Monthly Archives: March 2016

Robo-Advisor: What Is It and Why Does It Matter?

Robot Advising Client – Guidant Wealth Advisors

The term robo-advisor seems like something out of the Terminator movie franchise, where instead of searching for Sarah Connor the human-cyborg offers killer financial advice. Somehow, we don’t see Arnold agreeing to this role.

Here in the real world, however, robo-advisors are gaining traction with investors. Even LPL Financial, our affiliate broker/dealer, announced plans to launch a robo-advisor program later this year, though the platform is directed at advisors rather than investors.

But what is a robo-advisor in the first place, and does it really impact you?

What is a Robo-Advisor?

A robo-advisor is essentially an online wealth management platform that provides automated portfolio management advice based on algorithms. Oh, and it’s done without the intervention of human financial planners.

Wait, huh?

Isn’t the point of financial planning that you get help from a person?

Well, yes, at least to those of us who have been around for a while. Robo-advisors were created to attract younger investors who already complete other types of financial transactions online. In other words, those investors who are comfortable with handling money online. The automated platforms generally serve investors looking for low account minimums and low service costs, too.

By now, you may be wondering if robo-advisors are a good thing or a bad thing. The answer is, it depends on who you ask.

As of December 2014, robo-advisors in the U.S. directly managed about $19 billion in assets, a 65 percent increase from April 2014 (Corporate Insight). We can possibly take this as a signal of confidence from investors who increased their use of robo-advisors. On the other hand, some see the technology falling short. Paul Resnik of FinaMetrica, a risk profiling firm, says “The problem with robo-advisors…is that they don’t properly calculate a client’s risk tolerance.”

Either way, robo-advisors appear to be here to stay, if only for younger generations. We believe human financial advisors aren’t going anywhere either, especially as financial planning and investing tends to be a highly emotional transaction best handled with the human touch.

 

– The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.

An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.

Car Buying on a Retirees’ Budget

Car Wheels – Buying Tips for Retirees

Buying a new car is one activity many retirees don’t think about when planning for retirement. The truth is many retirees find car buying an eventual necessity, and when they do the challenges they face are much different from pre-retirement days.

For one, some retirees live on a fixed income. This may or may not accommodate for a new vehicle. If it doesn’t, then retirees can have a hard time coming up with the money or getting a car loan to finance the vehicle.

All hope is not lost, however; there are ways retirees can have a positive car buying experience – even on a static budget.

Focus on Your Credit Score

If you have been diligent about paying your bills on time, by the time you retire your credit score should be good enough to qualify for some solid offers. For example, you may be able to forego a down payment on a new car if your credit score is high. You may also get a better interest rate with a qualifying credit score. Make sure the salesperson knows that you know you have a good score, and that you have some leverage to negotiate.

Consider a Trade/Independent Sale

Most retirees have an existing vehicle. If you do not need more than one car for daily activities, then you may benefit from trading in your current set of wheels. The amount you receive from a trade-in can offset the amount you have to finance when buying a new car. However, if you find the offer below what you think the vehicle is worth, then you may want to advertise your car for sale online. Sometimes, you can get more money when you sell the vehicle directly to the buyer.

Inquire about Leasing

Buying a new car isn’t always a reality for retirees. But leasing a vehicle can be, as it is an option that lowers the upfront costs of getting a new vehicle. Generally, leasing also carries lower monthly payments than if you were to buy a new car. For retirees on a fixed income, this may be a better option to satisfy both material and financial needs.

Car buying can be exciting for retirees, but it can also be a source of stress. If you need guidance on how to make a new car purchase fit into your financial or retirement plan, please feel free to reach out to us at (847) 330-9911.

6 Lesser-known Income Tax Breaks for Homeowners

Owning a Home – Tax Credits for Homeowners

Owning a home may mean additional tax benefits.

It’s no secret that owning a home comes with a slew of potential tax breaks and credits. But even if you have been a homeowner for years, there are some benefits you may not be aware of.

Let’s take a look at six of them you might be eligible for:

Home Mortgage/Refinancing Points

Let’s say you bought a home in 2015. You may be allowed to write off the points (prepaid interest) on your tax return that you file this year. This is usually reserved for first homes. If you bought a second home or refinanced in 2015, then you may be able to write off the points, but likely not all at once.

Property Tax for Military Service Members

If you served in the military in 2015, then you probably received a housing allowance. In addition, you may also be able to write off your real estate taxes and home mortgage interest.

Home Improvement Loan Interest

When you take out a loan to improve your home/property, the IRS may allow you to fully deduct the interest up to $100,000 in debt. You may also be able to deduct the interest paid on a home equity line of credit (HELOC). There are certain restrictions for portions of a home loan over 100% loan-to-value, or if you own a second home, so be sure to get the details from your tax preparer.

Energy-efficient and Renewable-energy Tax Credits

Homeowners who installed equipment to increase the energy-efficiency of their homes may qualify for a tax credit of up to $500 through December 31, 2016. New equipment that uses renewable sources of energy to help power the home also come with benefits: tax credits of up to 30% of the cost of equipment and installation.

Home Improvements When You Sell

If you are planning on selling your home in 2016 and you are making improvements, then you might consider adding the cost of improvements into the asking price. Then you may reduce the amount of capital gain when you sell the home.

Deductions for Private Mortgage Insurance

For those who obtained private mortgage insurance (PMI) or have mortgage insurance premiums (think FHA loans), the IRS may allow you to claim a deduction on your income taxes. There are limitations, however, depending on how much income you make in a year. Speak with your tax preparer for details.  

Questions about how taxes might impact your financial plan?

Guidant Wealth Advisors can compare your income taxes with your financial outlook to help you manage or adjust your plan. Call (847) 330-9911 to speak with a financial advisor.

 

– This information is for general information only and is not intended to be a substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.