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Bigger Is Not Always Better

by | Dec 13, 2022 | The Ship's Wheel

 

A prospective client called the other day, concerned about the lack of attention from her current Financial Advisor. I asked her a few questions and realized why this was happening. It made me think that her situation was no different than many of yours. Her account was at a big brokerage firm you know. The lack of attention she was getting was not her fault. It happens quite often at the big brokerage firms.

Brokerage firms set minimum asset requirements on a relationship before the advisor can be compensated. As a result, if the minimum is not met, the client is usually directed to a call center where a different person may answer on any given day. To me, this is not good service. After all, even though your account size may be smaller, you are still paying a fee to that firm to advise you. That fee is usually the same (or higher!) percentage as if you received personal service from an individual advisor who knows and cares about you.

As an independent advisor, I can work with any client whether their assets are $25,000, $250,000, or $25 million. Prior to being an independent advisor, I worked for a couple of big brokerage firms. For me, the decision to leave that business was simple: I wanted to help as many people as possible. Will Thompson and I started this firm to help investors achieve their financial goals. We did it so we could decide who we wanted as clients, and we do not discriminate based on a dollar figure. If someone comes in with a goal to reach retirement or get through retirement, we are uniquely qualified to help.

Both Will and I cut our teeth working at major firms. Our backgrounds are completely different though. Will worked on the institutional side, investing and managing hundreds of millions of dollars, and got his Chartered Financial Analyst (CFA®) certification while doing so. The CFA® is the most highly respected designations in our industry, and involves years of high-level experience and study to achieve this designation. His experience is vast and sophisticated, and he has used it within our firm to make it a unique independent firm in Stuart. There are not many advisors around that hold both the CFA® and Certified Financial Planner™ (CFP®) designations, which sets him apart from other advisors. His credentials are impressive, but the most impressive part to me is that Will cares about every client we serve.

My background is advising clients like you. I worked for two major brokerage firms as well as a large independent Registered Investment Advisor prior to starting Chapman Capital Advisors, and have helped hundreds of clients reach their financial goals. I have passed multiple securities licensing exams and hold my Certified Financial Planner™ as well. I believe everyone deserves knowledgeable financial advice that is not conflicted by a commission. As a result, I work with clients in many different stages of life and financial situations.

Although Will and I come from different sides of the industry, we both share two common traits: We care about our clients, and we have unique, vast experience to help them succeed. If you are tired of being a number and want to work with knowledgeable advisors who care, please give us a call to set up a free consultation.

 

Am I eligible to Convert my Traditional IRA to a Roth IRA?

Converting your Traditional IRA to a Roth IRA can be one of the best financial decisions made when saving for retirement if done correctly. Prior to 2010 there was an income limit that restricted the conversion to a Roth IRA if your (AGI) was over $100,000. As of 2013, the income limitation does not exist for a conversion, but it still exists for contributions. This does not mean it will not come back in the future, but for 2013 and beyond anyone can convert an existing Traditional IRA to a Roth IRA regardless of income.

For example, someone has a Traditional IRA with $350,000 invested, that IRA can be converted to a Roth and all the taxes need to be paid for the tax year the conversion was completed. After converting to a Roth, the money grows tax-free. Paying the taxes on this money now might sound like a tough pill to swallow, but the potential tax savings down the road can be significant. Wouldn’t you rather pay taxes on $350,000 now than pay taxes on $1,000,000 in the future? One of the keys to doing this correctly is paying the taxes with funds outside of a qualified plan. Paying the taxes with money from the IRA defeats the purpose and will negate the full tax saving potential.

This is just one example of completing a Roth conversion. You can do partial conversions as well. This means you do not have to convert the entire account. You could develop a strategy of doing partial Roth conversions over multiple years. The key is to consult with your tax advisor or accountant to make sure the conversion will not put you into another tax bracket. Every dollar you convert is taxed at your ordinary income tax rate. This strategy works best for younger investors who have longer to allow the money to grow and compound. It can also work well for an older investor who is in a low tax bracket. Another reason to convert to a Roth is that Roth IRAs are not subject to the Required Minimum Distribution after you reach age 73. For those of you out there that do not plan to use your IRA money to live this can be a huge advantage when it comes to passing along your IRA to your beneficiaries. Roth IRAs continue to grow tax-free after the conversion and after you die. There are distribution requirements for the beneficiaries, but the distributions are tax-free as well.
This strategy might not be right for everyone. I would advise you to consult with a Certified Financial Planner™ or your tax advisor prior to taking advantage of this potentially large tax savings. One of the best times to complete a Roth conversion is when the value of your Traditional IRA has fallen due to a market correction like we experienced in 2022. If you have questions on this article or would like to schedule a free financial review. Please contact Jay Chapman at 772-320-9658 or email [email protected].

Jay Chapman| CFP®

Jay Chapman| CFP®

Founder

Jay Chapman, CFP®, is founder of Chapman Capital Advisors, as a member of the advisory team. He has over 20 years of experience in the Financial Services industry.

Will Thompson | CFA®, CFP®, AIF®

Will Thompson | CFA®, CFP®, AIF®

Advisor

Will provides the in-house expertise of CFP®, CFA®, and AIF® that is uncommon for boutique firms.


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