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Six Tips for Financial Health in 2016

By George C. Miller, Esq.  of Shustak Reynolds & Partners, P.C. posted on Wednesday, January 20, 2016.

George C. Miller

George C. Miller


Location: San Diego, California
Phone: (619) 696-9500 (Ext. 105)
Direct: (619) 501-8270
Email[email protected]

The Financial Industry Regulatory Authority (FINRA) recently published a list of six tips to help investors start 2016 on solid financial footing and avoid unnecessary risk and potential losses in their investment accounts.  And with the recent turbulence in the market, now is as good a time as any to step back and assess your portfolio.  Here are FINRA’s six tips for financial health in 2016:

1. Reassess goals. The beginning of the year is a great time to review your goals with your broker or financial adviser.  According to FINRA, investors should identify their most important short, medium and long-term financial goals and choose investments appropriate to help meet those goals while considering suitability and risk tolerance.  The sale or recommendation of unsuitable investments is something our firm is, unfortunately, quite familiar with.  Do some homework before agreeing to an investment and get a second opinion about whether the investment, particularly if it’s one you’ve never heard of, is appropriate for you.  Non-traded REITs and other private placements are not appropriate for everyone. 

2. Focus on financial security. Take advantage of tax breaks when saving for college or retirement through tax-advantaged savings accounts such as 529s, Coverdell Savings Accounts and 401(k)s.  Pay down higher interest debt and, if possible, pay more than the minimum due on credit cards.  This is particularly important for younger investors.  Don’t join the 52 percent of 18-34 year olds who, according to a FINRA study, carry high balances and are engaged in other expensive credit card behaviors.  FINRA also cautions investors against chasing the yield.  In a low yield environment, it may be tempting to invest in riskier, sometimes esoteric products that promise higher yields.  But the old adage usually proves true:  if it sounds too good to be true, it probably is. 

3. Understand the impact of higher interest rates. The Federal Reserve adjusted short term interest rates up .25% in December 2015–the first rate increase in eight years.  Rates may increase further in 2016 assuming the economy does not face another major setback. Understand the impact higher interest rates may (or may not) have on your investments.  It’s not as simple as “bond prices will fall when interest rates rise.”  For investors who purchase bonds and hold them to maturity, the rate increase may not mean much.  For those who sell bonds before maturity, it could mean those bonds sell lower in the secondary market.  But it could also mean investors may replace them with higher coupon rates.  Regardless, a change in interest rates presents a good opportunity to review your investment portfolio for suitability and diversification, as investments react differently to rate hikes. 

4. Track and rebalance investments. In the same vein, investors should assess and rebalance their portfolios at least on an annual basis, if not more often.  FINRA encourages investors to closely monitor their investment accounts for red flags or other suspicious activity.  Follow up with your broker or advisor if you do not receive account statements; read and keep all account documents, no matter how tempting it may be to recycle them; ask questions if you don’t understand, and don’t be afraid to get a second opinion; keep contemporaneous notes when speaking with your broker or financial advisor, as memory fades quickly; there is rarely a good reason to make checks payable directly to an individual broker or adviser–always deposit investment funds directly with the firm; and keep an overall eye on your portfolio.  An ounce of prevention is worth a pound of cure in this regard.  It is often easier to avoid investment losses than to recover them through litigation or arbitration.

5. Know your investment professional. At a minimum, investors should be aware of their financial professional’s background and experience in the industry.  FINRA maintains a “report card” on all registered representatives and brokerage firms through its BrokerCheck website, while the SEC maintains a similar database for investment advisers and RIAs.  Both sites contain professional licensing information and certain customer complaints and disciplinary events.  Investors should also understand the differences between stockbrokers, investment advisers, CFPs and CFAs and between broker-dealers and RIA firms.  Different investment professionals are compensated differently and sometimes held to different standards of care.  You, as the investor, should be aware of those differences.

6. Protect your hard-earned money. Fraudsters go where the money is.  No matter the economy or investment environment, they always find a way.  Contrary to common belief, the average fraud victim is not an isolated, uneducated and inexperienced investor.  Most are college educated with above-average income and are confident and self-reliant when making investment decisions.  They are our neighbors, family members and co-workers.  Be wary of obvious signs of potential fraud, including promises of “phantom riches” or “guaranteed” rates of return.  Investors also should be aware of the more subtle signs of potential fraud, such as the “source credibility” tactic, where a salesperson claims association with a prestigious financial institution or touts his or her prior experience in the business and financial world to induce a sale.  Scammers also prey on members of the same church, social organization or neighborhood, urging investors to “buy now” because so-and-so down the street has already invested and is earning great returns.  Finally, investors should be wary of anyone attempting to create a false sense of urgency by claiming limited supply or some other timing issue.  There are an unlimited number of ways to invest and will always be another opportunity.  Besides, if it sounds too good to be true, it probably is. 

Shustak Reynolds & Partners, P.C.’s securities attorneys and FINRA attorneys represent investors, investment advisers, stockbrokers and brokerage firms in claims involving fraud, unsuitable investment recommendations, stockbroker malpractice and other misconduct.  Contact us today for a confidential analysis of your situation.  


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