Ann Marie Pascarella: About that case that we we’re talking about. I have an issue with the clients, she has built his wealth, we have it ready to go into a trust but she has some additional money that we just didn’t know what to do. Do you have any suggestions?
Kevin Chau: Well it depends on the client’s situation, if she’s looking to take income from the trust. Maybe portfolio of tax re bonds. Maybe something that she can look at, another way to secure income is to look at government bonds, what’s going on in the world now, in the economy. She may want to lean towards the safe side, maybe look for something that is highly rated; either backed by the government or maybe a triple an entity that would make some sense for her.
Ann Marie Pascarella: What about do you suggest, well she has built a bit of money over the time. I don’t necessary think I need to get her all that much income. I kind of want to do more of a retirement, not much retirement but I want to plan up for the children so they can take over so I’m going to set one trust that’s going to focus more on the inheritance aspects. What kind of vehicles that you recommend with that?
Kevin Chau: I would probably look at everything that she has. Put together comprehensive plan, looking at what she’s looking to accomplish for her children, looking at the age of the children and maybe a portfolio that is going to be a mix of both growth as well as income. For instance, for most individuals that are let’s say, moderate investor, not aggressive, not conservative, just looking at the age, that should be the amount, the percentage that should be in, let’s say safe investments which we talked about bonds, CDs, cash,. The other half, let’s say a 50 year old, a 50 would be in safe, 50% would be in to something that can show her long term growth over time and it may be that versify basket of mutual funds, maybe Blue Chips stocks, something that’s going to keep the state growing and keep them ahead off inflation.
Ann Marie Pascarella: Well how do you deal with the clients or someday like myself who’s ultra conservative and I don’t want t go risky. Do you encourage, do you set it up? How do you explain to me that a little risk is good even though I’m going to be like a no, no, no, conservative?
Kevin Chau: One of things we do, we sit down with the client and we let them know what risks are involved with each asset class. Equity obviously has the best long term return but also have the most volatility. When we set up the portfolio, we show them what the best case, the worst case scenario is over a time frame, maybe ten years, maybe twenty years. So this way that that knows if they can stomach certain amount of volatility and they take a longer-term approach, that’s usually one of the best ways to explain to your client because having everything in ultra safe especially now with the very low rates that are out there. CDs are paying in where between 2% to 3%. Inflation is about 2% or 3%. You may wind up with the portfolio, that’s just keeping you status quo without showing any growth over the long terms.
Jonathan D’Agostino: With the economy being the way it is, it works that most common, question you’re faced with clients. I mean that is, I know from just, I’m talking to people out there, they don’t know whether they should step into the market now, wait hold their money or take advantage of some opportunities.
Ann Marie Pascarella: Put in under their pillow
Kevin Chau: Yeah.
Jonathan D’Agostino: Keep it in the pillow case or go shopping, bargain out there.
Kevin Chau: All of the above would be the correct answer. A lot of folks stay, they look at the television, they look at the media, they hear advise form all different areas and it’s almost they are being whip czar, they are looking at what’s happening on the market, on the day to day basis and as a certified financial pioneer, what we usually recommend is just take as long term approach. Since 1944, we’ve been through 11 recessions and we’re going through one now.
Ann Marie Pascarella: I don’t think what they’ve been to that money.
Jonathan D’Agostino: We’ve gone through 11 recessions.
Ann Marie Pascarella: Right, exactly.
Kevin Chau: Yeah. So if you take a longer term approach, make sure that the investments that you’re making now, not because you wan to buy and sell today but the real reason why you’re investing rather is to retire for the long term, to leave a legacy for the children. To maybe even help your children’s children, if you focus on that and you align your investment portfolio with the right type of investments over the long terms and you look at the long term results, not just what happened over the last year and a half at bear market. But what the long terms returns has been over the last 60, 80, 100 year, you want o align that too, those goal. No one just invests, just invests, people invest for a reason.
Jonathan D’Agostino: So do you preach things like dollar cross the averaging?
Kevin Chau: Yes. That’s a great tool especially during the uncertain time, you want to make sure that you put a certain budget around and you want to put moneys in equally throughout maybe 6 months, 9 months so that’s why you’ve dollar cross average in rather if the market is down or off. So at the end of the investment term, you wind up with a good average price. Because we do think that we’re going to make it pass this recession. There are a lot of companies that are out there that are doing well even during this time. And when things turn around rather, later on, this year, early next year, those who are getting involved now are going to look back and say, “Wow, we really got in that at some really under value reasonable points.”
Ann Marie Pascarella: So what you’re saying is that even in today’s economy, being a little risky is good.
Kevin Chau: I think there is a certain amount that you can put into the equities were we can have regardless of your age, especially if you’re looking at a situation where individuals saving for the children. You need some type of growth component, your portfolio.
Jonathan D’Agostino: I’m just thinking, you say risky I don’t think it might be the person who is actually investing that might be consider himself rotten. Some may say it’s too risky to invest today and somebody else may say this is great opportunity. I know 10 years from now, this thought that was 80 and is now 25 is going to be back up at wherever it goes because that product, we talked about GE; you know light bulbs are light bulbs.
Kevin Chau: Absolutely.
Jonathan D’Agostino: And we’re going to need light bulbs, you know, 5 years and not 10 years from now and where is was GE now.
Kevin Chau: Around little of a $10 we share which is
Ann Marie Pascarella: It has coming a lot of.
Kevin Chau: If you look at general electric, historically is training at a full time loan now in just about $10 or the single digit range so you have a very, very good point Jon. I think individuals with the long terms time horizon should commit a portion of their portfolio into equities because over the long term the last 100 years has really been nowhere else, you can see the returns from the equity market. If you’re getting involved for Blue Chip companies with strong balance sheets, companies that make products and services that we all need.
Jonathan D’Agostino: Right. And I think that whenever something like this happens to the economy, they are always 100 people that can capitalize on it and make a lot of money in the future. There are people out there that are hunting for properties, you know because they are more, virtually it’s low, the properties are, the values inflated, the fore closures, scoop them up, buy them, stop, pick, your bargains and then know that 10 years from now, we probably going to be sitting pretty.
Kevin Chau: Absolutely and the toughest decision now and we mentioned is to an advisor client to get involved for some equities or to get involved with something that looks risky due to the economic condition that we’re in but if you look at the long term, this are the same assets that coming over recession, that’s going to show the best possible return so it makes a lot of sense.
Jonathan D’Agostino: When you meet with a client to discuss a state planning, at what point do you decide to bring in a financial planning.
Ann Marie Pascarella: Usually when we do this, they plan it, a confidential question in a year and we start heeding on al their assets and we start looking at what they have in the bank, what do they have in the bank with that bounce, do they have annuities and a lot of times, you’ll get people who just have bank accounts and all that was bank accounts and maybe they’ll have CDs and that’s the most planning that they’ve done. At that point in time that’s when we recommend that financial planning to come in because that’s where they do need to start setting things up and it works for us too because it allows us more ability when we’re trying to help them shift assets if they are doing certain kind of break trust and things of that nature. It allows us to help them more when the plan is coming in, making the recommendations based on the assets that they have.
Jonathan D’Agostino: So they find that the generally they need to be educated on the need.
Ann Marie Pascarella: I think everybody needs to be educated. I think even people who are savvy, there are certain areas that they don’t know, some may be really good at dealing with bonds or maybe stocks but some of, I mean I don’t know anything annuities so I think everybody needs some education and that’s why I think a state planning, a financial planning really do go hand in hand when you put it together.
Jonathan D’Agostino: Okay, how about you, when you sit in with the client, when do you recognize the need for a state planning
Kevin Chau: Usually when a client comes in, we really survey them, what are there short term, medium term and long term goals and as we’re talking a survey and we put together a financial criteria for them, we ask them, well what have you done in a way of a state plan, do you have a will? A lot of folks mentioned that they do have something in place but it may be drafted 10 years ago. Yeah.
Jonathan D’Agostino: Life’s has changed.
Ann Marie Pascarella: People have changed.
Jonathan D’Agostino: Children have grown.
Kevin Chau: Children have grown and additions to family so that’s when we usually get a hold of amber and recommend them to work with a qualified state attorney who really understand what their needs are.
Transcription by:
Scribe4you Transcription Services