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The Journey: Simplifying Investment Portfolio Is Key To Financial Stability

The Journey: Simplifying Investment Portfolio Is Key To Financial Stability

By Janet Kidd Stewart, Chicago Tribune (TNS)

Q: We are 80 years old, retired, with assets of $1.5 million. I was an accountant and a practicing lawyer and handle all our investments. Despite spending what we want, our portfolio has grown every year. We are fully invested, mostly in equities but about 25 percent in bond funds. I have life insurance of $250,000. What should I guide my wife to do if I predecease her? I want her to be protected.

Financial planners want a percentage of our assets, but I’m happy with the income we’re earning now on these investments and don’t want her to pay a percentage of the assets for advice. Should I look for a planner who charges by the hour who could look at these investments to determine what changes she should make?

A: It’s hard to argue with success, but I’ll try.

Managing to live only on portfolio income in such a low-interest rate environment has been difficult in recent years, to put it mildly. The investment risk you are likely taking is quite high, however, and as you age the potential for your own mental decline and the increased risk that you’ll leave your wife a portfolio that’s extremely difficult to manage grows substantially.

Finding a planner who charges by the hour is relatively simple, and the Garrett Planning Network is a good place to start, but that’s not to say your task is easy.

That’s because what you really seem to want is an investment manager to perpetuate the complex portfolio you’ve amassed, without her ever having to make a decision. From the many financial advisers I’ve interviewed over the years, I can tell you the likelihood of that plan turning out well is low. Most widows who weren’t involved in financial discussions with their spouses or advisers when the spouses were alive will end up finding someone else to manage the money, for better or worse.

Rather than trying to manage a portfolio from the grave, you might consider working with your wife to gradually streamline your investments into something that can be managed relatively easily if one or both of you has a health issue or begins to decline mentally. If you want to retain control rather than pay an adviser for ongoing management, consider consolidating your stocks and mutual funds at a firm that has access to low-cost, index mutual funds. Over time, you could migrate the money to fewer funds that offer broad access to the market sectors best for you.

The financial services industry has trotted out a smorgasbord of ways to manage money in recent years, with varying degrees of human interaction and automated services, and costs for all of it have been trending down.

“The complexity of his holdings could be a real problem, even with his background,” said Rick Mayes, principal adviser with Mayes Financial Planning in Carlsbad, Calif. “I think even if he’s going to continue to manage it primarily himself, they both will benefit by streamlining the portfolio.”

If you do go that route, an hourly planner could help you project your wife’s future income needs once she’s living on one Social Security check plus the investments. That might illuminate a need to lower the risk profile of the portfolio now, particularly if her health is good and she could live another 20 years.

Such a planner could also help simplify your holdings and make sure you have an income buffer in ultra-safe investments — Mayes likes three years’ worth of expenses — so that if something happens to you, your wife wouldn’t have to begin selling off investments immediately. If you both develop a good relationship with the planner, it might be something your wife sticks with after you’re gone.

“I would simplify now rather than wait,” he said. “I’ve had a number of clients come to me with inherited accounts that haven’t been touched in years. It kind of puts the survivor on a tough path if she’s not comfortable managing it the same way.”

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Janet Kidd Stewart writes The Journey for the Chicago Tribune. Share your journey to or through retirement or pose a question at journey@janetkiddstewart.com.

©2015 Chicago Tribune. Distributed by Tribune Content Agency, LLC.

Photo: PRO401(K) 2012 via Flickr

Business Economists Report Solid But Slowing Growth In Third Quarter

Business Economists Report Solid But Slowing Growth In Third Quarter

By Jim Puzzanghera, Los Angeles Times

WASHINGTON — Business economists reported solid but slowing growth at their companies over the summer as gauges of sales, hiring and profit margins fell slightly from the second quarter, according to survey results released Monday.
Despite concerns about economic conditions in Europe, respondents in the quarterly survey by the National Assn. for Business Economics said they were more optimistic about overall U.S. growth than they were in July.
About 85 percent said they expected total economic output, or gross domestic product, to expand by more than 2 percent over the next year. That compared with 77 percent with those expectations in the last quarterly survey.
“Business conditions continued to improve during the third quarter, albeit at a marginally subdued pace from that of the second quarter, and the majority of the NABE Business Conditions Survey panelists report strong expectations for continued economic growth,” John Silvia, the chief economist for Wells Fargo Securities who serves as the organization’s president, said in a statement.
The findings are in line with analysts’ forecasts for solid economic growth in the third quarter of the year, but a drop-off from the strong 4.6 percent annual rate in the previous quarter. Part of that robust second-quarter expansion was the economy catching up from a weather-induced contraction over the winter.
Sales growth at businesses slowed in the third quarter, with 49 percent reporting rising sales, compared with 57 percent in the previous quarter, the survey said.
The group’s overall sales index, which includes the percentage of firms expecting unchanged and falling sales, decreased slightly to 42 from the previous quarter’s 45.
Sales expectations for the next three months also were down, the survey said.
The percentage of economists reporting increased employment at their firms dropped to 32 percent in the third quarter, from 36 percent in the previous quarter, and expectations for hiring over the next three months also was down.
With several indicators running lower, the index for profit margins was off as well.
Although 30 percent of respondents said their companies’ profit margins had increased in the third quarter, compared with 27 percent in the previous quarter, the percentage of economists reporting falling profit margins rose to 14, from 8.
That caused the profit margin index to drop slightly.
The economists also weighed in on their expectations for when the Federal Reserve will start raising its benchmark short-term interest rate, which has been near zero since late 2008.
About 77 percent said they anticipated interest rates to begin rising in the second half of next year or later. Their views are in line with Fed analysts.

AFP Photo/Matt Sullivan

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