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Investment Firms Are Catering To the Needs of Increasingly Younger Clients

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As the decade continues to unfold, a host of new trends are reshaping the face and future of the investment industry. Demographics are radically changing in many parts of the world, posing new and sometimes thorny challenges that must be met and adapted to in order to safeguard the future of the industry. One of the most pressing challenges comes in the form of an increasing gentrification among young clients, many of whom are dealing with an investment firm for the very first time in their lives.

Demographic Studies Confirm an Increasingly Younger Client Base

Demographic studies have shown that the client base of leading wealth management and investment firms is becoming ever younger. The total number of individuals who are currently in possession of $1 million dollars with which to invest is now 4.4 million, a number that represents an all-time record in the history of the industry. Meanwhile, the total amount of wealth that can be invested by this group has been estimated at $15.2 trillion dollars, another all-time high.

A Shift in Demographics Is Slowly Restructuring the Industry

Investment firms are thus pressed to find viable solutions to the issues faced by an increasingly younger and less experienced group of potential new clients. How can such companies cater to the needs of this new clientele while remaining faithful to their core principles and standard operating procedure? The issues raised by this new scenario have perplexed industry pundits and corporate CEO’s alike, and are sure to remain an ongoing source of productive speculation for many years to come.

The Retention of Customer Loyalty Is an Ongoing Industry Concern

One of the most crucial concerns that investment firms are going to have to grapple with in the very near future is the issue of customer loyalty. Most international firms, such as FI among others, have gotten used to a certain amount of long term customer loyalty. Many of these firms have based their long term corporate strategies on this basic assumption, and may thus be in for a rather rude awakening when they discover that younger customers are less likely to show such long term customer loyalty.

Customer Retention Strategies Are an At All Time Premium

As the direct result of such changing demographics, customer retention strategies are at an all-time premium. New strategies are being devised to retain customer loyalty to a single investment firm while also reassuring older customers that their continuing involvement in the company is being rewarded in the proper fashion. The revolutionary advent of Internet technology has enabled many investment firms to shift the emphasis of daily customer relations to an online basis, which has engaged these younger customers in a much more streamlined and direct manner.

New Strategies Are Being Devised To Deal with Online Clients

New strategies are being devised to deal with clients whose interaction with the company occurs almost wholly on a purely online basis. By engaging directly with these clients on their own terms, companies can increase the customer loyalty of this new breed of clientele by presenting them with informative content on a daily basis. The age of the fully interactive company website is now upon us, thanks to this new and emerging generation of investors.

Investing Questions to Ask Yourself

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So you’ve decided to start investing. Excellent. Investing is hands-down the best way to take the money you earn and use it to make more money, build wealth and finance an excellent future.

Before you begin investing however there are quite a few important questions that you need to answer, not the least of which is what type of investing you want to engage in. There are stocks of course, as well as bonds and mutual funds. You can also invest in an educational IRA or the 401(k) that your employer offers, or purchase an annuity.

You also need to keep in mind that, no matter what type of investment and investing plan you engage in, all of them come with a certain degree of risk. For example, the federal government doesn’t insure securities, even if you happen to purchase them through your bank or through a credit union, and if they lose money or fail you lose money.

With these things in mind, the following questions should all be answered, either by research that you perform or by a financial expert you consult with, before you begin investing. Enjoy.

What are your investing goals?

Are you investing to save money so that you can purchase a house? How about to finance your retirement? Whether you need money to pay for college for your children or create a “cushion” of money for when financial emergencies arise, you need to know as specifically as possible what your goals are before you begin investing.

How much time will pass before you get your invested money back?

If you purchase stocks, shares in mutual funds or bonds, you can sell them at any time. Of course, there’s no guarantee that you’ll get back the same amount of money that you paid for them, and you might just get back less. Other types of investments actually restrict you from getting your cash back for specific periods of time, including things like limited partnerships.

How much money can you earn on your investments?

When you purchase a bond you generally get a fixed amount of money in return. With securities however your earnings go up and down along with the market. Stocks do the same and, even though they might have done well before, most investments don’t comes with a guarantee of future earnings.

What is the risk involved in your investment?

As we mentioned earlier, investing is inherently risky. The risk is simply that the money you used to invest won’t be paid back to you, or the earnings that you thought you would make won’t come to fruition. There’s also a trade-off that you have to make; most investments with a higher potential for earnings have a higher risk, and vice versa.

Are you prepared to diversify your investments?

This one is relatively simple; if you have several different types of investments the chance that you’ll suffer a complete financial loss will be much lower than if you invest in only one or two. In other words, by placing your money in a number of different investments, your risk is greatly reduced.

What are the tax advantages of your particular investments?

Some investments have better tax advantages than others. For example, if you purchase US Savings Bonds, you won’t have to pay state and local taxes. Municipal bonds are the same, IRAs have tax advantages and Roth IRAs do too, but they’re a bit different. There are other tax-deferred investments that you can get for things like college and retirement as well, some of which let you postpone paying taxes and some of which eliminate them completely.

Tips on Investing Despite Looming Student Loan Debt

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If you’ve just graduated college, most likely you have years of student loan debt to pay off. College expenses have risen faster than the rate of inflation and students are having to take out more loans to help pay for it. So, the question is, should you put off investing and focus on paying your debt for fear of a volatile market or risk it and potentially earn a big payoff if the market swings upward?

Well, it depends on your unique situation. Of course, if you’re struggling to pay your bills, then any money you earn should be directed toward all your debt. However, if you’ve developed a little bit of discretionary income and can afford your monthly loan payments, then why not send some money to an investment account? If you’re considering this option, here are a few tips that should help get you started in the investment game:

Buy Individual Stocks

Starting small in the stock market is obviously a great tactic as you begin to learn the ins and outs of investing. The most important thing to remember: there is money to be made in the stock market. For instance, if you were to purchase a few shares of Apple stock in 2004 which was valued at $16.25 and left it there, you’d be able to sell that at $614.13 ten years later. Likewise, Google’s stock in 2004 was $85 in ’04 and in 2014 was $500.

Newer tech stocks (social media, apps, etc) could have just as positive a future so if you can afford to purchase a few shares they might be worth a lot more years later. But of course, that’s all speculation and you should always do your own research when investing. Just practice your due diligence before investing any money regardless of industry and find a few stocks you believe will do well and watch the magic (knock on wood) happen.

Setup a Demo Investment Account

If you don’t want to risk any money whatsoever, it’s fairly easy to setup a demo account to see how you’d do in the stock market. You’ll be offered some fake money that can be used to hone your skills as an investor. These accounts are completely free and will help you gain necessary experience without losing any money.

You’ll also learn how to use the trading platform of a specific brokerage firm. A few firms offering this feature include Scottrade, Updown.com and OptionHouse. To take it a step further, if your fictitious account earns a nice return, you can frolic on a bed of monopoly money to enhance the illusion of the new cutting-edge investor you’ve become.

Learn to Save

When you’re committed to investing, one important discipline should be discussed. Saving. The money being put away in an investment account can’t be used for a night out at the movies or the latest game console. In order to have enough money to invest, you might need to find ways you can cut expenses. That means evaluating all your debts, including your student loan, and monthly expenses to find out what can be cut and by how much.

In some cases, you can even decrease the amount of interest owed on your student loan if you set-up automatic payments to be deducted from a bank account or have made timely monthly payments for a certain period. Many student loan lenders, in an effort to prevent students from consolidating their loans, will offer interest rate reductions to help keep their borrowers. Also, investing in the stock market should come after a solid 401k plan and a modest 3-month emergency fund.

Keep it Simple

Taking it slow and learning as you go will help you become a wise investor in no time. Besides, as with many things life, taking risks can result in huge rewards.

Lance enjoys writing about financial topics as well as posting tips on his blog EasyScholarshipsNow.com.

Checking Renovation Costs for Your First Home

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Buying a new home can be expensive before you even step foot into your new place.  The excitement of owning a piece of ground in the world can be overwhelming to say the least.  To add to that pressure many homeowners (including myself) aspire to turn their new home into a place that reflects their personality.  But most people that aren’t filthy rich put every last penny into the purchase with very little left over to fix their new home to their liking. Here are a few tips to renovate on a budget.

There are a few different homeowner-renovator species. To some, the idea of buying really expensive things randomly and without vision is really all that is required.  This usually turns into a good conversation piece when it comes to their friends talking behind their backs.  Another species that is closely related to the above mentioned but with an edge is to hire an expensive interior designer. This species will never fail to mention which celebrity designer they paid.  Lastly, you have my type.  I have worked in the construction field since I was 16 years old.  I have managed remodel projects from the easternmost tip of Long Island, better known as the Hamptons, all the way across the Atlantic Ocean to Puerto Rico.  Personally, I have a background in carpentry, finish and rough, I know electrical for homes, painting, plumbing, low voltage AV, home security systems, as well as landscape design. Having the experience in these fields translates to thousands of dollars saved where you would normally be paying subcontractors and a general contractor to handle every detail.

Our Work’s Cut Out for Us 

Recently, my beautiful fiance and I purchased our first condo in Southern California.  Our new home is a cozy two bedroom two bathroom condominium.    The kitchen has already been updated, so very little has to be done there.  One thing that makes a huge difference and doesn’t have a big price tag hanging over it is pull knobs or handles for the cabinets.  First I plan to get a price for new pull knobs.  After that I look at the existing ones in the kitchen and decide if the ones on the cabinets are nice enough in design and shape to maybe customize them by painting them and clear coating them to give them a shine.  Many times old pull knobs from twenty years or so ago have fashionably come full circle and you find yourself liking the style, but the finish is worn out.  This option can save you $100.  I like to take the money I save and designate it to be used in the same room the savings occurred.  Kitchens usually have tile floors.  It is very easy to change the style of the appearance simply by throwing a different color grout down; it really personalizes the look to your taste.   In my opinion the biggest change as well as the best savings is flooring.  Manufacturers offer many types of laminate flooring.   Prices vary from $1 per linear foot up to $3-$4 dollars.  The purpose of laminate flooring is to cut costs but not sacrifice the look of having nice hardwood floors. Most people keep it in the $1-$2 dollar per square foot range.  Hardwood flooring tends to be much more expensive.  Prices range from $5-$20 per linear foot.  The main thing I like to keep in mind when deciding between laminate and hardwood floors is the area that needs to be covered.  Sometimes putting down hardwood flooring in a smaller area works out better in the long run.  Many times people get a gift from the gods when they remove their carpet to see old antiquated hardwood flooring, an instant upgrade from carpet.  Old hardwood flooring is usually oak and the floor can be refinished and sanded to expose a brand new beautiful hardwood floor.

All of this is just scratching the surface when it comes to cost conscious ideas in home renovations.  Playing your cards right in this first phase of the remodel will open up many different opportunities when you get to Phase Two: Decorating.  I have a good eye when it comes to interior decorating, but for this project I am leaving it to my bride to be, S.  Of course I will be overlooking the progress from afar like an Egyptian engineer overseeing the pyramids’ progress.  S has a classy and sophisticated style which could be bold and risky when she explains it to you, but it always turns out amazing, and at little cost.  We truly are a great team when it comes to this.  I just have to make sure I don’t turn my head for too long with her being Iranian, I will turn around and the whole house will be adorned in gold and silver.

Featured image by http://www.freeimages.com/photo/1436066

How Will I Know When I Have Enough To Retire?

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Saving for retirement.

My favorite topic….kinda.

As I’m mentioned previously, I’m not big on a traditional “retirement.” I love what I do and can’t comprehend leaving because I’m “too old.” However, I AM big on being able to tell “da man” to shove it whenever I feel like it. While I can’t imagine stopping work, I can completely visualize myself doing ONLY work I like whenever I like it.

Which brings up the question of the hour: How much should I save?

I’ve read countless pages on this topic written by well-meaning authors, and surprisingly, most get it wrong. Most discussions zero in on your risk tolerance and types of investments. These are absolutely ridiculous topics to tackle until you know the magic formula.

The Magic Formula

This is FAR easier than you might expect.

You only need three pieces to know how much to save before you start playing with investments and risk tolerance.

First, you need to know when you want to “retire” (or, in Joe lingo, tell the man to go f$%k himself).

Let’s talk about this number for a moment before we move on. Sure, you can make that number early, but what does that mean? as you make that number bigger and bigger you eat into today’s budget.

Also, realize that what you’re really trying to come up with is “how much money will I need if I don’t earn another dime between now and the time I die?” That means you’ll have to make a few assumptions about your goals

Second, you need to know how much money you can save.

Some people ask, “Why Not Just Save As Much As Possible?”

Really?

Do you want to do less today than you possibly could? Why would you sacrifice the now too much for a future that might never arrive? If you’re into pain, save every penny. Me? I’m more about balance. I want to save enough for tomorrow, but I also want my ice cream today.

Third, you need to know what return you expect on that money.

Financial guru Dave Ramsey famously had a public fight with Certified Financial Planners on twitter, who were admonishing him for suggesting that people can count on a twelve percent annual return on their long term investments. While I often love Dave’s advice, I never want to count on a return that’s higher than the average. Historically, most investors average far less than the financial markets, which have performed, over long periods of time, at around a ten percent clip.

We’ll tackle “risk tolerance” and when to think about that, later.

Those are it.

Once you have those three numbers you can arrange them like this:

Amount You’re Saving x Return on Investment = Your “Tell Off The Man” Goal.

Sure, you’ll need some calculators to figure out the formula, but I think you know where this is headed. Once you come up with the number you’ll need to “Tell Off The Man,” you can easily find out if your savings rate and return fit the goal.

Here’s When Risk Tolerance Matters

If you can’t meet your goal, you have a few choices to adjust course:

–    push back your “Tell Off The Man” date,

–    live on less after you tell him off,

–    save more money,

–    or jack up your rate of return.

Now your risk tolerance actually matters. Instead of choosing in a vaccuum, now you’re talking about risk toward meeting your goal. There’s a huge difference between “I really don’t like this type of investment” and “I’m not going to do what it takes to reach my goal, so something has to give.” As Steven Covey wrote in The 7 Habits of Highly Successful People, when you pick up one end of the stick, whether you want to or not, you pick up the other end, too.

Once you know the return you’ll need, it’s easy to look up which types of investments historically have given you that return. If you can’t stand the risk these investments present, you have three choices:

–    Teach yourself to take the risk.

–    Back down the risk and save more money.

–    Back down the risk and push back the goal.

See how that works?

Don’t get sucked into a “risk tolerance” quiz or investment discussion until you know your retirement formula. Why look up investments or make risk-based decisions without knowing what you have to do first?

Looking for more? Joe is cohost of the Stacking Benjamins podcast and writes at the blog by the same name.