Hans Blake, CFA, CPA

The Future of Financial Advice: Will AI Replace Human Advisors?

February 3, 2023 by Hans Blake, CFA, CPA

Reading Time: 4 minutes

In recent years, advances in artificial intelligence (AI) have led to the development of chatbots (such as ChatGPT) and virtual financial advisors (such as robo-advisors) that are capable of providing automated financial advice. But will these AI systems be able to replace human financial advisors?

While AI can certainly automate many aspects of financial advising, there are several reasons why human advisors are likely to remain an important part of the industry.

The Importance of Human Touch and Listening

First, many people value the human touch when it comes to managing their finances. A financial advisor can provide personalized advice, offer emotional support, and answer complex questions that AI may not be able to handle. In this sense, the role of a financial advisor is much more than just providing investment recommendations – they are trusted advisors and trusted friends.

Intelligent Investing believes that finances are the number one stress in lives, and we have a passion to minimize financial stress to maximize lives. Just having a professional listen to your financial situation can relieve your financial stress.

The Use of Artificial Intelligence Is Heavily Regulated

Second, the use of AI in financial advising is heavily regulated. There are legal and ethical considerations that may prevent AI from completely replacing human advisors. For example, regulators may require that a human advisor oversee AI systems to ensure that they are operating within ethical and legal boundaries.

Humans Still have an Emotional Bent to Make Financial Mistakes

Third, financial advisors play a crucial role in helping investors navigate the complex landscape of behavioral finance.

Behavioral finance is the study of how psychological and emotional factors can impact financial decision making. Understanding these factors can help investors make better decisions, but it can be difficult to do so without professional guidance.

At Intelligent Investing, we help clients understand and overcome the biases and emotions that can lead to poor investment decisions through behavioral coaching. For example, we can help a client understand and avoid common biases like the disposition effect (the tendency to hold on to losing investments for too long) or the herding bias (the tendency to follow the crowd). We also help clients develop a financial plan that takes into account their unique goals, risk tolerance, and other factors that can influence their behavior.

Intelligent Investing Leverages Financial Technology to Improve Investor Behavior

Intelligent Investing is a boutique wealth management firm serving high-net-worth individuals and families. We leverage a lot of financial technology such as risk software, and our proprietary Intelligrations™.

In addition, Intelligent Investing provides emotional support during times of market volatility or other financial stress. It’s not uncommon for investors to feel overwhelmed or anxious during these times, and having an advisor to turn to can provide a sense of comfort and stability.

Finally, we help clients stay disciplined and stick to their investment plan by being their financial accountability partner. This can be particularly important during times of market turbulence, when investors may be tempted to make impulsive decisions based on emotions rather than logic. We do our best to provide a calming presence and help investors stay focused on their long-term goals.

Future of Financial Advice

So, what does the future of financial advising look like? While it is unlikely that AI will completely replace human financial advisors, it is possible that AI will play a larger role in the industry, augmenting the work of human advisors and making their jobs easier. For example, AI may be used to automate routine tasks, freeing up time for human advisors to focus on more complex tasks.

While AI may change the financial advising industry in the coming years, it is unlikely that it will completely replace human financial advisors. The human touch and expertise of a financial advisor is still considered valuable by many individuals, and there are legal and ethical considerations that may prevent AI from completely taking over the role.

Conclusion

In conclusion, financial advisors are valuable when it comes to investor behavior because they can help investors understand and overcome the biases and emotions that can impact financial decision making. They can provide personalized advice, emotional support, and help investors stay disciplined and focused on their goals, making them an important part of the investment process.

It is important to note that AI is not a silver bullet solution for all financial problems. It is likely that AI will play a larger role in financial advising in the future, augmenting the work of human advisors and making their jobs easier. However, while AI can certainly make some tasks easier and more efficient, there are many tasks that still require the human touch.

How Intelligent Investing Leverages Financial Technology

One of our unique factors is to leverage technology, and we have leveraged financial technology such as artificial intelligence to help craft the above blog. We have modified the results of the blog to reflect our opinions. Leveraging this technology helps us be more efficient and serve our high-net-worth clients in other ways.

If you would like to learn more about our proprietary Intelligrations™, we’d love to have a complimentary call or coffee with you. Click here to get started.

Credits: This blog was written in part by ChatGPT, an AI language model developed by OpenAI. The content of this blog reflects the knowledge and opinions of ChatGPT, may or may not reflect the knowledge and opinions of Intelligent Investing, and is protected by copyright laws. Please do not reproduce or distribute without giving proper credit to ChatGPT and OpenAI.

Why does a positive “jobs report” sometimes hurt markets?

February 3, 2023 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

Today’s financial news had headlines such as “Stocks Drop After Surprisingly Strong Jobs Growth.” Jobs growth sounds like good news, so why would financial markets suddenly drop as a result of this positive news?

Why are Jobs Reports So Important

Jobs reports are a crucial economic indicator that provide insight into the health of the labor market and the overall economy. They are closely watched by investors, economists, and policymakers, and can have a significant impact on financial markets. Despite this, it’s not uncommon for markets to decline after the release of a jobs report, even when the report shows positive employment growth. So, why do financial markets sometimes decline after a strong jobs report?

Faster-than-expected rate hikes: A strong jobs report can indicate a robust economy, which can lead the Federal Reserve to raise interest rates faster than expected. Higher interest rates increase the cost of borrowing, making it more expensive for businesses to invest, and slowing down economic growth. This can cause a decline in financial markets.
Inflation concerns: A strong jobs report can also lead to inflation concerns, which can also cause a decline in financial markets. Inflation erodes the value of money and reduces purchasing power, which can lead to a decline in consumer spending and slow down economic growth.
Overvaluation: Sometimes, financial markets may decline after a strong jobs report because the market was overvalued. This means that the market was already at a high level and there was limited room for further growth. In such cases, a strong jobs report can trigger a correction, where investors take profits by selling their investments, causing the market to decline.
Unrelated Reasons: Sometimes financial markets decline because of other factors, and it appears that it was related to the jobs report. In general, on any given day, if there are more sellers than buyers, then markets will decline, and if there are more buyers than sellers, markets will rise.

In conclusion, a strong jobs report is usually seen as a positive sign for the economy, but it doesn’t always lead to an immediate increase in financial markets. Instead, there are various factors that can cause financial markets to decline after a strong jobs report, including faster-than-expected rate hikes, inflation concerns, overvaluation, and unrelated reasons.

Intelligent Investing Leverages Financial Technology

One of our unique factors is to leverage technology, and we have leveraged financial technology such as artificial intelligence to help craft the above blog. We have modified the results of the blog. Leveraging this technology helps us be more efficient and serve our high-net-worth clients in other ways.

If you would like to learn more about our proprietary Intelligrations™, we’d love to have a complimentary call or coffee with you. Click here to get started.

Top Tips to Keep Your Financial New Year’s Resolutions

January 27, 2023 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

Top Tips to Keep Your Financial New Year’s Resolutions

I trust you had a merry Christmas, and if you are like me, it is easy to set a bunch of new year’s resolutions for the new year, only to struggle to keep them until the end of January. Did you know that making New Year’s resolutions possibly started 4,000 years ago by the ancient Babylonians? And I bet they didn’t do a good job of keeping their resolutions either. In fact, I saw a t-shirt that said, “My new year’s resolution is to do last year’s resolution, which was also the previous year’s resolution. Today, I’d like to share with you a resource that should help you as you consider making your New Year’s resolutions. Though the following video was created last year, the truths mentioned are still true.

New Year’s Resolution Facts

This is the time of year where most people make New Year’s Resolutions. According to the University of Scranton, only 8% of those who make New Year’s resolutions actually keep them. In fact, research conducted by Strava using over 800 million user-logged activities in 2019 predicts the day most people are likely to give up on their New Year’s Resolution is January 19. Well that’s depressing. Wouldn’t it be better to just not have resolutions, that way there isn’t the associated guilt of not keeping them?

As Zig Ziglar says, “If you aim at nothing, you will hit it every time.”

I’ve found that one of the best ways to meet your financial goals is to break them down into smaller chunks.

I tend to start with writing down annual goals (including some stretch goals) that are a little beyond my reach.

Let’s say you want to pay off a $50,000 loan next year, you can break that down into quarters, months, and even paychecks. Remember, there is only one way to eat an elephant: a bite at a time.

Financial Freedom Calendar

Intelligent Investing believes in minimizing financial stress to maximize your lives. We created this financial freedom plan that includes monthly tasks as well as things to consider buying and things to avoid buying each month.

For example, the Financial Freedom calendar suggests that in January you should consider automation. Recently, I decided to automate all my bills to be paid and I can already tell you that the stress has been reduced instead of wondering, did I already pay that bill? When is that one due?

We love organizing our clients’ “financial junk drawers” and would love to organize yours as well. Feel free to share this Financial Freedom Plan with others.

A Resolution You Can Keep

One last resolution to consider…becoming more financially educated. You can start by simply subscribing to our Intelligent Insights Newsletter. You can also subscribe to our Intelligent Money Minute podcasts.

If you are ready to get some accountability partner and are looking for a new financial advisor, we’d love to have a complimentary call or coffee with you. Click here to get started.

Approaching Retirement? Here Are 6 Tips to Consider

January 19, 2023 by Hans Blake, CFA, CPA

Reading Time: 4 minutes

As you approach retirement, you are often overwhelmed by the vast number of decisions that need to be made. When should I retire? How much do I need when I retire? How should I roll over my 401k? What am I going to do in retirement? etc… It can be either a procrastinating or paralyzing time in your life as you contemplate the choices to be made. There are several critical “once-in-a-lifetime” decisions that are made within the 10 years leading up to retirement. These unique decisions can have life-lasting impacts, and we don’t want you to have a “regret period” in retirement. Here are six helpful considerations as you approach retirement:

1. Reassess Your Living Expenses

A step you will probably take several times between now and retirement is thinking about how your living expenses could or should change. For example, while commuting and other work-related costs may decrease, other budget items may rise. Healthcare costs, in particular, may increase as you progress through retirement.

Try to estimate what your monthly expense budget will look like in the first few years after you stop working. And then continue to reassess this budget as your vision of retirement becomes a reality. According to a recent survey, 38% of retirees said their expenses were higher than expected. Keeping a close eye on your spending in the years leading up to retirement can help you more accurately anticipate your budget during retirement.

2. Consider All Your Income Sources

First, figure out how much you stand to receive from Social Security. The amount you receive will depend on your earnings history and other unique factors. You can elect to receive benefits as early as age 62, however, doing so will result in a reduced benefit for life. The longer you wait, the larger it will be.

Next, review the accounts you’ve earmarked for retirement income, including any employer benefits. Start with your employer-sponsored plan, and then consider any IRAs and traditional investment accounts you may own. Try to estimate how much they could provide on a monthly basis. If you are married, be sure to include your spouse’s retirement accounts as well. If your employer provides a traditional pension plan, contact the plan administrator for an estimate of that monthly benefit amount as well.

Do you have rental income? Be sure to include that in your calculations. Might you continue to work? Some retirees find that they are able to consult, turn a hobby into an income source, or work part-time. Such income can provide a valuable cushion that helps retirees postpone tapping their investment accounts; giving the assets more time to potentially grow.

3. Pay Off Debt, Power Up Your Savings

Once you have an idea of what your possible expenses and income look like, it’s time to bring your attention back to the here and now. Draw up a plan to pay off debt and power up your retirement savings before you retire.

Entering retirement debt-free including paying off the mortgage will put you in a position to modify your monthly expenses in retirement if the need arises. If you don’t, you’ll have less of an opportunity to scale back your spending adding strain to your retirement plan.

In these final few years before retirement, why not save and invest as much as you can in your employer-sponsored retirement savings plan and/or IRA? Aim for maximum allowable contributions, and if you are 50 or older, you can take advantage of catch-up contributions, which enable you to contribute an additional income to your 401k plan and IRA.

4. Manage Taxes

As you think about when to tap your various resources for retirement income, remember to consider the tax impact of your strategy. For example, you may want to withdraw money from your taxable accounts first to allow your employer-sponsored plans and IRAs more time to potentially benefit from tax-deferred growth. Keep in mind, however, that generally you are required to being taking minimum distributions from tax-deferred accounts the year you turn 70½.

If you decide to work in retirement while receiving Social security, understand that the income you earn may result in taxable benefits. IRS Publication 915 offers a worksheet to help you determine whether any portion of your Social Security benefit is taxable.

If leaving a financial legacy is a goal, you’ll also want to consider how estate taxes and income taxes for your heirs figure into your overall decisions. Managing retirement income in the best possible tax scenario can be extremely complicated. Intelligent Investing strives to alleviate this financial stress by sharing and taking some of the burdens off you. Our financial planning provides probability statistics that allow our clients to know the success rate of their retirement plan.

5. Account for Health Care

As you age, the portion of your budget consumed by health-related costs (including both medical and dental) will likely increase. Although original Medicare will cover a portion of your costs, you’ll still have deductibles, copayments, and coinsurance. Unless you’re prepared to pay for these costs out of pocket, you may want to purchase a supplemental Medigap insurance policy.

Another option is Medicare Advantage (also known as Medicare Part C), which allows Medicare beneficiaries to receive health care through managed care plans and private fee-for-service plans.

Also think about what would happen if you or your spouse needed home care, nursing home care, or other forms of long-term assistance, which Medicare and Medigap will not cover. Long-term care costs vary substantially depending on where you live and can be extremely expensive. For this reason, people often consider buying long-term care insurance. Policy premiums may be tax deductible, based on a number of different factors.

6. Ease the Transition

These are just some of the factors to consider as you prepare to transition into retirement. Breaking the bigger picture into smaller categories and using the years ahead to plan accordingly may help make the process a little easier.

If retirement planning seems overwhelming, We would love to help. We love serving our high-net-worth clients by minimizing financial stress and maximize their lives using our proprietary Intelligrations™.

You can start by subscribing to our Intelligent Money Minute podcasts or by subscribing to our Intelligent Insights blogs.

Better yet, if you are finally ready to get some professional help, and want to collaborate or outsource this to qualified fiduciary professionals, please click here to reach out for a complimentary call or coffee. We’d be honored to spend some time with you to help you sort out your “financial junk drawers.”

Source: Broadridge Financial Solutions, Inc.

2023 IRA and Retirement Plan Limits

January 19, 2023 by Hans Blake, CFA, CPA

We all know it is important to plan for the future. This is a time of year where we set new resolutions and a great time to make a plan for your investable dollars. Note the following chart which shows the annual savings limits of the plan for this year and adjust your savings to take full advantage of the annual contributions. Remember, a missed year is a missed opportunity that does not come back.

We love automating this for our clients to improve their behavior and increase their odds of reaching their goals.

How to Use the Above Chart

Identify the type(s) of retirement saving that you currently use.

If you are 50 years or older, add the catch-up amount to your potential savings total.

Take note of the income limits within each plan type. For traditional IRA’s, if your income is below the noted threshold, your taxable income is reduced by your contributions. The deductibility of your contributions is also limited if your spouse has access to a plan. In the case of Roth IRAs, the income limits restrict who can participate in the plan.

Consider setting up new accounts for a spouse and set up automatic savings on a regularly-scheduled basis.

Please click here to connect with us if you need help in automating your contributions to help you reach your long-term retirement goals.

8 Key Takeaways from the SECURE 2.0 Act

January 19, 2023 by Hans Blake, CFA, CPA

Reading Time: 3 minutes

Do you have questions about SECURE 2.0 Act that passed in the final hours last year? You are not alone. I’ve been reading a lot about it and I too even have some questions for lawmakers.

As we wrapped up 2022, President Biden signed the SECURE 2.0 Act into law on December 29th.[1] The new act is being called SECURE 2.0 based on the name of its thematic predecessor, the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”). This legislation makes notable changes to qualified retirement plans. These will increase the age for RMDs, make enrollment and escalation automatic for most new 401(k)s and 403(b)s, and increase tax credits for low-income retirement savers, among other changes. Here’s a summary of some notable changes that occurred.

The age for RMDs goes up to 73 for those who turn 72 in 2023 and 75 in 2033. This is great news for those who don’t need the funds from qualified accounts. We help our clients with Roth conversions, and this allows more years to do this.
Most of the new 401(k)s and 403(b)s will be required to enroll employees automatically and escalate contributions automatically after December 31, 2024. This is what we preach about–improving investor behavior. Check out our behavioral finance page to learn more.
RMDs are eliminated from Roth accounts in 401(k)s and 403(b)s for tax years after December 31, 2023. As a result of SECURE Act 2.0, plan Roth accounts and Roth IRAs will be on more of a level playing field. It won’t be quite so obvious to determine whether or not rolling over a plan Roth account to a Roth IRA is in your best interest going forward. (We can help you with the decision)
Catch-up contribution limits will go up for those age 60 and 63 after December 31, 2024 to the greater of two: either $10,000 or 150% of the regular catch-up amount for those 50 and older. (Keep in mind that high wage earners will be required to use Roth option for catch-up contributions.)
The bill decreases the penalty for missed RMDs (or distributing too little) from 50% to 25% of the shortfall, and if the mistake is corrected in a timely manner, the penalty is reduced to 10%. (If you are a client of Intelligent Investing–we handle this automatically for you.)
There are some great (and complicated) planning options around Roth accounts inside and outside your employer plans. The Act authorizes the creation of both SIMPLE Roth accounts, as well as SEP Roth IRAs, for 2023 and beyond. Previously, SIMPLE and SEP plans could only include pre-tax funds. We help business owners setup Simple IRAs and manage their wealth in a cohesive way. (Side note: do you know it typically makes sense to put your “efficient” assets in a Roth IRA and your “less-efficient” assets in qualified accounts. It’s called tax location and something we love doing for our clients to reduce their tax bills)
Transfers from 529 plans to Roth IRAs (max amount in individual’s lifetime is $35,000) may be an area for high-net-worth families to consider. Great planning opportunity for high-net-worth families who have been funding their 529 Plans for a long time.
Those who are charitably inclined can give from qualified accounts directly to charities via Qualified Charitable Contributions (QCDs) and they can still be taken at 70.5 before reaching the new RMD ages. (We currently do this for some clients and can help you with this)

This summary scratches the surface on what all is in the SECURE 2.0 Act. Taxpayers (and especially those approaching retirement) are all but guaranteed to continue to have an endless stream of questions with respect to this complicated area.

Ask yourself: Do I have a trusted advisor who specializes in tax planning? Does my financial advisor have the right credentials (such as being a qualified CPA?) Is my advisor a true fiduciary? (i.e., do they put your interest AHEAD of their own at ALL times?)

Why don’t you make a new year’s resolution to get your “financial junk drawer” in order this year. We would love to help. We love serving our high-net-worth clients by minimizing financial stress and maximize their lives using our proprietary Intelligrations™.

You can start by subscribing to our Intelligent Money Minute podcasts or by subscribing to our Intelligent Insights blogs. Or if you are finally ready to get some professional help, please let us know.

If you want to collaborate or outsource this to qualified fiduciary professionals, please click here to reach out for a complimentary call or coffee.

Reference: Michael Kitces’ Perspective on the Secure Act 2.0

How Did Riskalyze Work During the COVID Pandemic Selloff

December 1, 2022 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: < 1 minutes

On today’s Intelligent Money Minute, we interview Aaron Klein on how Riskalyze worked during the Covid-19 pandemic selloff. During this episode, Aaron talks about the market “snap back” and how his company prepares for various scenarios. Aaron reflects on the early days of the pandemic and how Riskalyze helped intelligent investors weather the storm of uncertainty.

If you are looking for a financial advisor who can be your accountability partner who will help you with the emotional rollercoaster of financial markets. We believe in a data-driven approach to help minimize our human tendencies to sabotage our portfolios and improve the chances for success in sticking to a long-term plan.

Intelligent Investing is a boutique wealth management firm serving high-net-worth individuals and families. We’d be honored to take the first step with you by having a complimentary and confidential call or coffee.

If you are interested in becoming our next high-net-worth intelligent investor or want to learn more about our philosophy on risk management, click here. We’d be honored to have a brief confidential call or coffee with you to learn about your needs.

Aaron Klein Bio

Aaron Klein is co-founder and CEO at Riskalyze, the company that invented the Risk Number® and empowers the world to invest fearlessly. The company is headquartered in Auburn, California, and serves tens of thousands of financial advisors.

He is husband to Cacey Steward Klein, dad to Spencer (born in South Korea), and Emma and Teddy (born in Ethiopia). Aaron and Cacey cofounded Hope Takes Root, an initiative to use vocational training and life mentoring to change the future for orphans and at-risk kids in Ethiopia. He also sits on the board of Invest in Others.

How Inflation May Affect Your Retirement Distributions

November 10, 2022 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes

On today’s Intelligent Money Minute, we continue our conversation with Morningstar’s director of personal finance, Christine Benz on how inflation may affect your retirement distributions. One of the major questions that retirees face is how much to distribute from their portfolio in retirement. Retirees also want to know which buckets to distribute from first, and what happens if they withdraw too much during a downturn. During this episode, Christine Benz walks us through the impact inflation has on retirement planning and distributions.

At Intelligent investing, we love answering these types of questions. We perform various stress tests, we strive to use conservative assumptions, and we try to educate to improve investor behavior—all with the underlying passion of minimizing financial stress to maximize lives.

You may be unsatisfied with your current financial advisor or perhaps you’ve never worked with one before. You may find yourself with a lot of financial stress and would like a second opinion on your financial situation or portfolio. Don’t stress any longer than you need to when it comes to your financial picture.

Intelligent investing is a boutique wealth management firm serving high net worth individuals and families using Intelligrations™ and behavioral coaching. Consider requesting a complimentary no-obligation call or coffee with us.

Schedule a short discovery call or meeting

We’ll be interviewing Christine on several podcasts regarding retirement strategies, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Christine Benz Bio

Christine Benz is Morningstar’s director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. She holds a bachelor’s degree in political science and Russian/East European studies from the University of Illinois. Christine lives in the Chicago suburbs with her husband, Greg. She is an avid cook, a political junkie, and a long-suffering Chicago Cubs fan. Follow Christine on Twitter.