A satirical short film taking a look at the national debt and how it applies to just one family.

For more information visit www.debtlimitusa.org

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The following article discusses the definition of both wealth management and financial planning and what the difference is between the two.

New Trends In Wealth Management

visit American Institute of CPAs to view the complete article
by John Napolitano, CPA/PFS

The first trend in wealth management is an emerging understanding of the difference between financial planning and wealth management. Over the past few years, I have heard many botched attempts to explain what wealth management really is. Answers usually revolve around a client’s portfolio size or net-worth, and many professionals think wealth management is only for the ultra-wealthy. Not necessarily.

You should think of wealth management in the context of financial planning. A financial plan, or a financial planning engagement, can occur as a one-time engagement. You gather facts and qualitative goals from your client, as well as their objectives and life dreams. Then you assemble a report for your client that recommends strategies for maximizing their financial resources and accomplishing their objectives. Your client may be very satisfied with the work that you did, go on their merry way and never implement any of your recommendations - on their own or with other professionals.

Wealth management, on the other hand, is the manifestation of a financial planning engagement into a pro-active and holistic relationship for an indefinite length of time - or at least the foreseeable future.

Wealth management definitely includes life planning, and the wealth manager agrees to act as a client’s head coach and will oversee and advise the work done by other professionals. A wealth manager is accountable for ensuring a client has a current estate plan, but the wealth manager doesn’t necessarily draft documents. Wealth managers make sure their clients are properly insured, including ownership and beneficiary designations for life insurance. But, a wealth manager doesn’t necessarily sell insurance.

Retainer fees are the clearest trend among personal financial head coaches. Clients are willing to pay regular monthly or quarterly retainer fees to advisors who walk the walk and holistically advise. It’s true. Information overload is impacting your clients too. What they want is a sound and capable mind guiding them through most of their important financial decisions. Advisors who are not charging regular retainer fees and who are only getting paid from transactions or assets under management, may be missing planning opportunities that clients don’t even recognize.

Another trend is that of a comprehensive Customer Relationship Management (CRM) system that incorporates workflow and your service model. Most firms today still operate under the “squeaky wheel gets the grease” model. In other words, the clients who call most frequently and demand regular meetings with their advisors are the ones who actually get those meetings. The other clients, who do not make such demands, don’t get meetings or special attention.

If you have a service model that mandates that all “A” clients receive weekly market reports, monthly newsletters on financial planning, quarterly performance reports, quarterly phone calls and face-to-face meetings three times per year, you need to make that happen. This is no time for excuses and a good CRM will see to it that these events occur and that meetings are scheduled (by someone other than you!).

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Wealth management incorporates financial planning, investment portfolio management, and a number of other potential financial services. The following article further define what wealth management means.

Wealth Management

visit Financial Times to view the original article

Wealth management is a practice that in its broadest sense describes the combining of personal investment management, financial advisory, and planning disciplines directly for the benefit of high-net-worth clients. But it also is an increasingly popular self-branding reference that advisors and financial representatives of many different stripes adopt, often to describe a wide range of possible functions and business models.

In the narrowest context, a wealth manager helps a client construct an entire investment portfolio and advises on how to prepare for present and future financial needs. The investment portion of wealth management normally entails both asset allocation of a whole portfolio as well as the selection of individual investments. The planning function of wealth management often incorporates tax planning around the investment portfolio as well as estate planning.

More expansive definitions of the term append other tasks to the wealth management relationship, such as philanthropic counselling or coordination of the governance and routine administrative matters of large families. Other wealth managers add banking and lending capabilities or legal advice to their service mix.

Various kinds of financial professionals can claim the title of wealth manager, including advisors, brokers, private bankers and family office representatives. There is no single accepted certification for a wealth manager, though common ones for such professionals include the CFP, CFA, and MBA in the United States.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Here is a list of what you might need to do before 2012 to ensure that everything is in order with your IRA.

10 IRA Tasks To Do Before The Year End

by Robert Powell
visit MarketWatch to view the complete article

1. Take your required minimum distribution

Make sure all RMDs are taken for the year.

“Look at all owned IRA accounts and employer plans for individuals age 70 ½ or older this year, as well as at inherited IRAs, employer plans and Roth IRAs,” said Beverly DeVeny, an IRA technical consultant with Ed Slott and Company.

“Beneficiaries, no matter what their age, must take distributions from all inherited accounts beginning in the year after the death of the account owner,” she said, adding that inherited accounts must be split before year end so beneficiaries can use their own life expectancies to calculate their RMDs.

2. Check for excess contributions

It might seem unlikely, given that the average IRA contribution is $3,798, but it’s possible that you contributed too much to your IRA during the year. If so, remove any excess contributions before year end. You will be charged a 6% penalty for excess contributions, said Lustberg.

The maximum amount of an annual IRA contribution for a specified tax year, and whether or not your contribution is tax deductible, varies depending on a number of factors related to eligibility rules, according to Fidelity Investments. In 2009, the maximum allowable contribution to an IRA is the lesser of 100% of eligible compensation or $5,000 in 2009, and $6,000 for those age 50 or older.

3. Is everything in place?

Take nothing for granted when it comes to your IRA. “Before year end, double check on all IRA funds that moved during the year,” DeVeny said. “Make sure that IRA funds went into IRA accounts, not non-IRA accounts or Roth IRAs and be sure that Roth IRA funds went into Roth IRA accounts. Look for any unexplained distributions during the year.”

4. Can you do a stretch IRA?

Check whether your IRA custodian or 401(k) plan administrator will allow for the so-called “stretch” for beneficiaries, said Ben E. Connor, an attorney with Connor Law Firm.

The stretch means that beneficiaries can use their own life expectancy for distributions. In addition, check whether the custodian or plan administrator will accept a durable power of attorney, and disclaimers.

“The answer to these questions will have substantial impact on the success of their estate plan,” Connor said. (If the custodian or 401(k) plan administrator doesn’t accept a durable power of attorney or disclaimer, you might consider another custodian or plan administrator.)

5. Who’s your beneficiary?

Here’s some well-worn but can’t-be-repeated-often-enough advice: Review your beneficiary designations. Make sure there is both a primary and a contingent beneficiary named on the beneficiary designation form.

“If there is no beneficiary named, the IRA proceeds will go to the estate and lose the tax advantage of the stretch,” said Connor. “If there is no contingent beneficiary, and the primary beneficiary has died and no new primary beneficiary has been named, then the assets also go to the estate with the same negative result.”

It’s especially worth checking your beneficiary designations if you’re divorced, recently or ever. “Make sure your ex-spouse has been deleted as a beneficiary, unless you want them to remain as a beneficiary,” said Connor. “The U.S. Supreme Court has recently ruled that the beneficiary named on the beneficiary designation form trumps divorce.”

Connor also advised against naming a “living trust” as the beneficiary. “A living trust should not be the beneficiary because the living trust must qualify as a ‘designated beneficiary’ to receive favorable stretch and tax treatment,” he said. “I find that most living trusts do not qualify, or lose their designated beneficiary status through later changes to the trust.”

Make sure your custodian has a written copy of your beneficiary designations.

6. One last chance for Roth conversions

If you plan to do a Roth conversion , “the funds must leave the IRA by Dec. 31 to be reported and taxable as a 2011 distribution and conversion,” DeVeny said. “The funds can then be rolled over to the Roth IRA up to 60 days after they are received by the account owner - up to March 1 if the distribution was received on Dec. 31.”

Contrary to what some might believe, you do not have until April 15, 2011 to do a 2010 conversion, DeVeny said.

Here’s another reason why you might want to convert some or all of your IRA to a Roth IRA: according to Connor, the Roth IRA could fund a credit shelter or by-pass trust.

“A Roth IRA is usually not subject to the trust tax rate,” he said. Also, review your power of attorney to make sure the agent has authority to recharacterize the Roth, if needed, Connor said.

Remember, too, that anyone can convert their traditional IRAs to a Roth IRA in 2010 regardless of income. What’s more, you can pay the taxes over two years, instead of one.

7. Turn wealth into income

Right about now, the Social Security Administration is sending you a report that tells you how much income you’ll receive in today’s dollars when you retire. Write down that number on a piece of paper.

Now, total up the value of all IRAs and 401(k)s in your household and multiple that number by 0.04. That number is the amount some experts say you could withdraw from your retirement in today’s dollars.

Now, add that number to your Social Security benefit figure, and then subtract that amount from your income. The results are roughly the amount of money you’ll need from other sources - such as work, pensions, reverse mortgages, life insurance or inheritances - to enjoy a lifestyle similar to what you have today.

For some, the best way to close the gap will be to contribute more to their IRAs and 401(k)s, work longer, and lower their standard of living.

8. Review your investment plan

Consider updating your investment policy statement or plan. “Make sure your asset allocation remains appropriate given your financial goals,” said Michael L. Gay, a certified financial planner with Portfolio Solutions.

Also, rebalance your IRA if you haven’t done so within the past year. It’s best to rebalance your IRA in a holistic manner. That is, look at all your assets in all your accounts, taxable and tax-deferred.

In many cases, consider putting your fixed-income investments in your tax-deferred accounts and those investments that produce capital gains and dividend income in your taxable accounts. And while you’re at it, check whether you’ve bought or sold any inappropriate investments in your IRA accounts.

“Since IRAs are tax-deferred vehicles, it makes no sense for them to hold ‘tax-preferenced’ investments such as municipal bonds and annuities,” said Gay.

Gay also suggested using your RMDs to rebalance. It could save on transaction costs.

9. Roll old 401(k)s to an IRA

If you have one or more 401(k)s sitting with former employers, consider rolling that money over to an IRA. “You’ll generally get better investment choices, lower costs and more control of your investment assets,” said Gay.

10. Recharacterize your Roth IRA

If you converted a traditional IRA into a Roth IRA and now realize that your income taxes were higher than expected due to the conversion, or you’re short money to pay the income tax or you’re unwilling to pay the income tax, consider a recharacterization, DeVeny said. That is, consider putting the money in the Roth IRA back into your traditional IRA.

“This is the last year that some individuals must recharacterize,” DeVeny said. “Those who have no choice are individuals who converted in 2009 and whose modified adjusted gross income exceeded $100,000 or who were married filing separate.”

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Common IRA Rollover Mistakes

visit Investopedia.com to view the complete article

The 60-Day Rule

After you receive the funds from your IRA, you have 60 days to complete the rollover to another IRA. If you do not complete the rollover within the time allowed, or receive a waiver, or extension, of the 60-day period from the Internal Revenue Service (IRS), the amount will be treated as ordinary income in the IRS’s eyes. That means you must include the amount as income on your tax return, where any taxable amounts will be taxed at your current, ordinary income tax rate. Plus, if you did not reach age 59.5 when the distribution occurred, you’ll face a 10% penalty on the withdrawal.

One-Year Waiting Rule
Within one year, after you distribute assets from your IRA and rollover any part of that amount, you cannot make another rollover from the same IRA to another (or the same) IRA.

For example, imagine that you have two IRAs - IRA-1 and IRA-2 - and you make a tax-free rollover from IRA-1 into a new IRA (IRA-3).

Within one year of the distribution from IRA-1, you cannot make another tax-free rollover from IRA-1 or from IRA-3 into another IRA. However, you could roll funds out of IRA-2 into any other IRA, because you did not roll money into or out of that account within the previous year.

The once-a-year limit on IRA-to-IRA rollovers does not apply to eligible rollover distributions from an employer plan. Therefore, you can roll over more than one distribution from the same qualified plan, 403(b) or 457(b) account within a year. (Note: This one year limit does not apply to rollovers from Traditional IRAs to Roth IRAs, i.e. Roth conversions.)

RMDs Not Eligible for Rollover
You are allowed to make tax-free rollovers from your IRAs at any age, but if you are 70.5 or older, you cannot rollover your annual required minimum distribution (RMD), as a rollover of a RMD would be considered an excess contribution.

If you are required to make a RMD each year, be sure to remove the current year’s RMD amount from your IRA before implementing the rollover.

Same Property Rule
Your rollover, from one IRA or to another IRA, must consist of the same property. This means that you cannot take cash distributions from your IRA, purchase other assets with the cash and then roll those assets over into a new (or the same) IRA. Should this occur, the IRS would consider the cash distribution from the IRA as ordinary income.

Caution: When Not to Use a Rollover
If you are simply moving your IRA from one financial institution to another and you do not need to use the funds, then you should consider using the transfer method, instead of a rollover. A transfer is non-reportable, and can be done for an unlimited number of times during any period. A rollover leaves room for errors, including missing the 60-day deadline, losing the check and you are limited to the once per 12-month rule, discussed earlier.

Additional points
You can roll over funds from any of your own Traditional IRAs, but you can also roll over funds to your Traditional IRA from the following retirement plans:

• A Traditional IRA you inherit from your deceased spouse
• Aqualified plan
• Atax-sheltered annuityplan (section 403(b) plan)
• A Government deferred-compensation plan (section 457 plan)

Note that if rollover eligible amounts, from qualified plans, 403(b) plans or governmental 457 plans, are paid to you instead of processed as a direct rollover to an eligible retirement plan, the payor must withhold 20% of the amount distributed to you. Of course, you will receive credit for the taxes that were withheld. However, if you decide to rollover the total distribution, you will need to make up the 20%, out of pocket. If you want to avoid the withholding and the associated reporting requirements, a direct rollover is the method that should be used to effectuate your rollover from your qualified plan, 403(b) plan or governmental 457 plan account. A direct rollover is reportable, but not taxable. Plus, there is no 60-day window to worry about. Be sure to check with your plan administrator and IRA custodian regarding their documentation and operational requirements for processing a direct rollover on your behalf.

You might be able to move funds the other direction, too. That is, you may be able to take a distribution from your IRA, and then roll it into a qualified plan. Note, however, that your employer is not required to accept such rollovers, so check with your plan’s administrator before you distribute the assets from your IRA. Further, certain amounts, such as nontaxable amounts and RMDs, cannot be rolled from an IRA to a qualified plan

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

You can avoid taxes and penalties on an IRA distribution if you roll it over into a qualified retirement plan within 60 days.  There are however some exceptions that are outlined in the article below. It is important to understand these to ensure continued tax-deferred growth on your retirement assets.

Exceptions To The 60-Day Retirement Account Rollover Rule

by Denise Appleby
visit Investopedia to view the complete article

120-Day Exception for First-Time Homebuyers

Taxable distributions of up to $10,000 from your IRAs are not subject to the 10% additional tax (early-distribution penalty) if the IRA owner or a qualified family member is a first-time homebuyer and, within 120 days of receipt, the IRA owner uses the amount to pay for qualifying acquisition or rebuilding costs for his or her own or qualifying family member’s principal residence. If the amount is not used because of a cancellation or delay in the purchase or construction of the residence, the amount may be rolled over to the IRA within 120 days instead of the usual 60 days.

Automatic Waiver for Hardship
An individual may deliver distributed assets to a financial institution and intend the amount be deposited to his or her retirement account as a rollover contribution; but sometimes, because of an error, the amount is not credited to the retirement account within the 60-day period. If this happens to you, you receive an automatic extension of the 60-day period, providing all of the following requirements are met:

• The assets were delivered to your financial institution within 60 days after you had received the distribution.
• You followed the procedural requirements for rollover contributions that were established by your financial institution.
• The amount was not deposited to your retirement account because of an error made by the financial institution.
• The assets are deposited to your retirement account within one year after you received the distribution.
• The transaction clearly would have been a valid rollover contribution had the financial institution followed your instructions at the time of receipt.

Such errors can occur if you maintain multiple accounts with your financial institution, and a representative inadvertently deposits the amount to the wrong account, such as your regular checking account. To be sure your instructions are followed, check your account statement for accuracy, and contact your financial institution immediately if you detect any errors.

Non-Automatic Waiver Application
If you are unable to complete your rollover contribution because of certain circumstances beyond your reasonable control, you can submit an application to the IRS for a waiver or extension of the 60-day rule. When reviewing your application, the IRS determines whether you meet certain requirements by considering the following:

• Whether any mistakes were made by your financial institution, other than those described under this article’ssection “Automatic Waiver for Hardship”above.
• Whether the inability to complete the rollover was the result of death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or a postal error.
• How the distributed amount was used. For instance, if you received a check for the distributed amount, the IRS will want to know whether the check was cashed.
• How long it has been since the distribution occurred.

Additionally the IRS will look at whether you had any intention of rolling over the distributed amount at the time the withdrawal occurred. If the IRS determines that you didn’t have this intention, your request for waiver may not be approved. Also, before applying for a waiver of the 60-day rule, check to make sure the amount in question is rollover eligible. For instance, if the distribution occurred from an IRA from which another distribution was rolled over during the 12 months preceding the distribution in question, this second distribution is not rollover eligible.

In order to be considered for the waiver, you must submit an application for a private letter ruling (PLR) to the IRS and pay the applicable fee.

After reviewing your application, the IRS will issue a PLR to you indicating whether your application is approved. If it is, it will include the time limit within which the rollover contribution must be completed. If your application is not approved and you already deposited the amount to your retirement account, you may need to remove the amount as a return of excess contribution (which you can read more about inCorrecting Ineligible (Excess) IRA Contributions - Part 3).

Ensuring Correct Reporting
If you qualify for any of the exceptions explained here - that is, a cancellation or delay in the purchase or construction of a first home is the reason you didn’t use the distributed amount within 120 days for first-home costs; you were eligible for the automatic waiver within one year of the distribution; or your application for extension to the IRS was approved - you must report the amount on your tax return as nontaxable to exclude the amount from your income and avoid the penalty. This is done by including the amount on the applicable line of your tax return.

If you have failed to roll over the amount within the 60-day period and don’t qualify for these exceptions, you must include any taxable amount of the distribution as income, and pay the applicable taxes.

Consult with your tax professional for assistance with determining the taxable portion of your distribution and including the amount on your tax return. Your tax or legal professional should also be able to help you with determining your waiver eligibility and the application process.

You can avoid taxes and penalties on an IRA distribution if you roll it over into a qualified retirement plan within 60 days.  There are however some exceptions that are outlined in the article below. It is important to understand these to ensure continued tax-deferred growth on your retirement assets.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

While it is important to review an advisor’s past performance, if you are not aware of the dangers outlined in the following article, it is easy to be misled.

How to Avoid Choosing the Wrong Investment Advisor

by Kim Renners
visit Physicians Money Digest to view the complete article

The volatility of the market returns along with the cracking of the Wall Street foundation has left many uncomfortable with the idea of just “staying the course.” Before you switch firms, or advisors, here are some important considerations.

The Dangers of Reviewing a Firm’s Past Performance

A common mistake individual investors make when evaluating or selecting a financial advisor is to overrate the importance of an advisor’s past performance. There are reasons why this approach is flawed. Let’s examine some briefly:

The Time Frame May Be Too Short. When looking at an investment “track record,” many clients will ask for gross returns on a 1-year, 3-year and 5-year basis. This is simply not enough data to make any concrete conclusions about an advisor’s skill vs. randomness or even dumb luck. Even 10 years of data may not be enough.

Comparisons of Results Likely Not “Apples-to-Apples.” Even the common question, “How did your portfolio perform (last year)?” can lead to misleading answers in cases where portfolios are designed for individual clients. For example, many clients have customized portfolios based on their risk tolerance, age, time horizon, tax bracket, objectives and a variety of other factors.  As a result, it is entirely possible that Client A could see returns of 3%, while Client B could boast a gain of 20% over the same period. Both of these investors could be equally satisfied — or not — and neither of these results may give you any helpful advice about your particular situation. Only in situations when two investors have very similar goals, circumstances and objectives is any comparison worthwhile.

Past Performance is No Guarantee of Future Results. Anyone who has ever watched an investment firm’s commercial on TV, listened to an ad on the radio, or read one in a newspaper or magazine is familiar with the phrase “past performance is no guarantee of future results.”  While this is required by the firm’s legal compliance department, and can be easily discarded as “legalese” by consumers, it is crucial for investors to understand. To illustrate one aspect of this principle, examine the chart below showing the returns of leading investment asset classes over the past 28 years.

Factors for Choosing a Financial Advisor

Independent Custodian. Ideally, an investment firm does not custodian, or hold, its clients’ investments in the firm. Rather, the firm should have arrangements with a number of the largest independent custodians (such as Charles Schwab, TD Ameritrade, etc.) to hold their investments for safekeeping, while the investment firm manages the accounts. This “checks and balances” arrangement prevents the insular secrecy that allowed Madoff, Stanford and other criminals to operate.

Client-Aligned Fee Model. In addition to a transparent business model, you want to look for a firm that has a clear fee schedule. With an “assets under management” (AUM) model, advisors charge a clearly defined fee (typically a percentage of AUM). Contrast this with the traditional, convoluted transaction-based model that most brokers utilize, where a client pays based on trades in the account — regardless of whether the trade added value or not. In a fee-based model, not only do clients understand exactly what they’re paying, they also know the firm’s interest — seeing the portfolio increase in value — is the same as their own. The more money in your portfolio, the more money the firm earns.

Your Biggest Expense? It’s Not Fees

Many investment clients focus primarily on management fees and expenses when evaluating advisors. While such costs are important, for most physicians, the annual fees might range from 50 basis points (0.5%) on the low end to 300 basis points (or 3.0%) on the high end. Instead of haggling over fees, individual investors need to focus on their largest expense: Taxes.

The cost of federal and state income taxes, and capital gains taxes, on a portfolio depends on many factors — the underlying investments, the turnover, the structure in which the investments are held, the taxpayer’s other income and state of residence, and other issue. For higher-income investors such as physicians, taxes will nearly always be high. To gain perspective of how much taxation reduces your returns, consider this one statistic: Over the period from 1987-2007, stock mutual-fund investors lost, on average, 16% to 44% of their gains to taxes, according to a report on CNN.

Given that some investors are losing up to half of their gains to taxes, you’d think this would be a focus of value-added investment firms. Unfortunately, you’d be wrong. Mutual funds provide no tax advice to their investors, apart from the 1099 tax statements they issue in January. In fact, stockbrokers, money managers, hedge-fund managers and financial advisors typically don’t offer tax advice because they are prohibited from doing so. “Tax advice” could include specific techniques for limiting tax consequences of transactions or more general “tax diversification” in portfolios. As a result of these limitations, most investment clients are not getting the tax advice they need.

With the unraveling of some of the country’s leading investment firms behind us and volatility and tax increases ahead of us, many are wisely re-examining their financial advisor relationships. If you are one of these, be sure to focus on the right factors in evaluating potential new advisors so you make intelligent, well-informed decisions.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The following article provides a basic overview of the importance of asking for a track record and what to look for from potential advisors.

Getting The Record Strait

by Jack Waymire
visit Worth to view the complete article

How do you know how a financial advisor has performed for his or her clients? By asking for the advisor’s track record-and reading the fine print

All investors ask prospective financial advisors what type of performance to expect from the advisor’s stewardship of their money. Advisors’ responses are sometimes true, sometimes exaggerated and sometimes dishonest. How can an investor figure out what’s true and what isn’t? By looking for the characteristics of track records you can trust-and the warnings for records you can’t.

The Sales Pitch

Representatives and advisors who cannot provide legitimate track records must still convince you they can produce competitive results. They will make sales claims describing the results they have produced for current clients. For example, they may claim they have produced 20 percent returns, using references to back up the claim. But sales claims, even those supported by references, are not legitimate track records. You need …

Disclosure & Documentation

All legitimate track records are based on disclosure and documentation. Disclosure is usually in the fine print, but it should describe the methodology used to produce the track record. Documentation is your record of what is communicated to you before you sign on with an advisor.

Composition of Track Records

The most reliable records are based on the performance of all of the advisor’s portfolios. Second best is a composite of portfolios that still contains a large number of accounts. Be leery of track records based on a limited number of portfolios, which may include only the best performing accounts.

GIPS Compliant

The formula an advisor uses to calculate his or her track record should be in compliance with Global Investment Performance Standards, an industry code established by the CFA Institute.

Third Party Auditors

Independent third parties with no relationship to the advisor or money manager are the best auditors. Beware of unaudited track records and auditors you’ve never heard of.

Investment Expenses

The most reliable track records should reflect all of the fees that would be deducted from your account: advisory fees, money management fees, custodial fees, marketing fees, administration fees and transaction expenses. Expenses can range from 1.5 percent to 3 percent and occasionally even more.

The Free Lunch

Watch out for track records that appear to be too good to be true or an advisor who claims he can produce high returns for low risk. High returns for low risk do not exist.

The Hot Product

Many sales representatives and advisors will show you the performance of hot products (specific mutual funds and hedge funds, for example) and represent the results as their track records. Unfortunately, it’s virtually impossible to know when they began recommending the funds to their clients. In my experience, they usually selected the funds after the performance occurred.

Bottom Line

Some investors feel awkward asking potential advisors for their track records. Don’t. It’s your money.

It can be difficult to navigate the waters of selecting an advisor.  Understanding the importance of a track record is a good place to start.

Does Your Investment Advisor Have a Track Record?

by Howard Aschwald
visit Wealth Management Exchange to view the complete article

With the recent market turmoil, investors are looking for more credibility and transparency from their investment advisors. Many investors have become disappointed with the investment results achieved by their advisors. Their performance doesn’t look like anything they were shown in the presentation made by the advisor when they signed up. Perhaps it’s because the track records shown to them in the presentation were not actually achieved by the advisor directly.

According to a survey of 4000 investors conducted by the Paladin Registry, 91.4% of investors want their advisor to have a track record of their investment performance. Paladin Registry concluded that track records were not typically available from advisors. Most advisors have not found it necessary to have their own track record, since many investors still find it acceptable to just let the advisor choose investments for them.

These advisors are similar to professional buyers that shop on behalf of the investor to scout out investment opportunities. The investment managers for the major endowments (the ultimate professional buyers with just one client) are credited (or debited) with a track record. It is only a matter of time until individual investors, with 91.4% preference for real track records, begin to demand the same from their advisors.

Track Record: Reflection of Advisor’s Investment Judgment

It is perfectly understandable why investors want to see a record from an advisor that has management control (discretion) of their investment accounts. A track record is a reflection of the advisor’s investment judgment and decision making that is independent of an advisor’s presentation skills. If an investor is going to turn over control of the buy and sell decision to an advisor, then it would be prudent to see how that advisor has handled other decisions in the past.

Even if advisors are simply selecting mutual funds or choosing separate account managers on behalf of their investors, they should have a record of their past choices that would closely match how they intend to invest client funds. It’s not enough (and fairly misleading) to site the record of a mutual fund or separate manager unless that record coincided with the actual results achieved by the advisor’s clients in the past.

Investors should be careful when an advisor claims to pick only “the best” manager(s) or fund(s). They may say that they have a due diligence process for screening managers and it could look very impressive, but how can an investor know if that process truly worked without the advisor’s record to go with it.

Psychologically, the advisor is transferring the success of someone else’s track record and using that in their sales/consulting presentation. Under those circumstances, an investor should heed the maxim that “past performance is no indicator of future results”. As a side benefit of using an advisor with a track record, a client can be sure that the advisor/manager will be extra diligent in his management process since the client’s results will be included in the manager’s future performance record.

CFA’s Global Investment Performance Standards (GIPS)

Fortunately, there are global standards on how track records are to be calculated and presented. The CFA Institute’s Global Investment Performance Standards (GIPS) are the criteria that institutional investors require of their investment managers. These standards allow clients to evaluate track records from any firm in the world that adheres to them.

In much the same way that public corporations have to present accounting data in accordance with Generally Accepted Accounting Principals (GAAP) in the U.S., investment managers have to present their track records in compliance with GIPS. In this way, it is possible to make consistent comparisons across managers. Furthermore, the records of mutual funds, which are GIPS compliant and audited, can be compared directly to the records of separate account managers.

Calculating Performance Uniformly

Any advisor who has investment control (discretion to make buy and sell decisions) over accounts can adopt GIPS. The requirements are not difficult to implement and manage. The standards require managers to calculate performance in a uniform way and present their results into meaningful composite reports. There is broad leeway to include and exclude performance results from each composite, but the standards greatly diminish the potential for “gaming” track records by including only the best performing accounts or showing a potentially misleading “representative” account.

While managers can legally show records that are not GIPS compliant (with enough fine print to protect them from regulators), most institutional clients will not accept them. In addition, most institutional clients expect managers to not only have GIPS compliant records, but have their results audited by an independent third party as well.

Investors are looking for their advisors to be more responsible and accountable for the results of the advice and management they are providing. At the very least, individual investors should expect their advisors to provide them with separate account investment managers who have audited and GIPS compliant track records.

Not Asking For Too Much

Individual investors should be very leery of any advisor who shows a track record of a separate account manager or mutual fund and then implies that would have been his choice five years earlier. Finally, if the advisor has the responsibility to manage the client’s investment assets, asking the advisor for an audited written track record, is not asking for too much.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Choosing an advisor with experience is critical, but it’s not just a matter of years under their belt it is also a matter of results.  What is their track record? How have their portfolios preformed? The following article outlines questions to ask before determining who will manage your investments.

Sizing up a Financial Advisor

by Chris Parry
visit InvestorGuide.com to view the complete article

 A majority of investors are hesitant when looking into using a financial advisor. This is in part due to the fact that the financial service industry does not have the best track record. For example, many financial advisors work off commissions from certain

businesses which they receive for selling the products of that company. This creates an incentive for some financial advisors to sell certain products that will help them financially but may not be the right move for an investor. If you want to make the right decision with your money, using the expertise of a qualified, unbiased professional financial advisor may be the best way to create a financial plan which is ideal for you.

Getting referrals from acquaintances and friends for financial advisors is a good place to start but you should also look into each advisor on your own as you must ask as many questions as possible to make sure you are comfortable letting your financial advisor handle your investments. Below are some of the points which you should make sure of before choosing a financial advisor.

• The financial advisor should work for you on only a fee basis not on a commission based compensation structure. Advisors who work on commissions are generally more likely to recommend frequent transactions which may not be in your best interest. Also, an advisor who works on commissions may have ulterior motives because they make money both when you buy and when you sell securities.
• A financial advisor working for you must know the risks you are willing to take and stick to those terms. A good way to do this is to look at historical performance of the potential portfolio in bear markets to get a feel for how the value of that particular asset mix can fluctuate. An advisor who knows what risks you are willing and not willing to take will adjust your portfolio as need be to keep it focused on your financial goals.
• An advisor should work with you to set goals for your target rate of return. A fee only advisor can show you different models and different types of investments that have the potential for reaching the goals that you have set.
• Make sure the advisor writes a policy statement for you. A policy statement should have well laid out instructions that cover the following goals and risks: target return, tolerance of risk, time horizon, tax restraints, and also encompass any regulatory issues.
• The advisor should be active in rebalancing your portfolio. If there is a situation where an asset does not sit well with the originally specified target allocation, then they should either sell it or at least modify the exposure of your portfolio to it until the target, which you specified, is achieved.
• The advisor you choose should give you a quarterly report of your financial portfolio’s performance and its market value. They should determine if the market value of your portfolio is growing at a rate which will allow you to achieve your set financial goals. They should also be up front in telling you changes that they think you should make.