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If you’ve worked with a financial advisor before, one of the typical exercises is to fill out a multiple-choice questionnaire designed to assess your risk tolerance. The purpose of the assessment is so that the advisor can decide how much potential pain you can tolerate in your investments should the market decline. Some call it the “sleep at night” factor – if your investment strategy is so risky that it keeps you up at night, that’s too much risk.

This is all well and good. Financial advisors should be able to help you understand the concept of risk and how it plays into every aspect of your finances, including your investments. The problem, however, lies in the fact that investing and markets are inherently uncertain and no assessment of your tolerance for risk can predict what kind of pain the markets may inflict upon you or how you will react.

That’s why it is so hard to tie what is known as asset allocation – the decision on how your funds will be divided in different types of investments such as stocks, bonds, cash, real estate and alternatives – to a multiple choice risk tolerance questionnaire. The fact is that every kind of investment has its risks, including:

• Stocks: can and have declined as much as 45 percent one year within the past five years
• Bonds: can lose value as interest rates increase and can also offer extremely low returns that won’t even compensate for inflation
• Cash: loses real value every year because of inflation
• Real estate: suffers from boom and bust cycles and isn’t easy to sell in an emergency
• Alternatives: are hard to understand, difficult to sell in an emergency and can lose a lot of value in a short period of time

So what can you, as an independent woman, do in the face of all this risk? You can’t control it, that’s for sure. There is no way for anyone to know, even the savviest financial advisor or investment manager, what the markets will do at any given moment. But that doesn’t mean that you don’t have any control at all.

You do have control over the wealth goals you select and the financial advisor you choose to help you realize those goals. As a financial advisor who works with independent women and believes in and practices true wealth management, it’s my job to help you discern your goals, figure out where you are financially in relation to those goals and help you devise a plan to get there.

Obviously, any sound financial and investment plan will take into account the risks inherent in investing in stocks, bonds, and other investments. But at Wealthcare for Women, I don’t let what the market might or might not do dictate an investment and financial plan. Rather, I work with my clients to help them determine their goals, formulate a plan that works for them and execute that plan, making adjustments as we go through regular planning reviews every 90 days. That’s the job of an intelligent and caring wealth manager.

To learn more about how Wealthcare for Women can help you, follow me on Twitter, connect with me on LinkedIn and friend me on Facebook.

This information does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Examples and concepts used in this presentation are for illustrative, educational purposes and are not a representation or guarantee of specific results for any one specific existing client of Wealthcare Capital Management, Inc. Past performance is not a guide to future performance. To better understand the nature and scope of the advisory services and business practices of Wealthcare Capital Management, Inc. please review our SEC Form ADV Part 2A, which is available here.

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If you’re an independent woman, you may hear from financial advisors who are trying to sell you on how they will manage your investment portfolio as an institutional portfolio – such as a pension fund or university endowment – would be managed. But you aren’t a pension fund or endowment and that’s where many financial advisors miss the mark.

That’s because your personal goals as an independent woman are completely different than those of an institutional portfolio. Institutional portfolios are managed in a way to throw off a stream of income and provide an ongoing return to fund the specific needs of a group of employees for pensions, a university for ongoing funding to pay operating costs or some other institutional goal.

It’s very likely that your goals are not only not similar to institutional goals, but also are very different from those of  affluent men – and even other affluent women. As a wealth advisor who specializes in working with independent women, it’s my job to help you clarify and quantify what your life goals are and to figure out the best ways to align those with your financial goals so we can create a plan together to meet those goals.

In creating a personal wealth management plan, there are similarities in the Wealthcare process between how your wealth is managed and how institutional portfolios are managed. I utilize a similar quantitative approach to institutional money managers in that I identify exactly how much you would need to meet your future personal and financial goals,  and decide in advance how any shortfalls or overage would be dealt with.

Those choices could include reducing investment risk, reducing retirement plan contributions to fund other personal financial goals, increasing current spending or increasing the legacy value of the estate to provide more money for children, grandchildren, charity or other estate planning purpose. This is a decision that each woman makes with the most concrete advice, assistance and information I can provide.

The take away here is that under the Wealthcare for Women wealth management philosophy, you – the independent woman – are essentially the trustee of your own personal wealth management plan. My job as a Wealthcare advisor is to provide input and help you weigh the relative value of the all the choices you would have should an underfunding or overfunding issue arise in the funding of your various financial goals.

That’s because you aren’t accumulating wealth for the sake of accumulating wealth, you are accumulating wealth to meet your personal and financial goals, which can include saving for retirement, providing funding for a college education for your children or grandchildren and many other ways of caring for your family and ultimately living a better life.

If you’re interested in learning more about WealthCare for Women, download my Free Retirement Report or contact me for more information.

Also, my recent post about the role of happiness in financial planning was included in this week’s Carnival of Personal Finance which is being hosted by One Cent At A Time. Go check it out.

This information does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Past performance does not guarantee future results. Wealthcare Capital Management’s disclosure document ADV Part 2A can be found here.

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My wealth management work with women begins by first defining what “success” means to them.

For some women, it’s about having more time to pursue the things they’re passionate about. For others, it involves having money to contribute to the causes that inspire them. And for some, success is simply having “enough,” however they define it.

It’s been interesting for me to see how different women define success and how they’re personal happiness relates to their vision of success, now or in the future.

Many women seem to believe that once they reach their goals and achieve their personal version of success, happiness will be a natural byproduct. A result of their success.

Others seem to consider happiness a key ingredient in their journey to live a successful life. For these women, happiness is a key ingredient. Or maybe a prerequisite to success.

After watching the following TED Talk about positive psychology, I couldn’t help but reflect on this idea of whether the women I work with view happiness as a result or an ingredient. I encourage you to take about 12 minutes and watch the video.

What did you think? Pretty entertaining speaker, right?

Although he’s addressing happiness in the workplace, I think the same concepts hold true in our personal lives.

Our mindset and perspective have a huge impact on how we see and interact with the world around us. Nowhere is this more true than in financial planning and wealth management. Do you have a positive or negative view of the world? Do you subscribe to the idea of abundance or scarcity? Is your glass half-full or half-empty? And how do these perspectives impact your money decisions?

I don’t have all the answers here. But I’m willing to invest the time and ask questions of the women I work with to help explore and uncover not just what’s important on the surface, but what really makes them tick. This means identifying and discussing values and beliefs.

I would suggest that making happiness an ingredient in your success (instead of a result) will lead to a much more rewarding journey.

Would love to know what you think in the comments section below. Or if you’d like to explore the idea of happiness as an ingredient in your wealth management plan, give me a call.

This article does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Past performance does not guarantee future results. Wealthcare Capital Management’s disclosure document ADV Part 2A can be found here.

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First, I’m pleased to announce that my recent post, 3 Characteristics Of A True Wealth Manager, was selected as one of 3 Editor’s Picks at this week’s Carnival of Personal Finance hosted by Ashley over at Money Talks.

For those who aren’t familiar, the Carnival of Personal Finance is a weekly collection of the best personal finance articles across the web. Ashley chose a “color wheel” theme for this week’s Carnival, and I think she did a lovely job with it.

Go over to her site and check it out.

A Perfect Storm?

This recent article from Forbes caught my attention.

It highlights the widely known fact that women are at a financial disadvantage when compared to men. However, by citing a couple of recent studies, it quantifies in both dollar terms and percentages how much this disadvantage really amounts to.

Here are a couple of stats that really made me pause . . .

For example, The 2008 Center for American Progress Action Fund Report, Lifetime Losses:  The Career Wage Gap, found that the average female worker loses approximately $434,000 in wages over a 40-year period as a direct result of pay inequities.

And from a recent study by ING . . .

A recent study by the ING Retirement Research Institute found that a woman’s total retirement assets, both in and out of the workplace, averaged less than 70% of a man’s comparable savings. A much higher percentage of women (47%) than men (31%) reported having less than $25,000 in their employer retirement plan. Meanwhile, fewer women (67%) than men (76%) were receiving their employer’s full matching contributions.

While these facts and figures raise concerns on multiple levels, I think it also calls to attention the need for women to be more vigilant and personally responsible for securing a comfortable and confident financial future for themselves.

If you’re an independent woman and I can help you prepare for financial future, please contact me and let’s have a chat.

This article does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Past performance does not guarantee future results. Illustrative data used in the presentation regarding wages and savings and other statistics are from sources believed reliable but not verified independently by Wealthcare. Wealthcare Capital Management’s disclosure document ADV Part 2A can be found here.

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For the average investor, investment returns are one of the most difficult concepts to get your arms around. That’s because what seems so simple – how much a given investment of money returned during a specific time – is, in fact, much more complicated than meets the eye.

This is because the most common way investment returns are measured – how a stock, bond, mutual fund or other investment performed during a specific period of time – doesn’t reflect how your particular investment performed. And, it may have very little to do with the results of your investment portfolio even when compared to the numbers you see associated with the specific investments in your portfolio.

That’s why so many investors are downright bewildered by their financial advisors because the results of the advice, usually investment returns, don’t add up with the returns they see in their investment portfolios. At an intuitive level, it doesn’t make sense that if you were invested in a group of investments that performed at a certain level, that your actual results in no way, shape or form, reflected that reality.

The reality is that most financial advisors actually fail what they advertise as their preeminent job: increasing their client’s wealth. Instead, most advisors are focused on managing investment returns. Here are four reasons why, which are also fundamental truths about investment returns and something to think about when you, the newly independent woman, is seeking a financial advisor who will help you truly manage your wealth.

1. Most investment returns are stated in relative terms: Most financial advisors explain investment returns as they relate to investment benchmarks. Investment benchmarks are indexes such as broad stock market indexes, including the S&P 500, that measure how a particular group of securities performed during a certain period of time. So, if the market (as measured by the S&P 500) was down 20 percent in a year and your investment “only” lost 18 percent, your financial advisor would be boasting to you that your investments “beat” the market. You may not be impressed, and rightly so, because your investments actually lost 18 percent during that year.
2. Investment returns are not the be-all-and-end-all of wealth management: In fact, investment returns are a very small part of wealth management. Wealth management involves financial planning, risk assessment, retirement planning and much more. A true wealth manager seeks to establish a relationship with a client in an effort to assess her financial situation and goals so as to help her manage her financial resources in such a way to achieve her individual financial and personal goals.
3. Absolute returns matter: Most financial advisors don’t like to acknowledge this reality, but it is true. Absolute return – that is, the actual percentage returns of an investment portfolio – matters far more than relative return. That’s because your wealth will rise and fall based on what the individual returns of your portfolio are, not on how it did relative to the market. So, using the previous example, your 18 percent loss may have outperformed the market in a given year, but if the value of your $750,000 portfolio fell by $135,000, the fact that you outperformed the market isn’t going to be much of a consolation to you.
4. Dollar weighted returns reflect true wealth management objectives: Dollar weighted returns, which measure investment returns in terms of when dollars flow in and out of a portfolio, measure returns far more accurately than time-weighted returns. Time weighted returns are a far more common, but much more flawed, measurement. For you, the newly independent woman, the fact of the matter is that dollar weighted returns are much more significant because they reflect your choice of when to make an investment and when to make a withdrawal as well as how the actual investment performs.

The bottom line: As far as wealth management is concerned, there is much more to the relationship between a wealth manager and a client than the traditional definition of investment returns. Contact me today if you’re interested in learning more about how a true wealth manager can help you set and execute true financial and personal goals.

This e-mail does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Past performance does not guarantee future results. Wealthcare Capital Management’s disclosure document ADV Part 2A can be found here.