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Improving Investor Behavior – Doubt, Sold with a Smile

Note

This article originally appeared in the Denver Post, March 17, 2019.

Financial advice is usually broken into three steps. First, define your goals. Where do you want to go? Next comes a plan. This is the recipe for working toward your goals with actionable and measurable steps. Then comes implementation when you start your plan.

The first two steps lay out the “What” of your financial future; the last deals with the “How.” All too often investors make it through the first steps with optimism and progress, only to be led astray with the last. This is when experts, products, advertisements, advisors, and everyone else in the financial world tell you their way is best – and all the others? Well, they just don’t measure up.

Of course, this leaves investors with a problem. Who can you trust? The stakes aren’t small. This is a life’s savings for many. It’s the money investors will rely on for the next 30-40 years or more. But with so much doubt and confusion, how are they to choose in whom to trust?

It’s a hard question. Trust is built over time. Like exercise, it takes repetition. Do what you say you’re going to do when you say you’re going to do it, and always, always, act in the best interest of the client. But relationships take time to foster. If you’re looking for help, you may not already have a trustworthy relationship with someone in finance. So in blank-slate instances like this, I think it helps to examine the agendas of everyone involved. With a clear understanding of their “Whys,” it’s easier to make an informed decision.

Who are the players on the financial scene? I think there are four big ones: financial manufacturers, media, salesmen, and advisors.

Financial manufacturers are companies that offer mutual funds, bonds or other investments. They monitor demand and develop products that people think they want. Their sales are generated by uncertainty in the marketplace. Want to switch stocks? They will sell them to you and profit from the transaction. Want to add some bonds? Again, they will sell those to you too. When your doubt leads to an action, they generate revenue. As a business, their agenda is profit – not your financial future.

So, if manufacturers profit from doubt, doesn’t it benefit them to create more of it? In the media, a 24-hour news cycle has led to a focus on the here and now. In this fast-paced environment, “talking heads” share their opinions and financial forecasts with almost zero accountability. These differing viewpoints generate doubt, questioning, and in the end, change. Consider the number of sponsored talk radio shows, many of which are really 30-minute financial commercials. These shows help fund station’s operations. Again, as a business, their agenda is profit – not your financial future.

Next, we have financial salesmen and advisors. After 40 years in this industry, I’ve seen great salespeople and great advisors, but rarely are they the same person. How do you determine which is which? Ask yourself this: is this person helping me to transact or are they helping me to get where I want to go? Do they ask questions and listen? Do they really understand my goals, my fears and risks, my most significant opportunities, and my strengths? If so, do they help me along the way?

Investments in and of themselves don’t create peace of mind, income growth, generational wealth, or a lasting legacy. Products alone won’t do this. Does your advisor solve a problem or sell you a product? Are they a fiduciary who puts your interests first – before the company they work for and their own personal interests? Who writes their paycheck? If they work for a company, you might consider where their loyalty lies: to you or the company? This was one of the driving forces behind my choice to be independent. Without a company pushing products on me, I have the opportunity to provide clients with advice that works for them.

The goal is to find someone who’s agenda aligns with your own. Retirement planning isn’t a one-time project. It’s an ongoing partnership that works to ensure you have enough money, long enough, to find the freedoms you desire. It’s a large endeavor and one that usually requires a team of people to help tackle the complexities, paperwork, and strategies needed to make it happen. In choosing members of your team, examine their agendas to decide if the foundations of trust are there. Over time, let trust develop. If something doesn’t seem right, get a second opinion. This work may seem monotonous, but it can make all the difference in your financial future.

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Improving Investor Behavior: Managing Your Fears

Note

This article is set to appear in the Denver Post in about one week. We felt it was worthwhile to share with our clients now, given the events of the past few days.

Shark Week is among the longest running and most popular cable programs in history. First appearing 30 years ago in 1988, the show has since been watched and celebrated by millions. Why would a program about sharks and their danger be so popular? I think it plays on the emotion of fear, and more interestingly, people’s desire to be a little bit scared.

This is quite the paradox: some people enjoy engaging in an activity designed to make them uncomfortable. The same can be said for horror movies, especially at this time of year. In both circumstances, however, the fear is often wholly unfounded. Sharks are responsible for about six deaths per year, and I highly doubt zombies will be taking over the world anytime soon. Instead, people should be much more afraid of mosquitos with their death toll last year of more than 830,000 people.

My point is this: sometimes our greatest fears are the most unfounded. Whether it’s an oversized fish or monsters under the bed, our worst fears take up an oversized portion of our conscious and drive actions that can be damaging and counterproductive. Fear is a powerful emotion and one you must learn to rein in if you want to be a successful investor.

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Anxiety and Investing: Taking the Fear Out of Finances

The chances that either you, a loved one, or a friend have had an incident with, or an ongoing relationship with heightened anxiety are likely. Almost 20 percent of the population expresses some sort of anxiety disorder in a lifetime. It comes from a combination of genes and impactful experiences throughout life. Whether relatively mild, or the cause of full on panic attacks for the victim, it is a disruptive force.

Fear and worry can be associated with any number of events or circumstances, but I’ve found that finance can be a leading cause. This post is written for anyone who has anxiety around their money, or for those with a loved one who might. In either situation, it’s important to understand how to take the “fear out of finances.” In this three part series we’ll talk about how to Process, Plan, and Pursue more comfort and confidence in personal finances and investing, hopefully leading to decreased anxiety for those affected by this part of life.

As you get to know our “characters” by their “style of attachment” (the basis for how we think about and interact with our financial lives), I’ve written the characters to represent the extremes. You, or your peer / loved one, may not feel as strongly one way or the other as the examples, but you may find more similarities to one character than another. Wherever one finds themselves in the spectrum, they are not alone, and these processes can be put into practice for a confident future with your finances.

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A Retirement Plan Sponsor is Like the Pilot In Command of An Aircraft

The responsibility of being a retirement plan sponsor is like the responsibility of flying a group of passengers from one location to another. Are you and your team operating like a “pilot in command?”

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Improving Investor Behavior – Longevity and the Fear of Running Out

Note

This article originally appeared in the Denver Post, July 15, 2018.

When do you plan to die? Weird question, right? It’s one that financial advisors have to ask their clients. The typical approach to retirement planning involves spending down the portfolio, a lifetime of savings for a client, at a rate that will ensure they have enough to live on now and for the rest of their life. The hard part is knowing how many years a person has left.

If risk is defined as the potential of making a mistake, I believe the most significant risk facing investors and their retirement is judgment about their life expectancy or longevity. Live too long, and you’re liable to run out. Die young? Well, you can see the problem with this. It’s a variable that few people like to discuss, so it gets tossed to the backburner with a “let’s just say 85 and go from there” type answer. Ask a client how long they’ll live, and nine times out of ten they say they will die at the same age their parents did.

The problem with this approach is advancements in healthcare, education, and technology. I think most Americans significantly and consistently underestimate their life expectancies. Much of this is due to the increased rate at which people are living longer.

Life expectancy is increasing due to innovations in vaccines and antibiotics; they have indeed caused our health to be significantly better. Stories of pandemic flu today are solved in a matter of weeks or months, yet just 100 years ago it wiped out millions. Tuberculosis and polio were common in the early lives of today’s 70-year-olds. Today they are non-existent. Knee, hip, and shoulder replacements are common, as are cataract and heart stents, enabling people with worn out parts to lead active lives free of what used to be life-limiting pain.

When baby boomers consider their life expectancy, they are using a measuring stick for someone who was born in the 1930’s, expecting continuing improvements in healthcare. But advancements in the past 30 years have been exponentially greater. This creates a significant gap between the estimates of how long retirees will live, and how long they actually live.

More concerning is the combination of a couple in retirement, and their joint life expectancy. It’s like taking the same issue and multiplying it by two.

Data reveals couples live longer than single people. This may be attributed to caring for one another, socialization, and plain old love. Living for another gives purpose to your day. Rarely do people plan for and consider the life expectancy of a couple. In all actuality, the issue becomes even greater than the sum of its parts.

Education is also a significant factor in determining life expectancy. Today, the vast majority of our population is well educated. Educated people have higher incomes, and are more active, eat better, and more in tune with their health. If education is the trump card to longevity, today’s Americans may break out way ahead in life expectancies.

Underestimating your longevity is a significant risk and can become a large financial problem especially for those planning to retire in the next 20 years. Pensions plans cover the life of the individual, but as those plans are replaced with independent retirement savings, will retirees be prepared? Social Security may provide a base of income, yet it escalates at an anemic rate (only 2 percent this year, 0.3 percent in 2017, and none in 2016) and inflation has historically risen at 3 percent per year. This means the purchasing power of your Social Security income falls in half in just 35 years. Live ten more years, say from 85 to 95, and you might see another 35 percent reduction in your purchasing power.

According to a study released this month from The Senior Citizens League, the reduction in the buying power of Social Security benefits from 2000-2018 was 34 percent. Some of the largest cost increases during this period were medical related: Medicare Part V monthly premiums (195%), prescription drugs (188%) Medigap (158%) and medical out-of-pocket expenses (117%). (Source: https://bit.ly/2ItT6NW)

Living longer is a goal to which we should all aspire. With advances in modern healthcare and technology, the goal seems more attainable than ever. As such, we need to start accounting and planning for longer lives and the effect it may have on your retirement. Your investments should support you at all stages of life, whether that’s 65 or 105, especially when going back to work is no longer an option. If you haven’t already, talk with your financial advisor to discuss your longevity plan so your money doesn’t run out before you do.

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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My Dad’s Story

I work with people in many different ways, but one of my favorites is helping business owners retire the right way.

When my dad met my mom he told her he would be a millionaire one day.  He knew he wasn’t going to reach that goal by selling pharmaceuticals.  So, at 35 he took a big leap of faith. He left his stable salaried job with benefits to start a business selling used hubcaps to the consumer cheaper than they could buy directly through the manufacturer.

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Nelisha Firestone

Nelisha Firestone

As a mother and business owner, she knows life can get busy and is full of distractions. However, financial success doesn’t happen without some meaningful planning first. No matter your stage of life, she will help you connect with your goals and craft a roadmap to pursue financial independence Nelisha has 13 years in the financial services industry. She began her career at Edward Jones in 2004 then moved her practice to LPL in 2007 where she worked primarily out of the Coors Credit Union providing advice to their membership base. She’s married to a Colorado native and is mother to two young Daughters, Addison and Eden. They love to spend time in the great outdoors hiking, skiing, and camping to name a few.

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From Clutter to Clarity: What to Toss and What to Keep

By Michelle Santaferro, organizing expert and owner of Organomics

Like many during this time of year, you may have found certain documentation painful to retrieve and scattered in several locations.  But there’s good news: you can create a system to quickly file and find anything you need financially. Let’s look at the steps you can take to retrieve things quickly.

NOTE

Michelle will be speaking at our upcoming workshop on Friday, April 27th. Register today and join us!

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The Difference Between Financial and Investment Advice

There’s never been a better time to be an investor. Advances in technology have leveled the playing field in a truly unprecedented way. While these advances are great for you, they make offering value as financial advisors more difficult.

So as we continue to see improvements in technology I believe investment management will become more and more of a commodity. That means real financial advice will be a huge differentiator in the financial services industry. Anyone can create a portfolio, asset allocation or investment strategy. We are even told robots can do this with this concept called “Robo-Advisor”. What most people actually need is advice about how their investments fit into their overall financial plan, and more importantly their life. Believe me – robots cannot do this, nor do investment products do this. It takes an experienced, skilled, listening Advisor.

Both investment management and financial advice are necessary components for long-term success, but it’s important to understand the differences.

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Think $1M is Enough for Retirement? Think Again.

Remember when $1 million was a target goal on which to retire? Today, even that may not enough – especially for Baby Boomers getting ready to retire – and the situation is even worse for Gen Xers and Millennials.

The amount you’ll need in retirement depends on a number of factors such as:

  • How long you live
  • Where you live
  • Inflation rates
  • Your lifestyle

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Are You Fiscally Fit for 2018?

Are you ready to get “fiscally fit” for 2018? We want to help you work toward making this a successful and prosperous year, so we updated our checklist with pointers for getting a head start on the new year.

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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