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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

(626) 399-9579

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 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.

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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Larry Russell, Managing Director

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

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Concerning compensation, I charge solely on a fixed fee or hourly fee for services basis, and only under a contract that we would agree upon. You do not have to pay any form of asset fee. Furthermore, in the interest of avoiding all conflicts-of-interest, I do not accept compensation or commissions of any type from the industry.)

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

Pasadena Financial Planning Consultants

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.

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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

(626) 399-9579

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.

This website has been researched, written, and published independently. To ensure objectivity, no compensation of any kind has been paid by any third party to influence the editorial content of this website. All articles on this website were written by the Pasadena Financial Planner.

Do you want reasonably priced, comprehensive financial planning services from a responsive fee only investment advisor and personal financial planner?

My financial and retirement planning services will be valuable and cost-effective to you. My financial consultant fees will be reasonable, clearly understood, and determined in advance. I can provide you with comprehensive, reasonably priced financial, investment, and retirement planning services on an hourly, fixed fee, or retainer basis.

When delivering my financial planning and investment advisory services, I will never tolerate any conflict of interest. No financial industry incentives will ever interfere with my development of an optimal long-term financial plan for you. My recommendations will focus exclusively on your family’s financial interests.

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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

(626) 399-9579

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 Advisor

The best personal financial planner for people who live in the San Gabriel Valley, including those who live in or near Alhambra, Altadena, Arcadia, Azusa, Baldwin Hills, Burbank, Duarte, Eagle Rock, El Monte, Glendale, La Canada Flintridge, La Crescenta, La Tuna Canyon, Los Feliz, Monrovia, Montrose, North Hollywood, Pasadena, San Gabriel, South Pasadena, Sunland, Studio City, Sun Valley, Temple City, Toluca Lake, Tujunga, West Los Angeles, and West Toluca Lake.

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About this Website — DISCLAIMER:

This site is a financial publication of general and regular circulation, and all the information contained on this website is solely for informational and educational purposes related to your individual, personal, private, and non-commercial use. Furthermore, in no way does this site constitute or provide investment advice under the laws and regulations of the United States of America and its various States or of any other country in the world. This site does not collect any specific information on the investment situation of any reader, and this site does not render any advice on the basis of any readers’ specific financial or investment situation. In no way does this site constitute a solicitation or offer to sell securities or investment advisory services, as defined under any securities law in the world. This website’s articles may report on published research and may also express opinions. Information in research studies has not been verified. There could be errors with this information and in the opinions that are expressed. It is solely your responsibility to verify all information before investing. All trademarks and service marks are the properties of their respective owners.

You are hereby notified that Lawrence Russell and Company is a registered investment adviser in the State of California. As an entirely separate part of its business from this website, Lawrence Russell and Company provides comprehensive, independent, and individually customized financial planning and investment advisory services to clients solely through signed fee-only contracts. These personalized advisory services are only available through individually negotiated contracts, which must be signed by both parties. These customized advisory contracts specify the scope of services, deliverables, and fees. Your use of any information on this website will not establish an advisory relationship of any kind with Lawrence Russell and Company.