Retire Wealthy: The Tools You Need to Help Build Lasting Wealth - On Your Own or With Your Financial Advisor - Softcover

Brotman, Eric D.

Softcover

ISBN 10: 1496911245 ISBN 13: 9781496911247

Publisher: AuthorHouse, 2014

Synopsis

Retire Wealthy, author Eric D. Brotman’s second book, aims to provide readers with the tools needed to achieve financial independence in retirement. Specifically, Retire Wealthy serves as a financial literacy resource for readers who want to learn the basics of financial planning and wealth-building – whether working on one’s own or with a financial advisor. This highly informative book breaks down investment principles and vehicles in simple language to take the fear out of financial planning and motivate readers to begin the journey to financial independence.

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About this title

About the Author

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Eric D. Brotman, CFP®, AEP®, MSFS is President and Managing Principal of Brotman Financial Group, Inc., an independent firm assisting clients with wealth creation, preservation, and distribution. Mr. Brotman began his financial planning practice in Baltimore in 1994, and founded Brotman Financial Group in 2003. He provides investment, retirement, estate, insurance, and comprehensive financial planning services for families, professionals, executives, and business owners. Mr. Brotman’s clients enjoy extraordinary client service from working with multiple CFP® Practitioners and a team of specialists.

 

Mr. Brotman holds a Bachelor of Arts degree from the University of Pennsylvania. He earned his CERTIFIED FINANCIAL PLANNERTM (CFP®) certification in 1998, and completed his Master's Degree in Financial Services (MSFS) at the American College in 2003. He is also a Chartered Life Underwriter (CLU), a Chartered Financial Consultant (ChFC), an Accredited Estate Planner (AEP®), and a Chartered Advisor in Senior Living (CASL). Mr. Brotman is a Registered Representative and Investment Advisor Representative with NFP Advisor Services, LLC.

 

Mr. Brotman’s 2nd book, “Retire Wealthy: The Tools You Need to Help Build Lasting Wealth – On Your Own or With Your Financial Advisor,” was published in 2014 by AuthorHouse as a follow-up to “Debt-Free for Life: The Tools You Need to Free Yourself from Debt,” published in 2009 by One Hour or Less Publishing, LLC. He is a 2006 alumnus of Leadership-Baltimore County and a 2009 alumnus of Leadership Maryland, where he is serving as Vice Chairman on the Board of Directors. Mr. Brotman serves on the Board of Trustees and is the chairman of the University Advancement Committee at Stevenson University, where he previously served as an adjunct faculty member, teaching financial planning and investment planning courses to CFP® students. He is a Past-President and Chairman of the Board of the Financial Planning Association of Maryland, and is serving on the advisory board for the Fusion Advisor Network, where he also facilitates study groups for financial advisors within their nationwide network. He is a member of the Baltimore Estate Planning Council, and the Maryland Chamber of Commerce, where he served as Chairman of the Business Development Council. He is a champion for financial literacy programs for high school and college students, and serves on the Business Advisory Council for the Comptroller of Maryland.

 

Mr. Brotman's practice includes clients ranging from individuals to multigenerational families throughout the United States. He represents numerous small businesses and medical practices and assists in the long-range planning for executive benefits and partner buy-outs. Mr. Brotman frequently gives seminars and workshops for companies, membership organizations, and fellow financial advisors, and he has been a featured speaker for educational and career conferences, where he has addressed groups as large as 1,500 people on topics related to financial planning, business succession planning, entrepreneurship, and insurance matters. He was involved in assisting families of victims from 9/11 on a pro-bono basis, and has counseled dozens of employees from major local companies at the time of their voluntary or involuntary separation from service.

 

Mr. Brotman appears regularly on television on 11 News Sunday Morning on WBAL in Baltimore, as well as in print in Wall Street Journal, The Baltimore Sun, Baltimore Business Journal, The Daily Record, Smart CEO, Investment Advisor, Fidelity Investor's Weekly, Investment News, Journal of Financial Planning, Wealth Manager, National Underwriter, Registered Representative, Entrepreneur, Baby Years, Life Association News, and American Way, the American Airlines in-flight magazine. He also publishes articles periodically on the Adviceiq.com website, and has appeared on the Morningstar Advisor, Financial-Planning.com, and Forbes.com websites. Mr. Brotman was recognized as one of the “Maryland Power Players” by The Gazette of Politics and Business in 2010 and was named one of the “Very Important Professionals” by The Daily Record in 2011.

 

Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), member FINRA/SIPC.

Brotman Financial Group is a member of Fusion Advisor Network, a platform of NFPAS. NFPAS is not affiliated with Brotman Financial Group, Inc.

Excerpt. © Reprinted by permission. All rights reserved.

Retire Wealthy

The Tools You Need to Help Build Lasting Wealth - On Your Own or With Your Financial Advisor

By Eric D. Brotman

AuthorHouse LLC

Copyright © 2014 Eric D. Brotman, CFP
All rights reserved.

ISBN: 978-1-4969-1124-7

Contents

Author's Background, xiii, 
Author's Purpose, xv, 
Chapter One: GETTING STARTED THE BASIC DEFINITIONS UNDERLYING RETIREMENT PLANNING AND WEALTH CREATION, 1, 
Chapter Two: PROCESS OVERVIEW THE SIX STEPS TO CREATING A FINANCIAL PLAN, 7, 
Chapter Three: TAKING INVENTORY WHERE YOU'RE GOING BEGINS WITH KNOWING WHERE YOU ARE, 33, 
Chapter Four: RISK MANAGEMENT ELEVEN COMMON DEFENSIVE TOOLS TO HELP YOU AVOID THE PITFALLS THAT CAN DERAIL FINANCIAL PLANS, 47, 
Chapter Five: PAY YOURSELF FIRST THE MOST IMPORTANT BILL TO PAY EVERY MONTH, 95, 
Chapter Six: INVESTING BASICS SIX DECISIONS YOU NEED TO MAKE BEFORE YOU START INVESTING, 100, 
Chapter Seven: PORTFOLIO DESIGN PRIMARY ASSET CLASSES TO CONSIDER IN YOUR MODEL ALLOCATION, 128, 
Chapter Eight: PUTTING IT ALL TOGETHER SUMMARIZING THE STEPS TO WEALTH BUILDING AND FINANCIAL INDEPENDENCE, 153, 
FINAL THOUGHTS: WHAT TO DO NOW, 165, 
APPENDIX A: SAMPLE FINANCIAL PLANNING QUESTIONNAIRE, 168, 
APPENDIX B:: SAMPLE PERSONAL FINANCIAL PLANNING DOCUMENT CHECKLIST, 181, 

CHAPTER 1

GETTING STARTED

THE BASIC DEFINITIONS UNDERLYING RETIREMENT PLANNING AND WEALTH CREATION

Money is one of the most sought-after and misunderstood concepts in our lives. While most people understand the intrinsic value of money and what it can buy, its many forms can be difficult to grasp, as can strategies for its use and deployment.

The concept of "money" is frequently confused with "currency," that is, the paper or coins that stand for various monetary values. If we asked people around the world to show us an example of "money," in most instances they would pull local currency out of their pockets or purses as a demonstration.

In truth, money is much more encompassing, and we'll examine how that is so.

We also need to define ambiguous terms like "financial planning," "retirement," and "wealth" in our analysis, as there are as many definitions of those terms as there are people defining them.

Let's begin our conversation with a few brief definitions:

MONEY: Wikipedia defines money as "any object or record that is generally accepted as payment for goods and services and repayment of debts." In practice, that could include items of exchange or barter, either tangible or intangible, as well as items with intrinsic value like precious metals, or what is otherwise a worthless piece of paper or non-precious metal in your pocket, but for the fact that everyone agrees to a value based on the numbers printed on it.

Some forms of money are readily accessible, and some are not. Some are generally acceptable forms of payment in various geographic areas, while others are not. For example, if I went to get an oil change in my car and in lieu of a few dollars I offered my mechanic some livestock (presumably worth at least as many dollars as the oil change itself), my mechanic would not be likely to accept that form of payment and would likely refuse to change the oil for me.

That unlikely example highlights the need to agree on a definition of "money" for the balance of this book. For our purposes, money will encompass any item of financial value—including intangible financial assets like bank accounts, insurance policies, mutual funds, stocks and bonds, and tangible assets like collectibles, artwork, automobiles, gold, etc.

FINANCIAL PLANNING: Throughout the book, the term "financial planning," will include the decision-making process around all assets, as well as cash management and budgeting, debt management, risk management and insurance, portfolio design, asset allocation, and estate planning. It will also encompass the qualitative decision-making processes around such things as employment, healthcare, family matters, and end-of-life planning, for example.

RETIREMENT: The term "retirement" strikes me as a bit of a misnomer. That is because the root of the word is "retire," and to retire is to "withdraw" or "retreat." I can't imagine why anyone would sign up for that!

The famous football coach from Florida State University, Bobby Bowden, who coached into his 80s, was once asked when he was going to retire, and he said, "I guess I'll retire someday if I live that long." He said that retirement was the next-to-last milestone in his life and that he wasn't ready to have his last milestone next up on his list!

The concept of retirement has been around for centuries. The idea was that people would work for their entire adult lives, until one day they either couldn't do the job anymore physically, or some other reason forced them to leave their employment. Within a short period of time, they were deceased. Sound like fun?

In the U.S., "retirement age" is often set as a somewhat arbitrary figure imposed by an employer or the government, like the age at which one becomes eligible for a pension or Social Security Income. However, when Social Security was created, most people joined the workforce by 18 years of age, worked until they were 65, and were dead by 72. Today, many people don't join the workforce until after college or graduate school (say 22 to 25), they want to retire at 55, and could live to be 107. Needless to say, the old model won't work in most cases.

Some people think of retirement today as working one job instead of two, while others think of it as time on their yacht in the Mediterranean. Clearly, they can't use the same definition or measuring instrument to determine what retirement is or is not.

For our purposes, let's use the following to define "retirement"—the age or moment in life when work becomes optional. That way, for those who want to start businesses after leaving the employ of another, or for those who want to get the gold watch and ride off into the sunset, everyone is covered by the same standard. When you have achieved enough financial wherewithal to eschew any and all income-producing activities other than those you want to pursue, in my mind you are "retired." In other words, it is the absence of needing to work, not the absence of working that defines retirement.

While we're at it, I would propose that we all think of "retirement" more along the lines of "graduation." A graduation is always something to celebrate—a new chapter, opportunity, or series of life choices. It is a new door being opened. Since retirement sounds like a door being closed, I prefer to think of the positive versus the negative and would rather experience the excitement of launching "Eric Brotman 2.0" when I retire, as opposed to withdrawing and retreating from life.

WEALTH: I am often amused at the media's constant misuse of the term "wealth." How many times have you read that one county or one state is the wealthiest in the country, only to find that what they mean is that the median household income in those areas is the highest? Let me be absolutely clear on this ... income does not equal wealth.

Income is nothing more than an accounting concept for the top line in a personal financial statement. It is a factor in wealth building, but it is not the defining factor.

Wealth is a quantitative measure of prosperity. It is also a qualitative concept, the idea that one "has wealth" or is a "wealthy individual." But wealth is also incredibly relative. As a friend paraphrases from a Bulgarian proverb, "to be wealthy is to be doing better than your neighbor."

Illustrated another way, comedian Chris Rock once quipped about wealth by saying that if Bill Gates woke up tomorrow with Oprah Winfrey's net worth, he would feel poor and want to jump out a window! On the other hand, I would manage to "get by" on Oprah's net worth, thank you.

Since everyone has a relative measure of wealth, for the purpose of this book, let's define wealth as having achieved financial independence through obtaining enough assets to render earning income unnecessary for the rest of one's life.

Of course there are several paths to immediate wealth—inheritance, the lottery, being a number one pick in the NFL draft, etc. But, since most of us will not inherit life-altering money from Great Aunt Sally, will not hit the Powerball™ jackpot, and will not play quarterback for the Dallas Cowboys, let's concentrate instead on how the rest of us can get there.

Thus, for our purposes, we are going to look to building wealth gradually, through making a series of financial decisions and crafting a plan to reach a level of prosperity that makes work optional. I will share some personal stories and examples along the way, along with insights to assist you in setting your vision and following-through on your course.

Let's start by discussing the process of financial planning.

CHAPTER 2

PROCESS OVERVIEW

THE SIX STEPS TO CREATING A FINANCIAL PLAN

Financial planning requires a series of steps that must be undertaken in sequence to be effective. As with any great recipe, adding ingredients or taking action out of order can adversely impact the outcome of a meal.

Certified Financial Planner™ Practitioners abide by a six-step process for financial planning as established by the CFP®

Board of Standards. Those six steps are as follows:

1) Establishing and defining the client-planner relationship.

2) Gathering client data, including goals.

3) Analyzing and evaluating your financial status.

4) Developing and presenting financial planning recommendations and/or alternatives.

5) Implementing the financial planning recommendations.

6) Monitoring the financial planning recommendations.

We will explore each of these steps in greater detail below.

1) Establishing and defining the client-planner relationship.

If you are electing to utilize the services of a financial professional, or considering doing so, it is important to establish and define the relationship first. To do so requires agreeing on several key points:

• What services does the advisor provide personally?

In other words, you want to know if the advisor provides recommendations on all of the services in a comprehensive plan, or only on a few services. If the advisor is a stock broker, for example, he or she might limit the scope of your relationship together to just your investment or retirement portfolio. In most cases, you'll want to work with someone who can bring your entire plan into focus and can aid in the execution of that plan.

• What are the fees and costs of doing business with this advisor?

There are several ways in which advisors are compensated, and they are regulated by the types of licenses held by the advisor, not by his or her professional designations. Only registered representatives or investment advisory representatives can earn fees for investment advice or commissions on financial products.

Advisors can be paid in a number of different ways:

• By a flat project or engagement fee

• By an hourly or other time-based fee

• By an annual (or periodic) retainer fee

• By a fee expressed as a percentage of assets under management

• By commissions for making transactions

If you are paying fees for planning services, generally you need to know if there are fees associated with each meeting or conversation, or if the services are bundled.

While none of these compensation arrangements is "good" or "bad" per se, I believe that the best way to get comprehensive advice is on a fee-basis or based on a percentage of assets under management. That way, a client pays an advisor to perform analysis and provide recommendations that are not tied solely to the sale of one or more products.

• How often will the advisor meet with you?

This is really a personal preference question and is often a function of the complexity of your personal finances. However you want to establish this upfront so that you aren't surprised six months into the engagement.

I know some investment firms that hold portfolio reviews as frequently as once per quarter, while others only meet with their clients on an "as requested" basis. I believe that the ideal meeting schedule is one full annual review meeting, along with a year-end planning call for tactical and/or tax decisions that need to be made by December 31st. An advisor and his or her team should also be available throughout the year when challenges or opportunities arise.

• How much communication can you expect on an ongoing basis?

In addition to personal meetings or telephone calls, what other communication can you expect from your advisor? Some advisory firms limit their correspondence to monthly or quarterly statements, while others mail out quarterly newsletters or performance reports, or send periodic e-mails with market news or planning ideas. Some host seminars for the public, while others limit their speaking engagements to private client-only affairs.

Ideally, an advisor should try to communicate frequently without being overwhelming, perhaps with a brief weekly e-mail and monthly electronic reports in addition to basic statements and confirmations. For any planning firm, it is a delicate balance, and one that is ever-changing based on the make-up of the firm's clientele.

• Does your advisor have other team members who are available to you?

Knowing the size and depth of your advisor's team will be critically important to you, especially if you value frequent communication with your advisory firm. In some firms, a single assistant may be servicing the clients of six or more advisors, while in other firms there may be a team of licensed professionals ready to assist with your planning.

If your advisor shares an assistant, you are likely with an organization that only handles some small portion of the financial planning process.

I believe that the ideal ratio is two assistants or staff members for each advisor, to make sure that there is depth at every position. Thus, if an advisor is out of the office, clients can continue to interact with the team and get the vast majority of questions answered or needs met.

• Who are the typical clients of this advisor or firm?

It is important to have a sense of who the advisor's other clients are to make sure you are a good fit. You'll want to know if you'll be an advisor's biggest client—or smallest one. You may also want to know, for example, if you'll be a 34-year old client at a firm specializing in planning for retirees.

In our firm, we work with multi-generational families, initially engaging with clients who are 45-60 years old and who have to worry simultaneously about caring for aging parents, educating children or grandchildren, and planning for their own retirement. We often work with our clients' parents and children and provide a full spectrum of multi-generational services. Other firms have their own niche clientele, and ideally you want to find a firm specializing in clients who are a lot like you!

• What is the advisor's planning and investment philosophy?

In an ideal situation, you want your advisor's philosophy and yours to be in harmony. For example, if you are risk averse, you may not want to work with an advisor promoting his or her short-term stock-picking success. Does your advisor believe in a buy-and-hold strategy with passive management, or does he or she try to time markets or make frequent tactical changes, and how does that correspond with your objectives? Does the advisor favor a more offensive or defensive posture to planning?

All of these questions will help you determine if the potential advisor is a good fit for you and your family on a personal level. These questions will not determine if the advisor is good or bad at what he or she does. Again, it is about specifically matching your preferences and personality with an advisor's.

• Does the planner represent specific companies or products?

It can be difficult to know if you are getting objective advice when an advisor's compensation is driven by product sales. Whether the advisor's recommendation is to buy a mutual fund, an annuity, or an insurance product or even to hire a proprietary money manager, it is a potential conflict of interest upon which you should request disclosure in advance of engaging in the planning relationship.

At the end of the day, in making a decision about who to hire to help you manage your finances, I believe you should do everything in your power to make certain that your advisor is representing your best interests at all times.

The up-front disclosure of potential conflicts of interests does not preclude objectivity in rendering advice. However, if the advice you receive is heavily or entirely reliant on proprietary products, you may want to seek a second opinion prior to engaging.

• How does the advisor select specialists?

Because the financial planning process will often involve a team of specialists (for more on building your own personal "Dream Team," see Chapter Eight), you need to know how your potential advisor chooses specialists to work with you, and to know if he or she is willing to work with your existing specialists.

These specialists may include: accountants, attorneys, financial institutions (like banks or credit unions), insurance agents, real estate agents, mortgage brokers, money managers, and others.

(Continues...)

Excerpted from Retire Wealthy by Eric D. Brotman. Copyright © 2014 Eric D. Brotman, CFP. Excerpted by permission of AuthorHouse LLC.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Edition details

• Publisher: AuthorHouse
• Publication date: 2014
• Language: English
• ISBN 10: 1496911245
• ISBN 13: 9781496911247
• Binding: Paperback
• Number of pages: 206