A common and fair question we often get is: “Why pay a financial advisor a fee when I could simply invest in the S&P 500 index?” While fees vary depending on assets, let’s use 1% as an example. On the surface, the S&P 500 boasts a strong track record, making that 1% advisory fee seem like an unnecessary drag on returns.

However, long-term investing is more than picking a fund or chasing trends. It’s about staying disciplined during market volatility, understanding your full financial picture, and making informed decisions aligned with your aspirations. That 1% financial advisor fee isn’t just for portfolio management: it’s an investment in a comprehensive partnership to navigate your financial life.

Why Investors Compare Financial Advisors to the S&P 500

The comparison between hiring a financial advisor and investing in the S&P 500 is natural. The index offers a straightforward, often cost-effective way to gain diversified market exposure. Many see S&P 500 investing as a simple “set it and forget it” approach of passive investing vs active management. This prompts the question: Is a financial advisor worth it, given this seemingly simple alternative? We aim to answer this by revealing the true value of a financial advisor beyond just market returns.

More Than Market Returns: The Hidden Value of a Financial Advisor

While the S&P 500 is a strong benchmark, it’s also volatile and concentrated in the larger stocks within the index. When markets dip, panic often sets in. During these times, the temptation to sell is overwhelming, leading to devastating emotional investing mistakes. This is where a financial advisor truly shines. A significant part of your 1% advisory fee covers guidance that helps you to remain calm and focused when markets are tumultuous.

As we often tell clients, “Money is emotional—part of our value is to help take emotions out of the decision-making process.” Panic selling or irrational exuberance can severely erode long-term wealth accumulation. It’s often not the markets that destroy returns but the reactive decisions people make. A dedicated financial advisor provides a steady hand, a rational perspective, and historical context to avoid costly pitfalls. As your financial anchor, we ensure you stay focused on your long-term financial objectives.

Tailored Advice vs. One-Size-Fits-All Portfolios

Investing in the S&P 500 is a one-size-fits-all approach to a deeply personal financial journey. Your life, goals, risk tolerance, and timelines are unique. That 1% financial advisor fee is also for building a meticulously crafted financial blueprint that fits your life and aspirations.

At Fort Pitt Capital Group, we delve deep to understand your goals, whether they involve retirement planning, your children’s education, or leaving a legacy. This goes beyond asset allocation. It involves identifying tax-saving investment strategies, addressing estate planning considerations, and managing risk in investing that doesn’t show up on a stock chart. A good financial advisor connects strong financial ideas with your money, ensuring your investment portfolio grows strategically towards your unique future. Additionally, a good advisor will consider using a diversified portfolio of stocks, bonds, alternative investments, and cash to help you achieve your personalized goals while considering risk tolerance.

Long-Term Wealth: More Than Just Staying Invested

The adage holds true: “It’s not about timing the market; it’s about time in the market.” While the S&P 500 generally trends upwards in the long term, the challenge for individuals is to stay consistently invested through both up and down markets. Many investors buy high and sell low, trying to time the market instead of committing to a long-term investment strategy.

A competent financial advisor helps you grow wealth; an exceptional one helps you keep it and allows it to compound. For most of our clients, the main goal is to maintain and/or grow wealth, not get rich. We provide oversight and ongoing adjustments to keep your comprehensive financial planning on track, optimizing your “time in the market.” We monitor your portfolio, adjust as life changes, and proactively identify opportunities and threats.

What That Fee Really Covers

When considering paying a financial advisor, it’s important to understand the breadth of services.

• Personalized Financial Planning: Tailoring your financial blueprint.
• Behavioral Coaching: Preventing emotional investing mistakes during market volatility.
• Tax-Efficient Investing: Optimizing after-tax returns via tax-saving strategies.
• Estate & Risk Management Guidance: Integrating investments with broader estate planning and assessing financial risks.
• Ongoing Monitoring: Continuously adjusting your plan as markets or life changes.
• Expert Access & Peace of Mind: Providing insights and the comfort of professional management.

This holistic approach answers the question, “How much value does a financial advisor provide?” far beyond a passive index fund.

Partnering for Your Financial Future

So, yes, you could invest on your own and save that 1% advisory fee. However, what could that cost you in the long term? The real cost isn’t just potential lower returns from emotional investing decisions or missed opportunities; it’s the invaluable financial advisor peace of mind, clarity, and strategic wealth management a dedicated financial advisor provides. Just as you consult a qualified doctor for the best medical advice or a skilled mechanic for expert auto advice, managing your complex financial future often benefits most from a qualified financial professional.

At Fort Pitt Capital Group, we build enduring relationships based on trust and a shared vision for your financial future. We don’t just manage money; we manage your entire financial journey, helping you navigate complex markets with confidence and clarity. Let us be your partner in financial planning and turn your financial aspirations into reality. If comprehensive, disciplined stewardship is important, “Should I hire a financial advisor?” The answer is clear.

Ready to take control of your financial future?

Contact us to connect with a financial advisor specializing in your specific needs—get in touch and see what we can do for you.

About the Author

Lyle is a founding Partner of Telemus, a division of Kovitz Investment Group, which operates under the umbrella of Focus Financial Partners. He is responsible for managing some of the firm’s most significant client relationships. With over 30 years of experience in financial wealth planning and investment management, Lyle brings a deep understanding of the industry, shaped by his previous roles as a Financial Advisor at Merrill Lynch and a Senior Vice President–Investments at UBS Financial Services.

Kovitz Investment Group Partners, LLC (“Kovitz”) DBA Fort Pitt Capital Group. Fort Pitt Capital Group is a division of Kovitz, a registered investment adviser with the Securities and Exchange Commission. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

The information included herein may contain statements related to future events or developments that may constitute forward-looking statements. These statements may be in the form of financial projections and may be identified by words such as “expectation”. “anticipate”, “could”, “estimate”, “will”, “should” or similar terms. Such statements are based on the current expectations and certain assumptions of the author and are, therefore, subject to certain risks and uncertainties.

The description of products, services, and performance results of Kovitz contained herein is not an offering or a solicitation of any kind. Past performance is not an indication of future results. Securities investments are subject to risk and may lose value.

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Signs It Might Be Time to Engage a Financial Advisor

• Feeling overwhelmed by financial management
• Experiencing major life changes (marriage, divorce, new baby, career change, or inheritance)
• Approaching retirement and need guidance on Social Security, pensions, and income strategies
• Having a high net worth and needing sophisticated wealth management, tax planning, and estate planning
• Lacking the time or expertise to manage finances effectively
• Income is over $100,000/annually

Signs It Might Be Time for a New Financial Advisor

• Experiencing poor communication or service
• Receiving advice that is too generic and doesn’t fit your unique situation
• Suspecting conflicts of interest in their recommendations
• Feeling a lack of transparency around fees
• Observing consistent underperformance of investments compared to benchmarks that your advisor cannot competently explain
• Noticing that life changes are not being addressed in your financial plan

Choosing the Right Advisor

• Verify that the advisor has a fiduciary duty to put your interests first
• Check for relevant experience tailored to your needs
• Ensure the advisor’s communication style matches your preference and that they are responsive
• Understand how the advisor is compensated (fee-only, commission-based, etc.)
• Research industry average fees for advisors with similar services and client profiles.

What You Should Be Asking

Service:

• How many clients do you have, and what is your communication frequency?
• Do you outsource any of the decisions impacting my account?
• If so, who will be making decisions on my behalf?
• What about my personal situation might influence your investment recommendations?
• Do you have an investment committee, and how frequently do they meet to stay vigilant on market changes?

Fees:

• How do you get paid for your investment recommendations?
• Are you receiving incentives in any way?
• Do some investment recommendations pay you more than others?
• What additional costs will I incur beyond your structured fees?

Ethics:

• When are you held to fiduciary standards in our relationship, and when are you not?
• Have you ever had a complaint filed against you (or your firm) with the Financial Industry Regulatory Authority (FINRA), or the Securities and Exchange Commission (SEC) or any state/regulatory agencies?

Utilizing this checklist can assist in making informed decisions about hiring a financial advisor or switching to a new one. This ensures that your financial well-being is in the hands of a trusted and competent professional.

Still not sure? Take the guesswork out of investing. Fort Pitt Capital Group offers a no-cost or obligation financial review and plan to simplify your financial journey. Our dedicated advisors provide personalized guidance and clear, straightforward advice to help you understand your portfolio and make informed decisions. We’re committed to helping you achieve your financial goals. Contact us today to schedule your no-obligation consultation.

The post When to Hire or Change a Financial Advisor appeared first on Fort Pitt Capital Group.

1. Clarify Whether You Want a Merger or an Acquisition

Though we often mention them in the same breath, mergers and acquisitions are two different strategies.

An acquisition involves one company taking over another. The owner of the acquired business may get to make a favorable exit, but the acquiring company is in a position of power and initiates the acquisition for its benefit. This often plays out when a larger company buys a smaller one and absorbs the smaller company’s assets and resources.

A merger involves two companies agreeing to combine for mutual benefit. They combine all their assets and liabilities, aiming for a higher valuation and healthier financial situation than either had alone. The resulting combined company may be registered as a new entity. Usually, both entrepreneurs continue in the new business, but a merger could be a strategic way for one or both to exit.

This article will help you navigate a merger to set your business and yourself up for financial security as you approach retirement. Understand that this is a different strategy from acquiring another business or allowing another company to acquire yours.

2. Decide Which Type of Merger You Want

Once you know you are looking for a merger rather than an acquisition, think about the type of merger you want. Here are the five main types of mergers:

• Conglomerate mergers: These happen when two companies in different industries merge. The combined business may gain resources, efficiency, and product diversification.
• Horizontal mergers: These involve two competing companies in the same industry merging, which benefits both by reducing competition.
• Vertical mergers: When two companies at different points in the same supply chain merge, the result is a vertical merger. This helps both save costs and streamline operations.
• Product extension mergers: These mergers combine two companies that are not competing but offer related products to a similar customer base. For example, a makeup company and a skincare company could execute this type of merger to reach more customers, improve production efficiency, and increase revenue.
• Market extension mergers: These are mergers between companies selling the same product to different markets. For example, similar businesses serving different states or countries could merge. They give both businesses access to new markets and resources for increased revenue.

Analyze your industry’s competitive landscape, your supply chain, and your market to find the type of merger opportunity that best serves your business’s strategic interests. Once you’ve decided that, you can identify a potential company or companies to merge with and conduct your due diligence.

3. Conduct Due Diligence

You’ve been in business for a while, so you know due diligence is necessary for mergers, acquisitions, and investments. However, conversations in business circles often leave out many details you should study before merging with another business. Here are 10 things you and a fellow business owner should know about each other’s companies before merging:

• Finances: Inspect their tax returns, income statements, cash flow statements, and balance sheets.
• Costs: Request a breakdown of their cost of sales, operating expenses, and other costs.
• Valuation: Get a formal, up-to-date business valuation report.
• Assets: Obtain a list of all business assets, tangible and intangible.
• Properties: Ask for a list of any real estate the company owns or has investments in, along with valuations.
• Customers: Check customer relationship management data to understand the existing customer base.
• Employees: Find out how many employees they have, their roles, and their compensation and benefits.
• Litigation: If the company has any open or pending lawsuits, you need to know about them.
• Locations: Understand where the company is authorized to do business and where it currently trades.
• Documentation: Gather any other relevant documents, such as articles of incorporation and bylaws.

4. Agree to Merger Terms

Once you have approached a potential partner company about a merger and are both satisfied with your due diligence findings, it’s time to create and sign a merger agreement. Before the merger goes through, you must agree on key terms like:

• Structure: Determine the legal structure of your combined enterprise. A true merger often creates a consolidated entity that dissolves both original companies and absorbs all their assets and liabilities. Seek legal and strategic advice to understand the implications of potential legal structures and choose the right one for this merger.
• Leadership: Clarify how each company’s directors, executives, and managers will fit into a new, integrated structure.
• Redundancies: Evaluate any redundancies across departments, functions, and employees. If terminating anyone’s employment will be necessary, agree on how you will approach making and executing these decisions.
• Branding: Choose the new company’s name and branding. The new entity could retain one of the former companies’ branding, combine both, or create a new brand identity.
• Termination: Set conditions for a valid dissolution of the merger. Clarify who has the authority to terminate it and how they can do so.
• Valuation: Document each company’s valuation at the time of the merger with third-party valuations and a clear statement of the valuation methods.
• Funding: Executing this merger and any restructuring, rebranding, and operational changes will cost money. Before finalizing the merger, agree on how you will fund it.

5. Complete Your Exit

If this merger is part of your retirement exit strategy, the last step is to complete your exit. Although it’s the last step you’ll execute, you should be transparent about your intentions leading up to the merger agreement so both parties are on the same page. Depending on your goals and how they align with those of the other party, you could approach your exit a few different ways, including:

• Sell the entire merged entity and share the proceeds with your co-owner.
• Sell your shares to your co-owner and transition out of active involvement in the company.
• Retain some equity, perhaps as non-voting shares, but transition out of active involvement.

Seek professional business advice and financial planning services to help you choose the right strategy to prepare for the next phase of your life through this merger.

Choose Fort Pitt Capital Group for Exit Planning Support

If you want to set up your retirement exit through a merger, you have many moving parts on your mind. You’re thinking about your business, the other business, the consolidated entity, and your personal financial future. You know your business better than anyone else, but it’s worth enjoying professional guidance to secure your legacy through a well-executed merger. Fort Pitt Capital Group is here to help.

Fort Pitt’s Certified Exit Planning Advisor (CEPA) will work with you to plan every step of a smooth exit. Our advisor specializes in creating exit plans that align your business, financial, and personal goals for peace of mind when you retire.

Contact us to speak to our helpful team about your merger, exit, and retirement plans.

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What Is Sudden Wealth Syndrome?

Sudden wealth syndrome is a type of distress or confusion, stress, adjustment issues, and money mismanagement that afflicts people who suddenly acquire large sums of money. Sudden wealth can lead to making decisions you otherwise wouldn’t. You may suddenly become wealthy due to an inheritance, a successful lawsuit, an insurance payout, lottery winnings, or other means. The sudden wealth can cause anxiety, and you may fear that you’re going to lose the money.

Common Causes for Sudden Wealth Syndrome

Getting large sums of money suddenly is different from accumulating wealth gradually. With gradual accumulation, you slowly grow into a new financial status, and your mind gets prepared for the changes along the process. Sudden accumulation is almost a shock for some people, and that’s why it may cause stress. Some of the common causes of sudden wealth syndrome are:

• Societal and family pressures: You may feel pressure from family and friends to conform to a specific lifestyle or share wealth.
• Lack of financial education: People with little or no financial knowledge may feel overwhelmed by the sudden wealth. Financial education includes learning how wealth affects your psychology, behaviors, and emotions.
• Difficulty adapting to a new lifestyle: After acquiring sudden wealth, you may face changes in your relationships, social status, and even identity. You must deal with new challenges, opportunities, and choices you were unprepared for.
• Unrealistic expectations about being wealthy: People who suddenly become wealthy may have unrealistic expectations. They may think the money will solve all their problems or make them happier. However, money can increase their happiness only to a certain point.

Signs of Sudden Wealth Syndrome

How do you know if you or someone else is experiencing sudden wealth syndrome? The first condition is suddenly coming into a large amount of wealth. The following are the signs to look out for after acquiring sudden wealth:

• Excessive spending: Overspending and financial mismanagement are obvious signs of the syndrome. Mismanagement is mainly due to a lack of financial knowledge.
• Spontaneous decision-making: You may feel pressured to make rash decisions, such as buying an expensive car or house, quitting your job, or lending money to friends.
• Preoccupation with wealth loss: You may fear losing the money as fast as you got it. You worry that you may lose the money to lawsuits, taxes, bad investments, or theft.
• Feelings of guilt: You may feel guilty because you have more money than the people around you.
• Tension in relationships: You may face demands from friends, relatives, or even strangers to share your suddenly acquired wealth, which may strain your relationships.

How to Deal With Sudden Wealth Syndrome

Sudden wealth acquisition can be problematic, and it may affect the people around you as well. Sudden wealth is not necessarily a bad thing in itself — it’s the consequences for the unprepared that can be dangerous.

Here are some tips for dealing with sudden wealth syndrome:

Educate Yourself

Managing sudden wealth can be challenging if you lack the proper financial knowledge. Although learning personal finances can be overwhelming, it prepares you for situations like the sudden acquisition of wealth. Start with the basics, like budgeting and saving. You can then move on to understanding the dynamics of risk versus returns. Learn to use financial planning tools that can help you manage your finances.

Create a Financial Plan

Some financial windfalls cannot be anticipated. However, for sources such as inheritance, you can foresee yourself acquiring a large amount of money quickly. In such situations, you should be able to plan ahead. High-net-worth parents can help prepare by organizing meetings with their children and discussing how the wealth will be distributed when they pass.

Whether the windfall is foreseeable or not, you can manage your sudden wealth by creating a financial plan. A good financial plan will help you identify your goals and stay on track. If, for example, you receive a huge insurance payout, creating a financial plan will help you stay focused on the money and avoid the signs of sudden wealth syndrome.

Keep the Windfall Discreet

Keep the information about the sudden wealth discreet. Opening up to the wrong people may lead to problems such as feelings of guilt and tensions in your relationships. No one will have expectations if they don’t know how much you have. You should only discuss your newly acquired financial status with a financial advisor because professional wealth managers cannot disclose customer details to third parties.

Don’t Make Quick Decisions

It can be tempting to make large purchases to get the things you’ve always wished to have but couldn’t buy because you didn’t afford them. Take your time, assess your long-term goals, and see how your wealth fits them.

You should also avoid complex investments about which you have little knowledge. People will present you with opportunities with what they may term guaranteed returns. Avoid any investment with high returns but low risks.

Tax Planning

Coming into sudden wealth also puts you on the tax authority’s radar. Your tax obligations out of the windfall should be one of your first priorities. An experienced financial planner should be able to advise you on these obligations and help you minimize your tax bills.

Consider Therapy if Necessary

Sudden wealth syndrome may cause mental issues that may require therapy. Therapy will help you understand why you’re feeling the way you are.

Meet a Wealth Advisor

Wealth managers have experience working with wealthy clients, and they should help you navigate the challenges you’re facing. They know how to handle your money and will advise you on suitable options.

Seek Financial Help From Fort Pitt Capital Group

Getting your finances in order can be a challenging task if you don’t have the proper knowledge and tools. Poor financial decisions can lead to losses and regrets, but you can avoid such situations by seeking the advice of financial planners at Fort Pitt Capital Group. We are a team of in-house financial planners with experience in financial planning, wealth management, and investment analysis. Whether you suddenly acquired large sums of money or have any other financial issues that need the services of financial planners or wealth advisors, we are here to help you. We operate based on a simple conviction — to do what we believe is best for you. Feel free to contact us for more information about our services.

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It is essential to periodically assess whether your current financial advisor delivers the services you need in the manner you want. If your needs change or you see that they are not providing services in an open, ethical manner — you know what to do. When it is time to sever the relationship, the process is surprisingly simple. Apart from finding a new, reliable advisor, there is little you need to do to facilitate the process.

Signs That It’s Time to Fire Your Financial Advisor

There are many reasons to change service providers, and it is worth noting that not all of these are negative. Sometimes, you need a different structure. Still, the first sign that it is time to find a new financial advisor is that your advisor’s investment approach or risk tolerance does not align with your goals. Some of the leading reasons investors choose to hire a new financial advisor include:

• Lack of proactive communication: Lack of proactive engagement is based on your financial advisor failing to initiate communication regularly. It includes not providing updates on your portfolio’s performance or discussing strategic financial planning.
• Expertise or service limitations: If your financial needs evolve to include estate planning, tax optimization, complex investment structures, or increased risk management, it may be time to find a service provider with broader capabilities.
• Poor performance: Consistent investment underperformance compared to market benchmarks is a red flag. A good financial advisor can clearly explain performance and investment strategies.
• High fees with minimal value: Paying premium fees and not receiving personalized advice, comprehensive financial planning, or tailored solutions does not indicate an adequate return on investment.
• Conflicts of interest: It is vital that you have transparency and incentive alignment with your financial advisor. Identify conflicts of interest, such as recommending products or services that align more with the advisor’s interests than yours.
• Lack of responsiveness: Poor communication, delayed responses, difficulty contacting your advisor, or inadequate explanations about your investments pose a risk to your financial well-being.
• Limited technology or innovation: Access to analytics and other advanced financial tools, including online monitoring platforms and secure client portals, are essential to effective financial management.
• Lack of personalized services: A financial advisor must understand your preferences, long-term goals, and unique circumstances. If their advice becomes too generic, start looking for a new financial advisor.
• Compliance or regulatory issues: Concerns or indications of regulatory non-compliance, legal issues, or ethical breaches should prompt immediate consideration of change.

As you assess your current financial advisor and decide whether it’s time to make a change, ask yourself the following questions:

• Are they helping you move toward your long and short-term financial goals?
• Is their communication consistent, and do they help you understand your investment strategies?
• Do their fees depend on your financial gains?
• When was the last time they modified your portfolio to meet your wealth-building goals?

Alternatively, watch our webinar on when to hire or fire a financial advisor. We discuss the questions mentioned above in more detail, giving you the insight you need to make the right choice.

Steps to Switching Financial Advisors

Throughout this process, keep your communication clear and outline your expectations about the transfer of assets, account closure procedures, and other outstanding matters. It is also important to adhere to regulatory requirements, ensuring compliance with your legal obligations or industry standards as you transition to a new advisor.

Review Your Contract and Communication

Read your current contract, which should have a clause about terminating the service agreement and the accompanying fees. Some investment accounts may incur extra fees if they are exclusive to your current advisor’s firm or are locked down for a specific amount of time. Also, take note of the following in the fine print:

• Early termination fees
• Notice periods
• Termination clauses

During this stage, to facilitate a smooth transition to a new firm or advisor, be sure to collect your investment records and additional collateral like the following:

• Your investment portfolios
• Account statements
• Financial documents
• Any relevant correspondence

Ensure you get access to your cost basis, or the original value of various assets with adjustments for dividends, stock splits, and return of capital distribution.

Find a New Advisor

Research and identify potential new advisors who better match your financial goals, service expectations, and risk tolerance. Part of this research is re-educating yourself about what you should expect from a reputable financial advisor. Schedule meetings or consultations with prospects to discuss your needs and expectations and assess how these advisors will align with them. During these meetings, ask the following questions:

• What financial services do you offer?
• What are your investment credentials, and how long have you been in this role?
• What is your experience or focus?
• What is your investment strategy or philosophy?
• What is your service compensation structure?
• How can you help me reach my long-term goals?
• How often will you update me, and how can I communicate with you?

Notify Your Current Advisor

The last step is deciding how to tell your financial advisor you are transferring. Although it is not necessary to do so, it is good practice to notify them in person and on paper. Schedule a virtual or face-to-face meeting to discuss your decision and share your reasons for the cancellation, whether it is changes in financial goals, a mismatch in services, or the result of performance issues.

Your new advisor will take on transitioning your accounts through an automated customer account transfer service (ACATS), so your role in this process is simple — find a new advisor and notify your current one of the pending transition.

Trust Fort Pitt Capital Group With Your Wealth Management

It is essential to assess your financial goals and stance periodically. If your current advisor’s communication style, expertise, or services do not meet your needs, it is time to reconsider the relationship. Although it might be difficult, remember that this is business. Communication throughout the cancellation process is essential, as is staying engaged to ensure a seamless transfer of your assets and records. Be sure to continuously evaluate your new partnership’s effectiveness and alignment with your financial objectives.

Fort Pitt Capital Group is ready to offer you dynamic financial advisory services that evolve with your needs. Our skilled investment advisors have decades of experience in financial planning, investment analysis, and wealth management. You can look forward to consistent, reliable advice to help you better understand your portfolio while reaching your financial goals. Contact us today for more information on how we can take your portfolio to new heights or to schedule a free consultation.

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1. Hire a Capable Team of Professionals

A large sum of money requires careful thought and management, so it’s essential to avoid putting yourself, family members or friends in charge of all of it. It’s better to hire a team of experienced professionals to guide you instead. Some professionals you might need assistance from include:

• Lawyer: Lawyers are objective and can read and understand the fine print. They keep your best interests in mind, give valuable input on tough decisions and can set up charitable intentions and an estate plan if it is something you want.
• Tax planner, CPA, or accountant: The right tax advisor or accountant can help you handle income and capital gains tax. They’ll also help you avoid significant tax bills and advise you on better strategies going forward.
• Wealth advisory team: These professionals have experience in helping those who obtain sudden wealth. They often provide critical support and guidance and help you make informed decisions.
• Other professionals: Depending on what you decide to do with your wealth, you might request help from various other professionals. These can include an estate planning attorney for estate matters, risk management professionals, a banker, a real estate agent, or a loan officer for specialized assistance and advice.

2. Create a Realistic Spending Plan

A realistic spending plan helps you account for anticipated expenses and income. It also helps you understand your finances in depth, allowing you to budget and control expenses more accurately. A helpful spending plan is the 50/30/20 rule. This budgeting strategy involves spending 50% of your wealth or income on essentials, putting 30% toward your wants and reserving 20% for paying debt or saving.

This method can help you avoid overspending if you stick to it. You can also create a plan for investing to maintain your wealth. This may ensure the financial security of future generations when you create a sustainable withdrawal rate strategy.

3. Determine Your Values

Many feel they need to spend the money immediately, make many large investments, or donate to nonprofit organizations. While these are excellent uses for the money, first give yourself time to think about where your priorities lie and what your core values are.

What do you want your legacy to be? What do you want your money to accomplish? What type of lifestyle do you want to live? What future do you want for yourself and your family? You must answer these questions before creating a strategy so it can address your specific personal needs, circumstances, and goals.

4. Form Long- and Short-Term Financial Goals

For long-term financial goals, use structured plans to help you achieve broader financial objectives when you know where to focus your time and energy. Long-term plans can also help you mitigate risks when you use a balanced and diversified wealth management strategy.

However, it’s also important to consider short-term goals. For example, you might want to pay off debt, relocate to an income-tax-free state, update trusts and wills, or give family members monetary gifts. For long-term goals, you could create a structured financial plan based on your core values or tailored investment advice. You may want to create a strategy for leaving a lasting legacy, determine suitable charitable giving goals and policies for donations, or create a strategy for minimizing taxes.

5. Protect Your Identity

If your sudden wealth gains media attention, be sure you protect yourself and your family from scams, cyberattacks, and unwanted requests. Some actions you can take to protect yourself include hiring a credit monitoring service, setting up unusual activity alerts on credit cards, and hiring a security detail if you and your family must make public appearances. You should also ensure your team of professionals sign a nondisclosure agreement to protect your privacy.

You may also be able to protect yourself from cyberattacks by temporarily deactivating your social media accounts, adjusting privacy settings on social sites, and removing personal contact information from the internet where you can. You may also need a new private phone, phone number, and email address.

6. Resist Making Large Purchases

One of the most important things you can do with sudden wealth is exercise restraint. While it is tempting to make extravagant purchases, it’s better to aim to maintain a position of long-term wealth. This means resisting impulse buys and large purchases. Instead, use the money to pay off debt, take care of taxes, and save toward your long-term goals.

7. Think Carefully About Lending Money

Using your wealth to provide financial assistance to a loved one can be a kind act. Still, it’s essential to carefully consider who you lend to. When you acquire sudden wealth, family members you barely know may ask you to lend or give them money. This may allow them to take advantage of you or avoid paying you back at all. It’s often best to direct these family members and friends to your advisor if they have requests for money, which can help you distance yourself from the financial request, keeping your relationship personal and not transactional.

8. Implement a Comprehensive Wealth Management Plan

It might help to work with a wealth management company like Fort Pitt Capital Group for complete assistance in achieving financial and life goals that align with your personal values and financial priorities. Wealth management firms offer sudden wealth advice and provide ongoing support for increased financial stability and security. Professionals like the advisors at Fort Pitt can help you in various areas, including:

• Comprehensive asset coordination: Financial advisors can organize your assets and focus on liquidity to encourage a consistent income. This service can also help reduce risks and improve tax efficiency.
• Retirement income management: This service helps you convert your asset structure into consistent income during retirement if you’re looking to create a retirement plan with your sudden wealth.
• Intergenerational investment planning: Whether you aim to transfer some of your wealth to family members or a nonprofit organization, private wealth management companies can help you create and manage an effective plan.

Leverage Private Sudden Wealth Management Services With Fort Pitt Capital Group

With the right strategies and mindset, you can help secure a better financial future for yourself, your family, and future generations. Fort Pitt offers comprehensive wealth management services, including retirement income management, asset coordination, risk management, and intergenerational investment planning.

Our experienced advisors will work closely with you to understand your unique situation, needs, and priorities and customize your strategy based on these factors. We can also make adjustments if your priorities change over time. For sudden wealth advice or management strategies, contact our team for more information today.

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What Is Net Worth?

Net worth is the combination of what you owe and own. Your net worth provides a bird’s eye view of your financial situation. 

You may look at your net worth and realize everything is wonderful — you own more than you owe. That means you can start strategies that build your net worth further. On the other hand, your net worth could show that you owe more than you own. That’s fine — balancing debt is a part of life. It’s up to you to make a plan and grow your net worth. 

How to Calculate Net Worth

To calculate your net worth, you will need to add the total value of your assets and liabilities together. Then, subtract your liabilities from your assets. If your assets equate to more value than your liabilities, then you have a positive net worth. The opposite is true when liabilities outweigh assets.

However, tallying your assets and liabilities isn’t as simple as counting the quarters in your piggy bank. Your assets and debts are spread across numerous accounts. The value of some assets may vary by the day, while others steadily appreciate or depreciate over time. You will have to investigate the value of each asset and liability under your name independently. In many cases, this will require you to log into various accounts or check with relevant organizations. 

Net Worth for Business Owners

A business’s net worth is its book value or the product of its balance sheet. Balance sheets contain financial statements that report the company’s assets, liabilities, and shareholders’ equity — the amount each shareholder would receive if the business sold all assets and paid off all debts. 

Businesses keep balance sheets to easily measure and report success. Information on a balance sheet can tell decision-makers what they should prioritize. 

Balance sheets also provide valuable information to shareholders. Shareholders want to know their investment is producing value. Providing the net worth allows the business to prove its worth. A publicly traded company with a rising net worth will likely see its stock prices rise. 

Lenders consider net worth as well. A lender will assess an applicant’s balance sheet and are more likely to approve loans for a company with a positive balance sheet. 

Business assets and liabilities include: 

Net Worth for Individuals

An individual’s net worth is a valuable figure to know when managing personal finances. Your personal net worth is how much money you would have remaining if you sold all of your assets and possessions and then repaid all your debts. 

Personal net worth largely rides on the high-value assets under your possession. For instance, a home holds significant weight when determining a person’s net worth because it is one of the most expensive investments an individual can make. Purchasing a home will help your net worth grow because the total loan value remains the same, while the home’s value will likely increase over time. Other successful investments in stocks, bonds, mutual funds, and other sources can also make or break your net worth. 

Common assets and liabilities to include when determining an individual’s net worth include:

Determining What Is a Good or Bad Net Worth

On a basic level, one might consider “good net worth” as a positive balance between assets and liabilities, while “bad net worth” as when you have more liabilities than assets. But within this dichotomy, there is room for analysis. 

Your net worth may be in the red at the moment while showing a steady upward trend. A negative or low net worth is common for new families and startup businesses that incur debt in the short term for long-term benefits. 

Likewise, you could achieve a high net worth but start a downward trajectory. Monitoring net worth allows individuals and businesses to understand their financial situations and develop plans that promote growth. 

Work With Fort Pitt Capital Group

Net worth is what you own minus what you owe, and it’s important to know. You can calculate your net worth by adding the value of all assets you own and then subtracting the sum of your debts from that figure. Fort Pitt Capital Group is here to help you take control of your net worth. We offer various wealth management services for individuals and business owners. We encourage you to contact us online for more on our wealth management offerings. 

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What to Do With an Inheritance

Knowing how to invest your inheritance is something you need assistance with. An advisor with no incentive to push specific portfolios or products will help explain your options and any tax implications there may be. A few crucial points to consider include:

• Avoid assumptions: Never assume you will inherit. People may deplete their wealth by paying for medical expenses or donating more to charity. Be prepared for but not dependent on inheritance.
• Take time: When inheriting large amounts of cash, take your time when deciding what to do with it. What values, interests, and ideas did the deceased have? Can you use that money to honor their memory?
• Park the cash: Generally, making fast decisions with an inheritance is inadvisable. Place the sum in a federally insured bank or credit union account — a safe place to keep it while you think and grieve.
• Pay off high-interest debts: A wise decision for using your inheritance is paying off credit cards and other high-interest debts. Doing so can help you get a fresh start with less — or no — debt.
• Tax implications: Generally, you won’t need to pay taxes on the cash you inherit. Other inherited assets, like real estate, retirement accounts, and securities, may have tax implications.

Investing Your Inheritance

You can save, spend, donate, or invest money you inherited. If you obtained a property, like a home, you can sell it, rent it out, or live there. However, your choice may have tax consequences. If you sell a home, you will need to pay capital gains tax on the difference between what the house was worth at the time of the person’s death and what the property is worth at the time of sale.

An investment advisor can help you maximize your inheritance, inform you of tax implications, and give investment advice.

Speak With an Investment Advisor at Fort Pitt

At Fort Pitt Capital, we are transparent, service-oriented, and professional in what we do. Our investment advisors can guide you through inheritance’s intricacies, helping you make wise decisions for the future.

Learn about our individualized services or schedule a free consultation.

The post What to Do When You’ve Inherited Wealth appeared first on Fort Pitt Capital Group.

Financial Literacy Glossary

Diversification — A strategy to minimize the risk of loss. Diversification spreads investments over various assets with varied risk potential.

Dividend — Cash payments from equities owned; cash earned by a company paid out to shareholders.

Some stocks will pay out high dividends because they have a lot of cash flow and they return a portion of that cash to shareholders. Other companies will use their cash flow to fund the business’s operations and don’t pay a dividend to shareholders. A company’s dividend policy is based on the cash flow needs of the business and how much cash that they earn.

Emergency fund — Money set aside for unexpected expenses like large medical bills or job loss. An emergency fund can act as is a buffer tohat  protects against accruing debt.

Equity — A type of investment, another term for stocks or ownership. Owning stock gives a person equity, which makes them a part-owner of that business. Returns from this investment vehicle are unpredictable.

Financial planning — The study of putting all aspects of someone’s financial life together and coming up with a concrete direction or goal. This covers everything from asset allocation to how much is being saved to reach specific financial milestones: i.e., retirement, college education.

Fixed income — A type of investment that comes from lending rather than ownership, where a stated return or interest rate is received for a certain period of time. The returns from this type of investment are designed to be relatively stable.

A balance of equity and fixed income in a portfolio is important. The key differentiator for anyone is how much of their assets should be in either equity or fixed income, which varies based on individual goals and risk tolerance.

Interest — The percentage of a loan that lenders charge borrowers. Interest is broadly divided into compound and simple interest. Compound interest is based on the loan principal and accumulated interest over a certain time period. Simple interest is calculated solely by using the initial borrowed amount.

Liquidity — Refers to how quickly the money an investment represents can be turned into cash. Having a certain amount of liquidity is necessary because emergencies happen, and having a fund or cash cushion to pay for those things is important. All assets have varying degrees of liquidity.

The most liquid asset is cash, or what is in a checking and savings account. Equities are also fairly liquid; selling a stock is typically easy. Although it might not be the most appropriate time, if you need the money, you can usually get it. Fixed income tends to be less liquid because they aren’t as easy to sell.

Net worth — The total value of assets owned, less any outstanding liabilities; what is owed subtracted from what is owned. It’s a measuring tool to determine if you’re on track with financial objectives.

If you have any liabilities (a car loan, mortgage, credit card debt), you subtract that from any real assets owned (money in the bank, investments, house, car), which equals net worth. If you plan to retire at a certain age, you need your net worth to be high enough so you can draw upon the assets during retirement.

Pay yourself first (PYF) — A strategy prioritizing saving, making it an essential budget item. An amount of income is deposited into a savings account monthly. Saving is treated as an essential monthly cost, like rent and food. Once needed expenses are covered, leisure purchases can occur.

Principal —The original amount invested or the current value of a portfolio.

People, mostly in retirement, want to ensure principal stays where it is and doesn’t change. They then want to live off the earnings of their portfolio. If principal goes down, then they have less assets to draw from. For people that are not yet retired, their goal is to keep adding money to their portfolio to see the principal increase.

Risk tolerance — How much portfolio volatility someone can withstand; how much of a loss someone can accept in their portfolio.

People withstand more fluctuations within their portfolio. If someone has a low risk tolerance, they want a more stable portfolio with less price volatility. The key is trying to determine someone’s risk tolerance and matching that with a portfolio that will guide them to their goal.

Time value of money — A dollar today is worth more than a dollar tomorrow, or a year from now. The key here is keeping up with inflation. Inflation has caused prices to go up over time.

If you want a dollar to be worth as much a year from now as it is today, you need to get some sort of return on that dollar. If you get a return, then that dollar will be worth more in the future. If you get no return, it will be worth less in the future. That’s why we recommend being invested in equities. They are the only asset class that has historically demonstrated success in keeping pace with inflation.

Total return — The amount an investment increases in cash received in both price appreciation and any interest or dividends from an investment.

Some investors look for high dividend-paying stocks to get cash. Some are less concerned with that, so total return becomes important. Investors unlock the return of equities that don’t pay a dividend by selling shares to get a return from price appreciation. If someone invests $10,000 and $1,000 is earned in dividends, and the value goes from $10,000 to $12,000, the total return on investment would be $3,000, or 30 percent.

How Financial IQ Is Important in Our Life

Your financial IQ impacts essential decisions you make about money. It affects how you invest, save, earn, and spend. By investing time in understanding financial terms, you can achieve your money goals at every life stage.

Financial intelligence is vital to your success. It helps you:

• Manage wealth: Your financial IQ teaches you to track money and cash flow. You can identify patterns and know where to cut, modify or lessen spending, increasing wealth.
• Control money: Successful people control money effectively by growing their financial intelligence. Your relationship with money relates to your success. 
• Grow knowledge: As your financial IQ grows, so do your knowledge and willingness to learn.

Learn About Fort Pitt’s Financial Advisory Services

Most people need access to sound financial advice. Fort Pitt Capital Group has solutions to help you reach your financial goals. We keep things straightforward — no charts, industry terms or complicated documents. Get reliable information and financial advice to achieve your goals and increase your knowledge.

Learn more about our Financial Advisory Services.

The post Test Your Financial IQ: Your Guide to Financial Literacy appeared first on Fort Pitt Capital Group.

If you search the internet for financial education articles about “money lessons,” there’s list after list of lessons you need to learn by a certain age or rundowns from individuals about what they wish they had learned about money when they were younger.

These financial information catalogs cover everything from saving and investing to compounding interest. Let’s break the cycle of people not learning about money at a young age, and your kids won’t end up writing one of the “what I wish I had learned” lists.

So how exactly should you teach your children about money? The best advice is to start teaching your children about money as soon as possible. Warren Buffet even says to start begin teaching your children these lessons when they’re in preschool. Here’s a breakdown of great ways to incorporate financial education into their lives:

How to Set Your Child Up for Financial Success

Teaching your kids about investing and saving can take many forms. Starting early allows you to integrate essential lessons, so your child can make stronger financial decisions when they are older, whether they are a teenager or a young adult.

1. Offer an Allowance

Setting a weekly allowance for kids in exchange for completing chores can impart an important message that children have to work to earn money. However, this concept can get tricky because you may not want to reward kids for doing chores they should naturally be completing.

A good balance may be having them do normal daily chores but explain that to earn money, they’ll have to do extra tasks like giving the dog a bath. If you give your kids an allowance, don’t take it away as punishment because you don’t want kids to associate money with anxiety. Also, set boundaries so they know what types of things you’ll pay for and what items they’ll have to use their allowance to buy.

2. Help Them to Save

This is where those piggy banks come in and also plays into what I was talking about with setting allowance boundaries. If your child wants to buy that costs more than their weekly allowance, they will have to save their allowance until they have enough money. When putting the money in a piggy bank or jar, kids can physically see the money being saved for a future goal. This helps teach children the concept of delayed gratification.

You can also open a savings account for your kids. Walk them through deposits and withdrawals so they understand how to navigate using a bank account when they are older.

3. Encourage Them to Invest

Open a small investment account and have your children pick a company they like or use. Examples can include Apple, Nintendo, and Mattel. Investing for kids can serve as a powerful lesson because they can learn how the stock market works.

4. Have Them Witness Financial Transactions

Start a savings account for your child and have them participate in the transactions. When completing regular shopping at the grocery store, you might ask your child to count out the cash needed to pay for your food or sort through coupons. You can ask them how much you saved with store cards and deals, encouraging them to find ways to save money in regular shopping and understand sales.

Take your children to the bank and have them fill out the deposit slip. Show them their savings account statements to help them understand how banking works.

5. Provide Ideas for Small Neighborhood Jobs

While allowance is an excellent way for kids to earn their own money, they should understand that there are other work opportunities outside their homes. Many older children and teens run neighborhood businesses providing services for their community. Having a neighborhood business gives them more freedom to choose their hours and work frequency and teaches them that their earnings depend on their schedule, quality, and work ethic.

Some jobs you can encourage your children to take on in your neighborhood include:

• Babysitting
• Lawnmowing
• Raking leaves
• Petsitting and dog walking

Neighborhood jobs can also teach your children about working to meet someone else’s standards and instructions. They might learn how you like to finish tasks, but working for someone else can ensure they strive for quality results that impress neighbors. These habits can develop a strong work ethic that prepares them for the workforce and a successful career.

6. Involve Them in Bigger Financial Decisions

Learning about everyday transactions helps kids understand how to save for essentials like groceries and clothes. However, spending often involves larger items and experiences that qualify more as wants than needs. You can help them understand what it takes to save for more expensive things by including them in family spending decisions.

For example, you might want to go on a family vacation. You can include the kids in the planning portion, but take it beyond choosing the destination and activities by asking them to help with the budget. You can give them an amount and have them determine where you can go and what you can do with it.

Another option is to put money in a family fund and let them choose how to spend it when you reach specific amounts. You might take a family tax out of their allowance and put it in the fund to help it grow. Other families put money in from doing good deeds for each other and others.

However you choose to grow your fund, you can check in with the kids to decide how to spend it. They can decide to spend it or wait to do something else at the next touchpoint. This technique can teach them to save over time for something they really want.

The Advantages of Teaching Kids About Investing and Personal Finance

By teaching these essential financial lessons earlier, you set your children up for a lifetime of financial success. However, you can’t just teach these lessons when children are young enough to think a piggy bank is cute. Financial education should continue throughout their adolescence as they work summer jobs, through college, and even into their early 20s as they begin their careers.

Here’s a look at how financial education can change as children age and, get their first jobs, credit cards, and experience more financial firsts:

1. Saving

As kids get older, help them understand the best way to save is to pay yourself first. Meaning, when you get your paycheck, put a portion of it into your savings account first, before you do anything else. Before you pay bills or buy groceries, pay yourself!

Next, they should determine a budget based on the money from each paycheck. After paying themselves first and allocating money for bills and other necessary expenses like food and gas, they will have some money left over to spend on them. This leads us to the next money lesson.

2. Spending

It’s important for kids to consider how they spend their hard-earned dollars. Just because there’s some extra money left over in the budget to spend doesn’t mean you should. Eating dinner out every night or buying a new pair of shoes whenever there’s a sale is not worth it. Is it your Dad’s 60th birthday celebration dinner? Sure, spend the money if you have it. Is it just a regular Tuesday? Maybe make dinner at home and save that extra money.

It’s also vital to learn impulse control. In the moment, your child may really want that new, shiny, sleek watch, but is it really that important? Teach your kids to practice patience before purchasing. They should learn that if they see something they want, they should wait, even for just a day or a week.

It’ll put it into perspective and help your kid see that the thing they “just had to have” isn’t that big of a deal. By waiting and not buying right away, your children will learn to control unnecessary spending, which is critical for successful money management.

3. Credit Cards

While we’re on the topic of spending, let’s talk about one of the significant tools people use to spend their money — credit cards. Kids need to learn the good and bad of credit cards. While using a credit card may seem like “free money” since no cash is exchanged, it’s crucial to remember that credit cards come with a price.

Make sure your children understand they will have to pay that money back to the credit card company and, if they don’t do it on time, they will have to pay interest on top of that. And typically, credit card interest rates are pretty high, so they’ll end up owing much more than they spent. Avoiding credit cards altogether may not be wise, either. Credit cards are a great way to build credit if used responsibly.

Using credit cards responsibly means paying them off in full each month. Here’s a tip — tell your kids to treat a credit card like a debit card. They must have the money in their bank account to pay for everything charged on that card. If there’s not enough money in their account to cover the expense, don’t charge it.

4. Investing

Financial education changes as children get older. Investing will be much more complicated than simply picking a company they like and buying some stock in it. Investing is a great way to build wealth to help pay for more significant expenses down the road. Simply put, investing is allocating funds somewhere now with the expectation of generating a profit later. However, many parents are unsure how to teach kids about investing. 

This profit comes from the magic of compound interest. Compound interest means that the interest you are getting back on your money is for the entire pot of money, even as it grows. So in the first year, if you have $1,000 with 5% interest, you’d make $50. Then the following year, that same 5% interest rate is applied to your new total of $1,050, so you’ll make more in interest as your total amount of money grows from that interest. 

Your kids will probably like the sound of making more money. It sounds great to be able to make money by simply investing, but caution your children only to invest once they know they can pay their monthly bills and contribute to their savings. It’s also important that they know they’ll want to have saved at least three months’ worth of living expenses in an emergency fund before investing. 

So how much should someone invest? A common piece of advice is to invest 10% to 15% of your earnings a year, but if that’s not realistic for your kids, tell them to at least start with the minimum initial investment. No one needs millions or even thousands to invest — you can invest in the market with just a few hundred dollars.

Invest in Your Child’s Financial Future With Fort Pitt Capital Group

When you want to implement strategies to secure your child’s financial future, financial advisory services from Fort Pitt Capital Group can help you reach your personal goals. From saving to investing, we can advise you on how to accomplish your desired outcomes and navigate various financial decisions. You can learn skills to teach your child or set aside accounts ready for them when they reach adulthood.

Contact Fort Pitt Capital Group today to get started.

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