Broker Check

Should You Work with a Robo Advisor or Should You Use a “Real” Advisor?

May 19, 2015
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May 2015 - The “robo” world includes portfolio models often at low pricing such as .25% per year. A low cost portfolio allocation may fit many situations. However, financial issues interlace with your investments and may require an advisor. Here are a few areas we commonly cover in meetings with prospects and clients. 

A more complex estate plan, such as using trusts, may be apropos if you remarried after a divorce or the death of a spouse. Even if there was no pre-nuptial agreement, money earned while married is considered community property in New Mexico. There are methods to protect a surviving spouse and still posture assets for your children. We frequently refer clients to accountants and estate attorneys on these matters. 

The Federal Reserve is in a difficult position. There will be an impact on your fixed income holdings (bonds) if/when they raise interest rates. Existing bond values will be negatively impacted during a rising rate environment. Clients need to understand the impact and the options. 

Lower oil prices are deflationary. Raising interest rates are also deflationary. So the Federal Reserve has to be cautious in order not to push the US economy too close to deflation. Also, higher interest rates further strengthen the US dollar, which is great for us as overseas travelers, but not good at all for US companies that export goods: think Caterpillar and John Deere. 

Consideration of a Roth conversion is another example of the value we bring to our clients. Passing IRAs and 401(k)s assets to our children has tax consequences as follows: no step up in basis upon death; and, outflows to children will be taxed at their income rates. Roth IRAs on the other hand grow tax free. The dilemma however, is to accept the tax burden now in order to convert the assets. 

Hopefully, the above issues stir some questions. 

Disclosures: 

*For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. 

*All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. 

*Converting from a Traditional IRA to a Roth IRA is a taxable event. To Qualify for a tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place at least five years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending upon state law, Roth IRA distributions may be subject to state taxes.