Category: Wealth

  • True or False? — It Takes Money to Make Money

    True or False? — It Takes Money to Make Money

    The short answer is YES; of course it takes money to make money. To make money in the stock market, you must have money to make the initial stock purchases. Starting a business requires money to buy inventory, marketing materials, office space and equipment. Even lottery winners have had to have the seed money.

    The ability to execute an idea

    Great inventors and industrialists became great, not so much because of their ideas, but because of their ability to execute. This is the crucial aspect.

    It Really Does Take Money to Make Money

    Now before discouragement sets in, I want to stress that it doesn’t necessarily have to be your money. As we all know, ideas have value. This value can be unleashed by using other people’s money (OPM). OPM, has launched many a fortune based on nothing more than a fine idea.

    What these great men had in common was the ability to execute, which as we’ve already determined, requires money.

    Ideas, however, are like sphincters—everybody has one (or more). Taking an idea from wishful thinking to a viable business enterprise requires (you guessed it) MONEY! In the not too distant past, finding the money to turn ideas into realties was an arduous task. Loans from friends and family, bootstrapping with your own assets and credit, angel investors and venture capitalists were the only available sources of capital.

    The process of turning an idea into a commercially viable product or service is known in the entrepreneurial community as execution. Great inventors and industrialists became great, not so much because of their ideas, but because of their ability to execute. Samuel Morse wasn’t the first to invent the telegraph; Thomas Edison was not the first to conceive the light bulb and the venerable Alexander Graham Bell wasn’t the first to envision the telephone. What these great men had in common was the ability to execute, which as we’ve already determined, requires money.

    History of these inventions

    If we delve into the history of these three inventions, we learn that an Italian, Antonio Meucci, was the first to develop a working telephone. He filed a temporary patent 5 years before Bell but poverty and poor health prevented him from paying the patent office the $10 fee required for the patent’s renewal.

    Heinrich Goebel was likely the first to invent the light bulb. In fact, he tried selling Edison on the idea but Edison wouldn’t bite. Goebel died a couple of years later and Edison bought the patent from Goebel’s impoverished widow for a song.

    A French inventor by the name of LeSage invented the telegraph 60 years before Samuel Morse. The idea didn’t take root in France but Morse brought it to fruition here in America.

    These examples demonstrate the important roles money and execution play.

  • Wealth Building Tips for Modern Day Millennials

    Wealth Building Tips for Modern Day Millennials

    Millennial! Another of those media driven buzzwords, used to label those between the ages of 18 and 34, while the term Gen Xers define those between 35 and 50 years of age. Boomers, the group to which I belong, are those 51 through 69. This post covers 8 key pieces of advice.

    Challenges millennials face today are different from the challenges my generation faced, chief among them, crushing student loan debt.

    I hate millennials … well, not really. I ENVY them! I envy them because they have their entire lives ahead and I’m looking at mine in the rear view mirror. I hate them because, like all young people, they are ignorant—not stupid, but ignorant. They refuse to learn from the mistakes previous generations have made and many refuse to learn from the successes. But hate is the wrong word. How about profoundly disappointed?

    I’m not a sociologist, psychologist or anthropologist. Therefore, I have no academic insights into the reasons young people so often refuse the advice of their elders. All I know is—they do! And like those that have come before me, I continue to offer my advice and counsel, secure in the knowledge that it will rarely be acted upon. As a millennial, you will have your opportunity to have your own look into your own rear view mirror one day. When you do, remember these:

    Start early!

    Now is the time to start saving and investing. For example, if you invest $5000 each year from the time you are 25 years of age, you will have over $1 million at age 65. If you put $5000 per year in a mattress, you will have only $200,000. This illustrates the power of investing and compound interest.

    Conquer your fears!

    Forty percent of millennials surveyed are uncomfortable with investing in stock. This is a fear you need to conquer. For almost 8 decades, stocks have returned more than 10% gains when held over any twenty year period. Bonds, in contrast, have yielded about 4%.

    Tune in, turn on and don’t drop out!

    Shockingly, about one-third of those between the ages of 25 and 34 do not participate in their employer’s 401(k). Tune in to the benefits your employer offers, turn on the payroll deduction and don’t drop out of the plan. Need a reason? Ten years of savings beginning at age 25 trumps 30 years of savings started at age 35.

  • How to Discuss Philanthropy with Financial Advisory Clients

    How to Discuss Philanthropy with Financial Advisory Clients

    As a financial advisor, you’re a guardian and guide for your client’s financial well-being. But when it comes to philanthropic giving, many advisors cede that role and avoid engaging their clients on the subject. Don’t make that mistake. If you have a client inclined to philanthropy, you have a responsibility to guide them in that process.

    The waters of philanthropic giving are murkier than they may appear, and not every organization calling itself charitable truly is. Clients can make a smarter, more fulfilling choice if they work with a savvy advisor.

    Taking all this into account, it’s clear that advisors should be involved in this aspect of their clients’ financial lives. But how do you approach that sometimes awkward and difficult conversation?

    Why Advisors Should Care about Philanthropy

    If advisors are responsible for guiding their clients’ finances, then steering them toward legitimate charitable organizations is part of the job.

    Almost 100% of high net-worth-families donate to charity and 75% volunteer their time, according to a study by U.S. Trust. Advisors can help clients find a charity that will use their funds thoughtfully.

    Many organizations spend more on marketing than programs and services, and it’s part of an advisor’s job to show clients how to make an informed decision.

    By mentioning charity in client discussions, advisors can build a more trusting and holistic relationship. Philanthropy is about more than just money, and involving yourself in this part of your client’s life will lead to a deeper understanding of their needs and goals.

    The more you participate in your clients’ charitable giving, the more informed you’ll become of the world of philanthropy. You’ll know which organizations to avoid, which to support and how to make the process as smooth as possible.

    How to Approach the Topic

    Some advisors get the ball rolling by asking about any past donations, organizations they support or current gifts. Certified financial planner (CFP) Brent D. Dickerson of Trinity Wealth Management said he usually brings up charitable giving when discussing estate planning. Although some clients avoid talking about their mortality, Dickerson said others want to leave a legacy behind.

    According to research done by Dr. Russell James of Texas Tech University, people are more receptive to the idea of charitable giving when remembering past times they helped someone else.

    Starting from that place could be a productive way to engage clients. While he cares about philanthropy, Dickerson doesn’t discuss it with every client. “I mostly stay away from the subject if I can gather that a client is not charitable nor geared towards being philanthropic,” he said.

    This is where some of the awkwardness of the philanthropy discussion comes from. Advisors don’t want to make their clients uncomfortable, and bringing up the topic of charitable giving can come across as an unwanted suggestion to the less charitably inclined. Tread carefully, and get to know your clients before breaching the topic.

    Advisors should also let their clients know about the financial benefits of philanthropy, which can be quite substantial. Dickerson said there are multiple ways clients can donate to charity while lowering their tax burden. “Taxes seems to be the number one reason most people choose to leave a charitable estate,” he said. “With this, there are ways of donating appreciated stock, establishing trusts like charitable remainder or charitable lead trusts.”

    The Bottom Line

    Giving makes people happier, and they are starting to embrace this notion more than ever. With the ubiquity of information on the internet, people are also starting to become more aware and interested in the tax benefits of charitable giving. Embrace your clients’ generous inclinations and make it clear you want to help them achieve their philanthropic goals.