You have questions? We have answers! The following is a list of Frequently Asked Questions . . .
Why would I invest in stocks?
Stocks may be suitable for clients verus other investments because of their vast potential for growth.
Certain types of stocks may have capital appreciation and an opportunity for increased income potential. Depending upon the current tax regulations, some dividends may be taxed at lower rates and capital gains may also be given favorable tax treatment.
So capital appreciation, tax treatment, and income potential can make investing in stocks an attractive option.
Are there any drawbacks to investing in stocks?
Investing in stocks has historically brought a higher return on your investment, but it also carries a higher level of risk.
You're participating in an investment that fluctuates every day based upon the perception of investors and you have no control over that perception. Stock prices may go up or down based upon any information or news. The risk then is that the price may not be where you want it or need it to be when you want to sell the stock. You may have to hold a stock longer than anticipated to get the price you want or you may need to sell the stock at a loss. Keep in mind, though, higher risk comes with the potential for higher reward.
What else should I know about investing in stocks?
Sound advice for people interested in investing in stocks is: Don't go into it with a short-term time horizon and don't go in with unrealistic expectations. There are clients who have expectations that are too high and they can't focus on doing the right thing from an investment standpoint. Clients need to focus on the long-term goal rather than thinking just short-term.
Investing involves risk. You can lose your principal. Past performance does not guarantee future results.
Dividends are not guaranteed and must be authorized be the companies Board of Directors. Raymond James financial advisors do not render tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Why would I invest in bonds?
If stocks are the tools that can help your portfolio with potential higher returns, then bonds are the tools which attempt to help you reduce your portfolio's level of risk through diversification.
While bonds traditionally have not provided the returns of an equity portfolio, they can be used to provide current income. A client may want to supplement their pension, Social Security and other sources of retirement income. Many bonds pay interest throughout the year, so that interest can be used for this purpose.
Another reason bonds are used in a portfolio is to attempt to offset the volatility in the equities market.
Diversification does not ensure a profit or guarantee against a loss.
What are the different types of bonds?
Depending on your goals, your tax situation and your risk tolerance, you can choose from municipal, government, corporate, mortgage-backed or asset-backed and international bonds. Each one offers its own balance of risk and reward.
Are there risks involved with investing in bonds?
All investments offer a balance between risk and potential return. The bond market is no exception to this rule. Here are some general risks associated with investing in bonds:
- Interest rate risk: When interest rates rise, bond prices fall; conversely, when rates decline, bond prices rise. The longer the time to a bond's maturity, the greater the interest rate risk.
- Reinvestment risk: When interest rates are declining, investors have to reinvest their interest income and any return of principal, whether scheduled or unscheduled, at lower prevailing rates.
- Inflation risk: Inflation causes tomorrow's dollar to be worth less than today's; in other words, it reduces the purchasing power of a bond investor's future interest payments and principal, collectively known as "cash flows." Inflation also leads to higher interest rates, which in turn leads to lower bond prices.
- Market risk: The risk that the bond market as a whole would decline, bringing the value of individual securities down with it regardless of their fundamental characteristics.
Why should I invest in annuities?
For people who need a predictable stream of income and who are long term investors, annuities can be a good option. Some annuities are designed to protect their owners from long term down side risks.
What are the advantages of investing in annuities?
Some of the advantages of annuities are: tax advantages, potential for lifetime income, safety features, and payout flexibility.
- Tax Advantages: We believe taxes are a big issue with most people saving for retirement. One of the great advantages of annuities is that earnings grow on a tax-deferred basis until you start receiving a payout. This means your money can grow faster because income taxes won't be payable until distribution payments are made from the annuity, usually when you are retired and may be in a lower tax bracket.
- Potential for Lifetime Income: We believe financial security is a common worry for retirees. Annuities can provide an option for a steady stream of income for life. This can be especially useful for people who do not have a retirement or pension plan to rely on.
- Payout Flexibility:Annuities offer a broad range of payout options, so you have the flexibility to choose a payout plan that best meets your needs when you retire.
Withdrawals made prior to age 59 1/2 may result in a IRS penalty. Product and product features vary by state and insurance company. Guarantees are based on the claims-paying ability of the issuer.
Are there risks associated with annunities?
- Earnings are taxed as ordinary income when withdrawn, not capital gains.
- Early withdrawal tax penalty may apply if gains are withdrawn before owner turns 59½.
- Surrender charges typically apply for early termination.
- No step-up in cost-basis. Beneficiaries pay ordinary income taxes based on their tax bracket.
- Product and product features vary by state and insurance company. Guarantees are based on the claims-paying ability of the issuer.
Raymond James financial advisors do not render tax or legal advice. You should discuss any tax or legal matters with the appopriate professional.
Why would I add insurance to my portfolio?
We believe most people exploring insurance solutions have the following goal:
- protect current assets against unexpected death or disability
- risk management
- estate tax challenges
How much insurance do I need in my portfolio?
There isn't one solution which is right for everybody. It's a mix of various products and services, and insurance can be a part of that mix. You can use insurance for specific goals, needs and purposes, but we believe it shouldn't be the foundation of your portfolio. It is a very good way to protect assets and a good way to pass assets along to the next generation in a tax-efficient manner.
Guarantees are based on the claims-paying ability of the issuer.
Why is financial planning important?
A comprehensive financial plan can give you a clear picture of your goals and help you understand what it will take to reach them.
What is the financial planning process?
The first step is to meet with a financial planner is to develop a clear picture of your current financial situation. Our planners can then help you establish financial goals and time frames to achieve your goals, offering you advice on specific products and services. Finally, our planners will monitor your plan, making adjustments as your goals, time frames and circumstances change.
Is the financial planning process complicated?
Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, our financial planners will work hard to make the process as easy as possible and will gladly answer all of your questions.
Do I still control my finances with a financial plan?
Yes. Our financial planners make recommendations based on your needs, values, goals and time frames. But ultimately you make all the decisions. You decide which recommendations to follow and then work with our planner to make it happen.
If I already have a 401(k) plan, why would I open an IRA?
While 401(k) plans can make up a large percentage of your nest egg, in our experience they most likely will not fund all of your retirement. If your goal is lifetime financial independence - a variety of savings vehicles, including IRAs, will help get you to that goal.
The two most popular IRAs - the traditional IRA and the Roth IRA - may offer significant tax benefits. You can invest your annual contributions in a wide variety of securities, such as stocks, bonds, money market funds and certificates of deposit (CDs). And like employer-sponsored savings plans, the government offers IRA investors tax advantages in exchange for a long-term savings commitment.
Once my funds are in an IRA, how easily can they be accessed?
IRA accounts often offer additional flexibility than 401(k) accounts. 401(k) plans are designed by the companies that offer them … and that design may limit your options or not allow you to invest in selected asset classes.
Once your funds are in an IRA you can request a distribution without the liquidity issues of many company 401(k) programs. However, in both Traditional IRA and 401(k) accounts, withdrawals are subject to ordinary income taxes and a 10% penalty if you're under age 59½. Any time you take a distribution from a traditional IRA (not a Roth IRA)* the amount of your distribution is treated as taxable income.
*Unless certain criteria are met, Roth IRA owners must be 59 1/2 or older and must have held the IRA for five years before tax-free withdrawals are permitted.
Simplified Employee Pension (SEP) plans can provide a significant source of income at retirement by allowing employers to set aside money in retirement accounts for themselves and their employees. SEPs are available to any size business and Wealth Management professionals have the experience and knowledge to help you set up your own plan.
What are the advantages of a SEP?
Simplified Employee Pension plans are popular options for business owners for several reasons. They are simple to establish and maintain and normally have minimal reporting rules. SEPS can be used in addition to other employee retirement plans. With a SEP, business owners are not required to make contributions, but they are free to make substantial contributions if they choose.
Are there drawbacks to SEP plans?
There are certain aspects of a SEP plan which may not be beneficial to an employer. All eligible employees must be included in the SEP, including eligible employees who have worked for you during three or more of the past five years. The failure of one eligible employee to set up a SEP-IRA can defeat the entire SEP. In addition, employees have immediate access to contributions and it does not allow employees the election to have pretax dollars contributed to the plan through salary reduction.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC, are; not deposits, not insured by bank insurance, FDIC or any other governmental agency, are not deposits or obligations of the bank, not guaranteed by TheBANK of Edwardsville, and are subject to risk, and may lose value. TheBANK of Edwardsville is independent of Raymond James.
Raymond James financial advisors may only conduct business with residents of the state and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability.
Why do I need an investment manager?
There are countless reasons clients seek out our investment management experts. We have the experience and know-how to create custom portfolios to meet your current objectives and long-term goals. You decide what level of risk you're comfortable with and we can do the rest.
What makes the investment management team at TheBANK different than other investment management firms?
We deal with each customer on a case-by-case basis. We look at each individual's goals and needs and find out how they feel about risk. The most important aspect is learning the comfort level of each individual client and determining their financial goals, then putting together a plan which fits that client. We offer full-service packages which include trusts, investment services and everything in between.
What products and services do you offer for investment management?
When it comes to investment management, TheBANK has you covered.
We have five asset allocation models ranging from the aggressive to conservative depending on your risk tolerance. Each model is comprised of several mutual funds so you as a client are very diversified. This is often the simplest form of investment management.
We also have clients who want us to actively manage their money using a combination of individual stocks, mutual funds and bonds. We determine what level of risk they are comfortable with and we put together an investment portfolio that is unique to each individual client.
Investment Management services discussed above are through the investment management team at TheBANK and not affiliated with Raymond James.
What are the different types of trusts?
- Irrevocable: Should you desire to make large lifetime gifts, you could establish an Irrevocable Trust to benefit either yourself or others. The advantages are that you remove future appreciation of these assets from your estate, and your family would benefit from our investment management. Should you have a loved one who is in need of special medical care, you could establish such a trust for his or her benefit. Irrevocable Trusts can be an important tool for you to use in saving estate taxes. By definition, these trust generally prohibit you from making changes in the future even though your circumstances may change and don't provide you with control over the assets held in this form.
- Revocable: A Revocable Living Trust offers added long-range planning advantages. Because we act as your trustee rather than merely as your agent, you may arrange to have us take on broad responsibilities for keeping your financial affairs orderly in the event of your incapacity. In addition, your trust can outlive you, continuing the support of your dependents without normal probate delays or publicity. Usually a living trust helps to limit estate settlement expenses, and can be drafted to save death taxes at the death of your surviving spouse and /or other beneficiaries. Your instructions are set forth in a written trust agreement, drafted by your attorney, and you retain the right to alter or terminate the agreement during your lifetime. You retain control of your assets at all times and can change your mind should circumstances change.
Revocable Living Trusts make a highly adaptable framework for long-range family security planning. Any trust provisions that might be made for your family by your will can be made through a living trust. However, unlike a will, a living trust agreement normally does not go on public record at a person's death.
- Testamentary: By leaving all or a portion of your estate in trust, your will can add to your family's financial security. This type of trust becomes funded upon your death (testamentary = will)
A trust for your spouse, if you are married, can provide support if he or she survives you. In addition, trusts frequently reduce Federal and State estate taxes for husband and wife by reducing the tax exposure at the survivor's death. When compared with the tax consequences if the first to die leaves a will with no trust, the savings can be substantial.
When children or other beneficiaries are young or financially inexperienced, the need for a trust is clear. Trusts are appropriate whenever you want to leave someone the benefits of property without the burdens of management. Trust provisions can be as rigid or liberal as the creator wants.
A beneficiary need not be limited to the income from a trust fund. You can give the trustee discretion to distribute from principal in order to pay for a child's education or maintain your spouse's accustomed standard of living. Because our trust officers keep in close continuing contact with the families we serve, you know that these discretionary powers will be exercised with understanding
- Charitable: If you would like some of your assets to be paid over to your favorite charity, you may want to consider establishing a Charitable Trust. There are several different types of Charitable Trusts, but the two main types are Charitable Remainder Trusts and Charitable Lead Trusts.
A Charitable Remainder Trust allows you to receive a stream of payments during your lifetime or a specific period of time, and you can get an income tax deduction in the year you establish the trust. At the end of the term, the remainder of the trust would be paid over to the charity of your choice.
A Charitable Lead Trust allows your charity to get income distributions, and at the end of the term, the remainder will be paid to the persons you designate. You can also get an income tax deduction for establishing this kind of trust.
How do I keep track of what's going on with my trust?
The Wealth Management professionals provides clients with detailed statements on a monthly or quarterly basis, keeping them informed of their financial well-being. In addition, clients can get up-to-the-minute valuations on all of their assets as well as a complete record of all bills being paid and income coming in through our web-based online trust feature. We also meet in person with you as often as you wish.
What duties do you perform as Trust Administrator?
First and foremost, the Trust Division of TheBANK provides investment management (we invest your money) on all trust accounts. But it doesn't end there. If need be, we can pay bills for our clients, coordinate income tax returns and much more. The key is service. We make sure your money works hard and accomplishes the financial goals you need it to.
Will my trust administrator be there for me long term?
One of the real strengths of the Trust Division of TheBANK is a low turnover rate. When someone opens up a personal trust account with TheBANK, they can rest assured that their administrator will be there to take care of them long term. We have tremendous continuity within the department. You will know us and we will know you.
Trust Administration services discussed above are through the Trust Division of TheBANK and not affiliated with Raymond James.
If I already have a 401(k) plan, why would I open an IRA?
While 401(k) plans can make up a large percentage of your nest egg, they most likely will not fund all of your retirement. Your goal is lifetime financial security - and a variety of savings vehicles, including IRAs, will get you to that goal.
The two most popular IRAs - the traditional IRA and the Roth IRA - offer significant tax benefits. You can invest your annual contributions in a wide variety of securities, such as stocks, bonds, money market funds and certificates of deposit (CDs). And like employer-sponsored savings plans, the government offers IRA investors tax advantages in exchange for a long-term savings commitment.
Once my funds are in an IRA, how easily can they be accessed?
IRA accounts often offer additional flexibility … this is the primary reason people choose to rollover their 401(k) balances to an IRA. 401(k) plans are designed by the companies that offer them … and that design may limit your options or not allow you to invest in selected asset classes.
Once your funds are in an IRA, you can request a distribution without the liquidity issues of many company 401(k) programs. However, in both Traditional IRA and 401(k) accounts, withdrawals are subject to ordinary income taxes and a 10% penalty if you're under age 59½. Any time you take a distribution from a traditional IRA (not a Roth IRA) the amount of your distribution is treated as taxable income.
Who may need guardianship administration?
A child under the age of 18 whose biological parents are unable to provide the necessary care because of death, termination of rights or circumstance, a developmentally disabled person or an incapacitated person may be appointed a guardian by the court.
What is a conservatorship?
A conservatorship is a procedure in which a competent, suitable person or professional fiduciary is appointed to care for the ward's estate and financial interests.
What is the difference between a trustee and a conservator?
Trustees and conservators both act as fiduciaries and must comply with high standards of conduct, but there are distinct differences between the two types of guardians. A trustee is appointed by the individual in a trust document and the conservator is appointed by the court. An individual can remove his or her own trustee while a conservator can only be removed by the court. A trustee's duties are outlined by the trust document and a conservator's duties and responsibilities are governed by statute and court orders. Meanwhile, a trustee manages only those assets outlined in the trust while a conservator has the authority to manage all assets of the ward.
How do I name an executor to my estate?
You can name an executor to your estate when you draft a will and can change it as long as you remain competent.
What role does the executor play in estate administration?
The executor is responsible for initiating the probate proceeding, collecting and inventorying assets, paying debts owed by the estate, filing and paying taxes, distributing assets to the beneficiaries, and closing the estate.
Why should I have a retirement plan at my business?
A quality retirement plan can help you retain your employees and build company loyalty within the ranks. In addition, businesses have a financial reason for contributing to their employees' retirement plan - they get a tax deduction for the contributions in most cases. This helps lower your business' taxable income so you pay less in taxes to the government.
What can I expect from TheBANK when it comes to retirement plans for my business?
We're there from the beginning. We communicate how the plan works, the benefits of the plan and the products available so you can make an informed decision about which plan is best for your business. In addition, we do the presentations at enrollment meetings and coaching meetings with your employees so that they also make well informed decisions.
What if I already have an existing plan?
Have us review what you're doing and we'll have suggestions. There may be fees you're currently paying which you don't even know about. We NEVER compromise on service and our clients tell us that we are extremely competitive on our pricing.
What are some of the advantages of choosing TheBANK?
Our advisors work with pension boards to design an investment plan that fits each individual situation while staying within the guidelines and requirements of state regulatory standards. Clients also get: 24/7 Internet access to their accounts; monthly account statements, plan performance reporting, asset custody, collection of interest, dividends and other income, disbursement services including 1099R Issuance; and periodic board presentations to keep everyone up to speed on what's happening.
How often do you recommend reviewing or amending an asset allocation policy?
The asset allocation policy should be reviewed on an annual basis and amended based upon the economic and market outlook for the upcoming year. The recommended changes could include changing the portfolio weightings between fixed income and equities as well as changes to the portfolio within various equity components (i.e. increasing the international exposure and decreasing the mid-cap U.S. exposure). Any changes to the asset allocation would be within the parameters outlined in the Illinois Public Pension Code.
What is TheBANK's performance analysis philosophy?
While we analyze performance on a monthly basis to assess the progress of client portfolios, we recommend that clients review results on a quarterly basis. More importantly, we recommend that clients place more emphasis on the longer term performance results (1-year, 3-year and 5-year returns) to gauge progress and draw meaningful conclusions.
What performance measurement system do you use?
The performance measurement system we use is Investment Scorecard, which allows us to provide our clients with a detailed analysis regarding the returns of individual components of their investment portfolio. Each component within a client investment portfolio can be reviewed against its relevant benchmark.
What is your reporting policy?
Typically, Wealth Management representatives from TheBANK meet with our clients on a quarterly basis or as often as requested by a client. In addition, we communicate with our clients via telephone, written correspondence and email.
Our Wealth Management Department also provides clients with a performance review booklet at each quarterly pension board meeting that outlines the account performance, the account holdings, a statement of investment management fees and a quarterly market review.
Services discussed above are through TheBANK and not affiliated with Raymond James.