id
stringlengths 32
32
| url
stringlengths 31
1.58k
| title
stringlengths 0
1.02k
| contents
stringlengths 92
1.17M
|
|---|---|---|---|
ae70a791c0c64e56a46b179e3565cb3a
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/04/04/three-mantras-for-market-volatility/
|
Three Mantras For Market Volatility
|
Three Mantras For Market Volatility
As a financial advisor, clients are always happy to receive account statements that show higher balances than the prior month. But if I report a decline, the phone calls seem to come rolling in. It’s not surprising; investors abhor loss. But in my experience, even if the losses are temporary and on-paper, our brain seems to kick into fight-or-flight mode every time.
In my book, I devote an entire chapter to the discussion of human behavior and investing. I've observed that some investors have an instinct to flee when something doesn't go the way they were hoping. So in order to combat that instinct to flee, I've developed three mantras that I believe you can use to talk yourself off a rushed-decision-making ledge:
1. 'It’s not considered a real loss until I sell.'
I've found this mantra can help you manage myopic loss aversion, which results from investors reacting negatively to short-term, on-paper losses. In my experience, this is a high-risk behavior that can potentially cause capital loss consequences. Losses become realized at the time a position is sold. Until that time, losses are market value fluctuations that do not contribute to permanent losses. After all, the permanent capital loss is the thing that everyone is trying to avoid. If the investment in question has a low probability of going to zero value forever, then I believe the best reaction is to remember that, sometimes, the best action is inaction.
2. 'I don’t control the market, and it doesn’t control me.'
This mindset can help investors who suffer from an illusion of control. Many times, I have seen active day traders and other do-it-yourself investors make the false assumption that their charts, graphs and research gives them the ability to predict a positive outcome. However, no investors control the specific day-to-day outcome of a company or industry-specific events.
Regardless of the amount of confidence one might have cultivated, tempering your expectations for specific outcomes within specific time-frames is key to long-term investing success. I've observed many investors who buy stocks or mutual funds based on historical performance figures, including one-, three-, five- and ten-year returns. Using these returns as a reference is helpful, but they don't promise the same returns will occur in the future. Stock returns are notorious for fluctuating, which can make using average annualized returns a misleading data set.
3. 'New highs are not automatically followed by newer higher highs.'
In my experience, this third mantra should be exercised by those who have succumbed to recent extrapolation bias. I have observed this phenomenon of thinking the near future will return similar results as what happened in the recent past, and it can get many investors in trouble. You don’t have to look too deeply into history to find extreme exuberance (paywall) in certain areas of the capital markets (e.g., Bitcoin). Market participants loading up on assets send prices higher, while underlying fundamentals remain in early stages. I believe remembering this for new highs is just as important as for new lows. The basics of determining the price of any asset are fundamentally based upon supply and demand. In my experience, buying without concern for an asset's intrinsic value can be just as dangerous as selling due to a heightened perception of risk.
All markets — including stocks, bonds, hard assets, currencies, etc. — display nonlinear market value returns. That is to say that prices can change daily, which is the reality of our global capital markets. By reinforcing your mental fortitude with these above mantras, I believe you, too, can prevent yourself from falling victim to your instinct to run.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
6713d9872e10dc17225fad21b9f8f9b5
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/04/09/why-hasnt-sustainable-investing-gone-viral-yet/
|
Why Hasn't Sustainable Investing Gone Viral Yet?
|
Why Hasn't Sustainable Investing Gone Viral Yet?
With Leonardo DiCaprio raising awareness on climate change, Emma Watson advocating for gender equality and Matt Damon co-founding a company to address water scarcity, sustainability has gone mainstream. So what has prevented this movement from extending further into the financial markets?
Let’s first look at what sustainability looks like in financial terms. In sustainable investing, the ideal scenario is when you find opportunities that produce the highest returns and have the highest positive impact.
However, more often than not, there is a tradeoff to be made. On one end of the spectrum, sustainable funds can be philanthropic, or impact-driven, meaning the fund will be maximizing for impact subject to profits. Conversely, hedge funds that integrate non-financial sustainability metrics into their investment framework will be seeking to maximize profits and fulfill their fiduciary duty subject to impact. Here, the byproduct is better risk-adjusted returns by incorporating more relevant information.
Going back to the question of why sustainability hasn’t made greater strides in financial markets, it’s helpful to look at how a movement becomes successful. To begin and persevere a movement that effects real change, it needs not only leaders, but even more importantly, those first followers who can draw momentum to the movement to achieve critical mass. At that juncture, the comfort of being among the skeptics has shifted to being among the believers. Those who do not want to stand out will conform to the change, and the body of followers grows exponentially. Derek Sivers points to the famous “Sasquatch Music Festival 2009” video for a visual representation of that movement.
As simple as that methodology for change looks on paper, the truth is that social movements take considerable time and the removal or leapfrogging of many obstacles. Financial markets have been around for hundreds of years, so prior notions and dispositions need to be challenged. This initial work has been performed by funds such as Generation, Impax and Parnassus. They broke the status quo and proved to the markets that sustainable investing can be a significant part of investing’s future, in the 21st century and beyond. Further, early adopters have joined those leaders to establish the movement as a reckoning force. However, to truly enact a sustainable and permanent change, the most significant obstacle still must be removed — the concentration of assets under management.
At the end of 2017, sustainable investing accounted for around $12 trillion in U.S. assets, a drop in the bucket compared to the total $263 trillion invested in the global public markets, according to World Bank and IMF data, and accounting for a penetration of approximately 4.5%. Much like the move toward electric vehicles, financial market incumbents must maintain their current offerings while slowly pivoting resources toward the future. On the other hand, incipient funds do not need to migrate resources, as their investment process and research and development are entirely focused on this new frontier. However, these smaller funds currently lack the reputation or scalability to make a larger dent in the financial markets, so there is an opportunity for the larger, incumbent funds to empower smaller firms giving rise to this group of early adopters that will drive change in a larger scale.
How can these large, multibillion-dollar funds help this process along to create more sustainable returns for their investors, along with a more sustainable world for future generations? As those incumbent firms grow larger, their capacity to provide higher returns diminishes, their asset allocation shifts to higher liquidity assets and their impact is smaller than when they first started. By partnering with new firms, they could generate a win-win-win situation: By allocating money to new smaller sustainable managers, they can increase their overall returns, provide the emerging managers with the reputation and name recognition to raise additional assets, and increase societal impact not just through investments, but also by creating an ecosystem of sustainable investment firms.
Early adopters are vital to effect real change, and innovators should embrace early adopters by empowering them, be it through incubators, separately managed accounts, direct investments or some other way. If we can achieve that, we might have a chance at making sustainable investing mainstream.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
cc420ff1e9a29ef6ea9f5e3686367fb0
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/04/22/to-rent-or-buy-rethinking-the-american-dream/
|
To Rent Or Buy: Rethinking The American Dream
|
To Rent Or Buy: Rethinking The American Dream
Owning your own home has been a staple of the American dream for as long as anyone can remember. There’s something quite satisfying that comes from knowing you’ve worked hard, remained disciplined and achieved a substantial goal of providing for you and your family’s security.
But the dream of owning your own home comes at a price, and as housing costs continue to increase, some people are now rethinking homeownership. In many cases, it still makes good sense to own, but the decision making process has become more complicated.
Reasons To Buy
Aside from the sense of achievement and a feeling of security that comes from owning a house or condo, there are several practical reasons why it makes good sense to buy. Owning your own home can be treated as an investment that allows you to build equity over time. Assuming you make payments in a timely manner, you’ll build a great credit profile that can translate to benefits in other areas of your life, as well. Being a homeowner means that you may enjoy certain tax benefits, too.
You will be your own landlord, and that means you can decide how to maintain and upgrade your home, whether it’s changing out the carpet, remodeling the kitchen or undertaking a full room addition. The flip side is that all those costs come out of your pocket, but if done the right way, they can add to the long-term value of your home.
Home ownership also traditionally means more stability, which can be especially important if you have school-age children. Outstanding schools, police and fire protection, and parks and recreation amenities are important benefits that can’t always be measured by a financial bottom line.
Reasons To Rent
If you’re young and just starting out, or your life is in flux for any reason (such as a divorce, job loss, etc.), then renting makes more sense in many cases. It costs a lot less to come up with the initial amount of money required to rent, and your monthly costs are generally going to be less, as well. The caveat here is that you’re at the mercy of a landlord who could choose to raise your rent, depending on the terms of your lease. And while overall expenses should be much lower, you also won’t be building equity like you would by owning a property instead.
If you’re not handy or don’t want the burden of maintaining a property, as a renter, your landlord is responsible for maintaining the property, which can be quite liberating when a dishwasher breaks down or the roof springs a leak.
If your landlord reports to credit bureaus, you can still enjoy the benefit of building a credit history. You won’t be weighed down by having to pay property taxes, which can be thousands of dollars a year.
Moving is a hassle under the best of circumstances, but when you rent, it’s a lot quicker and cleaner than trying to sell a home, even in a bull market. If you still have a sense of adventure about you and mobility matters, then renting could be much more suitable than buying until you’re ready to settle down.
The Time Factor
Buying is a more measured approach that provides significant benefits over a longer period of time. You build equity, and you have more of a say in increasing the value by making improvements to an asset you own. If you’re only going to stay in a place for a short period of time, then renting may be preferable because there are fewer out-of-pocket expenses. The key to maximizing that as a benefit is making wise decisions about the money you save when renting instead of owning. If you blow the difference on things that aren’t smart investments, then you’re doing yourself a disservice. But if you take the difference (assuming you have enough income to do so) and invest it wisely, you could reap benefits down the road, as well.
There’s also a misconception that homes always appreciate in value. That’s simply not the case. Housing bubbles can and do take place in overheated markets, causing prices to tumble until the market corrects. In some cases, putting too much of your savings into a single, leveraged investment could be riskier than a diversified portfolio of stocks and bonds.
The Tax Factor
If you are a homeowner, as long as you file form 1040 and itemize your deductions and your mortgage is a secured debt on a qualified home (a first or second home) you own, you will enjoy a major deduction when filing your tax return.
This deduction was modified as part of the Tax Cuts and Jobs Act, so make sure you’re up to date on the new interest deduction limit. Note: The new limit only applies to loans initiated after 2017, while pre-existing mortgage loans are grandfathered at the old limits.
Also, if you put less than 20% down on a home, you’re going to pay private mortgage insurance, as well. PMI is treated as interest for tax purposes.
The Bottom Line
You may have the necessary resources to buy a property instead of renting, but that doesn’t always mean you should jump right in to a purchase. Work out a budget, find your comfort zone, and consider the time and tax factors before moving forward either way.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
e4830f09f2864c2efe349357ce3302dd
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/05/02/worried-about-payroll-fraud-nine-ways-small-businesses-can-mitigate-the-risk/
|
Worried About Payroll Fraud? Nine Ways Small Businesses Can Mitigate The Risk
|
Worried About Payroll Fraud? Nine Ways Small Businesses Can Mitigate The Risk
Payroll fraud is a common issue with severe consequences. Whether an employee asks for a pay advance that is never repaid, punches in for a fellow worker who takes the day off or diverts the paychecks of an absent or former employee, there are plenty of ways dishonest staff can conspire to get extra money out of your business. Those stolen dollars can add up quickly, especially for a small business on an already-tight budget.
While you want to believe your workers are trustworthy individuals, you shouldn’t assume that fraud can’t (or won’t) happen to your business. Below, nine Forbes Finance Council members explain how small businesses can mitigate the risk of payroll fraud.
Members of Forbes Finance Council offer strategies to help small businesses avoid payroll fraud. Photos courtesy of the individual members.
1. Set And Distribute Firm Policies Early And Often
Payroll fraud is most common in instances where employee advances go unreimbursed or administrators adjust their peers’ timecards. By creating, distributing and constantly iterating firm policies and procedures, you avoid unnecessary risk by addressing potential conflicts up front. Also, having dual-approval requirements on payroll prevents rogue administrators from making manual adjustments. - Damian Lo Basso, Compass CFO Solutions
2. Separate Your Payroll Bank Account
Set up a separate bank account for payroll checks and reconcile the account daily. By keeping a close eye on the account you can look for any checks being deposited out of sequence. In addition, by having a separate account you cut off the risk of anyone trying to cash large checks on your business account, which typically has a larger amount of cash reserves in it. - David Gass, Anderson Business Advisors, LLC
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Set A Checks And Balances System
If you have enough employees, utilize a payroll service. Have someone review payroll versus employee role to look for ghost employees periodically, and look at addresses that are the same for different employees. Separate the person who handles payroll from the person who cuts or signs the checks and the person who handles hiring. And remember, tenure does not always equal trustworthiness. - Chris Tierney, Moore Colson CPAs and Advisors
4. Outsource Payroll To A Reputable Firm
There are many outside vendors that offer payroll services. Small businesses can reduce or eliminate potential payroll fraud by utilizing their expertise. In addition, reputable companies have error and omission insurance to safeguard against any fraud and reduce liability for the business. - Sina Azari, PRESENT Financial Partners
5. Implement Direct Deposits
A considerable percentage of payroll fraud involves the use of checks. By switching all payroll and bonus payments over to direct deposit, this risk is largely eliminated. You can sell your employees on the advantages of direct deposit, such as faster access to cash. Also, there are many reputable firms with stringent security and fraud prevention techniques that you can outsource payroll to. - Ismael Wrixen, FE International
6. Have Multiple Eyes On It
When it comes to matters of payroll and complying with the law we always have our controller check with the payroll company we use to make sure we do things properly. Using a payroll company versus doing it yourself offers a level of security as well as checks and balances. We also have our accounting firm confirm everything on a quarterly basis as a third set of eyes to triple-check everything. - Jared Weitz, United Capital Source Inc.
7. Trust But Verify
When we think of fraudsters, we think of bad individuals, but the reality is that it is often a good employee who turns bad due to unfortunate circumstances. Creating a culture of integrity and communication is great; doing so along with implementing a transactional monitoring system is better. Or rely on your local CPA firm to conduct a basic review of your internal controls. Trust with verification. - Solon Angel, MindBridge Ai
8. Stay Involved In Payroll, Even If You Outsource It
For a small business, payroll is likely the most regulated part of the business. The big bad IRS is a cute kitten compared to the Department of Labor. The best way to avoid payroll fraud and ensure compliance is to employ a third-party payroll company while the owner keeps final approval and oversight to ensure everything is done correctly. - Vlad Rusz, Vlad Corp. USA
9. Reconcile Your Employee List And Payroll Budget
Unintentional errors are regularly made by the most respected payroll companies. Your payroll provider must explain your reports clearly, demonstrating your total payroll obligation and why. Once you understand the amounts needed to cover payroll, match them to the amounts disbursed from your bank account. Compare the employees paid to your employee master list and the totals to your budget. - Perry D’Alessio, D’Alessio Tocci & Pell, LLP
|
b4e3e3dc7b2b2a85e2151fa9cea4e662
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/05/13/new-trends-in-retirement-planning-a-wake-up-call-to-advisors-and-their-clients/
|
New Trends In Retirement Planning: A Wake-Up Call To Advisors And Their Clients
|
New Trends In Retirement Planning: A Wake-Up Call To Advisors And Their Clients
For years, the vast majority of wealth managers and financial advisors have been following a similar approach to their clients’ investments for retirement and beyond. The conventional wisdom is to start with higher proportions of stocks relative to bonds in the accumulation phase (many years until retirement), reducing that proportion as the client approaches retirement (protection phase) and even more during retirement (decumulation phase, when a portion of the principal is drawn down each year for monthly living costs).
In fact, there are over a trillion dollars invested in these types of “target date” funds and products designed to mimic this approach. On the surface, this seems like a reasonable way to manage retirement assets, as it allows for higher risk and returns when accumulating wealth, while cutting back on that risk later to avoid a large drawdown in wealth at the most inopportune time near or during retirement.
However, a March 2019 paper written by academic experts in the study of retirement planning concludes that this conventional wisdom is far from optimal based on nearly 100 years of market history, and in fact, this target date approach has serious implications for the success of retirement savers. The authors argue there are two main reasons for this:
1. Buy-and-hold portfolios can suffer large drawdowns at any time, so investors are subject to significant “sequence risk,” which they define as “the possibility of bad portfolio returns occurring at the worst possible time, e.g. just before or after retirement.”
2. Because the only way to mitigate this risk in a buy-and-hold portfolio is to shift away from higher-return stocks to lower-return bonds, potential returns are damped, which has an impact on the safe withdrawal rate of the accumulated wealth during retirement.
The study investigates a different way of thinking about the problem by using trend-following/momentum methods to automatically shift allocations from equities to bonds. This is referred to as “time diversification,” because the way the markets evolve over time determines how the stock/bond allocations shift. In the analysis, the authors use a simple 10-month moving average decision rule. In other words, if the equity market’s current price is below the average price of the prior 10 months, the portfolio exits from equities and puts that cash into treasury bills until the market price goes back over the monthly average. The same rule applies to bond allocation.
Clearly, this is a different approach. The conventional approach fixes the initial allocation percentages and, over time, shifts more to bonds from stocks on what is termed a “glidepath.” While this does involve a shift of allocations over time, it is done on a predetermined schedule regardless of what happens in the markets. The trend-following approach, by contrast, seeks to control the magnitude of possible drawdowns by exiting if (and only if) the market is doing poorly according to the 10-month rule. Sometimes this helps a lot, such as during the market crash of 2008-2009, and other times, it causes an unnecessary exit and re-entry, known as a whipsaw. The cost of these false signals is low relative to the real benefit to a client of avoiding the worst-case scenarios that can dramatically impact their retirement assets.
The study provides statistical proof that the trend-following approach offers significant improvements in expected withdrawal rates (up to 50% higher on average compared to the glidepath approach).
While there have been other studies that have examined the empirical evidence in support of trend-following as a risk reduction tool, some going back as far as 200 years, this is the first study that shows how important this approach can be as a way to deal with the real retirement risks faced by clients. As a wealth advisor providing fintech solutions for advisors, I firmly believe, and this paper confirms, that clients could benefit from augmenting traditional asset-based diversification with strategy diversification of this type.
I also contend that clients want their advisors to give them this kind of safety through asset and strategy diversification, but many advisors do not offer that choice. There are two main reasons for this. First, advisors are concerned about firm/career risk if they deviate from the buy-and-hold benchmarks. Second, many have been led to believe that market timing does not work because the market timing used by individual clients has been shown to cause significant underperformance over a full cycle as they overweight exposure near the tops of markets and severely underweight at bottoms. However, trend-following risk management rules act differently by exiting after tops (on the way down) and re-entering after bottoms (on the way back), resulting in higher risk-adjusted returns.
You might have heard the expression “the trend is your friend.” In the context of retirement planning, there is no question that a bad downtrend is your enemy. This enemy can more likely be defeated with a careful defensive risk management approach of the type described here. It is time for the industry to take a serious look at the issue of protecting clients against bad retirement outcomes.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
700e00e5d091abf996a07fb066e9fa6e
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/05/17/new-to-the-finance-field-10-industry-pros-offer-tips-for-young-executives/
|
New To The Finance Field? 10 Industry Pros Offer Tips For Young Executives
|
New To The Finance Field? 10 Industry Pros Offer Tips For Young Executives
Today’s finance professionals are entering the workforce at a difficult time. New technology and currencies are rising, the market is in flux, and the economy is increasingly global, making it difficult for them to settle into their careers.
To feel grounded, these workers might consider seeking guidance from a seasoned pro. That’s why we asked the experts of Forbes Finance Council for their best advice for young executives in their field. Here’s what they had to say.
Members of Forbes Finance Council offer advice and guidance to new professionals entering the finance industry. Photos courtesy of the individual members.
1. Commit To Continuous Learning
The rate of change—driven principally by technology—is unlikely to change. My best piece of advice is to commit to being a lifelong learner. Keep up with the changes in technology, politics and economics, and use the change as your opportunity to differentiate. - Robert Roley, SS&C
2. Get Familiar With Blockchain
Study blockchain, both technically and philosophically. The internet had a profound effect on the front of the house, where customer interactions occur, but it had less impact on the back office, where smooth operations are vital. It is here blockchain can create tremendous efficiencies, and the proper application of it from a business perspective will be a key driver in the success of your career. - Maryanne Morrow, 9th Gear Technologies
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Join Professional Organizations And Take Courses
Take time to understand the full industry landscape, and look beyond popular jobs with attractive starting salaries. Then, learn as much as you can. Join organizations like the CFA Institute or the CFP Board to connect with mentors, read about areas you’re less familiar with and take programming courses that may help automate parts of your role, ultimately scaling your growth and visibility. - Sonya Thadhani Mughal, Bailard, Inc.
4. Step Outside The Finance Bubble
Listen to the world—history, new tech, politics, neuroscience and unrelated industries. What is everyone up to? Keeping your ear to the ground doesn’t just keep you in the know, it also layers your perspective. You can use that to help you “see” in a new way. Nothing helps growth more than a willingness to learn. This is where innovation begins and where your differentiator will come to light. - Faith Keith, Leverage Retirement
5. Take The Lead On Your Company’s Digital Evolution
Everyone knows automation is rapidly transforming financial services. A key way new finance professionals can help their organizations is championing this evolution toward a fully digital DNA. Automation requires a complete mentality shift, but its added capital efficiency and better customer experience is a requirement for enterprises to stay competitive in today’s day and age. - Jeremy Almond, PayStand
6. Focus On Building Your Skills And Your Network
Finance is an industry where opportunities to learn are immense. The skills learned through the industry are applicable across a wide range of other careers. As a new finance professional, you should aim to constantly build your skills and professional network, which are the two most important aspects of your career. They can help you lead a successful long-term career. - Atish Davda, EquityZen
7. Define Your Specialty
Find the area that attracts you the most and specialize in it. Don’t try to be a jack of all trades, master of none. If you like to work with doctors, then focus your expertise on how you can best serve doctors. If helping retirees reach their lifelong dreams fulfills you, then focus on the retirement code. Whatever area most intrigues you, specialize in it. - Justin Goodbread, Heritage Investors
8. Know How To Build And Sell Your Experience
People pay for experience. Most people don’t care where you went to school, how well you did or if you were you an athlete. They want to know what you know as it relates to their needs. Work on as many varied projects as you can in your field and build up that experience database so when a client comes along with a particular need, you’ve been there. That’s the confidence most clients want to see. - Chris Tierney, Moore Colson CPAs and Advisors
9. Actively Seek Out New Knowledge
My best advice for new professionals is to seek as much knowledge and experience as possible. Use all the tools available to you. The internet is a huge knowledge base where you can learn an infinite number of things. Knowledge is power. It’s important to put in the hours to learn and experience as much as possible. - Andy Khawaja, Allied Wallet
10. Keep An Eye On Your Cash Flow
Executives can’t be blinded by money when it first hits their account. Instead, they should treat it like it’s not there and create a nest egg for their business. You need six months of capital at fixed spend for things like rent, payroll, internet or anything your business needs. Variable spend is more easily controlled. - Sal Rehmetullah, Fattmerchant
|
b2982b78c3304dd241f51548b04e3641
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/05/20/its-time-to-take-foreign-exchange-out-of-the-stone-age/
|
It's Time To Take Foreign Exchange Out Of The Stone Age
|
It's Time To Take Foreign Exchange Out Of The Stone Age
If you are a fellow member of the foreign exchange (FX) trading family, you probably understand when I refer to the entire process as something out of Bedrock. Bedrock, as you recall, is the fictional prehistoric town in the cartoon series The Flintstones. The Stone Age environment is an apt description for a trading process that, when compared to today’s digital-first world, is antiquated and downright Paleolithic.
Imagine the following exchange between a prehistoric Barney and Fred, which isn’t too far off how it works today:
Fred: I’ll give you 38 pebbles for 53 dinosaur bones, Barney.
Barney: I don’t have any bones to send you at the moment.
Fred: Don’t worry. I trust you. And you have two business days to find those bones, anyway. So, is it a deal?
Barney: You bet! (Mutters to himself) Just hope I don’t run into any problems over the weekend.
That may be a simplified version of the problem, but it begs the question: Isn’t it time FX trading moved out of the Stone Age and into the digital age?
Vices Become Habits
Before online systems became foreign exchange’s trading backbone, people kept manual blotters. In the example above, it’s a safe bet that Fred kept close track of his pebbles-for-dinosaur-bones offer, and Barney surely did, too. Mark up this side of the ledger. Mark up that side of the ledger. And hold your breath that an obscure bank in some far-off land doesn’t go bust and get liquidated before it sends its counterparties the currencies they are expecting.
Eventually, things did come up to “speed,” at least the level of speed traders came to expect in the early 1960s. The telex and telephone became the tools of choice, but back offices still could not guarantee transactions would always go where they were intended and in the right amounts. There were misunderstandings. Payments went to the wrong banks in whole or in part. Maybe they were sent gross and not net.
Eventually SWIFT, the Belgium-based Society for Worldwide Interbank Financial Telecommunication, came along and obviated a lot of the mess. That was in 1973, and nothing has changed all that much except that with broad use of the internet, messages now travel faster.
However, there is still risk in the system, particularly delivery risk (also known as Herstatt risk). This delivery risk is there because it takes two days for a transaction to make its way through the trade/confirm/settle process.
Think about it this way: You can go to an ATM, punch in a bunch of numbers and obtain cash instantly, and your bank knows to deduct that from your account right away. But a foreign exchange trade takes two days to settle. Why?
Promising Developments
You could blame the technology, but that is no longer an excuse. Recent developments have the potential to bring foreign exchange trading into the modern world. I have a deep background in institutional finance and also had the opportunity to lead my own startup accelerator. This offered unique insights into emerging technology, and over time, I became an expert in blockchain and cryptocurrencies.
Blockchain may sound like a word from The Flintstones, but it’s a 21st century way to help solve the problem. As I learned more about its capabilities, I realized it holds the potential to dramatically improve a range of industries, and I now run a company using blockchain to reimagine the institutional foreign exchange market. Blockchain is particularly useful in the trading environment, because without it, every trading partner has its own system and cannot see into its counterparty’s system. By providing a mutual ledger, one book of records for everyone to see, blockchain offers a single source of truth, which can help speed things up.
But the blockchain cannot do it all by itself. After all, Barney still needs to find dinosaur bones for Fred. Bones may not be easy to find. He may have to visit his local bank to fetch some, but if his bank is on the smaller side, then his bank has to go to its bank, a much bigger one, to find those bones. As for Fred, he may not have those pebbles ready to go, either, so he’d need to do the same, before the trade could be settled. Multiplied by millions of Freds and millions of Barneys, it takes time.
But what if peers could trade currencies with peers making the need for this spider web of correspondent banks disappear? Could simplified peer-to-peer exchanges that still operate within the banking system speed things up?
They could, but one more change has to fall into place: The funds still have to be available, more or less immediately. There needs to be a payment-liquidity component. Where will the liquidity come from? The obvious answer: lenders. These could be the banks themselves, asset managers or wealth managers. They could also be corporate treasurers who are stewards of some trillion dollars in cash, much of which sits around earning close to nothing. This is cash that could find a nice home for as little as a few minutes in a foreign exchange marketplace.
Several hurdles exist in the current peer-to-peer FX market, including the issue that trading takes two full days to complete and can come at high cost through wire fees and fixing breakages. System risks also abound. Blockchain-based FX markets today are mostly business to consumer, and these add additional risks due to the cryptocurrency step involved.
However, with some thoughtful changes, it truly won’t take much to reimagine foreign exchange, and the impact could be felt for generations to come. As Fred would say, “Yabba dabba doo!”
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
9b8531d0d996eadb18854fbd77df62e7
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/05/23/these-four-factors-are-the-difference-between-success-and-failure-in-digital-transformation/
|
These Four Factors Are The Difference Between Success And Failure In Digital Transformation
|
These Four Factors Are The Difference Between Success And Failure In Digital Transformation
Chief investment officers (CIOs) today are faced with more pressure than ever before to modernize and digitize. In fact, many large investment institutions are still managing billions of dollars using spreadsheets. This must change.
As the founder and CEO of a 15-year-old company that aims to help firms in the alternative investment management space operate, invest and communicate more intelligently, I’ve experienced firsthand the implications of digital transformation for clients. From pensions to family offices to endowments and foundations, CIOs are grappling with the explosive growth of both qualitative and quantitative data, asset growth and complexity, the need to overcome information silos, and a growing number of tools, fee structures and more. At the same time, the long life cycles of many investments can often outlast the tenure of your staff, leaving huge knowledge gaps as new managers step in.
Many CIOs know they must digitize workflows and operations — and fast. However, the worst course of action is to invest in technology for its own sake and in the interest of a quick solution. Before investing a single dollar, CIOs must consider the following four factors in determining the digital transformation strategy that will be right for their business.
• Culture and change. An organizational culture that is flexible and open to change is one of the biggest determining factors in the success of a digital transformation initiative. This commitment to change must begin at the highest levels of leadership within an organization, or it simply will not happen. If leaders aren’t on board, you can’t expect acceptance and adoption to trickle down among employees. Because change is hard and often met with resistance, it’s important to take the time to educate and train employees on new processes and technologies to make sure they feel comfortable and confident when the time comes for deployment.
• Business impact. Any investment in technology must be outcome-driven. It may seem appealing to go for the solution with the most bells and whistles or the solution built on whatever tech trend is currently “en vogue.” The reality is that every organization has different needs to fill with digital transformation, and if a certain technology doesn’t directly link back to business goals or added client value, it’s ultimately a failure. That is why it is imperative that business goals be clearly defined first and only then followed by the technology that will help an organization reach those goals. Too often, companies invest in a technology and then retrofit goals to accommodate and justify their investment, when it should really be the other way around.
• Partner ecosystem. A well-cultivated network can be hugely valuable in making decisions around digital transformation investments. CIOs should think about who they can work with or bring together, and what information might be able to be securely shared to improve the overall experience for all parties that will be impacted.
• Knowledge capture. The point of digital transformation in the investment field is to create a more efficient organization that is able to fulfill its investment mandates. As CIOs contend with the massive growth in the amount and complexity of data, their organizations must be able to capture information in meaningful and actionable ways that will enable better decision-making. As employees join, leave or take on new roles within an organization, it’s essential to have a centralized process for recording investment information, such as the investment thesis, terms, key risks, time to exit, etc. A digital knowledge hub that is institutional rather than individual is key, especially as the amount of data continues to grow.
Digital transformation can seem an overwhelming undertaking. But if you use the above factors as lodestars in architecting your initiative, the right partners, technologies, strategies and investments will become clear.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
425d5bf01c9750944aca07d7f4e1cde7
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/05/29/fix-and-flip-what-it-is-and-how-you-can-make-the-most-of-one/
|
Fix And Flip: What It Is And How You Can Make The Most Of One
|
Fix And Flip: What It Is And How You Can Make The Most Of One
House flipping has become mainstream with the help of HGTV’s plethora of reality shows about people fixing and flipping properties, but what exactly is a “fix and flip,” which types are the most common and how can you make the most of one?
A house “flip” is when an investor buys a home with the intent to resell it a short time later at a higher price. For many real estate lenders across the country, including my own hard-money lending company, that “short time” refers to any property bought and sold within a 12-month period. If your project requires more than 12 months to complete, though, don’t despair; many lenders can still offer financing for projects or situations that might require a longer loan term.
The Three Categories Of Flips
There are three main types of flips: wholesaling, “wholetailing” and the best known, fixing and flipping.
1. Wholesaling a property can be accomplished one of three ways. You can assign the purchase contract (to the next seller). You can sell via a double escrow (one escrow for the investor’s purchase and one for the sale to the second investor or end user. These are open concurrently but will close in the order of sale.). Or, you can purchase and quickly resell without remodeling the property.
2. Wholetailing a property is accomplished by purchasing a property, doing a quick cleanup of the property, then putting it back on a multiple listing service (MLS) to sell to an investor or an end user.
3. Fixing and flipping is when an investor purchases a property, remodels the property to add value and then (typically) lists it on an MLS to sell to an end user.
Maximizing These Opportunities
So how can you make the most of these opportunities? And what happens to your money if the property takes too long to sell?
To maximize your success at wholetailing, which is becoming more popular — especially in markets with low levels of inventory on their MLS — you’ll want to “buy right.” Buying right means purchasing at a price that will allow you to re-sell at or below market value and still make a profit.
Success with the fix-and-flip method is also dependent upon buying right, as well as setting a realistic budget for the remodel and sticking to that budget. A third key point to keep in mind when planning a successful real estate investment strategy is pricing the property correctly so that it sells in a timely manner.
If a fix-and-flip property takes too long to sell, it can cost investors in one of three ways:
1. Interest carry: This is the monthly cost of money borrowed for the project. This assumes the investor has a loan on the property.
2. Opportunity cost: This is the cost of not being able to take your money and invest it in another project. For example, if a property is priced too high and sits on the market and doesn’t sell, the investor might miss out on a great opportunity to purchase another investment property.
3. Cost of capital: This is the “cost” an investor should charge themselves for the money invested in the project. This amount should be based on what type of return the real estate investor would be able to get if they had their money invested elsewhere. (This can also be considered opportunity cost.)
Opportunities Remain
Since 2008, the market has continued to improve. Although margins have compressed, there’s still the potential for healthy profits to be made with all three types of flipping. When ATTOM Data Solutions released its 2018 Year-End Home Flipping report this month, it noted that in zip codes with at least 10 homes flipped last year and more than 5,000 residents, the highest home-flipping rate was in a Memphis zip code where flips accounted for 29.5% of total home sales. Other areas with high home-flipping rates last year included zip codes in Miami, Florida and Washington, D.C., among others.
The percentage of flipped homes purchased with financing was just over 36% in 2017, which was the highest percentage since 2008. Hard money loans can be a helpful option for real estate investors who don’t have all the capital needed for a project but still want to participate in fix and flips, as well as for more well-capitalized investors looking to leverage their equity to do multiple projects at once.
If you are a real estate investor looking to take advantage of the opportunities that exist with flipping, there are a few things to keep in mind. It is important to make sure you “buy right” no matter what strategy you take. As with all real estate investing, you make your money when you buy. It’s also important to know your numbers on a deal, both when it comes to values that are determined by comparable properties and sales, as well as what costs are going to be associated with buying, holding and selling the property. Opportunities are plentiful today, and I believe they will exist for the foreseeable future. I think this is especially true as people continue to want to live in more established urban areas, because most of these don’t have available land for new housing. So if someone wants a “new” home in one of these areas, they most likely will have to buy an investor fix and flip. So even though all those “reality” shows aren’t complete reality, there are still opportunities for those looking to flip properties.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
a21d07b99db67dc9a4f7e56f1feda517
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/06/03/10-self-help-tips-to-help-small-business-owners-keep-their-finances-organized/?sh=4700922457c6
|
10 Self-Help Tips To Help Small Business Owners Keep Their Finances Organized
|
10 Self-Help Tips To Help Small Business Owners Keep Their Finances Organized
Owning a small business can come with a steep learning curve, and it’s one that many entrepreneurs face alone. Learning as you go is never easy, and there are many aspects of day-to-day business that need to be mastered. In particular, small business owners may struggle to keep finances in order.
While it can be challenging to keep your business’ finances organized and under control, with a little know-how—and a bit of expert advice—you can get a grasp on the information, procedures and technology you need. Below, 10 members of Forbes Finance Council share their top recommendations for small business owners who are struggling to keep their finances in order.
Members of Forbes Finance Council suggest tips and tools for small business owners who are handling their own finances. Photos courtesy of the individual members.
1. Use Dedicated Bank And Credit Card Accounts
Entrepreneurs’ time has an incredibly high value. If outsourcing accounting is not feasible early on, the best practice is to use dedicated bank and credit card accounts for all your business activity. This setup will simplify migrating to an outsourced solution down the road. The best entrepreneurs focus their time on what they do best (hint: it is usually not their finances). - Levi Morehouse, Ceterus
2. Ask Your Community For Help
You may feel insecure about your finances and be tempted to tackle them solo, but tapping into your community will only make your business stronger. Lean on business owners in your industry or neighborhood. These are great resources to learn about best practices for managing finances, building business credit and more. Chances are they’ll be able to share downfalls and wins and provide guidance. - Steve Allocca, LendingClub
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Innovate And Automate
In the early days of my business, I used to handle the books on my own. However, as the business grew I had to delegate and automate most of our day-to-day tasks. I think to the extent you can automate everything through software you should. Tools like QuickBooks really streamline accounting and show you where you’re spending. By seeing this data, you can easily determine where and what is needed. - Jared Weitz, United Capital Source Inc.
4. Get Excited And Organized
Get excited and organized! Three tips are: 1) Invest in decent software and pay for an accountant to set it up correctly and provide you with some basic user training. 2) Establish separate bank accounts for personal and business matters. 3) Take pride in your archive system and create a filing system with labels so that you can find documents and have them at your fingertips. Then maintain! - Geanette Rodriguez-Ojeda, ARRI Rental
5. Separate Your Business And Personal Expenses
When you start a new business, be sure to separate your personal and business financials. Have a business account and a personal account. This will make it easier down the line to hand over your financials to an expert. One other thing that will be immensely helpful is tracking how your money moves. Luckily, many banks can quickly produce charts showing you exactly how your money was spent. - David Ehrenberg, Early Growth Financial Services
6. Utilize What’s Free
A startup may be too small to want to invest in an accounting package like QuickBooks. So in the interim, many commercial banks are providing free planning packages to help individuals and small businesses manage cash flow. Some banks even have people you can talk with to help set all of this up. This is a good way to start to establish solid managerial habits now before your company gets too big. - Chris Tierney, Moore Colson CPAs and Advisors
7. Make A Game Of Forecasting
First, find software that helps you easily keep track of everything. Then, make the budgeting and forecasting process a game with yourself to see how close you can get to your projections. Start out doing it month by month. Then increase to every quarter. Then forecast the entire year. This is a great way to create the good habit of staying on top of your business finances. - Ben Gold, QuickBridge Funding
8. Outsource Non-Core Activities
Successful entrepreneurs do one thing well—they identify an unmet need in the marketplace and fill it. Everything else is a distraction. If it’s not core to your business, outsource it. Smart entrepreneurs stick to their own unique abilities and hire others to handle all the other stuff. Organizing finances is truly a non-core activity. - Erik Christman, Oxford Financial Partners
9. Build A World-Class Finance Team
Hire a part-time CFO who will provide you with a high-level finance leader at a fraction of the price of a full-time CFO, which most small businesses can’t afford. A part-time CFO is worth his or her weight in gold. They can direct you on key decisions and how to improve efficiencies and create growth while being able to afford the cash outflows—so you don’t have to worry about the numbers. - Khurram Chohan, Together CFO
10. Find A Low-Cost Entry Point
There are multiple services that handle and simplify financial and accounting needs. People forget about accounting, taxes and strategic financial management. Finding a low-cost entry point for all those factors is important. But for a few hundred dollars a month, you can get a dedicated team managing your accounting and finances for you through services like Acuity.co. The cost pays for itself. - Sal Rehmetullah, Fattmerchant
|
62f54a25fcec5a40e0ce42911263c7b4
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/06/13/baby-boomers-dont-buy-into-these-10-pre-retirement-investment-myths/
|
Baby Boomers: Don't Buy Into These 10 Pre-Retirement Investment Myths
|
Baby Boomers: Don't Buy Into These 10 Pre-Retirement Investment Myths
As Baby Boomers approach retirement, they may encounter a lot of so-called “expert” advice telling them how to invest just before or during their golden years. While some of this guidance is sound, other tips are myths that may, in fact, steer investors in the wrong direction.
To help clear up contradictory and misleading advice, we asked a panel of Forbes Finance Council members to shed some light on the best way to approach near- and post-retirement investment. Below, they debunk a few of the most common myths and explain what you should do instead.
Members of Forbes Finance Council debunk common investment myths Baby Boomers may encounter as they approach retirement, and explain what you should do instead. Photos courtesy of the individual members.
1. ‘Safe Investments Like CDs Are Best’
The biggest risk facing retirees isn’t “the market,” it’s inflation. Most of today’s retirees can expect to live 30 years or more. At 2.5% inflation over 30 years, safe investments like CDs will lose half their purchasing power even though they appear to not go down in value. That’s a guaranteed loss in my book. Most retirees should have 50% or more in stocks at all times to combat inflation. - Erik Christman, Oxford Financial Partners
2. ‘You Can Make A Big Investment All At Once And Start Seeing Income’
Investors and financial advisors can’t flip a switch and start taking income when someone retires. It takes time and planning over months or even years. There’s this not-so-sexy term called “reverse dollar cost averaging,” and it affects everyone in retirement. This RDCA factor requires you to modify your portfolio of holdings and involves accounting for macroeconomic risks that are changing daily. - David Miller, PeachCap Inc.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. ‘You Can Spend 4% Of Your Retirement Funds Annually’
The old assumption that you can spend 4% of your retirement funds annually and not run out of money needs a reboot. People are living longer and medical care is costing much more. It would be safer to assume a 3% rule. While that seems like a small change, if you crunch the numbers it makes a big difference, especially if you are nearing retirement and planned on using 4%. - Robin Campana, Bulldog Solutions
4. ‘Focus On Accumulating Assets’
Those who are retired or nearing retirement should shift their focus from accumulating assets to turning them into income. Retirement is all about income. Once the income is solved, make sure you have increasing income: Everyone we talk to who has two or more paychecks that show up every month has a lot more peace and freedom in retirement. - Michael Foguth, Foguth Financial Group
5. ‘Toss Your Stocks To Reduce Your Risk’
A common myth is that those investors in or around retirement should throw out all their stocks because it can be too risky to keep them. While it’s not a good idea to sink every penny into stocks, they can be very beneficial for a rounded portfolio. The best thing for your nest egg is to keep your options rounded so you can benefit from a variety of investments. - Greg Herlean, Horizon Trust
6. ‘Medicare Will Cover All Your Health Expenses In Retirement’
The most common myth around retirement is that Medicare pays for all of your health expenses, including long-term-care costs. One out of two people over the age of 65 will need some form of long-term care, so invest in a long-term-care policy, even if you feel you won’t use it. LTC insurance is a policy we all should have and hope we don’t use, versus needing it and not having it. - Sina Azari, Present Financial Partners
7. ‘Lean Conservative In Your Investments’
It is a myth that it’s wise to always tilt heavily toward conservative investments as you near retirement, as this does not always consider your estimated retirement spend, which assets you start with or how to keep up with inflation. There is also an inverse correlation between bond prices and interest rates, which is increasingly important with rates as low as they are now in conservative portfolios. - Sonya Thadhani Mughal, Bailard, Inc.
8. ‘It Doesn’t Matter Where You Draw Your Retirement Funds From’
Leading up to retirement, so much attention is on accumulating assets, but it’s a myth that saving is where the planning process ends. Now, it’s equally important to know which accounts to tap first when withdrawing funds so that you can maximize your tax-exempt, tax-deferred and taxable accounts. A smart withdrawal strategy can have a significant impact on preserving fuel for retirement. - Jay Shah, Personal Capital
9. ‘Move Everything To Fixed-Income Instruments’
Generally, it is advised to move one’s retirement portfolio from stocks to fixed-income instruments. Still, one should be careful not to move all investments into bonds. You may invest up to 40% of the portfolio in stocks through less-risky index and mutual funds. Even if the opportune time does not come for you to liquidate the stocks, you can still have your children inherit them. - Atish Davda, EquityZen
10. ‘Go High-Risk/High-Return To Speed Up The Process’
The prevailing myth when it comes to Baby Boomers near retirement is to invest in high-risk/high-return stocks in order to incur the quickest returns possible since they are getting older with less time to invest. But getting fast and loose with your money is also the quickest way to lose what you invested. No matter your age, you can grow your investments with medium-risk stocks. - Jeff Pitta, Senior Market Advisors
|
254f44ab49cb08022c7a50092c551d82
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/06/13/three-simple-steps-to-jumpstart-a-new-websites-presence-in-google/
|
Three Simple Steps To Jumpstart A New Website's Presence In Google
|
Three Simple Steps To Jumpstart A New Website's Presence In Google
The first rule every content marketer learns is that Google is the end all be all. Here’s a shocking statistic to illustrate just how thoroughly Google controls the search engine business. From January 2010 to April 2019, about 90% of all desktop searches, on average, were done using Google.
The question is: Are you getting your share of the Google search pie? Unpaid organic Google traffic is valuable for a host of reasons. Chief among them is that it’s free. What business can’t benefit from having a zero-dollar customer acquisition cost?
Now, it can take the better part of a year or more before Google trusts a new website, and only then will it serve you to its users. That said, I relied on search engine optimization (SEO) when building my final expense insurance business. And from that experience and what I’ve seen work for other website owners, there are simple steps you can take to help radically shorten the length of time needed for Google to show your new website in its search results.
Step 1: Subscribe to HARO, and place it at the top of your daily to-do list.
HARO stands for “help a reporter out.” Basically, HARO is a free service that connects journalists to experts who can contribute content to help them write their stories.
When you subscribe, you’ll receive an email three times per day. Each email will contain a list of topics journalists need feedback for. If you see a topic that aligns with your area of expertise, you can respond directly to the author via HARO’s platform. If the reporter decides to use your content, they will oftentimes include a backlink to your site because you helped them do their job.
There are hundreds of variables that Google considers when deciding which websites show up in search results. It’s still widely accepted that backlinks from other domains are one of the most influential variables. Having more links from other sites can translate into higher rankings in Google.
Acquiring backlinks is one of the hardest tasks for any website, let alone a brand-new one. When HARO emails you, time should stop. You should treat these queries as your highest priority. Aim to instantly respond to all appropriate queries. If you do this every day, you will regularly land high domain authority backlinks that you would never acquire through another medium. These links can drastically shorten how long it takes for Google to trust your website.
Step 2: Create helpful resources that aren’t meant for your consumer traffic.
Put together some thorough non-promotional resources meant to educate users about a topic that has some relevance to your chosen field. For example, if you have a home loans company, for your website you could create resources such as “How To Rebuild Your Credit After A Bankruptcy” or “A Senior’s Guide To Understanding Reverse Mortgages.”
Whatever resources you create, they shouldn’t promote your company. They are meant purely to be informative and helpful in an objective way. The goal with these resources is to leverage them for backlink acquisition. As previously stated, backlinks heavily influence your website’s exposure in Google.
Once you have your resources created, you can reach out to websites that may benefit from displaying a link to your resource on their website. Quick access to your resource could add value for their users. Not all of the websites you contact will link back to you, but some likely will.
The beautiful thing about building backlinks via resources is that it’s easy to do, scalable and it works. It just requires some sweat equity. You don’t need to be an SEO guru or a full stack developer. You just need to be willing to grind out the work.
Step 3: Regularly produce new high-quality, long-form content.
Link building is of paramount importance for all websites no matter how old they are, but it’s particularly important for new websites. Until Google trusts your site, it won’t risk showing the site to users. As a website owner, you must accept that you’ll always be link building. It comes with the territory.
At the same time, at least once per week, you need to produce new long-form content that is meant to appeal to your consumer traffic. The pieces you create should be industry leading and better than anything else you’ve come across out there. The quality of the content is much more important than quantity.
To surpass another website in the search results, you must do a better job of answering a user’s question. Only extremely high-quality content will achieve this result.
How do you know what to write about? Given that you’re an expert in your field, you probably already know what phrases users search for in your industry. Create articles meant to answer their specific questions. Using the earlier example, for a home loans company website, you could create a post about the difference between various loan types. In it, you could explain how each type of loan works, their pros and cons, their costs, example monthly payments, when someone should choose each type of loan and anything else you think a consumer might want to know. This would be just one of many articles you could write as a way to answer your customers’ questions.
You can also use SEO optimization tools such as SEMrush to further investigate relevant keywords your customers search.
Ranking in Google isn’t rocket science. Sure, there are lots of nuances to dominating your competitors in the search engines, but at its core, SEO is merely a combination of high-quality content plus backlinks. If you consistently execute these three steps, you up the odds that your website will show up in Google so fast your competitors will think you’re cheating.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
1c87161643a78f48d20f87dc944a3f6e
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/06/20/small-business-owners-are-busy-they-dont-have-time-to-learn-to-speak-bank/
|
Small-Business Owners Are Busy. They Don't Have Time To Learn To Speak 'Bank'
|
Small-Business Owners Are Busy. They Don't Have Time To Learn To Speak 'Bank'
Recently, a small-business owner friend told me a cautionary tale about “bank-speak.” She had a great idea for expanding with a new product line, but she didn’t have enough room in her operating budget to turn the idea from vision to reality. So she decided to apply for a loan. In many ways, she’s an ideal borrower: already running a financially stable business, reasonably knowledgeable about accounting, just looking for some capital to expand her business.
But when she started shopping loan options online, she was overwhelmed by a dizzying array of similar-sounding options. Just figuring out what kind of loan she needed required extensive online searching: What are the differences between a “Quick Loan” and an “SBA Express Loan,” a secured and an unsecured loan, and a line of credit and a business credit card?
The trouble wasn’t over when she started her application. She had to read up on accounting terminology to find out what a “P&L” and a “debt schedule” actually were before providing this documentation.
Bank-speak can be extremely confusing for borrowers, even small-business owners who run complex operations. Some banks may hide behind claims of legal liability, or perhaps they’ve forgotten how unfamiliar these terms are to someone outside the industry. Either way, banks’ over-reliance on credit jargon is a false precision that can cost them valuable business.
Confusing application processes can push busy small-business borrowers to apply with alternative lenders, whose online applications are often less intimidating. The number of these borrowers turning to alternative lenders is growing steadily, from 19% of applicants in 2016 to 32% in 2018, according to the Federal Reserve’s annual Small Business Credit Survey.
Small-business owners want online loan applications to be clear and easy to understand — that’s the overwhelming conclusion of a series of focus groups conducted by the Federal Reserve. Participants in this 2018 study strongly indicated that they wanted to go to traditional banks first when they needed a loan, and they felt that banks offered the best prices on typical small business loans. However, they found banks’ paperwork time-consuming and disliked the long waits for approval and funding. This study also found that many small-business owners became confused when comparing different loan products, unsure of the meaning of terms like “APR” and “simple interest” and how the two compared. Lost in the technical jargon was the answer to their basic question: “How much will these various options cost me?”
Banks shouldn’t assume that small-business owners are familiar with lending and accounting terms. Many small-business owners keep their own books, but they may use software that simplifies the process or rely on a professional to help with tax preparation. In a 2017 survey conducted by Staples, almost 40% of business owners said they were “not good with numbers” or lacked accounting expertise. A small-business owner may be creative, hardworking, great at managing a team and an expert at innovative social media marketing — and still have trouble understanding a typical small business loan application.
Here are three simple things banks should do to make their small business loan applications more user-friendly and less confusing:
1. Guide borrowers to the loan they need.
Ask borrowers about their loan needs in plain language. Based on their answers, steer them toward the loan product that matches those needs. Why force them to Google a bunch of unfamiliar loan types when you can meet them halfway?
Wells Fargo’s website, for example, asks potential borrowers a few simple questions like “How would you like to access your funds?” Applicants then select an answer (“As I need it” or “All at once”) and, based on their answers, they’re shown only the loan products that meet their needs.
2. Ask questions in straightforward language, and explain why you need that information.
Instead of asking for a “debt schedule,” why not ask questions like “How much debt does your business have?” “What are your monthly payments?” and “When do you expect to pay this debt off?” You’ll get the same information — without confusing or intimidating your potential customer. Explaining why certain documents are needed or what the loan officer will be looking for can also help put the borrower at ease during a stressful process.
3. Don’t make the customer hunt for something that technology can provide.
Ideally, online loan applications should pull information directly from accounting software or from the borrower’s bank account. With today’s technology, there’s no need to make a borrower hunt down a profit and loss statement when that information can be easily extracted from their QuickBooks account. Similarly, why make a borrower calculate their “average daily checking account balance” over a given time period when a query to the borrower’s bank can pull this figure almost instantly?
Reducing manual work for borrowers simplifies the process on both ends, saving the borrower time while also reducing the time loan officers spend fielding questions and walking borrowers through the application. An Oliver Wyman/Fundera survey found that borrowers who got loans from online lenders were half as likely to say they were frustrated with navigating the application website or not understanding the next steps in the process, compared to those who borrowed from banks. In my company’s experience, a friendlier online loan application also significantly increases application completion rates.
Applying for a small business loan shouldn’t be so painful or intimidating. Making applications simpler and asking questions in simple language doesn’t compromise underwriting standards, but it does build customer loyalty. According to a 2018 survey by the Federal Reserve, roughly 59% of small banks and 57% of large banks consider relationships with borrowers to be their most important competitive advantage. So why risk damaging that relationship by intimidating your customer with confusing bank-speak?
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
68e8198bf950560fd5203e76af7d264b
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/06/27/why-iot-cybersecurity-risks-are-an-investment-opportunity/
|
Why IoT Cybersecurity Risks Are An Investment Opportunity
|
Why IoT Cybersecurity Risks Are An Investment Opportunity
The world can’t stop talking about the Internet of Things (IoT) – and that trend will only continue to gain momentum in coming years.
The IoT, technology that connects physical objects to the Internet to collect, process and share information, can encompass everything from a home’s smart thermostat to a company’s network of driverless vehicles. An explosion in the number of IoT connected devices and data is ahead. By 2020, there will be more than 20 billion IoT devices in the world, as forecast in a report from Gartner. Global tech spending on the IoT is forecast to reach $1.2 trillion in 2022, according to research from the International Data Corporation (IDC).
As IoT devices become more universally adopted, exciting new opportunities will emerge, but so will a new set of cybersecurity risks. Companies need to protect themselves and their customers from cyberattacks that could threaten privacy and profitability. This growing need makes early-stage cybersecurity ventures one of the most interesting areas for investors to pay attention to.
Startups around the world are already working on innovative applications, many that use AI algorithms instead of programmed data to identify suspicious behavior, to protect companies operating in the IoT era. I work with companies developing transformational technologies, primarily in the cybersecurity, AI and healthcare spaces, and I see this as an area of huge growth in the next few years.
The IoT, Big Data And A Bigger Vulnerability
Each of the 20 billion IoT devices we expect to see by 2020 will generate data, resulting in a buildup that will give new meaning to the term “big data.”
Way back in 2013, information gathered by IBM showed that 90% of the data circulating in the world was created in the previous two years, with approximately 2.5 quintillion bytes being added every single day. That’s just the tip of the iceberg. As 5G technology matures and delivers decreased latency and lightning-fast speeds, we will see an exponential increase in data traversing networks.
Without iron-clad protections, every single Internet-connected device and aggregate network leaves its data highly vulnerable to cyberattacks. In 2016, cybercriminals launched a major distributed denial of service (DDoS) attack, causing outages for websites including Twitter, PayPal, Spotify, Netflix and the Wall Street Journal. The hackers caused the disruption by exploiting the security weaknesses of thousands of IoT devices. These vulnerabilities don’t yet have a clear resolution, which creates an environment ripe for AI cybersecurity ventures.
How AI Combats Cyberattacks
To date, cybersecurity products have focused primarily on detecting potential intrusions: identifying malware, compromised network credentials and data packets. For instance, if a data packet enters a network from an unknown IP address, a product could flag this activity as suspicious. This is basic pattern-spotting, and the protection it offers is fairly rudimentary.
AI cybersecurity applications, on the other hand, look beyond discrete individual attacks and scrutinize vast amounts of data to spot abnormal behavior. In an approach known as user behavior analytics (UBA), AI algorithms efficiently analyze patterns in gigabytes of data to determine if a given user’s behavior pattern is out of the ordinary. The application will recognize that there is an anomaly and alert IT staff for further investigation.
UBA is quickly becoming the gold standard for cybersecurity products in the AI domain. It can aid analysts who may be overwhelmed with security alerts to identify threatening patterns that would otherwise be missed by conventional cybersecurity software.
In tech hubs around the world – from Silicon Valley to Hong Kong to São Paulo – ventures are developing UBA cybersecurity applications. In Silicon Valley, accelerator efforts run the gamut from the Department of Homeland Security's Science and Technology Directorate Silicon Valley Innovation Program (SVIP) to independent groups such as the Dreamit SecureTech program that launched last summer. In Hong Kong, the Applied Science and Technology Research Institute (ASTRI) is hosting and accelerating more than 15 firms working in this area. In Brazil, which has a much more decentralized startup ecosystem, Google is using its Launchpad Accelerator Program in Sao Paulo to identify and grow local startups, many that are active in this space.
The rapid increase in the number of IoT devices, and their accompanying data, is giving rise to a new class of AI-powered cybersecurity applications. The U.S and Asia, as well as Latin America to a lesser degree, are the centers of early-stage, investable ventures. Many of these investable ventures are being supported not only with investor capital but also are being accelerated by public-private partnerships. I believe it’s an exciting and rapidly developing domain for investors to consider.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
f8e4f704c8e34a82fb3a8792c44ed72e
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/06/28/how-to-avoid-having-the-difficult-unpaid-invoices-conversation-with-clients/
|
How To Avoid Having The Difficult 'Unpaid Invoices' Conversation With Clients
|
How To Avoid Having The Difficult 'Unpaid Invoices' Conversation With Clients
They can ideate boldly, meet unreasonable deadlines for clients, scramble breathlessly so they never miss a payroll and dream the biggest dreams you ever saw. But for some reason, small-business owners often are intimidated by one thing: asking for payment. They must shake off that way of thinking, fast.
Don’t Be Afraid To Get Paid
Despite having delivered the goods or services that a client ordered, on time and in full, many small-company owners are still afraid to reach out to customers about overdue invoices. Somehow, these owners feel that to remind a client that a bill is overdue would make them a nag — or even ruin a customer relationship. Or they figure the client has the invoice and will get around to paying them.
Stop: for the sake of your mental health and the future of your business. You should shift your way of thinking, immediately.
It’s Not Personal, It’s Business
Remind yourself that you’re not a charity. You’re providing services or goods for which you want and deserve to get paid. There’s nothing taboo about asking to get paid. It’s the least you and your company deserve.
Structure your invoicing and accounts-receivable system in ways that will help you get paid in full and on time. This can help avoid potentially unpleasant conversations down the line. Here are some elements you should include in your approach:
• Verify customer satisfaction. The first step after a transaction is to reach out to the customer by phone or email. Confirm they are happy, that they consider the transaction complete and that they’re expecting your invoice. Let them know you’ll be invoicing them soon and that you will follow up later. Most customers will appreciate — not resent — such a confirmation.
• Ensure you’re sending a complete and accurate invoice. There’s nothing worse than tapping your foot about a late payment and then discovering you created the problem in the first place. So, avoid complicating your own financial life by making sure your invoices are correct down to the last detail.
Make sure all the information on your invoice — recipient(s), your company details, the amount of the invoice, what it covers, the date of issuance and payment date and the agreed-upon payment method — are correct.
• Get specific about payment dates. You may know and have agreed to a customer’s payment policy as “net-15,” “net-30,” “net-60” or even “net-120” days. But do you actually know what that means? Even fluffier terms you might use include “payment upon receipt.” Being unclear about the timing of a payment is one of the easiest ways to cause yourself grief.
Be specific on your invoices about the date you need to be paid. This should be based on the date of the invoice and your understanding of the customer’s terms.
• Know your targets. Small-company owners often find that slow payments or other accounts-payable problems are the result of not targeting the right person or people who are going to make sure you get paid in full and on time. A common mistake is that your contact isn’t the same person to whom you are supposed to send your invoice.
Send your invoice both to the person who commissioned and approved your order and to the finance person who actually will be paying the invoice. Quiz your customer, know what they want you to do and follow their procedures.
• Invoice right away. This is important. Issue that invoice the first moment you can after you’ve performed your services, shipped your goods or otherwise fulfilled your customer’s order, and verified the customer’s satisfaction.
• Confirm receipt. You’ve got at least one other important task to complete before the invoicing phase is done. You must confirm that the customer has received the invoice, that it’s in their payment queue and that no immediate issues have developed around it.
• Check in after several days. The dark, murky deep for accounts receivable tends to be the period when your invoice is working its way through the innards of your customer’s accounting process. That’s when it’s most likely to get lost or ignored. That’s why following up is crucial for small-business owners. A good rule of thumb is to take the expected date of payment and contact the customer’s accounts-payable people about halfway through that period. If your invoice is a typical net-30 payment, contact your customer after a couple of weeks.
• Understand how things work and your options. Most customers are glad to pay your invoices when they’re due because, after all, they thought enough of you, your company, and your goods and services to agree to buy some. Rather, in getting their invoices paid on time, small-business owners most commonly encounter one of two difficulties.
The first is that a client is experiencing its own cash-flow challenges. There’s not much you can do about that but be patient and persistent.
The second is that your invoice has gotten lost in an internal disconnect on the customer’s end between your contacts and the finance office. Often, it’s a matter of your customer realizing the payment process has gone off the rails, and they’ll apologetically re-engage your invoice. If that isn’t the case, the squeaky wheel gets the grease. Nudging your invoice along in the queue can be a simple matter of pinging your client.
Another option to consider when dealing with payment difficulties is factoring your invoice. Invoice factoring is an alternative method through which you can ensure you get your funds when you’re expecting them. Invoice factoring services do this by setting up a payment system and working with your vendors for a fee.
It’s still up to you to make sure all the details on your invoice are correct. But by remaining diligent when it comes to their invoices and understanding their options, small-company owners can eliminate the stress of knowing when payment is coming.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
9d3abdf49961f5aadb26b10b25cc56f2
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/07/02/mindfulness-programs-are-the-next-big-thing-in-business-leadership/
|
Mindfulness Programs Are The Next Big Thing In Business Leadership
|
Mindfulness Programs Are The Next Big Thing In Business Leadership
Great leaders in business know the importance of competitive benefits, growth opportunities and a culture that supports a work-life balance for its team members. But here’s one offering many may not have considered: mindfulness.
I had a chance to see what mindfulness looks like when I visited American Samoa a few weeks ago on a work trip. Our host, Larry, was the father of one of my company’s employees and a gentleman with a capital “G.” He left one of the most lasting impressions of anyone I have met in my 18 years with the credit union.
I knew immediately I wanted to be like Larry. Larry didn’t have a fancy title, and he wasn’t famous. I learned through a friend that he served in the Army for 21 years but now works at the Samoan port managing the movement of cruise ships and fishing vessels.
He wasn’t trying to impress me, but did anyway. He exuded a balance, calmness and steadiness truly without equal. He told me his greatest moments were those he spent fishing, being outside and being with family.
Larry encapsulated, for me, the spirit of mindfulness — awareness of the present moment. He served his country and is still serving his family through an approach I see as “right livelihood.” Right livelihood is an approach to one’s work with the intention of playing a useful role in society while supporting oneself and one’s family. His tremendous sense of peace made me question what I could be doing differently in my own life. And it reminded me why, in today’s fast-paced, “needed it yesterday” work culture, maintaining employees’ holistic health is one of the most important things a leader can do.
Many companies already offer wellness programs that focus on physical health, such as gym and massage reimbursements, and even financial health, through financial management courses. But mindfulness programs that focus on whole (i.e., mental, emotional and spiritual) health are increasingly being offered in corporate settings, with remarkable results.
Mindfulness has long been linked to increases in empathy, focus and productivity, as well as a decrease in stress levels. In 2015, a team of scientists pooled data from more than 20 studies and found that mindfulness training affects brain areas related to perception, pain tolerance and emotion regulation, among others.
Some large corporations, such as Google and General Mills, have been offering mindfulness sessions to employees for over a decade. Their findings have inspired other companies to launch similar programs in recent years. Intel launched its program in 2014, offering it to over 100,000 employees in dozens of countries; in employee self-evaluations, the program has shown measured increases in happiness, mental clarity and well-being. Aetna found that, in one year, its medical claims dropped by 7.3%, which amounted to a $9 million savings for the company.
Programs like these inspired my company to launch its own program in 2017. The program teaches the fundamentals of mindfulness practice, in addition to the meditative arts of yoga, tai chi and qigong, to help leaders physically connect with their bodies.
Business leaders who are interested in starting mindfulness programs in their own organizations can follow these steps:
• Start by finding a trained mindfulness teacher who can help implement and lead the program. The International Mindfulness Teachers Association is a great resource for finding teachers in your area.
• Have your company design or set aside spaces for employee meditation and mindfulness practice, and encourage the use of these spaces. These “recharge rooms” should include dim lighting and comfortable seating, and they should be electronics-free.
• Enlist human resources in recruiting participants. Business leaders and mindfulness teachers should work together to determine a system for collecting feedback and metrics on the program to measure results.
When I look back on my time with Larry, I realize how rare people like him are. Most people — myself included — need some guidance in embracing a mindful lifestyle. And it’s a calling many business leaders should embrace. It’s not just about improving employees’ performance in the workplace. It’s also about putting people first. Cultivating a mindful approach to life results in a “right livelihood” approach to business. When you look out for the holistic well-being of the people who are the backbone of your business, you become a better leader and a better version of yourself.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
fbb39620ef1064eea8cf9aee17b33c26
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/07/03/dont-care-about-your-advisors-business-model-you-should-it-could-be-costing-you-money/
|
Don't Care About Your Advisor's Business Model? You Should. It Could Be Costing You Money
|
Don't Care About Your Advisor's Business Model? You Should. It Could Be Costing You Money
With the trade dispute between the United States and China showing few signs of easing, the equities markets rumbled for much of May, with the S&P shedding more than 6%. This followed a four-month stretch to open the year when the index was up over 17%.
While the markets have recovered — and then some — since then, May’s losses sparked renewed jitters among investors, many of whom have enjoyed relatively smooth sailing in the wake of the financial crisis, a period marked by uncommonly low volatility. Based on my experience, though, financial advisors tend to take sudden market shifts in stride, believing that ups and downs are part of the deal.
Last April, I informally polled advisors in my database, asking them whether deteriorating market conditions warranted a shift in strategy. An overwhelming majority said no. To them, the best, time-tested approach is to “ride it out.” Retail investors, according to the same informal poll, didn’t consider “riding it out” as the best way to manage a portfolio, preferring instead that their advisor make changes when market conditions change.
More recently, I checked back in with my investor and advisor contacts, asking them the same question, thinking that attitudes may have shifted given the recent wave of volatility, not to mention the tremors of late last year. The results were not surprising. Among retail investors, views have seemingly hardened. An overwhelming majority said they expected their advisor to make portfolio adjustments when market conditions change. What’s more, most also said they wanted math and science to serve as a guide — versus an advisor following a gut feeling or piggybacking onto something a so-called guru said on television. A gap remains between what clients want and what their advisors actually do when stocks go sideways or down.
To be clear, short of going to all cash, no financial advisor can shield you from volatility altogether. What they can — and should — do is take steps to limit it. Why smart money does this is something I’ve discussed in the past. However, what if your advisor is ill-equipped to do this for you?
Up until recently, many advisors tied their value proposition to their investment acumen, telling clients their expertise allowed them to create customized portfolios and boost returns. However, this skill set has become increasingly less valuable in an era when third-party providers have commoditized the asset management process, flooding the market with a range of highly sophisticated alternatives that save advisors time and money without surrendering returns.
Therefore, every advisor has access to investment models that make their jobs easier — meaning that anyone still trying to act as their own portfolio manager has opted to do business the hard way. One byproduct of that is it makes it far more difficult to react quickly to market turmoil, since that would require making portfolio modifications for each client.
If you’re like most investors, chances are you’ve never lost sleep over your advisor’s business model, if you’ve thought about it at all. But this issue matters, because without the processes and infrastructure in place to be able to fine tune perhaps hundreds of investor portfolios simultaneously, an advisor cannot operate efficiently, and during downturns, that sort of discord could mean your assets are being frittered away.
So, next time you meet with your advisor, ask them if they are using investment models to help manage your portfolio. If they say no, they'd better have a good explanation.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
c78982307a8ec8dfb2de337077d38dd3
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/07/11/federal-interest-rates-how-do-changes-affect-hard-money-lending/
|
Federal Interest Rates: How Do Changes Affect Hard Money Lending?
|
Federal Interest Rates: How Do Changes Affect Hard Money Lending?
As president of a private asset-based lender, I am often asked if increased interest rates on a federal level will affect the rates available to hard money borrowers. What I tell my clients is this: “What affects your rate in the private money space is simple supply and demand. The more money available to lend, the lower the rates can be for borrowers.”
Supply and demand affects everything from the price of housing to the price of money. Small and large lenders alike are affected by these fluctuations. For example, at the bottom of the real estate market in 2009, when many people were wondering when or if values would come back, there was little capital available to lend privately. For this reason, I saw hard money interest rates averaging 18% from 2009-2012. As the market steadily improved and more capital entered, rates decreased.
Fast forward to today when so many people are willing to pay for convenience. Consider companies such as direct real estate buyers Opendoor, Offerpad and We Buy Ugly Homes, as well as online used car dealer Carvana and others, and you will find an abundance of options — options that appear to be here to stay.
While hard money interest rates will continue to be dictated by supply and demand first, there are four factors that play roles, to varying degrees, in determining rates: supply of money (as discussed above), property location (think state, not street), leverage (aka how much financial interest a borrower has in the deal) and underwriting criteria (the conditions under which a lender is willing to loan). Here’s a look at these four categories in greater depth.
1. Supply of money: In markets with greater supplies of money to lend, such as California, rates are typically lower.
2. Location: This factor considers mortgage states versus deed-of-trust states. In deed-of-trust states, which are states where lenders can foreclose through trustee sales, rates are usually lower. Lenders can offer slightly lower rates in these markets, because the foreclosure process is less costly and time-consuming than in mortgage states, which require judicial foreclosures.
3. Leverage: The lower the “loan to value” (the amount borrowed compared to a property’s current or future value), the lower the rates hard money and traditional lenders alike can offer. How much “skin in the game” a borrower has will always affect rate, whether institutional or private.
4. Underwriting criteria: Typically, the more stringent the underwriting process, the lower the rates. Just as location plays a part in determining lender overhead, underwriting regulations play a part in how stringent a lender’s underwriting criteria will be. For example, some hard/private money lenders (particularly those with institutional capital ties) are required to obtain credit checks, verification of reserves and appraisals, all of which can slow the lending process. Contrast this with lenders who are truly “asset-based” (meaning they underwrite the asset, not the borrower), and you might understand why some lenders charge higher rates and why others are able to move more quickly.
It will be interesting to watch the industry as it continues to evolve. I believe the influx of institutional capital and the abundance of capital in general in this space are here to stay. However, interest rates will continue to be dictated by supply and demand first and foremost, and then, to a lesser degree, by the other factors listed above.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
456711acf975c70cf15a1e6b832b31fd
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/07/15/choosing-the-right-financial-systems-to-scale-your-early-stage-company/
|
Choosing The Right Financial Systems To Scale Your Early-Stage Company
|
Choosing The Right Financial Systems To Scale Your Early-Stage Company
The financial decisions that startup teams make during their growth phase ultimately determine their long-term success or failure. In these early days, it’s crucial to understand how, when and why you are spending money in order to address problems and make changes as you go.
Only around half of new businesses with fewer than 500 employees survive five years or longer, according to data from the U.S. Small Business Administration. And, unsurprisingly, the top reason businesses fail is low sales and cash flow.
To keep the lights on and paychecks and invoices paid on time, your company needs a strong but flexible foundation of financial tools that will serve you in different phases of development. Think of it as a hub and spoke approach to financial systems. As you scale, you can switch out individual elements to better fit your current needs. I have used this strategy at several different early-stage companies, and it helps resolve common challenges startups face.
Let’s walk through the questions to ask and the steps to take while you build your ideal finance stack, whether your revenue is $0 or $10 million.
Accounting Software
One of the most important decisions you’ll make early on is which general accounting or enterprise resource planning (ERP) software to use. This tool will be the center of your financial operations, where you will track transactions and expenses, manage cash flow and get an overview of the company’s financial health.
There are many cloud-based options available on the market, with QuickBooks and Xero among the most popular for companies under $10 million in revenue. Choose an accounting software that is easy to set up and can be accessed by an outside bookkeeper or accountant should you decide to outsource this role. Be mindful of the functions you need the software to perform now and in the future.
These questions will help you decide when it’s time to scale up to a more robust ERP:
• Do you want it integrate with bank accounts and other tools, such as a CRM like Salesforce or e-commerce and payment apps like Shopify and Stripe?
• Will you use it for invoicing and collecting online payments?
• How many transactions do you anticipate managing on a monthly basis?
• How many people will be on the finance team?
In addition to asking yourself if the transition makes sense at an enterprise level, be sure to check that your team has substantial bandwidth to undertake a project like this. If everyone is already at 100% capacity, consider adding additional resources before committing to an ERP implementation. Otherwise, there is a higher risk of failure, as any other emergency that arises (and it will) delays the implementation.
In my previous role at Bitly, I lead the move from Quickbooks to Intacct. The timing aligned well with our stage of growth, but the initiative would have failed regardless without the commitment of the finance team.
Spend Management
Even if your company isn’t yet bringing in any revenue, you will still have expenses to manage – from office furniture and laptops to professional subscriptions and vendor fees. While companies with less than 50 employees can typically manage this themselves, once a business starts growing, leveraging good spend management software is a must.
Without a dedicated tool, many startups end up overextending their budget on non-essentials or requiring employees to charge expenses to personal credit cards. This becomes a major headache for finance teams, which are left to manually code purchases, collect receipts and reconcile credit card spend at the end of the month.
Here are some questions to ask yourself when considering spend management software:
• Who needs to approve purchases? Do purchase requests need to be approved by different individuals or go through multiple layers of approvals?
• Does the finance team spend a large amount of time conducting manual data entry—time that could be better spent on more strategic tasks?
• Would integrating purchase data with your ERP facilitate an easier month-end close?
• Do all employees share a few corporate cards, leading finance to question who actually made each purchase and why (and spend time hunting them down for information and receipts)?
Adopt a clear and efficient system to authorize purchases, capture receipts, categorize expenses and issue reimbursements. And make sure the system is easy for employees to use to avoid compliance challenges.
Invoicing & Payments
Finding the right workflow for sending invoices is key to getting paid quickly. Your customers generally want to pay their invoices (they don’t enjoy receiving those reminders any more than you like sending them), but they want the process to be as smooth and effortless as possible.
When you’re first starting out, general accounting software may sufficiently meet your company’s needs for sending invoices and reminders and processing payments and reports. But as your revenue and customer base grows, you’ll want to graduate to a more complex accounts receivable software, like Bill.com, YayPay or Tesorio.
Keep these questions in mind to see if you’re ready to uplevel your system:
• What stumbling blocks are you running into with your current invoicing process?
• Does your system lack important functionality, such as managing purchase orders, calculating sales tax or syncing with your ERP or CRM software?
• Are you encountering problems with international payments?
• Have you outgrown your software because of a large team or multiple office locations?
Cash is king, and staying on top of customer payments needs to always be a top priority. When I worked at Unified, we implemented Tesorio for working capital management, which substantially improved our cash collection process.
Align Your Finance Stack With Your Growth Path
Every company is different, and your own internal priorities will evolve as you expand in revenue and reach. But by following these steps, you will be able to build financial systems that are the perfect fit for your startup at every stage of growth.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
fc60797d5fb7f0003ac3fd042db647a3
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/08/12/proceed-with-caution-10-tips-for-angel-investors-looking-to-fund-a-startup/
|
Proceed With Caution: 10 Tips For Angel Investors Looking To Fund A Startup
|
Proceed With Caution: 10 Tips For Angel Investors Looking To Fund A Startup
Pexels Pexels
As a successful businessperson, you want to give back to your community and help the next generation of entrepreneurs grow. Choosing the right startup to back can require a critical eye. The things that you knew about your business, you need to assume about the startups, especially if they don't divulge all the details behind their idea.
Even though you may not be privy to all the information about an idea, you should keep an eye out for the critical element that makes the business a "good bet." Below, 10 members of Forbes Finance Council share their best advice for angel investors. Here's what they say you should look at to determine whether a company is likely to be a successful startup or just a flash in the pan.
1. Join A Local Angel Group
Belonging to an angel group not only gives me access to a larger range of diverse investment opportunities, but it allows me to review potential investments alongside dozens of high-caliber, successful investors. Joining an angel group provides the ability to invest in a group or LLC at a much lower rate of participation, with the added benefit of a committee vetting each opportunity. - Anthony Holder, C&H Financial Services, Inc.
2. Make Sure You Understand The Risks
Angel investing holds a substantial risk that needs to be clearly understood before investing in any angel/seed round. The highest-ranking component to discern when listening to founders pitch their firm is the ability of the owner to articulate their company vision relative to how they want to implement their plan in the short-term, given their lack of people and resources. - David Miller, PeachCap Inc.
3. Look For Strong Business Systems
Successful entrepreneurs know that to succeed, you need to develop strong business systems. As an angel, you usually get a first look inside a business, and the systems need to be there for the business to grow. Besides joining an angel group, this is the next most important aspect to keep in mind. - Vlad Rusz, Vlad Corp. USA
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
4. Only Invest In Exceptional Entrepreneurs
Entrepreneurs drive success or failure -- it’s as simple as that. So, when looking for potential investments, think about what the entrepreneur can do with their business, not what you could do with it. Never invest in a mediocre entrepreneur assuming you can run their business for them; it's a disaster waiting to happen. - Bill Baumel, Ohio Innovation Fund
5. Invest In Missionaries, Not Mercenaries
As angel investing is mostly limited to early-stage startups, angels must realize that the initial proposed business idea will often have to be revised. This process is commonly referred to as a "pivot." Startup founders, passionate about bringing a solution to market, are more likely to effect a necessary change -- they are "missionaries" in search of a working product. - Christian Kameir, Sustany Capital
6. Consider Their Plan Of Action
Passion and know-how are important for a startup, but the key thing to watch for in a startup company is a clear business plan. A startup needs to have a clear idea of where they are going, what they are planning and an in-depth look at their market. A good plan should focus on competitive analysis, potential issues and the bottom dollar. - Greg Herlean, Horizon Trust
7. Learn What's Required Besides Money
Before investing in a startup or any newer company, work with the startup to understand what level of involvement will be required with the company. As an angel investor, you now hold a stake in the company and may participate in decision-making scenarios. Be very clear upfront how much or little involvement you would like to have when you invest money into the company. - Jared Weitz, United Capital Source Inc.
8. Really Know What They Do
Angel investors should be investing in what they know. Considering the high level of inherent risk in any startup, investing in something you don't know doubles that risk. If you know what they do, you can provide valuable advice and have better insight as the company grows and asks for more money. If they just want your money, you should be worried. - Chris Tierney, Moore Colson CPAs and Advisors
9. Choose An Industry Based On Prior Successes
Here are two things I would tell successful entrepreneurs when considering investing in a startup. First, entrepreneurs who wish to become angel investors should invest in industries where they have previously cultivated success. Second, most startups fail for a myriad of reasons. Consider whether or not the potential return is enough of a reason for you to be investing. - Shai Stern, CheckAlt
10. Invest In Companies Through Economic Cycles
Investors should research investments carefully and look for well-run companies in exceptional fields of growth. Even in periods of "sub-par economic growth," there will be innovative companies that are creating or profiting from major paradigm changes. Aim to invest in these companies through economic cycles and sell when business conditions change, rather than the market. - Gerry Frigon, Taylor Frigon Capital Management LLC
|
7501c816af112015ba106025890db429
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/08/22/passing-interchange-fees-to-consumers-works-when-its-transparent/
|
Passing Interchange Fees To Consumers Works -- When It's Transparent
|
Passing Interchange Fees To Consumers Works -- When It's Transparent
Across the country, businesses – especially small, independent businesses – are struggling to keep up with Americans’ exponential credit card use. What’s worse for small businesses: more Americans are using credit cards to pay for small transactions; new statistics show 16% of Americans use credit cards for purchases under $10, up from 12% in 2018. The number is much higher for those with rewards cards; 26% use their credit cards for purchases under $10, up from 23% last year. Factor in the fact that 57% of Americans now have rewards credit cards, and it’s clear why credit cards are becoming small businesses’ biggest problem.
Credit card companies charge merchants up to 4% of every electronic transaction in interchange fees, which cover the costs of payment processing and mitigating fraud. This fee doesn’t necessarily have dire consequences for large chains and big brands that generate enough revenue to offset these costs themselves. But small mom-and-pop shops and independent businesses, whose net profit margins are dangerously thin, suffer under the additional weight of credit card processing fees. Even the fast food industry – with the exception of some behemoths like McDonald’s – sees overall net profit margins as low as 2%.
For most businesses, the solution to credit card processing has been to pass those fees to consumers paying with credit cards. But these “surcharges” have historically been well concealed to the customer, who often doesn’t notice the additional charge until it’s been processed. Different establishments get creative in different ways; some charge for cups and cutlery while others employ euphemisms like “non-cash adjustment.” Where surcharges are involved, they’re often buried – quite literally – in the fine print of signage and receipts.
At the beginning of the year, seven U.S. states, including New York, prohibited retailers from surcharging. But that list grew shorter this past January, when New York granted retailers and restaurants the right to legally surcharge. This move promptly followed New York’s minimum wage increase. Initially, consumers were not happy to see the additional charge, even if they had already unknowingly paid it all along. Even though most establishments offer “cash discounts” (when consumers paying cash pay the menu price without an additional surcharge) it wasn’t enough to keep consumers from the convenience of paying with their cards, albeit begrudgingly.
As the CEO of an electronic payment processing platform, I believe businesses have choices regarding how they handle surcharges and cash discounts, and that some of those choices are more advantageous to both the business and the consumer. That’s why my company built a platform that acts as a middleman by charging the customer a 3.99% interchange fee, then paying that fee directly to the credit card company. With federally patented technology, we essentially become the merchant of record for that interchange fee, which frees the actual merchant from bookkeeping and tax liability, allowing them to focus strictly on their bottom line. Offering a cash discount and 100% transparency regarding the interchange fee allows the consumer to make a fully informed choice about how they want to spend their money.
Here are a few other ways passing interchange fees to the consumer benefits businesses, workers and consumers alike.
It might save small businesses.
Smaller regional establishments, which contribute greatly to local culture, may be most likely to charge credit card users. Consumers might encounter these additional costs at niche restaurants where they already expect to pay for a gourmet meal. Paying the additional 4% interchange fee is a relatively small additional cost incurred by these diners, and a small price to pay to keep their local restaurant scene thriving.
It might still be advantageous for rewards cards users.
Many Americans love earning points and miles by using their rewards cards to pay for nearly all of their purchases. The good news is that even with interchange fees, rewards cards will still likely be worth the rewards. Depending on how you maximize points for purchases like fine dining, the points you accrue could very well provide much more value than the cost of interchange fees.
It supports service workers earning minimum wage.
Even a dollar increase to the minimum wage can cost small businesses tens of thousands of dollars extra a year. These are the businesses most likely to pass interchange fees to consumers. And while interchange fees remain relatively stable, minimum wage doesn’t. For instance, between 2014 and 2021, California will see a $7 minimum wage increase (up to $15 in 2021) in just 8 years. 55% of Americans support a minimum wage of $15 per hour on paper. Paying a relatively small interchange fee for credit card purchases may be one of the best ways to support a living wage in practice.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
9cf5ffc03cbd7b2a86b1b689b9915b81
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/08/22/winning-over-your-organization-on-software-adoption/
|
Winning Over Your Organization On Software Adoption
|
Winning Over Your Organization On Software Adoption
“We may want a really cool tool, but we need to prove out a solid ROI first. We don’t want to invest in the status quo.” That’s where a lot of our tech discussions began at my company — and again when we were deciding to consider a new HRIS/payroll platform in 2014. The process ultimately took us over two years, but it was the right amount of time for our team to make an informed decision. A lot of work goes into new technology vetting, implementation and adoption.
Implementing new software programs can be difficult regardless of company size — although, it’s usually trickier when you’re dealing with a large or high-growth organization. That’s because different subsidiaries or business units may use specific platforms for accounting, engagement, customer relationships, HCM, employee reviews, data reporting, etc. But those systems also need to integrate and combine data for better decision-making. Unfortunately, they often don’t — or at least not very well — and that leads to manual processes, data loss or departmental inefficiencies.
Before you even reach that point, though, you may have a problem encouraging your organization to embrace change. I’ve seen this firsthand many times. For example, we had been using a more basic accounting software platform and then moved to an enterprise ERP that allowed for more self-service. Ultimately, the transition was successful and made our team that much more effective. However, early on, many people held tight to old processes.
How do you make sure that selection, implementation and adoption of new tech goes smoothly? Consider the following.
Assess ROI.
You’re going to need to present the technology to the executive team before you get any buy-in or final approval, and they'll want to know about cost and cost relative to projected ROI. Lean on your network for this. In this case, network means colleagues and friends who have used the tech platform you’re considering, but it also means cultivating potential power users within your organization and making sure they are included in any demos. Too often, only the decision-making or check-writing level assesses the software, which is a huge mistake when it comes to tech adoption.
Here’s why in one quick anecdote: A friend of mine was a power user of a CRM at her job. She switched to a different department and had an exit interview with the SVP in charge of her current one. When asked for ideas for improvements, she named the CRM and listed six or seven ways the team could use it better. The SVP, puzzled, said “What’s that again? We use what CRM?” He had signed the purchase order.
That’s not to insult that particular executive — but it’s important to remember that you may be a bit insulated from the day-to-day work when you’re concerned with broader metrics. Buy-in from those who will use these programs every day is a must. That’s going to factor into cost assessment as well.
Prioritize custom reporting needs.
Virtually everyone in your org will want custom reports. Thankfully, most tech platforms have caught onto this and offer custom reporting in some fashion. When you’re in the testing phase, make sure there is time to build and test custom analytics for potential power users. If pulling custom reports for those main users seems difficult, this software will eventually become “shelfware.” People will resist using it and find an easier workaround to get the reports they need. Then you will have wasted money on the tech, and that decision does not become a highlight of your resume. Since custom reporting is such a key feature, make sure it is ready at go-live and user-friendly.
Get ROI assessments from vendors.
A robust ROI study should be coming from the vendor. These can come in the form of case studies, by connecting you with a tech presenter to walk through some lesser-used features, or by showing you cost ROI studies of similar companies. Either way, the vendor should own the ROI analysis.
If the vendor has defined the ROI properly and you’re comparing across a few options, the decision-makers in your organization should have more than enough to work with when weighing the decision. Don’t take these analyses at face value, though — ask a lot of questions and poke holes in their assumptions, as it is in their best interest to overvalue their product.
Define timelines and deliverables.
Depending on the complexity of what you’re trying to do, you usually need nine to 12 months for a successful new tech platform rollout. While that feels like a long time, it’s important to get this phase right. Understand who your project managers are, who owns change management and training, whether you’re involving external consultants or not, and how you’ll deal with pushback or lack of adoption. Don’t rush through it simply because this is a shiny new object and you weren’t happy with your old technology solution (which is probably what drove that purchase as well).
Reward small wins and successes.
Implementation will be a time-consuming, frustrating process. Your team workflows will change, the ground will feel like it's shifting, and stress will be high. Work can be an ever-changing place anyway, and people begin to reconsider their roles when processes change.
To keep the momentum moving during those months, make sure you celebrate little wins: a deadline being hit, someone working late to figure out a customization, training programs running successfully. Incentivize and give feedback along the way, otherwise, the process can feel frustrating and tedious to your team. Incentives can be monetary, but additional time off and public recognition also go a long way.
Bottom Line
Tech adoption and software selection have become stressful processes in many organizations, but they don’t need to be. Take your time and move through the steps methodically to get the right people on board at the right time, and you'll be successful.
This is a long process, and it can feel wearisome at times, but the addition of successful tech tools are essential to the success of your company.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
d995eb05ebe1fccb6d77c83ba8588dbd
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/09/30/how-small-businesses-can-compete-with-big-businesses/
|
How Small Businesses Can Compete With Big Businesses
|
How Small Businesses Can Compete With Big Businesses
I almost didn't start.
I was excelling in the payments business in my early 20s. A colleague told me I should start my own company because I knew enough and had the motivation to do so. The problem was, I couldn’t stop thinking about how far behind I would be when compared to other major players in the industry that I convinced myself that I would fail if I tried.
However, it was only temporary. I ultimately realized that I would regret not going for it, and that pain would be worse than not succeeding. Now, 17 years later, I’ve never looked back. I’ve started three companies within the payments space, and they’ve all been in the “small” business phase, competing with major national banks and other large firms for clients. I’ve also been fortunate enough to sit across the table from thousands of small to medium-sized business owners facing similar competition in their own respective industries.
For those who have questioned taking the plunge, like I was, here are some ideas that might make you reconsider.
1. You don’t need to have the best products.
If you start to obsess about having a better offering than your competitors, remember this quote by investor Peter Thiel from his book Zero to One: Notes on Startups, or How to Build the Future: "Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true."
Does your product need to be great, and should your customer service be incredible? Absolutely. That said, there will always be room for a strong competitor in any industry or market.
2. You don't have a boss, board members or investors, so you can control every outcome.
When you’re small, you can move quickly. There is less red tape and fewer rules. Many big companies are sprinters, with CEOs making short-term moves to appease investors every 90 days.
You’re a marathon runner. You are in it for the long haul, and the only person you need to please is yourself. This gives you total freedom and control of your business at the same time to completely focus on your customers.
3. You can impact customers' and employees' lives in a way a large business may not be able to.
I recently sat down with a successful business owner who has restaurants in Newport Beach, California, and Houston, Texas. When I asked her how she continues to open local concepts that thrive against larger competitors, she told me it all has to do with taking care of customers and employees in a way that can’t be replicated.
This restaurateur has built her business one customer at a time and believes that great service is a lost art form. In fact, she and her staff intentionally go above and beyond to provide a VIP experience that makes every guest feel like a rock star.
In addition, the inspiring entrepreneur said that she empowers her employees to create their dreams, which has led to unrivaled bonds with her team and has allowed her businesses to grow faster. She has even encouraged and helped three of her employees to open their own restaurants.
Imagine what would happen to your business if you built these types of relationships with your customers and staff alike.
4. You're able to be scrappy.
In the beginning, you need to make a name for yourself. The more people who know you, the more customers you'll have. You should be willing to work for free, give things away and completely overdeliver on everything. It will pay itself off many times over.
For example, I once had a potentially large client send me an email around 9 p.m. one night with a simple question about how we compared to a competitor they were considering. Knowing I was up against an extremely large organization, I immediately opened my computer, researched his question and even called the competitor for clarification on its product. I wanted to show him how quickly I would handle his requests and the level of thoroughness he could expect from me, so I created a custom, color-coded, side-by-side PowerPoint and had it to him by 10 p.m. that night. I don’t think it was a coincidence that I won the business of all eight of their locations the next week. I made very little profit from this sale, but having them as a reference and the referrals they provided over the years created a return on investment too massive to measure.
5. It's easy for you to make changes and innovate.
The larger the organization, the longer it takes for updates and changes to happen. For small businesses that have less staff, fewer decision-makers and fewer processes in place, it is often much easier to innovate than it is for a larger business with a corporate structure.
As a final note, it’s important to decide what “compete” means for you. Everyone has a different answer for what it would mean to be successful in competing with a larger competitor. Are you just hoping to make a small income on the side and pick up the accounts here and there? Or, are you looking to completely dominate your competitor? Either way, you are the only one who should determine what a successful outcome looks like — not your parents, siblings, friends, teacher or social media feeds. It's also not what people think of you, or how you want to be seen by others. The most important thing is that you believe in what you are doing and are willing to outwork your competitors.
If I had let my concerns about getting started in the first place overwhelm me, who knows where I would be now. One thing is for certain, though: This article wouldn’t even exist.
Stop worrying, and just start.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
d9dbae144c1d77183620d48a616cb109
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/10/03/entrepreneurs-dont-overlook-these-12-common-startup-costs/
|
Entrepreneurs: Don't Overlook These 12 Common Startup Costs
|
Entrepreneurs: Don't Overlook These 12 Common Startup Costs
Starting a new business is exciting and full of possibility—and it can be downright terrifying. That’s why, when an individual begins an entrepreneurial journey, smart financial planning should be regarded as one of the most important milestones on the road to success.
While some first-time entrepreneurs may believe they have it all figured out when it comes to the finances for their new business, they may have overlooked a few key expenses. Below, 12 Forbes Finance Council members share one common startup cost that’s often overlooked by first-time entrepreneurs and why it’s important to add it to your financial plan.
Forbes Finance Council members share common startup costs that are often overlooked by first-time entrepreneurs. All photos courtesy of the individual members.
1. Training
Many startups ignore training resources, whether they be functional (e.g. sales) or internal (e.g. culture, policies, etc). This is because the early employees are all used to working around the same table and sharing ideas. As a startup scales, not everyone can be at the table, and therefore information needs to be shared in a more organized way. Hire a trainer once you hit 20 people. - Jason Lee, DailyPay
2. Professional Consulting
Professional consulting costs are often overlooked by many first-time entrepreneurs. Be conscious of the type of expert services you are unfamiliar with but that are required to set up your business. These services often include tax accounting, legal assistance, financial guidance and financial planning. Acquire estimated quotes for these services and include these expenses as part of your startup cost. - Geanette Rodriguez-Ojeda
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Time
Entrepreneurs tend to think goals will be achieved faster than they ultimately will. Businesses, especially startups, encounter all sorts of delays and roadblocks, and as any unprofitable startup knows, time is money. You need to plan on things taking longer than you think, costing more and taking longer to actualize. Otherwise, any roadblock can put the entire company in jeopardy. - Carlo Cisco, SELECT
4. Payroll Taxes
Not remembering to plan and budget for payroll taxes can lead to an unpleasant surprise at the end of the year. The exact amount will, of course, depend on the size (dollars) of your payroll and the state(s) where your business operations exist. Hiring a good third-party payroll processor can help you avoid surprises, as they will often account for these taxes through their system. - Rohit Bassi, Corridor Capital
5. Bookkeeping
Don’t overlook the cost of managing income and expenses or producing financial statements. Some startups forget about the cost of having a bookkeeper and the cost of the financial software. Using spreadsheets to track everything may be easy at first, but as your business grows you need to move to paid software that is built for small businesses, like Quickbooks. - David Gass, Anderson Business Advisors, LLC
6. Annual Taxes
A common startup cost that is overlooked and often complicated is taxes. Annual taxes depend on business structure, profits and dividends. Additionally, C corporation founders are required to prepay first-year tax fees. - Elle Kaplan, LexION Capital
7. Marketing
Entrepreneurs often overlook the importance of marketing. The sheer amount of money it’s going to take to market a new product or service can seem daunting; thus it’s avoided or underfunded. Startups could easily allocate 100% to 200% of the revenue to marketing in the early years, reinvesting money back in the business. - Justin Goodbread, Heritage Investors
8. Business Insurance
Business insurance costs more than a startup might have originally anticipated, especially when you start hiring employees. The amount of added liability when a business begins to hire employees is often overlooked. A business will need to add medical insurance and workers’ compensation insurance to the list, along with general liability insurance and professional liability insurance. - Jared Weitz, United Capital Source Inc.
9. One-Time Expenses
A cost that’s often overlooked is the “one-time expense.” This could come in many forms: domain purchases, trademarks, permits, licenses and dues. When it comes to a startup or any new small business, you have to buy these registrations and sometimes pay for them annually. While these costs may not seem like much, they do add up. And every penny counts when you are just starting out. - Greg Herlean, Horizon Trust
10. Customer Acquisition
Time is the greatest disruptor. Startups must understand total customer acquisition costs (“Total CAC”)—that includes lead time to acquire. How long was the time between the first day of prospecting and the last day of closing a customer, and what was the cost of “staying alive”? Just as important, can Total CAC be decreased by 20% per X number of customers? That kind of thinking will help startups win. - Franklin Tsung, BlackCrown Inc.
11. Equipment
The extent of equipment costs is often a surprise for many new business owners. Equipment is something literally every business needs, so it’s critical that you set aside capital for it. In the event that you don’t have sufficient funding for necessary equipment, there is equipment financing, which is offered by both banks and private lenders. - Gregory Keleshian, Crestmont Capital LLC
12. Transactional Fees
Many startups fail to account for transaction fees. Every time you run payroll, accept a credit card or add a piece of software, there are costs for these services that add up as your business grows. Since these fees are unavoidable, there is only one answer to this issue: Ensure each vendor that provides these services creates the most value for your business through its services and products. - Paul Hadfield, Hadfield Group
|
ced74fbac30cdfd146cc0712e9042c3f
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/10/03/weighing-consumption-based-billing-for-business-success/
|
Weighing Consumption-Based Billing For Business Success?
|
Weighing Consumption-Based Billing For Business Success?
While subscription billing is seen as a tried-and-true pricing strategy with many advantages, more companies are taking notice of a more complex strategy that offers customers greater flexibility and businesses greater creativity for pricing packages: consumption-based billing.
While this approach gets less press than other forms of subscription, consumption-based (or usage-based) strategies should not be overlooked. Consumption-based models are based on customer usage rather than on discrete transactions or recurring, flat-rate fees. Instead, enterprises can monetize user behaviors and create hybrid pricing packages that combine the best characteristics of one-time purchases and subscription-based pricing models with metered consumption to provide more choices and better customer experiences. Consumption-based models are flexible and valuable for both businesses and consumers.
As the chief strategy officer for a cloud-based billing solution, I have witnessed significant increases in the revenue streams of many companies that have added consumption billing. In telecom companies, metered usage still helps add variety and differentiation to general subscription plans. I have seen media and transportation industries revitalize their customer base by simply charging per view or ride. I believe consumption-based billing applications are only limited by the collective imagination of your business.
Companies can also gather rich data on how users engage with their products and services through consumption models. As a result, usage-based billing can lead to higher-quality offerings that are delivered through differentiated customer experiences.
However, consumption-based billing isn’t easy. Successful execution requires powerful billing capabilities, including automated rating, data mediation and invoicing functionality. Enterprises must be able to configure billing systems for specific applications and industries in any market. Otherwise, finance teams can’t unlock the full revenue potential of usage-based pricing strategies.
It takes committed leaders in forward-thinking organizations to deploy these models effectively. For high-tech enterprises that are ready to evolve beyond simple subscription models, consumption-based billing could be the answer.
Consumption-based billing can provide a competitive edge.
In the current age, consumers are more empowered than ever. By including consumption-based pricing and packaging into your offerings, you increase the number of levers you can pull and incentives you can offer to make your goods and services more attractive in saturated markets.
Consumers have unprecedented access to information at their fingertips and can quickly compare offerings between competitors. If one vendor doesn’t provide a desirable pricing plan, users are likely to find a comparable product with a more suitable billing structure. On top of that, many businesses now give customers access to certain base-level features for free in order to prove their value before any financial commitment is made.
Fortunately, consumption-based pricing models can take on many forms. Enterprises can use consumption-based billing to augment existing models with add-on features or deploy completely new usage-based pricing. They can offer customer-centric pricing scenarios and calculate “usage” in various ways. These consumption-based models, combined with additional features, create highly competitive and differentiated packaging that supports new business success.
For example, an agile SaaS company might want to charge corporate clients based on the number of users who need access to a particular service. Or, a marketing automation platform might prefer to invoice based on the sent out or the total number of list subscribers. A cloud-based CRM provider could easily deploy a freemium model in which clients have instant access to basic capabilities but are required to upgrade for premium features based on usage. Overall, there are countless ways that different types of businesses can use consumption-based billing to optimize new revenue streams.
Enterprises that offer consumption-based pricing give their consumers flexibility and choice when it comes to paying for products and services. At the same time, businesses gain real-time insight into customer desires and behaviors. With this knowledge, they can test and refine their services without completely overhauling existing operations.
However, consumption-based billing models are only as valuable as the underlying billing platforms that support them. It takes a highly agile and adaptable solution to deploy complex usage-based models in any industry.
Best Practices And Considerations
It’s important to consider that metering customer usage of a given product is not always a straightforward process. Typically, usage data comes from systems that are difficult to access and interpret for monetization. This is where mediation (the process of ingesting and normalizing data for different use) becomes vital.
Some best practices for evaluating the effort needed to launch consumption-based pricing are provided here.
• Ensure your business can retrieve the consumption data from upstream systems and automate the charging process.
• Test that your billing system can mediate raw systems data and assign it to customer accounts with the proper price rates.
• Make sure that the billing process can be audited and documented for troubleshooting.
While consumption billing is not always a simple step, your team will want to evaluate the benefits outlined above alongside these considerations.
Evaluate consumption-based billing for your business.
If your organization wishes to evolve beyond simple subscription or fixed-fee billing, consider utilizing the agility and diversity of consumption-based pricing strategies. With consumption-based business models, you can create differentiated, flexible and personalized offerings that fulfill deep customer needs. Your finance team can deploy complex usage-based business models with ease and adapt efficiently to rapidly changing economic landscapes.
As the global marketplace grows increasingly crowded, consumption-based billing can create a long-term competitive edge for your organization through differentiated pricing options. Winning business in the future not only means selling great products and services, but also delivering creative and flexible product packages that attract the customers you seek.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
32f65d8ec787877e0142fa76e1f98f22
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/10/14/raising-capital-from-accredited-investors-know-the-two-types-before-you-start-your-pursuit/
|
Raising Capital From Accredited Investors: Know The Two Types Before You Start Your Pursuit
|
Raising Capital From Accredited Investors: Know The Two Types Before You Start Your Pursuit
The pursuit of the coveted accredited investor has gained traction in recent years thanks to the passage of the JOBS Act of 2012 and its formal launch in 2016. The new regulations opened marketing channels not previously available to businesses. Advertising (general solicitation) directly to accredited investors is available through Rule 506(c) of Securities and Exchange Commission Regulation D. Marketing to accredited and non-accredited investors alike is possible via Regulation A+ and the Crowdfunding options.
Many companies are catching on to the value of accredited investors as a vast source of funding and capital for ventures of all types and sizes.
Why Pursue Accredited Investors?
The appeal of accredited investors is due in part to the elusiveness of institutional investors. Institutional investment groups (including family offices, pension funds, private equity funds and university endowments) generally only play in the gateway markets. They almost always require an investment track record of one or two funds, which makes it difficult for small and medium funds to attract capital from this segment. In addition, their minimum investment can start at $20 million. Their processes are generally slow and methodical since they have little urgency to invest and can bide their time to choose the right deals for them. And in my experience, many promoters will charge you $50,000 solely for the opportunity to pitch a group of institutional investors along with 30 other companies seeking funding.
Besides requiring a solid track record, institutional investors are looking for big exits and blue blood pedigree in managers, such as attendance at name-brand colleges and Wall Street work. It typically takes seven-plus years to build a track record of funds to fit the institutional capital model. That’s why they’re often only catered to by large funds with constant deal-flow.
Two Types Of Accredited Investors
In 20 years of raising capital from accredited investors, I've learned the first thing you should know about attracting these investors is there are two distinct types. Each is looking for a different kind of presentation and terms and will require different marketing approaches and messaging. Not all deals are suitable for all types of accredited investors. If you don’t recognize the type of investor your deal is an ideal fit for, you’ll target the wrong audience with the wrong message, making it difficult to entice anyone to invest in your company, fund or syndication. Based on my experience and expertise, below are the general characteristics of each type of investor.
The Professional Accredited Investor
A professional accredited investor may invest full-time or spend considerable time investing directly in private companies. They usually have experience as an angel investor, a private lender, or invest in private equity or will have expertise in the same sector as your company.
The professional investor is savvy and evaluates each deal based on its financials, team and market viability. They aim to balance their risk/reward plays across a diversified investment portfolio, and they know what to look for and how to vet opportunities.
You’ll know you’re dealing with a professional accredited investor because they will take charge and even proactively establish the terms and format of your meeting, rather than taking a back seat and letting you steer the discussion. They expect a pitch in the typical format and give you the floor to pitch your deal.
Professional accredited investors fully expect to lose all or some of their money on the majority of their deals. They aren’t interested in “slow and steady” — they want a rocket ship. They need to know there’s a possibility for 10 times the returns (or more) if an exit presents itself. That’s the only way they can justify an investment.
Ultimately, the professional accredited investor has been around the block; most of their deals will probably fail. It’s the ones that succeed that make it all worthwhile. It’s a matter of maximizing the odds when vetting deals to ensure positive net returns over the long run.
The Non-Professional Accredited Investor
The second class of accredited investors you’ll encounter is the non-professional. A member of this group typically has a “day job.” Their decision to invest could be based on the story you share, which may include:
• A new emerging market.
• A personal connection.
• The appeal of the asset class.
• The social impact.
• An immediate return on investment.
• Monthly/quarterly cash flow.
• Defined exit.
Some will invest with you solely on the asset class, because they are interested in it but do not have the experience, expertise or time. The non-professional group can include surgeons, business owners, sales professionals, engineers, lawyers, corporate executives, etc.
When you meet with non-professionals, unlike with professional investors, you set the terms and format for your meetings. If you use industry financial terms, they might pretend to know what you’re talking about; but in reality, they more than likely will not know terms like IRR, Pref, EBITA and CAP rates.
If they do not understand you or the terms, the answer is a no. They don’t want to get a “pitch” or the typical pitch deck. They want to hear about the opportunity in conversation form. The overriding factor for non-professionals in their decision-making is trust. Do they trust you and your knowledge and potential management of the opportunity? Ultimately, they want to know: Can you deliver?
There are three key metrics for non-professional accredited investors. Unlike the professional, the non-professional is more averse to losing their principal. This means they want to see a defined exit plan, a concrete timeline and a steady ROI.
Know the two classes of accredited investors, and adjust your outreach and approach based on their preferences. You’ll see this trend grow as more companies market directly to accredited investors. Successful early adopters will reap the reward of building relationships before their competition even gets started.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
3c714dc0a1d95906c86097ff074dfa2c
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/10/18/how-to-prepare-for-your-next-fundraise/
|
How To Prepare For Your Next Fundraise
|
How To Prepare For Your Next Fundraise
Raising money is both a challenging and exciting necessity for venture capital-funded startups. As a finance leader, preparing for a fundraise means going through your company financials with a fine-tooth comb, revealing the good, the bad and the ugly.
This exercise is the moment when the leadership team crafts a narrative for the company’s growth that inspires investors to put money behind it. Your financial data is a critical part of that story. The key to a successful pitch is to use hard numbers to back up a compelling narrative about the company’s mission and vision.
I’ve participated in several fundraises throughout my career in finance, and although the requirements vary by industry and investment, there are a few main components that stay the same: the data room, the financial model and the pitch deck.
The Data Room
The first step in any fundraise is creating your data room, the space used for housing important information about your organization. This includes employment documents, vendor agreements, consultant contracts, business bylaws, real estate leases, etc.
If this is your organization’s first time raising money, you’ll start by creating an outline or folder structure, perhaps in Dropbox or Google Drive, and then filling in the necessary documents. If you’ve raised previously, you’ve gone through some investor due diligence and have materials to build upon.
It is best practice to update these materials continuously as your company grows, not only when you’re preparing for a fundraise. Adding documents to your data room as you make new hires and onboard vendors ensures information is up to date when you need it. Instead of going through the time-consuming process of retroactively gathering everything at once, you can simply review what you have, identify any gaps and focus on those.
When preparing your data room, ask for outside guidance. Your legal team can share best practices on due diligence, as can companies that specialize in building data rooms. Outsourcing the creation of your data room altogether is also an option, though it likely isn’t necessary until later funding rounds or when you are looking to exit.
Review the data you are sharing with each potential investor and your timeline for disclosing each piece of information. Conflicts of interest — such as a potential venture capitalist who is an investor in a competitor — may mean that you want to restrict some data, or at least wait until later in the process to reveal it.
The Financial Model
While setting up your data room, build your financial model. The level of depth will depend on the stage of your business and the investment you are looking for. Early stage companies won’t have much historical data, so venture capitalists won’t expect a highly detailed model. However, later stage companies requesting large funds will be expected to provide a more robust financial model, especially around revenue, sales efficiency and marketing funnel data.
The typical financial model includes a plan for scaling the business three to five years ahead. First, identify the outputs you want to show. For software-as-a-service companies, these might include annual recurring revenue, bookings, churn, customer acquisition cost and customer lifetime value. These are the numbers that current investors and, perhaps more importantly, future investors are going to look at.
The strategy for managing your expenses — such as operating expenses (e.g., headcount, travel and expense, SaaS and office expenses) and cost of goods sold (e.g., hosting expenses to deliver software) — as your organization grows will matter greatly to potential investors. To provide the most accurate forecast, it is necessary for finance to work closely with other parts of the business, such as engineering, to plan what the organization will look like.
It might seem counterintuitive, but it is important to think about more than just finances when building the model. It should be easy to navigate including only the information necessary to help a potential investor understand your business. More numbers and complexities for the sake of it won’t further your cause.
Equally important to your model itself is the rationale behind it. In most cases, investors won’t rely on your model; they will build their own and compare the two. Investors will want to understand why your model differs from theirs and will evaluate your thinking as much as the numbers.
If you don’t have someone in house to do financial modeling, it may make sense to hire a consultant. Larger startups may even outsource their financial modeling to an investment bank.
The Pitch Deck
The pitch deck is the final piece of the puzzle. It’s where all the numbers from the data room and financial model come together to tell your company’s story. The CEO and other executives will have already developed the messaging, so it is necessary to collaborate with them to craft the complete narrative.
Leverage your financial data to make your organization’s story compelling. The deck should elicit emotion and convey the heart and soul of your company using the hard numbers to back it up. Weave in the data to support your points, but don’t overwhelm your audience with a bunch of numbers that are only tangentially related to the core value proposition.
Be sure to highlight your plan for the funding, pointing to specific places where the investment will fuel growth. Investors will want to understand why the investment is needed, why now and where exactly their money will go. List the metrics you’ll be judged on, and identify key milestones, such as ARR targets, to measure your growth. This helps investors set expectations and track your progress against them.
Before you finalize your deck, take a step back. Identify where your company fits in the past, present and future of the market. Most likely, the market has changed since the company was founded and will probably change again in the future — and what investors are looking for changes with it. Tailor your pitch to current trends, and tie those into your vision for the future.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
de0d24a300d2fc5567d3895a60651ad5
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/01/14-fintech-trends-to-watch-for-in-2020/
|
14 Fintech Trends To Watch For In 2020
|
14 Fintech Trends To Watch For In 2020
Automation and technology aimed at improving financial services—fintech—has garnered a lot of attention lately. From crowdfunding to mobile payments and money transfer services, fintech has the potential to revolutionize how consumers and businesses handle financial transactions.
As with any technology, fintech developments happen quickly, and smart business owners will want to keep up. Below, 14 members of Forbes Finance Council take a look at the trends in fintech that could rise to prominence over the next year.
Members of Forbes Finance Council share the trends they believe will dominate fintech over the next year. Photos courtesy of the individual members.
1. Regulation Technology
Regulation is everywhere in the financial services industry and it’s one of the largest business overhead expenses. Many regulation compliance tasks are still completed manually or with human oversight. Expect more regulation technology solutions to come to market with a goal of streamlining processes and reducing costs. - Jeffrey Burg, Dobrusin Burg
2. The Rise Of Decentralized Finance
Before the introduction of blockchain solutions, the term “fintech” was widely applied to companies that provided modern-looking interfaces while still depending on legacy financial technologies used by banks (ACH, SWIFT). Newer implementations avoid these systems and the fees and time delays associated with them. Look for solutions that utilize decentralized finance (DeFi) to cut down on fees. - Christian Kameir, Sustany Capital
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Institutional Adoption Of Cryptocurrency
We’ll see a spike in cryptocurrency adoption by institutional investors. With crypto-native companies unveiling enhancements to their institutional-grade custody solutions, these investors finally have solutions that meet the complex, high-stakes requirements of modern financial institutions. Meanwhile, the newly formed Virtual Commodities Association advances on the regulatory front. - Sarah Olsen, Gemini
4. Crypto-To-Cash Conversions
With the growing interest in cryptocurrencies and blockchain management, be on the lookout for emerging technology and product offerings. While there are still laws and regulations surrounding this arena, rest assured that where there is confusion, there is opportunity. I’m personally excited over what technologies will emerge and improve conversions from crypto to cash and crypto to e-wallets. - Anthony Holder, C&H Financial Services, Inc.
5. Large ‘A’ Rated Life Insurance Carriers
A big fintech trend will be the large “A” rated life insurance carriers. The new life insurance trend is to use technology to simplify the writing and underwriting of a new life insurance policy. A couple of fintech startups have successfully implemented up to $1 million of term coverage with no medical exam. They check your prescription history against your medical questionnaire to accomplish approvals. - Shane McGonnell, Abacus Life
6. High-Interest Cash Accounts
Keep an eye on high-interest cash accounts. There’s a wave of fintech companies like Ally and Wealthfront that are offering cash accounts with 2%-plus interest. While this is significantly better than the traditional checking accounts at big banks, there’s FDIC insurance, company risk and market trends that could affect what banks can offer positively or negatively. - Zack Cook, Rigor
7. More Co-Development And Joint Ventures
Fintechs are becoming more acceptable as a replacement for many proprietary legacy systems. Expect more co-development and joint ventures to pop up in multiple sectors and industries where there are some historical inefficiencies and expenses. Fintechs are lowering the cost of sale in back-office solutions and ancillary services to nontraditional financial services participants. - Brian Slipka, Business Broker Investment Corporation
8. More Partnerships Among Fintechs
One trend to watch for in 2020 is more partnerships among fintechs. Smaller companies are realizing the power of joining together. Direct-to-consumer fintechs have historically been hyperfocused on one piece of the market, but by working together, these companies can offer more of the consumer life cycle with relevant products and services. - Kathleen Craig, HT Mobile Apps
9. Unique Mergers And Acquisitions
As fintech companies mature and expand, industry leaders will continue to acquire crucial proprietary tech companies, blurring industry lines and cutting their costs in the process. Be prepared to see competitors in your space start to purchase and/or merge with marketing, big data and other non-fintech software companies to drive customer acquisition and retention. - Joe Camberato, National Business Capital & Services
10. Non-Fintech Players Entering The Space
Large non-fintech companies are entering the space in order to monetize and grow their customer base. Large players already in fintech are also expanding into other areas of the industry, such as lending. Of course, there are inherent risks involved with entering financial services, and large companies aren’t immune to competition, brand erosion and data protection issues, among others. - Ben Gold, QuickBridge Funding
11. Financial Health For The Win
Several fintechs are making financial health a priority. LendingClub, for example, has a “chief financial health officer.” As the market matures, the industry is evolving beyond products that mostly deliver returns to investors in the near term to more holistic offerings that invest in the long-term success of their customers, building trusting, long-lasting and multi-pronged relationships. - Luz Urrutia, Opportunity Fund
12. Use Of Fintech For Protection
Fintech is protecting vulnerable consumers, such as senior citizens who are targeted for financial fraud or young teens learning how to manage finances. New technology is on the rise for prepaid Visa cards that block certain merchant purchases that are suspicious. This enables financial independence to continue while placing protection on their assets. - Jared Weitz, United Capital Source Inc.
13. Consolidation And Simplification Of Fintech Products
A trend I see developing is the general consolidation and simplification of fintech products. If I had to choose one area where a new trend would apply, then it would be retail establishments having turnkey mobile payment and processing systems. - David Miller, PeachCap Inc.
14. Robotic Process Automation
Robotic process automation (RPA) stands out as the most helpful tool out there. The bot can maintain records and transactions, make calculations and perform tasks that include queries. Almost anything can be automated. Even in situations where RPA does not completely automate the process it frees up time and allows you to concentrate on providing higher-value support for clients. - Snezana Obradovic, Outsource Insurance Professionals
|
4cdc26ab6a17f086b37b55754b8474b2
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/05/diversity-and-inclusion-a-worthy-business-investment-with-strong-returns/?sh=3a8237112455
|
Diversity And Inclusion: A Worthy Business Investment With Strong Returns
|
Diversity And Inclusion: A Worthy Business Investment With Strong Returns
When I made the decision to pursue an accounting degree in college, I knew I had signed up for the road less traveled — for a woman. Throughout my career, it has not been unusual for me to be the only woman in the room. As a result, this has posed additional challenges as well as an opportunity for me to rise as a leader in the diversity and inclusion (D&I) space.
I’m sure this resonates with many women in the business world. Fortunately, this narrative is changing. Today, 4 out of every 10 businesses in the U.S. are owned by women, a remarkable, growing trend. Even better, the changing demographics of small businesses don’t just involve women. A 2017 report by The Business Journals showed there were more than 11 million minority-owned businesses in operation in the U.S., nearly double the number from 10 years earlier.
As the head of the small-business division of an international bank, I think these trends are exciting to watch. Since we serve small-business owners daily, we have a front-row seat to this increase in diversity. And as the business world becomes more diverse and more leaders learn to speak up and share their ideas, some unique and exciting truths are being uncovered — namely, that diversity breeds success.
Because of my experiences, I have seen firsthand the opportunities that come from embracing varying perspectives and seeing differences as a chance to grow. And the benefits of bringing D&I to the forefront in the business world don’t stop there. One measurable outcome that companies are realizing is a greater financial return.
McKinsey’s Diversity Matters report found companies in the top quartile for ethnic, racial and gender diversity in management were significantly more likely to have higher financial returns. Companies with diverse management teams also have 19% higher innovation revenue. This overflow of ideas and solutions also leaves today’s businesses more nimble and better positioned to adapt to a fast-changing business environment.
For those businesses not yet focused on D&I, these statistics strongly suggest a real missed opportunity. For those companies that are, these figures represent a huge upside. Breaking down the impact, Harvard Business Review found that the average company’s innovation revenue alone could increase 1% by boosting the diversity of its management team and even more when diversifying for national origin, industry origin, gender and different career paths.
While there is a good amount of data and numbers on the benefits of more diverse teams, progress in this area continues to move at a snail’s pace. Communicating these benefits and the role leaders play in positioning and rallying their organizations around making impactful, sustainable changes needs to start at the top. I believe that commitment to building a diverse workforce and inclusive environment is a leadership competency. As leaders, we must be intentional in creating ways to increase and retain representation.
Merely creating a diverse team won’t automatically make that team successful. Everyone’s point of view and personal experience must be heard and taken into consideration before real progress is made. Inclusion — the “I” in D&I — is just as important as diversity. Research from software platform Cloverpop found that teams following an inclusive process made decisions twice as fast and with half the meetings.
Furthermore, Deloitte researchers found that teams with inclusive leaders are materially more likely to report as high performing, collaborative and better decision makers, and they even hold better attendance records. However, their research shows that to achieve these results, everyone on a team — not just a majority — needs to agree that they are treated fairly, respected and valued and that they feel psychologically safe.
Psychological safety means that all members of a team feel comfortable expressing their ideas and feedback. It’s feeling safe to ask questions such as, “What’s the goal of this project?” without feeling like you may be laughed at, singled out or perceived as ignorant. If a business is truly interested in fostering innovation, accelerating productivity and, in turn, seeing a direct impact on its bottom line, organizational behavior scientist Amy Edmondson offers three ways anyone can foster psychological safety:
1. Framing work as a learning problem.
2. Acknowledging their fallibility.
3. Being curious and asking lots of questions.
While the benefits of creating a diverse, inclusive and psychologically safe environment are abundant, it should excite businesses that this kind of investment into their people and culture also has a direct impact on their level of success. The need to invest in D&I is not simply a trend. This kind of leadership needs to be practiced regularly, and an inclusive culture needs to be cultivated daily.
Leaders must be intentional in efforts to attract, retain, develop and promote more diverse teams. Demand for D&I-related positions increased 18% between 2017 and 2018, according to data from Indeed. This topic will only become more important as the world becomes further connected. This work is not easy, but if we remain steadfast in our pursuit of an environment where everyone feels like they belong, there is only tremendous upside.
Like all of us, I do my best work when I feel valued and included, and I consider myself fortunate to work for an organization that values diverse perspectives and experiences. My division’s leadership wants team members to bring their authentic selves to work to help shape a culture of inclusion and belonging.
The intangible gains reaped from such an investment, not to mention financial, should put this subject high on all business leaders’ priority lists.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
15e2ae6c2a2d52fc77430edce7fd9570
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/05/four-benefits-of-promoting-talent-from-within/?sh=5ffc2deb77dd
|
Four Benefits Of Promoting Talent From Within
|
Four Benefits Of Promoting Talent From Within
Recruiting, hiring and training staff is easily one of the biggest pain points for small business owners. Finding just the right talent for a specific job can feel like an endless struggle without additional help or the right tools. But there’s an easy way to solve the problem: promoting (and developing) talent from within your organization.
Even if you don’t have the perfect candidate for a management role now, that doesn’t mean that you can’t help your team develop the right skills to lead; some of the most talented and involved executives are those who’ve grown from entry-level positions at the same company. Although there’s no one-size-fits-all path to management, these four convincing benefits of promoting talent from within your company might make you reconsider an external search.
1. You’ll promote hard work and loyalty the whole company can see.
When an organization promotes from within, no matter the level, employees can see that their input and experience are truly valued. This can also lead to higher retention and engagement throughout the company since employees have room to grow and improve in their careers. It’s also a positive signal to entry-level employees interested in your company that you promote talent from within. In a tight job market, employees have the upper hand, but high morale and solid retention will help keep your organization running smoothly.
2. They’ll know the company better.
Although it shouldn’t be the only factor that’s considered when promoting an individual, years of institutional knowledge through job tenure can be invaluable to an organization. This firsthand experience through the company’s ups and downs cannot be quickly gained by an outside hire and is lost if someone leaves the organization. External hires can certainly provide fresh perspectives to a company, but an employee who has worked in other departments or positions and has the real-life experience to draw upon should not be discounted.
3. An internal hire will likely reach their full potential more quickly.
Starting any new job isn’t going to be easy, but with the right background, the move will be easier on everyone involved. When you outsource a position, that employee will need to learn the responsibilities of the job, but will also need time to figure out its subtle nuances and learn the organizational structure, as well as build new relationships. But the process doesn’t end there; this new person will also need to get up to speed with the software you use, your internal processes, your specific competitors and even the unspoken rules of the company. This process can have a trickle-down effect, and a long or rough transition can upset other teams, direct reports and even existing or prospective clients.
Having that internal knowledge of how your company truly operates will give a candidate a huge advantage when it comes to job efficacy, at least in the initial stages. Research has shown that some external hires can take several years to reach the same productivity levels compared to internal hires with the same job. Many of these outside hires also get paid more than their internal job counterparts. Of course, less training means less money spent onboarding, which easily costs several thousands of dollars (and many resources) per hire, though the actual cost varies widely per specific job title and company.
4. Recruiting is expensive, and costs are likely to increase the higher up you go.
Using a recruiter will also increase the overall cost of a new hire, and you’ll still have to train the new employee and allow them time to catch up. Statistically, these inside hires also typically make much less per year than outside hires. The longer it takes to fill the position, the more expensive your search will be in the end. When your pool of candidates is smaller, such as for executives or if you need a very specific background, your search will likely take much longer than it would for lower-level employees. Plus, there’s no guarantee that your new hire will actually fit in the company culture or work out for the overall job in the long run.
If you want to invest in more internal candidates, a management or job-shadowing program can help you identify specific employees that are highly capable and willing to take on more responsibilities. You can also use your own resources such as working capital or a tax-assisted program to help finance the education a specific employee needs to fulfill a higher position. Additionally, if you don’t have a substantial onboarding process, you might want to invest some resources into creating one. When your new hires are familiar with the job’s expectations and your organizational culture, they’ll be better prepared for their roles and for the road ahead.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
4bc0b5dc450e378515f13b46c9e7d2ef
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/07/the-need-and-demand-for-better-financial-literacy/
|
The Need (And Demand) For Better Financial Literacy
|
The Need (And Demand) For Better Financial Literacy
Today, many young adults are experiencing stress when faced with taking responsibility for their finances and planning for the future. This is because most lack the skills, knowledge and confidence to do so. Average student loan debt continues to climb to never-before-seen amounts, but many young adults know little beyond a transactional bank account.
As a result, many report feeling unprepared to manage their money and consider it the "most daunting challenge of college for nearly all students." So what can financial institutions do to promote financial health and support their student customers?
Better Financial Literacy
There is no doubt our nation's financial education is lacking, especially among the youngest generations. In fact, only a handful of states have a personal finance requirement for high school students. This means when students leave high school to pursue higher education, they often take out high levels of student loans due to lack of preparedness from their shortage of education, and often, this leaves students unsure of whom to turn to for financial advice.
And, with an unawareness of their financial options, the knowledge gap puts young adults at a disadvantage on their path to financial wellness. While this is a serious concern, it provides an incredible opportunity for banks and credit unions because consumers need improved financial literacy. With financial education, a door is opened for financial institutions to take initiative and fill that void.
The Disconnect
Knowing how financial institutions can help starts with finding the disconnect between young adults wanting financial help and not being properly educated in the earlier stages of their lives. Financial institutions can address this need through providing consumers with educational content that can not only improve customers' financial literacy but also their own retention and acquisition.
U.S. adults consume more than 10 hours of media content per day, according to Nielsen; knowing that can help financial institutions link consumers to content that is relevant and helpful. However, this goes beyond providing educational content — it's important to let consumers know whether there is a bank product that can satisfy their needs and give the bank the opportunity to deepen the customer relationship.
Targeted Content
Once financial institutions realize the disconnect and the aspiration for financial education from their younger audiences, they can bridge this gap by targeting their marketing efforts, providing content that will accommodate the needs of these consumers. Banks and credit unions can see a consumer's habits and target their messaging and content accordingly. For example, if a consumer is interested in traveling and engaging on travel websites and making purchases toward their planned trip, then the financial institution can leverage marketing dollars to target that specific consumer to meet their wants and needs.
The power of targeted messaging is not only about being able to connect within mobile banking but also across multiple channels, further integrating marketing efforts into other areas. Banks and credit unions must think beyond traditional uses of mobile banking apps and use them as a platform to relay their message to their consumers, providing content that resonates with their consumers and grows deeper relationships.
To add to the quality of the customer experience, creating content that is easily consumable by users is important. Financial institutions have the knowledge to share, but many find it difficult to convey the information in a way that is easy for the consumer to understand. By offering content that is presented in an understandable way, financial institutions can form deeper connections with their customers and position themselves as mentors.
The Solution To The Education Problem
The Nielsen research shows that Gen Zers are spending more time on their phones, and there is no shortage of content for them to consume. Banks and credit unions should use this as an opportunity to reach young adults and students with content that fills a major gap in their education, teaching them financial literacy.
Essentially, financial institutions must start by realizing the need and desire for financial education in younger consumers. Then, they need to cater to these tech-savvy consumers by providing enhanced financial literacy with content that resonates with that audience, tailoring messaging and marketing across all available channels. By expanding beyond the traditional mobile banking experience and messaging, banks and credit unions can provide true value to their customers and stand out against the competition.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
73f2813bfb42798415221eea9d9be77a
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/08/what-changes-are-coming-to-the-cfo-role-10-experts-weigh-in/?sh=5445abbc276a
|
What Changes Are Coming To The CFO Role? 10 Experts Weigh In
|
What Changes Are Coming To The CFO Role? 10 Experts Weigh In
Many companies have a chief financial officer who manages a variety of functions, from overseeing cash flow to monitoring the business’ financial health and taking corrective actions as needed. But as with many other professions, technology and a changing economy are leading to the evolution of the CFO role.
Over the next few years, companies are likely to begin altering and expanding the responsibilities assigned to their CFOs, so it’s wise for financial professionals to be prepared. Below, 10 members of Forbes Finance Council offer their predictions on how the CFO role will be changing over the next few years.
Members of Forbes Finance Council share their predictions on how the CFO role may soon be evolving. Photos courtesy of the individual members.
1. More Dependence On Technology
CFOs are now on the front line of technology innovation, and it’s a unique position for them. They’re accustomed to driving process innovation, but technology hasn’t always been a part of it. With the push for digital transformation, CFOs will be more dependent on data analysis to deliver organizational value. This will require them to rethink how they leverage not only technology but people as well. - Terrence McCrossan, Oversight Systems
2. A Merging Of The COO And CFO Roles
It’s common practice to have a COO and CFO serving separate, distinct functions despite needing an obvious alignment. In the future, I see these positions morphing into one. A CFO can and should fulfill financial and operational duties since they are so often attached at the hip. - Zack Cook, Rigor
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Expanded Application Of Performance-Based Metrics
The role of the CFO has always been about numbers, and more recently it’s been focused on applying performance-based metrics across the organization. This will continue to evolve to further include processes and technologies to deliver these metrics on a near-real-time basis to further drive the value delivered. - Tim Steinkopf, Centrify Corporation
4. Integration Into Every Aspect Of The Business
CFOs are now having to expand into operations, IT and HR. CFOs are required to be integrated into every aspect of the business to drive financial results in the right direction. The role of tracking and reporting results has expanded to driving results, strategically aligning with operations, inspiring human capital and leading data automation to boost up-to-date information exchange for decision-making. - Geanette Rodriguez-Ojeda
5. Enhanced Focus On Strategic Issues
CFOs used to be focused mostly on the accounting aspects of a business. With the rise of the controller as a solid career path for good accountants, CFOs have begun to focus more on operational and strategic issues and are spinning off their historical accounting duties to controllers. CFOs will more and more become the No. 2 person behind the CEO in the management of the company. - Chris Tierney, Moore Colson CPAs and Advisors
6. More Responsibility For Increasing Margins/Profitability
As the overall landscape of business shifts more toward data and automation, a change in the entire C-level corporate structure is inevitable. While the CFO role used to be all-encompassing in terms of finance, accounting and administration, this role is going to become more about increasing margins and profitability through the use of data and automation. - Jonathan Moisan, Advertise Purple
7. A Need To Understand Blockchain
As blockchain-based solutions are bound to take over many functions in finance and accounting, the role of the chief financial officer will require a much larger understanding of technologies and how these are integrated into all elements of the business. Simultaneously, these technologies are capable of extending commercial functions across borders without the need for a human custodian—i.e., the CFO. - Christian Kameir, Sustany Capital
8. Increased Ownership Of Business Intelligence For Proactive Decisions
CFOs will need to develop and own the entire business intelligence capability for the company and run a predictive finance function versus a traditionally reflective one. This will require them to be skilled in available BI tools, develop deeper service-level partnerships with customer insights and operations teams, and support programmatic decisions by triangulating financial, market and customer data. - Rohit Bassi, Corridor Capital
9. A Turn Toward Customer Experience
It’s been widely predicted that CFOs will play a key role in tech transformation efforts. From our perspective though, that time has already come, and CFOs who don’t have a digital strategy are at risk of falling behind. With tech transformation underway, the best CFOs are now turning an eye toward customer experience since it involves how customers transact and interact with financial ops. - Jared King, Invoiced
10. A Shift Toward Advanced Projections
Small-business CFOs will focus more on projections along with calculating things like hurdle rates, opportunity costs and capitalization rates. At this time, CFOs often focus on complying with accounting regulations and building financial statements. However, there will be a huge shift toward being capable of making advanced projections in the next few years. - Justin Goodbread, Heritage Investors
|
b516e7cc42e1b1fbd9dd7b584a016eb6
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/12/15-strategies-for-identifying-critical-business-metrics/
|
15 Strategies For Identifying Critical Business Metrics
|
15 Strategies For Identifying Critical Business Metrics
Developing a metrics-tracking system may be one of the more complicated tasks a business undertakes. Some metrics may not be useful, while others may be “vanity” metrics that make business owners feel good but don’t really offer actionable information. With the sheer number of potential metrics that companies can track, figuring out what’s essential can be akin to finding the proverbial needle in the haystack.
We asked 15 members of Forbes Finance Council to offer their best tips for identifying the most important metrics for businesses to track to determine where they’re excelling and where they can improve. Here’s what they recommend.
Members of Forbes Finance Council offer tips to help you identify the most important metrics for your business to track. Photos courtesy of the individual members.
1. Identify Which Stage Your Company Is In
To know which metrics are most useful for your company, it’s important to identify which stage you are in and what your goals are at that stage. In our case, since we have already established a product-market fit, we are now in the growth stage. We are focused on identifying metrics that help us get new users and engage our already established beta user base. - Lamine Zarrad, Joust
2. Set Your Goals First
Metrics are useless without clearly stated company goals. As a business owner, you must know where you are going and clearly communicate your vision to your team. Ideal metrics should guide your team toward your company goals. The best metrics can be improved by the performance of your team. Their positive response to your metrics should move you toward your financial goals. - David Singleton, Seiler, Singleton & Associates, PA
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Outline The Throughput Process
Take a holistic look and outline the throughput process, from when a prospect first appears on your radar to when that customer completes the sales cycle. Look for the key point in the entire process. Ask yourself, “How long does it take for a conversion ratio to take place? How long before they become a repetitive customer? What is the quality assurance component?” These questions are vital for determining KPIs. - Justin Goodbread, Heritage Investors
4. Leverage The Theory Of Constraints
Core business processes are those that are primary in how your business makes money. According to the Theory of Constraints, the largest contributors to profitability are your largest constraints to growth. Focus your metrics around core business processes, and this will create the highest probability that your efforts will translate into greater profitability. Everything else is ultimately noise from the system. - Blake Williams, The Growth HQ
5. Make Them Actionable
Each metric should have a minimum standard associated with it. Any time a minimum standard is not met, there should be action steps you can take to move things in the right direction. If the metric doesn’t work with having a minimum standard and the ability to create action steps to manage it, then it’s not a good metric. - David Gass, Anderson Business Advisors, LLC
6. Choose Metrics That Can Impact A Big Decision
Your metrics should be valuable enough to make a business-changing decision. One of our metrics is accounting services billings. If we are above goal for a few weeks, we can decide to hire staff based on that number. If we are below goal for a period, we may decide to invest marketing dollars to raise our customer billings. I have to have numbers that tell me what my next steps should be. - Marjorie Adams, Fourlane
7. Hire Outside Help With Industry Knowledge
It may be a good idea to have an extra set of eyes on these metrics. Hiring outside help with industry knowledge may uncover areas you are missing. They can also create reports and drive decisions based on data. That data will help drive action in the right areas. - Michael Foguth, Foguth Financial Group
8. Determine If They Touch The Customer
At the end of the day, every business serves someone; therefore, metrics should be focused on serving the customer. Metrics around revenue may be too broad, but metrics around returns and warranty claims should be considered because they are customer-oriented metrics. Metrics surrounding customer visits, website hits, repeat orders and the like all have significant value. - Chris Tierney, Moore Colson CPAs and Advisors
9. Choose Metrics That Matter To The People Who Matter
The filter of how much a metric matters to a customer can determine its application and importance. It can clarify what you are actually trying to achieve rather than solving a symptom of a complex problem. For example, focusing on delivery times could help develop metrics for an outcome that customers care about. The best outcomes involve discussions with your team to apply this filter rigorously. - John Langston, Republic Capital Group
10. Have A Defined Employee Communication Rhythm
The rule of thumb for a metric to track and follow would be from The Great Game of Business by Jack Stack. Rule No. 9 says, “When nobody pays attention, then people stop caring.” A specific metric and purpose for applying that rule would be to have a defined employee communication rhythm (i.e., defined meeting frequency and purpose among teams for those meetings). - David Miller, PeachCap Inc.
11. Focus On Business Intelligence That Aligns With Goals
In today’s age of technology, all businesses should track real-time staff productivity, client profitability and industry benchmark analytics. However, metrics should be designed with your unique business goals in mind. If you want to increase sales, open a new office location or launch a new service line, your business intelligence should be geared toward achieving those goals. - Greg Kniss, KROST CPAs & Consultants
12. Look For Metrics That Align With Desired Outcomes
Ask yourself the simple question, “Do our metric outcomes align with our desired business outcomes?” If the answer is no, it’s vanity. For example, if the highest priority is to grow top-line revenue, then key metrics should correlate with growth. Here, the percentage of on-target sales reps is a key metric, while cost per lead is a secondary metric. Focus on the metrics that drive your prioritized outcomes! - Zack Cook, Rigor
13. Draw An Unbreakable Line Between A Metric And Revenue
Can you draw an unbreakable line between a metric and your business’s revenue? Can each of your team members describe that line? If not, look for a new one. Otherwise, you’re likely pursuing a metric that will create noise and confusion, not cut through it. I’ve set metrics that don’t meet this test too many times. - Jack McCambridge, HomeLight Home Loans
14. Make Sure They’re Quantifiable
The metric needs to be quantifiable for you to be able to measure, track and report against it. Without the ability to quantify, it is easy to let subjective, anecdotal or even emotional views influence the metric. Also, your ability as an owner to make fact-based decisions, manage performance and evaluate long-term progress against it is only possible if the metric is quantified. - Rohit Bassi, Corridor Capital
15. Select Metrics That Drive Specific Actions
Each metric you track should pass this one simple criterion: What action or decision does this metric drive? If you can’t identify an action, it’s a “nice to have” or, quite possibly, a waste of resources. As your business priorities evolve, so should your reporting. We need to be regimented in eliminating the metrics that are no longer driving organizational or departmental decision-making. - Shawn Sweeney, Spinnaker Consulting Group
|
861cfdef82851191243187a7add58a40
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/11/18/medicare-out-of-pocket-costs-for-cancer-treatment-every-retiree-should-know/
|
Medicare Out-Of-Pocket Costs For Cancer Treatment Every Retiree Should Know
|
Medicare Out-Of-Pocket Costs For Cancer Treatment Every Retiree Should Know
Medicare is a great health insurance option for eligible retirees. However, working in the healthcare insurance industry, one issue I’ve seen not being talked about properly is the out-of-pocket costs for cancer treatment. No matter which option a retiree takes while on Medicare, there are costs the retiree will be responsible for that could be avoided if they fully understood all of their options.
Cancer is still the second most common cause of death in the United States. According to the American Cancer Society (ACS), men have a 39.3% lifetime chance of being diagnosed with cancer and women a 37.7% chance. That means more than one in three people will be diagnosed with some form of these diseases in their lifetime. Where the statistic becomes even more important for retirees is that about 77% of all cancers are diagnosed in people 55 or older, and the median age for cancer diagnosis is 66.
The good news is that according to the ACS, there has been a significant decrease in cancer deaths in the past 25 years due to the drop in smoking and better early detection and treatment. Many lifesaving treatment options are available; however, they can come at significant cost to a retiree living on a fixed income.
Retirees eligible for Medicare typically have two options for their health insurance. Below I explain both options to illustrate what some out-of-pocket costs could look like for those undergoing chemotherapy and/or taking high-cost oral cancer maintenance medications.
The first option is to keep Medicare as their primary insurance. This comes with nationwide coverage and doesn’t require doctor referrals. The big downside to Medicare is it only covers 80% of medical expenses. If a retiree chooses this route, they could then purchase a separate Medigap supplement to help cover the other 20% of medical expenses. Many are led to believe that if they do this, they will be covered at 100% for cancer treatments. That is not always true. Yes, Medicare with a Medigap supplement does a great job of covering the direct costs of things like chemotherapy and infusions, but there are indirect costs that are rarely mentioned.
The second option a retiree has is to choose to privatize their insurance with an alternative known as Medicare Advantage. These plans are not supplements, but rather are sold as all-in-one plans that cover hospital, medical and usually prescription coverage with little to no monthly premium. These can be a good option for limiting out-of-pocket costs for retirees in certain situations, such as those who can’t afford a supplement. Another benefit to a Medicare Advantage plan is all plans must limit out-of-pocket costs for Medicare Parts A and B covered expenses to $6,700 for in network or $10,000 for in and out of network combined. What is often not explained properly, though, is that with most of these plans, the retiree is responsible for 20% of chemotherapy and other Part B drugs up to the plan limit, according to Medicare.
There are three categories of indirect costs relating to either health insurance option that retirees should be aware of. The first indirect costs come from high-cost oral maintenance drugs, which are commonly taken when someone is treated for cancer. These drugs fall under Part D, which has no maximum out of pocket. Most of the time, a patient will be prescribed one to three “anti-nausea” medications, which can cost several hundred dollars out of pocket. A 2019 analysis by the Kaiser Family Foundation shows the high out-of-pocket expenses for Part D enrollees taking specialty drugs for cancer treatment. The study showed that 14 of the 15 specialty drugs for cancer treatment each had a median out-of-pocket annual cost of over $8,000. Of those 14, median annual costs ranged from $8,181 for a prostate cancer drug to $16,551 for a specific leukemia drug.
The second category of indirect costs includes experimental treatment options a retiree might want to pursue that are not covered. And the last category involves expenses like travel, lodging and meals that would be the individual’s responsibility even if they sought treatment regionally.
There is an option to help pay for such unforeseen expenses that, in my experience, most retirees do not know is available to them: cancer insurance. According to the Washington Post, most retirees who had either Medicare with a Medigap supplement or an alternative Medicare Advantage plan were responsible for almost $6,000 of direct or indirect costs due to a diagnosis of cancer. From my experience running scenarios, for a retiree to obtain a $10,000 lump sum cancer insurance benefit that pays tax-free upon diagnosis of cancer, it would cost on average about $1 per day. Retirees can use this sum as they see fit for their specific needs.
The downside to this insurance is it is not available to someone who has been diagnosed with or treated for cancer in the past five years or who outlives the monthly premiums in relation to the benefit amount. And obviously, not everyone who buys this insurance will get diagnosed with cancer in their lifetime.
Having a family history of cancer, I decided at the age of 42 to purchase a cancer benefit through my company on myself and my family. Knowing the statistic that men have a 39.3% chance of being diagnosed with cancer in their lifetime and that I would outlive my chosen benefit amount at almost 105 years old made this the right decision for me and my family to help with potential unforeseen costs.
Every person is different, though, so retirees should consider what’s best for themselves based on their own needs and situations. But although everyone’s needs are different, understanding the direct and indirect costs related to cancer will help retirees better plan for their retirement needs.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
dfd9437f95be4a74b543705d9478cdd0
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/12/10/is-bitcoin-a-better-store-of-value-than-gold/
|
Is Bitcoin A Better Store Of Value Than Gold?
|
Is Bitcoin A Better Store Of Value Than Gold?
(Disclosure: Author holds an investment in bitcoin.)
There have been a lot of analogies over the years to bitcoin being a sort of “digital gold.” But how does bitcoin actually compare to gold as a storage unit of value? Can it protect against the risk of inflation the way gold does? Let’s compare bitcoin and gold and see how they stack up as wealth preservation tools.
Trust In Bitcoin Vs. Gold
An asset cannot be used as a way to store wealth if the majority of people don’t agree it is valuable and believe it will remain valuable in the future. This is one area where gold has a clear advantage. Whether it takes the form of coins, jewelry, art or something else, someone in 2019 B.C. would be just as likely to agree that gold is valuable as someone in A.D. 2019.
Bitcoin, because it is so new, doesn’t have this advantage. It’s only been around a decade. It’s going to take more time for bitcoin to prove itself as a long-term tool for storing wealth.
Portability
Here is one area where bitcoin is the clear winner. Bitcoin is a nonphysical asset, and can be sent and received from anywhere with an internet connection. It also operates entirely outside the banking system, so it is easy and fast to send and receive payments across borders.
Gold must be physically stored somewhere, whether in a personal safe or with a company in its vaults. If you don’t hold the gold yourself, you can’t access it at will, and if you do, it doesn’t necessarily mean you can move it around easily. Try bringing several pounds of gold onto an airplane without attracting attention and suspicion at the airport.
Furthermore, some governments throughout history have attempted to ban or confiscate privately owned gold (it was actually illegal for private citizens to own and hold gold for 41 years in the United States).
It is much less likely a government could successfully block access to bitcoin, as doing so would require blocking access to the internet as a whole. China has attempted to block access to bitcoin several times over the past decade, and even with its great internet firewall, it has been unable to make a meaningful impact.
Barrier To Entry
Gold stands at about $1,500 per ounce at the time of this writing. So if you want to buy a 1oz coin, that’s the minimum you’d pay. You can buy bars in smaller sizes, but you can only shrink a physical asset so much.
One bitcoin is around $8,100 — but remember, you do not need to buy a whole bitcoin to get exposure. Bitcoin is divisible by 100 million into the smallest possible unit, the Satoshi, or “sat.” If you wanted to get started with only a couple dollars investing in bitcoin, you could do that. Bitcoin (and cryptocurrencies in general) have a much lower barrier to entry for people who don’t have a lot of money to throw around.
Protection Against Inflation
One of the most popular reasons for buying gold is to hedge against inflation. Some people fear the dollar, or whatever fiat currency they are holding, will experience a decline in value in the future. So, they convert it to gold to help protect their wealth against inflationary changes.
Both bitcoin and gold can be used for this purpose, though bitcoin’s price volatility can make people uncomfortable. No matter which you prefer, there is no denying the price of gold does not fluctuate nearly as much as any non-stablecoin digital currency.
Growth Potential
Over the past 20 years, gold has risen from around $430 per ounce at the end of 1999 to about $1,500 today. If you bought it then, you basically tripled your money. That’s certainly nothing to complain about.
Bitcoin has experienced unbelievable growth. When it first appeared in 2009, it was worth fractions of a penny, but steadily increased in value relative to the U.S. dollar over time. With each “halving” (when the algorithmically determined supply of new bitcoins being generated is cut in half), the price of bitcoin exploded a year or so afterward. Between 2015 and 2017, for instance, bitcoin experienced nearly 9,000% growth when it reached its all-time high of nearly $20,000. While there was a sharp correction after each all-time high, the new low was always significantly higher than before. If this pattern holds with the next halving, the short- to medium-term growth potential of bitcoin could be much higher than gold.
Functionality
One of the core arguments in favor of gold is that it is a physical commodity and you can actually do things with it. Gold is used for jewelry, electronics, dentistry, aerospace equipment and more. It has real, tangible utility besides money. There is a certain base level functional demand that contributes to the value of gold, but the majority of the demand for gold is based on the speculative value.
Bitcoin, of course, is a purely digital creation and really can’t serve any purpose besides being a digital, nonphysical storage unit of value and medium of exchange. Bitcoin has a certain base level functional demand for people and businesses using it as a payments network, but the majority of the demand for bitcoin is also speculative.
Risk Vs. Mobility
This is a polarizing topic among financial experts. Some passionately argue in favor of gold and dismiss cryptocurrency as “not real,” while crypto proponents call the naysayers “goldbugs” who refuse to have an open mind.
I’m not here to give financial advice, but I will say this: Gold has proven itself over the millennia, and I believe bitcoin is about the closest thing to a frictionless, portable, nonphysical form of gold that currently exists. Ultimately, what matters is your own tolerance for risk and how mobile you need your wealth to be.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
f954bc84dc6b95450470e6570d268424
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/12/16/14-unnecessary-startup-expenses-wasting-hard-earned-money/
|
14 Unnecessary Startup Expenses Wasting Hard-Earned Money
|
14 Unnecessary Startup Expenses Wasting Hard-Earned Money
When you’re running a small business, every dollar counts. Yet so much money is wasted on unnecessary expenses. This type of extraneous spending can hold your company back from growing, but it's not always easy to know what to cut to save money.
As experts in the financial industry, the members of Forbes Finance Council know how to spend smartly. Below they shared some of the most common ways they see startups wasting money and where startups should allocate their funds instead.
Finance Council members provide tips on how startups can make the most of their funds. Photos courtesy of the individual members.
1. Too Many Full-Time Employees
One big mistake that startups often make is hiring too many full-time employees too soon. Oftentimes, part-time employees and subcontractors make more sense and can fulfill the same needs as full-time employees. Moreover, part-time employees can sometimes be ramped up to full time if and when the circumstances warrant it. - Brian Slipka, Business Broker Investment Corporation
2. Fancy Employee Perks
One of my pet peeves is startups spending way above their means to attract talent. As an early-stage startup, you cannot provide the offices, perks or compensation a Fortune 100 company would. You don't need coconut water in your fridge to attract talent. Focus on attracting top talent who believe in your mission and are willing to make sacrifices along with you. - Baris Aksoy, AV8 Ventures
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Outside Leadership Hires
A lot of young startups think the help of someone who already knows everything and can come in elevating your company's market position is key. My firm promotes leaders from within, which has been empowering to our staff. If there is a person who already knows what your startup should do, why didn't they already solve the problem your company aims to solve? - Jonathan Moisan, Advertise Purple
4. Office Space
One of the expenses that many businesses take for granted as being necessary is office space. As a 100% remote business, I encourage business owners to question whether they really need an office. My experience is that operating remotely has a slew of benefits including a more productive and engaged workforce, a broader labor pool and of course, lower expenses. - Carrie McKeegan, Greenback Expat Tax Services
5. Cheap, Short-Term Solutions
Too often entrepreneurs look for the cheapest solution to save money now with the thought of buying a better solution later once they have money. Entrepreneurs shouldn't dip their toe in the water. They need to go all in and not step over dollars to pick up pennies. Find solutions now that will last for several years whether it be with CRM, people or software that will last for several years, even if it does cost a little more. - David Gass, Anderson Business Advisors, LLC
6. Business Travel
Many entrepreneurs see an opportunity to visit a prospect or partner and don't hesitate to act, resulting in crazy travel costs because it seems worth it in the moment. My advice is to pause and think smartly because travel costs add up quickly. Check the travel aggregator and direct websites. Book at least two weeks ahead and on Sundays. According to Expedia, this could save up to 36%! - Maryanne Morrow, 9th Gear Technologies
7. Minimum Viable Products
Many startups and large corporate innovators waste money on MVPs before validating that they have nailed the problem/solution fit and the product/market fit. They spend thousands, millions and many months bringing a product nobody wants to market. Tools like lean canvas and smoke tests help solve demand function, willingness to pay, pricing models, strategy and psychology before going all in. - Blake Williams, The Growth HQ
8. Reactive Tax Planning
Being reactive to taxes rather than proactive can cost entrepreneurs big. Working with an ineffective accountant who doesn’t understand your business or trying to manage it all yourself can result in major tax surprises. Partnering with a CPA that understands your industry and offers a proactive tax planning approach is the surest way to avoid those costly tax surprises. - Ryan Hauber, Honkamp Krueger & Co., P.C.
9. Premature Scaling
Premature scaling of the business is a huge culprit of wasted money. Hiring staff before they are really needed or getting an established office space to build presences are all unnecessary and major financial drains when you are starting out. Wait as long as possible before hiring your first employee and if possible, focus on building out your systems before putting the people in place. - Jared Weitz, United Capital Source Inc.
10. Revenue Driver Outsourcing
Nowadays, I have witnessed entrepreneurs outsourcing unnecessary responsibilities and paying high fees for it. This is how startup businesses tend to waste money. Analyze your business needs and your strengths to ensure you can realize the majority of core revenue. For example, don't start a food truck if you do not know how to cook! For small startups, revenue drivers should not be outsourced. - Geanette Rodriguez-Ojeda
11. Underqualified Staff
One mistake startups make is hiring employees that may not be a fit. Some companies grow rapidly, but instead of selecting quality candidates, startups tend to overhire underqualified staff. This can be a costly mistake. Be cautious and select one or two people rather than hiring a crowd. Quality workers are a better fit until you can be sure of just how many people you need to hire overall. - Greg Herlean, Horizon Trust
12. Product Fine-Tuning
Startups are spending a ton on fine-tuning their products before even going live. What they must do instead is create MVP, sell it and then fine-tune it according to market request. In this way, startups could save time and money spent on things no one needs. - Eugeny Prudchyenko, EvoShare
13. Business Expense Reimbursements
Startups often overlook the amount of money being overspent or wasted on meals, entertainment, travel, etc. That's why creating a clear, documented business expense and reimbursement policy early on will pay dividends. Employees will appreciate the guardrails and the business will appreciate the control of expenses, not to mention budgeting becomes more accurate. - Zack Cook, Rigor
14. Lavish Celebrations
Some startups do prosper early and instead of saving for the future, they celebrate their newfound "success" before they're even off the launchpad. Don't throw the lavish holiday party until you know you're on solid ground. If you've operated for two years, are making money and paying your bills on time, then celebrate a little and hope that next year you can do a little more. - Chris Tierney, Moore Colson CPAs and Advisors
|
687c7a1ee79c8a4edb197ca2a67464a5
|
https://www.forbes.com/sites/forbesfinancecouncil/2019/12/27/investment-forecast-for-2020-and-beyond/
|
Investment Forecast For 2020 And Beyond
|
Investment Forecast For 2020 And Beyond
photo: Getty
Trying to predict investment opportunities for a year or two into the future is not an exact science. The standard warning that goes with such forecasts is they are educated predictions, and there is no guarantee they will occur. However, as I share my forecast with you, I'll explain the thinking that goes into it.
This is for those of you who are sitting on a good amount of cash. You may be an individual or a company with the pleasant problem of deciding what to do with your money. You might find yourself continually asking, "Should I invest my money or hang onto it? And if I invest, where should I put it?" After all, the goal of an investment is to preserve what you are investing, while receiving a good return off it.
As everyone knows, the stock market has been perking steadily upward for more than a decade. It seems like an extremely attractive vehicle to place your money. While history gives no indication of future performance, those who do not learn from history are doomed to repeat it. In its past, the New York Stock Exchange has seen several streaks where the stock market continually rose. One was from 1949-1956 and resulted from World War II concluding and America starting its march to becoming the most robust economic machine in the world. A couple others occurred in the 1980s and '90s, when new federal laws governing investments, savings and pensions infused a great deal of money into the market. The latest is from 2009-present and came about after the market meltdown of 2008. Much of the current streak is the result of very low interest rates as the Fed cut those rates to historically low levels for a long time.
The previous upward trends, and any other little streaks the market had, all have one thing in common — they ended. Some ended with a bang and a crash, while others were more of a bull market turning to a bear market. I don't think we are going to be heading into an economic recession with a resulting market crash or major correction anytime soon. However, there is one factor affecting the stock market that is unpredictable and, I believe, has a more significant impact on its performance than ever before.
I am talking about politics, both the national and international variety. Whatever your opinion is of President Trump, the stock market should stay steady throughout 2020 and into 2021, at least, if he wins re-election next year. If the Democratic candidate wins, the stock market will probably take a negative hit, at least initially. Investors would then have to see what type of economic policies the new administration formulates to get an idea where the stock market will go from there.
The policies of whomever is president as they deal with trade and relationships with other countries will also have a bearing on the nation’s economy. Every time trade with China is in the headlines, you see a bounce or a dip in the stock market depending on the type of news. Wars and conflicts can also crop up at an alarming rate, and when that happens, all forecasts get thrown out the window until the situation stabilizes. Unfortunately, we live in a volatile world, and there is no sign of that abating in the future.
Overall, I believe the stock market will continue to rise, but because of the political volatility the nation is experiencing, there are going to be some peaks and valleys with moderate growth. Fixed investments continue to see a low yield and low interest rate environment. While their rate of return might not be stellar in the economic conditions that favor the stock market, there are ample opportunities to invest in things like general account portfolio of life insurance companies and other specialized fixed items, such as short-term private lending and mezzanine debt, due to their availability.
The economy still appeals to the bulls. For bears, low interest rates make it difficult for those who receive a fixed income on conservative investments. Those same low interest rates set by the Fed that spurred the current bull market have slowed the growth of some other investments.
The bottom line is the economy looks good for the next couple of years. I don't think we will see a recession. That being said, I urge great caution for anyone considering a major investment right now. The potential effect the political environment in the United States can have on the stock market and other investments is a wild card you cannot ignore. If you are sitting on money to invest, it would be wise to keep sitting on it. Even with a still rising economy, keeping money liquid for future investments is a good idea. Even if the political dust clears after the 2020 election, it might not be until 2021 that the picture will clear on the best places to put your cash.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
79fc7e56a25cfde3560b5fd3fb06cca9
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/01/02/13-changes-coming-to-the-banking-industry/
|
13 Changes Coming To The Banking Industry
|
13 Changes Coming To The Banking Industry
Very few industries have the long history and stability the banking industry has enjoyed. Banks depend on the firm trust of their customers, and as a result, change usually takes a long time. However, in recent years, members of the banking sector have realized that evolution is necessary if they are to remain relevant in a global economy.
The banking industry is letting go of some of its traditional methods and looking at new and innovative ways to make life easier for customers. Below, 13 experts from Forbes Finance Council discuss some of the latest trends in banking and talk about what developments they expect within the sector over the next five years.
Members of Forbes Finance Council talk about changes to the banking industry they expect to see in the next few years. Photos courtesy of the individual members.
1. Leveraging Fintechs For A Better Customer Experience
By working with fintechs, banks can offer their customers value-add solutions that fall outside their areas of expertise, and the appetite for such collaboration should continue increasing. From leveraging alternative data sets and models for enhanced underwriting to offering clients instant money transfers, banks can improve their offerings at low cost while increasing speed to market. - Ryan Rosett, Credibly
2. More Technology-Driven Consolidation
Over the last decade, the number of banks in the U.S. has declined, but there’s a lot more consolidation to come as many banks are “stuck in the middle.” Big banks can, and have, developed technology to give them an edge over small banks in serving consumers, and fintechs and non-bank lenders continue to take business in both commercial and retail lending. - Curtis Glovier, PENSCO Trust Company, a subsidiary of Opus Bank
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. The Advent Of Digital Lending
In its December 2019 report on digital lending, Grand View Research cites an estimated market size of $3.5 billion in 2018 and an anticipated compound annual growth rate of 20.7% from 2019 to 2026. Personalized digital lending is the future. As digital infrastructure becomes more robust and more consumers become comfortable with online transactions, the banking industry will inevitably have to move lending services, whether business-to-consumer or business-to-business, online. - Pushkar Mukewar, Drip Capital
4. The Rise Of Neobanking
Expect to see the rise of mobile-based direct banks over the next five years. Neobanks are already attracting millions of customers nationwide, suggesting a consumer-preference shift from traditional, branch-based physical banking to the convenience of digital-only solutions. - Tyler Gallagher, Regal Assets
5. Automated And Personalized Customer Experiences
One of the biggest changes I see in working with various banking clients is that a lot of them are realizing they are spending excessive resources in executing repetitive processes. Banks have realized automating some of these will help free up human capital to perform value-added activities, which will result in faster execution, more efficiencies and personalization of consumer experiences. - Breana Patel, Bonova Advisory Inc.
6. Blockchain And Decentralized Solutions Replacing Most Banks
The biggest change to the banking industry is being caused by blockchain-based solutions, which enable nearly instant peer-to-peer transfer of money. Furthermore, decentralized finance solutions based on smart contract platforms, such as Ethereum, are already enabling lending platforms without the need for financial institutions. Within five years these solutions might dominate financial services. - Christian Kameir, Sustany Capital
7. New Income From Open Banking And Data-As-A-Service
Relatively low-rate environments and commodification are squeezing traditional bank revenues. Expect dramatic business model rewrites with open banking, which creates two-sided markets like Apple’s App Store to earn revenues from both consumers and developers, or data-as-a-service and API offerings like the one from JPMorgan Chase to extend data and analytics services to institutional clients. - Wei Ke, Simon-Kucher & Partners
8. Mid-Market Banks Becoming An Endangered Species
Similar to Amazon’s impact on retail, the top five banks are setting the tone for what banking services customers expect. Regional banks are struggling to keep up—particularly with AI and machine learning—in terms of budget and human capital. The competitive advantage of scale is creating a growing chasm that will likely result in mid-market mergers as a means to leverage assets and talent. - Shawn Sweeney, Spinnaker Consulting Group
9. The Democratization Of Consumer Finance
Secure, mobile-forward solutions will continue to enable rapid, real-time “anywhere, anytime” answers to consumer needs and wants. These AI-fueled services will manage and optimize an individual’s full-stack financial capacity—available liquidity and ability to support credit—from a relational and holistic viewpoint, not the discrete transactional nature of today’s banking. - Kim Anderson, Strategic Link
10. Better Regulation
Traditional banks will focus on taking deposits and lending for productive purposes and leave other financial services to innovative new fintech and digital organizations. This decouples risk, liquidity and “know your customer” and ameliorates the conflict of interest from modern banking’s dual mission—the safety of customer money and financial returns for its shareholders. - Erica Schoder, R Street Institute
11. More Targeted Services For Underbanked Households
The fees the unbanked and underbanked pay are still astonishing, but thanks to fintech this will rapidly change. Unlike in the past, if you have a cellphone, you can have a bank account, and that opens up so many possibilities for banks and other companies to provide services to this 22 % of households. - Vlad Rusz, Centaur Digital Corp.
12. Big Banks Extending Services To Small Businesses
We’ll continue to see legacy financial institutions offering services to small businesses. On the surface, this seems like good news, as SMBs have historically struggled to access capital and credit through mainstream banks. However, the banking industry may still not adequately address the financial needs of Main Street businesses, such as the need for spending controls. - Farhan Ahmad, Bento for Business
13. The Reemergence Of ‘Relationship Banking’
In addition to seeing some of the regulations resulting from the recession of the early 2000s being rolled back, we’ll continue to see a proliferation of community banks and other smaller institutions, as opposed to the merger mania and larger banks that came on the heels of that trying economic time. The opportunity for businesspeople is closer, more personalized banking relationships. - Wm. Scott Page, LifeGuide Partners
|
b68ef3b744a31d072e3a7cbf57edb85e
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/01/03/what-to-have-in-place-before-your-child-is-born/
|
What To Have In Place Before Your Child Is Born
|
What To Have In Place Before Your Child Is Born
photo: Getty
You’re going to be a parent — congratulations. Your life is about to change in amazing ways. Children are a challenge but also one of life’s biggest blessings. You’re probably already brainstorming names and planning how their nursery will look, but there’s another step you can’t skip as you prepare for the baby’s arrival: planning your estate.
I know it’s not fun to talk about, and you may think you are too young to be planning your estate. You may not know who the best choice would be to raise your child if you and their other parent passed away, but there’s a good reason you need to settle these affairs now: Once the baby arrives, you will be exceptionally busy.
Sleep deprived and focused on keeping your baby alive, you will kick this part of the process down the road. Five years later, it still won’t be done.
If something were to happen to you without the proper documents in place, the court would decide your affairs for you, including who would care for your child. Now, it’s not random. They would pick a close family member, but the point is: You’d have zero say in the matter.
Working with a qualified legal professional — and with assistance from your financial advisor and insurance agent — you can put the pieces in place to ensure your child is taken care of should something happen to you. Here’s what you’ll need before the baby gets here.
Will
A will dictates what happens to any savings or assets not in retirement plans and, more importantly, lays out who will take care of your child should you pass. The surviving parent maintains their parental rights with the death of one parent, but it gets complicated if both parents die. To address that possibility, pick another family member or close friend to be the child’s legal guardian. Consider someone who is not only willing and capable, but who would provide them a life that is similar to what you want to provide.
Be sure to pull out your will and review it every three to four years. Life changes for you and your chosen guardian. If needed, update your will to reflect your new life circumstances.
Trust
Going hand in hand with a will is a trust, in which a third party holds assets on behalf of your child. If you were to pass, all your assets would funnel into the trust, and the trustee would handle making distributions to support your child (e.g., paying for private school). If the child’s guardian can financially support them day to day, the trustee can save that money for the bigger life events down the road.
Your trustee can be different from your guardian. You might choose your sibling as the guardian because you have older parents, but choose your parent as the trustee because they have more experience in managing assets. Picking different people also gives you an added layer of protection. Your guardian should be someone you trust, but if they’re also the trustee, the temptation is there to say, “The kid is living in our house, so we could use the money to help pay for our mortgage.” Separate designations can reduce the chances of this happening.
Life Insurance
If something were to happen to you or the child’s other parent, life insurance is a way to ensure you leave something behind for the child. If you’re early in your career, you likely haven’t lived enough of your professional life to amass a whole lot of assets. Life insurance can help your child’s caretakers pay for life’s essentials. Then there’s college. Life insurance could also help your child get a college degree without incurring massive student loan debt.
Life insurance gives them options early in life without undue financial pressure, and if you have a trust in place, list the trust as a beneficiary of the life insurance policy to assure it will be used appropriately for your child’s benefits.
It’s nice to have assurances that your parents or grandparents will take care of your child and have the financial means to do so, but life is unpredictable. What happens if they pass away or get remarried? Purchasing a life insurance policy lets you focus on what you can control.
Beneficiaries
Whether it’s an individual retirement account, 401(k) or 403(b) plan, an insurance product like an annuity — basically any kind of tax-sheltered investment vehicle — you want to update your beneficiaries. If you were to pass without having the right beneficiaries in place, it would trigger major tax issues.
For example, let’s say you had named a spouse as your beneficiary on your IRA, but there was no backup, which is normally people’s children. If you and your spouse died at the same time, the IRA would be deemed to have passed without a proper heir. To be a proper heir in the eyes of the IRS, a beneficiary must be a human being or a properly worded trust.
Without a proper heir, the money in that account has to be distributed within five years of death. It wouldn’t go into a trust, but rather be paid out to the estate. The tax hit would be huge. But if you list your child as a contingent beneficiary, the money can stay in the IRA, and the child can take small distributions over their lifetime to help with costs like college.
Next Steps
This list might seem intimidating, and it’s no doubt morbid to think about your death before your child even gets here. Find a legal professional who specializes in estate planning, and they’ll not only handle these documents for you; they’ll make you feel comfortable discussing your affairs and give you peace of mind knowing your child will be cared for no matter what happens.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
efd8e1fe7a3db8f59bde83289fe12649
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/01/21/why-reducing-the-refugee-cap-is-bad-finance/
|
Why Reducing The Refugee Cap Is Bad Finance
|
Why Reducing The Refugee Cap Is Bad Finance
Photo: Getty
In late September, the government announced that it would slash the number of refugees allowed in the U.S. to 18,000 — a dramatic and historic low for the country since the modern resettlement program’s creation in 1980. In 2016, the refugee cap was at 85,000, which means this current cap was a reduction of a whopping 78% in a short period of time. To put this into further context, prior to 2016, the previous lowest refugee cap was 67,000 in the late 1980s.
As a refugee from Baku, Azerbaijan, I know firsthand how being a refugee motivates and propels individuals forward to find stability, achieve success and contribute positively to the economy.
The Numbers
When a refugee is accepted into the U.S., there are undoubtedly resettlement and social service costs, but in the long run, the burden of these costs rapidly decreases. A study by the National Bureau of Economic Research found that adult refugees paid an estimated $21,000 more in taxes on average over a 20-year period, than they received in welfare payments.
A look into the 2017 New American Economy study shows that the nearly 2.4 million refugees who resettled in the U.S. earned more than $86 billion in income, paid more than $23 billion in taxes and held nearly $63 billion in spending power.
Entrepreneurship And Creating Jobs
Refugees not only contribute monetarily to the economy, but are also more likely than natives to become entrepreneurs and create more jobs. The New American Economy found that 13% of refugees are business owners; that compares to just 9% of U.S.-born citizens who start their own businesses. These individuals have already shown resilience, an ability to be resourceful and a willingness to take risks — traits that lend themselves well to successful entrepreneurs.
In fact, immigrants make up 15% of the general U.S. workforce but account for about 25% of the country’s entrepreneurs. In 2017, more than 186,000 refugee entrepreneurs generated $5.6 billion in business income.
Personal Stories
As a refugee, I fled the ethnic cleansing in Azerbaijan to eventually come to the U.S. I am now the CEO and cofounder of a banking startup in Austin, Texas, and I employ 18 employees and contractors. I am one of millions of refugees who can proudly share their success stories, including:
• Avant CEO and Cofounder Al Goldstein, who came to America as a refugee and now employs 2,500 people in his billion-dollar company.
• Ukrainian refugee Max Levchin, who went on to cofound PayPal and Affirm.
Bad Economics
Slowly dismantling the refugee program in the country is bad economics. Refugees pay more in taxes in the long run than what is spent on them during resettlement. They are natural entrepreneurs who create jobs and work hard, contributing significantly to the U.S. economy.
Putting such a low cap on the number of refugees allowed in is not only bad for our economy, but it also disregards a massive human element. Accepting refugees into the country can be life-changing, but most importantly, life-saving.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
0ddf1423043837af4a258f30ab0089eb
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/01/27/how-tech-is-making-banking-more-inclusive/
|
How Tech Is Making Banking More Inclusive
|
How Tech Is Making Banking More Inclusive
Photo: Getty
It’s no secret that wealth and income disparities in the United States are bad — and getting worse, with inequality reaching its highest level in 50 years. The banking industry has, historically, done plenty to make the problem worse.
First, let’s look back to the 1990s, when federal deregulation made it possible for banks to close less profitable branches and withdraw from economically disadvantaged communities across the United States. This effectively created “banking deserts,” and these deserts grew in the wake of the 2008 financial crisis. From 2012 to 2017, nearly 6,800 bank branches closed, and banks are still consolidating branches.
The repercussions of these deserts are far-reaching. In the absence of mainstream FDIC-insured banks, “alternative” financial services companies moved in — outfits like payday lenders, check-cashing stores and pawn shops — which often make people’s difficult financial circumstances worse with high fees, confusing terms and little credibility. Sure, they met a need, but at what cost?
“The average borrower spends over $500 a year in interest just on payday loans,” wrote Terri Friedline and Mathieu Despard in The Atlantic. “Residents end up diverting money that could have otherwise been used to pay for irregular expenses or to build wealth, instead paying to use the basic financial products that they so desperately need to manage their financial lives.”
In addition to depriving consumers of the basic banking tools they need to achieve financial health, lack of geographic access to banks has also served as a kind of gating mechanism to credit. As economists from the New York Fed noted, access to credit declines and loan rates increase as the distance between a bank and a borrower grows.
While the absence of mainstream banking services has become a problem, their presence isn’t always a panacea: As I detailed in a previous article, traditional banks have inherent structural challenges that limit their ability to serve customers who aren’t wealthy.
That’s not all. In spite of the fact that redlining has been illegal for decades, a 2018 report showed that blacks and Latinos continue to be denied conventional mortgage loans much more often than white Americans. And just last year, a branch of one multinational bank got in hot water for discriminating against a black multimillionaire.
Taken altogether, an increasing number of Americans are left overcharged and underserved. But, thanks to technology, a new era of more inclusive banking is on the horizon.
Geographic Access Will Become Less Important
The use of smartphones continues to grow — 81% of adults said they owned a smartphone in 2019, up from 77% in 2018, according to Pew. And they’re the primary way for many people across all income levels to access the internet.
While digital and mobile banks still must address the challenge of making the personal connection that branches offer, they have the advantage of bringing the bank to the customer — including loans and other white-glove banking services — even if the customer is in a banking desert. No matter where you live, you can now apply for and access a premium FDIC-insured bank account.
And as mobile banking serves people in banking deserts, the mobile-banking industry is creating other beneficial impacts. For example, the bias some borrowers of color or alternative ability may have faced in the past in a brick-and-mortar institution is poised to be eliminated with a digital or mobile-first experience.
By starting with people who have been traditionally excluded or marginalized (either through geography or socioeconomics), banks will end up designing new experiences that serve everyone. It is the very basis of inclusive design.
A Broader View Of Borrowers Will Be More Important
Technology has also yielded some drastic improvements to underwriting that allow financial institutions to have a more complete view of borrowers. New, technology-based lenders are already looking to “alternative” data, or “any nonstandard piece of data that can be used to inform decision-making,” as Datanami defined it, to make smarter lending decisions. This could include, among other things, mobile records, spending behavior or any other information that paints a more holistic portrait of a borrower.
This means that lenders will be able to more accurately determine which banking and loan products are appropriate for which customers without having to rely on narrow or lagging inputs (credit scores or the amount of a down payment) or, worse, their own flawed emotional instincts.
The Tipping Point Is Here
At present, a small minority of Americans have fully switched to a digital or challenger bank as their primary bank. However, a Boston Consulting Group study found that only 18% of U.S. consumers do the majority of their banking in person. The rest either do both digital and in-person banking (44%) or primarily digital banking (38%).
In other words, the move toward digital banking is happening, and on the rise. And as soon as challenger banks can offer consumers the reliability, stability, scalability and security of big banks, plus real innovation, a sophisticated digital experience and a focus on financial well-being, we’re going to see a wellspring of demand. I predict that 2020 will be a real tipping point in this direction — particularly from customers who have been historically underserved by the existing system.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
8d4e4de2e3e315e8935ee9dfa1959f37
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/01/28/cost-segregation-study-provides-for-immediate-expense-of-leasehold-improvements/
|
Cost Segregation Study Provides For Immediate Expense Of Leasehold Improvements
|
Cost Segregation Study Provides For Immediate Expense Of Leasehold Improvements
PHOTO Getty
Landlords and tenants often negotiate to make improvements or alterations to nonresidential rental space so that it becomes more suitable for the prospective tenant’s business needs. In doing so, the landlord or the tenant may be eligible to depreciate the costs associated with these leasehold improvements. Usually, the party that pays for and retains ownership of the leasehold improvements may depreciate them.
After the Tax Cuts and Jobs Act, or TCJA, leasehold improvements are classified as Qualified Improvement Property, or QIP, and must be depreciated using the 39-year straight line method. For example, a real estate investor spends $390,000 to make qualified improvements to an apartment complex. The investor would be allowed under the current system to take a $10,000 deduction against the property’s income to reduce taxable income. Under previous rules, the same improvement would have qualified for immediate expensing.
However, a taxpayer can overcome this error by utilizing a cost segregation study, which would reclassify certain improvement items so they are eligible to be immediately expensed. A cost segregation study is an engineering tax study that determines the amount of the improvement that is nonstructural versus the improvements that are structural in nature. The nonstructural components can be immediately expensed under current tax code as qualified short-lived assets. In the above example, a likely cost segregation result would qualify $195,000 as nonstructural assets that could be immediately expensed. The balance of $195,000 of structural assets would be depreciated over 39 years. The cost segregation study can generate much more upfront expenses to mitigate taxes in the first year the qualified improvements are installed.
Tax Treatment Of QIP Under The TCJA
The TCJA changed the definition of QIP. Previously, improvement property would be classified as either QIP, leasehold improvement property, qualified retail improvement property or qualified restaurant improvement property. Now, all improvement property has been consolidated into QIP, which is described as any improvements made to a building’s interior that is nonresidential property. Excluded from QIP are improvements related to the enlargement of a building, an elevator or escalator, or a building’s internal structural framework.
The intent of Congress was to allow QIP to be depreciated over a 15-year recovery period and have the ability to benefit from the new 100% bonus depreciation deduction. Unfortunately, a drafting error in the final bill did not provide for this. Therefore, current law requires QIP to utilize the standard 39-year straight line depreciation method for Section 1250 property.
It was widely thought that this technical error would have been fixed with the recent passing of H.R. 1865. The bill did extend a few real estate related tax provisions through the end of this year, but it did not fix the drafting error for the QIP.
Determining Whether A Cost Segregation Study Is Right For You
Cost segregation studies are beneficial for real estate investors who need additional tax deductions they can use to lower taxable income. The studies also allow you to write off the remaining depreciation on assets within the building when they are removed or exhausted. This is an important benefit of cost segregation, because this helps mitigate and minimize recapture taxes when you sell the building. Before going ahead with a cost segregation study, it is most important to review your situation with your accountant or CPA to determine whether a study could benefit you and ultimately allow you to build more wealth.
Moving Forward
Congress has acknowledged the drafting error for depreciation of QIP; however, a technical correction still has not been made. A cost segregation study allows those waiting for this correction to move forward with their leasehold improvements and immediately expense the cost of those improvements, as the law intended. Further, in the event a technical correction is hereafter made, the owner can use Section 481 to catch up lost deductions, if any.
Therefore, landlords and tenants don’t need to wait for a split Congress to act. With recent impeachment proceedings, it would be hard to imagine a fix happening anytime soon. Simple to say, utilizing a cost segregation study to maximize depreciation deductions on leasehold improvements makes sense in the right situations.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
91b5716f516fd47b8b39d370a29a92bf
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/02/12/you-yes-you-need-an-emergency-savings-account/?sh=6a0ce9c821d2
|
You (Yes, You) Need An Emergency Savings Account
|
You (Yes, You) Need An Emergency Savings Account
Photo: Getty
You know it’s true. You’ve heard it a thousand times. You need an emergency savings account, but somehow you’ve never quite gotten the details sorted out and set aside the money. Oh, but it’s OK, because you do have money put aside, just not formally designated as an emergency fund.
You have a pretty substantial chunk of change in your 401(k) plan, as well as an individual retirement account with money you could draw on in an emergency. Wrong. (Cue the flashing X lights and familiar sound that accompany wrong answers on a TV gameshow.)
Yes, you could use that money, but doing so would cause more problems than it solved. What with taxes, withdrawal penalties and missed opportunities, taking that money out before retirement should be on your list of possible solutions only for the most dire and enduring financial emergencies, the kind that call for a total revamping of your financial plan from the ground up.
OK, fine. You’ll just pull the money out of your business if you need extra cash. Only it’s not fine for a number of reasons. Here again, this is not something to consider for run-of-the-mill emergencies like expensive dental work or an unexpected need for a new car.
The fact is, if you don’t have a dedicated savings account for emergency use, you aren’t financially prepared for the curveballs life has a tendency to throw at us on a semiregular basis:
• Car calamities.
• Monster medical bills that don’t fall under insurance coverage.
• A job loss.
• Family situations that leave loved ones temporarily dependent on your support.
• A broken arm, leg or spirit that means you can’t work for the next few months.
Any and all of these can trigger the need to rely on savings for a while, and unfortunately, they often end up taking longer than expected to resolve. If you’ve planned ahead, you rely on your trusty emergency fund, keep a stiff upper lip and move on as quickly as possible. But without access to liquid funds earmarked for just such a rainy day, you’re looking at a messy situation where all your options amplify the inherent financial hit of the original event.
To avoid that scenario and to keep your financial advisor from becoming enraged, just go ahead and make the darn emergency savings account, using these guidelines:
1. Keep it where it is quickly and easily accessible, ready for use at any time. That means not in a brokerage account. If the market and/or your specific investments happen to be going through an awkward period, taking the money out will worsen the financial hit from the emergency itself. Instead, consider:
• A high-yield savings account is ideal, either online or at a physical bank. Be sure to verify FDIC status and make sure you’ll be able to get cash in hand within 24-72 hours should you need it.
• Certificates of deposit are another good option. Taking the money early would cost you interest but not principal, or at worst, just a tiny bit.
• Feel free to keep just enough in your regular bank to earn free checking. It’s good to have instantaneous access to at least some money, but larger balances are wasted where the interest, if any, won’t keep up with inflation.
2. Save enough to be meaningful, but not so much you’re missing out. You want enough to get through a financial crunch, but only enough for prudent planning and sound sleep. Since highly liquid savings vehicles don’t offer much in the way of growth potential, keep amounts over your target savings threshold somewhere more lucrative. When deciding how much to put aside:
• Enough to carry you through three months of unemployment is a good place to start. For young workers and single people with stable W-2 jobs, this may be all you really need.
• Figure on enough to cover six months of expenses if you’re the only earner in the family or if you’re not confident you could easily find a new job as good or better than your current gig.
• For single parents with multiple children and high earners in specialized fields where placement can take quite a while, bump up emergency savings to about 12 times your monthly salary.
To recap: You need an emergency savings account. The money should be accessible, but where it can grow at least a little bit. The amount depends on your specifics, but plan on enough to live on for 3-12 months. Do it right now, and then go tell your financial advisor so they can stop worrying.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
106a5f975679758e440295702a0b89e4
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/02/21/want-to-retire-early-follow-these-10-expert-recommended-tips/
|
Want To Retire Early? Follow These 10 Expert-Recommended Tips
|
Want To Retire Early? Follow These 10 Expert-Recommended Tips
For many years, the early 60s has been the default age range for retirement. This is an ideal time to retire for some, but many others would prefer to retire earlier. However, fears about lower social security, unexpected expenses or outliving their retirement savings can keep them from seriously considering it.
Fortunately, with careful planning, retiring early doesn’t have to be a pipe dream. Below, 10 Forbes Finance Council members share their top tips for those looking to retire a decade or two earlier than the average worker.
Members of Forbes Finance Council share tips for people who are considering early retirement. Photos courtesy of the individual members.
1. Decide what retirement looks like for you.
Retirement looks different for everyone. Sometimes retirement can be synonymous with a lifestyle change and a decrease in income, which can be much more easily handled than a no-work and no-income situation. There are so many interesting careers or jobs that people can still pursue once they are “retired” that it’s easy to find something that fits you. - Vlad Rusz, Centaur Digital Corp.
2. Find passive income opportunities.
Passive income works for you during vacation, time with family or full retirement. This doesn’t have to be from real estate or brokerage investments though. You can start any business and work your way out of the job itself. Find passive income opportunities as soon as possible, identify the timeline of how you’ll get enough cash flow without actively participating, then enjoy early retirement! - Jackie Meyer, Meyer Tax, The Concierge CPA Coach
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Research and restrict the available investment markets.
My advice is to invest your savings so that you can obtain higher returns from them. Do your research on the available investment markets out there. The choices available may be intimidating at first, but you can mitigate that fear by sticking to the countries or products you are most comfortable with and most interested in. Personally, I prefer the established stock exchanges and auction sites. - Frans Wiwanto, Flywire
4. Master your burn rate early.
Master living on a low burn rate (minimizing your personal expenses) now, when you don’t need to. If you can design a life you enjoy that does not require significant cash outlays, you’ll have the habits necessary to retire early. You’ll also have a life you enjoy, which is a major part of retirement that people forget. A good retirement is not just about not working anymore, but also enjoying your life. - Aaron Spool, Eventus Advisory Group, LLC
5. Create alternate income streams with minimal overhead and effort.
I recommend focusing on the sustainability of income with your work while having a minimal output of effort. Create other income streams that can last in perpetuity with more minimal overhead to sustain. In addition, the impact of keeping your lifestyle expenses low is critical for longevity from a habit perspective. Lifestyle creep prevents early retirement. - Meredith Moore, Artisan Financial Strategies LLC
6. Look into fixed investment vehicles.
Fixed investment vehicles—such as annuities—that provide a constant stream of income are a great source to allow an individual to retire early. Risk-averse individuals can preplan a calculated fixed income each month if managed effectively, so there is not a huge drop off in income even if they retire early. - Jonathan Moisan, Advertise Purple
7. Max out your retirement accounts.
To save for early retirement, maximizing your 401(k) and IRA contributions is a must. Americans aged 50 and up can contribute a maximum of $25,000 annually to their 401(k) and $7,000 to their IRA. If you’re saving for early retirement, you should be hitting these contribution limits every year while working to eliminate debts such as your mortgage and other outstanding loans. - Tyler Gallagher, Regal Assets
8. Downsize.
Start practicing minimalism. One example is to downsize your house before—not after—you decide to retire. Most often, your mortgage payment is the biggest item to tackle when considering your post-retirement expenses. - Wendy Nguyen, TNC CPAs
9. Save your gross income until you have enough to invest.
If I want to retire in my 40s and 50s, then I should not be investing the bulk of the money into accounts that cannot be accessed until I’m 59.5. Instead, I should be attempting to save 40% of my gross income now, accumulating at least $50,000, and then investing that money into real assets that pay passive income to me today. If I do that enough times I’ll replace my income and retire sooner. - Jerry Fetta, Wealth DynamX
10. Stay connected to the job market.
Life expectancies keep moving further and further out. If you don’t have an income plan that protects you with an inflation-adjustment strategy all the way to 120, then you are not truly safe to retire at such a young age. Plan to live longer than you think. Anticipate inflation (and potential hyperinflation). And stay connected just in case you need to go back to work. - Tim Clairmont, Clear Financial Partners
|
61b3fc841b3f3b84fa85f2fb58364e0f
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/02/24/retirement-planning-for-both-sides-of-the-mountain/
|
Retirement Planning For Both Sides Of The Mountain
|
Retirement Planning For Both Sides Of The Mountain
Photo: Getty
When someone approaching retirement comes to me, almost ready to begin living off the hard-earned savings they have accumulated over 30-plus years, I’m reminded of an intriguing factoid that the Discovery Channel never tires of sharing: More people die descending Mount Everest than on the ascent. Spending down your retirement accounts is similar in that it involves more risk than the trek up the savings mountain.
How much can you afford to pull out of retirement savings each year? It’s the financial advisor’s version of the traditional theological quandary over the number of angels that can dance on the head of a pin. And as in the pinhead conundrum, there are no hard-and-fast, universally agreed-upon answers. You will never discover the “one true answer” because the factors that influence it vary from individual to individual.
Your ideal drawdown rate hinges on a combination of needs, goals, time horizon, asset mix and market cycles. The main things I consider when structuring a sustainable drawdown plan are:
1. Guaranteed monthly income (Social Security, pensions, etc.).
2. Monthly income needed to cover expenses and maintain current lifestyle.
3. Time horizon: How long do you need the money to last? Most clients answer this with a summary of family genetics, beginning with their parents’ respective ages of death. But the reality is that with rapid advancements in medical technology, today people often live long with cancer and other previously fatal diseases. A 90-year-old is no longer a rarity, so your advisor should be modeling based on you reaching 100 unless you have a terminal diagnosis right now.
For most people, depleting retirement savings too fast means they might have to curtail spending to an undesirable degree or wind up unable to pay for necessities like housing, food and healthcare. An oft-cited rule to prevent such an outcome is limiting first-year withdrawals to 4% of the account’s total value (some advisors offer 3% to 5% as an appropriate range), and matching that dollar amount in subsequent years, adjusted for inflation. The rule assumes a diversity of asset classes and a relatively normal stock market performance over the long term. At this drawdown rate, the money could last 30 years or more, depending on the performance of the portfolio.
Your advisor should run stress tests (also known as a Monte Carlo situation) evaluating 1,000 different market conditions to gauge the probability of success, based on your projected cash flow and withdrawal needs.
But it’s more complicated than that, because the timing of withdrawals relative to market performance also plays a role. Taking withdrawals in a down market can have negative compound risk implications. It’s called sequence of withdrawal risk, and it means that if you’re lucky, you can spend more and still be fairly confident of having enough money until the end. Get unlucky with the timing, though, and you risk running out, which makes a well-formulated strategy for the drawdown imperative.
Portfolio allocation is one element of this strategy. A portion of the portfolio should be dedicated to generating the additional income necessary to maintain your preferred lifestyle. Your portfolio should also include a growth element to increase principal, so that the funds last until well after age 90.
Managing investment risk is another key to making retirement savings last. Don’t make the common mistake of assuming that extra risk automatically leads to greater returns. Excessive risk when you have a 20- to 30-year time horizon can adversely impact the portfolio. Minimizing risk too much will also deplete the portfolio, leaving you without enough principal to maintain the desired withdrawal rate.
But since market timing matters too, you need a backup plan. The period with the highest risk, known as the red zone, is a 10-year window covering five years before and five years after withdrawals begin. The investment portfolio transition shift from accumulation to the distribution phase is diametrically opposite. One year of negative returns in the market in the red zone can have the effect of negative compound interest and significantly reduce the odds of safely withdrawing money out at the original anticipated rate. Mathematically, the “sequence of returns” during this period is critical.
You’ll want to have alternatives in mind to help you make it through the red zone if the market isn’t performing well. Basically, that means you either:
1. Keep working a while longer or create another stream of income. With this additional income you won’t be as reliant on distributions from retirement accounts and won’t have to take as much out if the market tanks.
2. Figure out where you can reduce your living expenses.
Bottom line: Before you retire, it is critical that you have a long-term strategy for generating adequate retirement income no matter what the market does. Spend the years before retirement wisely, by building a portfolio that will support your future cash flow needs and determining how to supplement your retirement income temporarily, if necessary. Then you can feel confident your retirement savings will safely make the journey down the retirement mountain along with you.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
0cf6c27f4f86f7b2ee4838e46a5134d6
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/03/02/virtual-payments-poised-to-make-inroads-in-the-business-market/
|
Virtual Payments Poised To Make Inroads In The Business Market
|
Virtual Payments Poised To Make Inroads In The Business Market
Photo: Getty
Although still a relatively new technology, virtual payments systems, like virtual cards and real-time payments (RTP), have already integrated into routine consumer activity. From grocery store checkout lines to toll roads to Uber rides, these payment modalities have enabled sales in diverse industries. Beyond their novelty aspect, virtual credit cards and RTP offer genuine benefits for consumers and businesses.
Virtual cards and RTP exploded onto the scene in recent years and are poised to make even greater inroads into the payment facilitator architecture in 2020. For context, virtual cards have all the value and functionality of a physical prepaid card but can be instantly issued online via email, while RTP refers to the immediate transfer, access, settlement and reconciliation of money.
While consumers are already accustomed to virtual payment on apps like Lyft, from what I’ve seen working in the payments industry, I believe the trend of embedded payment solutions will proliferate into the wider economy as businesses recognize the benefits of adopting virtual payment platforms.
What Virtual Payments Can Mean For Front- And Back-End Operations
RTP offers faster speed in processing and clearing transactions — not just for traditional consumer point-of-sale activity but for peer-to-peer uses and settling accounts payable and back-end business finances, in general. RTP adoption presents a variety of advantages to business operations. The most obvious, consumer-focused element is maximizing productivity by expediting the actual sale process. Virtual cards and RTP streamline, simplify and accelerate individual transactions. This is particularly important for high-volume, point-of-sale businesses.
The trend toward virtual cards and RTP mirrors the broader shift toward all-digital, paperless solutions. Digital payments produce an immediate, readily indexable and searchable record of transactions that businesses can access, and this wealth of data holds immense value. Businesses and advertisers will find utility in tracking consumer activity.
One common area of difficulty I hear from businesses is the accounts payable process, which can be disjointed, costly and time-consuming. RTP can improve the supplier payments process by using virtual payments to pay invoices, providing immediate confirmation of receipt. The finance department then gets a smoother settlement and reconciliation process with a better cash flow management system.
Overcoming Tech Adoption Challenges
One challenge businesses face adapting to emerging payment architecture is a back-end obstacle. While things have improved on the consumer-facing front, enabling virtual cards and wallets for consumers remains an onerous process. The process is hardly uniform though, with enablements ranging from a series of activation codes to two-factor authentication, etc. (These steps are driven by security precautions.) Regardless, because this process is still unwieldy and difficult to navigate, it stifles the virtual card and RTP market from expanding.
Merely discussing the switch to real-time processing and virtual cards is, of course, much easier than executing it. Developing software and systems to enable virtual cards and RTP with a user-friendly interface requires a lot of work and represents a promising opportunity for fintech companies to step in and provide solutions for businesses.
Facilitating the transition as smoothly and painlessly as possible is of paramount importance. It should take the shape of a highly adaptable and responsive system — able to adapt to the changing needs of customers, clients and businesses’ fluid finances. As such, this technology should be configured to meet each business’s distinct unique payment needs.
White-labelling refers to a piece of software that is sold “unbranded” by a third party (a fintech company, in this case). White-labelling for RPT and virtual cards is easily adaptable to diverse business needs. Additionally, businesses can then brand that software as their own proprietary and connect to consumers within an integrated ecosystem.
Looking Ahead
With the rise of virtual cards and payment tools comes a need for updated regulatory standards and consumer data protection between jurisdictions. Uniform, international standards governing this emerging sector of the financial system must be adopted so consumers can be confident that sensitive financial information will be protected.
A more open-source architecture, driven by these virtual technologies, will de-emphasize the role of traditional gatekeepers in the financial system. Allowing individuals access to their own comprehensive financial data levels the playing field between customers and their financial institutions, fostering a more competitive and consumer-friendly system.
The explosion of new ideas and potential solutions is exciting, but it also brings with it the risk of bifurcating (or factionalizing) the existing regulatory regime. While this is a natural outcome of the competition of ideas in emerging fields, it is essential that comprehensive regulatory oversight develops in parallel with the fintech industry to ensure consumer protection.
In the meantime, as virtual payment systems offer a modern approach to payments, I expect more businesses will begin to embrace these technologies.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
a36f19be5fbb86468baaa0d376e178d4
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/03/10/five-reasons-you-might-need-a-revocable-living-trust/
|
Five Reasons You Might Need A Revocable Living Trust
|
Five Reasons You Might Need A Revocable Living Trust
Photo: Getty
In my experience, most people delay or avoid preparing and updating estate planning documents. That's understandable, since facing our own mortality puts us in a less warm, comfortable place than remaining in blissful denial. My wish for you, though, is that you do face your mortality and hire a specialized estate planning attorney to help prepare for the ramifications of this inescapable truth. In the estate planning and attorney world, that means creating a will or a revocable living trust.
Preparing a will is a time-honored and extremely common method of communicating your preferences for distributing assets after death. If the will says your daughter gets this, your church gets that and your son gets nothing, that's what will probably happen — but not always. Beneficiary designations on individual retirement accounts, annuity accounts and insurance policies override what the will says. In addition, community property and elective-share laws may mean a spouse receives a share of the estate — or a bigger share — even if the will disagrees. State laws vary, so it's important to understand your state's policies.
A revocable living trust, or RLT, on the other hand, is one of many types of trusts. The "living" aspect refers to the fact that the trust is created while you're still alive (as opposed to a testamentary trust). "Revocable" designates the trust as one that you, the grantor, can change as desired (unlike irrevocable trusts). You still control the assets until you die even though, technically speaking, the trust owns them.
And what about those five reasons mentioned in the title? An RLT offers several major advantages over a will:
1. Avoiding probate: A funded living trust passes to named beneficiaries without going through the probate process, even if property owned by the trust is in another state. This allows the estate to be settled quickly. But there's an important caveat: To successfully avoid probate, all relevant assets must be retitled in the trust's name, transferring ownership to the trust. Probatable assets include brokerage accounts (non-IRA), real estate, cars and privately held stock — anything with a beneficiary designation or joint title. I frequently see beautifully written RLTs, but the person never funded them or updated beneficiary designations. In that situation, you might as well have not bothered spending the time and money required to establish the trust.
2. Maintaining privacy: The terms of a trust are private, whereas wills become part of the public record. Many people don't realize that probate is a public process, and wills, just like birth certificates and pension documents, are publicly accessible. In fact, a benefit of my ancestry.com subscription has been getting to read the wills of dozens of my deceased relatives, as far back as three generations ago.
3. Ensuring assets go to intended beneficiaries: A trust prevents assets from being redirected to a surviving spouse's new partner or that partner's children by state law (or the surviving spouse's preference).
4. Increasing legal protection: Trusts are more likely to withstand legal challenges than wills are, though they are not bulletproof.
5. Costing beneficiaries less: Since trusts avoid probate, the costs of administering the estate are often significantly lower than with a will. Here again, the costs vary dramatically by state, and yours may be one where the price of probate is minimal, provided you own no other entities in other states. But that price skyrockets if there is any family "weirdness" or anyone who could potentially dispute the will upon receiving mandatory notification as a next of kin. In addition, legal fees can impact cost. Attorneys typically bill flat-fee for creating either a will or a trust. For handling probate, though, they bill by the hour. With legal fees included, the total cost of drafting and executing a will has the potential to be much greater than if you had originally structured a plan that avoids probate altogether.
If any of those advantages are important to you, there's a good chance your estate plan should include an RLT. However, that doesn't mean you're better off without a will. It is standard to accompany most RLTs with a pour-over will to address issues that a trust, by itself, cannot. These include the ability to:
• Name guardians for minor children.
• Specify who manages property owned or inherited by minor children.
• Convey specific instructions for repaying debts, taxes and other financial obligations.
So which is the winner? Both. The two are not mutually exclusive. You may not need a trust, but even if you do create one, you might also need a will to cover all your bases.
The truth is both are wonderful, and either one is far, far superior to doing nothing. Sure, letting the courts sort it out later relieves you of the responsibility for planning how your estate passes. But this "win" for you comes at a high cost to your family, who must handle everything without the benefit of knowing your wishes or the legal protections that would have accompanied either a will or a revocable living trust.
As with most financial choices, the appropriate solution depends on your unique family, situation and preferences. Talk with your financial advisor and a specialized estate attorney to weigh the pros and cons of each option in relation to your needs, and then choose accordingly. But don't stress over the decision; remember, properly preparing either or both counts as a win. Doing nothing, though? That's a guaranteed loss.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
e23efb00e95db85d7931196f46554c5b
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/03/30/is-a-529-plan-the-best-way-to-save-for-higher-education/
|
Is A 529 Plan The Best Way To Save For Higher Education?
|
Is A 529 Plan The Best Way To Save For Higher Education?
Photo: Getty
In financial planning, we sometimes talk about “one-dimensional money.” This is money that’s dedicated for a single purpose. You’re not likely to use it for any needs or wants except the one it’s originally slated for, nor would it be easy or financially wise to do so. The money is tightly bound to a specific purpose, which guides the way it is invested and the choice of investment vehicles.
The money families put aside to send children and grandchildren to college is often one-dimensional money, and that’s especially true when it is accumulated in a 529 plan. Also known as qualified tuition plans, 529 plans are tax-advantaged accounts that allow investment earnings to accumulate with tax deferred. Qualified distributions from the account are tax-free, and 529 plans come with additional federal benefits as well as state income tax deductions or credits in certain states.
These undeniable advantages, coupled with phenomenal marketing, make the 529 plan a popular way to save for higher education and, since the rules were tweaked in 2018, for primary and secondary education, as well. Plus, when you have a 529 plan you can honestly tell your in-laws that their holiday gift for the kids is going straight into their college accounts.
They’re great, those 529 plans, but parents and grandparents should not make the mistake of thinking they are the only — or even necessarily the best — way to financially prepare for college.
Many people prioritize saving for their children’s college education ahead of saving for their own retirement. It’s often seen as a matter of values, a clear black-and-white issue: “Good” parents save for college. But in the real world, that doesn’t necessarily translate to funneling all available money into a 529 plan.
You’ve probably heard someone point out that while it’s easy to take out a loan to pay for college, you can’t take out a loan to pay for retirement. It’s also true that not every kid wants to go to college, and at the risk of alarming some readers, I’ll even say that college just isn’t the right path for everyone.
What happens when your child flat-out refuses to apply or for any number of other reasons is obviously not going to make the transition to collegiate life? If you’ve been relying exclusively on a 529 plan to accumulate savings to pay for college, you now have a problem. Diverting those funds to another purpose means you’ll owe standard income tax plus a 10% penalty on the gains that had been growing tax deferred. Claimed a sweet state tax deduction during the years you’ve been saving? Don’t forget to repay that, too.
Besides the possibility that your child won’t choose college, there are other reasons to look beyond a 529. The plans are sponsored by universities and states (or state agencies) and usually have limited flexibility in terms of investment options. Choosing to save in one of these accounts may limit the growth potential of your savings.
Let me be clear: I’m not disparaging these plans or discounting their merits in the least. I’m simply suggesting that you avoid locking yourself into only one way of doing things to prepare for the costs of higher education. The reality is that you want multiple “buckets” to pay for college. A 529 plan is often a fine choice as part of a comprehensive education savings strategy.
Talk with your financial advisor, and consider multiple ways to meet the financial burden higher education typically entails. After reviewing your situation, you and your advisor can make a plan to fund college costs using a number of different techniques that might include:
• Current income.
• Taxable investment accounts.
• Cash value life insurance.
• A home equity line of credit.
• 529 account savings.
• Low-interest loans for parents and/or students.
It’s also reasonable to require students themselves to have some skin in the game. Your plan could include the expectation that your student work part time during the school year and/or contribute earnings from a summer job.
A 529 plan can be a great way to save for college. Just don’t make the mistake of thinking it’s the only way. Rather, consider it as one potentially useful tool to help you and your child financially prepare for what happens after high school.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
3a7bbf7fe247e503f807a2a2391c6b61
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/04/08/five-tips-to-boost-employee-engagement-in-the-finance-industry/
|
Five Tips To Boost Employee Engagement In The Finance Industry
|
Five Tips To Boost Employee Engagement In The Finance Industry
Photo: Getty
In today's economy, brands are tracking a slew of metrics and implementing new policies to better meet customers' needs and deliver top-notch customer service. However, many of the same companies are not putting the same emphasis on measuring and improving employee experience. This approach is faulty, as there's a direct correlation between employee engagement, customer engagement and business performance.
Highly engaged employees create a healthier overall company. According to Gallup data, the most engaged employees lead to higher profitability, sales and productivity than their less-engaged counterparts.
For years, the finance industry has heavily relied on monetary compensation for employee motivation. As a result, companies have missed opportunities to motivate people in other, more impactful ways. Here are five tips to boost your organization's performance through greater employee engagement.
Don't Mistake Retention For Engagement
Many companies will use retention as their benchmark for employee engagement. These must be viewed as two separate metrics. In terms of predicting performance, engagement is more important than retention, in my experience. A company with extremely low turnover but also low engagement will struggle. Employees may be comfortable in their roles, but they aren't exerting extra effort toward investing in their own development or the success of the organization. Retention matters, but it's dangerous to have disengaged employees disinterested in customer needs and prone to errors.
To Make It Better, You Must Measure It
To improve employee engagement, you must measure it. I've found triannual engagement surveys provide me with actionable data at the right frequency. These check-ins give leadership the opportunity to identify problems that, unaddressed, could lead to poor customer and employee experience. Survey questions explore sentiments around whether employees feel adequately supported by managers and within teams, have ample career opportunities, are receiving timely feedback and more. Every organization must determine the cadence and questions most helpful to them. Using some industry standard questions allows one additional benefit of being able to benchmark versus peers.
Provide Transparency Into Company Performance
A recent study by Gallup found the percentage of engaged workers in the U.S. — those who are highly involved, enthusiastic and committed — rose to a new high of 35% in 2019. The study also found employee engagement is determined by numerous factors, one of which was working toward a common mission or purpose. We shouldn't feel surprised employees want to feel like the work they do is making a meaningful impact on their company, but it can be easy to forget that not all employees have a holistic view of how all departments contribute to a company's overall success. Being part of a team is challenging when you can't see the scoreboard. Communications that focus on connecting the work of individuals and teams to the goals of the organization are helpful in creating a sense of purpose and driving higher engagement.
Our company's leaders are committed to keeping employees excited about our business. We have a culture of transparency and regularly report the company's progress throughout the year. We regularly showcase new products to all employees and allow our employees to test them first. Customer wins are shared beyond the sales team, so everyone understands the benefits our products bring to clients and the impact their work has on the business. We want our employees to know about all the good stuff going on within our walls, and how they impact success.
Promote Constant Communication
Communication is the root of human interaction, and good leaders must be good communicators. Employees want regular feedback and transparency into how they are performing, how they can improve and what their career potential is within an organization. Employees who feel like they work within a vacuum will begin to struggle.
Providing regular encouraging and constructive feedback is a vital skill all managers must have. Implementing career coaching opportunities, one-on-one meetings and other structured opportunities for employees to speak freely will go a long way. Leaders must be prepared to truly listen to employees and their ideas.
Create An Ownership Mentality
I find the most satisfaction in being a leader when I have an engaged team who is working toward the same goal and making positive connections with our clients. Part of creating an engaged team is empowering individuals to own their roles. Leaders should be available to help course-correct their teams when they start to stray but should be wary of micromanaging. High-performing employees crave responsibility and the opportunity to stretch within their roles.
The financial industry has been plagued by misunderstanding employee engagement due to an old-school mentality. The good news is it's not too late to fix it. Employee engagement — when done right — can be a competitive advantage that increases customer engagement, leading to more loyal customers and new revenue opportunities.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
5e2a1a1b95c337a86880cbd10e57527d
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/04/15/the-cybersecurity-gap-hidden-in-the-background/
|
The Cybersecurity Gap Hidden In The Background
|
The Cybersecurity Gap Hidden In The Background
Photo: Getty
Ring home security systems promise “Smart security here, there, everywhere,” and their products are indeed appearing all over. The company sold nearly 400,000 devices online last December, a 180% surge from the year before.
But while customers buy the tools to feel safer, they may be inadvertently introducing security vulnerabilities into their homes. In a well-documented incident, one digital intruder, claiming to be Santa Claus, terrified a Mississippi couple’s 8-year-old daughter, calling her racial slurs through the bedroom camera’s built-in speaker.
Home security is just one new source of insecurity that’s growing as the internet of things (IoT) expands. Hackers have discovered a new window of opportunity as internet-connected smart TVs, cars, appliances and wearable devices — many with limited security protections — flood into the lives of consumers and businesses who remain largely unaware of the looming threat.
But as the risks of compromised technologies rise, so do the business opportunities for mitigating them.
New Tech, New (Unseen) Threats
People’s lives are more digitally connected than ever. A couple of decades ago, an average home might have had only one or two internet-accessible computers. Now, the average U.S. household owns 11 connected devices. The arrival of 5G networks should propel that number higher.
The vulnerabilities and consequences multiply when people go to work, bringing their personal gadgets to mingle with their offices’ networked equipment. Hacking the mail clerk’s smart coffee mug might seem to pose little risk beyond a burned tongue, but intruders can exploit innocuous-seeming entry points to crack more critical systems. Criminals breached a casino’s internet-connected aquarium in 2017 to fish data from other parts of its network.
Furthermore, many of today’s IoT devices are always on, always watching and listening, in our most private spaces at home and at work. Smart devices, such as thermostats, speakers and wearables, seem to recede into the background, but their passivity belies the potential threat. Contrary to reassurances, researchers showed they could trick Amazon’s Alexa smart speakers into eavesdropping on users.
The economic costs of IoT hacks can be significant. Many culminate in what’s known as a distributed denial of service, which can leave websites and networks down for hours, if not days. Researchers have shown that the cost of IoT hacks can represent up to 13.4% of annual revenue at companies with under $5 million in revenue. At larger businesses, the cost often rises to the tens of millions. And costs can even be passed on to consumers. A 2016 hack of the KrebsOnSecurity website cost IoT device users more than $323,000 in charges for excess power and bandwidth consumption.
And when saboteurs attack next-level devices like connected medical equipment and cars, they can threaten health and safety, not just bank accounts. White-hat hackers showed they could remotely kill a Jeep on a highway in 2015, and there are only more internet-enabled cars on the road now.
Age-Old Security Bugs
Accelerating technological shifts have only exacerbated age-old security challenges. Consumers generally prioritize convenience. For all the warnings about having strong passwords and not using public Wi-Fi, people gravitate to the easiest and cheapest options.
Meanwhile, we can count on many of today’s startups to behave as startups always have — rushing products to market and racing to meet demand at the cost of inevitable product and security bugs. Backdoors are out there waiting to be uncovered by hackers. One group of researchers found they could get passwords for most off-the-shelf IoT devices they tested in less than 30 minutes.
At the same time, government regulation will always be playing catch-up. It’s reassuring to think laws will protect us, but when it comes to IoT, today’s consumers are often the guinea pigs. Legal protections (like this one enacted in California in January) are uncommon, and lack specific direction beyond requiring IoT manufacturers to equip their products with “reasonable security features.”
And, of course, criminals will always be criminals. If there’s a vulnerability with a dollar sign attached, they’ll exploit it. Hackers and criminal rings have made routers a prime target for IoT attacks, giving them access to networks and the data passing through them.
Filling The Cybersecurity Gap
All of that adds up to a serious and mounting threat, for sure. But it also translates to a serious and growing business opportunity. Cybersecurity has already built business empires, after all. BlackBerry’s impenetrable safety measures helped put its phones into the pockets of everyone who was anyone. Meanwhile, behemoths like McAfee and Symantec grew by offering ordinary people virus protection for their PCs.
Today, we’re on the cusp of a new era of cybersecurity, but it’s a little different than the one that came before. Contemporary security tools have to contend not only with unprecedented complexity and a proliferation of networked devices, but also with a new generation of users and businesses who demand the same simplicity and convenience they experience with their iPhones and apps.
Fortunately, some promising solutions have begun to emerge from both startups and established players. The Bitdefender BOX, for example, is a piece of hardware designed to protect any device connected to a user’s home network from attacks, even if it’s a toaster that can’t install its own anti-malware software. Big businesses’ networks are unfathomably complex, so companies like Darktrace use machine learning to detect suspicious movements in the currents of data that flow through an organization. Firms like NanoLock, meanwhile, provide device-level protection, fending off attacks on industrial smart meters, sensors and controllers — even if hackers have breached the network.
Despite the new threats, simple, commonsense steps are still an effective first line of defense. Installing security updates on your devices and not clicking on suspicious links will help prevent you from becoming the internet’s lowest hanging fruit. But as our lives become more networked and our smart devices start having their own smart devices, we’ll inevitably have to upgrade our safety measures. Indeed, the next digital boom may well be in one of the internet’s oldest and least sexy sectors: security.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
719618c9c5f4262d7ce94d5cc067c98d
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/04/20/self-driving-healthcare-automation-still-requires-humans-behind-the-wheel/
|
Self-Driving Healthcare: Automation Still Requires Humans Behind The Wheel
|
Self-Driving Healthcare: Automation Still Requires Humans Behind The Wheel
Photo: Getty
By now, there are few companies that are not planning for a future where automation powered by artificial intelligence and machine learning are ubiquitous in daily business. But there are still big questions to be answered as we embrace that future. One of the biggest is whether these technologies will outright replace human counterparts or augment and work alongside them. For executives, the answer will affect strategy, including hiring and managing talent. And for other team members, the answer could mean the difference between a greatly improved working experience and their positions being eliminated completely.
There are many things AI can do better and more quickly than humans — and many that it can’t. The goal is to identify which are which so that humans can apply their unique energy and intelligence in the right direction.
Current Applications — And Limitations — Of AI
I like to remind people of Tesla’s so-called self-driving vehicles. They include the disclaimer: “Autopilot is intended for use with a fully attentive driver, who has their hands on the wheel and is prepared to take over at any time.” In 2018, Tesla pulled back on promoting its “Full Self-Driving” feature. The point is that even the most sophisticated machines rely on human input and oversight, and it’s a good thing to remember as we move quickly into a world that’s increasingly automated and encounter the anxieties that go along with that change.
Automation processes usually lack a meta-view of the work they’re doing. They make things easily repeatable and automatic, but won’t really have context as to where their task fits into the bigger picture or the company at large. Only humans will be able to take those panoramic views and analyze based on the bigger picture.
At our company, we’ve seen firsthand how automation can empower better human decision-making on the financial side of the healthcare industry. For example, when medical claims are denied by an insurance company, AI can identify those denials with the highest likelihood to be overturned so that teams know which cases to prioritize.
As another example, hospitals carry the heavy administrative burden of collecting and reviewing applications for patient financial aid. But this process can be intelligently automated, proactively identifying patients who qualify for assistance and allowing hospital teams to spend their efforts on tasks that require a human touch, like communicating with patients about their options.
These examples — and there are many more — demonstrate that automation is best used to help people be more efficient and better at their jobs. And although these tools do indeed automate processes with the help of AI or ML, there must be a human in the loop for higher-level decision-making.
How To Move Forward From Here
In the short term, companies need to make sure they are thinking about and planning on making two big types of impact through advanced automation.
First, companies should leverage AI to make jobs better for employees. Employees previously bogged down by data entry or similar tasks can take on more valuable work, with the mindshare to devote to strategy and analysis, including analysis of the results produced by automation. There should always be someone keeping an eye out and seeing how the process can improve or what additional insights can be squeezed out of the new way of doing things.
Unlike AI, human brains aren’t designed to keep track of numbers in a list or perfect accuracy over tens of thousands of records; they’re designed for abstract, higher-level creative thinking and problem-solving. The primary aim of automation should be to empower more employees to do just that.
Secondly, automation should be evaluated as a profit driver that makes any organization more cost-efficient and can even open new business lines. The challenge I’m issuing is to make this a secondary consideration that builds on the improvement in workflows and task assignment above. When companies prepare for a future in which employees can be better and more fulfilled at their jobs, they will necessarily be putting the pieces in place for a more productive and profitable future.
Embrace The New Normal
It’s very possible, in the far-off future, that we’ll have levels of AI and ML that can “automate” humans completely out of some jobs. But for the foreseeable future, this simply will not and cannot happen. We should instead be thinking about how much jobs will evolve and how we’ll learn and train others to work with the unprecedented tools at our disposal.
This should be comforting for executives and employees alike. Executives should look forward to a more productive, engaged workforce that flexes more of its mental muscle and companies that run better in general. But their aim shouldn’t be to cut headcount as much as possible — that’s a losing proposition and arguably decades premature. Employees will benefit from this mindset, as well. Instead of fearing that their jobs will disappear, they should start adapting to working alongside automation to find the ways it can help them be better at their jobs and, ideally, more stimulated and satisfied. A little proactivity from both sides will go a long way. At the end of the day, a robot that can completely replace human decision-making is still solidly in the realm of science fiction.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
2a596d2f78617dfc27f0f52cb5069edc
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/04/20/weathering-the-crisis-three-helpful-tips-for-startups/?fbclid=IwAR2yYaAJ9F7WLhPlEvzsG3YkKSt5eJoGy1mFd253kfhq_4qgiOWSb-l6tlI
|
Weathering The Crisis: Three Helpful Tips For Startups
|
Weathering The Crisis: Three Helpful Tips For Startups
Photo: Getty
We’re in uncertain times as everyone across the globe adjusts to business as usual being a distant thought. It’s no surprise that the COVID-19 pandemic is having an economic impact on everything from small family-owned businesses to large global corporations. There has been much discussion on the impact of today’s new reality to travel, hospitality and healthcare. But what does this mean for startups? According to the Canadian Centre for Occupational Health and Safety, a pandemic’s total duration is likely 12 to 18 months, so businesses should plan accordingly.
Startup founders raising money are starting to worry, and for good reason. It will get worse before it will get better. Startups with at least one year in runway will see less impact if normal business resumes sometime this summer; however, those with less than six months’ runway need to get creative with their virtual fundraising efforts. It is important for companies to run lean and focus on the most essential activities needed to reach the next adjusted milestone.
What steps can startups take to weather the storm? Below are a few tips:
Reconsider your financial spending and needs.
Now is the time for startups to reconsider their financial spending and needs. What is the conversion on sales with that marketing campaign? What is your sales productivity? How much cash do you have in the bank, and how long will that last based on the current burn rate? Companies need to determine the most essential expenditures required to reach minimum milestones during this environment. The economic environment is very uncertain, so startups should not be watching for a stock market recovery as an indicator that the broader economy will get back to normal.
It might be possible to maintain your current workforce, but perhaps you need to stop hiring and ask current team members to take up other responsibilities. The management team should outline what are necessary needs and what are commodity needs. Focus on the necessary needs, and limit the commodity needs to extend your runway. For example, many software tools have valuable features to help a team with its work, yet they are often not deemed necessary expenditures. There are several free tools on the market today from companies such as HubSpot and Google that accomplish many of the same core functions as other more expensive solutions. Focus on the company’s readjusted milestones, and have a lean operation to provide as much time as possible to reach them.
Reset your stakeholders’ expectations.
Now is also the time to talk with your investors, customers and employees to adjust expectations. In the past, current investors and potential investors may have indicated a particular revenue milestone you need to reach for the next round of equity financing. Have a discussion with them, and brainstorm what is realistic given the new macroeconomic environment. If these investors cannot budge on the milestones, then find a way to extend your runway with a convertible note to give your team more time to reach those milestones. If you cannot extend your runway, many investors are likely to understand and provide a new target to go after.
It’s also good to spend extra time checking in with your customers. They may be considering how to cut costs, and you want to avoid being reduced or eliminated as a vendor. Listen to the problems they are facing because there might be a way to help during this difficult time.
Last but not least, reset expectations with your team. Individuals may be concerned about their job status and need direction from their leadership team. It’s important to convey that the company will be going into lean mode, while also emphasizing how you will do everything possible to keep the entire team intact — and that you need employees to take on more responsibilities. Overcommunicating with all of your stakeholders will be very important as you navigate a difficult environment.
Come up with an adjusted fundraising plan.
Startups will need to adjust their fundraising plans based on the new economic reality. If a startup doesn’t include an adjusted plan and cannot explain how it will take the new business environment into account, then investors will have an increasingly difficult time getting approval from their investment committee to finance that company. Many investors should still be able to participate in your financing round unless their limited partner base faces major difficulties. Show them you are not only aware of the environment, but also have a plan to navigate it and succeed. This plan should outline how you are going to market during the projected difficult next year or so, followed by how you will scale as the economy starts to recover. It will also be important to show how you expect to grow your headcount and manage cash during these times compared to how you will expand as the economy recovers. Thoughtfulness and detailed usage of funds are particularly important as you look to fundraise today.
These are just a few of the steps startups can take as they, and all of us, navigate this difficult time together.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
60b3d7ec58473a2ecef772883ccbadf6
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/04/22/four-systematic-ways-to-manage-your-debt/
|
Four Systematic Ways To Manage Your Debt
|
Four Systematic Ways To Manage Your Debt
Photo: Getty
Sometimes the finer things in life are just too tempting. Maybe it starts slowly with an overpriced coffee and a pastry every morning. Or whenever you find yourself at the mall, you think, “Why not?” Or you eat out with friends on a regular basis. Before you know it, you’re looking at your credit card bill, thinking, “How in the world did I spend this much money?”
For other people, debt doesn’t just sneak up. It grows quickly, thanks to a fancy car, an out-of-budget-home or too many luxury vacations.
And sometimes debt doesn’t have anything to do with a person’s choices. Maybe someone in their family had a costly medical emergency, or a natural disaster struck their home.
Whatever the case may be, debt is a reality that many people face. In fact, in 2018, around 300 million Americans carried debt, collectively totaling a whopping $13.21 trillion.
Thankfully, there are concrete steps you can take to mitigate — and ultimately, eliminate — your debt. If you’re staring down a seemingly endless pile of bills, here are four ways you can manage your debt and get your finances back on track.
1. Know where you stand
The first step to getting your debt under control is to have a clear picture of where your finances stand. Many people who are in debt are afraid to do the math, but unless you know the cold, hard facts, you won’t have a clear goal.
Start by making a list of all your creditors and what you owe each of them. Note the interest rates on each loan and the minimum payment you must make every month.
You should also check your credit report to make sure there aren't any errors and that you haven’t overlooked any outstanding debts.
2. Decide on a plan
When it comes to getting out from under debt, there are two schools of thought.
The first strategy is to pay extra on the loan with the highest interest rate each month until it has been paid off while making the minimum payment on the other loans. Once the first debt is gone, start paying extra on the loan with the next highest interest rate. Commit the same amount of money to loan repayment every month, even after you’ve reduced your number of loans.
The second strategy involves paying more every month on the loan with the lowest balance. As soon as that loan is paid off, take the funds you were paying to that loan and direct them — plus the minimum payment — to the next largest loan. Again, commit the same amount of money to repayment every month, even after you’ve eliminated loans.
Personally, I prefer the second strategy because it gives people a sense of empowerment and motivation to see loans quickly leave their list. No matter what, though, keep up on essential payments like your mortgage and health insurance.
3. Evaluate your monthly spending
If you’re in a tough spot, consider your spending habits. Gather your bank statements, and break all of your expenses into two categories: essentials (e.g., rent, electricity, gas, groceries) and extras (e.g., entertainment, fashion items, eating out, gifts).
How much do you spend each month, and what are you spending that money on? Are your priorities straight?
In our society, we often think we need the best phone, 250 TV channels and fancy coffee. But the reality is, we can build a content life without them. If you have been meaning to read more, for instance, then reducing or ending your TV access can save you money and redirect you to an activity you love.
There are lots of benefits to a simpler life! One benefit I’ve discovered is that I can actually cook pretty well. For some reason, I earned a reputation among my family as being a bad cook, so I didn’t try. Then I developed some food allergies, and eating out became a lot more limited. I discovered that I can make delicious food for a lot less money than eating out. I’ve actually gotten to the point where I would rather eat leftovers than go out to eat.
All that goes to say that reevaluating your spending takes a mental shift, but it can be liberating to reduce expenses that you once considered essential.
4. Adjust your payments
It may be tempting to consolidate your loans. If you do, stay away from predatory and high-interest lenders. They will only make things worse in the long run, and your stress relief will be temporary.
If you are having trouble keeping up with your payments, talk to your creditors. You may be able to reach an agreement over a more achievable loan repayment amount.
If you have equity in your home, you can consider taking out a home equity loan to pay off high-interest debt. But beware, since this can also be a potential trap if you haven’t made adjustments to your lifestyle and poor spending habits were what got you into trouble in the first place.
While you'll still have debt with the home equity loan, you will also have credit cards with zero balances, and the temptation to spend can creep in. You don’t want to be in a position where you owe on your credit cards again plus the home equity loan. I would recommend taking a home equity loan only if it’s absolutely necessary and if you have modest spending habits.
Don’t get discouraged
Debt can be a difficult situation to escape. If you’re facing multiple loans with high interest rates, it may seem that every month pulls you further and further from solvency.
Don’t get discouraged, though. It’s not always easy, but with time and a solid plan, it is possible to manage your debt. If you’re willing to evaluate your finances, stick to a repayment plan, change your spending habits and adjust your payments, you can build your way to a more secure financial future.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
67dead3ac45fe0cc9f94d9635e025f2d
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/04/14-outdated-investing-rules-you-dont-need-to-follow-anymore/
|
14 Outdated Investing 'Rules' You Don't Need To Follow Anymore
|
14 Outdated Investing 'Rules' You Don't Need To Follow Anymore
Members of Forbes Finance Council share outdated investing "rules" you should actually steer clear of. Photos courtesy of the individual members.
As the times change, so does the world of finance. Some investors are still stuck on “rules” of investing that have become obsolete, and sticking with these old adages may hurt you in the long run.
As experienced financial professionals, the members of Forbes Finance Council know the importance of keeping up with the latest trends—as well as understanding which ones no longer apply. Below, they share 14 widely believed “rules” about investing that are outdated or inaccurate, as well as what you should do instead.
1. ‘Your age dictates allocation to bonds.’
We have all heard the rule of ages—if you’re age 65, then you should have 35% in equities and 65% in fixed income. The reality is that allocation depends on a client’s cash flow needs as well as their retirement goals. With fixed income paying such low rates, why not add a high-dividend-paying utility fund or stock to create a bit more potential upside? - Richard Martin, Bluestone Wealth Partners
2. ‘Current valuation measures are all that matter.’
This isn’t to say you shouldn’t pay attention to valuation, but if investors had gotten hung up on current valuation measures they would likely never have owned great companies like Amazon or Salesforce. These have never been cheap over the last 15 years, yet they have been two of the best-performing companies over that time. A better “valuation” analysis is revenue to the “addressable market.” - Gerry Frigon, Taylor Frigon Capital Management LLC
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. ‘You can’t hold a real estate investment in an IRA.’
Actually, yes you can. Investments such as real estate, private equity, notes, precious metals and more can be held in a tax-advantaged retirement account such as an IRA. These types of plans are known as “self-directed” retirement accounts. The benefits of these plans include a hedge against stock market volatility, portfolio diversification and better control over investment returns. - Jaime Raskulinecz, Next Generation Trust Company
4. ‘Private markets are only for the ultra-wealthy.’
The landscape has changed for private market investing. Private equity, real estate, venture capital and others are now all accessible to the average investor. Ensuring your financial planner is giving you the proper options in diversifying your portfolio is essential for maximizing your savings and retirement portfolio. - Stephen Bruce, The Family Office Group, a marcus evans Company
5. ‘Don’t hold your portfolio in cash.’
Cash is a critical piece of your investment portfolio strategy. With the recent market selloff, those holding 10% to 20% of their portfolio in cash will have seen their portfolios decline less and are now in a great position to buy in the trough when the timing is right. - David Herpers, Credit One Bank
6. ‘Try to time the market.’
If you’re investing, you’ll inevitably deal with ups and downs in the market. Instead of timing the market, invest for the long term with a diversified profile and let falling stocks ride. If you invested the day before the Great Recession and then sold nothing, you’d be up 8%. Tony Robbins’ Unshakeable: Your Financial Freedom Playbook explains how to change your perspective to the long term. - Joe Camberato, National Business Capital & Services
7. ‘Always make extra mortgage payments to pay it down faster.’
One rule that may have become obsolete is paying down your mortgage quicker. With mortgage interest rates being so low there is a strong argument to not make extra payments to eliminate your mortgage quicker. Instead, one can earn a higher return over time in the market, build liquidity and better prepare for retirement. - Amir Eyal, Mylestone Plans LLC
8. ‘Draw 4% from your portfolio annually.’
The old-school rule of drawing 4% annually from your portfolio just doesn’t work anymore. In the past, 4% could easily earn you a comfortable retirement, but with the current economy, it just wouldn’t be enough. With the rise in the cost of living as well as additional fees for advisors and funds that number just won’t cut it. Instead, factor in all possible costs to reach a solid final number. - Greg Herlean, Horizon Trust
9. ‘Set it and forget it.’
I heard this frequently when I joined the professional marketplace: Add to your retirement and never look at it because it will build over time. While yes, it will build over time with continuous contributions, it is important to check at least quarterly to gain insight on where your money is and adjust if it is not providing the types of returns that you might expect. - Kelly Shores, GCubed, Inc.
10. ‘Immediate revenue proves a business’ viability.’
One common rule for early-stage investors is needing to show a level of revenue to prove business-model viability. Revenue is great—it’s second only to profit. But certain business models—especially business-to-consumer startups—require a build-up to monetization. When you start charging consumers, they change from free “users” to “clients,” which adds complexity and responsibilities. - Anderson Thees, Redpoint eventures
11. ‘Maximize tax-deferred contributions.’
Conventional wisdom holds that investors should maximize their contributions to 401(k) accounts and IRAs to capitalize on tax-deferred compounding and lower future tax rates. But holding equities in a taxable account is more tax-efficient for most investors. Keep tax-inefficient assets, such as bonds and other income-oriented investments, in tax-deferred accounts. - James Dowd, North Capital
12. ‘Plan for 75% of your current living expenses in retirement.’
It was commonly thought you had to plan investments around saving 75% of what you live off of today. Given the rise in life expectancy and overall medical costs, that rule is now more like 100%. To prepare for retirement, you should invest with added inflation and turns in the market in mind. - Jared Weitz, United Capital Source Inc.
13. ‘Diversify as much as possible.’
Diversification has long been touted as a solid investment strategy. There are many asset classes and industries that an investor can allocate capital to as part of their portfolio. However, gaining deep expertise within a very focused area and becoming an expert at that can often help you leverage opportunities within that niche for much greater returns than a balanced, diversified portfolio. - David Brim, Bright Impact
14. ‘Make financial plans based on huge ROI.’
Many investors seem to believe that their financial future depends on huge investment returns. Instead, we build financial plans that anticipate average rates of return and even market corrections. This gives our clients peace of mind about the future, even through downturns. The key to long-term success is to live within your means, save and invest wisely. - Mia Erickson, Whitnell
|
4b95146185f9faab8031868b8937704b
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/06/four-common-scams-and-how-to-avoid-them/
|
Four Common Scams And How To Avoid Them
|
Four Common Scams And How To Avoid Them
Photo: Getty
What is a scam? The generally accepted definition of a scam is a fraud involving any type of illegal transaction by a criminal that results in the victim being deprived of their funds or sensitive information. One common feature of a scam is the criminal often takes advantage of a situation that involves a heightened state of distress, panic or anxiety. This heightened state causes the victim to be more vulnerable and therefore easier to be taken advantage of.
COVID-19 is perhaps the single largest event causing anxiety for people right now. Unfortunately, criminals are already taking advantage of the situation with a host of scams. In March, Interpol announced it had arrested 121 criminals in 90 countries over scams related to COVID-19. These included the sale of fake surgical masks, substandard hand sanitizers and fake antiviral medications.
The following are some of the more common scams I have come across in my personal life and my working life, where I have performed fraud-related work for the Singapore government and at some of the world’s largest financial institutions. I’ve found that scammers use these methods to reach out to both companies and individuals, so I strongly recommend companies educate their employees about such scams and individuals educate themselves about these, as well. Companies can use a variety of methods to educate their employees, such as engaging a third-party training provider to design an e-learning anti-fraud course, hiring a professional trainer to hold a fraud briefing session, and designing and disseminating a company anti-fraud policy to all employees.
To prevent yourself or your business from falling victim, educate yourself on these four common scams and how to avoid them.
1. Charity Scams
This type of scam occurs when a criminal seeks to exploit a disaster for their own gain. It can be difficult, but not impossible, to spot such scams because legitimate and fraudulent charities often ask for donations using the same methods.
To avoid such scams, do your homework on any charity you plan to donate to. Check to see whether the charity is registered and whether it has received any complaints. Be aware that fraudulent charities often have similar names to legitimate ones. Lastly, avoid high-pressure tactics that ask you for immediate donations, especially if the request is coming from a charity that is unfamiliar to you.
2. Cyber Scams
Cyber scams occur when a criminal uses the internet to take advantage of victims. Most often, this involves the use of a realistic-looking business email or document intended to convince the victim to make a payment to the criminal. Other times, the criminal might trick the victim into providing confidential information or downloading malware onto their computer.
Be sure to carefully check the email address of any business seeking payment, because I’ve found that criminals often use email addresses that look similar to legitimate entities. If the email or document includes spelling, punctuation and grammatical errors, that is a sign it is a phishing email, in my experience. Do not click on links or open email attachments from unknown sources. One way to check the real link or email address is by hovering your mouse over the URL to see where it leads. Also be cautious of seemingly harmless social media quizzes that ask for a list of your favorite movies or otherwise mimic security questions. The answers provided could be used by scammers to access financial accounts.
3. Advance Fee Scams
This type of scam involves a victim paying an upfront fee for a product or service and then getting little or nothing in return. The fee can be called many names, such as a membership fee, an administrative fee or even a tax, in my experience. Requests may reference “found money” or “inherited money.” They can also be in the form of work-from-home job opportunities. In such instances, victims are enlisted to sell products such as cleaning supplies or weight loss products, but before they can begin selling, they are required to pay a startup fee for initial inventory and training materials.
Do your own checks to ensure the business is legitimate and enjoys a good reputation and that there are no major complaints against it. The FBI recommends being wary of any business that operates out of a post office box or requires you to sign a nondisclosure agreement that prevents you from independently verifying the reputation of someone you plan to do business with.
4. Government Agent Scams
This scam occurs when the victim receives a call from someone posing as a government agent. The criminal creates a sense of urgency by demanding money or personal information immediately so that you can comply with the law.
Be suspicious of any calls claiming to be from a government agency asking for money or information because real government agencies will never do that. You can verify the identity of the caller by asking for their name and department and then hanging up and calling the government agency’s official listed number to ask for that person. Never trust the caller ID because that information can be faked.
I hope this information helps you and your employees stay safe!
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
6b124d76c9d05b135c88d6a24a46b50f
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/07/why-life-settlements-are-becoming-a-mainstream-financial-option/
|
Why Life Settlements Are Becoming A Mainstream Financial Option
|
Why Life Settlements Are Becoming A Mainstream Financial Option
Photo: Getty
Americans are living longer than ever before. This is great news for those who can afford it, but bad news if you’re a baby boomer facing mounting debt and dwindling savings.
The Stanford Center for Longevity reports that baby boomers hold less wealth, carry more debt and will face greater expenses than retirees a decade older than them. And considering that there are more than 71.5 million baby boomers living in the U.S., the number of individuals who could run out of money in old age is staggering. So, what options do boomers have?
An Option Unknown To Many
Through my 22 years in the insurance industry, I’ve found that most people are unaware of an option available to life insurance policy owners. Individuals who own life insurance can sell their policy to reclaim equity and provide funding for their golden years. A life settlement, as it’s known, can help cover medical expenses, long-term care or any financial expenses faced by the policyowner. But unfortunately, most policies lapse or are surrendered without the owner benefiting.
According to a 2018 study by investment management firm Conning, $200 billion worth of life insurance will lapse or be surrendered each year through 2027 — all of which could qualify for a life settlement and be pocketed by the policyowner. And, according to research from the London Business School, a life settlement pays policyowners an average of over four times the policy’s cash surrender value.
Let’s also consider the following statistic: 88% of all universal life policies that are issued are lapsed or surrendered — without payment of a death benefit — because policyholders no longer want or need their policies, or they can no longer afford them. That’s where life settlements can play a pivotal role.
Why Are Life Settlements Becoming A Mainstream Financial Option?
Besides the details above, the following explains why life settlements are becoming a mainstream financial option for retirees:
• The pandemic’s impact on jobs and retirement accounts: The recent COVID-19 pandemic has hit retirement accounts hard and caused millions to lose their jobs. Many of these workers are seniors who have had to continue working due to the senior retirement gap. Life settlements can be a source of urgently needed funds.
• The new, higher estate tax exemption: In 2017, the estate tax exemption increased to $5.5 million. In 2018, it skyrocketed to $11.18 million for singles and $22.4 million for married couples. This means policyowners who bought life insurance to pay estate taxes might no longer need the policies because they no longer have an estate tax issue.
• COI increases by carriers: Because interest rates remain at historic lows, carriers are unable to make money the way they used to from investments. To make up for it, many carriers have increased their cost of insurance (COI) charges to customers. An option for policyowners to avoid increased COI charges in their premiums is to sell their policies.
• Comfortable regulatory environment: 43 states and Puerto Rico have life settlement laws that provide substantial consumer protections in the sale of a life insurance policy. Nine states require carriers to disclose that there are alternatives to the lapse or surrender of a life insurance policy when a policy is in jeopardy of lapsing, which includes the life settlement option. Additionally, in 2019, the National Conference of Insurance Legislators reaffirmed its commitment to making sure policyholders were informed of life settlement as an option. Even the National Association of Insurance Commissioners, the watchdog of the life insurance industry, has endorsed life settlements as a way for seniors to finance their long-term care costs and other expenses.
• Baby boomers holding large amounts of life insurance: About 60% of Americans were covered by some type of life insurance in 2018. The value of total life insurance coverage in the U.S. was roughly $19.6 trillion at the end of 2018.
What To Consider When Pursuing A Life Settlement
The biggest thing to consider when determining if selling your policy is right for you is whether you need the coverage. If someone needs their life insurance coverage and can afford it, they shouldn’t sell it. Life settlements are for people who either no longer want or need their coverage or simply cannot afford it any longer.
Another important thing sellers should be aware of is that when you search for a life settlement company, there are brokers, and there are buyers. It can be hard to tell the difference. Often, you will need to ask the company which they are. A buyer is self-explanatory, while a broker is a company that will find you an offer for a fee.
You should also research the background of any company you’re considering working with. A life settlement is a lifelong transaction, so be sure you have checked that company’s legal and regulatory history. Are they a member of the Better Business Bureau with an A+ rating?
An important consideration when going the buyer route is whether they are an institutional buyer. Are they using institutional money from a large life settlement fund with hundreds of other policies in the portfolio? You don’t want a private investor owning a policy on you or your loved one.
The fact that many boomers and seniors will experience financial hardship without knowing such an option is available to them is heartbreaking to say the least. Life settlements represent a safe option to retirees who need money.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
9efd00e1202c70dd1323a7a22aea785e
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/21/the-forecast-for-silver-in-2020-2021/?sh=5f5aaabc5cac
|
The Forecast For Silver In 2020-2021
|
The Forecast For Silver In 2020-2021
Photo: Getty
This has been a tumultuous year for investors, with Brexit, negative bond yields, a global trade war, an oil price crash and, of course, a worldwide pandemic that’s ushered in what’s expected to be the worst recession since the Great Depression. The question, then, is whether our money can be safely invested anywhere.
Fortunately, many experts are bullish about precious metals. Although the price of gold has risen roughly $400 per ounce in the past year, some analysts suggest that silver may be the better buy in the medium- and long-term.
As the CEO and founder of an online alternative investment brokerage, I’m constantly keeping my finger on the pulse of what precious metals experts forecast for the years ahead. In this article, I’ll take a closer look at the silver forecast for 2020 and 2021 to give investors an idea of what they can expect.
How Has Silver Fared So Far In 2020?
Let’s first assess the recent performance of silver bullion during this time of uncertainty. Although the price of silver has fallen since the outbreak of the novel coronavirus, its value has held considerably well compared to the U.S. stock market. During the worst of the stock sell-off in mid-March, May silver futures dropped $0.48 to roughly $12.34 per ounce, according to kitco.com, while the S&P 500 had fallen 27% year to date on March 18.
Virtually every asset price fell in March due to the “sell what you can” mentality many investors held during this frantic period of uncertainty driven by the coronavirus and an oil price war. However, allocating a portion of your portfolio to silver bullion would have softened the blow caused by the coronavirus sell-off.
Is Silver Susceptible To Price Suppression?
It’s worth noting neither the U.S. federal government nor the Federal Reserve system can assert significant control over the price of silver. In 2019, the U.S. accounted for an estimated 3.6% of global silver production (980 metric tons), compared to Mexico and Peru, which produced 6,300 and 3,800 metric tons, respectively. Therefore, the price of silver is ultimately beholden to global market forces rather than domestic price manipulation.
Silver And Industry
Silver is a metal with many industrial applications. In 2018, silver was heavily utilized for industrial manufacturing — in particular, for use in photovoltaic solar panels, brazing alloys and solders, electronics and ethylene oxide. This figure doesn’t include silver used in the production of jewelry, which required another 200 million-plus ounces that year.
What’s particularly noteworthy about silver’s industrial usage is that it’s prominent in the production of solar panels and batteries, which bodes well for the metal’s long-term price. The worldwide market for solar energy was expected to rise in value from $52 billion in 2018 to $223 billion by 2026.
Key Factors That Could Influence The Price Of Silver In The Near Term
In an article forecasting the price of silver in 2020, Capital.com’s Valerie Medleva mentioned that silver tends to perform poorly when the U.S. dollar is strong. The article went on to note that in Q4 2018, the price of silver fell 14% when the U.S. dollar performed well.
Although the U.S. dollar is currently strong, the Fed has recently cut interest rates to effectively zero, which could weaken the dollar, so it remains to be seen how this will impact the price of silver through the year. A strong dollar generally signals a weak silver price, and though there are exceptions, such as we saw in 2018, high interest rates tend to mean higher silver prices. In other words, if the dollar weakens, we could have two competing forces pushing the price of silver up and down simultaneously.
Regarding supply, a January 2020 report by Scotiabank determined the global supply of silver is “fundamentally oversupplied” but remains attractive to investors as a gold proxy. The authors note that silver can play an important role as a currency hedge, and upside growth is expected due to modest increased industrial demand. Overall, the report is mixed about silver prices for 2020, estimating possible outcomes of $15-$23 per ounce, depending on gold performance and demand drivers. The authors estimated that $17.50-$21 per ounce is the fair, market-aligned range for silver in the year ahead.
And according to technical analysts at FX Empire, silver is trending to the upside as price pullbacks throughout April have been met with quick buys from investors looking to fill their pockets with the white metal. They note a critical resistance point at $15.50 per ounce. If silver settles above that mark, that will open the path for it stabilizing around the $16.50 level seen before the crisis.
The Takeaway: A Worthwhile Hold But Not Without Risk
The general consensus among market watchers, researchers and precious metals experts is that the long-term forecast for silver is positive. Although no asset is without downside risk, the case for silver is supported by heavy industrial use as well as its strategic importance as a currency hedge during times of uncertainty. However, the strength of the dollar will play an important role in silver’s performance.
In short, silver is an alternative investment that’s a relatively safe option in a highly volatile market. Many analysts are optimistic about silver prices in the short and medium term. Regardless of how silver performs in the months ahead, the metal remains a strategic hold for many investors looking to minimize risk, diversify their portfolio and safeguard their wealth during times of heightened volatility.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
f3fae59ffc562dfecadcd2097e77edea
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/27/four-reasons-disability-insurance-might-belong-in-your-financial-plan/
|
Four Reasons Disability Insurance Might Belong In Your Financial Plan
|
Four Reasons Disability Insurance Might Belong In Your Financial Plan
Photo: Getty
Disability insurance protects your most valuable asset — the ability to earn an income. If you experience an injury or illness that prevents you from working, your disability insurance policy will replace a percentage of your earnings while you recover.
Although disability insurance is vital to financial health, as someone in the insurance industry I’ve found that it is often overlooked due to misconceptions about how it works and the likelihood of needing to file a claim. Here are four reasons for considering disability insurance in your financial plan.
Unexpected disabilities are more common than many people think.
The chances of becoming disabled are higher than most people realize. According to the Social Security Administration, over a quarter of today’s 20-year-olds will experience a disabling injury or illness before they reach normal retirement age. In fact, you are more likely to become disabled than you are to die at any point during your working career.
What constitutes a disabling event is also commonly misunderstood. Serious illnesses, such as cancer and heart disease, and musculoskeletal disorders, such as arthritis and back pain, account for the vast majority of long-term disability claims. Meanwhile, injuries stemming from accidents make up only a small percentage.
Disability insurance allows you to prepare for the unexpected now by protecting your future income. By putting a policy in place when you are young and healthy, you will also be able to lock in lower rates.
Financial obligations don’t disappear.
Financial obligations come in all shapes and sizes. But what happens to those financial obligations when you are no longer able to fulfill them?
Homeownership is a perfect example. In most cases, buying a home will require taking out a mortgage loan for financing. This is a major financial obligation that requires a steady stream of income to fulfill.
Even the best health insurance coverage will not make up for the income you lose while you are unable to work. Workers’ compensation only applies to accidents on the job. If you’re lucky, paid sick leave and your emergency fund savings will be able to provide some relief, but likely not for long.
Individual long-term disability insurance can keep you afloat financially for the length of the benefit period on your policy (anywhere from two years up until retirement).
Your family most likely relies on you.
When it comes time to start a family of your own, there are a number of serious financial decisions you need to make. This includes preparing for what could go wrong.
For many, life insurance is the first thing that comes to mind. You want to be able to protect and provide for your loved ones if you pass away. It makes perfect sense when you consider that 70% of working Americans would experience financial hardship within a month of losing their paycheck. The loss of any income can be devastating, but especially if it’s the primary breadwinner’s.
The reality is that disability insurance belongs in a financial plan just as much as life insurance does. It’s important to note, though, that one is not a substitute for the other. Together, life and disability insurance can provide you and your family greater financial peace of mind.
Disability coverage through work is often insufficient.
One way to get disability insurance coverage is through an employer-sponsored group plan. While group coverage is inexpensive and nice to have, it’s rarely enough by itself.
Group disability insurance plans typically place a cap on benefits. This can be problematic for high-income earners because benefits are cut off at a certain dollar amount. Group disability coverage uses your base salary, which means it does not account for commissions or bonuses earned, and benefits are taxed. If you leave your employer, you lose your coverage. Even if you stay, your employer can decide to cancel the plan.
Meanwhile, individual disability insurance allows you to select a higher benefit amount based on your total net income. Premiums are paid with after-tax dollars, so any benefits you receive will not be taxed.
Who doesn’t need individual disability coverage?
For many working professionals, an individual disability insurance policy can serve as a viable financial safety net. However, just because you earn an income doesn’t mean you need to have individual coverage.
You may be able to get by without individual disability insurance if the group plan offered by your employer covers at least 60% of your monthly income. Group coverage has its limitations, but it may be sufficient in some cases.
Those who have enough emergency and retirement savings to weather a prolonged disability can likely do without an individual plan, as well. It just depends on how long you could last without being able to earn a paycheck.
If you earn an income but do not rely on it to meet your financial needs, there’s a good chance you can skip buying a policy, too. In that case, it’s better for the primary breadwinner of the household to put a plan in place.
Final thoughts
Whether you are making a career change, becoming a homeowner or starting a family, disability can happen to anyone at any time. Fortunately, disability insurance is designed to provide financial protection against injuries and illnesses throughout your working years. These four reasons demonstrate why it’s important to consider disability insurance in your financial plan.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
c3e5b535db26e33e199ef4845276c6a7
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/27/how-to-stay-active-in-retirement-regardless-of-your-nest-eggs-size/
|
How To Stay Active In Retirement Regardless Of Your Nest Egg's Size
|
How To Stay Active In Retirement Regardless Of Your Nest Egg's Size
Photo: Getty
Planning for retirement can be challenging, but it's also an opportunity to build a retirement plan that can ensure you’re comfortable, secure and able to have fun. While the planning process starts with your financial goals and how much money you’ve saved, it also includes planning for your happiness and health. Retirement isn’t just about having enough saved; it’s also about thinking how your spending can yield the lifestyle you want.
Retirement should be the time of your life to do exactly what you want to do. So it’s important to be proactive about choosing activities you like that suit your financial situation rather than letting others dictate what your days will look like. Regardless of how much money is in your nest egg, there are plenty of fulfilling activities you can plan to do as you map out your retirement.
Pursue Healthy Habits
While retirement provides, for many, the long-awaited opportunity to rest and have some peace, it is also important to stay active for the benefit of your short- and long-term health. Spending time participating in a physical activity you enjoy can make a big difference in the quality of your retirement. According to the U.S. Department of Health and Human Service's Physical Activity Guidelines for Americans, adults 65 and older should aim for at least two and a half hours of moderate-intensity physical activity a week, or 75 to 150 minutes of vigorous-intensity activity to get extensive health benefits.
The good news is pursuing healthy activities can be free. For example, if you love the outdoors, then find no-cost ways, such as walking in the park, to build that into your schedule.
Invest In A New Hobby
Retirement is the perfect time to learn how to play a new instrument, start taking care of your garden or take art lessons. For many people, retirement means leaving the workforce, but it doesn't have to mean you stop investing your time in projects you are interested in. Or, it could be the time to discover a new passion. Studies have found that engaging in hobbies later in life is linked to decreased mortality risk.
And while the cost of starting new hobbies varies wildly, depending on which activity you choose, you can tailor your pursuits to how much money you'll have available to spend on them. For example, if you have $300 set aside, you could use it to create a flower garden at home or purchase art supplies.
Start A New Business
Guidant Financial's 2020 Small Business Trends For Baby Boomers survey of more than 3,100 small-business and franchise owners uncovered some surprising insights. It turns out Boomers make up 41% of small-business owners or franchise owners. Spending time developing a new business or project may feel odd or out of reach post-retirement, but it can be a good use for all of your experience and wisdom.
If you're considering starting a business in retirement, you'll want to evaluate business startup costs with a business plan draft as part of your overall retirement planning. By estimating potential expenses, you can get an idea of how much money you'll need to save.
Go Back To School
School isn’t just for kids and young adults. There are several common reasons people 50 and older go back to studying, such as searching for a second-chapter career, staying competitive in the workforce and meeting a long-held goal. Taking a course or going back to university is a great option for those wanting to stay mentally active.
When considering the potential costs, note that many universities offer specialized payment plans for older adult students, as well as discounts depending on how extensive the course offering is. With online courses more prevalent than ever, learning more about one of your favorite subjects can be affordable. Annual memberships to popular online learning platforms can cost less than $400.
Find A New Home In An Active Community
If you’ve built a comfortable nest egg, how about flying the coop? While some people shy away from the possibility of retirement communities due to the trite idea of being at an “old people’s home,” many active retirement communities are actually luxurious options for retirees Some communities offer upscale architecture, resort amenities and impressive landscapes. There are luxury retirement communities throughout the country for every taste, from traditional Florida condos to villas nestled at the foot of mountains in the Southwest. Active retirement communities often include state-of-the-art fitness centers and golf courses.
Retiring in style can certainly be more expensive than staying at home. With luxe retreats varying in price, you'll want to evaluate the costs carefully prior to making the move.
Stay Active
Retirement doesn’t mean that your life has to hit a pause. Not only does staying active in retirement ensure you enjoy it to the fullest, but it can also lead to the discovery of exciting new hobbies and activities. There are plenty of options for staying active in retirement, regardless of how much money you have socked away. But planning for your retirement isn’t solely focused on your ideal financial situation — it’s equally important to think about the lifestyle you want to live.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
97f7ccffe05f608c0dbe23434b727706
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/29/evaluating-real-estate-investments-through-a-post-pandemic-lens/
|
Evaluating Real Estate Investments Through A Post-Pandemic Lens
|
Evaluating Real Estate Investments Through A Post-Pandemic Lens
Photo: Getty
The COVID-19 pandemic is having a transformative impact on commercial real estate (CRE) markets. The crisis has brought to the fore longer-term questions about how social distancing measures will change the way people live, work and play.
As daily life itself alters, so too have the lenses that both lenders and investors use to evaluate commercial real estate’s functionality and ultimate viability. From multifamily and retail to office and industrial, all asset classes are being scrutinized from previously unconsidered angles.
With more than 30 years of experience in commercial real estate finance, I have financed deals across all property types, from specialty properties such as self-storage and parking to office, industrial, hotel, retail and multifamily. Throughout my career, I have navigated multiple recessions and understand that to come out ahead when facing challenging times, you must be adaptable, open-minded and tenacious.
While it is still impossible to predict precise outcomes of this pandemic, early evidence points to the following as key considerations for commercial real estate professionals looking to navigate post-pandemic waters:
1. Retailers will face an accelerated e-commerce revolution.
Seniors and others who aren’t digital natives are now growing accustomed to shopping for groceries and other goods online, with COVID-19 prompting a dramatic shift from physical to digital shopping. According to Salesforce data, in the first quarter of this year, e-commerce revenue grew 20%, compared with 12% in Q1 2019.
It’s safe to say the brick-to-click revolution is here to stay. Even the previously booming experiential retail sector will need to address “new normal” concerns about sanitation and disease transmission. Given all these challenges collectively, I predict that shopping center owners will need to show lenders how they expect to drive revenue.
2. Apartment owners may not see rent growth as expected.
Average apartment rents are dropping across the U.S. According to the National Real Estate Investor, average rent in the U.S. as of March 26, 2020 was down by 0.23% compared with the week before — a figure that might seem low but runs counter to “business as usual” trends. Typically, at that time, rents would have been growing by as much as 0.15% per week.
Longer term, it’s possible that demand for rental properties could increase as single-family homeowners feel pressure to downsize. At the same time, however, new worries over the potential for disease to spread in crowded, big-city buildings could have repercussions on housing decisions.
Moody’s Analytics points out the potential for systemic, post-pandemic flight from urban to suburban areas, and to rising interest in larger apartments. After all, if working and schooling from home continues, it’s easy to envision many paying a premium for more space.
3. Industrial real estate will reflect supply chain disruption.
The World Trade Organization has predicted that global trade will fall by 13%-32% in 2020, surely influencing industrial real estate. On the other hand, lenders will need to consider the growing influence of accelerating e-commerce trends on warehouse demand, particularly for last-mile urban locations.
In a post-pandemic world, U.S. business leaders may choose to shift manufacturing stateside, to diversify supply chains overseas, or both. Regardless, dynamics will shift for factories, ports and infrastructure.
4. In offices, evolution is key to winning financing.
Will COVID-19 mean more businesses shift to flexible models in the future? If so, will they then lease smaller offices? According to a recent Gartner survey, 74% of CFOs plan to move at least 5% of their on-site workforce to remote positions permanently after COVID-19. Even more dramatically, nearly a quarter intend to move at least 20% of on-site employees to remote positions permanently, too.
Still, smaller footprints aren’t a foregone conclusion. Some workplace experts are asking whether dense, open office environments will still be considered desirable after the pandemic. They’re also wondering whether social distancing rules today will only make in-person engagement more valuable. One thing is for sure: Traditional formulas for calculating office space needs will continue to evolve.
5. Self-storage could be a bright spot in post-pandemic lending.
So far, self-storage is proving more resilient than other classes during the COVID-19 crash. National Real Estate Investor reporting shows that in March, demand for these properties was higher than usual, with some activity driven by college students vacating campus housing. Although move-ins have slowed in April, move-outs have also slowed, netting higher occupancy levels in general.
6. Hospitality has been hit hard, but Americans are eager to travel again.
Along with retail, hotels are one of the hardest-hit asset classes — but there are nuances. In the U.S., hotels have lost upward of $23 billion in room revenue since mid-February and are expected to lose more than $400 million a day in room revenue, according to the American Hotel and Lodging Association at time of writing.
It may be encouraging that Morningstar anticipates long-term recovery will help balance out current revenue declines. Post-pandemic, I predict that lenders may look more favorably on financing applications for properties that proactively plan for reserves to enable continued payment of their mortgages should there be another crisis in the future.
As a global community, we’re still working to understand this new normal. We do know, however, that investors must think beyond how a property has traditionally been used and envision how space might be repurposed in the future. This will take not only a hyperlocal understanding of markets, but also a deep knowledge of macro trends. While no asset class will be unmarked by this crisis, it is clear that the future belongs to those who make plans today.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
cde5511aef2058a9e910b3d2f010b681
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/05/29/the-impact-of-the-coronavirus-on-small-business/
|
The Impact Of The Coronavirus On Small Business
|
The Impact Of The Coronavirus On Small Business
Photo: Getty
As a small business owner, I can tell you with total transparency and certainty that small businesses have been absolutely devastated by the coronavirus.
Not only has COVID-19 ripped right through my own small business, but friends and entrepreneurs in my local area, as well as the ones that I’ve connected with online throughout the years, are all reporting the same thing: record-low sales, record-high layoffs and a six-month forecast that is anything but certain.
The economic impact the coronavirus has had on small businesses has sent ripples through my community and my personal life. And truth be told, I’m not quite sure when or if things will get back to normal.
Almost Instant Impact
The beauty of running a small business is that you’re able to stay agile and pivot almost on demand as the market changes. I thought for sure this would give me and my fellow small business entrepreneurs an advantage when news of the coronavirus first started to bubble up to the surface.
Unfortunately, on the flip side of things, because so many small businesses are lean and so many are bootstrapped, it doesn’t take much disruption to normal day-to-day operations to feel that squeeze — especially on our bank accounts.
Small businesses certainly felt the impact of coronavirus first and continue to feel its impact disproportionately. Without the resources, the almost bottomless budgets and a war chest of cash on hand, as well as available assets that larger businesses have to get through these uncertain times, the future of almost all small businesses is up in the air.
Far Fewer Sales Coming In
After surveying 1,500 of its small business owners throughout the U.S., Goldman Sachs reported that approximately 75% said they might not be able to exist in three months because of the drop off in sales.
Think about that for a second. Think about what your day-to-day life would be like if 75% of the small businesses that you interact with on a "normal" daily basis just didn’t exist. We are talking about your favorite restaurants, your favorite shops and Main Street businesses in general. Independent businesses in particular are in real danger. All of them are at a risk of closing up shop permanently within 90 days if we aren’t able to turn things around in a hurry.
Everybody knows that the economy is getting squeezed right now because of the coronavirus. The government has initiated a couple of interesting programs to help give relief to small businesses and entrepreneurs, as well as employees directly, but how long can we prop up the economy with these kinds of measures?
Thriving During The Pandemic
Right out of the gate, the first thing you want to do as a small business owner in the midst of this pandemic is to find a way to be consistent with your offers. As much as possible, normalize doing business just the way you always have. Your customers will feel a lot more comfortable and confident in businesses that aren’t making radical changes to their core business model for offerings.
Secondly, you need to stabilize your cash flow situation as soon as possible. Traditional and nontraditional lenders have been working hard to help small business owners, many of them by facilitating Paycheck Protection Program lending through the CARES Act passed by Congress a few weeks ago.
Thirdly, it’s critical that you stay as flexible as possible as a small business owner going forward into this “new normal.” The economy is going to reopen — that much is guaranteed — but the speed at which you're able to grow, build and expand will come down to your ability to remain fluid in how you serve your market and your customers.
The ability to assess your customers' confidence levels, their willingness to spend on the products and services you offer, and the kinds of offers that they respond to will determine your odds of success.
This is a great opportunity for entrepreneurs to start focusing on building the business their customers most want to work with as opposed to building the business entrepreneurs always wanted to create. More often than not, those two goals are misaligned, and I can tell you with certainty that building a customer-centric business is crucial, especially now.
A Future That Is Anything But Certain
The only thing I know for certain is that the future is anything but guaranteed for my small business and businesses just like mine.
This invisible enemy has brought our global economy to its knees in a way no one could have ever expected or anticipated. We are living in a very odd time right now, with no vaccine and no treatment in sight, but we have to find a way to rebuild, reestablish and reignite the world of small business — the driver of our American economy —while keeping people safe, healthy and protected.
I don’t know what my business will look like at the end of the month, let alone in three months or at the end of the year. I’m not even sure if we will last that long. The only thing I know for certain is that I’m going to do everything I can to build and grow my business, and to help and serve my customers and clients the best I can while I am able to.
And then, when the dust finally settles and we have beat back the coronavirus pandemic that’s crippling Main Streets all over this great country, I’ll be there do everything I can to speed up our recovery on our path back normalcy.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
059af2eccc13c3478659b9616f0c141c
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/06/03/understand-history-before-purchasing-your-next-mutual-fund/
|
Understand History Before Purchasing Your Next Mutual Fund
|
Understand History Before Purchasing Your Next Mutual Fund
Photo: Getty
There are many variables that investors analyze when either buying or selling assets. One popular technique used to analyze stock mutual funds and exchange-traded funds (ETFs) includes analyzing past performance and using this information as the catalyst to either buy or sell. Generally, investors tend to buy funds that have recently had a strong performance and sell funds that have recently experienced poor performance. At first glance, this technique intuitively makes sense. However, a more in-depth look will illustrate how this may not always work as intended.
To understand the dangers associated with using past performance to drive your investment decisions, it is important to understand some basics surrounding mutual funds and ETFs. A few common classifications for stock funds include U.S. vs. international, large vs. small, and growth vs. value. For simplicity, this article will focus on U.S. stocks that are either growth- or value-oriented.
There is no one definition of what constitutes a growth stock versus a value stock. Generally, growth stocks are thought to have greater future growth potential. In contrast, value stocks are thought to be below their fair market value, making them favorably priced relative to what they are actually worth. A common ratio used to classify growth and value stocks is called the price-to-book ratio, which is calculated by dividing a stock’s price by its book value per share. Generally, stocks that have higher price-to-book ratios are classified as growth stocks, while stocks with lower price-to-book ratios are classified as value stocks.
Nobel laureate Eugene Fama and distinguished professor of finance at Dartmouth College Kenneth French have conducted significant historical research on both growth and value stocks. Part of their research has included tracking the performance of these two categories through filtering stocks by their price-to-book ratios. This filtering led to the creation of the Fama/French US Value Research Index and the Fama/French US Growth Research Index.
Dimensional Fund Advisors analyzed data since 1928 regarding the 10-year performance of growth versus value stocks using the growth and value indices created by Fama and French. Their analysis showed a few interesting themes:
• Value stocks have outperformed growth stocks in 82.5% of the 10-year time frames.
• Growth stocks have been outperforming value stocks over recent 10-year time frames.
• Historically, when growth stocks have outperformed value stocks over 10-year time frames, they have underperformed value stocks by a large margin in the following 10 years.
Since 1928, there have been 14 10-year time horizons where growth stocks have outperformed value stocks. Of these 14, there are six that have subsequent 10-year time horizons and eight that do not. This could be attributed to the fact that these time horizons happened in the recent past, and not enough time has passed yet for them to cover a full 10 years. Among the six time horizons with subsequent 10-year time horizons, value stocks have averaged 8.49% better per year in the subsequent 10 years when compared with growth stocks. Additionally, there have never been two consecutive 10-year time frames where growth stocks have outperformed value stocks.
The historical performance of growth versus value stocks is significant for multiple reasons. First, growth stocks have been outperforming value stocks in the most recent 10-year time horizons, which could ultimately lead to future underperformance if history repeats itself. Second, if investors are choosing to purchase mutual funds based on past performance, it’s important to understand the root reason for the historically strong performance. If the root cause of strong past performance can be attributed to a large percentage of the fund being allocated to growth stocks and it still holds a large percentage in growth stocks, this could cause underperformance of the fund if history repeats itself. Finally, there is a growing movement of investors and advisors shifting money into index funds and ETFs. Many of these funds have a larger percentage in growth stocks when compared with value stocks due to the rules on how they are managed.
Understanding the relationship between performance and category allocation is important when selecting funds. This relationship is also important to analyze when constructing a portfolio of several funds. If proper balance is not maintained within your portfolio, you could be unintentionally increasing risk, while also reducing future returns. This article focuses on growth stocks, and due to the strong performance of this category in recent years, this problem will likely rear its head once again in the future.
The author of this article does not provide legal or tax advice. Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Advisory Services offered through Bernicke Wealth Management, Ltd., an SEC registered investment adviser. Bernicke is not affiliated with Triad Advisors, LLC. Registration does not imply a certain level of skill or training.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
419aaa71f00fbadc599bd49db2ad84ce
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/06/16/understanding-what-asset-allocation-really-means/
|
Understanding What Asset Allocation Really Means
|
Understanding What Asset Allocation Really Means
Founder and President of Luken Investment Analytics, a quantitative research and third-party asset management firm based in Franklin, TN.
Though asset allocation and diversification seem like straightforward enough terms, the public often confuses them. Part of the reason stems from what has become the commonly accepted definition of asset allocation: a strategy that seeks to balance individual risk and reward based on a range of variables, including an investor's age, time horizon and goals — which is how Investopedia describes it.
Many investors see the word "balance" and assume that asset allocation automatically leads to diversification. That could be true, but not always.
A Regular Joe
To demonstrate, consider a simple example. Imagine a single man in his 30s who owns a catering business. Let's call him Joe.
Though Joe is far from wealthy, he does more than OK financially. His personal balance sheet is healthy and straightforward: He owns a home with a $250,000 mortgage, owns an SUV and has $100,000 in a savings account.
One day, though, Joe wakes up and decides he's ready to invest. He's intrigued by cryptocurrencies and believes electric cars are the wave of the future. So, he takes the $100,000 he's saved up and unloads it all into bitcoin and shares of Tesla, devoting $50,000 to each.
MORE FOR YOUBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekTax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021Democrats Now Planning For New Stimulus Bill By Mid-March—Here’s What’s Holding It Up
This is obviously reckless, but in Joe's mind, this asset allocation strategy (if you want to call it that) has balance because he hasn't, as the saying goes, put all his eggs into one basket. He figures, what's the worst that could happen?
While this is undoubtedly an extreme example, the point is that when many people hear "asset allocation," they think diversification. But asset allocation is how you are diversified, not that you are diversified — and it certainly doesn't mean you are managing risk effectively.
Granted, most investors will never put themselves in a position like Joe's. Yet without a full appreciation of what asset allocation means, they could miss out on the opportunity for gains and experience avoidable losses, which over time can have a profound affect on the value of their portfolio.
The Elimination Effect
Very often, investors — not to mention many financial advisors — are laser-focused on what they are invested in. Just as important: What they are not.
Here's why. On Feb. 19, the S&P 500 reached an all-time high, finishing the day up 23% from a year earlier. That's a great return, and since millions of investors have heavy exposure to mutual funds tracking the S&P, complaints were few and far between among that large group.
But consider that during the same span, energy — one of the 11 sectors that make up the S&P — was down 15%. Anyone who had eliminated this asset class from their portfolio over that period would have done even better.
In other words, "how" they diversified would have improved what were already solid returns. Naturally, it works the other way, too.
In the wake of the COVID-19 pandemic, the S&P has experienced some wild twists and turns, at one point plunging 34% in a month's time, only to rebound sharply in the weeks that followed.
However, that's primarily due to the resilience of the tech sector, with the likes of Facebook, Amazon, Apple, Alphabet and Microsoft faring far better than most. By contrast, industrials, materials, energy and financials have suffered terribly. Anyone who eliminated their exposure to those asset classes could have mitigated this year's losses significantly, or perhaps even turned them into gains.
Ideally, this is how asset allocation works. It's a question of how you are diversified. But more to the point, it also should force investors to ask themselves not which holdings are worth owning but which ones are not.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
a41e0abba832300231e30ff7ecb50968
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/06/23/for-cfos-cash-management-is-crisis-management/
|
For CFOs, Cash Management Is Crisis Management
|
For CFOs, Cash Management Is Crisis Management
Jared King is Co-Founder & CEO of Invoiced, an award-winning, cloud-based platform for accounts receivable automation. https://invoiced.com
In these unpredictable times, CFOs have a lot on their plates and on their minds. More than ever, they’re faced with difficult decisions about staffing and layoffs. Their companies are leaning on them hard for forecasting and scenario planning based on only the murkiest of economic signals. And they have to keep a good game face in the leadership roles they play, helping their cultures and their people weather the storm.
But for CFOs, many of those concerns pale in comparison to the ultimate four-letter word keeping them up at night: cash.
Cash was already king. But now it’s been coronated, for lack of a better term. When it comes to cash, it’s the CFO who needs to figure out how to make payroll. And it’s the CFO who’s tasked with ensuring healthy business operations that run on money.
Many CFOs are managing their cash challenges by focusing on cash outflows, stemming the amount of money leaving the organization. Some are stalling hiring or even reducing staff, while others are renegotiating vendor contracts, and still others are taking either a scalpel or a hatchet to nonessential programs and functions.
These measures are all worthwhile because, in many cases, they’re changes that will make companies even more efficient and resilient. As companies toughen up and get lean, they’ll undoubtedly be better positioned to take advantage of opportunities presented by more favorable business conditions.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
My organization helps companies automate, accelerate and manage accounts receivable (A/R), and what I’m seeing is that A/R is having a bit of a moment. Why? First, customers are paying suppliers slower than ever. And second, with many sales being impacted by the pandemic, it’s more important than ever to be able to collect on outstanding debt. You heard me right. It is simultaneously more difficult and more important to excel at A/R.
My company is on the receiving end of new urgencies around getting cash in the door. While there is scant concrete data on how big of a problem A/R is right now, there is one important signal we’ve experienced directly from our unique position: a dramatic increase in inquiries for cloud-based A/R automation solutions. The number of people inquiring with us about these A/R systems grew by more than 60% from January to May. And while we’ve been happy to have those conversations and be helpful however we can, the increase in inquiries underscores how the importance of cash management and effective A/R has intensified, seemingly overnight.
We can also see that, broadly, the amount of time it’s taking for businesses to get paid has increased significantly, from 30 days to 90 days or more. So while CFOs have their plates full with a variety of crisis management tasks, keeping cash moving into the business is a great concern. And one by one, they are coming to the realization that they simply can’t afford to not collect on outstanding receivables.
What we’ve learned is that many CFOs who have been somewhat on the sidelines of automation are now seeing it as less of a nice-to-have and more of a need-to-have. When business is booming and A/R metrics are reasonable, it can be difficult to prioritize a fix for something that’s not obviously broken. But now anything that will help cash make its way into the building sooner is the highest priority.
Many CFOs we speak with aren’t looking at A/R automation solely as a temporary coping mechanism. While current business conditions may be an important driver for jump-starting such an initiative, CFOs can look to implement solutions that are built to last and will be just as useful even after the current pandemic is only in our memory.
Once companies minimize cash outflows and optimize their cash inflows, they can make changes that could help them not only survive, but thrive.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
7bce3a8b2a1b6e7b7fa6e2c3484cd6ef
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/06/23/optimizing-your-taxes-using-the-1041-system/
|
Optimizing Your Taxes Using The 1041 System
|
Optimizing Your Taxes Using The 1041 System
KC Chohan, Founder of Together CFO Outsourced CFOs Specializing in Creating Optimized Tax Structures for the High Net Worth & Family Offices
As you’re aware, there are many different legal taxation systems in the U.S. Local, state and federal all have their share of the pie. And as business owners, we must file taxes for each of our companies as well as for ourselves as individuals. Knowing the laws in each system has its advantages: Being informed and able to navigate tax laws will enable you to optimize your taxes. The two main tax systems used by business owners are the 1040 system and the 1041 system.
The advantages of optimizing your tax strategy mean you will be able to increase cash flow and compound your wealth. Here, I’ll discuss one such optimization approach using the 1041 system and explain how it differs from the 1040 approach most people use.
1040
Form 1040, the Individual Income Tax Return, is the way most people file their taxes. The education on advanced taxation strategies is not always the most popular of subjects. Instead, many business owners do the same thing year after year, expecting a different result. The usual process involves sending over their profit and loss and balance sheets to their certified public accountant (CPA), who then looks for the latest loopholes to help reduce the owner’s tax liability. This is often enough for smaller businesses, but for larger companies, using loopholes is not the answer.
First, tax laws change from year to year. Prime examples of this include conservation easement and research and development credits, but the list goes on and on. Using loopholes is not a long-term solution to optimizing taxes.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
1041
A complex trust, one of the nine types of 1041 trusts/estates, is one way in which the top 1% optimize their taxes. The 1041 system has a different set of laws that allows for different classifications and deductions compared to the 1040 approach. The advantages of setting up an optimized tax system mean you will be able to increase cash flow and start to create more wealth.
To understand a complex trust, it helps to compare it to a simple trust. A simple trust has three main requirements:
1. It must distribute all income to the beneficiaries.
2. It cannot distribute the principal.
3. It cannot make distributions to charities.
A complex trust does one or more of the things that a simple trust can’t do.
The question then becomes why isn’t everyone using the 1041 system? One reasons is the expense of setting up such a system, which can run into hundreds of thousands of dollars, and that’s only if you can qualify to be part of a system. Wealth management companies and multifamily offices can charge hundreds of thousands of dollars to set up such structures and generally require a minimum of $25 million of liquid investable assets before they would consider setting up a 1041 structure.
If you are looking to optimize your taxes and you are not in the 1%, the next step would be to research a specialist in the 1041 complex trust system. Many estate planning legal firms, estate specialty CPA firms and CFO services companies may be able to assist you.
Know Your Options
The key to optimizing your taxes is to educate yourself on the different options available. But note that creating and operating an advanced tax strategy like the one above will likely require enlisting the help of a professional or team that specializes in the strategy you’re interested in. So do your research, and find the right professional or team for your situation. Once you have one in place and are fully optimized, you can start seeing the same benefits as the top elite.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
ed9477fcb83d1ba4f3fdc235cdb50d56
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/06/24/10-ways-to-safeguard-your-interests-when-selling-your-business/
|
10 Ways To Safeguard Your Interests When Selling Your Business
|
10 Ways To Safeguard Your Interests When Selling Your Business
Selling a business or the rights to a product or service you’ve developed is a transaction that a lot of entrepreneurs don’t fully understand. Parting with a company you’ve built from the ground up not only comes with a lot of emotion but also with potential pitfalls it’s important to be ready for.
There are important steps you can take to protect your current and future interests when you decide it’s time to sell your business. To help you prepare, 10 members of Forbes Finance Council share important strategies to remember.
1. Carefully vet all parties involved.
The sale process is a very transparent one. Before revealing any aspect of the business, it is vital that you properly vet the mergers and acquisitions broker/advisor as well as any prospect. Some firms use buying interest to identify critical methods, resources or other assets that comprise your value—don’t reveal any of it without proper assurances and protections. Take your time and be thorough. - Brian Daniells, Enterprising Solutions
2. Get expert help.
Working with an attorney and a banker who specialize in this niche field will go a long way. Furthermore, your accountant should be involved so you understand the tax ramifications of the deal. Quality professionals have been around the block and have seen it all, and they can help you better protect yourself. - Amir Eyal, Mylestone Plans LLC
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Only sell what the buyer is after.
Many times, buyers are really after something specific in your business—your technology, your team, your user base, etc. Find out what it is and try to keep the rest. Whether you take your team on to the next project or find a way to pivot your technology, try to maximize the value of your company’s assets. Being aware of each asset’s value will make negotiations easier, too. - Felix Hartmann, Hartmann Capital
4. Get an independent valuation.
Buyers and sellers often have very different viewpoints on the value of a product or business. The best way I’ve found to resolve this and to protect everyone’s interests is to retain a valuation expert. Their perspective can inform a reasonable sale price. While you may not agree with the valuation, it’s an important data point to factor into your decision. - Brian Henderson, Whitnell
5. Understand your value.
You must understand the value of the business or product from both an internal and an external perspective. This means understanding how you’re positioned in the market, the projected cash flows and risks. Once you understand these elements you will get the correct amount for your product or business. Knowing the granular details around all of these is key. - Andrew Lyon, Focused Energy
6. Make sure they can pay you.
Get proof of funds before you sign anything. Ask for it as a requirement in the letter of intent or a term sheet. You will want this early enough in the process that you do not waste time or give access to sensitive data in the due-diligence process. If done politely, a request for proof of funds isn’t offensive and shows that you are serious about the deal while also protecting yourself. - Aaron Spool, Eventus Advisory Group, LLC
7. Limit indemnification claims.
When selling your business, you can get burned after the transaction with substantial indemnification claims made by the buyer. To protect yourself, negotiate a limit on the number of claims that can be made and set a minimum dollar amount that must be reached if a claim is going to be made. This will help protect you against the buyer making petty claims to recover losses after the transaction. - Tyler Gallagher, Regal Assets
8. Get some money up front.
There are so many variables to consider when you structure a deal as an annuity payment. If the person buying your business or product is serious about its ongoing success they should be willing to make an upfront payment. You invested lots of time, money and energy, so make sure you get properly compensated for what you have done so far. - Vlad Rusz, Centaur Digital Corp.
9. Don’t pay voluntary taxes.
These kinds of sales can be very complicated, and oftentimes the tax implications are an afterthought. Before you structure a deal, make sure you evaluate the taxable impact and include those implications in the sale arrangements. Payouts over time and through dynamic strategies will benefit both buyer and seller. - Joshua Sherrard, Strategic Navigators Inc.
10. Register and set up separate arrangements for all items.
I want to make sure I am only selling the things I want to sell and not unknowingly selling the things I would still like to keep or control. A good way to do that is to register trademarks, patents and copyrights on all items I’d like control over and have those rights owned by a separate corporation. I can license or sell them off individually and still retain separation and control of the others. - Jerry Fetta, Wealth DynamX
|
b0048416a1423625803f2db87c92ced8
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/06/30/this-is-why-a-business-owner-needs-a-coach-and-how-to-identify-the-best-specialist/
|
This Is Why A Business Owner Needs A Coach (And How To Identify The Best Specialist)
|
This Is Why A Business Owner Needs A Coach (And How To Identify The Best Specialist)
Founder & Partner at TNC CPAs.
As a business owner, you’re used to wearing many hats: developing and delivering your products or services, marketing, sales, HR, operations, finances, etc. It’s safe to say you’re being pulled in many different directions, especially in our current economic climate.
But do you know how you’re spending your time and whether those tasks and activities align with your strengths and preferences to help grow your business? My guess is that, ironically, you haven’t had enough time to consider this because you’ve been so busy. And you probably haven’t been as productive as you’d like.
There comes a time in every business owner’s life when trying to do it all becomes too much. They raise their hand in defeat and yell, “I need help!” What they need is a coach — a partner who can complement their skill set.
As an entrepreneur and owner of multiple businesses, I know I have been at that point. What helped me was first to identify what I enjoyed most and did best, as well as what I dreaded doing and the things I felt less confident about. For instance, my strengths are finance and operations. Unlike many certified public accountants, who focus solely on financial matters, I’m also a management consultant, certified globally in objectives and key results (OKR) and “Profit First,” and I take ongoing education courses from Harvard and Goldman Sachs. I love capturing and analyzing data to help my clients increase the profitability, efficiency and longevity of their businesses. With that clarity, I’m free to stay in my lane of expertise and seek out coaching for those things that fall outside of my specialty.
MORE FOR YOUAmerica’s Top Givers: The 25 Most Philanthropic BillionairesTop Stocks To Buy Today As Markets Sharply Decline To End WeekAdvanced Micro Devices Devises Macro Advances Ahead Of Q4 Report
With so many different types of coaches out there, how do you know with whom to partner? Let’s start with a business owner’s four basic needs, and the coaches who can help with them:
1. Mental: This pertains to your mental health and your mind — are you feeling happy? Depressed? A mental coach or psychologist can help the most.
2. Physical: Your physical health can be enhanced with trainers, nutritionists and fitness coaches.
3. Spiritual: If you’re feeling lost and vulnerable and your mind is restless, a spiritual coach can help you find your center through meditation and prayer.
4. Knowledge: This is all about business and covers a wide array of topics, from finance and operations to sales and marketing.
When looking for a coach, most business owners find themselves in the last category, but the problem is business “knowledge” covers a lot of ground. And because it does, you’ll find lots of coaches claiming to be the one-stop-shop answer to your company’s woes. However, it’s important to recall that much like a business owner identifying and knowing their “lane,” a coach should do the same. A coach who specializes in marketing probably isn’t the coach you’d want advising you on operational matters.
In my business coaching practice, I use a framework I call the “3P Formula,” which stands for:
Passion: The energy you feel for your core business.
Profit: The financial success of your business.
Purpose: Why you have your business.
When I work with clients, I ask them, “What breaks your heart in business? Which of these three areas causes you the most pain?”
If they’ve lost their passion or have no clarity of purpose, I refer them to other coaches who can assist them. But if they lack profitability, I know I can help them; that’s my specialty. Their need aligns with my offering.
Make sure whatever coach you work with has a clear lane of demonstrated expertise. No one coach can do it all, despite what some might promise.
And finally, if you want to grow your business, the other thing to consider as you search for a coach is to think big. It’s easy to get stuck in small-minded thinking, believing that your business is too small for a certain partner. Instead, pick a coach who is in the space you aspire to be.
When I decided I wanted to take my business global, I realized I needed help positioning myself to a different audience. The writing coach I had used to achieve an intimate, local feel had been great but was no longer the best fit for the global presence I was building.
Don’t be afraid to up your game by aligning yourself with a quality coach who specializes in your area of need and who will help you take your business to the next level. After all, you wouldn’t trust a general practitioner to perform a surgery on your heart, so take the time to hire the right coach to ensure your business’s needs are met.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
40d01cbc09d69e3c1bcdba77ee10c2b5
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/07/01/13-things-to-discuss-with-your-financial-advisor-besides-your-retirement-date/
|
13 Things To Discuss With Your Financial Advisor (Besides Your Retirement Date)
|
13 Things To Discuss With Your Financial Advisor (Besides Your Retirement Date)
Most people who consult a financial advisor for the first time know they’ll need to discuss their targeted retirement date. But this isn’t the only piece of information your advisor needs—the better they know you, your finances and your goals the better they’ll be able to help you develop a sustainable plan for your future.
As successful finance leaders, the members of Forbes Finance Council understand what information a financial advisor needs to help a client reach their goals. Here, they share 13 pieces of information you should share when meeting with your financial advisor.
Members of Forbes Finance Council detail essential information it's important to share with your financial advisor. Photos courtesy of the individual members.
1. Risk Tolerance
Understanding one’s risk tolerance can be the greatest factor in becoming a successful investor. You’re better off if you ask yourself, “How far am I willing to see my account go down rather than up to reach my long-term goals?” Down markets are nothing new and are always part of an overall return. Put together a financial plan and stay the course. - Lance Scott, Bay Harbor Wealth Management
2. Specific Goals
All investing begins with clear, written goals. If you can’t define your goals in writing and commit to them, then your advisor can’t possibly design a sensible portfolio for achieving those goals. Further, “making more money” is not a goal. Real goals require a focus on the future, a burning “Why?” in pursuit of the goal and a willingness to defer gratification into the future. - Erik Christman, Oxford Financial Partners
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
3. Your Definition Of Success
Meeting a financial goal like retirement is just one way to look at the success of the relationship between a financial advisor and a client. Share your holistic definition of success, including the things that will give you peace of mind, like risk avoidance and frequency of communication. If you want your advisor to exceed your expectations, they need to know you. - Robert Roley, SS&C
4. Your Annual Spending
Every piece of advice revolves around the answer to the question, “How much do you need to spend in a year?” It determines how long you have to work and how much you have to save, and it dictates your investment strategy. Most incoming clients do not know this number. We help them get there. - Sharon Bloodworth, White Oaks Wealth Advisors
5. Your Primary Financial Concerns
Be prepared to know what keeps you up at night. A good advisor can solve for a broad range of problems—however, articulating your main concerns will allow the advisor to focus on what’s important for you first. - Cole Stoneman, IronBridge Wealth Counsel
6. Income And Expense Flows
Understanding all income and expense flows is key to helping the advisor understand what a client wants retirement to look like. Frequently, people want a “retirement optional” scenario where there are other sources of income—such as consulting or rental property—to supplement their lifestyle. Knowing income and expense flows is critical for the advisor to properly construct the retirement financial strategy. - Meredith Moore, Artisan Financial Strategies LLC
7. Your Personal Vision Of Wealth
Any true financial advisor is there to serve you beyond managing your investments. They should be the steward of your wealth, a trusted resource and a confidant for all things in your life. To get the most out of your relationship with your financial advisor, you need to share your aspirations, your personal vision of wealth, your spending habits and more with them. Don’t be shy, and always seek clarity. - Jonathan Turner, Clarus Merchant Services
8. Income And Capital Growth Requirements
The client needs to express their income and capital growth requirements and should, in return, have the corresponding risk level and market practices explained to them. From a regulatory point of view, it is the investment advisor’s obligation to explain risk scenarios to the client and to educate the client about the investment so the client can make an informed decision. - Azamat Sultanov, Fortu Wealth
9. Your Financial Dreams
A financial advisor is there to help you grow your wealth, and if they understand not only where you realistically want to be but also where you ultimately dream to be, your chances of getting there are higher. Don’t be afraid and hold things back, like debt or spending patterns—being transparent with your advisor is the best way to ensure they can help you reach your dream. - Jared Weitz, United Capital Source Inc.
10. Recent Financial Changes
To get the maximum value out of my financial advisor, I tell him everything. If my budget changes, I let him know. If I’m getting a bonus, it’s the same story. Financial advisors can only help you if you let them do their job. When you provide them with all of the facts, they can help guide you in the right direction to achieve your long-term goals. - Robert Reeder, GlassView
11. Where You Stand Right Now
Anticipate questions and bring clarity to your first meeting with your advisor. The first step is to make sure you are clear on where you stand now: what your net worth is, your expenses, debt, etc. Step two is to clearly communicate where you realistically want to be by the time you retire. Step three is to create an allocation plan and budget that will work in your favor and protect your assets and family. - Gabriela Berrospi, Latino Wall Street
12. Your Current And Future Lifestyle
Let them know what your current lifestyle looks like and if you will maintain that same lifestyle into retirement. Reaching your retirement date is inevitable. However, knowing what your lifestyle will look like in retirement lets your advisor know what you want to accomplish and in what areas you’re willing to sacrifice. I love to ask, “If you had unlimited resources today, what would you be doing?” - Justin Goodbread, Heritage Investors
13. All Your Financial Commitments And Goals
Communication with your financial advisor can be daunting. However, it’s important to bring a full and rounded picture of your expectations, spending, personal financial commitments and goals. Do you have family members whom you care for? Where do you see yourself in five years? It’s very important to communicate all of this upfront. - Kelly Shores, GCubed, Inc.
|
229cf4ea159ecc11019347d64959a8d4
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/07/08/success-in-most-things-is-as-simple-as-being-intentional/
|
Success In Most Things Is As Simple As Being Intentional
|
Success In Most Things Is As Simple As Being Intentional
Paul Hood is Owner and Founder of Hood & Associates, CPAs, PC.
Two years ago, at the age of 50, I decided to compete in a physique competition. I have always tried to maintain my body through exercise but never to the extreme of competing on stage with much younger men in front of a crowd. The first thing I did was hire a coach.
As a certified public accountant and financial coach for businesses across the country, I knew the importance of working with someone with expertise who had walked this path many times. I needed a predetermined path and someone to hold me accountable. Success is generally predicated on identifying where you are today (financially or otherwise), deciding where you want to be in the future, creating a plan of action, executing that plan, measuring results and modifying the plan to stay on pace to reach your desired goal(s).
My coach assisted me in creating a plan as to exactly what I would eat, when I would eat and what workouts I would do. At the end of the competition, I found myself standing on stage holding a third-place trophy in the 35 and above age group. The important point to this story is not the results but the process. I only exercised 15 minutes more per day than I already had been. Every movement I made during workouts and everything I ate, as well as the timing on when I ate, had a specific purpose. I had no miracle drug, was not blessed with extraordinary talent but did have a proven success pattern that was based on someone else’s experience. All I had to do was the work.
Success in your financial journey can and should be as predictable as my success in the gym. Success is being intentional. A financial coach should be no different than the physical coach I hired. Although we cannot control the ups and downs of investments, we can create a plan to harness risk when the time is right as well as mitigate risk during those down times. The steps toward financial success are the same as getting ready for my competition.
MORE FOR YOUBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekTax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021Democrats Now Planning For New Stimulus Bill By Mid-March—Here’s What’s Holding It Up
1. Know where you are today financially. Where is your money going, and what areas of waste are there? Schedule out 12 months of bank statements and credit card statements with all outflows in categories for types of expenditures. Keep in mind there are certain expenses that you can control, such as eating out, and others that are fixed, such as your car payment. After all this data is compiled, you will have a picture of where your money is going.
2. Determine where you want to be financially. What year do you want to retire? Keep in mind retirement does not take age — it takes money. Are you saving for a house or college for kids? Do you need to be planning on how to get out of debt?
3. Create a plan to get from where you are today to where you want to go. A great base line plan is to “pay yourself first” with a minimum of the first 10% of your take-home pay. This means save before you spend instead of after you spend. Train yourself to get your spending under control so that your total outflows are no more than 80% to 90% of your take-home pay or business profit. A set-it-and-forget-it plan with automatic saving transfers is the best.
4. Create a measuring process to track whether you are on pace to reach your goals. Use a budget to control spending. Let’s say you budget $500 a month to eat out. If it is the 25th of the month and you have used your $500, then you eat peanut butter and jelly sandwiches for a few meals until next month. Keep an eye on your investment balances, but do not make decisions based on fear or greed.
5. Modify your plan as you get closer to your set goal. Maybe you need to tighten the belt a little more if you are not saving enough. Maybe you have done well and can adjust your holdings to be more conservative. One idea people sometimes do not think about is to move current holdings into more conservative holdings but keep new money going into more aggressive plans. It’s a sort of advance and protect strategy.
Success will come if you make decisions in your life based upon being intentional. Having a plan and making decisions in accordance with that plan is a sure way to massively increase your odds of success.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
2187026a82005882f7ceb7d867695c34
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/07/15/a-common-playbook-best-practices-capital-raising-leaders-can-adopt-from-sports-general-managers/
|
A Common Playbook: Best Practices Capital-Raising Leaders Can Adopt From Sports General Managers
|
A Common Playbook: Best Practices Capital-Raising Leaders Can Adopt From Sports General Managers
Clint Coghill co-founded Backstop Solutions Group in 2003 and now leads the Backstop Executive Team as CEO.
Any great general manager of a sports team has a constant understanding of their team's statistics. The same can be said for capital-raising leaders at hedge funds and private equity firms. Like managing a professional sports team, it's a demanding and high-pressure activity. As the head of business development, you have targets to meet, and to do this, you're making decisions big and small every day to help optimize win rate, pipeline and time. To make these decisions effectively, you need comprehensive, detailed, real-time data — not unlike the general manager who is constantly aiming to perfect their team.
However, in managing a sports team or an investment firm, data needs to be structured in a way that allows you to glean the most insight.
Constantly Evaluate Your Roster
Managers need to know as much information about the people on their team as possible. Similarly, as the head of capital raising, you not only need to have the right talent on your team, you need to know how each individual is performing.
Examining the best practices of your top performers can yield valuable insight to be transferred and implemented across the team, improving all-around performance and productivity. Performance data can yield insight into who may benefit from training, coaching or one-on-one mentoring.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
When growing your team, you will get the most value out of your next hire if you know the current strengths and weaknesses of your current roster. You will be able to more adeptly add talent that fills gaps within your team's expertise or can help your best performers grow their results.
Build A Playbook For Success By Analyzing Your Win-Loss Record
Pro Football Hall of Fame coach Bill Parcells said, "You are what your record says you are."
Win rate is a critical metric for determining how to allocate your team's resources. A higher overall win rate means fewer deals are needed in the pipeline. Also, when you drill down into win rate by team member, you're able to uncover the success and best practices of those with higher win rates to help the entire team succeed.
To identify the best path for success, you can't only look at your overall record. If a football team's quarterback suffered a season-ending injury in the first game of the season, it would be a mistake to only look at the team's record and terrible passing statistics when building the roster for the next season. A sports executive could end up spending the free-agency period pursuing a top quarterback when it would be more prudent and strategic to invest in a back-up quarterback.
The same is true for capital raising. It is necessary to drill down to specific data to understand what affected your record and how you can improve it. I would recommend reviewing three key data sets as a first step:
1. Region. Identify the regions in which your team has been most successful. This data can drive strategic decisions on where to focus time and resources, and ensures you have the proper bandwidth to support each territory as well as the ability to pivot based on geographic performance.
2. Investor type. It is also important to note the types of investors that have proven track records of success, both overall and within each of your product lines. It makes sense that the more you're able to segment the types of investors most likely to invest in the strategies of your firm, the more successful your capital-raising efforts will be. Create profiles of target investors to avoid wasted efforts in pursuing investors who are not aligned with your firm's mandate, and so that conversations with relevant investors can be framed in such a way to maximize alignment and increase win rates.
3. Historical data. Historical investor data is also valuable when launching a new fund, as it provides a strong indication as to which regions and types of investors would be most receptive to the new strategy. Armed with this information, your team can "hit the ground running" after a fund launch and more swiftly raise the desired capital.
Keep Ahead Of The Game By Thinking Like The Scouting Department
While most fan bases are focused on the current season, sports executives spend most of their time thinking about what's next, whether that is fostering a minor league system, preparing for a draft or identifying upcoming opportunities in free agency. This makes the team's long-term success reliant on a strong scouting department, which in many ways mirrors the role of a hedge fund's business development team.
Win rate shouldn't just be used when identifying growth opportunities. It can help determine the overall health of your team's pipeline. You should be monitoring each team member's pipeline coverage as a percentage of their sales goal. Combined with the individual's win rate, you can judge how healthy each team member's pipeline is, as well as your overall pipeline.
However, an individual's value may not be entirely reflected in the numbers. In the movie Jerry Maguire, Jerry's mentor, sports agent Dicky Fox, said, "The key to this business is personal relationships." The same is true for your capital-raising team. Quantitative data, such as how many calls your team members make and how many meetings they take, are certainly important. But those only tell half of the story. Qualitative data is equally important to ensure you have full transparency into what was discussed, what was decided and the reasoning behind such decisions, which is key in knowledge transfer and service continuity. In the same vein, visibility into quality of sources of capital introductions can be helpful in determining how to alter your team's time spent nurturing (or not) each relationship.
Always Play To Win
Ultimately, there are never any guarantees in sports. Sports executives can only aim to give their team the best chance to win. For capital-raising leaders, this often comes down to understanding the data, asking the right questions and acting accordingly.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
4d1ff3937003d9c4f9257fd22231a1a8
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/07/22/pandemic-highlights-value-of-higher-ed-planning-for-college-costs/
|
Pandemic Highlights Value Of Higher Ed, Planning For College Costs
|
Pandemic Highlights Value Of Higher Ed, Planning For College Costs
President of Private College 529 Plan, a non-profit prepaid tuition plan operated by hundreds of private colleges and universities.
Headlines, especially of late, can be controversial. The alleged pending death of higher education has been recent headline fodder, including “The End of College as We Knew It?” “On Collegiate Death And Dying,” “The Oddsmakers of the College Deathwatch,” and the more optimistic, “Disrupting the Disruptors: Why Traditional Higher Education Isn’t Dead Yet.”
I’m not a gambler, but as the president of a nonprofit prepaid tuition plan, I think the odds are with America’s higher education system, recognizing that change is necessary. Research finds those most affected by the Covid-19 economic fallout in the U.S. labor market include those with less education. College Board’s Education Pays 2019 report found that those who have “higher levels of education earn more, pay more taxes, and are more likely than others to be employed.”
Yet, the Covid-19 pandemic may disrupt the plans of many students who had intended to return to — or start — college this fall. Fifty-six percent of college students say they can’t afford tuition, according to OneClass, which surveyed more than 10,000 freshmen, sophomores and juniors from over 200 U.S. colleges and universities. Roughly half of undergraduates said that because of the pandemic’s impact on their finances, they will need to rethink how they will pay for school.
For graduating high school seniors planning to attend college in the fall, a survey of nearly 10,000 students released by Naviance indicates the cost of college is an important factor for 79% compared to 51% in 2019. Fifty-nine percent of the same students said the amount of financial aid/scholarship money they will receive is also important in decision-making, compared to 39% in 2019. And 74% said the location of the college is important, compared to 49% in 2019.
MORE FOR YOUBernie Sanders Warns Republicans ‘Will Win’ In 2022 Midterms If Democrats Don’t Act Aggressively On Stimulus NowBernie Sanders: Here’s How To Get Student Loan Cancellation And $2,000 Stimulus Checks Without RepublicansAfter Massive Bitcoin Price Boom, Here’s Why February Could Be Very Big For Bitcoin
The cost of college can be significant, which means saving for a degree is critically important and should start early. Unfortunately for many families, even though they may have been saving money for years in a traditional 529 plan — a tax-advantaged savings plan designed to encourage saving for future college costs — because these plans are tied to the stock market, the accounts may have lost significant value over the past few months.
Even in a strong economy, saving for college can be challenging for many families given the monthly resource allocation. An alternative to a traditional 529 plan worth exploring is a prepaid 529 plan, which doesn’t react to the movement of the economy and markets, providing a safer, more secure way to put away money for a child’s college tuition. Prepaid plans allow participants to buy tuition at current or contract prices, avoiding both rising costs for higher education and market fluctuations. It’s an option many families that even financial advisors don’t know about.
For families considering a tuition plan, it’s important to know a few key differences between traditional and prepaid types because each type has advantages and disadvantages. Traditional 529 plans are managed by 49 states and the District of Columbia, providing families with many plans from which to choose. There are fewer prepaid 529 plan providers, though there are options available for state and private colleges and universities. Prepaid plans are not subject to market fluctuations; instead they help families keep up with rising tuition costs. Some families even save in both types, because prepaid 529 plans generally are limited to tuition and fees, while funds in traditional 529 plans also may be spent on room and board, books and other college expenses.
Regardless of which way you go, the Covid-19 pandemic has highlighted the importance of planning for higher education costs. Even as colleges and universities across the nation are facing uncounted challenges for the fall, betting on the power of education is still worthwhile.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
8d3e933ec26379e694be4a2f133f9ff4
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/07/27/the-psychology-of-a-retiring-advisor/?sh=53daca6f57a6,
|
The Psychology Of A Retiring Advisor
|
The Psychology Of A Retiring Advisor
Founder and Chief Strategy Officer at Financial Advocates. Financial Advocates provides servant leadership in the financial advice market.
getty
Retirement can feel like a leap of faith for many. It is a massive lifestyle change and can have irreversible consequences. Even after ensuring your financial needs are met, making that jump and following through on your retirement plan can be frightening.
For many, having a financial advisor can ease that fear. Financial advisors establish ongoing relationships with their clients and guide them through major life changes and financial decisions so that clients can pursue their goals comfortably and confidently. This is especially important when it comes to retirement.
After decades of having a working identity, a routine, a work-focused social environment and responsibilities, retiring can be an extreme change. An advisor’s role in a retiree’s life extends beyond financial guidance. Advisors remain in the client’s life even after retirement, which bridges the pre- and post-retirement worlds. This gives the client a constant confidant on whom to rely as they navigate through a time where so much of their life is changing.
But who counsels an advisor when it comes time for them to retire?
Enter the financial advisor’s advisor. I have been in the industry for 32 years, and it was 23 years ago that I founded our firm that has served and guided hundreds of advisors in many ways over the years. Given advisor age demographics, it should be no surprise that we are continually involved in practice transactions and transitions.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Practice transactions are one way an advisor can retire without abandoning their book of business, but with a transaction comes a lot of considerations. Terms and conditions must custom fit each transaction so both buyer and seller benefit. After the terms are set, the seller must prepare their clients, staff, books, records and practice management tools for the transition so the practice is ready for new leadership and the buyer can easily step into the seller’s previous role. And at some point, the seller must leave.
How does it feel for financial advisors to let go of the reins?
I have personally helped many advisors retire, focusing heavily on the elements of their practice transaction and its transition. Advisors need guidance, just as their clients do.
Even if they have not experienced retirement yet, an advisor’s advisor can provide observation and guidance through their education and experience. Likewise, advisors who have never retired can coach their clients through retirement, and those clients benefit from the objective perspective.
However, it is not until we experience something ourselves that we realize the full range of emotions that comes with it and fully grasp the experience. Through our feelings, we understand their feelings.
In business, it is not common to talk about emotions, especially when it comes to figuring out the details of a transaction. However, when you leave a business you have built over the decades, feelings are inevitable. You have some idea of what to expect by listening to others’ experiences, but there are also feelings that may catch you off guard. This can complicate your ability to make sound business decisions or to move forward at all.
How do I know? Recently, I finalized my succession plan. While my succession plan’s full execution is years down the road, I have still committed to following through with it. This beginning is a huge inflection point. By making this commitment, I am accepting the fact that I will soon retire.
I know I’m not ready to throw in the towel, but I also know that my level of commitment isn’t the same as it once was. I find myself less willing and able to meet the demands of the work — to travel, to stay long hours, to put the business first. I still want to work, but my priority is now myself and my family.
Similarly, if you own your own advisory firm, you may find it’s time to hand over the reins if you want to serve clients but don’t care for the issues that come with managing your firm. Your firm and its clients benefit from your knowledge, experience and judgment. Yet your firm would also benefit from the energy and focus of a new leader to move it forward. Understanding this discrepancy between your wants and your firm’s needs will help you hand over the reins of management.
You’ll likely have many personal questions to ask yourself during this time. As you work through them, have a plan to address and resolve each one. Even before all the details are ironed out, there is a sense of calm knowing you’ve answered the big questions and things are moving forward. You are moving forward.
For me, it was a long and winding path to get past that point. Now that I have experienced this side of succession planning, I believe I am much more prepared and have a deeper insight into how to help others navigate the emotional aspects of retirement. To any advisor thinking about what retirement may look like, it is OK that there is not one all-inclusive guide.
You can make it what you want it to be. Starting to explore your options will help to remove the mystery. And you don’t have to make the jump until you know you are ready.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
55c2bdf33d86b10cc94fb16264e76411
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/07/31/big-changes-are-coming-to-commercial-real-estate-industry-in-the-wake-of-the-pandemic/?sh=40a2aa1636c1
|
Big Changes Are Coming To Commercial Real Estate Industry In The Wake Of The Pandemic
|
Big Changes Are Coming To Commercial Real Estate Industry In The Wake Of The Pandemic
David McGuire is a leading expert on cost segregation, fixed assets and depreciation law and a Co-Founder of McGuire Sponsel.
getty
Few industries look to escape the Covid-19 pandemic without major change, and the commercial real estate industry is no different. Brokers are expecting to see changes in demand and increases in available sublease space in the coming days, weeks and months. The effect will not be the same across all areas of real estate because warehousing and industrial spaces are not expected to have the same downturn as office and retail. Still, real estate companies looking to adjust their portfolios for the new normal should evaluate the tax incentives offered by the federal government to prepare for these changes.
One way companies might look to adjust their real estate holdings is to design for social distancing. Between 2005 and 2015, office density increased significantly. The average square footage per worker in 2018 was around 120, down from 250 in the early 1980s. This makes social distancing difficult.
Before the move to a work-from-home environment, offices were getting more and more crowded. Many companies looked for solutions such as “hoteling,” pioneered by Ernst & Young, to reduce the necessary space per employee. While these methods worked well in the pre-pandemic environment, they do not allow for the social distancing requirements recommended by the Centers for Disease Control and Prevention. Because of this trend, social distancing may become an important design factor in the near future.
Changing from a dense work environment to a socially distant setting will come at a cost. Companies will need to hire designers, reconfigure equipment and redesign spaces. Dedicated individual workspaces may become more important as collaborative spaces are not utilized. Fortunately, the CARES Act has a provision that will reduce the sting for businesses that make this change. Under the act, qualified improvement property (QIP) was made bonus eligible. QIP is considered any nonstructural improvement to the interior of a building, if that improvement is placed in service after the building is placed in service. This will mean that most, if not all, of the improvements companies need to make to design a socially distant office can be taken as a tax deduction in the current year, thus lessening the financial hit when it is most needed.
MORE FOR YOUBernie Sanders: Here’s How To Get Student Loan Cancellation And $2,000 Stimulus Checks Without RepublicansCongress May Cancel Student Loans In New Stimulus PackageHere’s What’s In The Two New Covid Relief Executive Orders Biden Just Signed
The QIP deduction could also help businesses that need to redesign space for a new use. Retail space is expected to see a major loss in demand in the coming years, with some expecting negative demand for up to 13 quarters. However, warehousing demand is expected to grow due to the disruption in supply chains and the increase in online shopping. Such movement of demand from one type of real estate to another may move property owners to redevelop space. Similar to an office space that needs to be revamped, a majority of the expenditures associated with redeveloping space may be available for immediate expensing under the QIP provisions.
Real estate owners and renters may look at other options to make their space more usable. This could include HVAC improvements and maintenance. Small changes like upgrading filters, adjusting fan speeds and keeping the system on could help make spaces safer. Companies could also make larger changes by installing air purifiers, ultraviolet (UV) lights or other more comprehensive upgrades. Most business owners will be able to write off most of these improvements as operating expenses under the IRS Tangible Property Regulations. Real estate owners who install sizable improvements such as UV lights and air purifiers may be able to write them off under the 179 provisions of the Tax Cuts and Jobs Act of 2017.
A large percentage of workers are currently working from home, and many employers expect a greater part of their workforce will continue to do so. Still, these businesses also foresee a portion of their employees eventually returning to the office, which will require them to make physical changes to their work environments. While this may be capital intensive, tax breaks could offset some of the costs, but careful planning is required.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
d3ba880ce4b79151ebe5ee76618c6da4
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/08/20/how-to-pull-a-91-million-rabbit-out-of-a-hat/
|
How To Pull A $91 Million Rabbit Out Of A Hat
|
How To Pull A $91 Million Rabbit Out Of A Hat
I apply a multidisciplinary approach to wealth management dovetailed with structured tax planning at Magnus Financial Group.
getty
It was valued at $30 million per foot. That is a big price tag, considering it stood only 3 feet tall. The sale, however, created an even taller problem—taxes.
A 2019 Bloomberg article reported that Steven A. Cohen, founder of Point72 Asset Management, paid $91 million for artist Jeff Koons’ creation Rabbit—a shiny stainless-steel sculpture that looks like a balloon bunny. At $91 million, it is no surprise that the hedge fund manager set a record for the highest price ever paid for a living artist’s work. While he purchased a pop-art sculpture, the seller, the estate of the late magazine publisher S. I. Newhouse, likely received a hefty tax bill. If so, could advanced financial planning have allowed the seller to make the sale, keep the proceeds and distribute tax-free income to itself? It is like asking to pull a financial rabbit out of a hat. That is, unless the seller enlisted another work of art—the donor advised fund (DAF)—to help.
What Is A DAF?
Financial planners have many tools at their disposal, but the DAF is one of the more donor-friendly planned giving vehicles. A DAF is administered by a public charity, but you can think of it as a charitable savings account. The accounts are controlled by a nonprofit organization, which is called the sponsoring organization. You can find anything from small community organizations to large financial firms, such as Vanguard Charitable, Fidelity Charitable or National Philanthropic Trust (NPT), to serve as sponsors.
You simply open an account and contribute cash, stocks, bonds or other financial assets and can immediately claim the maximum charitable tax benefits allowed. While some sponsors have no minimums, most have minimums starting as low as $5,000. Once the money is donated, you surrender ownership—it is an irrevocable gift.
However, you do get advisory privileges, which means you can choose who gets the money and can recommend grants and allocations. You can also donate today for tax breaks but be sure to take time to decide where the money will go. There is a caveat: The sponsoring organization has ultimate control over the assets, so while you can make recommendations, it is not obligated to follow them. Most organizations will consider your wishes, though.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Donations are not just limited to financial assets. Non-cash assets like real estate—and art—can also be donated. By IRS rules, artwork owned by a collector or inherited and held for more than one year that has appreciated in value qualifies as a collectible. When you sell a collectible, capital gains taxes are usually owed on the difference between the current fair market value and the owner’s cost basis, but this is where a DAF can help.
Art is considered tangible personal property, and without additional financial planning, limits the charitable deduction to its cost basis, but if it is donated to a DAF, your tax deduction is based on the fair market value. A DAF allows you to make donations in the current year that otherwise would exceed your standard deduction. You can make large donations today, take the full deductions and still instruct your DAF to grant money to your favorite charities over time.
NPT’s 2019 DAF annual report outlined a number of key points that highlight the rise in popularity of donor-advised funds and their utilization. The report notes that in 2018, DAF contributions surpassed $37 billion, an increase of 86% over five years, and DAF contributions accounted for 12.7% of total individual giving.
To see the benefits, I will illustrate a hypothetical sale below. In our example, the Koons’ Bunny seller has a cost basis of $1,000,000 and donates the artwork to a DAF prior to the sale. The 65-year-old donor is unmarried with one adult child 29 years of age. As noted above, because art is considered tangible personal property, the charitable deduction (without additional planning) would be limited to its cost basis ($1 million). The trustee of the DAF could then sell the sculpture post-gift for $91 million, and all capital gains would be eliminated. The net sales proceeds could be reinvested into a portfolio of marketable securities. If both the donor and child lived to age 85, and assuming a 5% net rate of return, the planning could provide the following profound benefits:
• Capital gains tax savings: a little over $25 million ($90 million x 28% capital gains tax)
• Distributions to charity: approximately $232 million, $2.5 million per year over the donor’s life and $5 million per year for the second generation (Note: The charity figures and exact totals are based on a complex formula.)
• Remainder to charity: approximately $424 million
A DAF can be a powerful giving vehicle and income tax planning tool. They have gained popularity for several reasons, including their tax advantages, flexibility and ease of administration. They allow you to donate cash or highly appreciated assets and receive a meaningful charitable deduction, which can be used to offset taxable income in the year of donation and up to five additional years for any unused deduction. The deduction can be used to convert an individual retirement account (IRA) into a Roth IRA tax-free, which removes the taxation on the IRA at the time of distribution. Best of all, they can empower a donor and their family to create a charitable legacy, which can be facilitated over one or more generations, fund an unlimited number of IRS-qualified public charities and provide full control over the timing of all gifts.
With a DAF, a charitable legacy may just be a hop, skip and jump away.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
c3d0c45ba0f3bba5555b6828dc46c85a
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/09/08/new-wave-of-entrepreneurs-overcomes-crisis-economy/
|
New Wave Of Entrepreneurs Overcomes Crisis Economy
|
New Wave Of Entrepreneurs Overcomes Crisis Economy
Cameron is CEO of Azlo, a digital banking platform purpose-built for small businesses.
getty
You’ve likely seen the headlines: “About half of all small businesses in danger of failing during pandemic.” “Fed frets about small business failures amid ‘alarming’ data.” “Small-Business Owners Are Giving Up.” But perhaps Albert Einstein best summarizes how to look at this situation: “In the midst of every crisis, lies great opportunity.”
As the economy recedes because of Covid-19, small businesses — particularly those with a physical location — have undeniably taken an enormous hit. Walking around your neighborhood, you might see barbershops or local restaurants with boarded-up windows and “For Lease” signs. Yet, this doesn’t capture the entire picture. There is also a silver lining: While the small-business sector is struggling, many businesses, especially digital ones, are sprouting.
As the CEO and co-founder of a digital banking platform built for small businesses, I am seeing this firsthand. Despite the economic downturn caused by the pandemic, folks are starting new businesses at an impressive rate.
From mid-March to mid-May, more than 500,000 applications were filed for an employer identification number (EIN), according to the Census Bureau. In fact, the 27th week of 2020 — June 29 to July 5 — we saw a major increase from a year ago, with 127.4% more applications (113,210) filed.
MORE FOR YOUBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekTax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021Democrats Now Planning For New Stimulus Bill By Mid-March—Here’s What’s Holding It Up
Something similar has played out at our fintech company, with a record-breaking number of business accounts opened in May, June and July. A recent survey among 1,000 of our new customers uncovered that founders had more free time to get something started and saw a need in the market — factors they listed as the biggest drivers in their entrepreneurial journey.
Nearly all new business owners — a whopping 96% — said they always wanted to start a business. For about 40% of them, Covid-19 was the push they needed to launch their small business. For about 37%, the pandemic provided a business opportunity.
Not only did most of the entrepreneurs surveyed say they aimed to continue operating their businesses after the pandemic, but 39% also said they planned to hire workers in the near future or already had employees. This reinforces that small-business owners drive the economy and labor force.
While it might seem riskier to start a business when the economy saw its worst drop on record, it’s a trend we’ve seen before. Some of the U.S.’s biggest companies today began during times of economic instability. General Motors launched in 1908 in the midst of a financial panic. Hewlett-Packard got its start in the late 1930s during the Great Depression. More recently, entrepreneurs started Venmo, Square and Uber during the Great Recession.
University of California, Santa Cruz economics professor Robert Fairlie described this phenomenon as “necessity entrepreneurship.”
“If someone doesn’t have opportunities in a salaried job, that’s part of the motivation [behind setting up their own company],” he told the BBC. “With the shutdown, people have had more time to think and take time back from busy work schedules. So if there’s a business idea they’ve had, they might think, let’s try this out.”
Covid-19 is a crisis. At the same time, it’s given folks an opportunity — a chance to dream up businesses, focus on entrepreneurial endeavors, make a push to pursue a longtime goal or find sources of income through self-employment. I have seen this throughout my career. When I worked at Mercy Corps, a humanitarian aid organization, we often found that lasting change could most effectively take root after a crisis like an earthquake or hurricane.
In that sense, the pandemic is not any different. Difficult times inspire, so we’ll continue to see this new class of entrepreneurs take chances, get creative and offer alternative solutions. Some will dream up entirely new business ventures, and others will pivot to meet the demands of our new reality. Small-business owners are nimble by nature, and in the era of Covid-19, this is a necessity. As we face a new economic reality, I cannot think of a better group to bet on to continue fueling the economy.
So when you see headlines that focus on the downfall of small businesses, remember that there’s also reason to feel optimistic. At this very moment, the next big “thing” could be getting its start.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
0562ed8e30270e4567e55edc04c177d5
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/09/09/five-steps-to-revving-up-your-mobile-food-business-even-during-a-pandemic/?sh=1a05029e166f
|
Five Steps To Revving Up Your Mobile Food Business (Even During A Pandemic)
|
Five Steps To Revving Up Your Mobile Food Business (Even During A Pandemic)
Luz Urrutia leads Opportunity Fund, the nation's leading nonprofit small business lender.
getty
Entrepreneurs are a creative, resourceful, resilient and hopeful bunch. I find this is especially true with food entrepreneurs who are called by an art, and a craft, to create flavors and community. Like many folks stepping into business ownership, they’re generally more focused on developing their product or core service than on unit margins and cash flow projections. But obsessing over your craft at the expense of putting time into your financial planning can be detrimental — so much that it can lead to a denial of permits from your local health department and even press the pause button on any startup loans you thought you’d clinch.
Before the Covid-19 pandemic, food trucks and carts had officially arrived as a business concept, a great way to serve innovative, authentic, budget-friendly food. The mobile food service industry was estimated to generate roughly $1 billion in revenue in 2019. Last year, the food truck industry alone was forecast to grow by 20%.
Food trucks and carts offer a wide entrepreneurial on-ramp for women, immigrants and people of color, as well. Although there’s not much national research on ownership in the industry, an internal survey of 300 entrepreneurs among San Francisco’s Off the Grid’s food truck community found that 30% of owners are immigrants, 30% are women, 8% are members of the LGBTQ community and 2% are veterans.
As the Covid-19 pandemic continues to hammer the restaurant and food service industry, interest in setting up a food truck, cart or tent has increased in some areas. For some restaurateurs, a scaled-down version of their tables-and-banquettes model is purely about survival. For others, it’s a way to provide (with masks) face-to-face interactions with customers in an environment where the al fresco aspect reduces concerns related to eating outside the home.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Unfortunately, as new applications for food trucks come in, we’re also seeing myriad accompanying first-timer mistakes. As the CEO of a nonprofit community development financial institution (CDFI) that lends extensively to food trucks in California, I’ve seen how defeated an eager, hopeful entrepreneur can feel when we have to put a hold on their loan application because they don’t have the proper permit or health department approval.
And, with the pandemic, there are hold-ups in permitting that make it even tougher to launch a mobile food business right now. But with proper planning, you can get your business up and running without glitches from local authorities or lenders. Here are five essential steps to get there.
1. Remember that a menu plan is not a business plan. It’s likely that your menu is already well thought out, down to the shaved portobellos on your pasta. But your business plan requires equal, if not more, attention. That means determining your startup costs — such as settling on truck versus cart and new versus used — and how you’ll finance them. It means investigating locations, local permit regulations, customer tastes, marketing options, suppliers and competition. It means knowing where you will source your food, which commissary you will use and how you will transport it.
Fortunately, this is a well-traveled road. Many cities and counties offer step-by-step instructions on their websites, such as Portland, Oregon’s Multnomah County) while industry organizations, such as Off the Grid, offer online applications and assistance. And there’s always good old-fashioned talking with other food truck owners to hear their experiences and get a ground-level feel for the work.
You should also decide which type of business you will set up. There are several types — sole proprietorship, partnership, corporation, S Corporation or limited liability company — and each has its own ramifications for your tax obligations and personal liability. Most mobile food purveyors are either sole proprietors or partners.
2. Secure financing. Startup costs for mobile food businesses vary wildly, depending on whether you will be building, buying or refurbishing your setup. If you have large savings or a family loan to draw on, congratulations. But if you will be seeking a loan, you will likely have more success with a CDFI, minority depository institution (MDI), credit union or microlender. Many traditional lenders reject food truck loan applicants because they consider them high-risk and insufficiently profitable. (Our experience proves to be different.) So look into alternative lenders with a solid track record of responsible and affordable lending in the mobile food industry. Nonprofit lenders in particular, such as CDFIs and mission-based lenders, may also be able to connect you with reliable financial coaching and technical assistance.
3. Secure commercial space. All mobile food providers need a health department-approved commissary in which to prepare their food — home kitchens are outlawed in most places or need special certification. And if you intend to operate out of a truck, you will need to arrange for a garage or parking. Be ready to verify both of these items to licensing and permitting authorities.
4. Have your paperwork in order. There is a simple rule when it comes to permits and licenses: Deficient paperwork equals no mobile food business. So, before you meet with any local authorities or lenders, double-check everything, such as licenses, permits, insurance, trademarks, etc. And then check it again.
5. Keep an eye on the essentials. Now that the work of starting your business is done, the real work of operating the business begins. You will learn as you go and as you grow, but it is essential to keep an eye on your cash flow, inventory, customer preferences, neighborhood demographics, new housing construction and suppliers — in short, anything that could affect your business. And stay financially healthy. Don’t take on more debt than you can afford. If you find yourself with an opportunity to grow or need to get through a rough patch, always work with safe, reputable lenders.
With these items in place, new food truck operators will be ready to start their ovens — and their engines.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
d53b1058f1bdd66f955501297500a2dc
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/09/24/dont-let-election-uncertainty-hold-back-your-investments/
|
Don’t Let Election Uncertainty Hold Back Your Investments
|
Don’t Let Election Uncertainty Hold Back Your Investments
Andres Garcia-Amaya is CEO and Founder of Zoe Financial, whose mission is empowering people to make better financial decisions.
getty
This year has been a doozy — to say the least — with unexpected events left, right and center. Despite being one of the most anticipated events of the year, the U.S. presidential election is shaping up to be unpredictable. All this uncertainty has made for innumerable headlines citing the volatility of the markets. Yet that doesn't mean you should put off planning your financial future until the results are in.
Why Hold On To Your Investments
JPMorgan Asset Management's 2020 Retirement Guide shows that if you missed the top 10 days in the market from 2000-2019, your returns were cut by half. That's the impact of pulling out of the market out of fear of uncertainty.
Yes, this election is polarizing. It is hard to predict the market impact in the short-term. The Washington Post notes the unusualness of this election season citing the pandemic, the recession, rising protests, record numbers of unemployment, social distancing and noteworthy volatility in the stock market.
But whatever happens in November, investing is a long-term strategy with a history of rewarding investors for holding on. The JPMorgan guide noted how $10,000 invested in the S&P 500 would have performed under different scenarios. An investor who missed the best 10 days would have grown their investment to $16,180 with a 2.44% average yearly return. On the other hand, if fully invested, the $10,000 would have grown to $32,421 with an average yearly return of 6.06%. The results were worse the more best days investors missed out on.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
The study also shows that six of the 10 best days in the market happened within two weeks of the 10 worst. You have to be in it to win it. An investment strategy takes into account riding out the bad days to profit from the good days.
What You Can Do
When you're invested, you don't have to decide to get back in; but when you sell, you now have to make two decisions. If you do "get out" at the right time, you must then figure out the best time to get back in — potentially leaving you without the benefits of having stayed invested.
Working with your financial advisor to build your plan can help ensure a successful financial future for you and your family. Regardless of the election's results, you will have someone to guide you through it and make sure your investments are optimized as much as possible. No one knows what the election will bring to the markets. But we do know that not being invested and having a financial advisor guiding you can have serious impacts on your long-term financial health.
Don't confuse your political views with your retirement savings. Time, not timing, is the key to investing. Your financial advisor will be able to work with you to build a portfolio that aligns with your goals and time horizon.
If there is one thing that's been made clear by 2020, it is that anything could happen. While it may be tempting to wait it out in anticipation of November 3, you should still take a long-term approach to your goals. Don't put your financial future in the hands of an unpredictable election.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
fc5fa969f4eef5a43b4b5fafb73cea1d
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/09/29/what-drives-digital-transformation-in-banking/?sh=5f8b37c57dc5
|
What Drives Digital Transformation In Banking?
|
What Drives Digital Transformation In Banking?
Dmitry Dolgorukov is the Co-Founder and CRO of HES Fintech, a leader in providing financial institutions with intelligent lending platforms.
getty
Today’s world is becoming increasingly digitally driven with technologies gradually reshaping multiple industries, including the financial domain. From humble beginnings of online banking in the late 1990s to the possibility of, say, taking out a loan using a smartphone, those of us in the industry are lucky to witness the conversion toward a new era in finance. Digital transformation is becoming an integral feature of the financial sector, but what is this transformation exactly? In brief, digital transformation introduces technology to the business processes, products and services of a bank.
Ultimately, digitalization leads to the creation of new business models and the development of an open ecosystem involving all the players in the market. It is important to emphasize that digital transformation shouldn’t be seen as a strategy based on technology. In other words, you don’t go digital just because you can. Instead, it’s all about creating a business strategy that allows financial institutions to promptly respond to market needs.
To some extent, the trend that drives the transformation is the shift toward millennials — a demographic group that is focused on finding products and services digitally. One-third of this group believes they do not need banks at all, while 73% were more interested in financial services from Google and Amazon. However, millennials or not, it’s hard to imagine the modern world without technology and innovations in place. The banking sphere is no exception. Thus, the main reason is technological convergence that facilitates a wider adoption of technological advances in banking.
The key components of the digital banking concept are the customer-centric approach, personalization of the offer and mobility. Those three elements optimize the infrastructure of a bank, making it ready for digital communications and a rapid change in approach when needed. Currently, there’s a high intensity of the innovation race in regards to new services and products. Being the “first one” in the market offers a great deal of business opportunity — and banks know it. To keep up with an innovative pace, banks turn to agile-esque flexibility in the development of fintech solutions.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Large banks tend to develop their digital expertise on their own. To do so, they create internal digital teams that combine business, IT and marketing competencies. But guess what? No matter how paradoxical (and unfair) it sounds, banks that have been developing their IT platforms for years are the most vulnerable to modern challenges. Despite their best intentions, their systems are often built using outdated technological solutions. Plagued by a motley set of functionalities, interfaces and custom improvements implemented over the years, those legacy systems lag behind in a dynamically changing competitive environment.
The larger banks get, the more difficult it is for them to innovate. Accordingly, many banks and financial institutions accelerate through strategic partnerships and alliances with fintechs. That makes sense: While banks have a deeper understanding of the industry, fintechs are more experienced in the implementation of technologies.
Alternatively, it’s common for banks to buy fintech projects and support development through investments. At the same time, fintech companies are driving a change that translates business models into a digital form to provide better customer experiences via Banking as a Service (BaaS). In this context, banks are transforming from classical financial institutions to digital organizations in their own right.
Can’t argue with that: Digital transformation takes a lot of effort, and it is costly. Perhaps those partnerships make sense only for banks with a developed IT department, with professionals who are able to explain the economic effect of digital transformation to budget holders.
More and more banks are migrating online. In the U.S. alone, the number of branches decreased by 9% in the past 10 years. Familiar banking products are turning into flexible services available 24/7 from anywhere in the world. This availability has proved vital during the coronavirus pandemic. A study released by Boston Consulting Group claims there’s been a drastic change in the way customers connect with their banks, with 24% of respondents saying they planned to use branches less or stop visiting them at all.
Above all, the main benefits of digital transformation in banking are standardization and automation that lead to increased productivity, reduced costs and improved interaction with both customers and employees. Again, to make it work, one needs a detailed strategy that combines digital systems, applications, customer experience platforms and the whole infrastructure. Building a digital bank requires streamlining processes, a new organizational culture and flexible IT solutions that support speed-to-market and offer personalization.
Digital transformation opens up new opportunities and gives a new competitive edge, but at the same time, it introduces new risks in the domain of security and stability of the financial system. However, it’s the topic for another article. One thing is certain anyway: Digital transformation in the banking sector is inevitable, and I see it as a mechanism that is forming a new financial reality of tomorrow.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
e17a7a47218e442c6ccbf6c876ba07a5
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/10/08/how-should-gold-be-viewed-as-an-investment/?sh=233d0fac7085
|
How Should Gold Be Viewed As An Investment?
|
How Should Gold Be Viewed As An Investment?
Bill Keen is the Founder and CEO of Keen Wealth Advisors and the Best-Selling Author of Keen on Retirement.
getty
With the market turbulence stemming from the Covid-19 pandemic, gold has become a hot topic of conversation in the investment world. You’ve probably seen commercials at this point trying to sell you gold coins or bars, or perhaps you have a “goldbug” in your family who talked your leg off at Sunday dinner about now being the perfect time to invest in gold.
So how should investors view gold? Should you invest now? Is everything you’re hearing and seeing simply marketing hype driven to a fever pitch because of an unstable market? Or can gold be a good investment?
Let me answer that last question right off the jump and then I’ll dive into the reasoning. Yes, there is room in a portfolio for gold, so long as you have perspective. (Full disclosure: I hold some exposure to gold through a commodities ETF.) Like any asset class, gold is not bulletproof. It’s not a magic cure-all against the forces trying to wipe out your wealth. It has its advantages and disadvantages, which are what we’ll look at in this article.
The History Of Gold
Gold has been intertwined with money, wealth and economic power for thousands of years. When gold was used to back paper currency, government officials were the ones setting the price.
MORE FOR YOUThe Hedge Fund Genius Who Started GameStop’s 4,800% Rally Now Calls It “Unnatural, Insane, And Dangerous”Not Just GameStop: Here Are The Meme Stocks WallStreetBets Traders Are Pumping Up During This 'Extremely Erratic' Reddit RallyGameStop’s Massive Surge Creates A New Billionaire As Reddit Traders Bet Against Wall Street
President Richard Nixon ended the “gold standard” in 1971. Today, gold exists as its own entity that is market-driven, with gold buyers and sellers being the ones who dictate its price.
Proponents of the gold standard would argue that the economy had less debt and fewer deficits when gold backed the country’s paper currency. One of the reasons the U.S. moved away from that standard was because it limited the country’s economic growth. On the gold standard, the amount of money in the economy is tied to how much gold there is, which handcuffs growth. So, for example, the federal government would have had to purchase or mine more gold in April to finance the CARES Act if the country was still on the gold standard — not ideal for speedy relief.
Why The Rush For Gold Now?
With some context, the picture becomes clearer as to why gold pops back up as an investment during times of crisis. I believe there are three main reasons gold is so hot right now.
First, it’s seen as a hedge against inflation. This was true in the 1970s, when gold had a 10-year run that saw its value rise from a little over $35 an ounce to nearly $525 an ounce. But then you look at the 1980s, when it dropped from an average closing price of $615 in 1980 to an average of $384 in 1990.
Its price hit a peak near $1,900 in 2011, only to see the value drop to around $1,049 in 2015 before rising to where it is now, hovering around $1,875 an ounce as of this writing. These peaks, valleys and troughs have been nearly impossible to predict, which throws cold water on the idea of gold as a hedge against inflation. In fact, if you take out the 1970s, when double digit inflation rates were the norm (the inflation rate was 2.3% at the end of 2019), the correlation between gold and inflation is quite weak.
However, there is a greater case to be made that gold is a hedge against financial crises, during which the value of stocks and bonds can crater, leaving investors devastated. Conversely, research shows that gold holds its value and does not move in sync with stocks.
This brings us to the final reason: fear. When the markets take a tumble, people panic and make short-sighted decisions, because fear has them in its grip. They’ll move their assets to gold because they reckon, if things get really bad, at least their gold will be worth something. But as I’ve discussed before, there are dangers of letting fear drive your investing decisions.
Approaching Gold As An Investment
This isn’t to say that gold is an investment to stay away from entirely. Aside from being stable during a crisis, gold is also highly liquid. If you need to cash out, you can — but be warned that, as The Balance notes, gold coins and bars are often bought at premium and sold at a discount. So, if you need to cash out your gold quickly, you could be taking a loss on your investment.
If you want to purchase physical gold (whether coins or bars), make sure you’re buying from a reputable source. If you’re looking to buy gold for your retirement portfolio, you’ll need two things: a broker to buy it and a custodian to keep it. If you’re buying gold with a plan to bury it in your backyard, think again.
Finally, think about gold as a piece of your overall investment portfolio. The general rule is that gold should constitute no more than 5%-10% of your portfolio.
This advice makes sense for one key reason: You don’t see massive ROI with gold. If you had invested $150 in gold in January 1968, you’d have an asset worth $1,345 in January 2018. An ROI of 796.7% isn’t bad! But if you invested $150 in the S&P 500 over that same period? You’d have $11,288.
So, let’s return to the question above: Should you invest in gold? The answer is “perhaps.” Talk with your financial advisor if you’re considering such a move. Unlike gold sellers looking to make a buck, your advisor will help you come up with a plan that makes sense given your goals.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
6e6cc1e48ddbacd44cd10b0eedd1d994
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/10/22/how-to-get-better-car-insurance-rates-during-the-pandemic/?sh=6cec355836ba
|
How To Get Better Car Insurance Rates During The Pandemic
|
How To Get Better Car Insurance Rates During The Pandemic
Sa El is the Co-Founder of Simply Insurance and specializes in Life & Health Insurance, and he is certified in Long Term Care Insurance.
getty
People have been driving less during the Covid-19 pandemic. As a matter of fact, when I look out the window of my high-rise, I can see that once-busy streets look abandoned, as if everyone suddenly disappeared. With that being said, many people might still be overpaying for their car insurance.
Here’s the thing: Because car insurance companies base premiums, in part, on your estimated time on the road, you may be asking yourself whether your insurance carrier should charge you the same premium now that it did in 2019.
The pandemic and associated lockdowns immediately removed millions of drivers from the roads and significantly reduced car accidents. A University of California, Davis study published in April found that in California, highway injury crashes dropped by roughly 50% during the lockdowns.
The response from auto insurers to these dramatic changes in driving habits took a couple of months to roll out. However, most major insurers have now deployed plans to pass on savings and reduce premium costs for their customers. Current plans include premium rebates (including cash refunds) and discounts on policy renewals.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
However, I believe these measures are falling short of appropriate relief for drivers. Many Americans may still be seeking ways to reduce their auto insurance premiums further.
How is the pandemic affecting the U.S. car insurance industry?
According to research from McKinsey, total miles driven dropped by 40% among U.S. drivers in March. Historically, when total driven mileage drops, the numbers of car crashes also goes down. When drivers are less likely to have crashes, auto insurance claims decrease.
Auto insurance policy premiums take into account a driver’s anticipated monthly mileage. A driver whose monthly mileage has dropped from 1,000 miles per month to 200 miles per month may request a lower premium.
But mileage isn’t the only factor that affects the risk of car crashes. Driver behavior is taken into account, too. Weekday and weekend driving patterns used to be markedly different but now almost match in terms of driver behavior in areas that have not fully “opened up.”
Accidents may slowly creep up to previous levels because of several factors. Less traffic on the road has resulted in increased speeding and wildlife on the roads.
How are insurance companies responding to the pandemic?
In March, the Consumer Federation of America (CFA) sent out letters to commissioners urging them to provide relief to consumers. Many companies took quick action, promising refunds, dividends and credits; they began implementing assistance as early as March 20. Other companies were slower to act and required requests from government insurance departments to provide refunds for premium overpayments.
• State Farm announced a $2 billion dividend return, averaging a 25% statement credit, applied in July.
• America Family refunded $50 per automobile insured in April and announced an additional 10% premium discount on policies in effect from July to December.
• Geico paused cancellation on policies with missed payments through May 31 and followed up with a 15% premium discount on most existing and new policies (average $150 credit).
• Allstate rolled out penalty-free payment programs and provided 15% payback to auto insurance customers in April, May and June.
Why do relief efforts fall short?
Most of the top 35 U.S.-based auto insurers have promised some form of relief, according to the CFA, but many offers come with strings attached. In my opinion, these restrictions combined with the low percentages of refunds or premium discounts mean many Americans are still overpaying significantly for their car insurance.
Reasons premium relief is falling short include:
• Some insurers are only offering rebates to consumers who renew with the same company and may adjust their rates at renewal time.
• Not all insurers have committed to extending relief into and beyond the summer months.
• The assistance offered may not be enough to cover the gap between former premiums and where premiums should be now with many people still out of work or working remotely.
What can you do to get lower car insurance rates?
You can get lower car insurance rates by being proactive and exploring multiple approaches:
• Talk to your insurer. Ask your insurer about premium discounts, future rebates or credits, and other options you may have to lower your car insurance. If your insurer offers you a refund, request a commitment (in writing, if possible) that you will still receive your rebate if you renew your auto coverage with another insurer.
• Switch insurers. This is a big one. Now may be a good time to shop around for auto insurance to take advantage of current competitive rates. You can request quotes over the phone or online using individual insurers’ websites. You can also explore platforms that provide you with multiple quotes from different insurers and compare coverage.
• Change your policy. Car insurance is required by law in most states, so don’t cancel your car insurance. Explore options to change your coverage instead, such as opting for car storage insurance or comprehensive insurance instead of a full-coverage policy. Ask your insurer whether it offers a payment plan if you’re having trouble keeping up with your premiums because of job layoffs.
• Consider a new approach. Several companies are now promoting pay-by-the-mile policies. These policies adjust insurance premiums based on miles driven on top of a base charge. They track mileage via either a device that plugs into a diagnostic port in the car’s dashboard or through a photo app.
You may have more options open to you than you think. This pandemic doesn’t seem to be going anywhere anytime soon, so the least you can do is work to get your car insurance bill lowered.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
462adbc26e06ce51b2d6a298fe7e98d5
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/10/23/estate-planning-in-the-pandemic-age-its-time-to-prepare-for-the-unexpected/?sh=da1a5225bec5
|
Estate Planning In The Pandemic Age: It's Time To Prepare For The Unexpected
|
Estate Planning In The Pandemic Age: It's Time To Prepare For The Unexpected
Trust & Will Cody Barbo - Co Founder of Trust & Will. Our mission is to make Estate Planning inclusive, accessible and affordable for all.
getty
The impact of Covid-19 has affected all of us in different ways. With quarantine and social distancing orders, the pace of life has changed.
While this unprecedented time has been undeniably difficult, it has given many people a chance to spend more quality time with loved ones (speaking from experience with an 8-month-old at home). It has also provided a space for thoughtfulness, reflection and reevaluation regarding what's really important in life: family, health, happiness.
Because of this, you may have noticed that some important questions have begun bubbling to the surface: Are my loved ones protected? What if something were to happen to me tomorrow? Should I have a plan in place for the future?
When you get caught up in the everyday routine of life, it's easy to push your end-of-life planning aside. But with more flexibility in your schedule, now is the time to prioritize creating (or updating) your trust or will. Fortunately, you have plenty of options for setting up a comprehensive estate plan. In addition to an in-person meeting with an attorney, you also have the option of setting up a plan from the comfort of your home thanks to emerging online services.
Here are some factors to consider when embarking on your estate planning journey:
Have You Been Procrastinating?
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Procrastination is not only normal, it's absolutely understandable. No one really wants to think about the end of their life. However, the alternative is that something happens to you before having a proper plan in place. That's why it's time to put your procrastination to a stop.
Creating a trust or will so you can nominate guardians for your children, decide how your assets should be distributed after your death and specify your final arrangement wishes can help you gain peace of mind and get back to enjoying life.
Are Your Loved Ones Protected?
It's easy to assume that estate planning is only for the wealthy or elderly. However, anyone over the age of 18 should start thinking about their estate plan — regardless of income level. In addition, there's so much more to estate planning than the distribution of assets. More importantly, you are protecting your loved ones in the case something were to unexpectedly happen to you. Here are some key areas to cover in your trust or will:
• Defining arrangements for important family keepsakes and items.
• Laying out a plan for long-term health care.
• Naming guardians for minors and dependents.
• Communicating final wishes, funeral arrangements and burial requests.
• Clarifying the distribution of assets.
Your estate plan can also include policies that help provide your family members with a budget to help pay for health care, end-of-life expenses or outstanding debts.
Do You Have Key Documents In Place?
Having a proper estate plan can give you a sense of control and relief. You'll feel safe knowing your family and legacy will be protected long after you're gone.
With this, it's important for your plan to be thorough. There are several key documents that are generally recommended:
• Will or trust
• Power of attorney
• Living will
• Health Insurance Portability and Accountability Act (HIPAA) authorization
• Designation of guardianship
• Insurance policies (life and disability)
Is Your Existing Plan Up To Date?
If you already have an existing estate plan, you're one step ahead of the game. However, can you remember how long it's been since you revisited your estate planning documents? Many things can change during the course of life, whether they be regarding your assets or beneficiaries, and your estate plan should reflect those changes.
Marriage, divorce, the purchase of a new home, the birth of a child or grandchild or a death in the family are just a few examples of life events that warrant updating your will or trust. It's also a good idea to revisit your plan every three to five years.
Don't let Covid-19 act as a deterrent that prevents you from prioritizing your end-of-life planning. These uncertain times should be a strong reminder that anything can happen no matter how secure things feel. Estate planning should be inclusive, accessible and affordable for all because everyone deserves peace of mind.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
0f81da24ccac248e94b9a0a618d60a7f
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/10/27/how-real-estate-investors-could-profit-despite-todays-economic-uncertainty/
|
How Real Estate Investors Could Profit Despite Today's Economic Uncertainty
|
How Real Estate Investors Could Profit Despite Today's Economic Uncertainty
Rob Johnson is CRO of Realized, an investment property wealth management platform helping investors create custom investment property plans.
getty
Uncertainty seems to be the "new normal," when it comes to the ways in which people are living, working and investing. But despite rattled markets and short-term economic uncertainty, real estate investments can help manage your portfolio risk through diversification, while aiming to produce returns that can be enhanced with tax benefits.
First of all, while the pandemic is global, real estate is local. Unlike other investment-grade assets, real estate value is based on the unique characteristics of the local community and marketplace.
Second, real estate investment trusts (REITs) are trading at lower valuations, making them a potentially lucrative buy during the current downturn. Furthermore, vacation rental properties are selling at steep discounts, as business and leisure travel have declined.
With these and other factors, it's understandable that today's investors are acquiring real estate in an attempt to diversify and grow retirement accounts, and to help manage market volatility.
Tax Benefits Can Juice Real Estate Returns
MORE FROMFORBES ADVISORWhat Is A REIT?ByKate AshfordcontributorTo Rent Or Buy? Making A Smart Real Estate DecisionByE. Napoletanocontributor
At our company, we emphasize two simple, but important rules about U.S. tax laws:
1. It's your money, not the government's money.
2. The tax law is written primarily to reduce your taxes.
One potential benefit of real estate investments is they allow you the opportunity to take advantage of many tax benefits and deductions, such as:
• Closing costs
• Property management and leasing fees
• Maintenance and repair expenses
• Property and business supplies
• Marketing expenses
• Mortgage interest
• Property and rental taxes
• Home office business expenses
• Meals and entertainment (business discussions)
• Travel to and from property
• Vehicle used for business
Two additional ways in which you can reduce, and even defer, payment of taxes are depreciation and the Section 1031 exchange.
Depreciation is a noncash expense allowed by the IRS to compensate investors for property wear and tear. The value of residential buildings and improvements, excluding the land, can be depreciated at a rate of 3.636% over 27.5 years, while commercial property is depreciated at a rate of 2.564% over 39 years.
Property depreciation is a key reason why many wealthy real estate investors have plenty of cash but pay relatively little in income tax. In fact, by strategically increasing basis with debt, after-tax cash flows can remain strong and robust.
The second way to defer taxes on the sale of property is to roll capital gains over into a like-kind asset, via the 1031 exchange. When assets held for long-term investment are sold, the IRS assesses a capital gains tax of either 0%, 15% or 20%, depending on your income level. Through use of the 1031 exchange, you can replace one investment property with another and can defer paying taxes on a capital gain.
Caveat Investor
While real estate can be an important part of a well-balanced portfolio, there are no absolutes when it comes to any investment. As such, before putting money into an office building, rental residential property or retail center, it's important to consider the following issues.
• Hands-on management. The term "toilets, trash and tenants" is connected with real estate ownership for good reason. Unless your target is passive real estate investments, you can assume that your property will require continuous repair and maintenance, meaning capital in addition to the purchase price. And, even if credit-worthy occupiers are filling the space, long-term tenancy — or cash flow — is not guaranteed. For instance, Covid-19-spurred residential housing eviction moratoriums have placed apartment and single-family landlords in a tough position. Even if their tenants don't pay rent, the owners can't replace them with new tenants.
• Market volatility. At the beginning of this article, I mentioned that real estate is a very local investment. While due diligence is a must with any investment, you'll need to add in-depth research on local market economics, population and competition if you are eyeing real estate assets for your portfolio. Markets are cyclical; the "hot" metropolitan area of today could be tomorrow's blighted urban core. As such, when it comes to where to invest, it's a good idea to take cues from some of the larger, more established local investors, and where they are placing their proceeds. For instance, in targeting the best single-family rentals for investment, be sure to research neighborhood ratings, which are based on household income, home values, employment, school ratings and crime rate, along with newer or recently upgraded houses.
• Asset cycle declines. "Real estate" is a broad category, encompassing everything from a medical office building, to apartment complexes, to warehouses and distribution centers. Returns on investment can differ greatly, based on supply, demand and competition (especially geographic competition). You need to understand real estate assets' economic cycles and accordingly adjust your investment decisions.
• Depreciation recapture and capital gains taxes. Depreciation is a great tool when it comes to real estate investment. But when that property is sold, any realized gain must be reported to the IRS as ordinary income, a concept known as depreciation recapture. This is the case, whether or not you depreciate expenses during your property's hold period. You'll also be responsible for taxes on capital gains, unless you plan to roll those profits into another like-kind property, via a 1031 exchange.
In Conclusion
Though no one really knows what the "new normal" will look like, real estate has been a solid investment during low ebbs in the economic cycle. Despite short-term economic uncertainty, high-quality, investment-grade real estate can help you grow your income and retirement portfolios, while allowing you to leverage many tax benefits.
Full disclosure. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
ab06e56941a9d99f1dd3a401bcde0fc0
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/02/the-race-for-the-alternative-protein-market-five-investment-areas-to-watch/?sh=2bd3d85d6c6d
|
The Race For The Alternative Protein Market: Five Investment Areas To Watch
|
The Race For The Alternative Protein Market: Five Investment Areas To Watch
Head of Investments at the Unreasonable Group, focused on backing high-growth ventures at the nexus of advanced technology, profit & impact
getty
The alternative protein market has seen a considerable rise since environmentally friendly eating habits have taken center stage. Concerns about personal health, climate change and animal cruelty have been pivotal in the growth of the industry.
According to UBS, the alternative protein market grew to just under $5 billion in 2018 and is expected to grow exponentially to $85 billion within the next decade. As an example, their report noted that the stock price of Beyond Meat, makers of a plant-based burger patty that emulates the texture, taste and form of real meat, increased fivefold after only two months on the Nasdaq.
For investors interested in this space, here are five areas of alternative protein to consider:
1. Plant-Based Meat Alternatives
The alternative protein market is commonly associated with plant-based meat alternatives, which are made from processed plant products to emulate meat. There has been debate about whether plant burgers and nut milks and cheeses should be labelled alongside their traditional meat and dairy counterparts, resulting in the words "cheeze" and "mylk" circulating the market. Categorizing these food types can put them into a "vegan only" market and exclude them from mainstream markets, which is essentially where they need to be to make an environmental impact.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Marketing meat-free alternatives alongside meat products, whereby they share shelves, aisles and menus, seems to be the way forward. The nondairy milk market grew by 60% in five years and as of 2019 held a 12.6% market share from dairy products in part because of its strategic shelf placement in supermarkets.
The main shortcomings for many meat-replica companies are related to product taste and texture as well as limited product diversity. A study by food and beverage company Kerry revealed that 73% of consumers prefer plant-based alternatives to taste like real meat; however, from what I’ve seen, the vegan market does not advocate for the taste of meat. Consumers want variety, and with a low range of product offerings dominated 61% by plant-based burger patties, there is room for improvement.
Investors should take heed that consumers like to know the origins and nutritional information of the food they eat, but that not all of them necessarily want to label their diets as vegan.
In addition to this, plant-based meat is still primarily consumed by those with an annual income over $120,000 whereas those earning below $40,000 are the least likely to consume these products.
2. Raw Plant Protein
This category of alternative protein includes raw protein in the form of pea protein powder or raw, protein-rich foods, such as lentils, beans and nuts. This is an important market, as these are simple and cost-effective ways to consume the necessary nutrients.
3. Bugs And Insect Protein
A third type of alternative protein is one which is by no means vegan nor animal-free. Bugs and insects, which are eaten in abundance across the East, are high in protein and relatively easy to farm sustainably compared to traditional meat. The United Nations published a report stating that insect protein could be a key move toward increased global food security.
4. Cell-Culture-Grown Meat
Recent innovation has revealed the possibility to "grow" meat using animal cell-culture technology. Substantial investment has been directed into this new wave. Dutch food technology firm Mosa Meat received $8.8 million in funding from German drug maker Merck KGaA and Bell Food Group. Other cultured food companies include Future Meat Technologies and Memphis Meats. (Full disclosure: Memphis Meats is in our firm's network of ventures.) Mosa Meat plans to have a pilot plant in operation for its lab-grown meat by 2021.
In 2019, after years of disputes regarding the legitimacy of these products, the Food and Drug Administration (FDA) revealed it would regulate cell-culture products just as it does traditional meat products. This was a huge step forward for the industry, which, like any other food industry, relies on consumers' acknowledgement that products have been tested and are regulated, healthy and safe for consumption.
Cell-based meat has a way to go with growing products into different cuts of meat, such as steaks and chops. On top of this, scaling up the industry to meet the goal of being able to feed the growing global population with clean and slaughter-free meat requires a lot more innovation and research. However, with this new FDA regulation, investment into further research and development of cell-based meat is expected to soar.
Investors can be more confident funneling funds into this market with the government working to improve and regulate products for the wider consumer market.
5. Blended Protein
Tyson, one of the United States's largest meat producers, has introduced its first plant-based and blended products into the market. While not targeting the vegan or vegetarian market, these products are expected to experience a high growth in the traditional meat market. The company's hybrid meat products are expected to make headway with the 75% of consumers who "are open to including both meat and plant-based proteins" in their diet.
More Than A Fad
There are significant investment opportunities to be found, and although the alternative protein market might have started as a trend, there is no doubt it has developed into much more than a short-term fad.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
70c792572906e158c5ee97903e00c243
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/05/three-ways-for-leaders-to-give-back-in-todays-uncertain-times/
|
Three Ways For Leaders To Give Back In Today's Uncertain Times
|
Three Ways For Leaders To Give Back In Today's Uncertain Times
CEO of Calamos Investments, a diversified global investment firm. He has more than 30 years of experience on Wall Street.
getty
The Covid-19 crisis will be with us for a long time to come. The pandemic continues to impact communities and companies worldwide, especially as many locales risk resurgences this fall. While hiring has picked up and the unemployment rate has declined since the height of the pandemic, there are still nearly 13 million Americans without jobs, particularly in key sectors such as hospitality, travel and retail. Reopening offices means that CEOs and senior executives face challenging choices, balancing employee safety with productivity and economic growth.
While the consequences of our executive decisions are unforeseeable, leaders can find solidarity through philanthropy. In fact, according to a report released in August by the Center for Disaster Philanthropy (CDP), Covid-19 philanthropy has exceeded giving in other disasters, totaling more than $11.9 billion, and corporate giving accounted for nearly two-thirds of that number.
The problems of the pandemic are far from over, and the needs are still great. The future remains uncertain, but the time is now for leaders to step up and give back. Here some thoughts on how to do it, based on my recent experiences creating a new program from scratch for Covid relief and recovery.
Contribute through collaboration.
Philanthropic efforts can increase exponentially when companies and industries combine for maximum impact. This spring, I founded The Chicago CEO COVID-19 Coalition, uniting business leaders to alleviate the social and financial burden the pandemic has caused within the greater Chicago area.
MORE FOR YOUBernie Sanders Warns Republicans ‘Will Win’ In 2022 Midterms If Democrats Don’t Act Aggressively On Stimulus NowBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekBiden Signs ‘Buy American’ Executive Order—Here’s What It Means For Businesses
We had substantial success bringing together the CEOs of major local companies, many of whom had already made donations personally and on behalf of their organizations. The Coalition, composed of Chicago CEOs in finance, real estate, sports, entertainment and other sectors, continues to unite business leaders in our Covid-19 humanitarian campaign.
Think outside the box.
Innovation and creativity are crucial to garner support and foster success. The Coalition's goal was to rally the Chicago community for our local citizens and neighbors in need. Remember the Jerry Lewis telethons? That was our model in creating Sweet Home Chicago, a telethon broadcast with the support of NBC Sports Chicago and presented on social media. The show brought together Chicago's famous and celebrated sports stars and athletes, musicians, celebrities and entertainers, all of whom enthusiastically donated their time to appear and perform, to help the city we all call home.
In June, the Coalition announced the distribution of over $1.3 million to the 10 local charities the campaign is supporting, with additional pledges coming in through our partnership with GoFundMe.
Choose an impactful cause and maximize resources.
Leaders should determine a cause with the most impact, whether it is a national nonprofit or a local or grassroots organization. Address what is most needed. We decided to support local Chicago charities in four critical areas: PPE, food, shelter/homelessness, and essential counseling and community services. Resources such as Charity Navigator, which we consulted to help in our vetting process, provided credible options to fit our community and organization's priorities.
Leaders can also gather insights from employees. New research demonstrates a spike in volunteer efforts from individuals. Data from LinkedIn's Economic Graph team released in August shows LinkedIn's U.S. members have been adding more than 110,000 volunteer experiences and activities to their profiles each month in 2020.
Companies can encourage individuals to contribute to the causes they care about and can match donations. We matched our employees' contributions, and many of our Coalition members and sponsors did as well. Know the resources you have available and allocate accordingly.
All business leaders are part of the same community, wherever that community may be. As a native of Chicago, I felt it was my mission to help my city. As the consequences of the pandemic economy persist, rebuilding and restoring are critical and can't be done alone. Now more than ever, companies are realizing the interconnectedness and necessary collaboration with those in and outside their enterprises.
All stakeholders matter, whether they are employees, investors or local community members in the cities where your business operates. For those of us who can, any measure of support can reap substantial benefit. In this unprecedented time of Covid, leaders globally and locally can demonstrate their commitment to help.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
7f0de2130201caaba4d5e32f0cfda864
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/09/what-many-chief-investment-officers-dont-understand-about-ai/
|
What Many Chief Investment Officers Don't Understand About AI
|
What Many Chief Investment Officers Don't Understand About AI
Clint Coghill co-founded Backstop Solutions Group in 2003 and now leads the Backstop Executive Team as CEO.
getty
Thanks to the sheer amount and complexity of data that is generated each day, the office of the chief investment officer has effectively expanded into an intelligence unit in recent years.
Data is flowing in from multiple sources, including custodians, fund administrators, consultants and managers, to name just a few, and that data is flowing into inboxes and shared drives in tens of thousands of emails per year. All of that information could live in any number of functional and technology silos within a typical investment firm, while at the same time, complex assets often have life cycles that outlast investment staff, leading to issues around knowledge transfer and data continuity.
Machine learning and artificial intelligence (AI) can absolutely be valuable tools in collecting, analyzing, managing and putting that vast amount of information to use. They can generate more insights and better analysis, create smarter automation for business processes and continuity, drive down processing costs and generally yield more value from data.
However, they are not a magic bullet. The technology is only as smart as the data it is working with. This means that not enough data, poorly trained data or dirty data will render even the most advanced automation and decisioning algorithms ineffective. Data governance is the critical element that will determine the efficacy and success of any machine learning or AI initiative.
Defining Data Governance
By data governance, I am using an umbrella term that refers to defining the sources of data within an organization and the process for gathering data and making sure it is clean. In practice, this often involves data stewards in the firm implementing practices to account for compliance, security, privacy and quality of information.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
All of this has to be in place starting from day one in order for machine learning to be effective, as these processes and the proper information architecture will ensure that data sources are being combined in sets to tell the right story.
The first step is understanding existing data flows across teams, as well as who owns what part of each flow to establish the source of truth. This will help firms avoid a "garbage in, garbage out" scenario when attempting to use machine learning. When AI gets it wrong, it's most often due to a data governance issue that hasn't been sorted out from the beginning.
It is equally important to be outcomes-focused in establishing data governance processes. An ultimate goal backed by executive support is what will ultimately lead to organizational change. Whatever the clarion call may be, there must be one that serves as the guiding principle to which everything ties back. This helps keep firms moving toward their ultimate goals (and avoid getting sidetracked by occurrences that don't have a direct link to the desired outcome).
Putting It Into Practice
Once sound data governance practices have been established, firms can begin to realize the maximum benefit from investments in machine learning and AI technology because they're starting from a place of clean data for entities and relationships of data sets for funds, accounts, investors and organizations.
As the CEO of a technology provider to institutional asset owners, some of my recommendations for leveraging machine learning and AI may include:
• Leverage automation to reduce manual touch time on processing incoming data, while simultaneously unlocking new insights from that data: Institutional allocators receive hundreds of documents related to their investments into private equity funds or hedge funds on a monthly basis. Some of these documents contain timely information that requires action, such as call notices. Others may contain information that needs to be extracted for analysis and summary, such as balances and transactions.
With sound data governance practices in place, allocators are able to automate the identification of these documents and the information extraction, removing manual errors and delays.
• Streamline knowledge transfer for enhanced business continuity: Institutional allocators regularly manage assets with life cycles that outlast the tenure of investment team members. When an individual leaves a firm, they can often take much of the valuable knowledge about the investments they've been managing with them. Standardized, automated data processes will ensure that all knowledge about an investment or asset is preserved correctly and comprehensively for the next manager to step in and provide seamless continuity of service.
• Organize vast amounts of unstructured data: Another key challenge for institutional allocators is consuming and organizing the vast amount of unstructured data received. Machine learning can address this challenge in a few ways. Data governance policies and processes should ensure AI models have been diversely trained with ample amounts of clean data. With this underlying information architecture in place, firms are able to implement systems of automated collecting in a structured form.
Another option is to use machine learning to process the data using natural language processing (NLP) and named entity recognition (NER) techniques to automatically categorize the information. Both will save time and boost efficiency.
These are just a few examples of the benefits that machine learning and AI can yield with proper data governance in place from the outset. Looking ahead to the coming decades, growth in the financial services sector will only continue to be fueled by the automation and productivity gains driven by technology innovations in machine learning and AI, especially as more and more data is generated each day.
In order to reap the full value of these technologies — such as the automation of manual tasks, seamless knowledge transfer, ordering unstructured data and more — institutional allocators must also have the right data foundation in place, and that starts with proper data governance. It is only with the processes in place to ensure data quality that machine learning and AI can be effective to drive real organizational gains.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
84d63db8f011240e870e618212e50a45
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/10/running-a-startup-through-the-eyes-of-a-poker-player/
|
Running A Startup Through The Eyes Of A Poker Player
|
Running A Startup Through The Eyes Of A Poker Player
Csaba Konkoly is Co-Founder & President of Capital, the company that is pioneering the Capital as a Service model with The Capital Machine.
getty
To pass the time during the Covid-19 lockdown, I taught my kids how to play poker. I'm no expert, but I play occasionally and understand the game well. As I walked them through the fundamentals, I started thinking about the similarities between playing poker and running a startup. The skills you need and the mindset you have to develop are similar in both, and as a founder, that's likely what drew me to poker in the first place.
There are two major principles that lead to success in poker: focusing on your hand and focusing on the process, not the outcome. I believe that founders can take a page out of their playbook.
Focusing On Your Hand
• You only know what you've got. In poker, you never know what cards everyone else has until they show their hands at the end. You only know your own hand and the community cards, meaning your decisions in the game are based on limited information. If you have pocket aces — the best hand pre-flop in Texas Hold'em — it's unlikely that anyone else does too, but not impossible. You can't know.
In business, this is like having a wonderful idea you think could change the world. Is it unlikely that someone else is working on the exact same idea? Perhaps, but never impossible. You don't know what others are developing behind closed doors, so you can't assume you have all the time in the world to get to market.
MORE FOR YOUBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekTax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021Democrats Now Planning For New Stimulus Bill By Mid-March—Here’s What’s Holding It Up
• You can't be passive. If you never bet high because you're waiting for the perfect hand, you'll fall behind. Those who take risks will lose sometimes, but they'll also win more often than those who never bet at all. You can't wait for the perfect hand.
When building a startup, waiting to reach perfection means giving your competitors time to beat you at your own game. Companies like LinkedIn and Netflix launched early versions that still needed improvements, but the goal was likely to get a product out. If you wait for perfect, you'll wait forever.
• You need the skills to take advantage of opportunities. You could have a winning hand, but if you don't know what you're looking at or don't know the best way to leverage it, you'll lose. You need to understand odds and have a heightened emotional quotient to read the table and your competitors if you want to make the most out of a good hand.
In the same way, founders need the skills to take advantage of good business opportunities. They should understand their odds of success and possibilities for failure, and be prepared with the financial cushion to manage these problems as they come. And when it's time to act, founders need to know what action to take. When do you fundraise? How much do you raise? When do you launch? All of this requires skills beyond just spotting a good opportunity.
• You can't control your hand. Poker and startups are both games of skill with heavy elements of chance. You can't control your own hand or the hands of those around you. All you can control is how you respond to what you're given. In the case of startups, that means building more cushion than you need and having plans in place to deal with failure.
Focusing On The Process
Win or lose, the outcome of any single hand in poker is unimportant. What matters is the process. What decisions did you make that led to that outcome? How could you make different decisions in the future? Early on, you should expect to lose often — which is a good thing. Those losses are where you'll learn what went wrong and what you could do better in the future.
The goal is to build skills that result in more wins over time. You won't win every game; even the best poker players don't. But after every loss, you'll hopefully learn how to make wiser decisions moving forward.
This is true for startups, too. You won't win every investor. You won't always have award-winning ideas. You will lose money, lose staff and lose opportunities. Keep your eyes on the processes that led to those decisions, not on the result.
Takeaways
Poker and startups are games of skill with a large dose of chance. Whether you get good cards or bad, you need to have the skills to take advantage of the hand you have. You have to learn how to balance the risks with the payoffs; both those who are too aggressive and too passive end up losing in the long run. And most importantly, you have to remember that every loss isn't important. Everyone loses, from the biggest poker players to the most famous entrepreneurs. All that matters is what you do with those losses when they come.
Do you pick up the cards and keep playing, or do you fold?
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
600f450bfbe6a4ccb4b01161340ebff7
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/12/what-you-should-know-before-investing-in-a-bitcoin-ira/
|
What You Should Know Before Investing In A Bitcoin IRA
|
What You Should Know Before Investing In A Bitcoin IRA
CEO and Founder of Regal Assets, an international alternative assets firm with offices in Beverly Hills, Toronto, London and Dubai.
getty
It's been a good year for cryptocurrency investors. As of Oct. 22, the price of bitcoin (BTC) was up roughly 80% since January 1. However, there's no denying that the digital asset is prone to volatility and price swings. Bitcoin's erratic price movement has left many investors wondering whether to include it in their individual retirement account (IRA), or if it's better off left out. (Full disclosure: Author holds investment in bitcoin.)
As the CEO of an alternative investment company, I've helped countless clients invest in assets such as precious metals and cryptocurrencies. Since the inception of bitcoin, I've been watching its development closely, and there have been times when I thought its performance and steady increase in adoption among institutional investors made it a good investment. On the other hand, there were periods when the asset was simply too unstable to confidently invest in.
If you're thinking about investing in cryptocurrencies via a bitcoin IRA, here are a few things to know beforehand.
What Is A Bitcoin IRA?
Let's first break down the details of a bitcoin IRA and why it might be an attractive option for investors looking to get into alternatives. A bitcoin IRA is a tax-advantaged retirement account like any other, only that it includes cryptocurrencies.
MORE FOR YOUBernie Sanders: Here’s How To Get Student Loan Cancellation And $2,000 Stimulus Checks Without RepublicansCongress May Cancel Student Loans In New Stimulus PackageHere’s What’s In The Two New Covid Relief Executive Orders Biden Just Signed
These IRAs are self-directed retirement accounts, which can either be Roth or traditional. Such accounts can only be opened with a custodian that allows alternative assets (i.e., you won't find these accounts at your typical brokerages). These IRAs aren't limited to cryptocurrencies — rather, they allow for a wide range of asset classes, including traditional stocks and bonds as well as alternatives.
Diversification And The Impact Of Economic Instability
For investment purposes, cryptocurrency is, more than anything, a diversification tool. Unlike other diversifiers, such as precious metals, bitcoin is a highly asymmetrical investment. In other words, the upside potential (i.e., price ceiling) is much higher than the downside risk (price floor). This characteristic can make bitcoin an attractive option for risk-tolerant investors looking to allocate a small portion (5% or less) of their portfolio to a high-growth asset.
At present, bitcoin price movement appears to be influenced by systemic instability caused by the coronavirus pandemic and, as angel investor Sankalp Shangari noted in an April interview for ETBFSI, is becoming increasingly correlated to the performance of the U.S. equities market. If the coronavirus situation worsens and businesses have to undergo further restrictions, we should expect to see a BTC bull run based on historical precedent.
Ultimately, a bitcoin IRA is most appropriate for long-term investors who can ride out BTC's significant price fluctuations. In the meantime, BTC provides value as a hedge against U.S. dollar inflation for investors bearish on the future of the dollar.
Know The Risks
Investing in bitcoin is not without its share of risks. Critics of cryptocurrencies rightfully point out that the asset is still immature and suffers from many pitfalls and risks that one would expect of emerging technological assets, such as:
• Volatility and erratic price movement
• Cybertheft
• Fraudulent exchanges
• A limited and unpredictable regulatory environment
Many of these pitfalls can be avoided by carefully vetting bitcoin IRA providers and currency exchanges, as well as managing a properly diversified investment portfolio. Likewise, investors should look for custodians with strict cold storage protocols to avoid theft and hacking, as well as insurance on the full amount of each deposit.
In addition, it's best to stay clear of a bitcoin IRA if you have a short investment horizon of five years or fewer. Given the volatility of the asset, a steep downward price movement could delay your retirement or cost you a sizable chunk of your savings. The same is true of conservative, risk-averse investors. These types of accounts should only be considered by investors who can afford to lose some of their savings if the asset takes a downward turn.
The Bottom Line
When deciding whether to invest in bitcoin via an IRA, you should understand the cryptocurrency landscape and its potential for the future, your individual risk tolerance, your time horizon and your investment objectives. A bitcoin IRA can be a good option for retirement investors with a long time horizon on their portfolio (i.e., 10 or more years) or those who can afford to assume the additional risk, because of its upside potential in the long-term. Those close to retirement age, however, might be better off playing it safe and sticking to fixed-income traditional assets or time-tested hard assets such as precious metals.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
0a0a88205d37c7b5761de1eaaaf4f0f8
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/13/14-finance-experts-share-their-biggest-fintech-predictions-for-2021/?sh=1607998310c2
|
14 Finance Experts Share Their Biggest Fintech Predictions For 2021
|
14 Finance Experts Share Their Biggest Fintech Predictions For 2021
Financial technology is constantly changing. Tech such as contactless payments, online banking and investing, cryptocurrency, and digital wallets have evolved to provide more advanced ways for people to make transactions and manage their money.
If you work in finance, it’s important to keep a close eye on new systems and best practices that could help you better serve your clients and customers. To learn more about upcoming industry trends and which will be the most impactful, we reached out to the members of Forbes Finance Council. Below, 14 of them share the biggest trends they see coming to fintech in 2021 and their potential long-term impact.
Members of Forbes Finance Council share their predictions for upcoming fintech trends. Photos courtesy of the individual members.
1. Remote Collaboration
I think the biggest trend coming is going to continue to be anything that allows clients to collaborate remotely. I think you continue to see risk analysis, financial planning software, meetings, etc. become even more collaborative. This will affect the industry by accelerating the trend of the “virtual office.” This could easily increase the number of clients an advisor can reasonably serve. - Joshua Strange, Good Life Financial Advisors of NOVA
2. Tokenization
The way we invest in assets is on the cusp of fundamentally changing. Through tokenization (blockchain tokens that digitally represent real-world assets), security tokens can represent shares in a company, real estate or a painting. Tokenization will allow for a new financial system that’s more democratic, efficient and vast than before, disrupting not only fintech but the mass of interlinked industries. - Alexey Koloskov, Orion Protocol
3. Banking As A Service
There will be more “bank in a box” tech layers between fintech and banks to enable spinning up partnerships on a faster timeline. I also see more back-end companies to automate critical compliance functions such as Know Your Customer and regulatory change management. I also think we will see even more “regular” companies offering financial services as well as increasing consolidation among fintech companies. - Jeanette Quick, Gusto
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
4. Increased Focus On Financial Literacy
A big trend that could be seen is a renewed need for financial literacy. Covid-19 forced everyone to think about both their long- and short-term financial outlooks. What we have seen in the auto refinancing sector is that people don’t even know you can refinance a vehicle. You’ll find consumers who are looking to sharpen their finances and companies that will be trying to reach and educate them. - Tom Holgate, iLendingDIRECT / Auto Finance Solutions
5. Insurance Technology
The rise of insurance tech will revolutionize the health insurance industry, with innovations ranging from digital health records to tracking fitness. The rise of smart contracts gives insurance companies a way to update their infrastructure and cut long-term costs while providing clients with superior service. - Joseph Safina, Safina Asset Management
6. The ‘Internet Of Cash’
The rise of the “Internet of Cash” and the ongoing shift to a completely cashless society has created an onslaught of fraud attacks. This has heightened the urgency for the financial industry to create new payment standards around the use of digital cash—as well as all types of financial transactions happening in digital channels—to eliminate the systemic banking fraud plaguing our nation. - Eric Solis, MovoCash, Inc.
7. Open Banking
Open banking has been noted as one of the innovative forces expected to reshape the banking sector. If traditional banks embrace this opportunity and become savvier in the way they analyze and stream data, they will expand their ecosystem and be in a position to better serve customers. Once a comfort level with the safety of data is reached, the implementation should lead to lower costs. - Snezana Obradovic, Outsource Insurance Professionals
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
8. Paperless Banking
The fintech industry was inching closer to a paperless world, and the pandemic has helped both consumers and businesses trust in technologies that fully eliminate paperwork. Consumers are comfortable enough with connecting their bank accounts and using platforms like DocuSign that, in 2021, paper bank statements and other financial paperwork will become obsolete. - Joe Camberato, National Business Capital & Services
9. Increased Interest In Credit And Financing
I see increased interest in both consumer and business-to-business credit and financing. Large, mainstream payment providers and networks entering the market of card installments are further validating this trend. This could lead to consolidation in the space, with fintech leaders being acquired by larger institutions to add these capabilities to existing solution suites. - Eric Christensen, Digital River
10. More Partnerships With Non-Fintech Companies
With Covid-19 disrupting much of 2020, fintech experienced significant growth. Along with continued growth and increased adoption, we anticipate a significant number of partnerships with non-fintech entities that will continue to expand the fintech ecosystem. - Ryan Rosett, Credibly
11. AI Chatbots
Fintech is one of the fastest-growing industries. It can leverage technological advantages such as AI chatbots to act as personal digital assistants. In the long term, AI chatbots will be able to complete more and more complex tasks for customers and help improve customer engagement with common financial products that are currently offered by financial institutions. - Lijie Zhu, Dragon Gate Investment Partners
12. Remote Work Automation
Remote work has exposed processes that could be automated or need to be enhanced due to a distributed/non-centralized workforce. Fintech that helps processes that require coordination (e.g., payments, budgets, AP) will be in demand. Easy-to-use, time-saving reporting tools will get traction. Finance and accounting teams will be asked to do more with less, which is a perfect fintech play. - Aaron Spool, Eventus Advisory Group, LLC
13. Digital Private Placement Platforms
Businesses will face a capital shortage in the mid-term as investors grow more cautious and conservative, and banks expect tough quarters ahead. As a result, I expect private placements will grow exponentially. There are only a few digital private placement platforms, and they often have lengthy back-office processing and punitive pricing. Innovators in this space will be game-changers for the industry. - Lucia Waldner, CC Trust Group AG
14. Increased Use Of Online Investment Platforms
The pandemic has seen record numbers of people signing up for brokerage accounts. With Robinhood and other companies making it seamless and free to trade stocks on an everyday basis, stocks are trading at record numbers. I think there is a ton of opportunity to take advantage of these trends and have fintech conform to the younger stock-trading demographic, and that will continue into 2021. - Jonathan Moisan, Advertise Purple
|
3d31a1b2ae8f068d1b1aff8967efd815
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/18/spac-101-what-founders-need-to-know-on-the-path-to-exit/
|
SPAC 101: What Founders Need To Know On The Path To Exit
|
SPAC 101: What Founders Need To Know On The Path To Exit
Sean Cantwell is a managing partner at Volition Capital, focusing primarily on companies in the Software and Tech-Enabled Services sectors.
getty
Special purpose acquisition companies, or SPACs, have been generating a lot of buzz in the startup world recently. These "blank check" companies offer entrepreneurs another path to exit that is less complicated than a traditional IPO. With the uncertainties of the pandemic, some, such as CrunchBase News, have called 2020 the year of the SPAC.
But what truly makes SPACs attractive for founders, what does pursuing one say about your company, and when does it make sense to choose SPACs over traditional IPOs or other exits?
Here's a SPAC 101 specifically tailored for founders who might be reevaluating their options along the path to exit:
1. How Does A SPAC Work?
SPAC management teams begin the process by raising often hundreds of millions of dollars in an IPO for the purpose of effecting a merger or other type of business combination. Interestingly, they still go through the traditional IPO roadshow of speaking with institutional investors to build support and capital.
Over the next several years, the money they raise in the IPO is held in a trust, which cannot be accessed until the management team has identified a private company for acquisition. The goal is to make that company go public through acquisition. Ideally, this draws upon the reputation, experience and documented success of the SPAC's management team to identify the right business and effectively transition them into a public company.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
2. How Do SPACs Simplify The Process Of Going Public?
Having already gone through the IPO roadshow, the SPAC can negotiate a merger with the private company, sparing them from having to go through the IPO roadshow process themselves. Theoretically, this could be done in a single negotiation, which means the private company can skip months of meeting with potential investors one-by-one, courting hype for the day of IPO.
For companies that raise huge amounts of venture capital, this can delay the traditional IPO timeline by quite a bit. This is because a high venture capital efficiency ratio, where revenue/ARR over capital raised/consumed, will yield better valuation multiples. Companies will wait longer to grow that revenue base after raising a big round if they aren't particularly capital efficient. SPACs might be able to help companies accelerate this process and get access to public funding faster.
3. What Type Of Companies Are Attractive For SPAC Mergers?
Right now, a majority of the companies that are going public via SPACs are consumer-focused companies, but some experts think this is just the early wave and there could be interesting SPACs targeting enterprise software companies in the future.
There are virtually no early-stage companies being targeted by SPACs, as going public requires organizational governance and infrastructure in place that only well-established companies can really muster. Companies should broadly fit the profile of companies already considering an IPO: a large and growing market, a track record of sustained growth and an experienced management team.
4. When Does It Make Sense To Pursue A SPAC?
Because SPACs give private companies access to public capital much faster than traditional IPOs, many companies use them to act quickly when markets are hot. With many IPOs recently outperforming target prices on the first day of trading, there's still a lot of investor confidence in the market.
However, if a company thinks that confidence won't last, they can use a SPAC to quickly go public and avoid potentially getting stuck in a down market, and the pandemic could be a huge driver of the recent boom in SPAC formation.
SPACs also give founders more flexibility to negotiate the terms of stock rollovers and incentives that wouldn't be available in a normal sale. The inherent risk with traditional IPOs comes from potentially underperforming or overperforming the target price. While overperforming might sound good, with so many IPOs recently exceeding target prices quite dramatically, early investors are getting shares at discounted prices. A SPAC would largely remove this risk.
5. What Are The Downsides Of SPACs?
However, floating their valuation to the public through the IPO roadshow allows management teams to pressure test their target price and ultimate valuation.
Companies like Snowflake may have left money on the table via an IPO target price that was wildly exceeded on the first day of trading, but had they gone the SPAC route, they likely would have left considerably more on the table. This is because investor hype plays a much smaller role in a single negotiation, which makes it hard to gauge the appetite of investors for a higher valuation. IPOs may expose you to risk due to fluctuations in investor confidence, but they can also hedge against lower valuations that might come as a result of SPACs.
As more well-regarded investors and management teams form SPACs, there could be a change in perception, but skepticism still lingers. Because the profile of a company considering a SPAC should roughly match that of a company considering an IPO, some investors might still raise an eyebrow about a company choosing to go down the SPAC route, especially if it's not with a well-established firm or team.
What Does The Path To Exit Look Like For You?
As the first investors in Chewy.com — which IPOed at a valuation of just over $14 billion — our company has seen firsthand the benefits and the challenges of IPOs, but every path to exit is unique to that founder and management team. While I wouldn't advise any company to discount SPACs as another path to exit, I would advise caution.
Some companies that raise huge rounds and delay the exit timeline will find SPACs attractive during the pandemic, but capital-efficient companies (whether raising large rounds or small) might not need to accelerate their exit in the same way. There are certainly benefits to SPACs, and this method could become a popular and viable alternative to IPOs in the future, but I recommend exploring all your options to walk down the path to exit that's right for you.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
86f565a9badf4e31108644e0c0aab5c9
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/18/the-internet-of-cash-drives-need-for-new-payments-standards/?sh=6b7d506852ee&utm_campaign=Fintech%20-%20BZ%20Fintech%20Daily%20Beat&utm_source=hs_email&utm_medium=email&_hsenc=p2ANqtz-9e3KF8ormGPLSL6eB10qvI_oAavzvQLs9unnow5_IaIr0f95e40oMuXcC84cy2aibViRgT
|
The Internet Of Cash Drives Need For New Payments Standards
|
The Internet Of Cash Drives Need For New Payments Standards
Founder & CEO of MovoCash, Inc., where he's combining the best of banking & blockchain through MOVO, a highly secure payment card platform.
getty
The payments industry has undergone a radical shift in recent years. Consumer desire for fast, frictionless digital payment options has driven adoption of mobile payment solutions, peer-to-peer (P2P) payments, digital wallets, cryptocurrencies and more. The global Covid-19 pandemic and associated growth of online shopping have further accelerated this trend.
However, along with the rise of digital payments has come a surge in fraud. Traditional financial institutions, neo-banks, mobile payment apps and other payment players have all found themselves targets of fraud and cybersecurity attacks. In fact, cyberattacks against the financial sector rose 238% during the early months of the pandemic as lawmakers poured trillions of dollars of relief funds into the financial sector and fraudsters sought to take their piece of the pie. It’s a Wild West scenario, and new standards are needed around digital cash, cryptocurrencies and all types of digital payments to eliminate the banking fraud plaguing the nation.
The Rise Of The Internet Of Cash
The Covid-19 pandemic drew increased attention to and amplified the need for a digital currency in the U.S. as much of the nation sheltered in place and minimized travel to only the essential. Even before the pandemic, we saw a global trend moving away from physical cash, toward many different types of digital payment options. However P2P payments, mobile wallets and mobile payment apps, though they move money through digital channels, are still based on the traditional banking system and payment card networks. On the other hand, cryptocurrencies are digital money, but they are not backed by the Federal Reserve. Taken together, the wide ecosystem of payment options in digital and mobile channels create what I like to call the “Internet of Cash.” As they have grown in popularity, they are all bringing us one step closer to the concept of a true digital currency — a fully digital currency issued by the Federal Reserve and backed by the authority of the U.S. government.
A Surge In Fraud
At the same time, the pandemic also placed increased pressure on financial institutions to digitize their services, as fewer people visited bank branches and ATMs. This rush toward digitization created holes in the system that didn’t exist previously and opened the floodgates for fraud. As unemployment skyrocketed, lawmakers poured trillions of dollars of relief funds into the financial system in the form of stimulus checks, expanded unemployment benefits and more. This relief effort was especially important to the unbanked and underbanked, who don’t have access to traditional bank accounts.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
I believe that a digital currency would have been the fastest and most effective way to get money to those who needed it most. Early drafts of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) proposed one, but it was cut from the final bill. As a result, when fraudsters overwhelmed digital processes throughout the financial system, government agencies and banks were forced to freeze funds as they sorted out the fraudulent claims from the legitimate. Months later, millions of people still had not received the funds they were supposed to receive.
The Need For New Standards
There has never been a greater need for a digital currency in our country than there is now. But to move forward with a digital currency while also reducing the wide-scale fraud in the financial sector, we need standards that are designed for the Internet of Cash. The regulations and standards governing the financial world were created for a previous era, one that consisted solely of physical currency, central banks and the need for settlement times. They fall short in today’s fast-evolving payments world. Financial institutions, fintech innovators and digital payments players must work together and help create new standards that foster the safer use of digital cash and digital payments. These standards need to include:
1. Frameworks for guaranteed, instant settlement for both consumers and merchants. The old financial system was built in silos, and moving money from one place to another required latency and settlement times. With digital cash, transfers are instantaneous. With a government-backed digital dollar, settlement can be guaranteed immediately, for both the consumer and the merchant.
2. Dispute and chargeback resolution methods for digital cash. Similar to settlement times, chargebacks are a byproduct of an earlier era. When money exchanges become instantaneous, the ability to detect fraudulent transactions and dispute or reverse them becomes more challenging. More modern technologies and policies can be put in place to eliminate unauthorized transactions and protect funds as they are moved around the ecosystem.
3. Advanced fraud prevention technologies and policies. As the world moves toward instantaneous digital payments, traditional fraud prevention techniques are no longer adequate. The financial sector needs to widely adopt technologies, infrastructure and policies that enable continuous monitoring as funds move in order to identify suspicious and fraudulent activity in the moment and stop it as it happens.
4. Stronger data security standards. Current practices around consumer data protection, as well as methods used for identity verification and authentication, will be inadequate in an increasingly digital world with an ever-growing fraud risk. Banks and fintechs alike must adopt more modern and effective data security standards and practices.
The world is moving toward a cashless, fully digital payments ecosystem. The Covid-19 pandemic has accelerated this trend and is bringing us closer to a government-issued digital dollar. This will deliver many benefits, including faster settlement, reduced fees and greater freedom for people to gain and use their money any way they need. However, the rush to digitization has highlighted a porous technology infrastructure prone to fraud and security vulnerabilities. The financial industry and government legislators must act now to create new standards designed for the world of digital payments to eliminate fraud, better serve consumers and protect their hard-earned money.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
ce02d79107bc530af491934b1e5c3e5a
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/18/venture-capital-funds-need-to-innovate-and-differentiate-heres-how-they-can/
|
Venture Capital Funds Need To Innovate And Differentiate. Here's How They Can
|
Venture Capital Funds Need To Innovate And Differentiate. Here's How They Can
Dayakar Puskoor is Managing Partner at DVC, an early-stage venture capital firm investing in cloud, AI/ML, IoT, XR, emerging technologies.
getty
The venture capital (VC) industry has been redefining, reinventing and repurposing itself in recent times due to the influx of online crowdfunding platforms, accelerated technology cycles and a newer generation of founders. This has required venture capital funds to increase their relevance, become agile and transform themselves into more than an investment partner to founders. In this article, I'll discuss several factors that are helping venture capital funds to innovate and differentiate.
Venture Capital Funds' Relevance In The Startup Ecosystem
Venture capital funds play a profound role in financing, accelerating and invigorating the startup ecosystem. Venture capitalists take on an investment's risk either as a standalone investor in a startup or as part of a financing syndicate with a lead venture capital pulling together the syndication.
In recent times, the syndication model has proven to provide better outcomes for investors as well as for startups. Cross-border venture capital syndication between venture capital firms in the U.S. and in the emerging economies, such as India, are creating immense synergies for the relevant U.S.-based VC firm, the local VC firm and the startup as cross-border syndication increases the chance of good exits.
Through their investments, venture capital firms typically tend to obtain either a board seat and/or a board observer seat through which they perform an advisory role guiding startups into growth trajectory. However, venture capital firms have upped their game recently to provide a much broader role than financing. They have been bringing in expertise in product strategy, product-market fit, customer acquisition and, most importantly, helping enterprises pivot to their second act, when needed. This further emphasizes a VC firm's relevance in a startup's success.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
How Technology Is Changing The Venture Process
Technology life cycles have shrunk. Newer market categories are springing up and disappearing quickly, which impacts the life cycle value of an industry on a time-horizon scale. This requires venture capital firms to be agile in managing their deal-flow funnel.
Venture capital firms are beginning to use proprietary and in-market tools to more efficiently manage the deal-flow funnel, analysis and investment. Here's an example of how this can work: The deal flow starts with a startup submitting a form that feeds itself into deal-flow management and due-diligence systems. The data-driven digital tools enable venture capital firms to streamline data collection and manage deal flow and portfolio companies. In the spirit of differentiating and adding value to its portfolio companies, the VC firm then begins its structured engagement, which includes review of product-market fit, product architectures, executive hiring and go-to-market strategies that can lead to accelerated pivoting in the right direction for growth and success. Venture capital companies are going to the extent of productizing, branding and customizing their structured engagement resulting in value creation for the startup and the investors.
The Importance Of Mentorship
Technology and processes can go a long way in the highly relationship-oriented business of venture capital investment. But venture capital is not simply a business of investment or investment in a business; it is an investment in a founder's conviction, vision and ability to execute. Mentoring founders and their founding teams is a unique value that many venture capital firms are including in their engagement model with startups. Mentoring provides significant benefits to startups, such as helping to build their organization's culture and helping them enshrine their beliefs and values as they enter hyperscale mode. Venture capital companies are also going beyond mentoring by conducting special skill-building workshops, sourcing digital libraries and sponsoring portfolio companies' employees in professional programs.
The venture capital industry is being challenged by a newer breed of players including incubators, accelerators and micro funds. It is pertinent that investors such as limited partnerships, family offices and fund-of-funds partner with venture capital firms that can differentiate themselves, and likewise startups partner with VC firms that can become strategic partners beyond funding and gaining equity. Mainstream businesses are transforming, and so too should the venture capital industry. The mantra of innovate or die does not have an exception, including the venture capital industry.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
7b9644ac4bb43c7754568ef89838fe29
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/18/why-cloud-enabled-accounting-doesnt-necessarily-include-financial-automation/?sh=ca708723529e
|
Why Cloud-Enabled Accounting Doesn't Necessarily Include Financial Automation
|
Why Cloud-Enabled Accounting Doesn't Necessarily Include Financial Automation
Jared King is Co-Founder & CEO of Invoiced, an award-winning, cloud-based platform for accounts receivable automation.
getty
Cloud-enabled computing is more important than ever for finance and accounting teams. With these functions now needing to be performed easily from home or otherwise remotely, this year's pandemic has been a forcing function for shifting the workload of on-premise financial and accounting systems to the cloud. Fortunately, many businesses had already initiated or completed that transition before the outset of the pandemic, and many younger companies were already cloud native.
But what I've observed is that while many businesses have moved their finance and accounting software and data to the cloud, their financial operations are simply stuck. What do I mean by financial operations? It's all that hard, cyclical work that doesn't get fully done for you by your enterprise resource planning (ERP) or accounting system. It often requires more people or more time to do it successfully — it's the work that's getting done outside those core systems with spreadsheets, handwritten notes or manual data entry. Examples of financial operations are accounts receivable and collections, accounts payable, period close, budgeting, revenue recognition, etc.
In practice, many cloud-based ERP and accounting systems provide basic tools for handling or aiding specific financial ops functions. For example, just about any accounting package has some way for you to generate and send an invoice to a customer. But what I consistently see is that companies with significant customer volume or business complexity have financial operations requirements that easily surpass what most accounting or ERP packages come with out of the box.
As a result, it's possible to have a state-of-the-art, industrial-strength ERP fully and pristinely implemented, while your team is still working tirelessly to chase down invoices, forecast quarterly cash collections or pay suppliers. In fact, these types of businesses — which have the growth and complexity that drove upgrading to a new financial system of record in the first place — are often the ones that need to spend the most time and manual effort on their financial operations.
MORE FOR YOUBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekTax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021Democrats Now Planning For New Stimulus Bill By Mid-March—Here’s What’s Holding It Up
So what's a modern, digital-forward business to do? How can they get their financial automation strategy caught up to the other software and data advancements they've made in migrating to the cloud?
Here are the steps I've seen the most successful companies consistently taking:
1. Know Thyself: The first step is taking stock of your team's current and expected financial operations workload. Where is the greatest amount of manual effort being expended each month and each quarter? Are there patterns that can be recognized? Are there certain team members or groups who are being burdened the most by specific activities? Can you identify one or more specific functions (e.g., accounts receivable, accounts payable, quarter close, etc.) that consume the lion's share of manual time and effort? Use these findings to create a prioritized list of potential financial automation/efficiency initiatives to shape your near or mid-term digital transformation agenda.
2. Shop Local: Once you've enumerated and prioritized your opportunity areas per above, consult with your ERP or accounting software provider. Many widely used systems offer specialized modules that are sold, integrated and fully supported alongside your core system. And even more have assembled their own ecosystem marketplaces and partner relationships for cloud-based, third-party add-ons designed to seamlessly integrate with your existing system. (Full disclosure: My company participates in many of these marketplaces.) Also consider consulting peers at different companies who use the same accounting/ERP system, to see if they recommend specific add-ons and to learn from their experiences implementing and using those solutions. LinkedIn can be a useful resource for gathering this particular type of input, as there's usually at least one LinkedIn Group for just about every popular business software system under the sun.
3. Make A Project: Validating that pre-built solutions exist doesn't necessarily mean that all of them will work for you. The most successful companies extensively document their business requirements and prioritize feature wishlists, making it easy to compare solution alternatives based on fit. Understand who will integrate outside systems with your core financial package, how long it will take, what training might be needed and when it will be ready for use. All of these considerations including evaluation, procurement, implementation and launch should be compiled in a plan with a budget and timeline. Having such a plan will enable you to keep yourself and your stakeholders on the same page with regard to what you'll get, how much it will cost (in budget and effort), and when you'll be able to start using it.
As many businesses have already taken the important step of cloud-enabling their finance and accounting software, it's not too hard for them to envision the benefits of automated financial operations. The fact is though, today, implementing a new solution that will automate manual finance and accounting work still isn't an automatic process unto itself. Putting financial automation in place is not a trivial effort — it requires diligence, internal and external effort and plenty of expectation setting. But when embarked on using the steps above, you'll be taking significant steps forward in reaping the fullest set of benefits made possible by the work and resources you've already invested in moving to the cloud.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
621c76cd6e085f1204dcf306f09673f4
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/20/tackling-2020s-unique-holiday-season-14-pro-tips-for-prepping-your-business/?hss_channel=lcp-11077990&utm_content=148104421&utm_medium=social&utm_source=linkedin&sh=54287eab29e3
|
Tackling 2020’s Unique Holiday Season: 14 Pro Tips For Prepping Your Business
|
Tackling 2020’s Unique Holiday Season: 14 Pro Tips For Prepping Your Business
Businesses are in the midst of the final setup for the rush of holiday sales. However, the current pandemic and a looming flu season have quieted the usual hustle and bustle of holiday shopping and driven many more shoppers online.
The holiday season of 2020 will likely look different than years past, and all businesses need to be financially prepared for the outcome. Below, 14 Forbes Finance Council members share how they predict this holiday season will be different and what steps businesses can take now to get ready.
Members of Forbes Finance Council share strategies for businesses to prepare for the 2020 holiday season. Photos courtesy of the individual members.
1. Build a robust e-commerce value chain.
More will be bought online this year than ever before. Businesses should ensure they have a strong and robust value chain for their e-commerce channel, including an attractive and easy-to-use website, strong marketing—both offline and online to ensure consumers are aware of their store—a credible payment processor, and a strong delivery/logistics provider. - Nasir Zubairi, The LHoFT Foundation
2. Generate temporary income with financial assets.
Brick-and-mortar businesses will continue to be negatively affected by Covid-19 during the holidays. Even holiday parties are unlikely as the flu season gives the pandemic an unfortunate boost. Small-business owners may need to look to utilizing cash-generating financial assets as sources of temporary income. Life insurance, life settlements and reverse mortgages are just a few likely examples. - Shane McGonnell, Abacus Life
3. Invest in a top-notch website.
The shift to e-commerce was already evident, but amid a pandemic, the 2020 holiday shopping season will be predominantly online. That means companies should be investing now to ensure their site has the capacity to handle increased traffic. Website crashes are the retail equivalent of locking the store’s doors in the middle of the business day, and even the biggest companies are not immune to them. - Zack Cook, Rigor
MORE FOR YOU$1,400 Stimulus Checks Will Blow Up The Stock MarketHere’s What’s In The Two New Covid Relief Executive Orders Biden Just SignedTop U.S. Value ETFs For January
4. Ruthlessly attack operational expenses.
Get online as quickly as possible with a cost-effective, off-the-shelf Web package. Ruthlessly attack your OpEx—even if it means dumping your store and going purely online. This isn’t just about holiday sales; this pandemic is here to stay for another year, and business survival means thinking of a complete retooling into 2021 and 2022. - James Hewitt, CEO, Advisor, Angel Investor
5. Take control of cash flow now.
Safeguarding cash flow to meet seasonal demand has always been important. With consumer spending still unpredictable, companies will need to proactively prepare their balance sheets for the “new normal” holidays, which could see lower inventory and a heightened focus on e-commerce. Businesses should take control of their cash flow now to maintain a supply of working capital for 2021 and beyond. - Kerri Thurston, C2F0
6. Create a fun online shopping experience.
The days of flocking to the mall to buy holiday gifts are likely over—at least for now—so businesses need to be creative in planning for online sales. Consider creating an online experience that makes shopping fun for the consumer while also maximizing your holiday revenue. How can you package your product or service in a way that makes buying from you enjoyable? - Danielle Kunkle Roberts, Boomer Benefits
7. Offer employees tax-free reimbursement for their pandemic-related expenses.
Instead of a last-minute December bonus or party, think about how to give back to your team during this rough time with a tax-free reimbursement for Covid-19 personal expenses. Section 139 is a provision of the tax code that’s only available during a “qualified disaster.” It allows a business to deduct payments made to their team to cover personal expenses—home office, child care, etc. Talk to a tax strategist CPA or EA for more information regarding Section 139. - Jackie Meyer, Meyer Tax, The Concierge CPA Coach
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
8. Create plans for both in-person and online sales.
There may be a pandemic cure in time for the holidays. But maybe not. Main Street businesses need two plans: one that anticipates in-person shopping and one that assumes the opposite. Build operating models for both possibilities that include inventory, labor, rent and other factors. The more prepared you are, the more likely you’ll succeed with one plan or the other. - Mia Erickson, Whitnell
9. Invest in software, developers and social media.
This holiday season, I anticipate online sales to hit record highs. If you follow the stock market, take the technology sector’s rally in the middle of the pandemic as the perfect example. To prepare your business, start building or growing your online presence. Make sure you are visible. Invest in software, developers and social media ads—it’s the fastest ROI I have ever had as a business owner. - Gabriela Berrospi, Latino Wall Street
10. Minimize fixed expenses.
Economic uncertainty can cause unpredictable consumer behavior. The best way to prepare financially is to minimize locked-in expenses. This might mean cutting down inventory or relying on flexible “pay as you go” staff augmentation. The positive financial impact of a few additional sales is usually less than the expense of inventory you can’t sell. - Aaron Spool, Eventus Advisory Group, LLC
11. Shore up your online infrastructure.
This year’s holiday sales rush is going to be almost all virtual. Companies should focus on investing in their online infrastructure to make sure they have a good e-commerce platform, either by joining forces with an organization like Amazon or investing heavily in their online presence. - Joshua Strange, Good Life Financial Advisors of NOVA
12. Carefully manage your product inventory and availability.
The Covid-19 pandemic lockdown might make this year’s holiday season less active in stores and more active online. Consumers are still aware of the importance of social distancing during the holidays. Businesses should prepare in advance for the special 2020 holiday season by improving and updating their online platforms and making sure their products are available when demanded. - Lijie Zhu, Dragon Gate Investment Partners
13. Be aware of the Covid-19 situation in your area.
I predict online retail sales at levels we’ve never seen. I also predict uneven brick-and-mortar sales based on regions that are open or shut down due to the pandemic. So if you’re an online retailer, get the funding you need to fulfill the demand. If you’re a traditional retailer, build your plan based on what you think is most likely to happen with Covid-19 in your region. - Brian Henderson, Whitnell
14. Strive for increased promotion in social and local media.
Consumers will be looking to support small businesses in any way they can, whether for holiday shopping or other service needs. Consider asking loyal customers to spread the word on social media or writing an op-ed for the local newspaper about the impact of supporting small businesses. Now is a great time to start planning and ensuring you have the funds to meet the potential demand. - Jenn Flynn, Small Business Bank at Capital One
|
7d3be0391d9355d081c4d5104f2a6a45
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/23/14-pro-strategies-to-brace-your-business-for-economic-downturns/?sh=1bb07cb51fd5
|
14 Pro Strategies To Brace Your Business For Economic Downturns
|
14 Pro Strategies To Brace Your Business For Economic Downturns
In the last few months, the pandemic has created a volatile and challenging economy. Several small businesses have been forced to shut down due to severely curtailed sales and crashing revenue. Meanwhile, businesses that have survived are looking ahead to be better prepared for the next downturn.
To this end, 14 industry experts from Forbes Finance Council share specific steps businesses can take to shore up their finances and create a stronger foundation to face the next economic crisis.
Finance pros from Forbes Finance Council share strategies to help you get your business ready for financial downturns. Photos courtesy of the individual members.
1. Create a dynamic forecasting model.
Move toward a variable-cost business model that can dynamically scale up or down to nimbly adjust to changes in demand. This would include creating a dynamic forecasting model to facilitate decision-making. - Marc Blythe, Blythe Global Advisors, LLC
2. Build up your liquidity.
There is no way to recession-proof a business. That being said, I think the No. 1 thing businesses should focus on is building up liquidity. In recessionary times, cash is king. Many businesses run tight cash flows, which makes disruptions such as we’re seeing particularly damaging. Not having sufficient liquidity—for whatever reason—is a recipe for disaster. - Joshua Strange, Good Life Financial Advisors of NOVA
3. Cut non-revenue-generating expenses.
Get revenue up first. Then clean out nonproductive staff members, and cut any expenses that aren’t producing ROI. Automate and systematize everything possible. Get six months built up in reserves. The downturn was not a downturn for everybody; for those who did experience it that way, I recommend implementing these points and looking at what others did to avoid the downturn altogether. - Jerry Fetta, Wealth DynamX
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
4. Carefully track monthly cash flow.
The No. 1 thing you can do is know your numbers. Effective cash flow management is key, especially in times of economic uncertainty. Start by looking at your recent revenue expenses to help estimate your needs for the future. Leveraging a cash flow management tool is a great place to start tracking money coming in and out each month. This process will allow you to get ahead of issues before they arise. - Jenn Flynn, Small Business Bank at Capital One
5. Tighten up invoicing terms and look into credit.
I recommend two things. First, ensure invoicing terms are tight. The first thing many clients do in a downturn is to extend their payables, which kills cash flow. Second, seek a business line of credit, which requires incorporating and having a business bank account. Many of our small-business freelancers found out the hard way during the recent PPP program that they weren’t eligible for business credit. - Hussein Ahmed, Oxygen
6. First understand if recession-proofing is possible for your business.
Businesses must be very disciplined to weather a recession. First, you must determine if your business has the potential to be recession-proofed—you must know if you are at recession risk. If your business can be recession-proofed, reserving 25% of monthly profits in a rainy-day fund is a must. Businesses that can’t be recession-proofed, such as retail, need to keep an eye on inventory and cash flow. - Joseph Safina, Safina Asset Management
7. Regularly add to your emergency fund, and build up your online presence.
While nothing can make any business 100% recession-proof, there are some key things we must do to prepare for the next downturn. The most important one is regularly adding to your emergency fund. Poor cash flow is the main reason businesses fail. Innovation is also key if you’re to continue growing and expanding. Never depend on in-person, local clients only—you need an online global presence now. - Gabriela Berrospi, Latino Wall Street
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
8. Take a closer look at your staffing.
Reanalyze your staffing needs for 2021. After a crazy 2020, many businesses are expecting better times in 2021, but what happens if this doesn’t occur or the recovery is slow? Consider keeping fewer people, but working them harder and paying them more for it. If things pick up, then add people. If they don’t, then your team should be right-sized, and you won’t have carried unproductive people. - Chris Tierney, Moore Colson CPAs and Advisors
9. Diversify offerings.
Be prepared to pivot your business model, particularly if you have critical dependencies on in-person interactions. You should diversify product offerings to hedge risks, and pivot early and often. - Jeanette Quick, Gusto
10. Invest in resilience training.
The pandemic put people under a thick cloud of fear, which narrows the vision and debilitates us from seeing options we might employ to overcome adversity. Resilience helps us push aside fear and explore ideas to triumph over hard times. Resilience gives us the space to dream bigger dreams and then take the necessary risks to make them real. - Brian Henderson, Whitnell
11. Double down on your core business.
Businesses should focus on their core business instead of investing a large amount of money in attracting new clients or in new products and services. Even though taking risks might be rewarding sometimes, there is much uncertainty during and anticipating a downturn or a recession. Investing in current clients whom you already know and trust is relatively safer in the current situation. - Lijie Zhu, Dragon Gate Investment Partners
12. Stay in close communication with customers.
Listen to what your customers want from you. Have meetings on product roadmaps and communicate often to pivot your business toward current and future demand, not past successes. - Dave Sackett, ULVAC Technologies, Inc,
13. Maintain solid vendor relationships.
When it comes to vendors and creditors, you now know who your friends are. Make sure you keep those relationships strong and let them know the health of your business. Refer business to them, and be a good citizen and customer. There will again come a time when you will need their trust and flexibility. - Aaron Spool, Eventus Advisory Group, LLC
14. Keep your finger on the pulse of your industry.
Find ways to streamline and optimize, especially financially. Get lean and get smart about where you’re spending, saving and investing. Keep your finger on the pulse of your industry, and don’t let others evolve faster than you. Even the best, most prepared businesses can become “nonessential” if they fail to evolve at the pace of their competition or customer expectations. - Julio Gonzalez, Engineered Tax Services Inc.
|
f714dbfa4462c38e20c350c8940cf719
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/25/using-a-self-directed-ira-to-lend-money-and-earn-tax-advantaged-interest/
|
Using A Self-Directed IRA To Lend Money—And Earn Tax-Advantaged Interest
|
Using A Self-Directed IRA To Lend Money—And Earn Tax-Advantaged Interest
Founder/CEO of Next Generation Trust Company, a trust company specializing in custodial & administrative services for Self-Directed IRAs.
Portfolio diversification is a major benefit of self-direction as a retirement strategy because of the many alternative assets that self-directed retirement plans allow. Among the list of permitted nontraditional investments is private lending, in the form of secured loans (with collateral) or unsecured loans (personal loans based on the borrower’s creditworthiness). Private mortgage notes — promissory notes backed by real estate — are also included in this investment class. Here is a quick overview of the process and different loan options.
How Private Lending Works With Self-Directed Individual Retirement Accounts (IRAs)
With self-directed transactions, the account holder/investor works out all the terms with the other party. In this case, as the lender, you would be expected to conduct your full due diligence on the loan/investment and determine whether it should be a secured or unsecured loan. Some items on the research checklist may include background checks and a determination of the borrower’s creditworthiness, potential for growth if this is for a business loan and state laws about lending, if relevant.
The next step is for the two parties to work out the terms of the loan — collateral for a secured loan, interest rate, length of the loan/maturity date and payment schedule, late fees and any legal matters in the case of default.
Once everything is agreed upon, instructions are sent to the self-directed IRA administrator who executes the loan instructions on behalf of its client, the account owner. All payments (principal and interest) are made to the IRA, which is the lender. The account holder will earn tax-advantaged income from the interest payments to grow his or her retirement account.
MORE FOR YOUBernie Sanders: Here’s How To Get Student Loan Cancellation And $2,000 Stimulus Checks Without RepublicansCongress May Cancel Student Loans In New Stimulus PackageHere’s What’s In The Two New Covid Relief Executive Orders Biden Just Signed
The types of loans you can make using funds from your self-directed IRA include:
• Business loans to a startup or established business (commercial paper for funding inventory acquisition or equipment purchase, covering payroll expenses or accounts payable, and other short-term debt)
• Real estate loans to finance a project or purchase (residential or commercial)
• Tuition/school loans (private elementary or secondary school, college or trade school)
• Automotive loans to purchase a new vehicle
Secured Vs. Unsecured Loans
A borrower may prefer to go to a friend or colleague who wants to include loans within his or her self-directed IRA rather than apply for financing with a bank for a number of reasons, such as issues with borrowing limits, tight credit market, poor personal credit or the application process. If you are including a loan as part of your IRA’s investments, as the account owner, you may require collateral or not — the choice is up to you and, in some cases, depends on the type of loan.
The collateral that backs a secured loan is the fallback for the lender in case the borrower defaults. If your IRA lends money to someone with a secured loan to purchase a car or a home, the vehicle or the residence is the collateral, which lowers risk since there is tangible property to seize in the event of nonpayment. If your IRA makes an unsecured personal loan to pay off credit card debt or student debt, the loan carries greater risk since there is no recourse in terms of material collateral.
Example
Here is an example of how a self-directed IRA loan could work. Sarah has $20,000 in credit card debt, paying an interest rate of 15%; the high interest rate is causing her to accrue more debt while she works down the balance, slowing down her ability to repay the debt efficiently.
Her friend, Sherry, has a self-directed IRA with the funds available to pay off this debt. They agree that Sherry will make a personal loan of $20,000 for Sarah to pay off the credit card. Sarah agrees to pay Sherry back at 5% interest over four years with regular payments in a certain amount that is affordable every month. Sarah saves on the interest over the life of the loan, since she is paying a much lower interest rate, and Sherry will earn a higher rate of interest than she could earn on a certificate of deposit.
While the appropriateness of this method depends on your personal financial situation and goals, loans are another investment avenue a self-directed account can open up.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
3a500fb77945e27c458e593899c9c358
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/30/five-simple-steps-to-evaluate-business-investments/
|
Five Simple Steps To Evaluate Business Investments
|
Five Simple Steps To Evaluate Business Investments
I am a CPA specializing in helping busy business owners decrease the amount of time and energy they need to manage their accounting system.
getty
When I purchased my first large business asset, a semitruck to be used in my family’s trucking business, my deal included 30% down, 30% interest and full repo if payment was 14 days late. Talk about being taken to the cleaners, but I was just happy to find financing.
Fresh out of college with a finance degree, I made the numbers work. But reality struck back, and although I didn’t lose money, I didn’t make nearly enough. I learned two important lessons from this: We don’t live in theory, and being able to afford the payments doesn’t necessarily make it a worthwhile investment.
Financing and monthly payments are a useful way for small businesses to expand beyond their current means. In itself, this is a great thing. Getting a mortgage to buy a small office, for example, also ends up being an effective way to save and build assets.
But it’s a slippery slope, with many businesses unable to properly maintain assets or generate enough funds to replace assets when needed. Financing can also force you into a never-ending stream of loan payments. You can use financing to grow your business, but first ensure your underlying investment is sound.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Managing a business means accelerating your financial knowledge to make better decisions. Thankfully this process does not require a finance degree or even complex formulas and calculations. It does, however, take a change in perspective and mindset.
When evaluating a business purchase, monthly payments are irrelevant, and financing in general should be a small factor in your decision. Here are five simple steps to evaluate business asset purchases:
1. Determine the total cost of purchasing. Add all the costs needed to get the asset in operation. For leasing or renting, multiply the monthly payment by the length of the contract.
2. Evaluate operating and maintenance costs. For a quick calculation, ignore inflation or cash flow discounting. Just estimate costs. Do a web search, and determine the industry average: For example, search “average single-family home repair and maintenance costs.” This ensures your numbers are not outrageous. If you plan to finance, add the estimated interest payment.
3. Consider what you can earn elsewhere. When you invest in your business, you can just as easily invest in something else. The simplest rate to use is the average rate of the stock market. Although there are many ways to calculate the average return, and it depends on the time period and index used, I personally use a 9% rate of return. And remember to compound your earnings.
4. Calculate the resale price. Rental agreements won’t have a residual value, but other assets will. Start by looking at used assets. For example, if you plan to sell your car in five years, look at five-year-old cars today. If you're unsure, just use a zero residual value to be conservative.
5. Estimate your income. Large purchases must produce income. Try to stay away from nonrevenue-producing assets when possible. If it doesn’t produce revenue, it has to save you money — like a new office that will allow better team cohesion. However, often those “savings” are unrealistic. You need to spend money to make money, but if no income is generated, you are just spending without earning.
Once you have these five numbers, the formula is easy: Take the money coming in and subtract the money going out. This is your net amount, which should at least be positive.
Next, subtract how much you can earn elsewhere. This comparison will tell you not only if the asset will make you money but if it’ll be worth it. The complex version of this formula is the net present value.
This formula is a basic version of how to analyze cash flow for an investment. Finance-minded people can take this further, but small businesses don’t have strong forecasting models, so simple is better. For small purchases, you need a quick way to determine feasibility, not a 10-page report. And for larger purchases and in businesses where asset acquisition is routine, standardize and automate the capital acquisition process to ensure accuracy and timeliness.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
27fd2724d6a138587aa0fe86ebee3712
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/30/five-things-to-know-about-tech-sector-company-stock-options/
|
Five Things To Know About Tech-Sector Company Stock Options
|
Five Things To Know About Tech-Sector Company Stock Options
Andres Garcia-Amaya is CEO and Founder of Zoe Financial, whose mission is empowering people to make better financial decisions.
getty
When it comes to landing a coveted job at a tech startup, there are plenty of misconceptions around stock options. While the experience of working in the tech space can be invaluable, understanding and effectively negotiating the best stock options can make a difference to your income and net worth. If your tech employer offers company stock options, you might be wondering what they mean and how they work.
1. What Are Employee Stock Options?
Employee stock options are a form of compensation. They are agreements between a company and its employees. They give employees the right to buy a number of company shares within a certain time at a set price.
There are two parties to an agreement, the employee and the employer. The employee is given stock options with certain restrictions, including the vesting period. This is the time you must wait before exercising those options. This motivates the employee to stay and perform well.
If you have received stock options, it is important to know the rights and restrictions that apply to you. These are found in the options agreement and provide details of your vesting time, how the options will vest, the strike price and the shares represented by it. The strike price is the price you can purchase the shares at. If you hear the word “exercise,” it refers to the actual moment at which you purchase the shares. Depending on whether you are in a senior position, you might be able to negotiate certain aspects such as the number of stock options or the vesting schedule. Regardless, it may be good to check with your financial advisor before you sign.
MORE FOR YOUBitcoin Is Braced For A Huge $4 Billion Price Earthquake This WeekTax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021Democrats Now Planning For New Stimulus Bill By Mid-March—Here’s What’s Holding It Up
You cannot exercise your stock options before the set vesting date and after the expiration date. Once you choose to exercise your stock options at the strike price, you might choose to immediately sell them in the open market and earn a profit or hold onto them over time. The number of options available to you varies, depending on your situation.
2. What Are The Two Main Types Of Stock Options?
The two main types of stock options are:
• Incentive stock options (ISOs): These tend to be offered to high-ranking employees. With ISOs, you receive preferential tax treatment, which means the tax treatment is better than NSOs.
• Nonqualified stock options (NSOs): These are granted to employees at all levels. The earnings generated through the NSOs are considered income, and the IRS taxes them as such. This means your taxes will be the same as if it were ordinary income.
The main difference between an ISO and an NSO is how it is taxed. With the NSO, it’s as if the company paid you a salary, while with an ISO, you are not taxed on ordinary income on any gains between the strike price and exercise price. From the exercise date, if you hold your shares for at least one year before selling, you will be taxed at capital gains rates. If you sell your shares before one year after the exercise date, you will likely be taxed at ordinary income levels, which are often higher than capital gains.
3. How Do Stock Options Vest?
Stock options usually vest over time in blocks, as laid out in your agreement or signing contract. These will depend entirely on your company. Say you are granted 400 shares, and your options vest 25% per year over four years. Within a year of the issuing date, you can buy 100 shares (25%). You have a cumulative increase in exercisable options if you don’t exercise your vested options when they come. Four years on, you would have 100% of the options to exercise.
Note that, often, companies include a “cliff” to your stock options. The cliff refers to the period of time required for you to be in the company before you can start exercising said options.
4. How Are ISOs And NSOs Taxed?
The preferential tax treatment for ISOs occurs prior to being exercised. Say you are given the option to buy 100 shares for $1. Let’s also say these shares are now worth $5. If you exercise (meaning you purchased the 100 shares for $1 each), that means you have a theoretical $4 gain even if you haven’t sold those shares. With an ISO, the IRS doesn’t tax you for that $4 gain. That’s the preferential treatment that doesn’t happen with NSOs. Using the same example above, NSOs, on the other hand, trigger a tax event when you exercise. That $4 gain would be considered ordinary income tax by the IRS. Even if you don’t sell the shares right away, that “spread” between strike price and exercise price is considered income and taxed as such.
5. How Are Stock Options Taxed When Selling?
If you sell your shares within one year after exercise, it is considered a short-term capital gain and taxed at ordinary income tax rates. However, if you sell them more than a year after exercise, this will qualify for lower capital gains tax rates. This rule applies to both ISOs and NSOs.
Before you exercise your options, consider income tax and the benefits of holding onto your shares for at least a year. It may be worth consulting with your financial planner so they can help you to gain the maximum benefit and optimize tax cost.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
898cca26b9cb98f0d1403536085333b2
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/30/how-gpt-3-is-poised-to-change-the-employee-benefits-landscape/
|
How GPT-3 Is Poised To Change The Employee Benefits Landscape
|
How GPT-3 Is Poised To Change The Employee Benefits Landscape
Co-Founder and CEO of Ease, a leading HR and benefits software solution for small businesses, insurance brokers and insurance carriers.
The first year the U.S. Census Bureau began collecting data on computer ownership was 1984. At that time, just 8% of households had personal computers. Just think, babies born in 1984 — to a world where 92% of Americans did not have personal computers in their homes — are not even 40 years old. Technology has evolved exponentially over the past several decades; the speed of that evolution is increasing at an astonishing rate.
I started my current company as a response to a need for simple technology to make my life as an insurance broker easier. As any broker could tell you, countless hours are spent chasing down forms or checking in — sometimes repeatedly — with individuals to fill out or correct their benefit forms. The process is paper-driven and frustrating for those involved. So we created a software solution that streamlines this experience into a single online system, freeing up brokers to spend their time doing what they do best — helping employers and their employees better utilize their benefits.
Similar to the technology curve, the past 10 years have brought some of the biggest changes to the insurance landscape I’ve seen in the previous several decades combined. As both an insurance broker and the co-founder of a SaaS startup, I’m drawn to the ways in which new technology has the potential to improve — or in some cases redefine — the employee benefits landscape. Lately, I’ve taken an interest in observing GPT-3 and the way it has demanded attention from the tech community.
If you’re unfamiliar, GPT-3 is the world’s largest and most advanced neural-network-powered language model. This groundbreaking model can put out remarkably human-like text and perform myriad tasks after receiving fewer than 10 training examples. In fact, you can prompt GPT-3 to act as a programmer, a translator or even a writer.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
HR departments and the insurance brokers who service them often lag behind in adopting new technology. If you have ever gone through an open enrollment with your employer, you have likely encountered this paper-centric, disjointed, confusing experience. My road to CEO of a successful SaaS startup was unconventional; I dreamed up the technology I needed to be successful in my career as a broker. Then, a desire to build that same experience at scale led me to co-found my current company. The employee benefits space is prime for disruption — the kind that creates efficiencies and improves the employee experience.
In imagining how GPT-3 might impact the benefits space, I think toward the current climate of challenges and frustrations I hear about from both HR leaders, as well as the insurance brokers who use our tools to bring their benefits admin processes online. GPT-3 could help usher in a new future for HR and benefit departments by playing a greater role in informing the employee benefits strategy. Here are three ways we could see it change employee benefits in the future:
1. Saving Brokers Time During Open Enrollment: Historically, insurance brokers are expected to create a sea of materials during open enrollment to help their groups and their employees better understand their benefit options and make informed selections. Imagine instead a scenario where a broker could provide GPT-3 with several years’ worth of benefit packets and enrollment materials, along with carrier-specific documentation and group-level data. GPT-3 could then create new enrollment packages — simplifying the lift for brokers in communicating to their groups, while helping employees better understand their options.
2. Better Health Outcomes: Artificial intelligence-driven applications already enable us to predict things like a person’s likelihood to take maintenance medication based on a number of individualized factors, including ZIP code. We know, for example, that access to reliable transportation can contribute to filling and maintaining prescriptions for those managing chronic illness. What if GPT-3 could take it a step further by creating personalized communications targeted at early intervention to drive better health outcomes? What might this look like for countless employees facing different circumstances, all of whom have their own individualized needs for health and wellness? Employers could leverage GPT-3 to develop employee wellness communications aimed at improving health outcomes, from diabetes to heart disease to high-risk pregnancies, and everything in between. Gone would be the days of generalized group wellness plans, too broad to be effective.
3. Better Plan Selection For Employees: Benefits selection is complex and oftentimes confusing for employees. Employees are tasked with predicting their health and lifestyle needs for the next year to determine the right plan type for themselves. Imagine an open enrollment where, rather than guessing, a GPT-3-based algorithm could conduct plan comparisons and build individual communications with dynamic scenarios comparing one plan to the next. These pieces could contain comparisons and recommendations based on an employee’s lifestyle, medical history, risk tolerance and recurring medical expenses. They could even be done dynamically, so if an employee is in a certain job class, they would only see the scenarios relevant to the plans offered to them. What if GPT-3 could empower employees to choose the best plan for themselves and their families based on their own data and goals, both health and financial?
The future of GPT-3 and the ability it could have in enabling better strategic decision making is yet to be determined. In September, Microsoft announced it was teaming up with OpenAI, the company behind GPT-3, to exclusively license its language model. The potential of this deal has many people considering what impacts the next iteration of GPT-3 will have on a broader level.
I read an article recently that stated, “The Industrial Revolution has given us the gut feeling that we are not prepared for the major upheavals that intelligent technological change can cause.” It was written entirely by GPT-3. I am fascinated by the possibilities that exist as a result of this new technology and believe it will play a significant role in the workplace in the future.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
87a3b73b5625df5517b8dd3aef8f97ca
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/11/30/retirement-accounts-offer-tax-advantaged-investing-as-irs-ramps-up-cryptocurrency-tracking/
|
Retirement Accounts Offer Tax-Advantaged Investing As IRS Ramps Up Cryptocurrency Tracking
|
Retirement Accounts Offer Tax-Advantaged Investing As IRS Ramps Up Cryptocurrency Tracking
Henry Yoshida is CEO of Rocket Dollar, helping Americans unlock retirement funds with Self-Directed (S-D) IRAs and S-D Solo 401(k) plans.
getty
Increasing interest in cryptocurrencies in the past few years has led to millions of Americans investing in some type of digital currency. (Full disclosure: Author holds investment in bitcoin.) And with that, the IRS is increasing its focus on cryptocurrency.
IRS Adds Cryptocurrency Question To Form 1040
Because of the uncertainty surrounding digital currencies' taxation, many investors have employed a "hope for the best" strategy. In 2015, only 802 investors reported owning bitcoin to the IRS.
The IRS revealed an updated Form 1040 recently that includes a section asking, "At any time during 2020, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?" This new section on Form 1040 makes clear that even small purchases with a virtual currency are taxable events.
Also notable is the prominence of the new field, right below the taxpayer's personal information. This placement represents an increased focus by the IRS to increase enforcement on folks underrepresenting their virtual currencies or not reporting them altogether.
MORE FOR YOUExtra $300 Unemployment Payments To Begin This Week In Some States5 Student Loan Changes For 2021IRS Says You Can Now Check The Status Of Your Stimulus Check With Get My Payment Tool
Not The First Time The IRS Has Cracked Down
This is not the first time the IRS has succeeded in tracking down misrepresented assets. Since 2009, it has raised more than $12 billion from taxpayers after asking the simple question of whether they had an offshore financial account.
The crypto question in the 2020 Form 1040 represents a similar strategy on the IRS's part to track down the billions of dollars held in crypto assets. As virtual currencies become more popular, it is easy to assume the IRS will continue to track their growth and, more importantly, improve its process to ensure people are paying taxes on their profits.
A Tax-Advantaged Approach To Cryptocurrency Investments
Cryptocurrency investments are taxed as property, as most investments typically are. While long-term investments are not taxed as heavily, short-term investments can be taxed as regular income. The volatility of cryptocurrency means investors might not want to hold on to a crypto investment for more than a year, meaning that if they sell when there's a big upswing, they will be subject not to capital gains taxes, but rather those gains will be taxed as regular income. So how can investors avoid this potential tax minefield?
The answer might be surprising to some people, but it also is quite simple. Cryptocurrencies do not fall in the list of disallowed investments in retirement accounts set forth by the IRS.
This means that even though you will still need to respond "Yes" to the question on the new Form 1040, you will receive the same tax treatment as other assets held in your retirement accounts. For crypto holdings in a Roth IRA account, that means you will never pay taxes on any of the gains, and in a traditional IRA account, taxes will be deferred until you take a distribution in retirement, not on any of the profits of your crypto.
While many providers do not allow for customers to hold crypto in their retirement accounts, there are providers that specialize in crypto-specific retirement accounts as well as others that allow virtual currency to be among several different assets inside a self-directed retirement account. Determining which option works best for you depends on your individual situation and whether you want to invest in other alternative assets.
The Downsides To Investing In Crypto In A Retirement Account
While it is possible to transact in bitcoin or other virtual currencies if you hold your crypto in a retirement account, you would need to treat your coins as an investment, not as a means of transferring money, as any use of the cryptocurrency for purchase could constitute a taxable event. If you do plan on making purchases with crypto or using it as an alternative to cash, it would be best to hold it outside a retirement account.
Another potential downside to cryptocurrency investing, regardless of whether it's done in a retirement account or a taxable account, is the inherent risk of cryptocurrency investments. The volatility of the space has created wealth for some investors, but at the same time, it has led to large losses for investors who sell at the wrong time. Cryptocurrency investing is a relatively new space, and investors must be comfortable with high levels of volatility in the course of their investment.
Looking Forward
It is safe to say that virtual currencies are here to stay, and whether folks adopt them as a means to transact or primarily as an investment, the excitement around them has caught the attention of the IRS. For those interested in investing in digital coins with tax-advantaged dollars, using retirement funds to make investments could make sense for certain investors and help them avoid a potentially high tax bill.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
1cc3ce0e2a6165b203b71eb769ecd906
|
https://www.forbes.com/sites/forbesfinancecouncil/2020/12/02/know-whats-changing-with-medicare-in-2021/?sh=51f1af0f4f70
|
Know What's Changing With Medicare In 2021
|
Know What's Changing With Medicare In 2021
Co-Founder of Elite Insurance Partners, a Medicare learning resource center for all Medicare beneficiaries.
getty
Each year, Medicare undergoes changes. It's crucial for beneficiaries to keep up with new developments and know about them ahead of time. If you're on Medicare or will be next year, these changes impact you. Here is the information you need to stay informed about the significant changes taking place in 2021.
Annual Premium And Deductible Increases
Each year, the premiums and deductibles for Medicare Parts A and B increase. Part A is your inpatient or hospital insurance, and Part B is the outpatient insurance you use at the doctor's office.
According to Medicare.gov, most people don't pay the Part A premium because during their working years, they worked more than 40 quarters and paid the Medicare tax. Those who paid 30-39 quarters' worth of the tax will be paying $259 per month for Part A coverage in 2021. Those who haven't paid at least 30 quarters' worth of Medicare tax will pay $471 per month. The deductible will increase to $1,484 for 2021, which is $76 more than this year.
The standard monthly Part B premium for the coming year is $148.50. If you have a higher income, your premium will see an adjustment to a larger amount than the standard. The monthly Part B deductible will only rise by $5, for an amount of $203.
MORE FOR YOUAmerica’s Top Givers: The 25 Most Philanthropic BillionairesAdvanced Micro Devices Devises Macro Advances Ahead Of Q4 ReportTop Stocks To Buy Today As Markets Sharply Decline To End Week
More Choices And Lower Prices For Medicare Advantage
A larger number of Advantage plans will be available in 2021. According to the Centers for Medicare & Medicaid Services, enrollees will have over 4,800 Advantage plans to choose from during open enrollment this year. Open enrollment (which takes place from October 15 to December 7 each year) is when Medicare beneficiaries make changes in their coverage for the upcoming year.
Additionally, the premiums for Medicare Advantage plans will be historically low. On average, they are expected to decrease to $21 nationwide, making premiums the lowest they've been since 2007.
Increase In Telehealth Services For Advantage Plan Participants
Since the global health crisis, Medicare has been offering telehealth services more extensively. Particularly for those living in rural areas, access to telehealth has been a saving grace. Also, specific health care areas will receive coverage for telehealth, including dermatology, psychiatry, cardiology and more.
Insulin Price Caps
Starting in 2021, more than 1,600 new Medicare Advantage and Part D prescription drug plans will require a $35 or less copay for insulin. At this price, many diabetic Medicare recipients will have access to the drug.
Medicare Advantage Plans Will Accept End-Stage Renal Disease Patients
Per the 21st Century Cures Act, the Social Security Act received an amendment to allow all end-stage renal disease patients who are Medicare-eligible to enroll in Advantage plans. The change begins on the first of the year, with plans being open for enrollment during the annual enrollment period.
Key Takeaways
With quite a few changes coming to Medicare next year, the annual enrollment period is the perfect time to review your coverage. Those currently on Medicare should review their Annual Notice of Change letter to determine if their current coverage is what they want next year.
The premiums for Parts A and B will go up, but the increases are reasonable, in my opinion. If you take insulin, you could benefit from a Part D or Advantage plan with a price cap. Those with end-stage renal disease can also enroll in an Advantage plan that begins on the first of the year.
Regardless of which plan you choose, make researching your options a priority. This step is vital to making the best long-term choice for your health and budget.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
|
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.