Financial Advisor News

Piedmont, CA

Financial Advisor News

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Piedmont, CA

by: ALISON VAN DYKE

FIRST AND MAIN FINANCIAL

(510) 601-1935

Oakland, CA | East Bay; Financial Planning and Advice on Anticipating Recessions

Is the Recession Coming?

Yes, we’ll likely have a recession at some point but not starting in the next few months without something currently unknown rearing its head.

Recessions are good. They clean the system of excesses allowing a new cycle to begin with better educated, more efficient and experienced players.

We’re in the longest growth cycle ever in the U.S. and there are a lot of reasons why our growth cycles may continue to get longer. But just because we’re in record territory doesn’t mean we have to have a recession right away. The general fear may actually be helping to prevent one because a little caution in the system helps curb excesses.

There are risks in the current global economy. Europe and China are not doing well but the problems are known and attempts are being made to ease a steeper slide. One could very easily argue both of those economic systems will always be at greater risk without significant systemic reform, especially in Europe.

Recessions can present wealth creation opportunities. When things are at their worst and people need to sell assets because they didn’t enter into the recession prepared, assets may be acquired at a significant discount. Being a buyer or a capital provider at these times of duress can help move the system along to a curative state.

For general personal financial health, it’s good to either run a pool of cash, the size of which depends on your circumstances, or have access to capital in case of emergency. Home equity, margin on investment accounts or loans from life insurance can be sources of capital for emergency or time sensitive investment opportunities. Rates on home equity or margin will most likely be relatively low.

If you are looking for financial guidance, whether it be for a one-time financial plan or continuing advice on your investments, we invite you meet with us here at First and Main Financial for a free consultation.  We would be more than happy to sit down with you, assess your current financial situation and review our services to help you plan for a better future.

Oakland, CA | East Bay, Managing Real Estate for Success in Retirement

Is it time to pay down that HELOC?

We recently had a CPA firm refer a client to us that was in need of financial assistance.  She was a 68 years old, recently retired widow.  She owned multiple rental properties and was in the process of a large home renovation when we first sat down with her.

We initially met with her and her daughter to gain a full understanding of her financial picture.  It was imperative that we learned about her goals and objectives in retirement.  She explained what her ideal living arrangements would look like.

Her income consisted of her late spouse’s Social Security benefit and rental income from two of her four rental properties.  Without making any adjustments to her situation, based on her existing income and expenses, she was on pace to run out of money within 10 years.  One of the first action items we suggested was to invest a larger portion of her cash for a higher return, which added immediate value.  We also reviewed her annual expenses to help define and fine-tune her retirement income withdrawal strategy based on a budget that she was comfortable with.  We evaluated her rental properties and their viability for generating income and helped determine which property to consider selling.  We prioritized which financial actions to takein a short-term, medium and long-term timeframe.

We recommended that an outstanding HELOC of approximately $190k with a variable interest rate (currently 6.5%) expiring in 2021 be paid down aggressively with available cash.  The rental property that was identified as a candidate to be sold was going through a major renovation.  It became clear that the benefit of the renovation would not offset the mounting costs.  The renovations were put on hold and a real estate agent was engaged.  It was suggested that the property be placed on the market as is.  Within a couple of months, she received an offer on the property.  Selling one rental property and then strategically using the proceeds to achieve the best possible outcomes based on various what-if scenarios that were presented during our financial plan review meeting, was identified as a key factor in her success.  We also recommended that she consider a bookkeeper who could help keep her retirement budget on track.

Gaining her trust was instrumental to the success of the financial plan and implementing the proposed recommendations.  We still have work to do, but she is now on a clearly defined path for success which will allow her wealth to last throughout her lifetime.  As her situation evolves, we continue to monitor and update her plan to keep her on the right track.

If you are looking for financial guidance, whether it be for a one-time financial plan or continuing advice on your investments, we invite you meet with us here at First and Main Financial for a free consultation.  We would be more than happy to sit down with you, assess your current financial situation and review with you our services to help navigate your own financial future.

Oakland, CA | Bay Area Financial Advice for 401(k) Plans and Business Owners

Advising on 401(k) Plans:

Over the eighteen years I’ve been servicing my clients’ financial needs, I’ve looked at the investment choices of literally hundreds of 401(k) plans on their behalf.

I’ve found the investment choices often surprisingly bad, the expenses high and the service by the assigned advisor essentially zero. There’s a system of smoke and mirrors in the 401(k) world where the advisor is supposed to provide expertise on the investment options used by the plan. However, if the plan uses actively managed mutual funds then it’s up to the plan to monitor the funds, discuss them, and potentially replace them if they’re not performing as expected.

Sometimes actively managed mutual funds can beat their relevant index over time but overwhelmingly they don’t. The few good funds may go through rough patches only to recover later. So what if the investment committee, in doing their job as fiduciary for the plan, replaces a fund that’s under-performing with a fund that’s about to under-perform? Or what if relatively orphaned plans never even really have their investment options considered periodically, either because the plan isn’t a big source of revenue for the advisor or the plan sponsor has their own business to consider as a top priority?

And is any of this necessary?

A plan can be put in place where the investment choices are either generic index funds or index funds and proprietarily constructed index funds (with a real chance of out-performing their comparable index). Under this format it’s then extremely unlikely the performance ever needs to be considered beyond ensuring the funds are acting as they should as passive investment vehicles. The advisor then potentially doesn’t have anything to do, and shouldn’t get paid much.

However, their role could become one of true service both to the sponsor and the participants; as we believe it should be. This entire structure should cost a lot less, the investment returns should be more reliable and the service should then be excellent and ongoing.

A trend for service to participants is help-yourself tools and educational materials but in my experience many people not only have limited understanding of how investing works but also feel a deep mistrust and are fearful of loss. Understandable, given the overwhelming amount of information available, coupled with most people’s natural aversion to loss.

Big firms also have a tendency, in their generic materials, to not offer real advice, but advice that’s unlikely to get them sued; no real work is done and no liability, at least in the current regulatory environment.

There are literally life changing moments to be had when plan participants reach out to an actual expert on investing and financial planning, which is what we offer in the 401(k) plans we service.

Excellent service, fair pricing and true expertise and perspective are available. This kind of thinking is counter, and possibly not even understood, by the broader transactionally based financial services industry, but real time attention and caring makes a real difference.

Oakland, CA | Bay Area, Financial Planning Confirms Financial Foundation

A Probability of Success:

Most clients we meet with need financial help, such as suggestions on how to start saving, funding college for their kids and what to do with their retirement plan at work. Janet, however, had a solid financial foundation and knew a lot about her own situation; she had saved for retirement and understood her 401(k) plan at work, she budgeted for her expenses and she had been consistently building her net worth.  She came to First and Main Financial looking for verification that she was on the right path to meeting her financial needs throughout her life.  She also asked us to identify 1) the earliest age she could retire, 2) how to best fund her retirement accounts to minimize her taxes, and 3) what she could do to help care for her mother who would potentially live with Janet.

We worked with Janet to gather her financial documents such as bank statements, trust documents and budget information, which she uploaded to our secure financial planning software, eMoney Advisor.  Janet was able to simply connect her bank and brokerage accounts to eMoney where we could review her finances.   We produced a base case scenario for Janet showing her financial situation at present.  We then created multiple “What If” scenarios, such as retiring earlier, funding a 529 account for her 11-year old son, and using different retirement accounts to minimize taxes.

Within each of these scenarios, we could project a “probability of success” of reaching age 95 with enough assets to live on.  While her probability of success was 100% in each scenario, we were still able to show her the positive or negative impact of these various scenarios on her total portfolio assets and net worth.  For example, by assessing her potential tax rates in future years, we showed her the positive impact of converting her existing rollover IRA account to a Roth IRA, generating an additional $850,000 in net worth and portfolio assets.

In addition to reviewing her finances, we reviewed her insurance (Life, Disability, Auto, Renters/Home, Medical, etc.) to assess if she maintained enough coverage.  We recommended that she get a quote for an Umbrella Policy to give her greater liability coverage above her auto and home insurance policies, especially since her net worth was significant.

After we presented the financial plan, Janet asked First and Main Financial to manage her assets. We offer a tiered fee schedule for our clients which Janet appreciated; like most of our clients, she considered this a good deal compared to the industry averages and starting rates usually charged by other firms.  We also provide clients like Janet with quality and individual attention as well as complementary guidance on existing 401(K) money.

If you are looking for some financial guidance, whether it be for a one time financial plan or continuing advice on your investments, we invite you to meet with the First and Main Financial advisors for a free consultation.  We work with a variety of clients, some like Janet who know a lot about their financial situation and with others who may not fully understand what they own or need to do.  We would be more than happy to sit down with you, assess your current financial situation, and review with you our services to help you navigate your own financial future.

Berkeley, CA – East Bay Financial Planning Services for Managing College Debt

Tackling Student Debt and Other Financial Goals While Growing a Family

We recently had a younger couple under the age of 40 approach us to help them with their financial future and develop a plan that prioritizes what is most important to them.  They have a young child and have recently moved into a more spacious rental property to accommodate their growing family.  Both parents are high-income earners with master’s degrees, but both parents are saddled with large amounts of student debt; more than $300k between them.  They have recently consolidated and refinanced their student debt, but currently are not eligible, due to high debt balances, for the better, lower-rate, refinancing programs offered through private banks.

After meeting with them to review their overall situation, we learned about their financial goals and priorities.  We discussed their thoughts on additional children, retirement, housing preferences and goals for education.  The challenges they face with funding multiple goals became apparent right away.  It was critical to gain a full understanding of their current and future expense structure and also their family’s priorities. We engaged in a data gathering exercise to assess their overall financial situation.  As information was gathered, it was entered into our financial planning software, eMoney.  Leveraging eMoney for its annual cash flow projections and the ability to model ‘what-if’ scenarios were critical to making sure the financial plan being recommended would work throughout their lifetime.  An important component of their plan is to systematically reduce their student debt over time and simultaneously stick to a disciplined savings strategy that will allow them to make progress on all their goals at the same time.   In addition to paying off their student debt, they also want to save for retirement and education, as well as put money away for a down payment on a future home.  They are also looking forward to having at least one or possibly two more children, so their plan also incorporates ‘what-if’ scenarios with additional children to assess the impact that this would have on the overall financial plan.

During the analysis phase we went through many iterations of different savings options and eventually settled on recommended annual contribution amounts for retirement, education and a future down payment, while simultaneously paying down their student debt with a periodic payment plan.  We projected what each amount would turn into when they expected to need to use the money, whether it was time to buy a house (projected in 6 years), time to pay for college and of course a tax-efficient retirement withdrawal strategy for when they were expecting to retire.  We also outlined when their student loans would be paid off and recommended that they refinance their debt as soon as they become eligible for some of the better private refinancing programs.  Although their student debt will take time to pay off, having a set plan in place with milestones and a projected amount of wealth at end-of-life will help to keep them on track and not lose sight of their goals.

In addition, we walked them through recommended amounts of life and disability insurance and referred them to trusted agents in the Bay Area to help them with determining the right amounts of coverage for their specific situation.

After our presentation, we also assisted with rolling over a couple of older 401k plans from previous employers, so now they both have a single IRA with First and Main Financial in addition to their employer retirement plans.

Within the first year with us, we have already re-visited their financial plan due to a recent job change which resulted in higher annual income and bonus amounts.  A financial plan is a living document, so we periodically make updates as needed over time to keep the plan on track.  All of our clients have ongoing access to an eMoney client portal where they can monitor their net worth, account balances, investment values and allocations, as well as spending/expense details, if this functionality is utilized.  It also offers a secure vault where important documents can be stored safely.

If you are looking for financial guidance, whether it be for a one-time financial plan or continuing advice on your investments, we invite you meet with the First and Main Financial advisors for a free consultation.  We would be more than happy to sit down with you, assess your current financial situation and review with you our services to help you navigate your own financial future.

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BIO: At First & Main Financial, Alison Van Dyke helps clients with their financial lives. She has worked in Corporate Finance for Bank of America and Chase Manhattan Bank. Alison is pursuing the CFP® certification; she received her MBA at Georgetown and her B.A. in Political Science from UCLA.

235 Wildwood Avenue,
Piedmont, CA 94610, USA

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Piedmont, CA 94610, USA

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BIO: At First & Main Financial, Alison Van Dyke helps clients with their financial lives. She has worked in Corporate Finance for Bank of America and Chase Manhattan Bank. Alison is pursuing the CFP® certification; she received her MBA at Georgetown and her B.A. in Political Science from UCLA.