Where four advisers think Wall Street’s conventional wisdom is wrong

Financial Advisors


“Conventional wisdom” has many advantages. Who would dispute the notion that practice makes perfect, or that every penny saved will earn him a penny?The conventional wisdom offered by financial advisors is usually solid, too. But sometimes common sense collides with experience and must be questioned.

In this week’s Advisor’s Big Q, we asked financial advisors to explain areas within their industry that disagree with conventional wisdom. We have found that there is a lot of disagreement when it comes to topics such as budgeting, planning and investing.

Crystal Garrett, Financial Advisor, Tiras Wealth Management, said: One topic that comes up often is when to start Social Security. Traditional advice suggests it’s better to wait, but I often advise my clients to think a little more about their decisions. While we recommend waiting in most cases, we believe that people with high retirement income or large investment balances should consider starting early. The straight-line break-even period for waiving annual payments is approximately 14 years. However, if the client is leaving the company and you are certain they will not return to work, you may want to consider starting early as there is a risk that the system will change and not provide the full benefits later. increase.

We know the system will need to change in the next decade or so, but it’s not clear what changes Congress will make to ensure the long-term health of the system. Many retirees are unaware that the “means” test was added already in 1993. At this point, the retiree earning above the threshold began having to pay income tax on her 85% of benefits. We are concerned that our clients may be impacted by such future benefit cuts. In addition, the impact of getting Social Security and continuing to grow our other assets will extend our breakeven point. may be There’s no way to know the correct answer without looking back from the future, but I think the typical knee-jerk reaction deserves further consideration.

Erin ScannellCEO, Heritage Wealth Advisors: There are many conventional wisdoms that I dislike. One of the most frustrating examples concerns Wall Street’s message to consumers during uncertain times. When markets fall, Wall Street tells us not to do anything. Recover. ” It is a proverb to stroke the head. That advice is certainly better than panic. Plus, it feels good to take action. When people feel anxious or stressed, they don’t want to do anything. When we are frightened, our brain releases cortisol, the fight-or-flight hormone. The key is to do the right thing.

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Sure, markets recover after recessions, but what can be done in the interim to increase the chances of portfolios recovering and recovery being healthier than usual? What are the actions taken before and during the recession that some of the people in the world are taking? Not only certain wealthy individuals, but also endowments, pension funds, foundations, etc.?

Cheryl HollandPresident, Soroban Planning Group: One common myth that I disagree with is that you need a budget to manage your cash flow. In my experience, clients who save, share expenses, and don’t have a lot of mortgage or consumer debt don’t need a budget.80% of my clients say they’ve never made a budget . I think it can be powerful to understand where your money is going and have a budget if you are overspending or if there are differences in spending habits between couples.

Another idea is to reduce your retirement spending. You can see that the client’s monthly spending is fairly stable. You may have paid off your mortgage before retirement and no longer have to direct your funds toward retirement. Greater medical need. And another questionable myth is that money undermines a child’s work ethic. If children are given values ​​about money, work, and purpose in life, and given them the skills and experience to manage money, I see no conclusive evidence that equates money with a loss of work ethic.

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Andrew Busser, President, Family Office, Pitcairn: I think many advisors fall into this kind of thinking trap during times of uncertainty. If you sell it, you will only lose money. One of the few things we know for sure about investing is that 100% of the time, when the market goes down, it will hit new highs again. The worst thing you can do in uncertain times is to do anything. In times of market stress and emotional stress, advisors are much less likely to do anything that adds value.

Another part of conventional wisdom concerns volatility. Advisors tend to think, “I have a portfolio here that could be the bulk of the client’s wealth.” Others feel the need to minimize volatility. Don’t worry too much about volatility unless you plan to retire in the next 10 years or more. ” Probably not. Having many ties in that situation is unlikely to work for clients or advisors.

Please contact advisor.editors@barrons.com.



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