Is Your Foundation or Endowment Vulnerable?

Posted on August 26, 2011 by Daniel Dingus

Some time ago, I blogged about the personal liability that comes with a nonprofit board position. I talked about how, with the recent market turmoil, board members have faced litigation. Individuals have sued because they believed the foundation’s endowment’s investment strategy was inappropriate, investments were illiquid or there was no investment policy.

Well, anyone who’s seen a television or even glanced at a newspaper over the last few weeks knows the markets remain volatile. That means board members will continue to face scrutiny, more so than they might normally, especially relative to any investment portfolio. And that makes this a perfect time to talk about ways board members can ensure they’re meeting their fiduciary responsibility.

Looked at another way, there are several points of vulnerability that may keep foundations and endowments from meeting their investment objectives. Many trustees don’t know that their endowment or foundation may be vulnerable.

From asset allocations that are not aligned with organization objectives to failure to adjust portfolio to change in objectives or market conditions (something that is especially critical now), we’ve seen multiple ways foundations miss their financial goals. Based on our experience at Fragasso Financial Advisors, we’ve identified 10 points of vulnerability.

Use the current market situation to your advantage. If you’re a board member or the executive director of a nonprofit foundation, read what we’ve identified to be the areas of most concern, and see where your organization falls. If you are not sure of some of those areas identified, give us a call. We stand ready to help.

For informational purposes only.  Neither Fragasso Financial Advisors nor LPL Financial offers legal advice or services.

Daniel Dingus is Managing Director and Chief Portfolio Strategist at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Dan can also be reached for comment at 412-227-3200.

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How would I design a portfolio to generate income from a $500,000 nest egg?

Posted on August 3, 2011 by Robert Fragasso

This was exactly the question posed to me in an interview for Bankrate.com: How would I design a portfolio to generate income for a 70-year-old retiree with a nest egg of $500,000, and no other source of income?

As a certified financial planner with more than 39 years of experience, I know that there are currently plenty of theories about retirement planning out there, and a lot of them are untested. If you aren’t careful, these theories could be tested on you, the investor, maybe for the first time. My best advice for making the best decisions now, to make sure your savings are safe later, is to work with a trusted advisor who is managing by textbook principles and can knowledgeably guide you toward the realization of your goals.

It is also very important for the client to find a program that he or she agrees with and can stick with.  At Fragasso Financial Advisors, we specialize in creating long-term relationships with our clients, guiding them and managing their investment assets.

You can view the complete details of my portfolio recommendations in the Bankrate.com article.

Given the overwhelming range of retirement strategies out there for people to choose from, our clients find it comforting to know they are gaining experienced and assured guidance to the path that is right for them. We encourage you to contact us to ensure your investment portfolio is working hard for you.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Robert Fragasso, CFP, is chairman and chief executive officer at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Bob can also be reached for comment at 412-227-3200.

Posted in CFP, Financial Advisor, Financial Planning, Investing, certified financial planner | Comments Off

Why Work With a Certified Financial Planner?

Posted on July 26, 2011 by Melissa Richey

Choosing a financial planner may be one of the most important decisions you make.   A planner can play a central role in helping you meet your life goals and achieve financial well being.    Take the time to choose a planner who is competent and trustworthy, one of whom you can depend for professional and objective advice.  Your future depends on the choices you make.

People are pulled in so many different directions when it comes to their finances, but a CFP® professional is uniquely qualified to pull all the pieces together and provide a comprehensive evaluation that looks at the whole picture of a person’s financial life.

The public’s growing need for objective financial planning advice, has placed the CFP® certification at the forefront of the financial planning profession.

A Certified Financial Planner has voluntarily submitted to the rigorous CFP® certification process that includes “the four Es”:

•    Education
•    Examination
•    Experience
•    Ethics

Anyone can call themselves a “financial planner.” But only those who have fulfilled the certification and renewal requirements of the CFP Board can display the CFP® marks.  The CFP® certification ensures that the person you choose to help you plan for your future is competent and ethical. When you work with a CFP®, you are the focus of the financial planning relationship and your needs drive the recommendations.  CFPs follow certain practice standards – called Financial Planning Standards which are based on a six step financial planning process.  This holistic approach distinguishes CFPs from other professionals who typically focus on only one area of a person’s finances.  When you work with a CFP®, you can trust that you are working with an educated, experienced and ethical advisor who is dedicated to providing current, relevant and conscientious advice.

The CFP®‘s Code of Ethics ensures that practitioners are acting fairly and diligently when providing financial planning services – this puts the client’s interests first.  Look for a measure of the planner’s commitment to ethical behavior and adherence to high professional standards.  Look for a financial planner who will put you and your needs at the center of every financial planning engagement.  Most importantly, look for the CFP® or CERTIFIED FINANCIAL PLANNER marks.

To verify that your planner is authorized by the CFP® Board to use the CFP® certification marks, call toll free 1-800-487-1497 or visit www.CFP.net/search.

Copyright© 2002-2009, Certified Financial Planner Board of Standards Inc.  All rights reserved.

Melissa Richey is a Vice President at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm. She is also a registered representative with LPL Financial. Due to industry regulations, comments are not permitted on this blog. If you would like to contact the author, please email us at blog@fragassoadvisors.com. Melissa can also be reached for comment at 412-227-3200 Fee-based investment management and securities offered through LPL Financial. Member FINRA/SIPC.

Posted in Advisor, CFP, Financial Advisor, Financial Planning, certified financial planner | Comments Off

Why There’s No Time Like Now to Begin Planning Your Legacy

Posted on July 14, 2011 by Deborah Graver

As a financial planner with nearly 20 years of experience and president and chief operating officer of Fragasso Financial Advisors, I have had the privilege to work with many clients at multiple points of their financial journeys. I have seen how hard they’ve worked, come to know the families they’ve nurtured and grown, and managed the assets they’ve accumulated.

Having built such close relationships with my clients, I know how important it is for many of them to leave a legacy for future generations. I want to be sure they do it in the most effective way possible, which is why I am advising my clients that now is the ideal time to plan for the transfer of wealth.

In December 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, extending the Bush-era tax cuts and offering additional benefits for estate planning purposes. However, the act is only in existence for 2011 and 2012.

We have provided details of the top wealth transfer strategies that you need to know about if you plan to transfer assets to future generations, including:

  • The tax-free transfer of wealth during an individual’s lifetime has been increased to $5 million.
  • The amount of money that married couples can pass on tax-free has been increased to $10 million.
  • The amount of money that can be gifted without paying any generation-skipping tax has been increased to $5 million.
  • The top estate tax rate for 2011 and 2012 is 35 percent.
  • The IRA charitable rollover has been re-established for 2011.

You can download our three-page paper detailing these tax advantages. If you are interested in learning more about how best to manage and transfer your wealth and want to work with a team of financial advisers who will make your financial success personal, we encourage you to contact us.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Deborah Graver is the President and Chief Operating Officer at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Deborah can also be reached for comment at 412-227-3200.

Posted in Estate Planning, legacy planning, tax | Comments Off

Have you thought about personal liability when joining a nonprofit board?

Posted on June 16, 2011 by Daniel Dingus

The short answer is you need to understand what that commitment exposes you to. Joining a board of a nonprofit is an important step in assisting a worthwhile cause and promoting the social benefits it offers the community. It is critical to the potential board member to think of the work not as an opportunity to occupy some of your free time with activities near and dear to your heart, but as a business venture, in more respects other than just the IRS definitions. With business comes risk, and in a form many of the charitably inclined do not consider – personal liability. As an unpaid non-profit board member, your decisions, input, and voting creates a personal liability. Consider your actions to the appropriation of funds, what implication does that suggest?

Members of the board and/or officers of a nonprofit could be sued individually or as a group. Clients of the organization you are serving can even sue in regard to issues such as discrimination (racial, sexual, religious, age, and sexual-orientation). Board members and officers can be included in these suits. Money disputes, such as misappropriated earmarked donations, special grants, and donor expectations, can often become a target of a lawsuit that includes board members. With the recent market turmoil, board members have faced litigation if there was reasonable doubt to the foundation and endowments investments. Lately this has included whether the investment strategy was inappropriate, investments are illiquid, or a general lack of investment policy.

Well now that I have your attention and maybe I made you a bit more uncomfortable about your commitments, some simple steps can be taken to ensure you and other board members are appropriately protected. The first step in protecting your liability is Directors and Officers Insurance coverage (D&O). It can be costly at times but to protect your personal liability, nonprofit organizations should not only have coverage but be aware of the appropriate level needed. D&O insurance is purchased by the company itself on behalf of its board members. This will be your first line of defense and a critical one should a lawsuit surface. Coverage is also provided for the costs of defense such as legal fees and other court costs.

In addition to the obvious legal protection, some nonprofits cannot secure grants and governmental funding without the proper insurance, especially in many of the Health and Human service areas. Without D&O coverage many professionals cannot join a board, thereby limiting the talent pool needed for the organization.

It may seem inappropriate to ask questions related to insurance and liability but it is imperative. It also shows that as a steward of the organization’s goals you care about the group and understand the intricacies of proper structure. Risk management is in everyone’s best interest.

For informational purposes only.  Neither Fragasso Financial Advisors nor LPL Financial offers legal advice or services.

Daniel Dingus is Managing Director and Chief Portfolio Strategist at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Dan can also be reached for comment at 412-227-3200.

Posted in IRS, non-profit | Comments Off

College Expense Planning – 529s

Posted on June 1, 2011 by Daniel Dingus

A 529 College Savings Plan is an investment program designed to assist individuals with a more effective means to save for future college costs. The benefits of a tax-advantaged savings vehicle permit earnings in 529 College Savings Plans to be tax deferred while withdrawals are free from federal tax if used for qualifying higher education expenses. Qualified education expenses from a 529 College Savings plan include tuition, fees, books, and board expenses.

Who can use a 529 plan? Typically, anyone can take advantage of a 529. Unlike an IRA or other tax-advantaged plans, 529 College Savings plans are permitted by all, regardless of age or affiliation of the intended college attendee. The account can be established for grandchildren, nieces, nephews, or as often the case, your own sibling.
What is critical to the process is funding early and periodically. (Although it is never too late to begin a 529 even if a recipient is beginning college). As the power of compounding illustrates below, an initial $10,000 dollar investment with an annual return of 7% over 18 years grows to $33,800. But by adding an annual contribution of $1,000 to the initial $10,000 dollar investment, and again with a 7% annual return over 18 years, the ending value is over $67,798!

There are many College Savings 529 plans available with differing investment objectives. Please do not hesitate to contact the knowledgeable personnel at Fragasso Financial Advisors for help in understanding the details and how College Savings 529 plans may assist your education goals in a tax-advantaged way.

Daniel Dingus is Managing Director and Chief Portfolio Strategist at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Dan can also be reached for comment at 412-227-3200.

Posted in 529s, college | Comments Off

Keeping our clients educated – and prepared – for retirement

Posted on May 24, 2011 by Ray Amelio

Ray AmelioThose approaching retirement age hopefully have been preparing themselves financially for years for this stage in life. For many, however, no matter how much saving, planning, and researching has been done, that troubling question still lingers in the back of their minds: Can I really afford to retire?

We hear this concern often, which is why we work closely with our clients to develop and execute a retirement strategy that gives them the best chance of living the lifestyle they choose when they retire.

To bring retirement education to life, we recently held two pre-retirement forums. Clients and their guests were invited to join us as we discussed how Social Security and Internal Revenue Service (IRS) rules will affect retirement.

Guest speakers Elaine Cole, a public affairs specialist with the U.S. Social Security Administration, and Diana Smith, a tax consultant with the IRS, covered a variety of topics, including solvency of Social Security, how work affects retirement benefits, Medicare benefits, protecting your Social Security number, why your pension is taxed and what types of income are taxable, to name just a few.

The engaged audience asked specific questions about their retirement situation, and many walked away with planning tips they could use immediately. We’ve packaged the valuable content from the Social Security presentation and made it available for download. The package includes material on survivor Social Security benefits, retirement Social Security benefits, and a fact sheet on Social Security changes for 2011. You can also view the two pieces of the presentations — “Medicare Benefits” and “What types of income are taxable?”

We understand how important planning for retirement is. It can also create anxiety. To give you a sense of whether you’re saving enough for retirement, we offer a “Cost of Retirement” analysis. And for those who’ve reached a point in their life where they’re able to invest a significant amount of money toward their retirement, our financial advisors are ready to work with you to ensure you’ll have the nest egg you need to retire comfortably.

Call us at 412-227-3200 to begin your journey to a financially secure retirement.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Ray Amelio is Managing Director and Chief Marketing Officer at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Ray can also be reached for comment at 412-227-3203.

Posted in Social Security, retirement | Comments Off

IRA Charitable Distributions

Posted on May 5, 2011 by Daniel Dingus

Thanks to the Tax Relief Act of 2010, Congress extended the ability to make direct qualified charitable distributions (QCDs) from your IRA, in amounts up to $100,000 by IRA owners who are at least age 70½ years of age through December 31, 2011.

This extension of the original Pension Protection Act of 2006, has potential benefits for IRA owners who are 70 ½, subjected to required minimum distributions, do not necessarily need the funds to live on, and may be charitably inclined. This allows retirees required to take IRA distributions to keep tax bills lower by designating the distribution directly to a charity. The drawback is that you cannot also claim a charitable deduction since you theoretically lowered your adjusted gross income (AGI) but the same amount. In years past when Congress suspended the required minimum distributions from IRA accounts this strategy became a lot less attractive.

From an estate planning perspective there are benefits as well. When passing along assets, it may be an advantage to pass along a taxable account with appreciated stock and low cost basis to heirs whereby they receive a “step-up” in cost basis as opposed to inheriting a traditional IRA with required distributions. As a word of caution: There are specific rules to follow when executing this type of strategy; the operational transfer process being a crucial aspect. The assets or check needs to move directly from the IRA to the charity. Not following the procedure closely could jeopardize the tax benefit.

For many high-net worth individuals such strategies are often over-looked due to their complexity despite the tax-efficiency it may provide. As financial advisors specializing in the complete approach to wealth management, including estate planning and tax strategies, we encourage you to contact us.

Public Law 111 – 312 – Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Daniel Dingus is Managing Director and Chief Portfolio Strategist at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Dan can also be reached for comment at 412-227-3200.

Posted in Charity, Congress, IRA, Pension, tax | Comments Off

Taking Your Tax Refund Further in 2011

Posted on April 28, 2011 by James Danko

April 18th has come and gone, and, if you got your taxes in on time, the stress of filing can finally be put behind you.

Now comes the fun part – patiently awaiting the refund check. Whether big or small, this lump sum check can feel more like prize money than earned income, and many people are tempted to go out and spend it as such.

However, before making any rash decisions with your tax refund, take a moment to answer the question “How can this money benefit me most?” A shopping spree that may bring instant gratification will only last for a short time until buyer’s remorse kicks in. However, the benefits to being smart with your tax refund could pay off for years to come.

Here are a few of my recommendations for taking your tax refund further in 2011:

  • Use your tax refund to fund your IRA contribution. The contribution to the IRA may qualify for a tax deduction on next year’s tax return. In addition, any growth on that money is tax deferred until it is withdrawn, and with a dividend reinvestment election you have the opportunity for compounding.
  • Using your tax refund to fund your Roth IRA contribution is another option. The primary benefits here are tax-free growth and tax-free withdrawals during retirement. You will also enjoy  the opportunity for compounding return with a dividend reinvestment election.
  • Use your tax refund to fund a taxable investment account. Although there are no tax benefits with this option, you will enjoy the opportunity for compounded return with a dividend reinvestment election.  This option is best if the money is needed before retirement or in the short term.
  • Use your tax refund to pay off existing, high-interest debt. The primary benefit of this option is the dollars saved on future interest charges.  The longer the term of the debt, the more savings there are to be had by paying down the debt early.

As financial advisors who want to ensure your financial success by making it personal, we take the time to understand your unique circumstances, responsibilities and risk-tolerance levels. We work with our clients to help them make the best financial decisions – from wisely investing their tax refund to properly planning their estate. We encourage you to contact us to learn more about how we can help you craft a personal investment strategy to ensure financial success for you, your family and your future.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing in stocks and/or bonds entail risks, including possible loss of principal.  Withdrawals from an IRA prior to age 59 ½  may be subject to a 10% IRS penalty.  In addition, a Roth must be held a minimum of 5 years prior to withdrawals.  IRAs are subject to fees and limitations.

James Danko is a vice president at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  James can also be reached for comment at 412.227.3207.

Posted in Uncategorized | Comments Off

What is the Fragasso Client Experience?

Posted on April 6, 2011 by Deborah Graver

On May 1, 1975 (still referred to as May Day! around our offices), the investment industry’s sources of revenue became unfixed by federal government fiat. Consequently, thousands of independent investment firms were swallowed by large organizations over the next few years and some did not survive.

In 1996, when technology and industry evolution made independent status feasible again, Bob Fragasso, along with a core team of financial advisors that he worked with at the time including myself,  began Fragasso Financial Advisors. However, this transition to independence was not easy—there were new forms of competition (bank investment departments, internet investment trading, and the Charles Schwab’s of the world, to name a few), necessary personnel cuts and salary freezes. A whole new way of doing business had to be devised with better automation and greater efficiency, despite being plagued with less staff and much less revenue per case.

So what was our solution so many years ago? Rediscover the client. Fifteen years later we still wholeheartedly believe in and practice this philosophy.

While we pride ourselves on making every client’s financial plan and portfolio management unique to their circumstance, we also believe every one of our clients should have a uniform experience.

This led to the creation of the “client experience.” Starting at the time prospective clients first encounter our firm, we want the experience and their reaction to be uniform in quality. We want them to understand how we go about managing their portfolio, how we construct their financial plan and how we guide them through the years. Our financial advisors are really relationship managers who are charged with understanding everything about their client.

Clients should not have to worry about who’s been assigned to them and how that will affect their experience. Fragasso clients never have to worry about being falsely led into believing they will be working with a firm of fully-staffed, experienced investment professionals, only to be handed off to a handful of fresh post-grads to manage their account daily.

We want our clients to be informed because we want them to be an active part of the process. Continuity is imperative to us; your team of advisors will stay constant throughout the financial process. We use multiple resources to ensure our clients always feel informed, including:

  • An LPL Financial monthly client account statement (LPL Financial is one of the nation’s leading financial services companies and largest independent broker/dealer. LPL Financial and its affiliates offer industry-leading support to more than 12,000 financial advisors and over 750 financial institutions who, in turn, provide independent financial advice to millions of Americans);
  • A quarterly management report that contains detailed information about your account(s);
  • Timely response to questions;
  • Quarterly analytical reports;
  • Quarterly rebalancing to original asset model;
  • Annual account and financial planning topics review;
  • Quarterly topical newsletter;
  • Monthly, focused topical e-news; and
  • Special market-related or financial planning newsletter.

But our clients tell their own stories best. Take a look at some of the successful life stories from the clients with whom Fragasso works here.

If the Fragasso client experience sounds like something you want to learn more about, contact us to take the first steps toward making your financial success personal.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Deborah Graver is the President and Chief Operating Officer at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Deborah can also be reached for comment at 412-227-3200.

Posted in Financial Advisor, Financial Planning | Comments Off