Skip to content

On-Demand: Behavior and Wealth Building

Jan 18, 2022

Join our webinar to understand key concepts of behavioral finance including biases toward risk, wealth, and investing as well as the behavioral impact on the financial planning process including women-specific considerations.


Lois Clinco:Thank you, Bella. As Bella said, my name is Lois Clinco. I'm a partner in our PBS group in our Syosset, Long Island office. I wanted to thank Jennifer, Onofrio, and Marc for presenting today on our topic of behavior and wealth management. Or wealth building. Sorry. And I will turn it over to Jennifer Keiling now.   

Jennifer Keiling:Thank you so much, Lois and Bella, for today. So, during today's webinar, we'll be discussing several items. I will be handling the behaviors and wealth planning. Understanding how behaviors and biases affect your wealth plan. How to prioritize what is most important to you? Focus on items that are in your control. Marc will go over behaviors and impact on investing. How behaviors can affect your investment decisions. Importance of staying focused to improve your returns. And Onofrio will also spearhead the behavior and risk factors women need to consider. How to review risks and wealth planning? And developing a strategy of continual assessment.             

So human behavior is a fascinating subject and is a topic that has been studied for centuries. The ability to understand why and how a person arrives at a decision can be an intriguing process. Behavior is a way a person conducts one's self. And you can see that there are several factors, or I would say statistics, that are interest. As you can see here, 51% of women and growing are the CFO of their household. Fewer women than men invest in the stock market. Women are less comfortable with risk. 74% of women age 75 or older are married versus 38% of men. More women are dissatisfied with their current financial situation than men. Women on average do live longer, five years, in fact, more than men. And women are less confident about investing. So some of these items we'll touch on today.

So, behavior and wealth planning are an interesting subject. Today we will shed some light on how behavior and wealth planning intersect. And no stranger, as a woman myself, many times we find ourselves caught in the middle, right? We're juggling a multitude of responsibilities, and are often the last to take care of ourselves. We're juggling a home, a career, taking care of our health and wellness, trying to squeeze in doctors’ appointments, planning for our children's higher education, taking care of our kids, and retirement planning. So it can be a daunting task at times when you're wearing numerous hats. But we want to make sure that we are taking care of ourselves. The world moves at such a rapid pace, and oftentimes we run into these issues.

So today we'll discuss a little bit further into this process. So again, a few other statistics. Fewer women than men invest in the stock market. Women are less confident about investing. Women do earn higher returns. Women are less comfortable with risk. Women are more patient investors. No surprise there. Women are more open to seeking guidance. And millennial women are investing earlier than their predecessors. So these are all great topics for women. Today it's, again, juggling work, family, life balance. COVID. It's been a challenging time. But we want to make sure that we're staying on track. And fortunately we have many tools available to us to help guide us in our decision making process, such as emotional intelligence, intuition, listening and understanding, which enable us to gain a clearer picture of our goals and objectives.

But how do we get there? Sometimes the hardest part is beginning. So as a practice, we do have some tools that we utilize. Behavioral finance. I know that is a word or words that have been synonymous with financial planning. So part of our method is to ask our clients what's most important to them. Typically financial planning has been you sit down with an advisor and you're solving for retirement. What we do is definitely a bit more different. We want to understand why money is important to you and how it plays a part in your life.

So, you can see here, we have a few different- We go through the Money Mind exercise, as I mentioned. It's a few short exercises. And what these really do is focus on your biases. We have the protector, which they all have their pros and cons. During this particular Money Mind, the protector seeks security and safety, struggles to find genuine peace of mind, is cautious and deliberate, delays enjoyment in order to feel safe, experiences anxiety when making financial decisions. So we want to make sure that you're taking care of yourself. We know that your family's important, or taking care of a parent who might be older or ill. But we want to ensure that the crux of financial planning too is making sure that you take care of yourself as well.

The second Money Mind bias is the giver. So, taking care of others first, always wanting to give more, is very considerate of other people's perspectives, over emphasizes the opinions of others, often makes too many personal sacrifices. So with this, we understand commitment Money Mind is putting others first. Sometimes what happens is you wind up putting everyone else first and not yourself. So, we want to make sure, again, that when you are planning your retirement, that you are inclusive of taking care of yourself as well.

And then we have the happiness Money Mind, also known as the pleasure seeker. So the primary goal is satisfaction. Never feels like they have enough money, maximizes joy from their resources, doesn't spend enough time evaluating financial decisions, or too casual about future risks. And this particular Money Mind, I kind of always reference the person carpe diem, seize the day. And we have clients who maybe are a heavy happiness Money Mind. That perhaps, well, I don't plan on living until age 95. And that's all well and good, but today comes, tomorrow comes, and we don't want them to run out of money. We want them to enjoy the same lifestyle that they're enjoying today throughout retirement.

So, believe it or not, as financial planners, these biases are important to us. It might be a few simple questions for you to answer. But at the same token, it really shed some light as to what your Money Mind is. And additionally, these biases have also been studied that they're created between the ages of eight and 18. So oftentimes people who are born of the Depression era might be more of a protection mindset where they feel that money, what they have is never enough. So again, interesting the way that you grew up really plays a huge part on how you see money and how you are arrive at those financial decisions.

 And again, during this exercise, it highlights- And what's really great too, is if you do it with your partner or your spouse or even yourself, it's really shedding light on those biases and how they do affect you. Oftentimes during this discovery process, there might be things that we don't know about our spouse that are discussed during these meetings. So again you could see here, this slide is representative of the different variables that occur during this exercise.

Additionally, we also utilize what's called honest conversations. So we, at this juncture, similar to the commitment, the happiness, and the protection cards that you did see during the Money Mind. We also utilize those same biases in the honest conversations. So it really allows you to prioritize your goals and values. Important enough, during these conversations, it's not just about retirement planning. It can be those short term, midterm, long term financial goals as well. How can you solve for tomorrow, or maybe you want to purchase a second home, or you want to help a loved one. How is that going to impact your financial plan? And are you going to be able to handle that? We know that what you do today can impact your financial plan down the road.

So again, as planners, it helps us shed some light and plan accordingly. And also it's a healthy exercise. Oftentimes there might be a non-CFO of the house. You typically have someone that handles the bills and knows everything that's going on financially. What this does is allows the other person, the partner, the spouse, or whomever, to be in tune. Give them a voice. So this way it's thought provoking. So again, definitely behavioral finance. We hear that term quite often. But at the same time, we feel that it's imperative. It's a different way of handling the financial planning process.

And aside from the honest conversations, there's a few key factors that are also within your control. You have the ability to spend, save, the timing of when you want these of events to occur, the risk that you're willing to take. And it doesn't necessarily have to be risk within your investment portfolio. Risk can also be deemed as changing a job. Or there's different variables of risk. And as well as legacy. Do you want to earmark money for charities, or other family members? And how do you do that? At the end of the day, you want confirmation and clarity and the confidence to make sure that your financial plan can sustain the duration of your retirement. So that's the crux of what we do. And Marc, I'll hand it over to you.

Marc Scudillo:Thank you, Jen. I appreciate that. And thank you everyone for joining. And Jen just went over, so we call it, our various aspects that go into the actual planning to see are you going to be on track to accomplish your goals? Do we have that right strategies in place, the right roadmap, that you're on the right road of success to accomplish the goals? And when we look at things like your Money Mind exercise that Jen had mentioned, your behaviors of how you make your financial decisions, whether you're a commitment or a giver along the way, or if you're looking really to protect your assets. By going through the planning process, it makes it a lot easier to say, well, then how do we make sure that we're investing properly? Because some people look at investing, and when they look at investing it's based upon a rate of return. And that's absolutely important, but we want to make sure that we're focusing on the total wealth of a client because there's different things that could impact the success.

And so what I mean by that is that there needs to be an understanding of what the difference is between different types of planning processes that come into play here. So for example, linear versus dynamic planning process. A linear process takes into consideration average rates of returns. That's what many spreadsheet based financial planning tools incorporate. So what you're seeing on the screen right here is if we took a linear approach, you'll see in the middle columns, I know it's a little bit small, but I'll interpret for you, it says the investment rate of return is averaging right around 5%. And if we're projecting this out for a particular client, saying, well, if we average the 5% rate of return, and you had X dollar amounts, you'll see that, as a need, of a retirement need over time, of a certain dollar amount.

By the time you turn age 95, if that's what we wanted to plan for the success of how long we wanted the money to last for, well, you could see at the end of the day, the end of the plan, it looks like it's successful. We have $53,000 of excess capital as part of the plan. But that's assuming an average rate of return. Now, unfortunately, for those that actually are familiar with the markets, the markets don't do 5%. They do a lot better than 5% sometimes, they do a lot worse than 5% sometimes so you get to an average rate of return. And so what happens if you use a more dynamic approach that says, well, hold on, what happens if our sequence, the order of our rates of returns, go against us. Meaning what happens if we lined up a series of bad markets in a row before we got to good markets? Can we still accomplish our goals? Or what happens if we actually had great markets? Now how does that impact the plan?

So we use something that's going to take a more dynamic approach to say, well, what's our probability of success in all markets? So you can see in this illustration, with that same client that's averaging a 5% rate of return on average, looks like they'll be successful to accomplish their goals. Take out the income that they need. However, if you see on the bottom, again I'll interpret because it's a little bit small, you'll see that there's this one percentile, the second column in from the left, is that if we get the 1% worst markets lined up, that individual could run out of money in 2037. Actually, if we had the 25% worst markets lined up in a certain order, that doesn't actually bode well for the plan. We could run out of money before the end of the plan. And that's not what we're looking for.

We're saying that we don't want to be on average, better to allow our clients to accomplish their goals. We want to be in a high confidence zone. And that high confidence zone is typically anywhere between 70, 75% to 90% success rate in all markets. Because the one thing that we could promise our clients is the markets are going to go up. Without a doubt. The markets are going to go up. We also promise you it's going to go down. And that's just the reality of investing. But if we could accomplish your goal in bolts scenarios, now you have a successful plan.

And so how we're able to do that is by making certain modifications and how we would want to think about the modifications, is to move the needle up. You'll see in the top right hand corner of that success rate, of saying, there might be some subtle adjustments that we can make along the way here now while we're working to enable us to get into that high confidence zone of an 88% probability of success in this example, in all different market scenarios.

But there's certain things that could actually hold us back from actually making certain decisions. And those go back to that behavior concept of what happens from a behavioral point of view that could hold us back? And so there's a series of different types of behaviors that could cause people to have faith in one direction versus another direction based upon what they're thinking internally. So for example, recency bias. This is something that we see is what that reflects to is what's been the trend? What have we seen that's been happening all along the way? And you know what? That trend then becomes, well, that's how it'll always be.

I remember back in the late 90s, there was this whole tech bubble, right? People remember the tech bubble, but they don't remember what happened right before the tech bubble for the previous four or five years. Technology stocks were the way to go. That was it. Anything and everything that you touched that was technology just went up in value back then. And so everybody was buying into it saying, well, that's the wave of the future. But what happened 2000, 2001? The bubble burst. And people that bought, typically they bought after they saw the trend. Recency bias. They saw what happened recently. They're going to buy into that. And then it goes down and then they get out of it. That's a recipe for certainly losing money.

Fortunately again, part of the concept is that we want to educate so that you don't fall into these types of traps. Loss aversion is another one. Loss aversion is saying the focus is always if I'm going to lose money, I'm going to lose money, I'm going to lose money, that means I don't want to invest. Because the pain of the thought of losing money, which again, I promise you, the markets will go up. I also promise you the markets will go down. There's going to be a point in time that the markets are going to work against you. But if you're in it long enough, we'll speak to that. But most people sit on cash for too long a period of time because of that loss aversion.

Then there's confirmation bias. That's by seeing what's happening out there, you look for it, you seek for it to confirm, well, that must be the case then. That must be the reason why something is happening. And that proves the point. You see it? It's right there. The economy's bad right now. So let's just look. There's job loss claims have gone up. Inflation's high. So the economy must be bad, right? Well, not necessarily. There's a lot of other factors that go into it.

And I have another example of confirmation bias. Gambler's fallacy. That's treating events as representing a bigger pattern. So a lot of that happened back in 2005 through 2007, when people became very smart to say, "I'm going to buy real estate." And they became real estate experts. Starting to see a little bit of that now where people are saying, "Oh, I'm going to buy more real estate now because it's going up." Well, it has gone up. Doesn't necessarily mean it's going to continue in perpetuity to go up.

And so that's some of the things that we want to try to avoid. Herd mentality. Everybody else is doing it. So I must have to do it. It's following the crowd. Each person is unique. We go through the initial planning process. Start with what Jen was referring to of understanding really, through an honest conversation, of what's most important to you might be not the same as what's most important to someone else. So how do you make sure that you're not following just the trend, but you're making sure that you're doing the right thing that's based upon your personal goals and your personal values.

And then there's the overconfidence. Believing that the success is the result of a skill is most important. They have all the skills versus, you know what? It's just the external forces. There's a lot of people that have said, "My portfolio's gone really up over the last few years. I must be trading really well." Well, the markets have done really well. Pretty much everything's gone up at a decent pace. So we're in, what I consider still, the longest bull market in history. Even though there was technical corrections along the way, the reality is they were so short. My belief is that we're still in this long bull market that's been from 2009 to today. That's historic of having that type of run. So don't become over confident.

And how do you prevent from overconfidence is seeing, and again understanding, we feel the education is a great part so that you could understand and become empowered as to making the right decisions along the way. Because we don't want to fall into, for example, the recency biases show illustratively is that when the markets are going up, people say, "I want to buy into the market. I feel more comfortable." When the markets are going down, people often perceive that things are only going to get worse, and it's going to go continue to go down and I'm going to wait. And this is something that we hear often is saying, "I'm going to wait until I feel more comfortable to get back into the market."

Well, when does that comfort level occur? It typically occurs after the market's already rebounded, right? Remember finance 101 is to buy low and sell high. So by waiting for the markets, the markets are going down and we're going to wait until we feel more are comfortable, we'll wait for the markets to come back up. Again from a comfort level, that might make sense. From a finance point of view, we want to try to avoid that.

Separate from a confirmation bias, we all remember this type of event that took place not too long ago is that, geez, things must be really bad. How bad is it going to get? We had to stock up on toilet paper. And that confirmed that everything's got to be horrible. So what do we do? We bought more toilet paper because things were going so bad. That's just a confirmation bias. And so again, these are just some things of how people react along the way. Because we want to make sure that you don't fall into the average statistics. The statistics are typically this. The average investor does about 25 to 30% worse than the actual index. Because of all of these different behaviors, it effects their decisions to make adjustments versus properly riding it out along the way.

So in this example where an average investor put away money from 2000 to 2019, they would've averaged, what we've seen from a DALBAR study is that they averaged 4.25%. Why? Because they made adjustments along the way. They made changes when things were bad. They most likely made an adjustment or got out. Or they sat on cash for too long. Versus if they put their money to work, rode out the markets, the ups and downs, the actual index illustrated out to be about a 6% rate of return.

So again, we want to avoid those biases that's going to work against you from your goal. We call that tuning out the noise. Of course, when we tune out the noise, interestingly enough, we are not seeing the chart that I see I on mine, is that chart that you- Oh, it's an animation. Didn't realize that. There you go. Now you see it. Seeing now on the screen shows that if you ride it out and stick to the opportunity, than the probability of having a positive rate of return for you increases. All right? If you invested and you looked at it from a day to day perspective, from a day to day perspective, your account is going to go up or it's going to go down. That's what it's telling you daily.

On a monthly perspective, you have gains actually start becoming more prevalent than the losses that you'll see in your portfolio. Start holding it for a one year period, a three year period, a rolling five year period. Over a 10 year period, on average, you'll see that in any rolling 10 year period of time, 91% of the time, you had a positive rate of return versus 9% that you had losses. That's if you avoided all of those biases along the way.

So to how do you get a sense of comfort, though, that the strategy is going to fit your style? Again, not by matching what someone else is doing just because it sounds good. Because they're different. They have different attributes. So understanding what your attribute is helps you design a strategy that you could stick to in all markets. Because what happens is that people have different thoughts, behaviors, that's the topic of this webinar, around how their investments should be designed.

You have performance seekers. Those are the people that are saying my goal with my investments is to try to outperform the markets over a full market cycle. Well, there's pros and cons to the different attributes. For you to have a performance mindset, you also will have to get comfortable with a couple of other things. The downside of having a performance mindset is that the markets don't go up all the time. And the more risk you take on, the more downside potential there may be at any point in time. Fortunately, women often ride it out because they're more patient, or they have more guidance, as Jen was alluding to in the beginning that gives them that sense of comfort of saying, all right, I could still accomplish my goals again in good markets and bad markets. So I could ride things out better.

The other downside of a performance mindset is that it might cost you more because you're going to have active those strategies that are going to try to outpace the index. So things that are trying to outpace the index typically cost more, and there might be more transactions that are associated. So in a taxable type of portfolio, there might be more tax consequences along the way. That's all part of the design of a performance strategy.

Some people say, "No, no, no, I'm more of a protection mindset. I've made my money. I don't want to lose my money. What could we do to design that?" Well, there's pros and cons associated with that also, right? The more protection you have, the lower the performance. The more protection you have, or guarantees that are associated with it, maybe there might be higher costs associated with those guarantees. You might pay for those protection components. And again, from the protection point of view is that there might be some tax consequences to be able to take out money when there is any slight gain to protect that money again on the downside.

Other clients, what they're looking for is just the minimal cost. They're saying is I just want to have the strategies that are going to have the least amount of costs along the way. And when that is the goal, which is absolutely fine, well then what you would have to seek for and understand is that you'll go up and down with the markets. Because a low cost strategy is basically an index based approach to investing. You're not looking to outperform the market. You're not looking to protect from the market. You're just going to go up and down with the market.

So then the last are those clients that say, "I hate paying Uncle Sam an extra dime if I don't have to. I want to have the least amount of tax consequences along the way." And again, with that, the possible cons associated with that is, well, you might not be outperforming because you're focusing on tax minimization along the way. So you really should be looking at it from what's my best net after tax strategies. But again, you want to find the attributes.

And there's ways that we work with clients is that we actually go through an exercise to say what should be customized for you. And by going through the exercise, we actually rank these different attributes and customize to your own personal desires. Then it makes it a lot easier to design a strategy that you could stick with in good times and bad times. Quite often we see a frequent combination of either performance or protection. No surprise, right? Becoming one and number two as their top two attributes. I think almost everyone on the call, many people would be saying, yep, that's me. I'm either focusing on performance first and then protection second, or protection first and performance second. Either way, it's one of those things that we have to continually educate that client is to say, "Well remember, the more protection you're seeking, the less performance." They go in opposite directions from one another. So it's trying to find strategies that balances those two concepts along the way, and then putting that into practice.

And so again, how we're able to do that is by ranking the different attributes along the way here of what's most important. And again, this is a very common one after we go through the strategy of the exercise and the questions that we ask along the way, is kind of the result that we have. So by taking that approach to say, let's tune out the noise, let's understand our biases, understand our preferences, and put them together so that we could come up with a strategy that's able to ride out the storm, because there will be storms, but also take advantage of the opportunities for growth along the way.

But what could affect those growths is beyond just the market's performance, right? So Jen had mentioned there's really five key aspects that are in your control, right? You could control your spending. That's something that you directly have control over. You could control the savings along the way as you're building up your nest egg. That you have control over. You could control your risks. What we're talking about here, finding which of your attributes are most important and how you're going to apply risks to each one of these different attributes, that's in your control. You could also control the timing of different events and the protection which you put into place. We say that you could control the protection, not only from the inheritance point of view, or leaving to charity point of view, but you could control the protection as to different influences that could affect your plan.

And that's where Onofrio is going to go over now is what are some of the things that we see along the way that women should be aware of, that they are more affected by over time, which includes age and so on. So Onofrio go ahead, and you could take control.

Onofrio Cirianni:Thanks Marc. And good morning, everyone. Thank you for participating. Happy new year. As you have seen, we have a pretty disciplined process. There's a certain methodology as we're of developing a plan. Jen talked on how do we get to understand how people think about money? Marc then showed you some examples of how do you align their investments and their as assets so that they are aligned with those biases, those priorities, those values, and those goals?

I think this is a great time of year to do this type of webinar. I get pretty excited because I think a lot of people reflect on last year. And based on the whole COVID situation, now they're reflecting really on the last two years because their lives have been changed. And they may have been affected financially, physically, emotionally, psychologically, or all of the above. So today, I'm going to cover different types of risk factors. Not just the ups and downs of the market and how you could maybe manage those risks and make you sleep a little better at night, but also talk about some concepts and some tools and subject matter that really can affect your plan. We want our clients' plans to work under the broadest range of circumstances. And as we have shown in certain respects, there's certain things that we control. There's some things we can't control at all.

So, what are women likely to face? There's been many studies on this in regards to women are the ones most likely to care for a parent or a spouse, more likely to do the physical caregiving tasks, most likely to be the surviving spouse in retirement, and the one most likely to need long term care. Women should plan ahead. How can we help our clients financially prepare? So as we're talking with clients, for certain subject matter, this affects men and women alike, but there are, because of certain statistics, I will say longevity is one of them. Women still live longer. Two, that graph that Jen showed where the woman was right in the middle, and had all of those people that rely on them as a parent, as a professional, as a spouse, et cetera, and so on. So a lot of people rely on you.

Just some statistics to share with you that I think are surfacing more and more. The direct correlation of health and wealth, right? So you can be a very healthy person, but do no planning at all. And you might be vulnerable and expose yourself. The flip side is true as well. A wise man always said, "You can have all the money on the world, but if you don't have your health and you can't take care of yourself, what is it worth? You can't enjoy it. You can't enjoy it with the people that you care about." Just some recent studies over the last few years. 78% of individuals expect their financial advisors to provide advice on this subject. How do I prepare for those healthcare costs in the future? Most of the healthcare costs while you're actively working or you're accumulating asset in the earlier stages of your financial life, most people are looking at the cost of their health insurance, and maybe their responsibility for their out-of-pocket costs if they get sick.

But there's other aspects of keeping you healthy and preserving your wealth. 80% in this study said they are concerned with funding the cost of retirement during their healthcare. 56% have factored the cost of care into their plan. That's just a little bit more than half. And about half of those with a plan are likely underestimating the cost. There are a lot of statistics and data out there that you could build into your plan. And these are measurable. So examples Marc gave you in terms of projections into the future for retirement, taking into account inflation, rate of return on your assets, whether it be a linear approach or that dynamic approach.

We see a lot of financial plans. A lot of our clients that have worked with people over the years. And I will tell you, just naming a few subjects, very few plans have what is the financial impact if you are disabled? What is the financial impact if you have a long term care event? You and or your spouse or partner in retirement. Those are other eroding factors that are going to eat away at your ability to save and accumulate wealth. Or if you've accumulated wealth, and maybe you are in the latter stage of your financial life, where you have to rely on these assets, and you did not incorporate rate some of these costs, you will be accelerating the spend down of those assets. And again, those probabilities of success, those percentages, we want them to remain high, again, under the broadest range of circumstances. I think COVID-19, this pandemic, underlying this point. Many people around us have been affected. And depending on the planning that they've done, or maybe were forced to make decisions without a plan, were seriously impacted. So I think it's top of mind.

Let me share with you some information. The financial impact of caregivers, the financial impact of caregivers, it is pretty significant. So how does it affect you? You may be contributing to, whether it be your household, maybe a parent, maybe a child, right? So I'll use myself as like sandwich generation, having elderly parents and in-laws who have had health issues. And we were very fearful and protective about them getting COVID, especially over a year ago. We've had to make sacrifices, like many, where someone is taking care of them. It turned out the most dangerous place to end up was in an assisted living facility or a nursing home.

So, I will tell you, it's not just what you're giving up in terms of giving up time at the ability to earn an income in your profession, in your job, or your business, where it's been shown that on average $324,000 has been lost in wages and benefits statistically across the board, because you're helping somebody that you care about. But it's also the contribution factor. I am working with several families right now within our practice here where clients did not want to put a parent into an assisted living facility or a nursing home when it was really necessary. Cognitive issues, physical impairments where they need 24/7 care. It was just not safe for some of these families.

So, the delivery systems have improved over the years in regard to home healthcare. But generally speaking, if you need 24/7 care, that involves more than one person because somebody can't stay up for 24 hours. It's usually a minimum of two or three people changing shifts if there's no other family members. The costs are even higher. So now we're taking a step back. When we look at this and measure what is the financial impact for that probability of success, that longevity risk, so that you can continue to live your lifestyle?

The other impact. And again, particularly for women more so. When you're giving this care, it's not just affecting you financially. It affects you physically, emotionally. Anybody that has gone through having to take care of an elderly parent who's been ill, and again, I think COVID has exacerbated this whole slide that I'm touching on here, it's wearing you down. So when we go through exercises like Jen covered before, in regards to looking at are they a commitment Money Mind? Meaning they're thinking about others first, right? They're always putting everybody else ahead. And that may be their time, their money, and their care. There may be other things that surface in the earlier stage of the planning process when we understand the values and the priorities of our clients.

So those cards that Jennifer had up where people are ranking what's most important to them. It's not unusual that people have I want to protect the people around me if I'm not around. Or I do not want to be a burden to my family. And I typically see that card usually come up high in the ranking when somebody just went through the situation. So there's been a little bit of a shift. We learn through our own personal experiences as we go through life. And our hope is with us being in business, having been in practice for 35 years, we see a lot that we can share with you in advance of something happen and having that impact your family.

So, a lot of discussions lately, I will say a trend that's been upticking is things like long term care insurance. What does it look like? How much does it cost? How do we build that into the plan? What are the opportunities out there? Do I have my house in order? We like to hit on these subjects that are on this slide. If you look at the perimeter of this slide, we refer to this slide as the moat around our clients' castles. So you can do all the great planning in the world, be a great saver, investor, be disciplined, but there could be an eroding factor or something that could puncture your plan and half your balance sheet could be wiped away. Or you might erode against the distribution of those assets at an accelerated rate and run out of money at some point in the future. You and/or who's ever the survivor.

So just some highlights on this slide, on the left side. We touch on even liability protection as a part of protection in your planning. What if you get sued. We want to make sure that your plan is protecting you against different types of creditors. Are your legal documents in order? Do you have a durable power of attorney? Do you have healthcare proxy? Do you have a living will? Do you have a basic will? Without even getting into wealth transfer techniques in terms of how do we reduce taxes in the future? I would say those basic documents, if there's a goal that we have with all of our clients, is we try to get them to get these basic, I'll call, foundational estate planning documents in place.

As you've seen with COVID particularly, we represent a lot of people who are frontline workers, healthcare workers, where they didn't have these documents, right? And their family was concerned. What if something happened to them? We had clients ending up in the hospital. Why scramble? These are certain things that can be done relatively inexpensive and efficient with some guidance and with counsel so that you put them in place. And again, it's your sleep at night factor. You never know when you're going to have to use them.

We also look at things like long-term care insurance, your disability insurance. Do you understand what you have if you're employed at a company? What happens if you get sick or hurt? Short-term disability, long-term disability? Does it ensure just your base salary? Does it include your bonuses, which most people either you use to live or maybe use that bonus to save more. And then life insurance. Again, there's been an uptick in general with life insurance. It was the first year where mortality rates actually increased in the United States. And there's been an uptick. People are reactive, right? So they see what's happening. They might feel a little bit more exposed, and they're going out and taking some action and maybe filling in some of these voids.

So how do we approach this? I'm just sharing you a slide. As you can see, we have a very disciplined process. There's a lot of tools. Depending on what your priorities are. And I think you have to ask those to yourself. What's most important to you? How are you most affected at your stage of your life and your facts and circumstances? You start prioritizing where are my shortfalls? Take an inventory. What do I have? How does it work? What level of protection do I have? Whether it be insurances, whether it be my legal documents, et cetera, and so on. And then just check the box and move on.

This is not an overnight event. We understand there's a lot of subject matter here. This takes time. Usually it takes years. But maybe hit those that are most important to you and the ones that may exposing your financial situation the most first. So we'll have an overview like this. And each line has basically a page behind it. Which has check the boxes, follow up items, homework for you. Things that we may counsel you on, or other professionals like attorneys and CPAs, et cetera. A team of advisors that can help and support you and your family.

So how do you bring this all together? So this is a slide based on our internal planning process. We've touched on various parts of this planning process. We named it the advocacy process because we truly feel that we are your advocates. The great thing about technology and the internet is that there's so much information, right? The stuff we had to go back in the day, telling my kids I had to go to the library to pick a book or pull out an encyclopedia when they can come up with five answers in 30 seconds. But the question is what are you going to do with that information? How are you going to take all that information, compress it, and apply it to your specific situation, and execute, and then move forward?

And even if you identify that on your own and execute, things change, right? The world changes, your health changes, your financial situation changes, the markets change, right? So to make things, I'm going to say, easier to swallow. I always say you can eat an elephant. Take just one small bite at a time. We've broken our planning process, basically, into four different themes. These are usually quarterly meetings. So Jen touched on a lot of the subject matter in the earlier part of here. Where we're looking at their priority, their values, their Money Mind, their goals, updating their balance sheet. Marc touched on the investment portfolio optimization review. Understanding what are your biases in how you approach investment? What's been your past experience? What do you really want your assets to do for you? And are you on track in a very dynamic approach to be able to have a high probability of success under all markets? All markets. The best of the best, the worst of the worst.

I drill deep in my group into the protection and estate solution review. So we have a disciplined approach looking at all that different subject matter. Other things like Medicare, Medicare supplement, Part D. Do you do an annual assessment of the prescriptions you're on? Do you have a health savings account? Are you using it while you're funding it and you're employed? Are you accumulating assets, maybe as another nice nest egg to pay for expenses once you are Medicare eligible? So there's a lot that goes behind in terms of how you protect your assets as you're accumulating wealth.

And then last but not least, with our counterparts like Lois at EisnerAmper, is in the fourth quarter we're pretty busy looking at tax efficiency. Where are the opportunities to plan where we can either avoid, defer, or minimize taxes? And that could be income taxes, estate taxes, gift taxes, all of the above. There may be items on your balance sheet that have nothing to do with investments. It may have to do with your business. It may have to do with a piece of real estate or an inheritance. And how does that incorporate into your entire plan?

We truly feel that all four of these themes and these boxes that are on this slide, there is a direct correlation with one of them versus the other. So where you may be doing great in one area, you might be exposed in the other. So it's great to go through the entire process, then take a step back, and then really prioritize through our priority action list so that you can accomplish things and see progress. Because that's what everybody wants to see, right? So I want to lose some weight this year. So I committed I'm going to ride my Peloton at least two days a week, right? It's one thing to have a goal. It's what are those activities and what are the projects that you're going to work on that accumulate wealth, protect wealth, and really have a plan and a process to review it as time goes on, as things change. We are at 11:56. That was all my prepared material. How are we dealing with time? Do we have time, Bella, for-

Marc Scudillo:Yeah, I think enough where we could take a couple of questions there. And exactly what you're saying, though, is that having this, taking this all into consideration, and then also how you then think about and behave around the finances actually play an important part to kind of pull this all together. So an example, one of the questions was how can women earn higher returns if they are less confident, which is what the study had shown? Well, the reality is the second part of that study was saying that those that do invest, so that they have that confidence to move forward, they're more patient and they seek guidance along the way. So that they're able to understand when things move, they're more open to be educated as saying, this is why the adjustments were made, or why the markets moved in this direction. And how does that impact your overall portfolio to be able to make the right adjustments, not knee jerk reaction adjustments?

So that's part of the reason why this study had found that women actually who do invest, again, it's not over- but those that take that leap to invest, they actually perform better because they're doing it the right way with the proper education and the right guidance along the way. They're more open to that.

Lois Clinco:Marc, I wanted to add to that also, and Onofrio touched on it also that it depends also, a large part, in where you are within your age. Within your investment cycle, right? That to me is a big part, especially being a woman as to how, now that I'm in my 50s , I'm more conservative, as opposed to when I was in my 30s, I led it, right? I didn't just sit there and watch it, which I think Jennifer had, or you did, I think, you had the person just sitting and just waiting.

Marc Scudillo:Absolutely, absolutely. So it does depend upon the age cycle that the client is at at that point in time to make those adjustments. Another question that came up was, as far as how people make up their minds, how do you make up your mind regarding debt versus equity in the terms of paying off a mortgage versus investing it? And how does that play into also with the fact that women may live longer along the way versus their spouses?

So I would just say, and Jen, definitely please add in, one of the things that I would say is that ties exactly into some of the behavioral aspect of this, right? Because from the finance perspective, on that spectrum, you could illustrate how having what we call good debt, and you utilize those proceeds from the good debt to work harder for you than the interest that you're paying over to time, that could quantify to adding more wealth.

But then you have on the other end of the spectrum, the behaviors or the comfort level of still maintaining debt over a longer period of time. And those don't always intersect. So that's why we do exactly what we do. We go through, and if someone has more of a, I'll call it, a protectionist mindset along the way when it comes to their plan, well, they might not take on sufficient amount of risk for you to outpace the mortgage interest that you're paying. So that question is saying it depends on that particular individual's comfort level and willingness to try to outpace the cost of interest just along the way versus just paying down the debt. And so that's one aspect. Yes. Go ahead.

Onofrio Cirianni:I'll just add one other note, and I know we're running at a time, based on that topic. I go back to those four themes, right? We can go through and financially show you economically with projections that it's better off to, let's say, maintain a mortgage at this low interest rate environment for the next 30 years. Because you can outpace the investments. Somebody's comfortable with that. But then you have somebody like my dad who can't sleep at night cause he hates debt. You could show him the numbers, but it's not how he's wired. And his Money Mind is like protection plus 10, right? Or maybe I'm comfortable with it because I'm the CFO of the household. But my wife wants to know what if something happens to me? What if I got sick? What if I couldn't earn the income? What if I got hit by a bus? What insurance and protection components have we put in place to make sure that they're okay? Not just when we're both alive, but if she is the one that survives me. So in closing-

Marc Scudillo:And that's how it is. Onofrio-

Jennifer Keiling:It does.

Marc Scudillo:I was just going to say that ties right into the why women in transition practice that we developed is to try to coordinate that aspect of both the risk, the investments, and the planning along with the taxation altogether. So I know we ran out time there. Thank you for extending an extra minute and a half here.

Onofrio Cirianni:Thank you everybody for participating. We appreciate it. And there were a lot of great questions. We will follow up after this webinar. Stay safe-

Jennifer Keiling:Thanks so much.

Onofrio Cirianni:and have a good new year.

Transcribed by

What's on Your Mind?

Start a conversation with the team

Receive the latest business insights, analysis, and perspectives from EisnerAmper professionals.