dsmWealth: December 5, 2024

Hiring a financial adviser? Consider the three Ws.
BY STEVE DINNEN

Before you hire a financial adviser, consider the three Ws: whether, when and who.

Whether
Let’s start with whether: Is it even advisable? We all (should) have money to manage, be it personal savings, inheritance, 401(k) workplace accounts or a similar investment. Maybe it’s a pension that’s building value — they still exist — or individual investments in the stock market. Then we have outflow, like mortgages, tuition, a new business investment, a surprise weekend in Paris. It can get complicated tending to all these dollars flying in and out from different directions, and not everyone has the time or inclination to do it on their own.

Travis Rychnovsky, chief growth officer at Foster Group, said the company was approached a few years back by a couple with assets in the $10 million range. The husband was quite an astute investor. The wife wanted a financial adviser to step in because, if her husband died before she did, she had absolutely no interest in managing their money.

When
Not to get too dark, but the inevitable arrival of death presents an opportunity to consider bringing in a wealth adviser.

“A lot of times there is a triggering event, like the kids going off to college, or retirement planning,” said Eric Williams at AO Wealth Advisors. A job change might prompt a conversation about wealth advisory service, especially if that new job comes with new benefits.

There’s no age limit, young or old, to hire a financial adviser. But most agree it’s better to think about it sooner than later.

“We tend to focus on the 30s and 40s, when people are hitting their stride in their career,” Williams said. Their chances to build wealth are greater when their money-management plan has a far-off horizon.

That horizon will stretch from your work years into retirement, from paying for college and a home to buying a vacation home, or selling your business or law or medical practice. You’ll shift from accumulating assets to managing them, so you may want some expert guidance.

Who
Anyone can call themselves a financial planner. At a minimum, though, look for someone who has earned the certified financial planner (CFP) designation, which shows they’ve spent time developing skills to serve you. Additional designations include chartered financial analyst (CFA) or registered investment adviser (RIA). These advisers will take charge of your money, typically by placing it into mutual funds or ETFs. They will have done so after interviewing you about your goals and needs. They’ll also help keep you accountable or manage risk, which may not be your strong suit.

They’ll charge you for this. Some charge a flat fee, while others charge a fee that’s a percentage of the assets they’re managing.

For small businesses, some states are friendlier than others
BY STEVE DINNEN

In a recent ranking of states that are friendly to small businesses, Washington topped the list. Iowa ranked 37th in Bankrate’s new Small Business Study.

Bankrate analyzed 18 data points to determine its rankings. These criteria included business costs, access to capital, infrastructure, and policy and regulation. While no state can tick all those boxes, states with relatively favorable conditions in many of these categories tended to rank higher on its list.

Washington stood out in three categories: access to capital, the level of small-business activity, and the availability of skilled workers. The state’s biggest areas for improvement are its business costs and tax policies.

Small businesses play a big role in economic development. In Washington, for instance, they accounted for 86% of job growth between 2021 and 2022.

Iowa’s ranking placed it second to last in the Midwest. The state scored poorly in access to capital (47th), infrastructure (40th), business costs (42nd) and policy and regulation (40th). It ranked better in overall business cost (14th) and in robustness of small-business activity (25th).

6 smart year-end tax moves
BY WILLIAM BALDWIN FOR FORBES

Three weeks remain for end-of-year tax dodges. This review suggests strategies that might work for you and tells you how to find out if they will work.

Some of these schemes are, or should be, familiar, such as harvesting tax losses in your portfolio. Some are less so, such as choosing Roth for a last-minute contribution to a self-employed retirement plan. All have the potential for creating surprises.

Surprises? Selling a depreciated stock might make your college tax credit go up. Sticking with pretax retirement contributions over the aftertax (Roth) kind might damage the 20% pass-through deduction for the self-employed. A Roth conversion could easily make your dividend taxes go up. Any of these things can produce weird effects on your foreign tax credit.

For such surprises you can thank the convoluted ways in which different tax rules are connected. Instead of a flat tax, Congress has created a system of benefits and phase-outs, credits and surtaxes, goodies and grab-backs, all wrapped around rewards for favored behavior or favored constituencies. Unspoken platform element of both political parties: “Let’s curry votes by making the tax code more complicated.”

Don’t throw up your hands. Do this instead: Buy software. Buy it now, not in February when you were going to start work on your taxes. It won’t cost more to buy early. Updates, which stream in constantly during the tax season, are free.

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The wealth-building powers of health savings accounts
BY ERIC ROBERGE FOR KIPLINGER

There’s an amazing, tax-advantaged, wealth-building tool available for savvy savers that you may be neglecting to use right now. What is this great financial tool, and how can you take advantage of what it offers?

It’s a health savings account, or HSA.

HSAs are often billed as a type of savings account to help people manage health care costs. You can contribute pre-tax dollars to an HSA, and then pull money from your HSA to cover qualified medical expenses. This can reduce your total costs because the money isn’t taxed, allowing you to keep more of those dollars in your own pocket to use for your health care.

While it’s true an HSA is a type of savings account, this simple definition also masks the power of these vehicles when fully optimized. Here’s the full story you need to know.

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