assurance that they will always be looking out for your best interests.

At the end of the day, finding service you can trust that offers the most value for you and your family is the best way you can go. HCM Wealth Advisors are ranked among the “Best Financial Advisors in Cincinnati 2019,” and can offer you extensive services and advice for preserving and building your wealth. If you have any questions or would like to schedule an appointment, please call our office at 513.598.5120 or 877.598.5120 (toll free).

 

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