Funding Your Family’s Future:

A Guide to Choosing the Right Financial Planner

Financial advisors aren’t just for millionaires. Individuals of all ages and circumstances can benefit from the guidance a financial advisor offers. Recent college graduates have different financial goals than couples in their 40s. A newly married couple may be interested in purchasing a new home, whereas an older couple wants to maintain financial security well into retirement. Whatever the situation, a financial advisor or planner can assist with major financial decisions.

While some choose the do-it-yourself approach to securing their financial future, others seek the assistance of financial professionals. Many even procrastinate when it comes to making crucial financial decisions simply because the process is too daunting. Seema Ramroop, CRPS, Senior Financial Advisor with Merrill Lynch, works with her clients “… at different stages of their growth and to help [them] seek their preferred lifestyles through a one-on-one relationship.” A financial advisor is able to answer the many confusing and complicated questions you may have related to investments, insurance, inheritance, college funding, retirement funds, and more.

The prospect of choosing and working with a financial adviser is overwhelming, and the process of selecting a financial advisor may seem like no easy feat. How do you choose an individual who understands your needs (and those of your family) as well as your financial goals for the future? Whether you are buying a business, saving for college, or funding your retirement, your main goal is to find someone you not only trust, but also formulates the right strategy for securing your financial future. Finding the right financial planner is the first step to securing your family’s financial future and ensuring all your financial goals are met.

Factors to Consider

When researching financial advisors, remember that not all financial professionals are the same. Stockbrokers, accountants, and insurance agents provide specialized services like buying stocks and mutual funds or tax-related assistance. Financial planners, on the other hand, provide guidance about investments and insurance as well as about major financial decisions like buying a house or business, retirement, and college funding.

During the process of researching and meeting with potential financial planners, keep your financial goals front and center. Samant Sharma, CFP, Wealth Management Advisor, advises clients to “look at their goals and needs, and ask questions regarding the planning process as it relates to achieving those goals.” In addition to keeping a list of goals, consider the following factors when choosing a financial planner:

Credentials: Look for someone who is licensed and has gone through rigorous testing and training. A Certified Financial Planner (CFP) goes through training on regulations and ethics and must commit to ongoing education to retain their license, so check that their credentials are current.

Experience: How experienced is the advisor? Has the financial planner weathered economic slumps? Are they familiar with types of financial goals you hope to achieve? Review their qualifications and do research on their website.

References: As with any major decision, ask family and friends for recommendations. Does the individual have a good track record? Do they make appropriate recommendations and maintain periodic check-ins?

Reports: Will you receive quarterly and annual reports? Does the advisor check-in periodically to gauge progress and make adjustments when needed? A good financial planner will not disappear once the checks have been written, but rather maintain a strong working relationship.

Compensation: Some financial planners are paid by flat fee by the hour while others rely solely on commissions based on your investments. Commission-based planners may be motivated to sell you certain products, so it is best search for a fiduciary that has pledged to keep the client’s best interest in mind. When making payments, checks should always be written to a brokerage, insurance or financial services firm – not to the individual.

Prepare for Your First Meeting

Once a financial advisor has been selected, what next? Ramroop advises clients to first begin “by asking themselves what is it they are trying to achieve financially.” Whether you want to buy a house or ensure you have enough saved for retirement, your goals will frame the meeting. Sharma adds that clients should “gather financial information, assets and liabilities, to allow the Advisor to better provide possible solutions for you to consider.”

When sitting down with your financial planner, keep a list of questions ready so all concerns are addressed. Questions to ask during the initial meeting may include:

• How do I know if I have enough savings to fund my goals?
• How can I afford to keep up with rising healthcare costs?
• What would happen to my family if we lost one or both of our incomes?
• Do I have enough cash flows from my business and what are other sources of liquidity?
• What strategies should I use to create a family legacy and be tax efficient?
• What strategies can I use to plan for retirement?
• What is the best way to leave money with a charity?

Tips from the Experts

The experts share their advice for those beginning the process of financial planning.

Seema Ramroop: It is a robust process, and it can be very easy to become overwhelmed by it initially … Your advisor’s role is to be a guide and to provide clarity for all the minutia.

Samant Sharma: … Consistency of two-way communication is key. Updating your Financial Advisor as your life evolves will help match what your money is doing with what your life is doing.

Experts

Special thanks to the experts who contributed their thoughts and advice to this article.

Seema Ramroop, CRPS
Assistant Vice President
Senior Financial Advisor
Merrill Lynch, Pierce, Fenner & Smith Inc.
Tel: (727) 799-5621
www.fa.ml.com/seema

Samant Sharma, CFP
First Vice President
Wealth Management Advisor, Portfolio Manager
The Sharma Group
Tel: (727) 799-5615
www.fa.ml.com/samant

About the Author

Rina Shah is the CEO and founder of The Arpan Group, a boutique ad agency and public relations firm that specializes in capturing untouched ethnic markets. From press releases and media kits to marketing materials and by-line articles, The Arpan Group customizes solutions based on the client’s needs. For more information, visit www.thearpangroup.com or call (703) 651-6670.

Tax time is here! What changed, and how will it impact your tax return?

Don’t you feel Income Taxes are the hardest subject in the world to understand? That is exactly what Albert Einstein said way back when: “The hardest thing in the world to understand is income taxes.” Taxes have gotten more complicated since then – most are dazed and confused when it comes to their tax returns. insight on 2015 IRS Tax code and provide a quick reference guide for tax preparation.

General Tax Updates

Tax Bracket Adjustment: The 2015 tax bracket has been updated to reflect 1.6% increase factoring inflation. The top 1% of high income earners including individuals with over $413K in Taxable income will be paying out 39.6% income tax on their Gross Taxable Income.

Changes to Standard Deduction – The standard deduction amount has increased from prior year:

$6,300 for Single/Married Filing Separate

$12,600 for Married Filing Jointly

$9,250 for Head of Household

Alternative Minimum Tax – The alternative minimum tax was set to limit tax breaks for Americans looking to reduce their overall tax bill. As of 2015, the AMT income exemption for taking this tax break is set for individuals who earn over $53,600 and married filing jointly couples at $83,400 in taxable income.

Healthcare Tax Updates

Affordable Care Act (ACA) Penalty – The ACA penalty has increased in 2015. The fee for not having health coverage in 2015 is the greater of:

• 2 percent of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,150 for an individual, is used to calculate the penalty.) Or,
• $325 per person, ($162.50 per child under 18). The maximum penalty per family using this method is $975.

Health Expense Account (HSAs & FSAs) – Individuals who have a Health Savings Account (HSA) in 2015, the contribution limit has been raised to $3,350 for the single plan and $6,650 for the family plan.

In addition, the Health Savings Account (HSA) has three major tax savings:

• Contributions are tax deductible
• Growth of the HSA (outside of contributions) are tax-free
• Withdrawals are tax-free if used to pay for medical expenses

On the other side, for those individuals who opted to use a Flexible Spending Account (FSA), you will also receive an increase in the total contributions limit to equate to $2,550, up $50 from 2014 that is required to be spent in the 2015 plan year.

Retirement Plan Updates

401(K) Contribution Limits – In 2015, employees can now contribute up to $18,000, which is up from the $17,500 limit imposed in 2014. In addition to the increase in 401(k) contributions, there is also the increase in catch-up contributions for individuals who are age 50 or over at the end of the calendar year. For 2015, the total catch-up contributions equate to $6,000 per person and are allowed under a 401(k), 403(b), SARSEP, and governmental 457(b) plans.

Limitation on IRA rollovers – As of 2015, you are limited to one indirect rollover from your IRA account to another IRA account per year. With an indirect rollover, a plan participant is allowed to withdraw (through a distribution) all of their retirement balance without taking on a penalty if they decide to enroll the balance into a new IRA account. Due to the 2015 change, indirect rollovers are now only allowed to be performed once a year.

However, if you want to transfer your IRA balances through a direct rollover, i.e., trustee to trustee, then there are no limitations on how many times this can occur. As long as your retirement balance stays out of your hands during the transfer (i.e., direct rollover), you can perform this process as many times as you like.

The Saver’s Credit (Retirement Savings Contributions Credit) – Low and moderate income workers are provided an additional tax credit to help them save for retirement. According to the IRS, the saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs.

In 2015, the saver’s credit increased by $1,000 for married-filing-jointly couples who make less than $61,000. The credit was also increased by $500 for individual taxpayers with incomes less than $30,500.

Other 2015 Tax Changes

Foreign Bank Account Reporting (FBAR)

FBAR was created as part of a US initiative to uncover hidden monies in offshore accounts. The IRS is forcing those with money in overseas bank accounts to disclose those accounts if balances exceed the threshold. Keep in mind that those filing FBAR aren’t taxed on the balance of the accounts or anything of the sort—it’s truly just a reporting requirement so the IRS knows what money lies overseas.

Any US person with a foreign account balance of $10,000 or more at any point during the tax year will need to file. The threshold is also an aggregate amount—meaning, if you have multiple accounts, it’s the total balance of all of your accounts that trigger a filing requirement. So, if you are thinking that keeping $3,500 in one account and $7,500 in another will enable you to avoid filing, you are incorrect. This also applies to those who simply have signing authority over an overseas account. That’s an important thing to remember, as the account doesn’t have to be YOUR account. To explain further, signature or authority means the authority of an individual to control the disposition of money, funds or other assets held in a financial account by direct communication to the person with whom the financial account is maintained.

Along with your bank account balances you also need to report Foreign stock or securities held in a financial account at a foreign financial institution. The account itself must be reported but the contents of the account do not need to be reported separately, Financial account held at a foreign branch of a US bank, Foreign mutual funds and Foreign-issued life insurance or annuity contract with a cash-value.

FBAR is filed separately to the Department of the Treasury. You have to submit it electronically through the BSA e-filing site. This form is also necessary if you hold joint accounts. Your spouse would sign this form to allow you to file on their behalf. Keep in mind that if your spouse has other accounts you are not on that he/she needs to file (i.e. individual accounts), they must file their FBAR separately (including the FBAR for your joint account). The filing deadline is June 30th each year and unlike your Federal Tax Return, no extensions are available.

For those whose lack of filing was non-willful (meaning you truly didn’t know about your reporting obligation), the fine can be $10,000 per violation. If it is determined that you purposely avoided filing, the fine can be $100,000 or 50% of the balance of the account at the time of the violation (whichever is greater).

The IRS has created two amnesty programs to help you get caught up. The program most helpful to expats is the Streamlined Filing Procedures. This program is available to US citizens living in both the US and abroad and all who have failed to file due to lack of knowledge are eligible. To file under this program, you will file the last 3 years of Federal Tax Returns (if you haven’t already done so) as well as the last 6 years of FBARs. The FBAR filings will be done electronically, just as they would if you filed on time. It is extremely important that you get caught up if you are behind in your filings.

About the Author

Umang Thakkar is the founder and owner of IncorpTaxAct. An Enrolled Agent with over 15 years, his expertise includes Taxation, Accounting & Payroll. Contact Umang Thakkar for more information. Visit www.incorptaxact.com, call (770) 682-3119, or email at umang@incorptaxact.com with your questions and comments.