Endowment Wealth Management, Inc.
Director of Wealth Management
Robert assumes the role of the client family’s Chief Financial Officer and coordinates with the client’s current professionals (i.e. attorney, tax accountant, stockbroker, insurance agent) to provide an integrated wealth management plan.
Robert’s 30 years of professional experience is key when consulting with client families, businesses and institutions. He began his career at Arthur Anderson & Co., as a staff accountant, serving the needs of small business clients. He was the founder and President of Fox Valley Spring Company and President of Oak-Bay Corporation. Additionally, Robert held a consultant role providing strategic advice to entrepreneurs in areas such as corporate structure, customer base, product mix and systems. For the past ten (10) years, Robert was the Director of Wealth Management and a Member of the Investment Committee at Sumnicht & Associates, LLC. During Rob’s tenure with his prior employer, the entity won numerous accolades and rankings from Bloomberg and Worth magazines. He was involved in helping incubate and launch their ETF model management business in February of 2005 under the brand name iSectors.
Rob received his Bachelor’s Degree from Marquette University with a double major in Accounting and Finance. He received his CPA designation from the State of Wisconsin in 1983, became a Certified Financial Planner (CFP®) in 1984, and received his Accredited Wealth Management: Advisor (AWMA®) designation from the College for Financial Planning in November of 2005.
BS, Accounting & Finance, Marquette University
Assets Under Management:
Dividend income has represented roughly one-third of the total return on the Standard and Poor's 500 since 1926. According to S&P, the portion of total return attributable to dividends has ranged from a high of 53% during the 1940s — in other words, more than half that decade's return resulted from dividends — to a low of 14% during the 1990s, when investors tended to focus on growth. If dividends are reinvested, their impact over time becomes even more dramatic. When you reinvest dividends, you are buying more shares of the dividend-paying stock. The reinvested dividends can then start earning returns and dividends of their own, using the power of compounding.
If a stock's price rises 8% a year, even a 2.5% dividend yield can push its total return into double digits. Dividends can be especially attractive during times of relatively low or mediocre returns; in some cases, dividends could help turn a negative return positive, and also can mitigate the impact of a volatile market by helping to even out a portfolio's return. Another argument has been made for paying attention to dividends as a reliable indicator of a company's financial health. Investors have become more conscious in recent years of the value of dependable data as a basis for investment decisions, and dividend payments aren't easily restated or massaged.
Finally, many dividend-paying stocks represent large, established companies that may have significant resources to weather an economic downturn — which could be helpful if you're relying on those dividends to help pay living expenses.
Differences among dividends
Dividends paid on common stock are by no means guaranteed; a company's board of directors can decide to reduce or eliminate them. The amount of a company's dividend can fluctuate with earnings, which are influenced by economic, market, and political events. However, a steadily growing dividend is generally regarded as a sign of a company's health and stability. For that reason, most corporate boards are reluctant to send negative signals by cutting dividends. That isn't an issue for holders of preferred stocks, which offer a fixed rate of return paid out as dividends. However, there's a tradeoff for that greater certainty; preferred shareholders do not participate in any company growth as fully as common shareholders do. If the company does well and increases its dividend, preferred stockholders still receive the same payments.
The term "preferred" refers to several ways in which preferred stocks have favored status. First, dividends on preferred stock are paid before the common stockholders can be paid a dividend. Most preferred stockholders do not have voting rights in the company, but their claims on the company's assets will be satisfied before those of common stockholders if the company experiences financial difficulties. Also, preferred shares usually pay a higher rate of income than common shares. Because of their fixed dividends, preferred stocks behave somewhat similarly to bonds; for example, their market value can be affected by changing interest rates. And almost all preferred stocks have a provision that allows the company to call in its preferred shares at a set time or at a predetermined future date, much as it might a callable bond.
Look before you leap
Investing in dividend-paying stocks isn't as simple as just picking the highest yield. If you're investing for income, consider whether the company's cash flow can sustain its dividend. Also, some companies choose to use corporate profits to buy back company shares. That may increase the value of existing shares, but it sometimes takes the place of instituting or raising dividends. If you're interested in a dividend-focused investing style, look for terms such as "equity income," "dividend income," or "growth and income." Also, some exchange-traded funds (ETFs) track an index comprised of dividend-paying stocks, or that is based on dividend yield.
Be sure to check the prospectus for information about expenses, fees and potential risks, and consider them carefully before you invest. Also, when investing always take a long-term perspective and dividends and DRIPs are a great way to build a portfolio.
I think your initial question, "Are mutual funds safe," is not the appropriate question. I think, generally, mutual funds serve small investors very well and since each mutual fund family and related investment fund varies by type of investment, cost structure, investors needs, investors tax rate, investors risk tolerance and etc, makes answering your question almost impossible to answer based on the information you provided.
I truly think your question should be, based on my $3,400 of monthly retirement income, how should I invest my $500K? This generates the following list of questions from me back to you.
1. What is your monthly spending amount? Greater than the $3,400 of retirement benefits?
2. What is your risk tolerance or risk profile?
3. What is your incremental Federal income tax rate?
4. How much income must the $500K portfolio distribute annually to fill your income needs versus expense shortfall determined in question #1 above?
5. Where is the $500K portfolio located? In an IRA, 401(k), or personal account?
6. What is your current age and life expectancy?
7. Other general questions like married, spouse's age, health and etc?
Once I know these answers, I can give you both better advice and more information appropriate to your specific retirement situation. I truly have to congratulate you for being concerned and actively seeking out professional advice regarding what to do in your retirement. I look forward to receiving your answers and assisting you better by providing you a more substantive answer.
Rob Riedl, CPA, CFP, AWMA
Let's start by saying congrats on your financial success to date. Your overview and facts open many issues, but over all, I see no problems:
1. Business income growing at 20% a year, great.
2. Retirement accounts $1.25 million, great! How are they asset allocated and are they IRA's or 401(k) accounts?
3. Cash $1.7 million, great! Where is it being held or invested?
4. Office building $400K, no debts. Great!
5. Cars (4) and owe $200K at 2%. That's fine.
6. Land valued at $1.2 with $0 debt. Great!
7. New Building will cost $2.5 million, use $800K cash, and $41.7 million loan have a 10 year loan at 3.5% and a $17K monthly payment. Tenants paying $12K a month NNN, leases 5-10 years. Great!
8. Old office: Will rent for $3K a month, great!
9. HELOC of $500K, Great!
10. Kids schooling is fine!
My only concern is not leverage, but rather the strength of your business. I would consider adding key man life insurance coverages to protect the business value because that is the key to your wealth and cash flows. If something happened to you and your wife, your children could be in a rough spot. Also, your estate plan should be current because I believe you will have estate transfer problems coming soon, and maybe your kids should own some company stock? You might want to shift some financial assets to your children, throughout annual gifting, to use their lower tax brackets for related earnings and saving for college. Your biggest risk is if your human assets, your kids, get "affluenza" related to excessive family wealth and they do not develop a good work ethic and professional drive. I think this is what I would watch the closest. Otherwise, stay focused on your plan and don't get distracted by other opportunities and distractions!
We are fee-based fiduciary advisers who assist HNW families like yours throughput the USA. If you would like to protect your family and create sustainable multi-generational wealth and peace of mind, please check us out at www.EndowmentWM.com. I would be more then happy to introduce our professional team and Multi-Family Office services. Again, congrats on your accomplishments to date and your future execution.
Robert Riedl, CPA, CFP, AWMA
Yes, you should consolidate all your retirement accounts to one IRA because it will lower the costs of managing your investments. It will also provide you with greater access to other investments,more diversification, and more importantly, it will simplify your financial life. Most annuities generally have a higher cost structure because they provide a tax differed feature which you don't need because an IRA is a tax deferred account. Thus, you are truly incurring an additional cost for a feature you already have. I would look for a fee-based fiduciary adviser to consult on what to do next. If our firm can be of any assistance to you, please don't hesitate to contact us. We also maintain a low cost automated investment platform at www.MyRoboAdviser.com if you would like to do it yourself.
Yes, investments in ETFs should be a major part of your portfolio because they are a low cost, transparent, tax efficient, and intra-day liquid investment which can rapidly diversify your portfolio using a passive asset allocation. The problem is, there are various types of ETFs and ETF providers to choose from. I recommend creating a basket of ETFs in a model as a very prudent way to invest. One option is using an automated platform like www.MyRoboAdviser.com and accessing their 100 different ETF models and dollar cost averaging into your various personal goals.