Stockbrokers are paid on commission, while fiduciaries are paid as clients’ assets grow.

A broker’s income is largely dependent upon the commission he or she earns from selling financial products. Each investment opportunity has a different commission value. As a result, it can be tempting for brokers to build portfolios with investments that will make them the most money, rather than focusing on what is best for the client.

On the contrary, fiduciaries are paid a percentage of their clients’ total assets under management. This means that fiduciaries’ income only grows as their clients’ investments grow. Put simply, fiduciaires don’t make more money unless their clients do. As a result, fiduciaries have even more motivation to build portfolios that work for their clients, which should give clients peace of mind.

Stockbrokers are only allowed to utilize a handful of investment opportunities, while independent fiduciaries have access to an unlimited number of possibilities.

Stockbrokers at large, chain investment advisement firms have a list of investments they can use to build portfolios. Because brokers are not allowed to stray from this list, clients may miss out on their best-suited investment opportunities.

Independent fiduciaries, on the other hand, have access to an unlimited number of investment opportunities, and through careful research and analysis, fiduciaries can find investments that best meet clients’ needs. This allows fiduciaries to build stronger portfolios that reflect clients’ financial goals.

Stockbrokers must meet monthly quotas, while this is not a requirement for fiduciaries.

In addition to being required to stick to a list of investments, most stockbrokers are also required to meet a quota, whether that be a set monetary value or number of financial products. This can cause brokers to act selfishly and push products that aren’t necessarily best suited for their clients.

Fiduciaries are not required to meet monthly quotas. This takes unnecessary stress off of fiduciaries and allows them to focus on helping their clients, rather than worrying about how they are going to please their supervisor.

Stockbrokers abide by the “suitability standard,” while fiduciaries are required by law to put clients’ best interests first.

This is the biggest and most concerning difference between a fiduciary and a stockbroker. Stockbrokers as subject to the “suitability standard,” which means that they are required to give clients “suitable” financial advice. However, stockbrokers are not required to give clients the best advice. This allows stockbrokers to put their firm in front of their clients’ best interests, and as a result, clients’ finances may suffer.

In the meantime, fiduciaries are subject to the Investment Advisors Act of 1940, which legally requires registered investment advisors to offer financial advice that puts the clients’ needs before the firm’s. In other words, fiduciaries must do what is best for the client. We believe this is reason enough to choose a fiduciary over a stockbroker.

Lorenz Financial President Mark Lorenz chose to become a fiduciary, rather than a stockbroker, for these reasons. We believe that fiduciaries are better able to meet investors’ financial goals and are proud to serve as investment advisors in the Lafayette, Indiana area.

Are you interested in receiving market trend updates?

Register for our e-newsletter to receive Lorenz Financial President Mark Lorenz’s thoughts on and analysis of the current market.

Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.

The post What Is the Difference Between a Fiduciary and a Stockbroker? appeared first on Lorenz Financial Services | Lafayette Indiana.

What Should You Bring to the Initial Meeting with Your Financial Advisor

You will probably have several emotions when you meet with your fiduciary for the first time: excitement, anxiousness, etc. You will, however, feel more relaxed and prepared if you know what you should bring to the initial meeting with your financial advisor. By bringing the information listed below, your fiduciary can get a clear pictures of your financial situation and put you on track for the future you’ve always envisioned.

1. Current Income and Savings

You can’t get where you want to be without assessing where you are now. Your fiduciary will need to be aware of any means of financial growth, so bring any relevant information. If you work, bring copies of your paystubs. If you receive assistance through medicare or medicaid, bring that information with the appropriate numbers. If you are the beneficiary of a trust fund or if you receive child support, bring a copy of the appropriate documentation.

Your fiduciary will also need to know what you have in savings and be aware of any other funds you have set aside. Bring copies of your bank statements, preferably at least the last three months.      

2. Current Spending

While your fiduciary needs to understand your income, he or she will also need to understand your expenses, so bring a copy for your budget, whether it be a weekly or monthly budget. If you don’t have a budget, don’t worry. An estimate of your expenses will do for now; however, the more specific you can be, the better your fiduciary will be able to assist you.  

3. Debt

A majority of Americans have debt of some kind, whether it be student loans, credit card bills, medical bills, or a mortgage. Part of creating a financial plan will include determining how you are going to handle the debt. Bring copies of your most recent bills and statements to your initial meeting with your financial advisor.  

4. Insurance Policies

Also bring copies of your your insurance policies, as these may have an effect on your finances. For example, if you and your spouse both have life insurance and something happens to one of you, the other will be compensated through life insurance. This compensation and the loss of the deceased spouse’s income will need to be worked into your financial plan.

5. Retirement Savings and Investments

If you already have a 401(k) or retirement fund established, that’s great. Please bring the most recent balance and any other information you have relating to your retirement savings or investment account(s). If you aren’t currently saving for retirement, don’t worry. Your fiduciary can help with this.  

6. Other Investment and Assets

If you have other investment accounts, shares, mutual funds, bonds, or other investments, bring all relevant information. Your fiduciary will need to be able to understand your current portfolio. If you own property or other valuable assets, bring information about their current value and any debt you may have against them. All of these investments will need to be addressed in your financial plan.

7. Your Financial Goals

Having a thorough understanding of where you stand financially is important, but you also need to decide where you want to go. Before you meet with your financial advisor, make a list of financial goals. For example, do you want to put your kids through college? Are you imagining retiring on the beach? Do you want to take a trip abroad every five years? How often would you like to be able to purchase a new vehicle? Your fiduciary will be able to help you determine which goals are plausible, as well as what adjustments you may need to make.

Knowing what you should bring to the initial meeting with your financial advisor will help you feel prepared for your first consultation and help your advisor get the best picture possible of your financial situation. At Lorenz Financial, we a offer no-cost, no-obligation financial planning consultation because we believe it is important for every individual and family to have a financial compass. Learn more about our financial planning services, and contact us if you have further questions or concerns.

Are you interested in receiving market trend updates?

Register for our e-newsletter to receive Lorenz Financial President Mark Lorenz’s thoughts on and analysis of the current market.

Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.

The post What Should You Bring to Discuss a Financial Plan with Your Financial Advisor? appeared first on Lorenz Financial Services | Lafayette Indiana.

Whether you’re looking for a financial advisor who can help with your first financial plan or you’re a seasoned investor searching for an investment advisor to manage your portfolio, here are five reasons to choose Lorenz Financial:

1. Lorenz Financial always puts clients’ needs before the firm.

Because we are a fiduciary, not a stockbroker, we are legally required to put our clients’ best interest ahead of our firm. In other words, we always do what is best for our clients, regardless of what this means for Lorenz Financial. Stockbrokers are not subject to this ruling, and we chose to become fiduciaries because we believe our clients deserve to have peace of mind.

What’s the difference between a fiduciary and a stockbroker? Find out here.

2. We have access to an unlimited number of investment opportunities.

Because we are an independent fiduciary, we have access to an unlimited number of investment opportunities. This allows us to utilize investments that best meet our clients’ needs. This isn’t a benefit that all financial advisors can offer. In fact, many financial advisors have a list of investments they can use to build portfolios. Because they are not allowed to stray from this list, their clients may miss out on ideal opportunities. At Lorenz Financial, having access to an unlimited number of investment opportunities allows us to build strong portfolios and doesn’t put restrictions on our clients’ financial success.

3. Our income only increases if our clients’ assets grow.

Many financial advisors work off of commission, but we don’t. Our income only grows if our clients’ assets grow. In other words, we don’t make more money unless our clients’ portfolios are profitable. We believe this is the only fair way to serve as investment advisors.

4. We offer no-cost, no-obligation financial plans.

We believe having a financial plan is so important that we offer truly free financial plans. We take time to get to know our financial planning clients, assess their finances, and understand their financial goals. Then, using a goals-based, probability software, we help individuals and families determine if their goals are plausible. If they aren’t, we will help clients determine what they can change (e.g. delaying retirement, setting more aside, investing, etc.) in order to make the future they’re envisioning possible. After all of this is complete, we help clients get on track to reach their financial goals.

Schedule a no-cost, no-obligation financial planning consultation!

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5. We’re passionate about what we do.

Lorenz Financial President Mark Lorenz became fascinated with the investment and finance industry when he was 13 years old. During his 40-year career as an engineer, Mark managed his own portfolio as a hobby. Lorenz Financial was founded on Mark’s passion for this industry, and this passion drives what we do and how we serve our clients.

If you have further questions about who we are or what we do, please visit our website or contact us. As we said, we are passionate about our industry and are always happy to discuss financial planning and investing.

Are you interested in receiving market trend updates?

Register for our e-newsletter to receive Lorenz Financial President Mark Lorenz’s thoughts on and analysis of the current market.

Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.

The post Five Reasons to Choose Lorenz Financial? appeared first on Lorenz Financial Services | Lafayette Indiana.

1. Spend less than you make, even in retirement.

Enjoy retirement, travel, go to the symphony, visit friends and relatives, but everyone has a limited amount of income. Don’t endanger your retirement by depleting your savings through excessive spending.

2. Maintain a healthy emergency fund for retirement.

Unfortunate things will continue to happen in retirement. Your washer or dryer might go out, or the furnace might break down in January. Be prepared with at least three to six months of living expenses in reserve that you can quickly get to, such as an FDIC insured checking account.

3. Only take Social Security when you need it or at age 70, whichever occurs first.

Even though you can begin withdrawing from Social Security at age 62, your monthly benefit will increase approximately 8% per year if you can wait. After age 70, the increases stop, so don’t wait past 70 to collect your benefits. Because of the nearly 8% increase per year in social security benefits after age 62, for those with a full retirement age of 66, the amount you can receive at age 70 is 76% higher than the amount you are eligible for at age 62.

4. Do your Medicare research.

Prior to turning 65, attend a free seminar to learn all about the many decisions that need to be made when signing up for Medicare. In Indiana, Ohio, and Kentucky, contact Medicare Simplified.

5. Make sure your investment portfolio is diversified.

You should put no more than 4% in any one stock and no more than 15% in any one mutual fund. A fiduciary can help you make sure your portfolio is well diversified.

6. Investment costs are important – they reduce your portfolio’s returns.

Be sure you know how much your investment costs you per year and how much your advisor costs you per year.

Because stockbrokers are paid per trade or by commission, working with a stockbroker as a financial advisor can be costly. A fiduciary, on the other hand, is paid a percentage of your total assets under management. This means a fiduciary only makes money if you make money.

What’s the difference between a fiduciary and a stockbroker?  

You want to get the most out of your investment, so be sure that you understand your investment costs.  

7. Don’t withdraw too much of your investment funds in retirement.

If you’re withdrawing funds from your investments for living expenses, do not withdraw more than 4% of your total portfolio per year, or you risk depleting your assets sooner than you planned.

8. Pay off all debt before retirement.

Getting your debt settled is one of the most important money management tips for retirees. An investor cannot build wealth by borrowing. If you do not have a competitive interest rate on your mortgage, refinance it before you retire. If possible, pay off your home mortgage before retirement.

9. Minimize taxes.

Minimize taxes by keeping mostly stocks in your taxable accounts and mostly bonds and real estate investments in your tax-sheltered accounts, like IRAs.

10. Utilize qualified dividends.

If you are receiving dividends in your taxable investment account, make sure they are qualified dividends and not ordinary dividends. Qualified dividends are taxed at only 15%, while ordinary dividends are taxed at higher income tax rates.

11. Don’t move all of your investments to certificates of deposits.  

If you retire at 65, don’t move all your investments to certificates of deposit (CDs) and bonds.  What if you live 30 more years? CDs and bonds will not protect you from inflation. A new Chevy today at $30,000 will cost you $50,000 after 26 years with only 2% inflation.

12. Have a durable power of attorney when you retire.

Almost everyone over 18 years old needs a will and a durable power of attorney, a document that appoints a person or organization to manage your affairs if you are not able to do so yourself. Almost everyone with a home or significant financial assets needs a revocable living trust to avoid probate.

13. Determine a retirement health care plan of action.

Everyone over 18 needs a health care power of attorney, a living will (also called a health care directive) and a HIPAA waiver.

We hope these money management tips for retirees are helping you feel a little more prepared for your financial future. If you’d like more retirement tips, download “Saving for Retirement? Five Tips to Make Sure You’re on the Right Track.”  

Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.

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What is an emergency fund and why is having one important?

An emergency fund is a sum of money reserved for the unexpected curve balls life throws at you. Separate from your savings account that you may dip into for leisure, an emergency fund is something that you don’t touch unless, of course, it’s an emergency.

Why is an emergency fund important? The short answer is that life is unpredictable. Whether it’s medical bills, car troubles, a stock market crash, or job loss, building an emergency fund gives you financial security in a crisis.

How much money should you put in an emergency fund?

How much money should an emergency fund have? It’s different for everyone. The number of dependants you have, your monthly expenses, and the security of your job all play a role in determining the amount of money you need to put aside. Online tools, such as this emergency fund calculator, can assist you in sorting through those factors to decide how much you should save.

Our recommendation is to have at least three to six months of monthly spending in your emergency fund. However, this rule does not apply to retirees who depend on their investments for income. In this case, building an emergency fund with 12 to 24 months of income will prevent a situation where you have to sell stocks and bonds when the market is down.

Will your money be there when you need it to be?

In addition to being adequately funded, your emergency fund needs to be easily accessible. Therefore, the most important aspect of an emergency fund is its liquidity. Liquidity means you can use the money today by writing a check or swiping your debit card. When building an emergency fund, it is important to keep it in a checking account or brokerage money market account with check writing authority.

It’s better to be safe than sorry.

Understanding how to keep your money safe starts with knowing where to put it. You can protect your emergency fund by using an FDIC insured bank account, an NCUA insured credit union account, or a money market mutual fund.

How do you start building an emergency fund?

You understand what an emergency fund is and have calculated how much money you need to set aside. But, how do you go about building an emergency fund?   

Setting a monthly savings goal is one way to steadily put the money you need aside. Treat your emergency fund like it is a bill that must be paid after each pay period. After a few months of doing so, the task of building an emergency fund won’t seem so daunting.

Too many people do not have a sufficient emergency fund to cope with unexpected expenses. Understanding why an emergency fund is important is a start to ensuring financial security for you and your family when a costly surprise occurs.   

Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.

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