Are My Dollar Bills Transparent?

Are My Dollar Bills Transparent?

In a financial advisory relationship, it is important for investors to understand the multitude of fees they may be required to pay.

When you walk into your CPA’s or attorney’s office, you sign an engagement letter, and pay a fee for their services; there are not a lot of hidden costs. Their engagement letter outlines expenses including charges for photocopies and interest charged on late payments. With your financial advisor, that may not necessarily be the case.

If you ask your financial advisor, “What is your fee?” the common response is, “a percentage of your Assets Under Management (AUM).” A percentage of your AUM is the percentage of money your advisor manages. So, if your advisor manages $1 million dollars, you pay $10,000 a year; some advisors charge more and some charge less. I read recently that a typical fee was 1.5% of AUM (Investment News).

A prudent investor seeking transparency, understanding and knowledge will ask about other potential fees, such as:

• Management fees;
• Sub-manager fees (if someone has been retained to manage a sub-portion of your portfolio);
• Sales charges;
• Transaction costs;
• Custodian fees (fees charged for the safekeeping of your securities and other administrative services like collecting dividends and interest);
• Performance fees;
• Mortality and expense fees (in certain investments like commission-based annuities);
• Mutual fund expenses;
• Operational expenses; and
• Surrender fees (in some annuities).

As an investment manager, I may go to a potential third-party money manager and say, “I’m looking at this investment for my client. What are their fees?” and they’ll typically reply, “The fee is x%, but  the client will only see your fee on the statement.” I’ll reply and say, “The client still pays the fee whether they see it or not. They should know what they are paying.”

My charge to you as an individual investor is to know what you are paying and why. Compose a list of questions for your financial advisor to learn exactly what fees are being charged, to whom they are being given and how they will impact you. Also ask your advisor to see all performance net of fees.

My charge to the financial industry is that all fees become transparent. Over a 20- to 25-year investment period, fees can add up and cost investors a lot of money. I understand we have to earn our living, and if we are prudent and fiduciaries to our clients, we will earn a great living. However, the fees need to get easier for our clients to understand. This is paramount in establishing trust with them.

As an investor, you can’t control what the markets are going to do, but you can control the information you have when you’re doing your own investing: minimizing your taxes, keeping fees low and staying ahead of inflation.

Our firm prides itself on giving you all the information so you can make informed decisions that best suit your needs.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

Announcing Strada Wealth Management, LLC

Announcing Strada Wealth Management, LLC

We are proud to announce that we are changing our company name from Failla Financial Management, LLC to Strada Wealth Management, LLC.

The name change is due to the significant change in our business structure.  Strada Wealth Management is now a fee-only Registered Investment Advisory firm and as always, our business activities will continue to include comprehensive retirement and income planning for families just out of divorce.

As a fee-only registered investment advising firm, we are able to truly assure our clients that our advice is objective and independent. Compensation never comes in the form of commission or trails (money paid to the financial adviser for chosen investments), and as a result, we are our client’s fiduciary.

Our former e-mail addresses will continue to be operational for the foreseeable future. Our new email addresses are as follows: jfailla@stradamanagement.com and ssakala@stradamanagement.com. Our web domain is in transition - www.faillafinancial.com will change in the near future to www.stradamanagement.com. We will continue to update you on our progress and improvements; we strive to be better for you, our clients. Thank you for all these years of trust in the firm.

Warmly, Jennifer Failla

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

Save the Date! Apr 17 - Why Collaborative Needs To Be a Part of Your Practice

Join me on April 17, 2014 as I present at the Collaborative Family Law Institute's event for Attorneys, Mental Health Professionals, and Financial Professionals on why your practice should be collaborative. See below for details. Hope to see you there!

Save the Date! Apr 17 - Why Collaborative Needs To Be a Part of Your Practice

Save the Date! Apr 17 - Why Collaborative Needs To Be a Part of Your Practice

For more information, please contact Lisette Beraja, LMFT at 305-858-7763.

Please click below to register or RSVP.

Register Now!

I can't make it

Thank you for your attention and response. We look forward to seeing you at the event!

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

Know What You Own for Your Own Sake

Know What You Own for Your Own Sake

One unintended consequence of getting a divorce is that it forces people to get their financial houses in order. Often clients come to my office and have little or no idea what is actually in their portfolios, or how much any of it is worth. One of the first things I do when I sit down with clients is to educate them as to what they actually own. We are most often paralyzed into inaction because of fear. We overcome that fear with education! We then discuss both the short-term opportunities and long-term implications of their holdings.

These are some of the questions to consider when evaluating your assets:

• How many accounts do I have, and what forms do they take?
• In whose name(s) are they titled?
• What are the tax implications of each asset? How does that affect my tax bracket? (see next blog article for more on that). 

One discussion I have quite frequently is explaining the difference to clients between two different, but somewhat similar, financial instruments within their portfolio: ETFs (Exchange Traded Funds) and mutual funds.

A mutual fund is a pool of funds collected from many investors for the purposes of investing in securities. An advantage of a mutual fund is that it allows an investor to participate in a selection of securities with a smaller amount of money. Your $100 investment might be able to buy small pieces of many companies for increased diversification.

An Exchange Traded Fund is basically a number of stocks packaged to sell like a single entity - same goal intended; you purchase lots of companies for a set dollar price. There are hundreds of mutual funds and ETFs on the market to sort through and understand.

Mutual funds have been around for a long time now, and most people are relatively familiar with them, but ETFs  are relatively new. Many people do not even know what they are, let alone how it might prove beneficial to their portfolios. Here are some of the key distinctions:

• ETF fees are significantly less than those of mutual funds: Typically ETF fees range from .5% to 1%, as compared to fees of 1-3% for mutual funds.
• ETFs can be more efficient: This is because they are traded intraday, not just after the market closes. If there's a buy or sell order you want to place, you can have it executed right away. You don't have to wait for the market to close, and for the managing company to go out and re-calculate its value before being able to make your trade.
• ETFs allow you to control how and when you pay taxes on any profits you make: Whenever a mutual fund realizes a gain that is not balanced by a loss, the mutual fund must distribute capital gains to all its shareholders. These gains are fully taxable to each shareholder, even if the profits are reinvested. In contrast, holders of ETFs only realize taxable gains when they make the decision to sell their own shares. This leaves the tax planning in the hands of the shareholder him or herself, not a fund manager.

If you are going through a divorce, the first glance at your portfolio may seem like the junk drawer in your kitchen, but that’s why professionals are here to assist you in understanding and evaluating your finances. Organize your accounts and understanding your holdings is critical.

Once all the assets are clearly identified, valued and tax-affected, you will understand how to make better strategic decisions regarding your financial future.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

I’m Officially Divorced. Now What?

I'm Official Divorced. Now What?

Once the divorce decree has been finalized and filed with the court, clients will often call me and ask, 

“What now? What happens next? Is my work with my attorney complete? So are we done?”

The short answer to that is yes. You have to consider the divorce process as somewhat transactional. Once the decree is filed, the relationship with the divorce attorney really comes to an end unless there is something that is further needed (i.e., modifications to the decree). It is not as if the attorney is itching to get rid of you, it is just that they have completed their scope of services with you until new services are needed. However, your work is not yet done. It is just beginning...

One of the reasons why attorneys call us in to meet with their clients for post-divorce wealth management is because we are very experienced in helping people transition from the words on the decree to their new life. When a decree has been finalized, and filed with the court, there typically is a list of action items that follow it.

Our firm helps clients establish what it is they need to get done right away, and what action items and tasks need to be completed in order for them to start moving on. We really focus on helping our clients transition from that very confusing time to a more stable time. That involves a lot of work, not just in the area of the portfolio, but in the areas of cash management, new tax situation, re-doing wills and estates and reassessing liability policies.

A simple example is the need to change beneficiaries on a life insurance policy, or changing beneficiaries on individual retirement accounts. Another is changing allocations of portfolios because there are no longer two risk profiles that need to be considered, or redoing their retirement planning based on one person’s needs instead of two.

The wealth management practice really is not just about reestablishing your asset allocation, but it’s about analyzing your current living situation in light of your new life and the needs that match your new life.

Typically, when someone gets divorced, they don’t know what to do next. I just advised on a case where we did not negotiate the divorce, but the wife was referred to us a couple years after her divorce was finalized. She still had not executed the Qualified Relations Domestic Order attached to her decree.

For two years, her money has been sitting in her ex-spouse’s 401K, waiting to be transferred to an IRA in her name. She hasn’t had access to these funds so that she can make investment decisions based on her needs and suitability. It was confusing, and sometimes when we are confused, we are paralyzed out of action; she needed guidance on how to move forward. Our firm clarifies that and sets out a path and course of action to help people transition, and not feel paralyzed by how to approach it.

Are you feeling like you are in that post-divorce limbo of not knowing what to do? If so, please feel free to give us a call or leave a comment in the box below. We would be happy to answer any questions you have.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

You Are Not Divorced?

You Are Not Divorced?

Lots of times people ask me why I do what I do for a living. “It is a hard job,” they say. I get a lot of comments on how depressing it must be. They assume I must have gone through some horrible divorce and that experience led me into my current profession.

I do chuckle and reply that I am a product of divorce. When I was little my parents divorced. It was your classic 1970 “war of the roses” marital break-up with my sister and I smack in the middle. My sister moved in with my dad and I stayed with my mom.

My mom had never managed finances and, at the time, she was given a lot of money. Instead of using budgets and planning properly for herself and us girls, she was really unfocused and, some would say, irresponsible. I remember having the lights turned off at times.

Post-divorce wealth management is not a traditional financial planning situation. I chose this specific market because post-divorce wealth management is professionally fulfilling and clients need the help. They know that we are not here to judge as they navigate through this trying time. We are here to help organize and create calm in a sea of confusion. We give them sound, honest, objective, but not always what they want to hear, advice to ensure they do not let their emotions run and ruin their finances.

I am in this line of financial planning because I have a passion for the client and believe in the work we do. I also know if clients have help with their finances, they can channel and use their energy in the right places to move forward and heal.

Years and many cases later, I continue to invest in this profession whether as a mediator or a collaborative financial professional. I can see how collaboration around finances and parenting plans benefits the children, the communication between the parents, and ultimately, the family.

I got into the business to help other people avoid the mistakes my mother made when I was a child, but I am still in it and more dedicated than ever because I see everyday how this work will help the next generation. We cannot change the fact that people divorce but we can change how they do it.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com