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Financial Planners in Pasadena CA

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Financial Planners in Pasadena CA

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Financial Planners in Pasadena CA

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Financial Planners in Pasadena CA

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Financial Planners in Pasadena CA

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planning in Pasadena California

This article provides a list of recommended reading from among the many hundreds of articles that I have authored in the past several years. Note that I have personally written all the content that you will find on the six personal finance and investment websites referenced below.

Enjoy!

The Skilled Investor website

Note that you can find all of my other financial websites, by going to The Skilled Investor website and clicking on the red colored links in the left hand column on any page of The Skilled Investor website.

On the front page of The Skilled Investor website you will find an index of pages with major categories and subcategories. Within the subcategories there are lists of articles and the front page tells you how many articles are in any subcategory. There are many articles in addition to those listed below, which you can find by clicking on the subcategory links below that have arrows in front of them.

This article continues below this introduction:

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planning Pasadena CA

Article continues:

Here are some suggested personal financial planning and investment management articles within the major categories and subcategories. Article titles are descriptive and should help you decide which articles you want to read first.

Personal Investment Management

• You must stay invested in the securities markets to earn market risk premiums
• Commodity futures in your investment portfolio — Is there really any future for individual investors?

• Excessive investment costs are a huge problem for individual investors

• How much do hidden mutual fund trading expenses cost you?

• Is it worth paying higher bond mutual fund management fees?

• Pay less to get more (Part 1 of 2)

• The heavy burden of recurring investment fees (Part 1 of 2)

• Understanding one-time investment fees, such as sales loads

• What is the cost to individual investors of sub-optimal portfolio diversification?

• Why is diversification valuable to individual investors?

• Can a limited number of stocks provide complete portfolio diversification?

• How many mutual funds are needed for a well-diversified portfolio? – Commentary

• Chance creates the illusion that investors can beat the stock market

• The illusion of superior professional investment manager performance

• Distinguishing between true investment skill and luck

• What have average investment asset class risk premiums been over long periods?

• Asset class investment risk premiums — your reward for taking investment risk

• How stable have common stock market returns been over time?

• How are asset class risk premiums and the risk free rate of return related?

• How do return expectations of investors compare to historical stock returns and risk premiums?

• Calculating your investment wage and the opportunity cost of your time

• The value and opportunity cost of your investment time

• Passive Personal Investment Strategies are More Time Efficient with Better Returns and Risk Control

• 15 Value-Added Individual Investor Activities

• What else should you read about investing?

• A caution related to classic investment books

• How can individual investors trust, when so much investment information is rubbish?

• How investment securities are valued — snapshots in time

• Introduction to investment valuation and securities risk

• The confusing investment securities market motion picture

• What is efficient market pricing in the securities markets?

Personal Financial Planning

This is a must shortened list of available articles, because there are many other personal financial planning articles posted on The Pasadena Financial Planner website. See a selected list below.

• The Problem — Straight answers about personal financial and investment planning are difficult to find

• The Solution – Only follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient

• Traditional versus Roth tax-advantaged plan contributions

• Factors that tend to favor Roth tax-advantaged plan contributions (Part 1 of 2)

• Summary Table of Traditional IRA and Roth IRA Tax Rules

• Executive Summary of VeriPlan

• VeriPlan’s 10 Financial Planning Tools and Financial Calculators

Financial Advisors, Investment Counselors, and the Financial Industry

Are Your Best Interests the Same as the Financial Services Industry?

• Financial science drives industry product development, but not necessarily toward the best interests of individuals

• The investment industry is not your investment partner

• How to lie with statistics: Investment performance charts (Part 1 of 2)

• Many individual investors are not fooled by an ethically challenged securities industry

• The securities industry calls marketing and selling – “advising”

Payment of Investment Advisors, Financial Planners, and Investment Counselors

• The economics of the financial advisory industry

• Does it matter how financial planners and investment advisors are paid?

• Can you really get free and objective investment advice, when you pay investment sales loads? (Part 1 of 2)

• How expensive is advisor compensation paid via sales loads?

Selecting a Financial Planning Advisor or Investment Adviser

• Preparing to interview a financial planner or investment advisor

• Questions to ask when hiring an investment advisor – Part 1 – Background and training

Regulation of Financial Advisors and Investment Advisers

• Regulation of financial planners and investment advisors — Introduction

Frauds and Scams by Financial and Investment Advisers

• Avoiding financial planning and investment advisor frauds and scams – Overview

• Avoiding financial advisor frauds and scams – The Never-do list — Part 1

Best No Load Funds website

Click “Sitemap” in top banner for a list of articles. Suggested reading:

• 7 Ways to Pick the Best Noload Mutual Funds and ETFs

To find articles that focus on each of these seven selection criteria, either click on the numbered headings within this article or go to the Sitemap.

No Load Bond Funds website

Click “Sitemap” in top banner for a list of articles. Suggested reading:

• No Load Bond Funds
• The Top 14 Low Cost Taxable United States Bond Mutual Funds (Low Minimum Deposit)

The Skilled Investor Blog

(associated with The Skilled Investor website)

You could read these selected articles:

• Where’s Waldo? – The illusion of superior professional mutual fund manager performance.
• Why only one Warren Buffett? The illusion of superior professional mutual fund manager performance.

Low Cost S&P 500 Index Funds website

You could read these selected articles:

• Top 10 S&P 500 Index Funds
• Buy an S&P 500 Index Fund with Low Costs

The Pasadena Financial Planner website

Click “Sitemap” in top banner for a list of articles.

Suggested reading:

• Your Family Financial Planning
• Your Family Financial Planning Process

The two articles above summarize “10 Financial Planning Steps in the Right Direction,” a recommended personal financial planning process. There are individual articles with more details about each of these 10 steps. You can find them by clicking on the bold section headers within the two articles above, or you can find them by clicking the “Sitemap” link on any page and looking for the articles that are numbered 1 through 10.

In addition to these financial planning process articles, read:

• Living Expense Tracking Methods
• Asset Allocation, Investment Asset Tax Location, and Emergency Cash Management

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See: Fee Based Pasadena Investment Advisor >>>

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Use the top fee only financial advisor — helping clients in Southern California, including Altadena, Tujunga, Walnut, West Covina, La Canada, West Hollywood, West Los Angeles, West Toluca Lake, and Pasadena.

Families need an objective financial planning process. In addition, they need to be in control — whether or not they have a family financial planning consultant. With a well-designed and personal financial plan, you can optimize your financial affairs over your lifetime. You can greatly reduce the waste of your money and your time. I recommend the 10 steps below for personal financial planning and personal investment management.

To find an in depth article for each step, just click on the Sitemap link at the top of this page and look for the articles numbered from 1 to 10. Also, you can reach us by using the contact form below. Please enjoy reading this article. Thank you!

1 – Personal Financial Planning

Because you must live with the results, you need to take full responsibility for your financial and investment success or failure. Delegating financial planning and investment decisions to advisers largely on faith can be very dangerous. Naive hope without adequate personal financial knowledge, attention, and control can be very risky to your personal and family welfare. The only practical solution is for you to increase your personal financial planning and investment knowledge and skills.

This article continues below this introduction:

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planning Consultants in Pasadena California

Article continues:

Educating clients about scientific investment and financial planning is extremely important to me. As such, I have written many educational materials that are of interest to my clients and the general public. My objective financial publications on The Skilled Investor website and blog are often the reason that people learn about my fee only independent financial planner and investment advisor services.

Your questions are important to me, and you should expect there to be a factual basis for any strategies and recommendations that I make. Please ask any and all of your questions, as we work together. During the course of developing a comprehensive, personalized plan for you, if you are interested, I can provide copies of educational materials that I have written and copies of original scientific finance papers that are particularly applicable to your situation.

2 – Financial Planning Tools

The single most significant financial lever that individuals control directly is their management of personal expenditures. The second is their lifetime effort to obtain sufficient income. Most people simply do not save enough of their current income to fund adequately their future needs.

To analyze your financial affairs in detail, we will use VeriPlan. VeriPlan is a very sophisticated and customizable computer planning model that I have developed. VeriPlan enables you to view graphical projections of your family’s income, expenses, assets, and debts across your lifetime. Data inputs reflect your particular situation and include all your assets, including cash, bonds, equities, property, real estate, private equities, and business interests.

Step 2 is a very important step, because this is where we construct your baseline financial plan and measure your current financial circumstances and goals and intentions for the future. To develop your customized lifecycle model, we will work together to gather information, adjust assumptions, and evaluate the effects of different financial decisions across your lifecycle. For more information about VeriPlan, see: Personal Finance Software for Your Lifetime.

VeriPlan can vary future expected investment returns by asset class, and it automatically analyzes the details of your taxes and investment expenses. Any and all assumptions can be changed for instant “what-if” testing. The model’s risk analysis capabilities evaluate how well your future assets would cover normal and extraordinary expenses, if market or personal circumstances were to disrupt your plans.

Excessive and unnecessary investment costs can substantially undermine your lifetime investment returns. VeriPlan automatically projects the returns you will waste with such fees, if you do not choose more cost-efficient investments.

3 – Investment Risk Tolerance

Investors with different levels of risk tolerance are more satisfied investment strategies that are better aligned with their risk preferences. Differences in risk tolerances mean that more risk-averse investors are personally more satisfied with a lower risk portfolio despite its lower expected returns. Less risk-averse investors are more satisfied with portfolios characterized by higher risk and higher expected returns.

While there are a variety of approaches to the measuring relative investment return and risk preferences, we do not believe that a simple “check-a-few-boxes” survey is sufficient. Therefore, you can expect that we will discuss your feelings about risks and rewards. We will assess together your likely behavior in the face of financial risks that might actually materialize.

We will also discuss the implications of adopting a particular investment risk profile relative to that of the average investor. Furthermore, we will test the financial projection implications of your risk preferences using VeriPlan. With VeriPlan modeling your particular financial situation, you can better appreciate the projected outcomes of different investment allocations associated with your risk preferences.

4 – Investment Diversification Strategy

Diversification is genuinely a financial planning and investment “free lunch.” A fully diversified portfolio is a key contributor to improved investment risk management. Diversification has become an axiom of personal investing, because the specific risks of businesses and other investment entities can be reduced or eliminated from a portfolio without reducing expected returns. As such, our investment recommendations will usually focus on very low cost mutual funds and very low cost exchange-traded fund (ETF) investments.

A significant portion of a portfolio may sometimes become concentrated in a single investment entity, which increases the overall risk of the portfolio. While undesirable, there sometimes are good or unavoidable reasons for investment concentration. In such circumstances, we will provide recommendations on possible ways to ameliorate the associated risk. If there are not good reasons to maintain the current level of concentration, then we will discuss how to reduce this concentration.

5 – Investment Asset Allocation

Your risk preference relative to the average investor with the average portfolio will influence your asset allocation. Appropriately setting your personal asset allocation in line with your personal risk tolerance is a critical decision for every investor. Because the average risk-averse investor holds the average portfolio asset allocation, this becomes the starting point in determining how a specific individual’s portfolio might diverge from that average allocation.

VeriPlan supports several mechanisms for allocating assets permitting a comparison of projections based upon different asset allocations. Anticipating allocation adjustments that may be needed in the coming year, we will also discuss how near-term net income might be invested to reduce the need to reallocate some of your portfolio in the future. If asset withdrawals are required to cover anticipated retirement expenses or other living expenses, we will recommend how to do this most cost and tax efficiently. Our goals will be to establish a durable approach to asset allocation and to minimize costs and taxes.

See Part 2 — Pasadena California Financial Planning >>>

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Find the best personal financial planning consultant for those who need financial planning help in the Pasadena area including residents of Altadena, Arcadia, Baldwin Hills, Baldwin Park, Burbank, Eagle Rock, Glendale, La Canada Flintridge, La Crescenta, Monrovia, and Pasadena.

This is one of the “10 Steps in the Right Direction” that make up the Pasadena Financial Planner’s personal financial planning and personal investment management process. For a summary of these ten steps, see “Your Family Financial Planning.” To find an in-depth article for each step, just click the Sitemap link at the top of this page. Also, you can reach us by using the contact form below, and you can subscribe to our Family Financial Planning Blogs. Please enjoy reading this article. Thank you!

This ten-step optimal financial planning and investment management efficiency process envisions time-efficiency throughout all its phases.

When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan. You need to control and limit the time that you spend on your financial planning, and you need to focus your planning efforts on the most effective activities.

Furthermore, since time is always money, you need to ensure that the financial advisors and investment counselors that you hire are also efficient. They need to deliver tangible value and do it quickly and efficiently. Obviously, you should also carefully monitor them and ensure that their recommendations are optimal and in your best interests.

This article continues below this introduction:

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planners Pasadena California

Article continues:

Personal financial planning and investing is a lifelong process and not a one-time exercise. Personal situations and financial requirements change, as do the economy and the financial markets. Investment plans need to evolve. By establishing optimal practices at the outset, you can reduce your financial planning and investment management time and get on with other things you might prefer to do.

Scientifically valid financial management and investing strategies often are more time efficient, largely because they are consistently passive rather than active in nature.

For example, given the recommendation in Step 4 to use a Global Investment Diversification strategy, it is questionable whether the vast majority of individual investors should own any common stocks or individual bonds directly. Instead, they can achieve similar expected returns with lower risk by owning index mutual funds or exchange-traded funds (ETFs). The superiority of broadly diversified index mutual fund and ETF based investing for individual investors is broadly established in the financial research literature. Therefore, you should question why any financial advisor, who supposedly is operating in your best interests, would recommend that you hold an under-diversified portfolio.

Note that, in your quest for personal financial planning and investment management efficiency, you also should have a very strong preference for advisors who will only charge you hourly fees or fixed project fees. Then, at least you have a much better chance of evaluating the scope the assistance and tracking the real costs of the efforts that go into advising you. You will be able to control your advisory costs more directly, and you will not have to tolerate advisory hand waving just to justify continuing high fees and asset sharing arrangements. (See these articles: ” Cost Control and Investment Performance Improvement“, which are published on our sister website, The Skilled Investor.)

With financial services, which inevitably are very costly, less is most often more. This is particularly true given the predominant financial services industry business models that view “retail” clients as revenue and profit centers. When you in fact pay “free” advisors by letting someone else pay them, your best interests are at great risk. When you repeatedly pay a percentage of your valuable assets for financial and investment management services, you let someone feed continuously in your trough. Furthermore, with these repeated percent of assets fees, there often is no meaningful connection between what you pay and the value of what you get in return. Financial services industry fees are horrendously high, so you should protect yourself.

A side benefit of choosing index mutual fund and ETF fund-based investments is to be more time efficient. Index mutual funds and exchange-traded funds require far less personal attention.

Most individuals are poor portfolio managers. For the great majority of investors, portfolio self-management yields inferior risk-adjusted results. (See this article: What is the cost to individual investors of sub-optimal diversification?, which is published on our sister website, The Skilled Investor.)

Managing a well-diversified, passive index-based portfolio of individual securities is a task that professional portfolio money managers can manage much more economically. Not owning individual securities means that individual investors do not have to keep up with and decide on a myriad of minutia about dozens or hundreds of companies.

When you finally figure out that active investment management strategies just enrich the financial services industry at your expense, you will quickly abandon them.

Then, it should become incredibly obvious to you that you should turn the index portfolio management task over to professional index mutual fund and ETF managers. The most cost effective multi-billion dollar index investment funds can be managed very efficiently by just a couple of skilled traders.

Monitoring and adjusting your investment plan requires a periodic commitment of your time, but that commitment can be modest. If you choose optimal investment strategies and properly automate your financial tracking and periodic investing to the degree possible, then spending more time on personal finance becomes a matter of choice and not a necessity.

Despite the great importance of financial planning and investment programs, people have lives to live, work to attend to, and family and friends to love and play with.

Financial and investment planning should not and does not have to impose an excessive time burden. Unless financial planning and investing is an enjoyable hobby, which it is to some, there is a significant personal cost to spending time on personal finances. It is important to calculate one’s “effective hourly wage” for the time spent on investment management and to ensure that this hourly wage remains high.

See these financial planning and investment management personal efficiency articles about the value of your time, which are also published on our sister website, The Skilled Investor:

• Investment Opportunity Cost
• Scientific Investment Strategies
• Value-added Investing
• Investment Time

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See: Pasadena Financial Advisors >>>

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Benefit from the best fee only financial planner. Most of our customers are in the San Gabriel Valley, including La Canada Flintridge, Alhambra, Altadena, Burbank, Glendale, Arcadia, Azusa, Baldwin Hills, and Pasadena.

This is one of the “10 Steps in the Right Direction” that make up The Pasadena Financial Planner’s personal financial planning and personal investment management process. For a summary of these ten steps, see “Your Family Financial Planning.” To find an in-depth article for each step, just click the Financial Planner Pasadena CA Sitemap link at the top of this page. Also, you can reach us by using the contact form below. Please enjoy reading this article. Thank you!

Set an insurance budget as part of your personal financial planning for non-investment risks

While value, affordability, risk exposure, and risk tolerance should affect insurance purchase decisions, insurance is often sold and purchased emotionally. Yet, insurance premium payments reduce personal funds that might otherwise be available for additional investments and/or consumption. Many people could spend all their net savings on insurance premiums and have nothing left to invest and to build an investment portfolio. The issue is where to set a rational rather than emotional balance between expected risk and return.

This article continues below this introduction:

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Pasadena Financial Planning Consultants

Article continues:

The reality is that individuals and their families must intelligently and rationally budget for those insurance coverages that might ameliorate most effectively the risks that could do most damage their lifetime financial prospects. There simply are too many risks and too many types of insurance that cost too much. Given the required premiums for the broad range of insurance coverages, a majority or even a large minority of the US population simply can not afford adequate coverage for most of these insurance risks. Furthermore, they cannot find jobs that help to provide adequate coverage in some of these risk areas.

At the outset, let me be very clear about the role of insurance in personal financial planning. Certain types of cost effective and carefully selected insurance coverages from reliable insurance companies are vital and very important to protect your family’s long term financial interests. Determining which insurance coverages would be most beneficial to you requires 1) knowledge of your needs, 2) an appreciation for uncertainty, 3) an understanding of the best product alternatives, and 4) complete objectivity in the decision process. Unfortunately, putting all four of these factors together when buying insurance is a very tall order.

Given the unpredictability of life and the attendant risks, fears, and emotions, a primary point of this article is to urge you to shift your personal insurance decision making process toward as much rationality as is possible. When you find yourself in an insurance sales process, where subtle or overt appeals to your emotions have begun to predominate, stop and step outside the sales process for a breath of fresh air. Your emotions may be willing to pay any price for safety, but your rational mind should be asking about the tradeoffs. Do your homework BEFORE the ink is drying on the contract.

Tradeoffs between personal financial and investing strategies and insurance risk management are inevitable

Living is risky and unpredictable. For the price of their premiums, insurance companies promise to eliminate or reduce many of these risks for you. When you have coverage in force, you experience an insured event, and your insurance company steps up to meet its obligations, the real virtues of insurance are obvious. At other times, you must operate in a very broad realm of uncertainty about a) what might happen to you and your family, b) whether the insurance that you happened to purchase will actually cover the risks that actually materialize, and c) whether your insurance company will deliver on its promises.

To remind you of the extent of the various risks to which you might be exposed, these are many of the insurance coverages that you could buy, depending upon your needs:

• auto insurance
• business insurance for the self-employed
• dental insurance
• disability insurance and workmans compensation insurance
• earthquake insurance
• fire insurance
• flood insurance
• flight insurance
• general liability insurance
• home owners insurance / condo insurance / renters insurance
• legal insurance
• long term care insurance
• medical insurance / group health insurance / individual health insurance
• mortgage insurance / title insurance
• property insurance / boat insurance
• term life insurance / universal life insurance / whole life insurance
• unemployment insurance
• vision insurance

Insurance is never free and you should never expect it to be “profitable” to you. Unless an insurance company is poorly managed and makes excessive benefits commitments, you can never make a “profit” from an insurance company on the premiums you pay. From a strict financial standpoint, you should always expect to get less money out of insurance than you pay in insurance premiums.

In general, you are paying to participate in a risk sharing pool. That is all insurance really is. If, somehow, you find an insurance contract that seems to provide excessive benefits relative to its costs, then you better be toward the front of the claimant line, because the insurance fund will be exhausted before those at the back of the line get served. A better approach would be not to enter into any insurance contract that seems too good to be true.

Insurance is even more expensive, because it not just a redistribution of paid in premiums and the pooled financial assets of policy holders. Insurance premiums include very substantial sales and marketing costs, administrative expenses, and insurance company profit requirements. For some forms of insurance, less than 50 cents of each dollar taken in gets paid out in benefits. Insurance is like a lottery. Insurance premiums and lottery tickets are both prices of participation. Yet, with insurance there inevitably is less joy in the payout, because something rather nasty needs to happen to become a “winner” with insurance.

Risk and return tradeoffs between insurance and investments

Insurance affordability inevitably dictates that most people will bear some insurable risks without insurance coverage. Individuals may be more or less comfortable with this situation. Having a good understanding of one’s risk exposure and risk tolerance is one place to begin.

Given that people are exposed to many, if not most, of the risks that could potentially be reduced by the insurance coverages listed above, where do you set the balance? A good start is to have a better understanding of the potential impact of certain risks, through financial planning and cash flow modeling across your lifetime. To judge the value of insurance, you need to have a better understanding of the inevitable reduction of consumption, savings, and investments that accompanies higher insurance premium payments.

In general, individuals can significantly lower insurance premium costs by focusing on buying catastrophic risk coverage and using self-insurance for more minor risks. For the insurance that you must have, shop around and choose high deductibles to reduce premium payments. Carefully evaluate the scope of insurance coverage to assure that the policy has good quality catastrophic coverage. Then, invest the premium savings achieved through higher deductibles, rather than spending those savings. Over time, these premium savings and investment returns on them will build up your self-insurance asset pool.

Catastrophic personal events can drain assets and destroy the best of investment plans.

Property, liability, life, disability, and other types of insurance may be rational purchases, because of risk pooling with other risk adverse people. However, these types of insurance are not investments in and of themselves. Instead, they limit the financial impact of potential, but relatively unlikely, negative future events. The question comes down to finding good quality insurance at a competitive price and determining the tradeoff between money spent on premiums versus money retained and invested.

Optimal investment planning focuses on enhancing expected risk-adjusted portfolio performance. An optimal investment plan assumes that the necessary labor-based net income will be earned over time to build up your investment assets. By adopting optimal investment practices, individuals increase the chances of financial success that can be attributed to investment returns. However, other risks are inherent in life planning, and there are no guarantees. Personal financial and investment plans may fall short of goals due to a long list of non-investment risks. These risks include inadequate savings, personal tragedy, and family misfortunes.

Combined insurance and investment products confuse personal financial planning decisions

In recent years, insurance firms have expanded their products and services from offering only pure insurance to selling hybrid products that combine insurance and investment characteristics. Long ago, the insurance industry also garnered certain tax treatments that can make their products more seem more appealing to persons with particular tax situations. The mixing of these tax advantages into hybrid insurance and investment products makes evaluation even more confusing.

Unfortunately, many hybrid insurance/investment products are characterized by inferior returns, very high costs, significant insured risk limitations, and other problems. Ultimately, the issue that the potential buyer must sort through is whether the purchase of a separate insurance-only product and a separate investment-only product would yield better insurance risk reduction and superior risk-adjusted investment performance. Very often, buying separate low cost insurance and separate low cost investments is a much better alternative.

Insurance-based annuity income guarantees are not investments

Investment risk cannot be insured or avoided. Without the risk of loss of capital, you simply cannot be investing. If you think that you can pay someone else to take away your investment risk through some insurance guarantee and still have the chance of earning an investment risk premium, you are simply mistaken. No insurance company will take on your investment risk, unless they can do so profitably for the capital that they must put at risk.

Many investors rationally seek retirement income guarantees through annuities insurance products. When they purchase such insurance with their labor income and/or investment assets, they change the complexion of their portfolios. When they shift investment risk bearing to an insurance company providing a guarantee, they cease to be investors for that portion of their assets.

For example, fixed or immediate annuities are not a investment. Instead, you transfer your assets to an insurance company and you pool your longevity risk across all annuity participants. Your expected total return is likely to be inferior to holding onto your assets and continuing to be exposed to the investment risks. However, unless you have far more financial assets than you are likely ever to need, you cannot self-insure against longevity risk.

Longevity risk is when you live far longer than expected and you exhaust your financial assets somewhere along the way. The value of an annuity is realized, when you live a long life, and of course, the insurance company also stays around to meet its commitments. When your lifespan is shorter, you just happen to be the part of the annuity participant pool that provides valuable financial assets to fund the remaining lives of the other participants. From six feet under, presumably, you will not be concerned about your altruism toward these other longer lived annuity participants.

Finally, there is one insurance risk that individuals must retain and cannot shift, when they trade their financial assets and investment risk to an insurance company for an annuity. This risk concerns whether the asset pool of the guaranteeing insurance company will be adequate to fulfill its future annuity obligations. The sad, yet still ongoing saga of the 1991 collapse of Executive Life Insurance Company is a reminder of nontransferable risk when dealing with insurance companies.

Do your homework about the insurance company from which you intend to buy an annuity or any other insurance product. Looking into the resources and ratings of insurance companies can reduce the risk of non-fulfillment. Do not expect that a commissioned insurance agent or insurance broker will do this, as carefully as you should do this assessment. Insurance agents and insurance brokers will get paid at the front end, whereas you want to get paid all the way to the back end!

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See: Financial Planner in Pasadena California >>>

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Use the top fee only financial advisor — helping clients in Southern California, including Altadena, Tujunga, Walnut, West Covina, La Canada, West Hollywood, West Los Angeles, West Toluca Lake, and Pasadena.

As you move your cash, bond, and stock financial assets into lower cost, more broadly diversified investment mutual funds and/or ETFs, you should also consider how to “locate” your investment asset allocation with respect to more optimal taxation. This article will also discuss some ideas about where and how to hold your cash assets and how to make emergency cash available.

First, we presume that you have already properly assessed your investment risk tolerance. Using knowledge of your investment risk tolerance, we also presume that you have decided upon an appropriate asset allocation across the primary cash, bond, and stock asset classes. Then, the next question is how you will split your cash assets, fixed income assets, and equity assets between your taxable retirement investment accounts and your tax-advantaged retirement investment accounts, including traditional IRAs, Roth IRAs, traditional 401ks, Roth 401ks, and other such tax-advantaged retirement accounts.

This article continues below this introduction:

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

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Deciding which investment assets to hold in various types of taxable investment accounts versus tax-advantaged or tax-deferred retirement accounts is known as the “asset location” decision.

There can be substantial confusion on the part of individual investors and many investment advisors as to the best location for assets from the standpoint of taxation over the long-term. Simply put, in deciding on your investment asset location, the question is whether you should hold your stocks, bonds, and/or cash in taxable and/or tax-advantaged retirement accounts. To summarize the investment research literature, the academic consensus is that you should prefer to hold your stock or equity assets in your taxable accounts and you should prefer to hold your cash and fixed income assets in your tax-advantaged accounts.

The primary reason for this is that long-term federal capital gains tax rates historically have been substantially lower than short-term capital gains tax rates and ordinary income tax rates. Even though stocks tend to appreciate more quickly than bonds, taxation on equities can often be deferred for a very long time. In addition, when capital gains taxes must be recognized on equity asset transactions, very often these gains will be subject to lower federal long-term capital gains tax rates.

[Note, of course, we also hope that you intend to lower investment fees significantly, if you have not done so already. You can invest your equity, bond, and cash assets in very broadly diversified, passively managed index mutual funds and index ETFs with very low costs, very low turnover, and very low taxes, as well.]

Fixed income / bond assets and cash money assets usually yield income that must be recognized regularly and must be paid at generally higher ordinary income tax rates.

Including inflation which has averaged 3% annually, stocks have returned about 10% per year over the past 80 years. Alternatively, expressed in real dollars or constant purchasing power dollars without inflation included, this means that stocks have yielded about 7% annually over the long-term. For these many decades, high grade longer duration corporate bonds have yielded about 5.5% to 6% including inflation and about 2.5% to 3% without inflation. Cash has yielded somewhat short of 4% with inflation and somewhat less than 1% in real terms without inflation. (For more information about long-term financial asset returns, see these Market Risk Premiums articles published on our sister website, The Skilled Investor.)

For bonds, only a small part, if any, of longer duration fixed income yields are in the form of capital gains, which could be subject to more favorable long term capital gains tax rates. Cash does not generate favorable long-term capital gains at all. Despite the lower yields of bonds and cash, their income is usually continuous and taxable in the short-term. Particularly if you have a relatively high combined state and federal marginal income tax rate, you can lose a substantial part of your bond and cash income to taxation without the tax shelter provided by tax-advantaged retirement plans.

In contrast, even though equities have substantially higher yields, a substantial proportion of these returns can be deferred, which avoids near term taxation. Furthermore, if properly managed, most often these taxable equity returns can be taxed at lower federal long-term capital gains tax rates, when needed.

Combined, these factors mean you can net more after taxes by holding your equities investment assets in taxable accounts and by holding you bond and cash assets in tax deferred retirement accounts.

In the research studies that were mentioned above, investigators analyzed a wide range of portfolios with different asset allocations and different asset tax locations. The objective of these studies was to determine what is optimal from a tax location standpoint, and uniformly they reached the general conclusion to put equity assets subject to long-term capital gains into taxable accounts and bond or fixed income assets into tax-advantaged accounts.

Cash and cash equivalents, which tend to earn less than bonds are “located” in the middle from a tax location or tax optimization standpoint. If your particular asset allocation would me that any cash or bond assets would be held in your taxable accounts, the assets should be cash assets, because their taxable yields are usually lower than bonds. (See the related section below about cash holding entitled “Emergency cash management and your allocation of cash assets to tax-advantaged retirement accounts.”)

Your asset allocation and the total amount of assets you have in taxable versus tax-advantaged accounts combined with your asset allocation will determine whether some of your cash, bond, and/or equity assets end up being held “less optimally” from a taxation standpoint in taxable or tax-advantaged accounts.

To be clear, however, the research demonstrates that the asset allocation decision dominates the tax location decision. This means that you do not change your asset allocation decision, because of tax considerations. Instead, you hold to your asset allocation despite tax considerations. (Note, however, there may be alternative investment vehicles that address particular needs. For example, persons with very high federal, state, and local marginal income tax rates and a relatively high allocation toward bonds may find that their bonds would fill their tax-advantaged accounts and overflows into their taxable accounts. When this happens, they might benefit from holding municipal bonds rather than taxable bonds.)

Obviously, over time your assets in taxable versus tax-advantaged accounts may grow at differential rates. In addition, over time you might decide to change your asset allocation between asset classes. However, asset allocations tend to be relatively stable because they are tied to your relative investment risk tolerance, which tends to be more stable. Therefore you preferred asset allocation percentages do not have to change over time, although they may.

As time goes on, you may need to make rebalancing adjustments to maintain your asset allocation within the percentages and tolerances that you wish to maintain. This might cause some shifts in the which asset classes are held in accounts with different taxability. Nevertheless, your asset allocation decision still would drive everything.

An example of how the personal asset allocation and asset location decisions are combined

Your asset allocation decisions and your asset location decisions can be mapped onto a line that goes from 0% to 100%. First, total the cash, bond, and stock financial assets that you hold in your taxable and tax advantaged accounts, and then determine the proportions that are in taxable accounts or tax-advantaged retirement accounts.

In this example, assume that you presently hold 60% of your total cash, bond, and stock financial assets in taxable accounts. In addition, assume that 30% of your total assets are held in traditional tax-advantaged accounts, and that 10% of your total assets are held in Roth tax-advantaged accounts.

Using the 0% to 100% line illustrated in the graphic below, mark the range from 0% to 60% as your taxable assets. Mark 60% to 70% as your Roth tax-advantaged retirement assets. Finally, mark 70% to 100% as your traditional tax-deferred retirement assets. (Below, we will discuss why we have chosen to place your Roth retirement assets before your traditional tax-deferred retirement assets, as you move up this line.)

Next, on this same line we will overlay your asset allocation. Let us assume that you have chosen an overall asset allocation of 70% to stocks and equity assets, 20% to bonds and fixed income assets, and 10% to cash and cash equivalents. Along this 0% to 100% line, your individual stocks, equity mutual funds, and stock ETF assets would be assigned to the left hand side of this line or from 0% to up 70%.

Because bonds tend to be higher yielding than your cash, you would always assign your fixed income assets to the right hand side of this line. Since you have decided that you want to have a 20% bond asset allocation, then your bonds would fill in the range from 80% to 100%. Finally, your cash would fill in the space in the middle that remains between equities and bonds. In this case, you cash would be “located” from 70% to 80% along this line.

Now, what is the result? Of your 70% allocation to equities, 60 percentage points would fill up your taxable accounts entirely and the remaining 10 percentage points would overflow into your tax-advantaged retirement accounts. In particular, your 10 percentage point overflow of equities would be invested in your Roth retirement accounts. Therefore, in this example, all of your Roth account assets would be equities, since 10% of your total assets currently are equities.

For the remaining 30% of your total assets, which are traditional tax-advantaged assets in the 70% to 100% range of this line, these would be where you put your bonds and cash. Therefore, your 20% fixed income asset allocation and your 10% cash asset allocation would be held in your traditional tax-advantaged retirement accounts.

Why would equities be allocated into Roth retirement accounts versus into traditional tax-advantaged retirement accounts.

If your equity asset allocation is sufficiently high that some of your equity assets would be held in tax-advantaged accounts, then they would be invested in Roth accounts, if you have Roth account assets. Because equity assets historically have appreciated more quickly than bonds or cash, it is preferable for your stock assets to be in Roth accounts, which would not be subject to future taxation. Since traditional tax-advantaged accounts eventually would be taxed at ordinary income tax rates, you would prefer that these accounts would grow more slowly, while you would prefer that your Roth accounts would grow more quickly in relative terms.

Also, note one caveat about the example presented above. If your asset allocation and/or taxable versus retirement asset proportions were different and your equities do not entirely fill your Roth accounts, then you would fill the remainder of your Roth accounts with your bond assets rather than your cash assets. This is simply because you would prefer to have higher growth fixed income financial assets in your Roth accounts versus slower growing cash assets.

In addition to normal differences in investment asset class growth rates, there are some other personal estate planning reasons that could favor placing higher growth assets into Roth retirement accounts.

Roth retirement accounts have some very significant advantages over traditional tax-advantaged accounts for estate planning purposes. If a family’s financial model indicates that there is a good possibility that they will still have some tax-advantaged account assets at death, then those should be Roth tax-advantaged account assets, whenever possible.

US tax laws and IRS regulations require mandatory withdrawals from traditional retirement accounts after age 70 and 1/2. These mandatory withdrawals might be adequate to meet your expense needs in retirement without having to touch your Roth retirement account assets. During your retirement, your Roth accounts would not have mandatory withdrawal requirements. (Obviously, in retirement you would still have the option to withdraw either traditional retirement account assets and/or Roth retirement assets.)

Furthermore, your Roth accounts could be inherited by your children, and these inherited Roth assets could also grow tax free within the inherited Roth account over the expected life of the child. During your child’s life there would be certain mandatory withdrawal requirements that apply to them and taxes would apply to these mandatory withdrawals. This means, for example, that a child inheriting a Roth account at age 40 could perhaps enjoy another 50 years of tax-free investment growth with an income stream along the way from the mandatory taxable withdrawals. Traditional tax-advantaged retirement accounts do not provide these very significant estate planning benefits.

Emergency cash management and your allocation of cash assets to tax-advantaged retirement accounts.

Some people become concerned, if their combined asset allocation decision and asset location decision means that all their cash would be held more optimally from a tax standpoint in their tax-advantaged retirement accounts versus in their taxable accounts. Furthermore, some people also may be concerned about how much cash to hold in a taxable account for “emergency” purposes, despite whether such taxable cash holdings are less optimal from a tax location standpoint.

Often these emergency cash and tax issues are of lesser importance than they would seem at first. A decision can be made simply to keep “X” expense months of cash in a taxable account and to pay the taxes, even though this allocation might less than optimal from a tax savings standpoint. In addition, real estate lines of credit or other unused and available debt lines can be taken into consideration, which perhaps might reduce the amount of emergency cash that one desires to hold in taxable accounts.

By way of example, if your monthly expenses were $6,000, you might want to hold 6 months cash or $36,000 in a taxable savings account. Assuming that you could earn the average historical pre-tax return of 4% annual interest rate on these $36,000 dollars, your taxable savings account would yield $1,440 in additional taxable income. If your total marginal federal income tax rate and state income tax rate was 26%, then you would pay about $375 more in federal and state income taxes annually to hold this cash in a taxable account versus in a tax-deferred retirement account.

To optimize your asset tax location, you could invest your cash in a tax deferred retirement accounts and use off-setting transactions to raise cash money for emergencies.

If you did happen to have a major financial emergency, you could make some offsetting transactions to free up the needed emergency cash from your retirement accounts. In effect, cash can be “moved” out of your tax-deferred accounts when needed by selling taxable equity assets for the cash that was required and then “replacing” those assets in your retirement accounts. You would replace the assets that you sold in you taxable accounts by buying similar assets in tax-advantaged retirement accounts using the cash that you held in your tax-advantaged accounts.

Of course, these offsetting transactions could trigger capital gains tax recognition related to your equity asset sales from your taxable account sales. Over the long-term, the affects usually are quite small particularly since true emergencies consuming significant amounts of cash are relatively rare. Of course, you also might need to make overall adjustments to your asset allocation, given the emergency use of the cash. Furthermore, be aware of IRS wash sale tax rules that might apply, if you buy substantially identical investments in tax-advantaged retirement accounts, when you also sell them in taxable accounts.

Finally, concerning a smaller cash emergency fund, you still might chose to hold some amount of cash in a taxable account for ready access — perhaps a few thousand dollars or more. There could be other benefits to doing this. You may find a bank that will arrange for your savings account cash (earning reasonable interest we hope) to act as over-draft protection to your linked checking account. With such an arrangement the higher taxes associated with holding a small amount of emergency cash in taxable accounts might be offset sometimes by preventing those nasty overdraft events, when you make a mistake and bank charges mount rapidly.

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This is one of the “10 Steps in the Right Direction” that make up The Pasadena Financial Planner’s personal financial planning and personal investment management process. For a summary of these ten steps, see Your Family Financial Planning. To find an in depth article for each step, just click on the Sitemap link at the top of this page. Also, you can reach us by using the contact form below. Please enjoy reading this article. Thank you!

You need to develop your own personal financial management skills, because you must live with the results of your financial planning and investment management decisions.

People face formidable challenges to lifetime financial success and their ability to retire with financial security. Throughout your life, you must decide for yourself whether any particular personal financial planning or investment management concept is fact or fiction. One thing can be guaranteed: there will be no shortage of ideas proposed to you by others about what you should do with your money.

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Pasadena Financial Planner

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Even when you delegate decisions to an investment counselor or financial advisor, you and your family still must live with the consequences. You must learn about investing.

You must make intelligent and informed decisions about whether the financial planning strategies and tactics recommended to you in the financial media and by financial advisers are personally valid for you and your family. The vast majority of financial ideas proposed to you during your lifetime will be suboptimal, self-interested (not yours), simply wrong, and/or just plain rubbish.

Many people have inadequate knowledge and skills about personal financial planning and personal investing.

Some of the saddest financial stories concern naive older people who get robbed of their lifetime savings by some smooth-talking slime bag financial scam artist. These fraud victims have no way to recover the lost lifetime assets. Before the fact, they needed to know better to avoid being duped. However, they lacked the knowledge, skills, and judgment to know better.

Only through a lifetime of taking personal responsibility and intentionally educating yourself will you learn how to manage your money. Only by taking personal responsibility will you learn to navigate around the amazing number of potential pitfalls associated with personal financial planning and personal investment management.

Is it reasonable to expect that you would have such expertise? You may be an expert in your profession or trade, and you may earn substantially more than you need to meet your current expenses. However the dilemma is whether and how you will also learn to manage, grow, and protect your financial assets. As you develop your financial expertise, you will increase the chances that your assets will grow sufficiently to fund your family’s future financial needs, while you become less dependent on your earned income.

Personal financial planning and investment management requires knowledge that is different from professional and career skills.

This situation makes self-direction of your finances problematic. Furthermore, this situation creates a great temptation simply to trust someone else to manage your financial affairs and investment strategy — hopefully in your best interests. (Remember to cross your fingers and keep them crossed!)

The Pasadena Financial Planner believes that people who are successful in their careers and have the ability to generate substantial investable income must also become more successful concerning the management of their money during their lifetimes. You must develop both career professional skills and personal financial planning skills to increase the probability of achieving lifelong financial success. In financial affairs, trust is often given, but not always reciprocated. Many people are just too naive and trusting, when others have an eye on their pocketbook.

Many people need help from financial planners and investment counselors. However, they base their advisor selection decisions on “trust” and the recommendations of friends and colleagues. Frustrated with complexity of personal finance and investing, they want to find someone they can “trust.” Then, they want to hand over the keys and let someone else drive.

Unfortunately, the entire financial services industry uses a “we are worthy of your trust” marketing message. Yet, it is difficult to find another service industry where so much is paid for so little genuine value in return. Much of the trust that individuals have if mis-placed and ill-founded.

Personal financial planning and asset class investment management advice from the financial services industry is often shallow and inappropriate.

While advice might seem plausible, many financial industry proposals are simply not good for you. The financial services industry writes its marketing material to sound reasonable to individuals. Some financial ideas reasonable, but many are not. Most recommendations involve the purchase of financial and investment products that are simply far too costly and far too risky.

The vast majority of personnel in the financial services industry are taught how to sell the most profitable financial products. Relatively few genuinely understand finance and investments from the perspective of what is really best for their clients. Even fewer have an incentive to act in the best interests of their clients.

Most often, the interests of the industry and the client are in conflict. Most often, the financial services industry will win, as it delivers excessively expensive and overly risky financial and investment products to its overly trusting clientele.

Without adequate personal financial knowledge and oversight, delegating personal finance and investment decisions to industry financial advisers can be very risky to your personal and family financial welfare. You will have to live with the consequences of poor or bad decisions long after your advisors have perhaps passed from the scene and even retired on their fees.

Naive trust, faith and hope are not a reliable path to financial success, when you are dealing with the financial services industry. There are simply too many potholes, conflicts of interest, and hands in your wallet. The only practical solution is for you to increase your personal investment knowledge and skills.

Information from the financial services industry furthers its interests, as brokers and financial counselors sell risky and expensive investment products and financial services to you.

For example, when hundreds of broadly diversified mutual funds and exchange-traded funds (ETFs) are available at extremely low costs, there is ABSOLUTELY NO GOOD REASON for individuals to do so much buying and selling of individual securities. Yet, millions frantically buy and sell equity securities in efforts to beat the market.

Egged on by the financial media and the brokerage industry, millions of people waste huge amounts of their valuable personal time in these pursuits. Most will fail miserably in their efforts and will suffer substantially increased risks, costs, and taxes in the process. Most will obtain substantially inferior performance results relative to the performance of broad securities market indexes.

Yet, the vast majority will never bother to check their net performance against passive benchmarks. They will just keep trusting and never really know how very badly they have done compared to a passive investment program that would have required far less time, less risk, lower taxes, and much lower industry fees.

Individual investors need to do a much better job of distinguishing personal finance and investment planning fact from fiction.

They need to base their decisions on financial strategies and tactics that have been validated scientifically. Individuals must become better informed. Otherwise, they must rely naively upon the supposed goodwill of investment counselors and financial advisors who have very strong incentives to sell expensive financial products to them.

When you deal with a broker, investment counselor, or financial advisor, the financial products they recommend will almost always far more expensive than necessary. You will be sold the dream of better results, while most often the reality in the future will be the opposite. In this very costly environment of “advised” personal finance and investing, depending upon the goodwill of industry representatives can be a very risky strategy.

Significant danger exists in not understanding certain fundamental truths about the financial services industry itself. The structure of the financial services industry creates costly conflicts between the financial interests of individuals and the profit motives of companies in the industry and the self-interest of its sales agents. These financial conflicts of interest are a much greater threat to the welfare of individuals and their families, than is the potential for outright financial fraud that rightly concerns so many people.

The securities industry sells investment products that add substantial and unnecessary costs that are not in the interests of their clients.

Individual investors, sometime referred to as “retail investors,” will never find “free” risk-adjusted investment money lying around. Interactions with the financial markets are a “zero-sum game” before costs and taxes. With all costs and taxes, dealing with that financial industry is a “negative sum game.”

In the short-term, the size of the securities market pie is fixed. When one party gets more, another gets less. In and of themselves the securities markets do not create value, but the industry can siphon away a significant portion of an individual investors’ potential returns through visible fees and hidden costs.

Of course, the capital markets provide an extremely valuable economic contribution to our world through the generally efficient allocation of capital. However, this role does not necessarily mean that investment profits will be shared equitably between individual investors and the financial services industry. Retail investors and the financial industry are in competition with each other over how to split this fixed short-term pie. Investors who understand this conflict can better ensure that they get a more reasonable deal.

The good news is that modern financial markets are competitive and relatively efficient asset price setting mechanisms. This means individual investors cannot consistently “beat the market” on a risk-adjusted basis. While this might disappoint some investors who believe they are smarter than others, in reality this is very good news. On the opposite side, the good news is that competitive and efficient markets mean that individuals need not be beaten badly by the market either. Investor returns can track a market return quite closely at very low cost.

While beating the market is not a reliable strategy, individual investors can still make better decisions by choosing lower cost investment strategies.

Passive strategies targeting the market return do not provide an entirely free ride, because there is always a minimum cost. However, optimal investment practices do amount to a highly discounted ticket, which can get individuals to their financial goals quicker and/or richer.

Without optimal strategies, the risk-adjusted asset class returns of the average investor will lag the market return by a much wider margin. This lag will be due to the inferior gross returns of their sub-optimal investment strategies, which are primarily attributable to their unnecessarily high investment costs and taxes.

Therefore, at the outset, the crux of the matter is to learn what does and does not work in personal financial planning and investing. Accepting what you hear or read about personal financial strategies without demanding proof, is almost certainly the road to a much lighter wallet in the future.

Please click the Sitemap link at the top of this page to find and read about the other steps in this 10 step Family Financial Planning Process.

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An objective and independent financial advisor for clients in the West Los Angeles area including, for example, financial planning clients in Altadena, Monrovia, Montrose, Pasadena, San Gabriel, South Pasadena, Sunland, Temple City, and Toluca Lake.

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planning in Pasadena CA

Use the services of the best independent investment advisor and financial planner in Southern California. I can help clients locally and remotely including residents of Altadena, Alhambra, Arcadia, Burbank, Eagle Rock, Glendale, La Tuna Canyon, Los Feliz, North Hollywood, San Gabriel, South Pasadena, La Canada Flintridge, La Crescenta, Monrovia, Pasadena, Pomona, Rosemead, Studio City, Sun Valley, Sunland, and San Dimas.

<<< Pasadena Financial Planner Background Part 1: Pasadena Financial Planning

Receiving my Stanford MBA in 1982, I moved a few miles south to begin my corporate career in Silicon Valley. For most of my twenty-five plus years after Stanford, I have managed strategic business and corporate initiatives for technology companies. Analytically oriented management positions in these corporations sharpened my financial and business judgment. I first joined Hewlett-Packard’s computer systems division, where I led business development and marketing initiatives. After seven years at HP, I was Director of Product Marketing at IntelliCorp, an AI software company, and then I moved on to Sun Microsystems.

At Sun Microsystems from 1991 to 1999, I acquired rights for Sun to numerous product lines from independent technology companies via negotiated licensing arrangements. As Director of Corporate Development during my last four years at Sun, I oversaw merger and acquisition projects and evaluated innumerable external investment proposals that were made to Sun’s executive committee members.

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planner Pasadena CA

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Bitten by the startup bug in 1999, I co-founded Codexa Corporation in Altadena, California. Codexa provided advanced information services to Wall Street securities industry professionals. My co-founder and MIT roommate, Dave Leinweber, had been managing about $6 billion of institutional equity with highly quantitative methods at First Quadrant in Pasadena. Look here for chapter summaries of his recent book, Nerds on Wall Street, published by Wiley. Most individual investors do not have a clue about the techology behind Wall Street professional trading — if they did, then some of them might not do all the silly stock trading, options trading, currency trading, day trading, etc. that they do to fritter away foolishly some of their hard-earned assets, while wasting their valuable time.

Solving the Internet on-line trading and investment management information challenge

Dave believed that the flood of financial information across the web had greatly changed the nature of the securities markets. Together, we founded Codexa Corporation and set out to develop a technological solution to gain some control of this information explosion. Our primary objective was to harvest, filter, and display semantic trading and investment management information on traders’ workstations in real-time.

We developed Codexa’s information service provider business plan, hired the management team, and raised an $8M Series A venture round. The company secured $2M in initial revenues from major Wall Street investment and trading clients. As Codexa’s EVP and CFO, I managed the finance, business development, accounting, human resources, legal, and real estate functions. Then, the stock market collapsed and our paying Wall Street clients simply evaporated. It did not matter that we succeeded in developing a robust and extensible technology. The clients who had been supporting our early technology development efforts disappeared as Wall Street’s revenues collapsed and tens of thousands of people in the securities industry lost their jobs.

Our business stradded both the faltering financial securities industry and the plummeting high technology industry. When these industries collapsed, so did Codexa. We had to let fifty very skilled software technology people go. Subsequently, I had the privilege to learn about the corporate bankruptcy process, which had never been high on my list of career interests. Except for a subsequent six-month consulting arrangement as the interim president of a Caltech startup during its formation, very little new was happening in the technology economy after the crash in Southern California. Therefore, I retired at the ripe middle age of 50, just as I was receiving my first solicitations in the mail from AARP.

With the dot com stock market collapse, the high tech industry in the U.S. lost roughly 225,000 positions and the securities industry lost approximately 75,000 positions. It was financially devastating for many affected families, and even those who remained employed found a very significant deterioration in the quality of work life and a great increase in stress.

While the economic fallout from the market crash could have been a lot worse to the broader economy, it was and still is devastating to many in the high tech industry. (And, you could easily perceive that historically low, post-dot-com-crash interest rates coupled with good old greed and lax regulation of mortgage brokers, resellers, and derivatives hucksters have lead us to the broader real estate and credit crisis of 2007/8/9 and counting — just a delayed reaction to the false “cure” for the dot com crash.)

I quickly concluded that the dot com economic downturn was so severe from a new employment opportunities standpoint, that it is not even worth looking. I decided to wait it out. This was a great blessing in disguise, that I did not recognize at the time.

Comprehensive financial planning advice based upon objective financial research

As an involuntarily retired 50-year-old, I still had the start-up bug. Instead of heading for the golf course, I decided to do some in depth investment research and to catch up on new developments since I studied finance at Stanford.

I started Lawrence Russell and Company, and I began to publish The Skilled Investor. I wrote and published hundreds of objective personal financial planning and investment articles on the Internet. I now have a family of free and objective financial information websites written entirely by myself that help to meet the informational needs of individuals around the world who are managing their own financial and investment affairs.

My firm also became a Registered Investment Adviser in the state of California (Certificate #133101). I passed the Series 65 “Uniform Investment Adviser Law Examination” administered for the North American Securities Administrators Association (NASAA) by the Financial Industry Regulatory Authority (FINRA). I hung out my virtual shingle.

I designed and developed VeriPlan, which I dubbed “Your Personal Financial Lifecycle Planner.” I did an indepth, multi-year study of the scientific finance and investment literature to find out what personal financial planning and investing strategies and tactics really do and do not work.

In short, I am having tremendous fun developing financial planning software, writing financial planning articles, and offering comprehensive financial planning services to families in the Greater Pasadena California, West Los Angeles, Gendale, and San Gabriel Valley areas of Southern California.

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Get comprehensive financial planning services from the best personal financial advisor serving clients in the Pasadena area, including these cities: Altadena, Arcadia, Burbank, Eagle Rock, Glendale, La Canada Flintridge, La Crescenta, and Monrovia.

The Pasadena Financial Planner (Larry Russell) is an experienced business executive with a background in corporate business management, technology start-ups, financial modeling, investment management, economics, statistics, taxation, and accounting.

This article provides the biography of the Pasadena Financial Planner and explains how his expertise in comprehensive financial planning and investment management has developed over his career.

This article continues below this introduction:

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Financial Planner in Pasadena California

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The Analytical Education of the Pasadena Financial Planner

The Pasadena Financial Planner is me, Larry Russell. I grew up in a rather small town in the Midwest. I was 6’ 6” tall by age 16, and my pants were always too short. In 1970, I left for college on a Greyhound bus with one box and two suitcases. I arrived in Cambridge, Massachusetts to study at MIT.

As a child growing up in the America’s endless rural heartland in the 1950s and 60s, I lacked a genuine appreciation for the word “metropolitan.” I did not realize that the edge of one “town” near Boston was not a field or pasture, but just another suburb. A modern Paul Revere would have been stuck in traffic all the way to Lexington and Concord. And, the British Army would have been way back in that traffic jam.

At freshmen orientation in MIT’s old gymnasium, various university dignitaries welcomed the incoming freshmen. One gentleman gave us the “look-to-your-left-look-to-your-right-one-of-you-won’t-be-here-in-four-years” speech. I got the point and decided that I would still be there in four years, and I was. While MIT’s core science and math curriculum was a required rite of passage that I still value over three decades later, I found studying human behavior to be much more interesting.

I studied politics and economics and picked up a BS from MIT and later an MA from Brandeis University. After Brandeis, I embarked upon a career in social science research. First, I conducted survey research and performed statistical analyses of corporate employee benefit programs at the private, non-profit National Manpower Institute in Washington, D.C. Then, I moved to Northern California to join the Institute for the Future, a think tank in Menlo Park that built automated economic, demographic, and technological models to explore scenarios about the future.

An early understanding of the strengths and limitations of future-oriented financial planning tools

The Institute for the Future provided opportunities for me to apply my econometric, statistical, and political education to supposedly predictive, automated modeling projects. We used sophisticated projection methods to develop long range planning scenarios for Fortune 100 clients that incorporated financial, econometric, demographic, and technological factors.

Through my work experience at the Institute for the Future, I became convinced that the future is fundamentally unpredictable from the standpoint of forecasting reliably any specifics about the future. I came to realize through experience that the quality and comprehensiveness of any analytical projection model and its associated data will significantly affect the forecasting model’s usefulness in developing insights about what might happen in the future.

I also learned to appreciate the value of comprehensive and automated scenario planning. While any specifics about the future cannot be predicted reliably, computer modeling permits the evaluation of a range of internally consistent future projection scenarios. (And, when it comes to planning your personal lifetime finances, such a rigorous projection modeling approach is a heck of a lot better than relying upon uninformed, random guessing!)

While I did not expect my experience at the Institute for the Future to be useful 30 years later, the insights I gained have strongly shaped my approach to delivering comprehensive personal financial planning and investment services to clients. During the past several years, I designed and developed VeriPlan, which is a comprehensive, automated personal lifecycle financial planning application.

I use VeriPlan with clients who want to develop a comprehensive picture of their financial affairs projected across their lifetimes. In addition, for do-it-yourselfers, I have also made VeriPlan available for licensing through one of my other websites, Financial Planning Software. Individuals can buy a copy of VeriPlan for a very modest fee and do their own lifecyle personal financial planning, if the have the time and energy it takes to enter their data and do their own planning.

In designing VeriPlan, I knew that this Financial Software Tool must enable detailed modeling and rapid development of lifecycle scenarios in a highly personalized financial context. Over the last several decades, computer resources have vastly increased. The average PC today can handle the intensive computational demands of VeriPlan and still produce results instantly after any change is made to a family’s financial projection model. Thirty years ago you had to line up with all the other nerds to use some hulking room-sized computer in a distant building. You had only one chance to run your program correctly, before you went to the back of the line to restart the cycle.

Most days that I worked at the Institute for the Future, I peddled my bicycle across the Stanford University campus and huffed and puffed up Sand Hill Road. The Institute for the Future was nestled in the foothills along with all the venture capital firms that made Sand Hill Road famous.

My commute became much easier when I stopped halfway to attend Stanford Business School starting in 1980. At Stanford Business School, I developed expertise in business management and increased my knowledge of economics, finance, and investments.

Continue to Part 2 of this biography: Pasadena California Financial Planner >>>

Serving clients throughout the greater Pasadena, California area including these cities: Altadena, Glendale, La Canada, Pasadena, Pomona, Rancho La Tuna Canyon, San Gabriel, San Marino, South Pasadena, Sunland, and Tujunga.

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Also, see: Pasadena CA Financial Planning >>>

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