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Fiscal fitness
Build wealth by avoiding common mistakes


June 2013

When it comes to wealth management, there are several ways good intentions can go awry. Our panel of experts outlines five common mistakes and advises how to avoid them. Knowledge is power, and in this case, itís profitable.

1. Pay Yourself First

Some people consider it a parental duty to provide for their children in the form of a college fund. Potential difficulties begin when parents allocate significant dollars to higher education while simultaneously underfunding their own retirement accounts. Michael Formella, managing director at Northwestern Mutual in Mequon, puts it simply. "You can borrow money for a college education but you cannot finance retirement." For those who might have neglected their retirement plans for an extended period of time, "It becomes very challenging to try and get back the time it takes to accumulate retirement dollars. One approach is to pay yourself first," he says.

2. Tune Out the White Noise

In our digital age we are overwhelmed with information that can be difficult to funnel, and headlines have been consistently negative about the markets and the economy. "People make snap investment decisions based on the headlines, and most often that is very damaging," says Blanche Berenzweig, president of JK Investment Group. On the market bottom of March 9, 2009, people pulled out of their investments at the worst time, when no one was buying. She emphasizes the importance of intellectual ó not emotional ó investments that address the actual need to reposition as opposed to selling in times of panic. Consulting a professional who can "tune out the white noise" will help your money work harder for you.

3. Pay Attention and Adapt

Kowal Investment Group provides two generations of specialized service in retirement planning. Financial adviser Aaron Kowal says you should avoid the "set and forget" mentality with your investments, or as company President Jeffrey Kowal describes it, an autopilot approach to your accumulation of wealth. "Ongoing attention is crucial," Aaron says. "Your situation will change and you will need to adjust your portfolio to adapt to those changes." He notes that key birthdays, especially 59 and 70, can affect your tax situation, health care eligibility and retirement benefits. Actively managing your investments will ensure you donít miss new opportunities or face penalties. "We invest in different ways at different ages," he says.

4. Be Aware of Fees

Working with a trusted firm and an expert adviser who has a disciplined strategy is effective money management, but personal responsibility is still required. Be sure to monitor annual fees paid to your professionals, trading commissions and mutual funds. Michael Sadoff is an investment adviser at Sadoff Investment Management, who says many of his new clients are unaware of the fees they pay, or if they are paying too much. He recommends that the total expenses of your portfolio should not exceed 1.5 percent. Even a small difference in interest rates can have a large impact on your investment returns. "Compounding fees add up over time. At a certain point, it gets excessive," he says. Be aware, and donít allow costs to overwhelm your returns.

5. The Rule of Three

Christopher S. Smith, senior investment consultant at Robert W. Baird & Co., has found that many people hire several financial advisers. He often poses the analogy, "How many dentists do you have?" Some might believe that more opinions will help them achieve maximum returns, but in reality, this can cause overlap in your portfolio, an increase in management fees, and it doesnít offer the benefit of buying in bulk. Smith does, however, suggest working with a team of professionals. "An accountant, estate planning attorney and a financial adviser are three trusted parties that go hand-in-hand," he says. Each should have a comprehensive understanding of your particular situation, an updated tax-efficient strategy, and the personal connections to work together for the common good.


This story ran in the June 2013 issue of: