Improve your wealth IQ in just minutes by reading through key questions and answers related to wealth management.

What Is Integrated Wealth Management and why do I need it?

How can I grow my portfolio to help reach my retirement and other financial goals while reducing market volatility and risk?

What impact will providing long term care to me have on my family and retirement portfolio?

How critical is Disability Income planning in my total wealth protection strategy?

What Is Integrated Wealth Management and why do I need it?

Integrated "Wealth Management" is more than just investments.  It encompasses a broad range of services and uses a comprehensive, integrated approach in order to accumulate and grow assets, while preserving, protecting, utilizing and (potentially) transitioning them in a tax efficient manner to future generations and charitable causes. Many firms today are advertising a Wealth Management service, however for affluent families and business owners, "Wealth Management" requires a high level of sophistication and complexity that most firms are simply unequipped to provide.  Select Portfolio Management, Inc. is a veteran in providing sophisticated financial services and delivers an authentic and satisfying "Wealth Management" experience to its clientele.

Every family is unique in its needs and desires for Wealth Management. Most however, share several of the following objectives:

• Accumulate Wealth
• Reduce Taxes
• Protect Assets
• Manage Risk
• Maintain Control over Personal Affairs
• Manage Cash Flow
• Increase Charitable Giving Potential
• Coordinate Estate Distribution
• Increase Control over Social Capital
• Allocate Assets more Efficiently
• Manage Family Business Succession
• Protection of family privacy and confidentiality
• Preservation of family values

How can I grow my portfolio to help reach my retirement and other financial goals while reducing market volatility and risk?

The foundation of our investment philosophy includes:

• Defining short and long term goals
• Using a disciplined investment process
• Creating diversification
• Controlling risk
• Mitigating volatility and risk
• Having a long-term perspective on investments

To create wealth, you must:

• Define your goals
• Collect current financial information to define where you are today
• Create a strategy to:
  • Enhance cash flow
  • Reduce taxes
  • Protect assets in varying economic conditions
  • Select investments and asset allocation that match your future short term and long term financial goals AND your risk tolerance
  • Protect you against loss of income or accumulated assets due to illness, disability, or death
  • Enhance your estate plan
  • Provide for business succession (if applicable)
• Implement your plan
• Update and modify your plan as the situation inside your life and environment outside your life changes
• Ongoing review of your plan to ensure you stay on target to meet your goals

Once I have grown my portfolio through the many years of saving and investing, how do I preserve my wealth and reduce my tax exposure (income tax, capital gain tax, estate tax, etc.)?

Wealth Preservation involves strategies intended to mitigate risk, while having your investments grow ahead of inflation and taxes.  During your lifetime, wealth preservation strategies also reduce your overall tax exposure.  Upon your death, it is intended to reduce or eliminate estate tax, while providing a continuity plan and orderly distribution of assets while avoiding undue legal costs.

People desiring to reduce taxes will typically seek out a tax adviser with technical expertise involving trusts, tax-exempt securities, or insurance policies. These tax advisers will often jump at the opportunity to implement a tool that will lower taxes.

Unfortunately, most planners frequently focus on just one of the various estate, gift, GST, capital gains, income or AMT taxes affecting a client’s wealth. This preoccupation with just one or a few of the six common taxes results in planning team members working at cross purposes and making bad assumptions about the client’s goals. Furthermore, as advisers combine different planning tools, they may realize how the tools compete for cash flow or interact in a way that undermines a client’s goal of eliminating all unnecessary taxes. 

SPM uses tax planning tools using a wealth management process that illustrates simple solutions to complex planning challenges.  We integrate tax planning techniques with other tools you may use for portfolio management, retirement planning, asset protection, business succession, or other objectives. The process of choosing and integrating tools requires an evaluation of your planning goals in full view of the vision that most inspires you.

Uniting a team of advisers to implement the most effective planning tools is much like bringing together the architect, electricians, plumbers, stone masons, and other builders to construct a dream home. SPM creates a “Financial Blueprint, so all the team member advisors can review the proposed overall architecture, building materials and then work in harmony to help achieve your overall financial goals.

What alternatives are there to investing in traditional mutual funds?

Investors have seen major shifts in the investment landscape over the past 10 years.  Until recently, mutual funds were considered the best choice for many investors because of the benefits they offered – professional management, diversification and low investment minimums. 

Today, more investors are choosing separately managed accounts (SMAs) as their investment of choice.  This is because of the many benefits that simply weren’t accessible to individual investors a few years ago.

• Institutional investment management
• Ability to customize portfolio
• Tailored tax management
• Single management fee for more services
• Easy access to portfolio holdings
• Personalized performance and tax reporting
• Morally and socially conscious investing

Will the same approach used in the Wealth Growth stage of my life be successful in the Wealth Utilization or Distribution stage of my life?

Longer life expectancies, future inflation rates and retirement spending habits must be accounted for in distribution plan modeling. While historic average returns may be a valuable starting point for modeling in the accumulation phase, distribution modeling is complicated by cash outflows. The central concern in the distribution phase is shortfall risk, or outliving one’s assets, so investors and advisers must develop a sound distribution strategy.  The new math of the distribution phase emphasizes the importance of downside risk management and the sequence of investment returns — particularly in the initial years of withdrawals. Standard deviations and calendar-year returns are incomplete measures of downside protection.

Creating sustainable retirement income portfolios is both an art and a science. Multiple uncertainties and assumptions complicate the task, as individual investors must balance portfolio stability and growth in order to meet future liabilities. Furthermore, portfolio withdrawals amplify the impact of market declines in the distribution phase. The shift from the accumulation to the distribution phase of investing requires new thinking about risk and risk metrics.

How do I leverage Estate Planning in my overall Wealth Management plan?

If you have a well-drafted estate plan in place, you'll ensure that your estate passes to whom you want, when you want, and is carried out in the manner you've chosen. You can rest assured that your family won't have to endure the public process, time and costly matter of probate. The government won't be able to take what you've spent a lifetime building. But you need to be aware of the many options that exist in estate planning - and you must choose your attorney wisely. That is why SPM works with the most experienced attorneys who understand how to integrate your estate planning requirements into your overall wealth management plan.

A properly designed Estate Plan can accomplish the following:

• Avoid the lengthy time and high cost of probate.
• Provide instructions for health care and life support decisions.
• Keep personal and business affairs private and confidential.
• Ensure control of all property, including pensions and life insurance.
• Leave explicit instructions for the care of loved ones.
• Create protective trusts for young children, disadvantaged children, adult children, and grandchildren.
• Reduce or eliminate estate and gift taxes.
• Control when and how your heirs will receive their share of the assets
• Allow continuation or sale of your assets and business

How can Charitable Planning fit within my total Wealth Management plan?

We all give away our wealth.  The question is whether you will let the government direct your philanthropy through the tax process or whether you will direct the giving through charitable planning.  SPM Wealth Advisors are experts in creating Charitable Giving strategies that meet your needs and reflect your values.

With Charitable Planning, you can:

• Reduce income taxes
• Reduce capital gain taxes
• Reduce estate taxes
• Reduce IRD taxes
• Increase transfers to heirs
• Increase transfers to charity

Can you think of a better way to improve your after-tax returns?

With its combination of favorable tax treatment, cash value growth, death benefit protection, premium flexibility, and investment flexibility, life insurance is a great solution for many financial needs that go far beyond traditional death benefit protection.  Essential to protecting your legacy, a properly structured life insurance policy can become an integral piece of your overall wealth management plan.

Some of the key life insurance applications are:

• Income protection for beneficiaries
• Asset Protection
• Tax-Advantaged Savings & Investments
• Tax-Advantaged Retirement Income
• College Funding
• Charitable Giving 
• Estate Planning tool
  • Pays federal & state estate taxes 
  • Increase wealth & liquidity outside taxable estate (Irrevocable Life Insurance trust) 
• Business
  • Funding Buy-Sell agreements
  • Key person Insurance
  • Executive Bonus plans
  • Non-Qualified Deferred Compensation plans
  • “Split Dollar” policies
  • Captive Insurance Company
  • Welfare Benefit Trust

Life insurance in Retirement Planning is a strategy to provide life insurance protection and the potential for supplemental retirement income.  A flexible premium universal life insurance policy can help you protect your family and may also be able to help supplement your retirement income needs.  Tax-advantaged loans and withdrawals from the policy account value can provide a source of supplemental income during retirement or in other times of need.

What Is Long Term Care?

Long term care is assistance-in-living that must be provided for an individual due to illness or injury. This may include full skilled care for the bed-ridden patient, or may only involve some assistance with Activities of Daily Living such as bathing, dressing, toileting, administering medication, etc. These services may be provided in the home, a long term nursing facility or an assisted-living facility.

Neither Health Insurance nor Disability Insurance will cover what Long Term Care Insurance provides. 

The issue aging baby-boomers need to address is not long term care insurance, but long-term care. Failure to consider the consequences of needing long-term care risks the emotional and physical health of your family and the integrity of your retirement portfolio. The question is not “Who will take care of you when you live a long life and need care”, but “What impact will providing long term care to you have on your family and retirement portfolio?”

Why is the need for LTC increasing?

“Baby-Boomers” are reaching retirement age and are living longer.  Unhealthy lifestyles are increasing the risk of stroke (3^rd leading cause of death and # 1 cause of disability) and advancements in medical technology is prolonging life for victims of heart attack, stroke, diabetes, dementia, MS, Parkinson’s, and auto & sports accidents.

What are the chances that I will need Long Term Care?

Industry studies indicate that approximately half of all persons reaching age 65 will need long term care.  LTC Insurance is NOT “Senior Insurance”.  Forty percent of people needing LTC are working age adults, ages 18-64. 

How much does it cost?

Costs vary greatly depending on nature of service provided and geographic location. Skilled care (the highest level of care within a long term nursing facility) can cost $4,000 to $6,000 monthly. The approximate range for Southern California is $175 - $250/day or $5000 - $7500/month.  With the average range of time requiring long term care being 3-6 years, this can become a $180,000 - $540,000 expense.

You will be taken care of whether you own long term care insurance or not. Long-Term Care Insurance pays for the types of care your family and friends will find most time consuming, stressful, difficult, and perhaps financially costly.  It allows your spouse or children to maintain their relationship with you as a spouse or child supervising your care, not providing it.

The odds of becoming disabled are greater at any age than are the odds of dying at that same age; yet many working adults have not made any provision to manage this risk. In many ways, disability is a more expensive risk to manage, since income flow would stop, as in the event of death; but in addition to that, there are usually extra medical and care-giving costs which actually increase the cost of living.

You might be surprised to learn what poses the greatest threat during the course of one year.  Your odds for risk are:

• 1 out of 114 that you will die
• 1 out of 96 that you will have a fire
• 1 out of 21 that you will have a disabling accident
• 1 out of 5 that your auto will be damaged in an accident

Source: Field Guide 2001, National Safety Council, World Almanac

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