“The competitive atmosphere among adviser tech just got a lot thicker after Riskalyze launched a highly publicized campaign Tuesday claiming the risk methodologies used by competitors are inaccurate and lack fiduciary responsibilities.
“Riskalyze co-founder and CEO Aaron Klein countered competitors HiddenLevers, which Orion purchased in March, and RiXtrema “predictive guesswork models” calling it “wildly inaccurate,” compared with the Riskalyze approach of a “historical data model,” according to the post via Riskalyze’s website.
“‘Advisors should beware: There are two very different approaches to risk analysis and stress testing,’ Klein said. ‘Riskalyze leverages a Historical Data Model and calculates a historical range to illustrate risk and support client behavior.’”
This nerd topic is all about how to best select your investment choices when given a list of available options. These tools help quantify the volatility in your portfolio. Tools such as these give us risk-adjusted return range expectations. If actual returns fall outside the 95% probability range of returns, it can be a trigger to look into your portfolio and find out why.
These tools are very useful, especially when working with a financial professional who can help interpret the high level data into layman’s terms. They also can allow you to input unexpected, catastrophic events and estimate what that will do to your portfolio.
Importantly, OG points out, all this data is fantastic, but what really matters is investor behavior. How do you react when faced with unforeseen (positive or negative) scenarios)? When $&%# hits the fan, do you stick to your plan or do you react? Do you get a false sense of overconfidence in extended bull markets?
Having perspective with historical data and risk analysis can certainly help keep you on track and keep your expectations in line. But it’s all about what you do with the data that matters.
“Americans are all in on the stock market.
“Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts. JPMorgan’s Nikolaos Panigirtzoglou, who analyzed the data, attributed the elevated allocations to appreciating share prices alongside stock purchases.”
As a whole, this can be viewed as good news. Rather than blow excess money on the latest gadget, American as a whole have added money to bettering their financial position. However, as OG points out, there is a monumental difference between investing using a sound plan and investing for entertainment. “I love the participation; I don’t like the gamification of it. I love the fact that, when we look over the last year, we made a lot of predictions that the stimulus money would be all of TVs and vacations and stuff like that. Statistically, that didn’t happen, which is really good.”
We shall see if this is a one-time FOMO event or if this is the start of a longer trend. When the stock market is hot, everybody is an expert. It could result that this serves as a learning experience by making mistakes with real money.
You can use all the tools and financial resources in the universe to help you make smart decisions, but it all comes down to actually doing it.
Interview with Kirsten Jordan
Whenever you want to do something well, it behooves you to seek out a mentor at the top of the game. When it comes to negotiating real estate deals, there is nobody better than Kirsten Jordan. We talk to her about how to best negotiate in a hot real estate market and how to best deal with other people in negotiations, in general. In addition to being a top notch real estate broker, she is also starring in the ninth season of Bravo’s hot reality series, Million Dollar Listing, New York.
She had worked in the real estate industry for 12 years when Million Dollar Listing came calling, and she was perfectly positioned to be the next choice to star in the series. As the first ever female star in the series, Kirsten brings a unique perspective to the hit franchise.
Bringing Value to Sellers
Joe recounts his personal experience with personal shoppers when shopping for a new wardrobe. While this may fly in the face of the FIRE and frugality movements, Joe found incredible value in hiring a Nordstrom personal shopper when he was a financial planner. He says that, in spite of paying her to do the shopping for him, she actually saved him so much money and time, all while upgrading his professional appearance to a higher level than he’d ever reached in his entire life.
Kirsten wholeheartedly agrees, stating, “…the amount of time people spend in their closets trying to figure out what to wear for important appointments is, I would say, completely undervalued.” In the real estate world, and more broadly, the professional world, having a perfectly cultivated professional appearance is one of the best investments you can make.
Joe compares Kirsten as a “personal shopper of real estate,” highlighting the enormous value that she can bring to the buyer, potentially saving both time and money.
Actionable Tips for Buyers and Sellers
Probably the most common action sellers take is
to clean out the basement and burn everything staging, which Kirsten says there is always a gain from staging, in her opinion. This makes sense, as you want to make sure the buyers see the property in its best light.
“You can always make a place feel better; you can always up the value; you can always get to that next level.”Kirsten Jordan on staging a house to sell
Staging can help in the velocity of the sale, the price, or both. Joe points out that the velocity of house sales has been very quick lately, citing recent trends of buyers offering above asking price, all cash offers, even waiving the inspection (not recommended).
Acquiring favorable financing terms can really come in handy and save a ton of money if the whole process doesn’t go according to plan. Also having a financing contingency allows the potential buyer to back out of a contract if he/she is unable to secure financing for the purchase.
Try your best to detach your emotions from the transaction. This is probably easier said than done, but do your best to remain as objective as possible when evaluating properties, making sure that all the conditions are right – location, financing, space, etc.
Partner with a great agent. Many DIYers may be inclined to go on their own, whether buying or selling a piece of property. This is probably a mistake. Having an awesome agent on your team will more than pay for itself, as he/she has knowledge and insights that just aren’t available through a quick Google search. Plus, having access to the MLS is invaluable, which is not an option with houses that are FSBO (“for sale by owner”). Just remember that your agent is a professional and to be respectful of his/her time and expertise.
To see more of Kirsten and get a peek into her world, don’t miss Million Dollar Listings: New York on Bravo!
Q: What baking-related phrase is typically attributed to companies who are playing games with their records?
A: :Cooking the books”
Elle calls in with a question about her father’s 401(k):
“He is widowed and 75, and has approximately $700,000 in his 401(k) with Vanguard. My financial planner is encouraging me to have my father turn that into an IRA, so upon his death I could do a stretch IRA. I have a brother, and we would be splitting this inheritance 50-50. I also am planning to be financially independent in 5-10 years, so I would not have my W-2 job, so it would be a tax savings if I could stretch it out and take that as income in those years without my W-2 income. My dad really does not want to move his 401(k) because he holds company stock in Cargill and he doesn’t want to lose that. My financial planner says that this is a publicly-traded company and he could hold that stock in an IRA. What do you think, and are there any other reasons to convince my father to do this, such as any benefits that would be specifically for him of moving it to an IRA?
Our resident CFP, OG, chimes in:
“Dad has to move the money into an IRA so she can stretch it out? That’s not true.”
You can stretch it out over 10 years, not over your lifetime, except for a spouse.
“You want to have the choice of when to take it out, but you have to do it within the ten years.”
As stated above, the benefit of the stretch IRA for a non-spouse beneficiary does not really exist.
“If your advisor knows that there’s company stock in the 401(k) and doesn’t know how to handle that, as in there’s very specific ways to take company stock into account in a 401(k) transaction, I thank the Good Lord that you haven’t moved your dad’s 401(k) over to an IRA because here’s some opportunity for some pretty profound tax savings…”
Rolling the money into an IRA erases all of those tax savings forever.
The two points of concern for Elle, from OG’s POV were: the financial planner’s apparent misunderstanding of the new stretch IRA provisions and the lack of knowledge about how to handle company stock in an employer-sponsored plan.
For the homegamers who want to get in the weeds about company stock in a 401(k), look up and read about “Net Unrealized Appreciation” to get a better understanding of why the her planner missed the boat.