A Day in the Life – Part 2

41236520 - piggybank with eyeglasses and calculator on wooden table

I previously shared an eye into a “typical” day in the life of a Senior Financial Planner at Woodward Financial Advisors in Part 1.  Since it was so well received and no day is actually “typical,” here is another sampling. It turns out this day doesn’t involve client meetings but instead a lot of behind the scenes research.

9:00 – 10:00 am – Analysis of client I-bond holdings

Mr. and Mrs. Adams emailed us last night to let us know they have some paper I-bond certificates and aren’t sure what to do with them. I do some research to confirm my understanding of these bonds, including taxation and interest rate details as well as how our client can convert these paper bonds to an electronic version.  That’s step one.  The next step will be to slowly divest of these bonds based on my knowledge of this client’s specific situation.

10:00 – 11:00 am – Cost basis analysis

Ms. Jefferson has asked for our help sorting out the cost basis for the numerous stock holdings that she accumulated over the years. Some of the holdings were inherited, some were gifted and some she purchased. We break out the spreadsheet and stock-split history to make progress on this initiative, which will take some time to complete.

11:00 am – 1:30 pm – Rebalancing of client portfolios

I’ve got several portfolios to rebalance today and a lot of information goes into the rebalancing thought process. I’m balancing in my mind a client’s tax situation, their cash flow needs, their target asset allocation and what the trading costs will be. I’ll follow our firm’s process to recommend trades, get them approved and execute.

1:30pm – 2:00pm – Lunch

I’m having lunch in the office today with my colleague, Allison. She and I are both senior planners here at Woodward so it’s great to chat and to share ideas about common client challenges we’ve encountered and solutions we’re currently implementing.

2:00 – 2:30 pm – Discuss Social Security claiming strategy with client

I have a phone call with Mrs. Washington to review the claiming strategy she and her husband will use when applying for their Social Security benefits. Every client is different – some clients will be waiting until they turn 70 to turn on their benefits while others will be collecting benefits earlier and potentially taking advantage of some advanced strategies like filing a Restricted Application.

2:30 – 3:30 pm Summarize Insurance quotes for client

Mr. and Mrs. Madison asked us to obtain some price quotes for both disability insurance and long-term care insurance. As fee-only advisors we don’t sell insurance, but we certainly help our client shop for policies. Once designed these policies will likely cost several thousand dollars per year. While expensive, the financial protection the policies provide is worth the cost.  I’ll write up a summary and send to our clients to see if they have any questions or if they’d like to move forward with obtaining either of these policies.

3:30 – 4:30 pm Long Term Care hybrid analysis

Mr. and Mrs. Monroe had some whole life insurance policies that they weren’t actively using to meet any of their goals. They didn’t particularly need the policies but the premiums were reasonable and the policies were paying a decent participating dividend. The Monroes wanted some long-term care insurance but didn’t want to buy traditional long-term care insurance. Instead they asked us to investigate some ways that they could obtain additional long-term care insurance but still retain some of the benefits of traditional life insurance. We looked at a few different options and were able to help them obtain a hybrid life-LTC policy that met their needs.

4:30 – 5:00 pm Annuity Analysis

Mrs. Jackson purchased an annuity from her previous financial advisor with various guaranteed income benefit riders.  We put in a call to that insurance company and spent some time understanding how the annuity works and what income options are available to the her. It turns out that since the annuity was purchased before the 2008 market downturn, taking advantage of the GMIB (guaranteed monthly income benefit) annuity riders is probably going to be in the best interest of the client.  I call Mrs. Jackson to deliver my analysis and make recommendations on how she should proceed.  Since this is a very confusing product, she was thankful to have this analysis performed.

5:00 – 5:30 pm Wrap-Up

I look over my inbox to see if there are any more follow up emails that need to go out today, then I look at my calendar for the following day and the rest of the week to see what’s on the docket. I can see upcoming meetings, more analysis work and investment related projects. The biggest things I see are more opportunities to help serve our clients and help them simplify their financial lives.



Disclosure:  All names of individuals used in this post are fictitious.  Any resemblance to actual clients is purely coincidental.


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Portfolio Lifeboat Drill

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Photo Credit: Hellen Sergeyeva via http://www.123rf.com

Ahoy there!  Most of us are familiar with a lifeboat or “muster” drill.  It’s an exercise that is conducted by the crew of a ship prior to embarking on a voyage.  The purpose of the drill is to prepare passengers for a safe evacuation in case of an emergency, such as bad weather, fire, equipment malfunction, a collision, or some other catastrophic event.  During the lifeboat drill the passengers become familiar with the emergency escape route, most efficient path to board the lifeboats, location of the life vests, plan once disembarked, and many other important safety measures.

The key to a successful lifeboat drill is that it’s done under calm conditions, before the ship leaves port.  The crew, passengers, and ship aren’t in peril.  The weather is fine, the ship is docked, and everything is functioning properly.  If a crew were to attempt a lifeboat drill while out to sea and under duress, it would be too late.  Less than desirable outcomes would likely occur. It’s much easier to hold these drills when everyone is “of sound mind.”

At Woodward Financial Advisors, the timing seems almost perfect for our latest “financial lifeboat drill.”  Apart from a few recent instances of increased volatility, the stock market has been quite calm.  The market has shrugged off seemingly volatile world events such as the US Presidential election, Syrian War, Brexit, terrorism in Europe, and the North Korean nuclear threat.  While volatility has been low even in these very uncertain times, we know that over time the market will experience periods of heavy volatility.  Just like maritime history points to rough seas as being part of the risk of sailing, down markets are part of the trade-off to being a long-term investor.  Dealing with down markets is the compensation we must pay to achieve the meaningful expected returns of these same markets.  Just as the lifeboat drill educates us so that we’re not caught off guard when nautical danger approaches, good investor education teaches us that neither the reason, nor timing, nor length, nor depth of the next market downturn will be known ahead of time.  History has shown that volatility spikes and market downturns happen unexpectedly.

The continual process of setting expectations is important to us here at Woodward.  It’s an ongoing exercise.  Just because one was able to weather a market downturn in the past doesn’t mean she or he is prepared for the next one.  Amazingly, it has already been over eight years since the bottom of the market in March 2009 during the Great Recession.  While the market hasn’t gone straight up from there, it certainly has been a long time since we’ve had a substantial protracted downturn.  It’s easy to get complacent when things are humming along nicely.  While we’re here in port under sunny skies, let’s go over some things to keep in mind when the seas start to get choppy:

  1. Your goals have been well thought out. Your goals, carefully communicated in the comfort of our conference room, over the phone, and via email drive how we invest your resources for the long term.  Short-term market volatility should not impact your long-term goals.
  2. Your risk tolerance has been assessed and reassessed. Through our process, we have had conversations together about risk, you’ve taken analytical risk tolerance assessments, and we’ve touched on the portfolio risk virtually each time we have a review.  We have a high degree of confidence that you are in the right portfolio mix for this stage of your life.
  3. Your plan has been stress tested. We periodically update your Financial Independence Analysis to make sure you are still on track to be able to reasonably achieve your goals.  When we feel that you aren’t as comfortably in the “confidence zone” as we’d like, we let you know.  In those cases, it’s possible that adjustments to goals,  spending, or other things may be necessary down the road, and we’re here to help you through those decisions.

Uncertainty and market declines are part of the nature of investing.  It’s not pleasant, but embracing their inevitability is important to a less stressful investing experience.  If investing outcomes were certain, like money markets and savings accounts, we wouldn’t expect much of a return.  When the next downturn occurs, it may be protracted, it may be sudden, and it may accompany some very scary world events.  Just know that it’s not permanent and that you are prepared to weather it.

Your crew at Woodward is here to help, whether the seas are rough or calm.  Bon voyage!


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What Fire Ants Can Teach Us About Our Investments


Photo Credit: Cabezonication via iStockphoto.com

Summer is upon us here in the Carolinas and we can expect our share of strong thunderstorms and localized flooding during this season. As humans though, we have a way of surviving extreme weather. We’ll adjust our travel routes and times to best handle the storms until things get back to normal. I recently learned how another native resident of the Carolinas, fire ants, deal with these extreme conditions. It turns out that fire ants have developed specific traits and techniques for surviving floods that we as investors can learn from when it comes to managing our portfolios during stressful times.

  1. They Rely on their Natural Survival Traits

When floods hit, fire ants group together to form incredible floating islands to protect their queen and preserve their larvae for future generations. How do they do it?

Fire ants have naturally repellent exoskeletons that cause water droplets to roll off their backs, keeping them dry. They can also trap air bubbles against their bodies, making them buoyant. When thousands of fire ants group together, these traits allow the colony to float together on seemingly treacherous flood waters.

We as investors can also develop our exoskeleton to repel all the investment noise that bombards us and often distracts us from our long-term goals. We could couple this with a system to trap the good noise like the advice that comes from a trusted financial advisor!

  1. They Follow a Repeatable Process

Fire ants have been through this before. They know the drill and they know how to mobilize, and can do so in as little as 2 minutes – but it’s a process not a panic.

We greatly benefit from a repeatable process of our own so that the next time there’s panic in the markets, we know exactly what to do. We’re going to remind ourselves that there are normal market downturns, but that we have well thought out, diversified portfolios that we’re not going to change to try to dodge the next temporary market drop.

  1. They Rebalance!

As their raft survives out on the open waters, the fire ants occasionally need to change their individual positions due to workload management, and some of the ants may even get picked off by fish swimming underneath the raft. Interestingly, research indicates that the fire ants rebalance their raft to keep a fixed ratio between the ants on the top of the raft and the ants on the bottom part of the raft.

As investors, we know that rebalancing is a great way to deal with market downturns. Rebalancing prescribes selling assets that have increased in relative value and buying assets that have decreased in relative value. Typically, bonds will increase in value during stock market downturns, so oftentimes investors will sell their appreciated bond holdings and buy lower priced stock holdings when rebalancing their portfolio.

In Summary

Fire ants know that summer storms will be a rough ride: they may get thrown off course, and they may be uncomfortable for some time. But they also know to rely on what has always worked for them until the floods subside and they can resume their normal day-to-day routine.

We know that as investors, there will be rough times. It’s simply part of the process – we should learn to expect it. We’d do well to develop traits that help shield us from outside investment noise. And, we should have a repeatable process for dealing with difficult market conditions in order to minimize panic and protect ourselves from upending our long-term goals.

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Wednesday Morning, 3 AM: Estate Planning for the Little Things

A couple of nights before my kids and I left on a recent family visit to California, I woke up at 3 AM from a nightmare that involved a plane crash and thought, “If that plane goes down, my wife is in serious trouble.”

I wasn’t thinking about the emotional aspects (which I’d selfishly like to assume would be devastating) or even the long-term financial stuff (we’ve taken care of our life insurance needs and periodically update our estate plan). Instead, I was thinking about the day-to-day practical things, like the physical act of paying our bills and our mortgage.

Like most families, we’ve got a division of labor in our house, and the responsibility of making sure our bills get paid falls on my side of the ledger. To make things easier, I use the online bill pay feature at our bank. And while we still get some paper bills, many of our bills now come in e-bill form.

Unfortunately, those e-bills are tied to my bank login, even though the payments come from a joint bank account. If my wife logs into our bank account, she can’t see my online bill pay recipients or those utilities where we receive e-bills. She can only see that information for any payee that she’s entered into the bank’s system. Without knowing where bills are going or how we make certain payments, it would be hard for her to keep things running smoothly, particularly during a time of high emotional stress.

As this all raced through my head, I dragged myself out of bed and put together what I thought was a pretty good early Mother’s Day present:

  • Contact information for our professional advisors, like our estate planning attorney and our CPA. While my wife could eventually track these things down, putting this information in a readily accessible place should make life a little easier.
  • Life insurance information, including death benefit amounts, policy numbers, and company phone numbers.
  • Account information for our utilities, including account numbers, where my wife could find physical statements, and how I’ve been making bill payments (e.g., auto draft, on demand, etc.).
  • Access to my important passwords.

That last bullet point is the kicker, and it’s the one that separates what I did from the typical “organizer.” I’ve been advocating to others about the benefits of using password managers to store passwords while failing to take full advantage of some of their more powerful features, like the ability to share passwords with designated people.

I’d previously used our password manager to share our Netflix password with my wife, but that’s about it. While the ability to watch House of Cards from any device is important, it might not be the most pressing piece of information to have in case of a true emergency.

Now, I’ve used the sharing feature of our password manager to share the passwords for our joint bank account, mortgage account, credit card, my Health Savings Account, and the 529 accounts we’ve set up for our kids. What’s more, if I ever change any of those passwords (which of course I should on a regular basis), my wife will automatically have the updates available in the password manager when she logs in.

After my own sweat-induced panic, I suggested to a client couple that we go through the same exercise during a review of their estate plan. What started out as a small task list grew to be many more items than anticipated. The couple now has summer project of identifying all the things that a survivor might have to pick up, as well as to figure out the best way of transferring the information stored in the head of the person who is currently performing those tasks.

If you are the responsible party in your household, I encourage you to think about all the financial things you do that just get lumped into the minutiae of daily living, and then ask yourself how your surviving spouse might handle those things if you died or were disabled. It might not be the same as reading the most recent beach-worthy novel, but the long-term payoff is probably better.


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