Most financial professionals will give you their credentials, which will include the professional organizations they belong to. Here at Step By Step, one of our longtime associations is NAPFA: National Association of Personal Financial Advisors. In fact, many of our referrals come from their handy “find an advisor” function on the website. Every advisor is required to pledge a Fiduciary Oath annually (no sales commisions for products, complete disclosure of business practices) and adhere to a strict Code of Ethics. They provide ongoing continuing education for affiliated advisors and are often noticeable in the public sphere, promoting integrity in the financial profession. Step By Step is proud to be a part of NAPFA. We hope you’ll take 40 seconds to view their latest video: The NAPFA Story. It gives a great background introduction to how it came to be and it’s mission.
Top 5 Initial Interview Questions
One of my favorite parts about being a tax and financial advisor here at Step By Step is getting to know my clients. Relationships are the foundation of society and without a strong, trusting, confident one there is little I could do to effect positive change in the lives of my clients. One of the ways I can start building that relationship is by being as forthcoming as possible during an initial interview with potential clients. To that end, I have taken the time to pick the 5 most common questions asked by potential clients in my practice, and to provide a summary of my answer to each.
1. How much does your service cost? This will vary depending on the retainer agreement, but the minimum fee is $800. Our goal is to provide each client with more value than the cost of the service. If I don’t think I can do that, then I will tell you upfront (and I have!). In that case, it’s not worth your money or our time.
2. Why can’t I do this myself? This answer might surprise you, but you can! Why don’t you? Another example would be that I could represent myself in a court of law, but I don’t. There are professionals for a reason and a financial advisor, like a lawyer, has specialized training to practice their specialty with much greater efficiency than someone without it. It’s the value of time. You pay someone else to specialize in one area so you can concentrate on your area of expertise.
3. I just need <fill in the blank>, why are we discussing all these other issues? Our practice focuses on holistic advice that will help your entire financial health. If I were to help you mitigate the symptoms but didn’t try to cure the illness, what good would that do you in the long run? Yes, we can help with the urgent issues but I am always going to ask broader questions to make sure there aren’t other influential factors that you might not realize are there.
4. I don’t know what to ask; if you were in my shoes, what would you ask? The questions I would ask someone I was interviewing to be my own personal financial advisor are: How many clients do your work with? Will I get released if I don’t meet your minimum assets? Will I get the same level of service as someone with a higher value of assets? What are your credentials and why do they matter? If you get hit by a bus tomorrow, what happens to my information and the work you’ve done for me?
5. Why should I choose you over other advisors? You should work with Step By Step if you like me and if you value what we can do for you. It’s that simple!
Retiring Soon? Do You Have all Your Questions Answered?
If you are looking at retiring soon, do you have the answers to the questions to adequately prepare for this time in your life? I have listed below and also included in the video typical questions I help clients answer. If you have these questions, you may want to consider seeking out a financial planning professional.
- Will I outlive my retirement savings?
- What will I spend my time in retirement doing?
- Will social security be available to me?
- Should my annuity really be inside of an IRA account?
- How much money do I really need to retire?
- I want to retire early. How much should I be saving now?
- I am a teacher. What pension payout option should I select?
- What will be my cost of living in retirement?
What Should You Expect from Step By Step Financial
SBS_What_to_Expect (Click here to listen to short audio version of this blog.)
What should you expect if you engage Step By Step Financial for holistic tax and financial planning services?
1. Straight Talk
2. Easy Access
3. Value for Your Money
4. All-Inclusive Approach
5. Adaptive & Ongoing Service
Looking for a Planner? Want to know who we serve best?
I often get asked who would be a good fit for the services we offer here at Step By Step Financial. Well just watch this short 2-minute video and you will find out.
Five Factors that Influence Your Investment Decisions
When you are making an investment decision, it is important to remember these five factors and the how they effect your decision-making process. These variables include:
1. Time Horizon
2. Risk Capacity
3. Expected Return
4. Asset Class Preference
5. Tax Status
Looking for a financial planner? Consider a Fee-Only Adviser
Are you looking to work with a financial planner? Are you confused of who you should contact? Do you know how the adviser you are meeting with is getting paid? Do you want someone who is working for your best interest? Consider the benefits of working with a fee-only adviser who is held to a fiduciary standard. Check out the video above for more details.
Common “Do-It-Yourself” Tax Preparation Mistakes
I find three of the most common “do-it-yourself” tax preparation mistakes include capital gains, business asset depreciation and rental home cost basis.
Many people do not know the difference between short-term (1 year or less) and long-term (1 year and 1 day+) capital gains tax treatment. I have met individuals who had to pay more in tax then necessary because they sold their asset within a day or two of it becoming a long-term asset. Knowing the difference between short-term and long-term capital gains can save you up to 20% or more on your federal return. If you receive an inherited asset, it is deemed to be a long-term capital gain and it receives a step-up in basis. This means your basis is what it was worth on the day the grantor died. If you have capital gains on your return and/ or your received an inherited asset, I strongly encourage you to seek out a professional and competent tax professional.
Moreover, another area worth significant tax savings on your return is calculating and planning your business asset deprecation correctly. I have had to amend many returns to correct their depreciation schedules. It is important you keep your purchase documentation for business assets and allow your tax professional to determine the best course of action in preparing your depreciation schedules. Many times, if I have a start-up business, it is more advantageous to depreciate business assets rather than taking a Section 179 expense deduction. If your business is showing a loss even before you have calculated depreciation, it is probably not in your best interest to expense the asset.
Finally, cost basis tracking on rental properties is another area where I see common mistakes. This is especially evident with converted personal to rental property. If you convert your home from a personal residence to a rental, your basis for depreciation is either the FMV (Fair Market Value) or adjusted basis at the time the property was converted. The adjusted basis is the original purchase price of the home in addition to many improvements and purchasing expenses. The basis for your rental property is the lower of these numbers (current FMV or adjusted cost basis).
Unless you have a very simple tax return, I strongly encourage you to seek out the advice of a competent professional. Tax preparation work is very tricky and can cost you in the long run if it is not done correctly. If you have capital gains, business depreciation or rental property on your return, I would consult with either a CPA or Enrolled Agent before filing your own return. The value of a good professional should far outweigh any fee they may charge.
Proactive Tax Planning Strategies
Many people fail to plan when it comes to taxes. You can save significant amounts of money regarding your tax liability if you are willing to be plan. Below you will find some proactive tax planning strategies:
1. Learn the range for the marginal tax brackets. You can find these at http://taxes.about.com/od/preparingyourtaxes/a/tax-rates_2.htm. With some planning, you may be able to reduce your taxable income so as to be taxed at a lower marginal rate.
2. Evaluate your investments and make sure you not only have them allocated appropriately, but also determine if they are in the most tax-efficient vehicle. See previous blog entry regarding asset location at http://stepbystepfinancial.org/blog/2009/06/14/asset-location-an-often-overlooked-aspect-of-investing/
3. Fund your available retirement plans as much as possible. Don’t just contribute what the company gives you as a match!
4. Document the non-cash charitable contributions you make to organizations, such as Goodwill and Salvation Army. You give more than you realize.
5. Keep track of miles for business, unreimbursed employee expenses, charity and medical.
6. Use your investment losses in your non-retirement accounts to offset gains.
7. Be mindful of potential state tax deductions for contributions to 529 college savings plans.
8. Consider Donor Advised Funds for charitable purposes.
There are many other potential tax planning strategies so I encourage you to speak to your tax professional for ideas and suggestions. Tax preparation is nothing other than “documenting history.” Tax planning is where the real money is saved. I encourage you to take some time before the end of the year to see how you can proactively plan to reduce your 2010 tax liability.
Virginia: Update: we got the pre-approval letter! The realtor took us out to v...
Chuck Rylant: These video blogs are very helpful. I think time horizon is what many ...
Chuck Rylant: This is very helpful information. Good basic foundation information an...
Elliot Taylor: Kevin, cool blog, I like how it's right on the site and conversational...
Brigette: That is great info. I agree that a shredder is a necessity. You can'...