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In late May we conducted a client survey and this article explains what we learned. There were 242 responses received which represents a 20% response rate. There were six categories of questions under dimensions of service: Interpersonal skills, client knowledge, investment knowledge, communication skills, and responsibility. There were a number of statements under each dimension and each was rated by how important it is to the client, and then how clients rated the firm. The scale for evaluation went from 1 to 7. Clients rated all dimensions as important and in all cases rated the firm as doing these very well. An example will help. Under Interpersonal skills there is the statement “establishes a good personal rapport with me.” In importance clients scored this 6.53 and evaluated the firm at 6.55. So it is important to our clients and we are doing a good job in establishing good rapport.
Overall, the Dimension of Service scores were very good but there is room for improvement and one of our goals for 2011 is to make The Client Experience even better than it is today. We truly appreciate the trust you have placed in us and clearly understand that we must earn your business each and every day.
Turning back to the survey there were some other interesting points that should be highlighted. For example 56% of respondents met us through an introduction by a relative, friend or colleague, or by attending a seminar sponsored by the firm. 76% use Fragasso Financial Advisors exclusively and have no other advisors managing their assets.
Turning to Client Investment Priorities, respondents were given the ability to establish a first, second, and third priority of what is important to them. The first priority was retirement, the second priority was tax reduction, and the top selection for the third priority repeated tax reduction. In each priority there were eight possible choices: retirement, hedge against inflation, estate distribution, educational funding, cash flow for business, tax reduction, saving for a major purchase and charitable giving.
When asked about the status of their wills 62% indicated that their wills were up to date while 24% said their will needed adjusting and the remainder indicated that they did not have a will. A good question to ask here –What is the status of your will? Is this something you should address in 2011?
Regarding estate plans 52% indicated that their estate plan was up-to-date, 23% said their plans need to be reviewed and 25% indicated they do not have an estate plan. What is the status of your estate plan, should you talk to your advisor about this important topic?
A question was asked about where clients obtain information and from the 242 responses; 95 responded from this advisor, 34 from their accountant, 33 from financial publications and 27 from financial television. The remaining 53 respondents were spread over the remaining six categories: Internet services, attorney, financial planner, Personal banker, insurance agent and others.
Finally there were a series of questions on how clients rated their Fragasso Team using a 7 point scale with 1 (disagree) to 7 (agree) on being courteous, pleasant, respectful, knowledgeable, understanding, responsive and accommodating. In each case the scores were 6.5 or higher.
We are pleased that so many of you took the time to respond to give us feedback on how we are doing and pleased that your responses were so positive. Our goal is to keep on improving how we serve each of you, our valued clients, and invite you to contact us whenever you have a question or concern.
Animal Friends will be holding it's 6th annual telethon in March hosted by WTAE - 4 Watch your TV for adorable adoptable pets, heartwarming stories and your chance to make a difference!
  
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Resolutions or Goals
by Bob Fragasso
A New Year's resolution is a commitment that an individual makes to a project or the reforming of a habit, often a lifestyle change that is generally interpreted as advantageous. (Wikipedia)
See the words in italics. It all sounds pretty formidable and somewhat negative. Change my lifestyle!? The magnitude of that makes one stop and think before embarking on that course of action. The low success statistics associated with resolution fulfillment confirm that we don’t react well to negative, major changes in our lives. Consider the beneficial changes associated with, for example, quitting smoking. Yet only a minority of quitters are successful when making that a New Year’s resolution.
So let’s consider an alternative. What if we forsake resolutions and instead set goals for ourselves? These are positive in nature and thusly motivating rather than inhibiting. Let’s try some alternative examples.
Resolution
I will stop wasting money in my expenditures.
Goal
I will accumulate assets.
Resolution
I will contribute more to my 401K plan.
Goal
I will retire comfortably and securely.
Resolution
I will save more for my children’s education.
Goal
My children will have options when it comes to post-secondary education.
It is not just wordplay. The subtle reframing from painful change to positive expectations allows for an opening up of possibility thinking. It acknowledges our natural human tendency toward the positive and acts as a powerful motivator. I discovered this 36 years
ago when, like Mark Twain, I had tried to quit cigarettes “a thousand times” as I thought of all of the bad things that smoking would bring to me; heart disease, cancer and the like. I finally succeeded when I conjured up the positive imagery of me unhooked. How
would I look? How strong would I be and with how much endurance? I saw myself playing with my small children without becoming tired. I saw myself attending their weddings and their children’s school graduations. Then I quit once and for all.
Now what are your goals? And to the point of what we do for you, what are your financial goals? Create them and see them clearly in your mind. Then talk with your Fragasso Financial advisor to fashion the plan to achieve them. And enjoy the fruits of 2011 and beyond!
How Long Do You Have to Keep Your Statements?
You have probably heard that you should retain copies of your federal tax returns for 7 years. Is that true, or a myth? How long should you keep those quarterly and annual statements you get about your investment accounts? And how long should you keep bank statements before throwing them away?
Your age, wealth and health might shape your answer. If you are not yet retired, then you may wish to follow the general “rules of thumb” presented across the rest of this article.
On the other hand, if you are retired and there is any chance that you might need to apply for Medicaid, then you should keep at least five years worth of all financial records on hand (including credit card statements).
Why? Medicaid has a five-year "lookback" period in many states. To be approved for benefits in those states, you have to prove that you didn’t give away funds during that five-year period. To prove this, you must produce complete records from every bank and brokerage account to which you have access, including those held jointly. With all the Wall Street mergers and bank closings in the last few years, these financial records can be really hard to obtain if you don’t have them.
Another special circumstance: if someone you love ends up under court supervision via guardianship or conservatorship, all financial records must be kept from date of that guardian's or conservator's appointment until the court gives final approval to the fiduciary's financial account.
All that said, many people do not need to retain all financial statements “forever”. Here are some suggestions on what to keep and when to purge.
Tax returns? The Internal Revenue Service urges you to keep federal tax returns until the period of limitations runs out. The period of limitations = the time frame you have to claim a credit or refund, or the time frame in which the IRS can levy additional taxes on you. (This is a good guideline for state returns as well.)
If you file a claim for a credit or refund after you file your tax return, the IRS would like you to keep the relevant tax records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. If you claim a loss from worthless securities or bad debt deduction, you are advised to hang onto those records for 7 years. If you … uh … filed a fraudulent return or no return, you should keep related/relevant documents for 7 years. The IRS also advises you to retain employment tax records for at least 4 years after the date that the tax becomes due or is paid – again, whichever is later.1
Some tax and financial consultants advise people to keep their tax returns forever, but concede that canceled checks, receipts and other documents supplemental to returns can usually be safely discarded after 3 years. (The standard IRS audit goes back three years.)
Tax records relating to real property or “real assets” should be kept for as long as you hold the asset (and for at least 7 years after you sell, exchange or liquidate the asset). These records can help you figure appreciation, depreciation, amortization, or depletion of assets with regard to the property.1 You also might want to keep receipts and tax records related to major home improvements – if you sell your home, you can show tomorrow’s buyer how much you put into the house.
Mutual fund statements? The annual statement is the one that counts. When you get your yearly statement, you can toss quarterly or monthly statements (unless you really want to keep them). You might want to quickly glance and make sure your annual statement truly reflects changes of the past four quarters.
You want to keep any records showing your original investment in a fund or a stock, for capital gain or loss purposes. Your annual statement will tell you the dividend or capital gains distribution from your fund or stock; as you may be reinvesting that money, you have a good reason to keep that statement.
IRA and 401(k) statements? You get a new one each month or quarter; how many do you really need? The annual statement is the most relevant. Additionally, you want to hang onto your Form 8606, your Form 5498, and your Form 1099-R.
Form 8606 is the one you use to report nondeductible contributions to traditional IRAs. Form 5498 is the one your IRA custodian sends to you – it is sometimes called the “IRA Contribution Information” or “Fair Market Value Information” form, and it usually arrives in May. It details a) contributions to your traditional or Roth IRA and b) the fair-market value of that IRA at the end of the previous year. Form 1099-R, of course, is the one you get from your IRA custodian showing your withdrawals (income distributions).2
If you are 59½ or older and have owned a Roth IRA for 5 years or more, the assets in your account become tax-free, lessening your need to save these forms. However, you will want to keep a paper trail before then – if you somehow need to make early or tax-free withdrawals or write off a loss, you need the documentation.2
Bank statements? The rule of thumb for most people is 3 years, just in case you are audited. Some people shred bank statements after a year, or immediately, fearing that such information could be stolen.
In some cases, it is wise to hang onto bank statements longer. If you are going through a divorce, if someone tries to take you to court in the future, or if a creditor comes knocking, you may want to refer to them. Your bank may provide you with archived statements online or on paper (but it may charge you a fee for hard copies).
Payroll documents? Most financial and tax consultants advise you to retain these for 7 years or longer if you are a small business owner or sole proprietor. The IRS would like you to keep them around at least that long. Again, should there be a lawsuit or a divorce or any kind of potential legal dispute involving your company or one of its employees, a detailed financial history can prove very useful.
Credit card statements? You don’t need each and every monthly statement, but you may want to keep credit card statements that contain tax-related purchases for up to 7 years.
Mortgage statements? The really crucial records are most likely on file at the County Recorder’s office, but it is recommended that you retain your statements for up to 7 years after you sell or pay off the mortgaged property.
Life insurance? Keep policy information for the life of the policy plus 3 years.
Medical records and medical insurance? The consensus is 5 years from the time treatment ends (or from the time medical services are rendered, with regards to insurance). Do you think you can claim medical expenses on your tax return? Then follow the IRS suggestion and retain records for 7 years following the end of the year in which they are claimed.
Copyright 2010 Peter Montoya, Inc.
All Rights Reserved
Profiles in Progress: Client Stories
Chuck and Libby Modispacher
Chuck Modispacher started the conversation by modestly suggesting that he is boring and that no one will want to read about him. We don’t believe that is true. Not unless you think that starting from humble beginnings and rising to become a partner and principal in two major accounting firms, chairing the board of a health care system, successfully raising two children in a chaotic world and remaining happily married for 44 years is boring.
Chuck and Libby Modispacher grew up similarly, each in a different area of the South Hills. Chuck was raised in the Overbrook section and Libby in Castle Shannon. Chuck attended St. Norbert Catholic Church’s elementary school and Libby, St. Ann’s. Chuck went on to South Hills Catholic High School and Libby to St. Francis Academy. And Chuck was graduated in 1965 from Duquesne University’s School of Business Administration with a major in Accounting. Chuck’s dad was in charge of PNC Bank’s Potter Office and its huge depository vault. He was once featured in a documentary of Pittsburgh as the curator of that now-gone cornerstone of banking. Libby’s dad was a candy maker for Gimbel’s and then Betsy Ann Candies. Both moms were traditional stay-at-home while the children were raised. Chuck’s mother worked post-child rearing at Mellon Bank’s foreign currency department. Libby herself followed that model staying home to raise their two children, Jeffrey and Susan born in 1967 and 1968 respectively and then later worked for The Kerygma Group’s bible studies publications until her retirement.
While Libby kept the home and children safe and organized, Chuck worked from the position of audit associate at Arthur Young and Co., then one of the “Big 8” national accounting firms, up to coveted partner status. This occurred in the years of 1965 to 1993. Chuck was then recruited to join Hinds, Lind and Miller, a well known local firm that merged its way up to eventually become a part of Perente Beard, a major regional firm covering the states of Pennsylvania, New York, New Jersey, Maryland and Texas. Chuck became a Principal in the Pittsburgh office, finally retiring at the end of 2009.
Throughout Chuck’s career, he chose to give back to his community by serving on boards and committees, most notably among them as a board member of St. Peter’s Child Development Center and South Hills Country Club and as Chairman of the Board of Jefferson Regional Medical Center. The Jefferson position continues into retirement and is a source of pride for him as he looks at accomplishments during his board time. In that period, Jefferson moved from a hefty operating deficit to an operating surplus. As such, Jefferson was able to resist the forced-to-merge-or-close fate of other hospitals and health systems. And Jefferson expanded by three-fold its out-patient services to multiple geographic areas. All of this totals quite a set of accomplishments for a “boring” guy!
When asked to provide advice for young persons beginning their careers today, Chuck suggests hard work, staying focused and balancing family and job responsibilities. He admonishes us to enjoy ourselves and to be open to whatever opportunities that life presents. He concludes with the counsel to always be ethical and to ask questions, as that is how one learns and grows.
He and Libby can enjoy their children, Jeffrey and Susan, and Jeffery’s daughter, Allie, as well as their well-earned retirement. We thank them for their vote of confidence and pledge to continue to work hard to justify it. And we thank Chuck and Libby for their friendship.
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Shattering the Myth that Women Aren't Good with Money
If you look at the personal finance books out right now, some of the titles might convince you that women need “special help” when it comes to figuring out saving, investing and budgeting. The current self-help tomes include Prince Charming Isn't Coming … SHOO, Jimmy Choo! The Modern Girl's Guide to Spending Less and Saving More … Does This Make My Assets Look Fat? … Girl, Get Your Money Straight … A Purse of Your Own: An Easy Guide to Financial Security.
Judging by these titles, you would think contemporary American women are naive shopaholics or squanderers. But is that really the case?
Data suggests women and men don’t spend that differently. The Bureau of Labor Statistics, which tracks consumer spending patterns per gender, finds that personal spending between the genders evens out. For example, while women have historically spent more on their apparel than men do on theirs, recent findings show that men are spending more on eating out, audio and visual equipment and transportation.3,4
Do women run wild at the mall? Data seems to say otherwise. While the most recent BLS data indicates that 76% of women have at least some credit card debt compared with 67% of men, it also reveals that credit card balances are higher for males. Empathica, a firm providing consumer insights to retailers, polled more than 7,200 U.S. consumers in 2009 and found that 72% of women had reduced their retail spending in the recession compared to only 62% of men.3,5
Two surveys suggest women might be more prudent investors. In 2001, a study conducted by two University of California, Davis professors titled Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment appeared in MIT’s Quarterly Journal of Economics. Looking at patterns across 35,000 households, Brad Barber and Terrance Odean determined that male investors traded stocks about 50% more often than women investors, with their market timing efforts resulting in poorer returns and more frequent fees and charges.3
In March 2009, University of Oregon professor Ellen Peters conducted a nationwide survey which revealed that just one in every 40 women had "made riskier investments looking for long-term growth" in the past week, while one in eight men had taken such a risk.6
Other surveys find women prioritizing savings and debt reduction. TD Ameritrade has a new poll out in which 68% of women say they intend to save more of their money in 2011, compared to 62% of men. In a 2010 Citigroup survey, 48% of women aged 18 to 39 said that they were saving more money than they had in the past. Overall, 72% of women in the Citi survey responded that they would use extra cash to pay down debt, compared to 65% of their male counterparts.7,8
The real issue is unequal income. On average, women live longer than men and therefore need more money across a lifetime. Yet on average, they don’t earn as much as men. According to the Labor Department, women working full-time after age 24 still earn just 80% of what men working full-time do.7
However, the National Center for Women and Retirement Research estimates that 75% of women will be widowed – at an average age of 56 – and that 90% of women will be solely responsible for their financial situation at some point in their lives.7
There is no need for condescension; there is a need for comprehension. Women do need to realize the financial challenges that come with potentially longer life spans and potential absences from the workforce, and plan accordingly.
Copyright 2010 Peter Montoya, Inc.
All Rights Reserved
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Fragasso Celebrates 15 Years of Independence
In 1996 Bob Fragasso took a big risk by going independent and starting his own financial services firm. Prior to the 1996 move to independence, Bob spent several years managing his team within a well-known national wire-house. However, after a series of mergers in the early to mid 90’s changed the landscape of the investment industry, Bob knew he wanted to make a change. The message from the brokerage industry was becoming very clear; sell our proprietary products to your clients and you will be rewarded. Refuse to sell the proprietary products and we won’t support you or your business.
While Bob knew that a change was necessary, he also knew that he had to find the right partner to enjoy the freedom to run and build his business the right way. For Bob, defining “the right way” to continue to build his business was easy; “Always act in the best interest of the client”. After a thorough analysis of available options, Bob determined that a move to an independent broker dealer would give him the freedom he wanted and that his clients deserved. Going independent offered far fewer limitations and absolutely no product bias and Bob knew his clients would appreciate that flexibility.
Both Deborah Graver and Michael Fertig worked with Bob prior to his move to independence with LPL Financial in 1996, and they quickly agreed that the benefits of doing so were immediately evident after the move to independence. We asked Bob, Deborah and Michael about the 15 year anniversary of the founding of Fragasso Financial Advisors as we know it today.
“Being independent allows us to do what we do best; help our client’s progress toward their important goals by focusing on comprehensive financial planning and investment management, without ever having to deal with even a hint of proprietary product bias. The move to independence opened up an entire universe of non-proprietary financial products and services to us, and, more importantly, to our clients. In this new independent world, no product provider or individual security has an advantage over any other. That affords us with the flexibility to choose the investments that best match our clients’ needs” stated Michael Fertig, Managing Director of Sales and Financial Advisor Development. Bob agrees and states that being independent allows for not only that “proprietary-free universe” of investments for our clients, but also assures that the firm will never be bound to the dictates of corporate entity. We work only for our clients.
And what was it like working with Bob in the beginning? “He’s always been entrepreneurial, hardworking, and charitable and believes strongly in what he does.” stated Deborah Graver, President and Chief Operating Officer. Those attributes have contributed greatly to the success of our firm. Michael Fertig believes that Bob’s capacity to truly listen to suggestions from his staff and his willingness to make adjustments to the firm’s business plans has allowed the firm to continue to grow and expand in a constantly changing environment. Mike continued by saying that Bob has never been the typical CEO. “He has always been very active and devoted to building his business the right way and he has always been such a generous and self-sacrificing boss. I can’t imagine a business model that would suit Bob’s personality any better. He’s really a great person to work with. His principles never waiver, yet he’s been able to do so much over the last 15 years. We’re all looking forward to the next 15.”
So what does Bob Fragasso think the next 15 years has in store for Fragasso Financial Advisors? “Continuing to grow our client base with the tools we’ve put in place; the technological tools, the good people, and the training. We will continue to increase and refine our quality of service because that’s what our clients deserve.”
Bob closed by saying that he appreciates the confidence our clients place in us to manage their assets and their trust in referring friends, family, and business associates through the years.
Citations:
1 irs.gov/businesses/small/article/0,,id=98513,00.html [4/8/08]
2 kiplinger.com/columns/ask/archive/2004/q0206.htm [2/6/04]
3 slate.com/id/2274416/ [11/17/10]
4 mint.com/blog/finance-core/boys-gone-shopping-wild/ [1/27/09]
5 prweb.com/releases/2010/01/prweb3531414.htm [11/1/10]
6
online.wsj.com/article/SB124181915279001967.html [5/9/09]
7 blogs.reuters.com/deep-pocket/2010/11/08/women-saving-more-despite-uncertainty/ [11/8/10]
8
businesswire.com/news/home/20100510007375/en/Citi-Survey-Finds-Young-Women-%E2%80%9CMe-Generation%E2%80%9D [5/11/10}
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