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Investing For Life



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By Lee Rennick

Taking a cue from magazines that pull together a panel of local experts to rate the newest restaurants, we pulled together a panel of local investment experts and asked them
questions about when a person should start investing, and how that person should invest his or her money for the future.

Having a nest egg for retirement, saving the funds for a healthy down payment on a new home or planning ahead for a child’s college education, these can all be aided with a well thought
out program of putting away money over time in a diversity of options.

We asked Helene Colvin, Financial Advisor, First Bank Investments; Dee Jernigan, Executive Vice President, Franklin Synergy Bank: Tammy Holland, Senior Vice President and Trust Portfolio Advisor, Pinnacle Financial Partners; and Steven Ruckart, Financial Advisor, RAI Advisors, a number of questions about investment planning at different stages in life. 

TAMMY HOLLAND started her investment career in 1987 working with an independent brokerage firm prior to joining the private wealth management division of a major regional bank. She earned a Chartered Financial Analyst designation in 2001. In 2008, she opened her own practice as an independent advisor. She joined Pinnacle Financial Partners as a Trust Portfolio Advisor in the Spring of 2016. 

DEE JERNIGAN provides the customers of Franklin Synergy Bank with
wealth and asset management services through a partnership with Raymond James. In addition to his role as a financial advisor, he leads the bank’s Wealth Management Group. Prior to his banking career, Jernigan was Owner and President of The Jernigan Agency, a full-service insurance and financial consulting firm representing numerous insurance and financial services companies. His professional accreditations include Chartered Financial Consultant (ChFC) and Life Underwriter Training Council Fellow (LUTCF).

HELENE COLVIN is a Louisiana native who found a home here in Middle Tennessee. She began her investment career in 1983 at J.C. Bradford in Nashville, where she rose to partner. When her career began, the Dow Jones Average was under 3,000 and Federal Funds rates were about 9%. Her history in the industry gives her a unique long-view perspective. Before coming to FirstBank in 2003, Colvin also worked for Merrill Lynch and Raymond James 

 STEVE RUCKART founded RAI Advisors in 1982 as an independent financial services firm specializing in retirement planning, wealth creation, and preservation strategies. He serves as a consultant to independent advisors, community banks, and national warehouse firms in the areas of estate and retirement planning. Ruckart is a Registered Principal and Investment Advisor Representative of LPL Financial. He is a member of the Nashville Chapter of the Society of Financial Service Professionals, and has served as Regional Vice President of the National Association of Insurance and Financial Advisors.

Let’s start at the beginning. When should you start saving and investing?

HELENE COLVIN: The most important thing is to start! And to start young. If you work for a company with a 401K Plan, you should always participate in it first—even if it is a small amount. If the company matches, you should strive to contribute enough to receive the full
match. After that has been achieved, then it is time to possibly consider some outside investing.

TAMMY HOLLAND: You should begin investing when you have an established income, a comfortable emergency fund, and dollars that you are able to commit to investing that you will not need for the next three to five years. As Helen said, if your employer offers some type
of retirement plan, begin participating when the plan allows you to begin. These dollars are often pretax.

DEE JERNIGAN: The most important steps are to start, develop a plan, and follow it. Even if you have to start small, it’s better than not doing anything. How much you have to save each year will be driven by the goals in your plan.

STEVE RUCKART: If possible, you should begin saving ten thousand [dollars] per year for retirement beginning at age thirty-five. If you do, you will have over one million dollars at age sixty-five. If you wait until you are age forty-five to start saving, the same annual amount of savings will only be four hundred and thirty four thousand (assuming a seven percent return on your money). So, if you get a late start on your retirement savings, you will have to save a … lot more money each year. Most people do not start getting serious about their retirement plans until their late forties or fifties.

Some people think, “I don’t have that kind of money, how much do you need to start investing?


JERNIGAN:
You can start with a surprisingly small amount of money, but it’s important you establish a systematic investment that continues to grow your assets. The younger you can start, the better, but it’s never too late. As folks get older, many assume they can’t invest, but nothing could be further from the truth.

HOLLAND: Get started. Regardless of the size of the original investment, taking the first step is the most important step. Many companies will allow investors to begin with a very
nominal initial investment if they commit to a small monthly addition to that investment.

All of you have said that having a plan and being consistent in your saving are the most important things to do when investing. As financial advisors, what sort of information do you need from your clients to help them develop their plan?

JERNIGAN: To complete a proper financial plan, clients need to be willing to really open up. In addition to their basic personal information, it’s important to learn about their family, goals, wishes, and wants.

COLVIN: As in all things, each person is very different. What is their net worth, risk tolerance, income, goals? Answers to these questions as well as other suitability information, such as the
investor’s age, are very essential in making a recommendation.

RUCKART: Within five years of retirement or sooner, [we suggest that our clients] should consult with a financial advisor that specializes in retirement distribution. They will be able to advise you on how to get the maximum value from your social security, coordinate your other retirement assets, and minimize your tax liability. These are all important parts of a retirement plan, so we will need to know what these amounts will be, as well as all of your presumed expenses. Most folks like to have a good portion of their monthly expenses guaranteed in retirement. This can be accomplished with a combination of social security, pensions, and certain annuity programs.

 

We have been talking about retirement, but there are other types of saving and investing. When do you need to start saving for a home? A car?

HOLLAND: A home is one of the largest investments that a person will make in their lifetime. Savings for a home should begin as you move from being a student to joining the workforce. Most often the dollars you are saving for your home should be accumulating in an account
that assumes no market risk. As far as a car is concerned, a student can begin saving for a car if they are working while going to school. Reliable transportation is critical, but luxury cars are not. The expense of a car can vary greatly and practical decisions are usually smart decisions when it comes to buying a car.

When should you start saving for your children’s education?

HOLLAND: It is never too early to begin saving for a child’s education. There are many different ways to save and types of accounts that can be used to save for a child’s education. Some of these accounts may have tax advantages associated with them. Many times family and friends are looking for ways to celebrate major milestones in a child’s life. A gift contribution to their college savings is a meaningful way to help celebrate.

And when should you start to teach the next generation? When should you start a savings account for a child?

HOLLAND: A savings account allows you to accumulate money with no risk, and earn current interest rates along the way. Not only is it a way of saving for major purchases, but is also a
wonderful way of teaching your child valuable life lessons. If your resources allow and your home, personal investments, and retirement plans are being funded, start saving for the
kids.

We’ve been covering saving and investing during different stages of life by talking about saving for a house, a car, a child’s education, and even retirement, how is
investing different over the different stages in life?

HOLLAND: The stages of our life typically dictate how much risk we are willing take with our investments. Depending on whether you are in the wealth accumulation, preservation, or distribution stage of your life plays a part in determining how much risk and what types of assets are most appropriate for you.

COLVIN: Goals definitely change over time. Risk tolerance can almost be a bell curve over a lifetime of investing as a person goes from an accumulation phase to a distribution phase. The types of investments certainly can change.

Some people are willing to take more risks than others. How does that effect how you advise them to invest?

JERNIGAN: We develop an Investment Policy for our clients. This policy determines the structure of the portfolio. One of the key components that influence the Investment Policy is risk.

COLVIN: Some people are so risk adverse that they only own bonds their entire life. Others will own nothing but equities throughout their investing life. Most people have a balanced and diversified portfolio that can be adjusted with time and needs.

RUCKART: It is important to remember not to take a real aggressive position with your retirement funds. Many people were really hurt in the economic downturn in 2008 and their retirement accounts never fully recovered. The closer you get to your retirement date the more conservative you should become.

What safeguards are there for investors?

JERNIGAN: While there are investments ranging from very conservative to very aggressive,
it’s important to remember, that, unlike bank accounts, investments are not FDIC insured. That is why the Investment Policy I mentioned before is so important. Part of the planning process, determines the client’s appetite for risk. It’s one of the more important elements of an Investment Policy.

COLVIN: Investing can involve risk, including loss of principal.

There are many things to invest in, what are the options? Can you describe them?

JERNIGAN: There’s not enough room in this article to mention all the options. It’s important to develop a plan and educate yourself on the options that make sense for your plan. Ninety percent of our investors either buy stocks and bonds directly, or more likely they use a combination of ETFs, Mutual Funds, REITs, and UTIs.

Investopedia defines an exchange-traded fund (ETF) as a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. Mutual Funds are professionally managed investment programs that pool the financial resources provided by a group of shareholders into a diversified portfolio of stocks, bonds, and other options.

REITs, or real estate investment trusts, are defined by Investopedia as companies that own or finance income-producing real estate in a range of property sectors. It is a way for investors to put money into real estate without actually owning the property.

A unit investment trust (UIT) is an investment company that provides capital appreciation and/or dividend income. There are also Unified Managed Accounts where an investor can own stocks and bond in a managed fund by basically buying – in a very simplistic description - the fund manager’s services, but few of our clients use these types of funds.

COLVIN: One of the … great changes in the field is technology offering the availability of software to help us with all sorts of planning. When I started, we had a “Quotron machine” where we could get quotes and see client positions. Orders were entered by “wire” from the “cage.” There were no business news TV channels, and no personal computers. News came in on a teletype machine. I can get more information quicker on my phone now that we could
from all of the resources in the office. The technology is certainly a tremendous change, but more important is that it has allowed everyone to be better informed and knowledgeable about investing.

Tammy, you work in the Trust Department at Pinnacle Financial Partners, what is a trust? What does it have to do with investing?

HOLLAND: A trust is a fiduciary arrangement that can be established during an individual’s lifetime or at their death. They can be either revocable or irrevocable. A trust can assist in minimizing estate taxes, provide for protection of assets, and allow for privacy when settling estates. Trusts are typically funded with marketable securities.

How does a trust department work?

HOLLAND: A trust department assumes the role of trustee and acts as a fiduciary when there is a trust established. In addition to managing the trust in order to assure that the terms of the document are being upheld, the trust department assumes responsibility for managing the assets of the trust. The trust department also manages assets for individuals that are not held in a trust, for example an IRA or individual investment account.

You each have a very unique perspective on saving, investing, and wealth management. Any other pearls of wisdom you’d like to share?

COLVIN: While there are many great investment options, listening comes first. Clients share lots of information, only a part of which is financial in order for us to begin.

HOLLAND: Relationships and discipline are critical to financial success… Do not necessarily allow what you see or read to distract from your goals and objectives.

RUCKART: One thing that many people do not plan for in retirement is the high cost of healthcare. It is not uncommon for these costs to exceed two hundred thousand per person. Take that into consideration as you work to guarantee your funds will not run out over your lifetime. You should plan on taking out no more than five percent of your retirement funds each year. A couple has a better than fifty percent chance that one of them will live past age ninety if they are reasonable healthy at age sixty-six. Consult with your advisor to make sure that you are setup to not outlive your income.


JERNIGAN:
More than anything, remember that investing’s a marathon, not a sprint!

Whether just beginning an investment plan, or to freshen up what you have, there are a number of books available about how to invest and all your investment opportunities. Investing 101 and Investing for Dummies are two of many options. The market is always changing, as are investment instruments. Never hurts to keep up with the changes.

To find up to date information about investment opportunities and the rating of various funds, business magazines provide extensive research online. US News Money and Kiplinger are two options, as is Morningstar.

A recent article in March 2018 issue of Money Magazine discussed the investment gender gap. One of the biggest points the article makes is for a woman to insure they have financial stability, because they are more than likely going to be the one who lives to be over 90 that Steve Ruckart referred to above.

The same issue of Money Magazine has a story called “Money at Every Age.” The article provides goals for saving and action steps for each decade of life. For example, in your twenties it suggests beginning to build an emergency fund (as Tammy Holland mentioned).
And in your fifties to think about potential future healthcare needs, as fifty to sixty-five year
olds are more likely to save for future medical costs. Sound saving and investing is a lifelong pursuit.

“Find an advisor that you trust,” says Holland, “that listens to you, and that is invested in your
financial success. Work together to put a sound financial plan in place and stay the course.”

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