Monday, November 28, 2011

Are You Diversified?

Asset allocation is about more than just diversification. Each type of asset or asset class inside your investment portfolio serves a very different function. But most Financial Advisers don’t understand these functions and your money suffers.

Assets should be divided into four main categories:
1.      Interest-Earning
2.      Real Estate
3.      Commodities
4.      Equities

Most advisers never even discuss commodities or real estate. I believe that all portfolios should contain all four categories. How much you should own of each category will depend on your unique situation. All four categories are important and serve totally different purposes.


1.      Interest-earning assets such as cash and bonds give you access to capital on a short-term basis. If you need access to liquidity, bonds and cash are the first place you should look. Bonds are also hedge against deflation.
2.      Real Estate is one of the best ways to protect you from inflation. It is one of the most inflation sensitive assets you can own. Inflation decreases your purchasing power as the prices of goods and services increase, and it is a major risk to your long term financial goals. Usually owning your primary residence is enough to have at least a third of your assets in real estate. However, if you have built up a bit more wealth, you might need to purchase real estate beyond your home in order to keep your portfolio balanced.
3.      Commodities are actual physical goods like corn, soybeans, gold, crude oil, etc. In years past, using this asset class was done only by professionals. But since the addition of commodity based mutual funds and exchange traded funds, this is no longer the case. Recently we have all been hit by rising prices at gas stations and grocery stores. By adding commodities to your mix, it provides a hedge against rising prices of goods.
4.      Equity Investments should be held long term, and typically outperform all other asset classes during periods of economic growth. Equities are broken down into large cap, small cap, international stocks, and emerging markets. Each area of equities also serves a different purpose and amount of ownership should be based on you and your goals.
As I mentioned earlier, most Financial Advisors do NOT understand functional asset allocation. Understanding the function of each type of asset is critical to tailoring your investment strategy to your specific needs, rather than using a one- size-fits-all approach. If you need a second opinion on your investments from someone who understands risk and asset functionality, call me at 615-878-2134 or click

Monday, November 21, 2011

Why Is Fee-Only Financial Planning A Better Way

My unique approach to investing and financial planning stems from a strong belief that most financial advisors are often driven more by how to sell you financial products than by sound financial principles.

Fee-Only Financial Planner is someone who does NOT sell financial products OR accept commissions. They are compensated ONLY by providing you with unbiased, objective advice regarding your finances.

The way in which a financial planner is compensated can directly affect the advice he or she gives clients. A relatively small percentage of the individuals offering financial advice actually get paid exclusively for giving such advice. The majority earn some or all of their income selling mutual funds, annuities, insurance, and other financial products to implement their recommendations. “Advisors” who are also salespeople, however, inevitably face a conflict of interest and will almost certainly be tempted to steer clients into products in which they have a financial interest. The greater the advisor's dependence on commission income, the greater the conflict. In the end, that conflict could cost you both in out-of-pocket expenses and in the quality of advice you receive.

Achieving your life goals is easier when your financial planner focuses on all areas of your financial life and is accessible when your circumstances change. Financial planning is a process, not an event. 

If you have questions or would like a complimentary initial consultation call 615-878-2134 or click

Tuesday, November 15, 2011

Accountants Selling Financial Products? You're Joking Right?

Over the last month I have met with 4 different CPA's (Certified Public Accountant). Every one of them is now selling mutual funds and insurance products to their clients. Can you say conflict of interest?!

Now, I realize that there are many large CPA firms that offer wealth management services separately to their accounting clients. That is NOT what I'm talking about here. These guys have a small, independent CPA practices where on one side of the fence they are claiming to offer objective tax advice, AND on the other side trying to sell financial products.

I don't know about you, but I find that simply ridiculous! Do these guys care more about properly advising you on taxes? OR about getting a commission from selling you a mutual fund?

If you wanna be a financial sales person, go do that! If you want to help individuals and businesses with their taxes, go do that! But don't leverage your tax planning client base to sell financial products!

If you happen to be one of these CPA's who also wants to be a Financial Advisor, then go about it in a way that doesn't have obvious conflicts of interest. Like offering Fee-Only Financial Planning to your clients (meaning you don't sell products or accept commissions).

And to continue on my rant! I'm a Certified Financial Planner. That doesn't qualify me to be an accounting expert. And just because someone has the Certified Public Accountant designation doesn't mean they are qualified to be a financial planner!

The 2 things I want you to learn from this post: 

1.) Demand Full Disclosure from anyone wanting to advise you on your investments. Make them tell you every detail about how they are paid, and what conflicts of interest they may have before doing business with them.

2.) Ask any so called "Financial Advisor", CPA or otherwise, to share with you what qualifies them to give financial planning advice. What education do they have? Are they a Certified Financial Planner or are they a PFS (Personal Financial Specialist, a great designation for CPA's wanting to give financial planning advice.)

True Financial Planning is objective, unbiased, and covers every part of your financial life. To learn more about what "Real" Financial Planning is go to my website or listen to my radio show on called "The Financial Doctors".