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Robert Fragasso, Chairman and Chief Executive Officer of Fragasso Financial Advisors, was named to Registered Rep Magazine’s 2010 list of the Top 100 Independent Broker/Dealer Advisors. Fragasso was ranked at #11 out of 100 nationally recognized advisors and #1 out of advisors from Pennsylvania. The list is compiled based on assets under management.
From the August 1 announcement - "A decade ago, the independent broker/dealer firms were filled with part-time advisors, certified public accountants and insurance agents. The channel has moved on, but in many ways, its reputation hasn't. Some still see it as a place for those who just can't hack it on Wall Street. Our Top 100 list of independent broker/dealer advisors tells a different tale. Today, the channel is home to some of the most successful advisors in the industry with hundreds of billions in client assets."
Fragasso is proud to be ranked among the list of top broker/dealers throughout the U.S.
Fragasso Financial Advisors was also named as one of the top 100 independent financial advisors in America, as identified in Barron Magazine’s August 28th issue. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices. The scoring system assigns a top score of 100 and rates the rest by comparing them with the top-ranked advisor.
Fragasso Financial Advisors is now on Twitter and Facebook! Follow us and keep up-to-date on all the latest news. We have also launched a brand new blog to provide you with our insights on a weekly basis!
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Hundred Acres Manor is Pittsburgh’s premier haunted-house attraction. Located in South Park (Allegheny County) it is the longest single haunted-house experience in Western Pennsylvania. Our 45-minute tour of terror and mayhem will leave you shivering with fright. Come and see for yourself!
Managed by a group of dedicated volunteers that want to make a difference in our community, Hundred Acres Manor is a Halloween tradition in its 7th year.
All proceeds from this year’s event will benefit two of Pittsburgh’s most exceptional charities:
• Homeless Children’s Education Fund
• Animal Friends Inc.
Homeless Chidren and Homes Animals...
You can make a difference and have a frightfully good time along the way!
- Group discounts available for parties of 25 or more
- Private showings for corporate functions
For more information, please visit hundredacresmanor.com or call 412-851-HAUNT.
LOCATION:
South Park (Allegheny County) on 100 Acres Drive
PRICE: $16
DATES: October 1 - 31 (Open Wednesday through Sunday)
Recycled pets are best!
An elegant, green-friendly gala on Saturday, November 6 at the
Circuit Center & Ballroom, South Side
To purchase tickets visit Animal Friends website here
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A Successful Retirement
by Bob Fragasso
What makes retirement successful? Many would answer that it is financial security. We would respond that financial security is the means toward achieving a successful retirement. Adequate financial resources open up possibilities and allow us to live, work, play, contribute and connect as we wish during our retirement years. So the definition of retirement happiness is unique to each of us, we suggest, but very dependent on the common need to be financially secure. We all want the living arrangements, the travel, the avocations and the ability to enjoy children, grandchildren and family that form our unique vision of those golden years and adequate funding makes it a reality.
Keep your individualized retirement goals in mind as we switch to the hard realities of amassing adequate funding. Wishing is a start, but it doesn’t show up on a balance sheet. Keep those wishes alive as they form the fuel to propel us into productive action. Excluding lottery winnings and inheritances, all that will be there for you at retirement time is what you have sent on ahead, and that refers to both assets and liabilities. So, as you march inexorably toward your retirement dream, you must simultaneously build up assets and pay down debt. Sprinkling pixie dust on the situation won’t help, but thoughtful planning and determined action will.
The most productive avenue for building retirement assets is through tax-deductible and tax-deferred retirement plan savings. And that includes your company contributory plans, self-employed retirement plans and individual retirement accounts (IRAs). Consider that you place money into a qualified retirement plan before tax. When you contribute money that way, you are putting 100 cents of the dollar to work for you and the earnings grow tax-deferred until withdrawn. If, instead, you take a dollar of earnings to the consumer goods store, you must first allow it to pass through the tax collector’s filter leaving you only 65 – 90 cents to spend, depending on your top tax bracket. All of that money you didn’t have to pay in taxes on the contribution and all of the subsequent earnings on those contributions will be waiting for you at retirement. As you systematically or sporadically withdraw from your retirement accounts, you will pay taxes, but only on what you withdraw. The remainder continues to grow tax-deferred waiting to serve your next financial need in retirement. Your personal portfolio plays a big part in your retirement security but is definitely in second place to the power of retirement plan saving.
Now let’s consider liabilities. There are only three kinds of households. Those that spend all that they make and accumulate nothing. Then there are those that spend more than they make and accumulate debt. And, finally, there are those that spend less than they make and accumulate assets. Accumulating bad debt impedes asset formation and that especially includes high interest, consumer goods-related debt. By contrast, good debt can aid asset formation and that includes home mortgages, school loans, business loans and necessary vehicle loans that provide transportation to work or school. So, if it’s discretionary spending and you can’t pay for it, don’t buy it. Build assets and a good credit rating only through productive borrowings. The real-life, inescapable conclusion of the asset and liability approach to retirement success is that good planning, sound decisions and hard work create security and open a world of opportunities for you. And we are here to help with the planning and the investment decisions and management so you don’t have to go it alone. Call us now to start or accelerate along the road to retirement success.
Why Four Percent?
When retirement planners try to estimate just how much money a couple or individual should take out of their savings annually, their model scenarios often assume a 4% annual withdrawal rate. Why is 4% used so frequently? Was that percentage plucked out of thin air? No, it actually became popular back in the 1990s.
The “Trinity Study” helped popularize the 4% guideline. In 1998, a trio of professors at San Antonio’s Trinity University analyzed historical market data between 1925 and 1995 in search of a “sustainable” withdrawal rate. They used five different portfolio compositions - 100% stocks, 100% bonds, and 25/75, 50/50 and 75/25 mixes. (For purposes of the study, “stocks” equaled the S&P 500 and “bonds” equaled long-term, high-grade domestic debt instruments.) They tried to see which withdrawal rates would leave these portfolios with positive values at the end of 15, 20, 25 and 30 years.1
Their conclusion? If you are retired and withdraw more than 5% annually, you increase the chances of depleting your portfolio during your lifetime.
Subsequently, another such study was conducted by RetireEarly.com using financial market data from 1871 to 1998 – and that report reached the same conclusion.1
However, that wasn’t all the study had to say. The “Trinity Study” made some other conclusions that were not entirely in agreement. The professors maintained that most retirees should have 50% or more of their portfolios in stocks. But they also noted that retirees withdrawing just 3-4% a year from stock-dominated portfolios may end up helping their heirs get rich while hurting their own standard of living.1
Perhaps most interestingly, the study concluded that an 8-9% withdrawal rate from a stock-heavy portfolio was sustainable for a period of 15 years or less – but not for longer periods.1 In other words, while our parents and grandparents could confidently withdraw 8-9%, we who might easily live to age 90 or 100 probably can’t. Another 4% advocate: Bill Bengen. In 1994, CERTIFIED FINANCIAL PLANNER™ practitioner William P. Bengen published a landmark article in the Journal of Financial Planning presenting his own research findings on withdrawal rates from retirement savings. While Bengen published this article in the middle of a long bull market, he factored in the possibility of extended bear markets, minimal annual stock market gains and sustained high inflation.2
Looking at 75 years worth of stock market returns and retirement scenarios, Bengen concluded that a retiree who was 50-75% invested in stocks should draw down a portfolio by 4% or less per year. He felt that retirees who did this had a great chance of making their retirement money last a lifetime. In contrast, he felt that retirees taking 5% annual withdrawals had about a 30% possibility of eventually outliving their money. He put that risk at better than 50% for retirees withdrawing 6-7% per year.3
Over time, people began to call Bengen’s dictum the “4% drawdown rule”. The model 4% income distribution could be inflation-adjusted – in year one, 4% of a portfolio could be withdrawn, in year two that 4% withdrawal amount could be sweetened by .03% for 3% inflation, and so on.3
A dissenting view. In 2009, William Sharpe (one of the Nobel Prize-winning principals of Modern Portfolio Theory) published an article in the Journal of Investment Management contending that “it is time to replace the 4% rule with approaches better grounded in fundamental economic analysis.” Sharpe thinks that “the 4% rule's approach to spending and investing wastes a significant portion of a retiree's savings and is thus prima facie inefficient.” If a portfolio underperforms, he notes, you have a spending shortfall; and if it surpasses performance expectations, you end up with a “wasted surplus”.4
So in Sharpe’s view, by adhering to a 4% rule, you either risk living too large or short-changing yourself. Therefore, it would be better to constantly fine-tune a withdrawal rate according to time horizon and market conditions. While not necessarily a rule, 4% is a frequent recommendation. There is some compelling research to support the “4% rule”, and that is why financial advisers often cite it and tell retirees not to withdraw too much. Would withdrawing 4% of your portfolio annually (with adjustments for inflation) allow you to live well? For some of us, the answer will be yes; others will need to address an income shortfall. As we retire, most of us will want to practice some degree of growth investing. Now may be the right time to talk about it.
Copyright 2010 Peter Montoya, Inc.
All Rights Reserved
Profiles in Progress: Client Stories
Mark and Cathy Moir
Moir Computer Services
Mark and Cathy Moir were unaware when they first met as undergraduates at Thiel College in Greenville, PA that they would go on to become husband and wife, have two lovely children and become business partners. But that is exactly what occurred.
Mark Moir grew up in Whitehall. He is a 1977 graduate of Baldwin-Whitehall High School and went immediately on to Thiel College to study business administration, graduating in 1981. While there, he met Cathy Butler who had come to Thiel from Allegany, New York after having lived all over the northeast as the daughter of a career Air Force non-commissioned officer. Cathy majored in accounting and business administration and chose Thiel because of the small class size and the quaint campus. Western Pennsylvania’s architecture and topography drew her to make this her home. She still references her first sight of Pittsburgh on an accounting professor’s field trip; coming through the Ft. Pitt Tunnel and having the Pittsburgh city sky line spring up in front of her. She understood then the meaning of Pittsburgh’s reputation as the only city with a front door.
After completing undergraduate studies at Thiel, Mark returned to Pittsburgh to find the recession of 1981, similar to the current time, causing massive unemployment. That period began the exodus of steel and other manufacturing jobs from our area. No one could then foresee the role that medical, educational and research organizations would play in the revival of the Pittsburgh area economy. Then we could only see that things were very bad economically with job and population losses. So, both Mark and Cathy decided, fatefully, to take a nine month computer technician’s course at a local technical school. Upon graduation in 1982, Mark was employed by Radio Shack in management and later in the then-fledgling personal computer sales area. IBM, as a reference, had not recognized the potential of personal computers and the manufacturing of PCs came several years later. Radio Shack’s personal computer store for Pittsburgh was located in Bethel Park and Mark managed the computer sales operation. One of Mark’s salesmen sold Bob Fragasso his first and then his second personal computer to be used for client record keeping in the Fragasso Group’s investment business. Prior to that innovation, client contact recording was done with paper records.
Mark was recruited from Radio shack to a computer communications and maintenance company. Ever observant of processes and business trends, Mark watched the tension that occurred between large companies that dominate an industry with proprietary products at premium pricing, in this case personal computers, and the inevitable generically manufactured competitors. He quickly saw how the private labeling of interchangeable generic parts might play a major role in the computer industry. He also began his studies for a master’s degree in information technology at the University of Pittsburgh and continued to indulge his life long fascination with electronics with a side business assembling computers from generic, interchangeable parts. That business became an immediate success and Mark left both his full time employment and his graduate studies to devote all of his attention to the fast growing business and in rapid order married Cathy in 1987 and founded Moir Computer Services in 1988. In a short amount of time, 1000 dental offices were outfitted with specialized management software and computers manufactured from generic parts. Interestingly, the software manufacturer subsequently did not keep pace with the quickly evolving industry and Moir Computer moved their clients to an upgraded platform with another software company. This illustrates the benefit of a service provider such as Moir working for the client and not for the product company.
After Cathy’s computer tech training, she went to work for a local company that specialized in offsite data processing of marketing information for large companies like General Foods. This processing occurred on large main frame computers with data loaded on the machines by reels of movie-like tape. In the not so distant future, processing evolved to the desktop PC. She moved to the University of Pittsburgh in 1985 as an internal auditor utilizing her combination business and accounting undergraduate major.
By 1990, Moir Computer had burgeoned and required Cathy’s full time attention as business manager and company accountant while Mark managed the sales, research and technical side of the business. And by 1991, Moir Computer had taken over the computer hardware and software needs for the Fragasso Group. That continued through Fragasso’s evolution to complete independence in 1996 and to this day. Moir Computer provides the complete hardware, software and service needs of Fragasso Financial Advisors, including its use of assembled computers from generic parts, as Mark envisioned way back in 1982, which allows Fragasso to repair and upgrade computers with parts rather than buy entirely new units in many cases.
During this time, Mark and Cathy became parents to Elizabeth who is now a Baldwin-Whitehall High School senior and who is choosing from among several Western Pennsylvania colleges and universities for the 2011-12 school year. Mark and Cathy are trying to not unduly influence her toward Thiel College. Their second child is Mark II who is age 14 and entering 9th grade at Baldwin-Whitehall. Mark, Sr. and Cathy are very proud of both children’s accomplishments. Both do well in school and Elizabeth and Mark are both trophy-winning motorcycle racers. Additionally, Elizabeth is captain of the varsity tennis team, runs cross country and is an expert skier. Mark II also runs track, plays football, wrestles and is an expert skier. In spite of their very busy schedule, Mark, Sr. and Cathy have always been closely involved with their children’s activities and usually participate in various sports with them.
Today Moir Computer has six associates including master technician, Chuck Puleo. The company will continue to grow and is seeking an additional technician now. They provide both computer and telephone service to organizations in the fields of dental, finance, manufacturing and animal welfare. Fragasso Financial Advisors utilizes their unique computer/telephone integration that offers the ability to control all telephone functions via the computer. This eliminates costly routine service and maintenance calls from the telephone company and also records all telephone activity for record keeping and management oversight. It extends even to the convenience of mouse-clicking on a client’s record file to dial the phone which eliminates wasted motion and misdials. Moir additionally provides business surveillance equipment and software. This proved its value in a recent highly publicized crime where an assailant was caught and arrested because of the placement of their equipment outside of a business. And, finally, Moir provides home entertainment equipment and software that harnesses the power of the Internet to provide content from all over the world. Moir Computer prides itself on being a home town manufacturer remaining true to its founding concept of generic parts, locally assembled to the needs and specifications of the customer.
After forming a business relationship with Fragasso Financial Advisors, Mark and Cathy soon determined that the firm was an ideal fit for financial guidance and personal investing. Cathy notes that honesty, integrity, client education and lacking hype drew them to Fragasso’s service. We have mutual trust and share common ideals. All of these qualities are very comforting in an uncertain world. We are proud of our long association and friendship with Mark, Cathy, their children and their capable staff and appreciate the trust they have placed in us.
Quality of Advice
by Bob Fragasso
Are there factors that affect the quality of financial advice you gain from different sources? Congress and the regulatory agencies that oversee financial services think so. As part of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission (SEC) is undertaking a six month study to gauge the results of the bill’s provision differentiating the role of brokers providing investment products to customers vs. financial advisors who provide investment advice. This means more to you, the investor, than simple semantics. And acting on the difference may have a major impact on the results of your investment portfolio and financial planning.
A broker or registered representative who offers securities such as stocks, bonds and mutual funds to the public is bound by rules of suitability. This means that a broker can offer securities to you, the investor, after determining that 1) you can afford to make the investment and 2) the risk seems suitable for you. There is no requirement to determine if it fits into your overall financial plan or even if you have a financial plan. There is no requirement to determine if that particular investment being sold fits into your overall investment portfolio or strategy or if you even have a portfolio or strategy.
By contrast, an advisor must act as a fiduciary, per the new law, and determine if the proposed investment is appropriate to your goals, family situation, time frame, risk tolerance level and means. That advisor must consider how the investment fits within the existing portfolio and if it’s in keeping with your investment strategy. In short, the advisor works in your best interests and not for those of the investment firm or product manufacturer.
It is a sad commentary based on our experience and observation that the general public does not differentiate between a knowledgeable product sales person and an advisor working in the best interests of the client. The product person is not evil, but he or she is there to move the product out in to the hands of the investing public, often on commission or similar volume of product formula. The true advisor works for the client on a fee basis and is free to choose from all available investment opportunities. Yet the public, to its own detriment, often sees no difference among the broker selling product manufactured by the broker’s company or the insurance salesman who sells mutual funds as an added product and lumps them all under the misnomer of “advisor.”
We are very happy that Congress and the SEC are now making that distinction for the public and predict you will hear much more of this over the ensuing months.
We chose the path of Certified Financial Planner (CFP) back in 1981 and have always strived to practice and uphold the ethical provisions of that profession that, in sum, means we work in the best interests of the client. We thank our clients for the trust they have placed in us as a result.
Fragasso Financial Advisors Extends Its Commitment to Young People Through a Partnership with E Youth and Northside Urban Pathways Charter School
Fragasso Financial Advisors Extends Its Commitment to Young People Through a Partnership with Entrepreneuring Youth and Northside Urban Pathways Charter School.
Employees of Fragasso Financial Advisors have joined with Entrepreneuring Youth (E YOUTH) to bring an innovative, hands-on experience in business creation to students at Northside Urban Pathways Charter School (NUPCS) in downtown Pittsburgh. As a significant underwriter of E Youth programs, the firm’s employees volunteer as business coaches for students engaged in NUPCS’s entrepreneurship program. Coaching includes investing time in the classroom and at the firm’s headquarters, where students and teachers periodically visit.
About E Youth
E Youth, a Pittsburgh based nonprofit organization, designs programs which teach young people essential life skills and basic information necessary to succeed in tomorrow’s business world. Its programs focus on:
• Building self-esteem and developing a personal brand
• Nurturing confidence in one’s ability to learn
• Encouraging flexibility and adaptability
• Learning to problem solve, set goals and manage time
• Developing initiative, resourcefulness and accountability
• Fostering leadership and decision-making skills
• Working effectively with others
• Earning money
E Youth works diligently to ignite interest in new career possibilities or educational avenues among this region’s most challenged youth. Participants in E Youth’s programs become opportunity seekers, no longer waiting passively for others to open a door or assuming that doors will never open. In short, E Youth is in the business of creating promising futures.
About NUPCS
The school is located in the cultural district serving young people in grades 6-12 from the City of Pittsburgh and nearby communities since 1993. The school is recognized for individualized instruction leading to a 100% rate of high school graduation and an equally superior rate of student acceptance at universities and other post-secondary education programs. To learn more about E Youth programs and how you or your business could become part of an E Youth program, please contact Jerry Cozewith 412. 608.5009 jerryc@eyouthamerica.org
Citations:
1 – New York Life[6/21/10]
2 –FPA Journal [3/04]
3 – CNN Money[5/24/10]
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