Consolidating your Financial Accounts

When it comes to simplifying your personal finances consider consolidating your accounts.

Consolidating your Financial Accounts

Over the course of a career it is very possible for individuals to accumulate multiple checking, savings, brokerage, and retirement accounts. The likelihood for this increases as we get married, move, change jobs, etc., but it can unnecessarily impede your financial progress. That said, we encourage households and individuals to review their existing accounts to make their savings and investments more efficient.

Furthermore, you can consolidate all your accounts to one or two institutions. For example, you can limit your checking and savings account(s) to one bank, and your investment and retirement accounts to one financial institution.

Below are some potential advantages to account consolidation:

  1. Estate Planning
    • Oversee fewer accounts as opposed to many at separate financial institutions.
    • Streamlines recordkeeping for surviving spouse.
    • More efficiently review account beneficiary information.
  2. Investment Planning
    • Allocation is more efficient to one account rather than multiple accounts.
    • Performance is monitored over fewer accounts.
    • Automating your contributions or withdrawals in retirement is simplified with one account versus multiple accounts.
  3. Tax Planning
    • Fewer statements alleviates the task of income tax reporting.
    • Cost basis is better managed.
  4. Cash Flow Management
    • It is easier to track income and expenses.

Where do you start?

Take the time to list all your accounts, and it may become abundantly clear after listing all your accounts that it makes sense to consolidate! You may want to list these accounts in the format below:

Account #1
Account #2
Account #3

Non-retirement/Investment Accounts
Brokerage Account # 1
Brokerage Account # 2
Brokerage Account # 3

Retirement Accounts
Traditional IRA # 1
Traditional IRA #2
401(k) # 1
401(k) # 2

You may want to work an accountant or financial advisor to make you are aware of any tax consequences that may arise from consolidation. The Certified Financial Planners™ at PFA, LLC are here to help you with all your planning needs. Let us know how we can help you reach your financial goals.

Securities offered through Independent Financial Group, LLC, Member FINRA/SIPC.  Advisory services offered through Plotkin Financial Advisors, LLC.  Plotkin Financial Advisors, LLC and Independent Financial Group, LLC are not affiliated.

7 Criteria to Evaluate Your Current 401(k) or 403(b) Plan

As more lawsuits are filed against Plan Sponsors and Plan Fiduciaries, many companies and nonprofits are taking steps to evaluate their current defined contribution plans.   Here are seven criteria we suggest should be used to evaluate your current plan.

1. Fund Suite

How many investment options do you have? Does your plan allow for Exchange Traded Funds (ETFs)?

Recent lawsuits filed against university 403(b) plans highlight the fact that many plans have hundreds of investment options. Plan participants have paralysis and can’t fairly allocate among so many overlapping options, many of which may be underperforming high cost mutual funds.

Your best option may be open architecture, whereby a fund suite of about 28-42 funds are carefully selected from over 20,000 mutual funds and exchange traded funds (ETFs)
Use of low cost ETFs may lower overall fund expenses. Too many investment options and/or your plan does not allow for ETFs – It’s a red flag!

2. Investment Policy Statement and Ongoing Monitoring

ERISA does not require an Investment Policy Statement, but does suggest that there be guidelines. So why not have an Investment Policy Statement (IPS)? The purpose of an IPS is to set forth the policies for selecting the funds in the fund suite and the policies for monitoring and replacing poor performing funds. Funds must be selected based on fund performance vs. the benchmark and vs. the peer group. Plan participant’s time horizon and risk tolerance are also key factors. Lack of an investment policy statement and lack of a monitoring policy are red flags!

3. Plan Expenses

If your overall plan expenses are greater than 1.2% of plan assets, you may be paying too much. The negative compounding effect that expenses have on one’s future retirement is very serious. Many plan Sponsors do not even know how to calculate plan expenses and many believe that the only expense paid is the annual (or quarterly) administrative charge.

When calculating total plan expenses, you need consider the following:

a. Average fund expenses;
b. Administrative expenses;
c. Hidden charges and revenue sharing; and
d. Advisory fees

You also need to know whether these fees are a percentage of plan assets or a fixed charge. Fixed costs imply that, as assets grow over time, expenses as a percentage of plan assets will decline over time. Fully variable fee structure is a red flag!

4. Services Provided

Does your advisor do anything? What services are to be provided according to the plan documents? Independent advisors could provide many useful services, including:

i. non-discretionary investment advisory services;
ii. discretionary authority of plan assets –selection and monitoring of funds, alleviating your fiduciary risk;
iii. selection, monitoring and replacement of service providers;
iv. fee and cost review comparison of existing Plan compared to other available options;
v. ongoing monitoring of investment options and plan performance;
vi. selects the funds in the fund suite, monitors and replaces funds;
vii. participant education and enrollment, which helps to maximize plan participation;
viii. development of the Plan’s investment policy statement; and
ix. development and maintenance of a fiduciary audit file.

An advisor that charges you money for limited (or no) services, is a red flag!

5. Experience and Qualifications

What makes your advisor qualified to administer the plan, provide services to the plan and act as a fiduciary to the plan?

While the number of plans and the amount of plan assets under administration are key factors to consider, there are a few other factors that are also important. Other factors to consider are licensing, legal registration, educational background and certifications.

In our opinion, an independent registered investment advisor (RIA) is preferable to a stock broker or insurance broker – licensed to sell insurance. RIAs are supervised by FINRA and the Securities and Exchange Commission. Being independent means that they are less likelyto offer proprietary products, which is a good thing.

Educational background demonstrating expertise in business, economics, and finance are important. In addition, certifications like CFA Charterholder (CFA), Certified Financial Planner (CFP) and Accredited Investment Fiduciary (AIF) demonstrate knowledge of investing and personal finance, as well as a commitment to a Fiduciary obligation to plan sponsors and plan participants.

6. Conflicts of interest

A plan that includes revenue sharing, finder’s fees and proprietary funds may pose a conflict of interest. In order to get compensated, brokers often push poor performing proprietary funds – funds owned and managed by the third party administrator or record keeper. These funds are often higher priced compared to other available alternatives.

A broker that wants to switch you from one third party administrator (i.e. MassMutual) to another (i.e. Principal) with no good reason is a red flag! The advisor could be earning a fee equal to 1% of plan assets – making it a clear conflict of interest.

A fund suite with a significant number of proprietary funds is a red flag!

7. Suitability Standard or Fiduciary Standard – To what standard is the advisor held?

A Registered Investment Advisor is held to the fiduciary standard, while most brokers are held to a lower ‘suitability standard’. Consider it a red flag if your advisor is unwilling to agree in writing to its fiduciary duties.

For a free, no obligation review of your 401k or 403b plan, please contact

Michael Edberg, CFA, CDFA™, AIF® at 301-907-9790 or

IMPORTANT NOTE: This blog is for informational purposes only and comments will not be posted on this site.

Attention Income Investors: Preferred Shares May Be Overvalued!

  • For yield-starved investors, preferred shares have been beneficial.
  • The problem is many have chased yield and many preferred shares are overvalued.
  • A careful look reveals there are many preferred shares trading in excess of their call price
  • Lastly, many preferred share ETFs are skewed towards REITs and Financials – understand your sector exposures

It’s been difficult to find income and yield with global interest rates being suppressed by central banks and a lack of fiscal policy stimulus from the U.S. government. It’s been a real tax on savers and investors that depend on fixed income to support their retirement. There’s nothing inherently wrong with preferred shares, but you need to look closely at the price you pay.

a. Preferred Shares Have Been a Solid Option

By keeping rates low, it was theorized, that investors would be forced into riskier assets. As a result we saw the run-up in Master Limited Partnerships – and their subsequent demise as oil and gas prices fell. We’ve also seen a run-up in preferred shares. Below is a graph showing the performance of the iShares U.S. Preferred Stock ETF (PFF) for 2016. It shows two things: (i) high volatility with a decline of 8.5% to a low of 35.89, followed by a run-up of 12.4% from the February low; and (ii) a good overall return with a year-to-date return of over 9%, both capital appreciation and dividends (current annual yield is about 5.6%).

(Source: Charles Schwab)
Jason Zweig points out in a recent Wall Street Journal article that PFF, which seeks to track the preferred stock index market, has taken in $2.2 billion in new money so far this year. This inflow of new capital is likely the reason that the price of preferred stocks has risen, which almost never happens with most of their return coming from their fixed dividends. This year, however, almost half the 9% total return of the S&P preferred index has come from rising share prices.

b. Many Have Chased Yield and Many Preferred Shares are Overvalued.

The top 10 holdings of PFF show a few things. First, nine of the top 10 holdings are financials, which represents a significant sector overweight. Next, you can see the run-up six month returns driven by a demand for yield from yield starved investors. What you don’t see is the largest single holding is actually cash standing at 3.6% of PFF’s portfolio.


Investors are unaware of the differences between preferred shares, common equity and bonds. One key difference – preferred shares are often callable. In fact, 28% of PFF’s $17.5 billion in holdings are callable by the end of 2016, according to Jason Zweig. Issuers of preferred shares have the right —not the obligation — to redeem those securities, taking them off the market in order to refinance at lower rates. The threat of rising interest rates suggests that many of these callable preferred shares will actually be called at, typically, a price of $25.

c. Many Preferred Shares are Trading in Excess of Their Call Price

For Example, GMAC Cap Pfd shares, currently trading above $25.20 are callable on September 18, 2016 at a price of $25.

Jason Zweig points to another good example. He highlights the $950 million in preferred securities from Bank of America’s Merrill Lynch Capital Trust II, whose price shot up from $25 in February to $26.50 in June, far above the $25 par value. Then, in July, the bank announced it would call the securities on August 15, 2016. Their price fell 2% in a day. This was one of PFF’s largest holding in July 2016.

d. Many Preferred Share ETFs are Skewed Towards REITs and Financials – understand your sector exposures

About 80% of preferred shares are issued by real estate investment trusts, banks and other financial companies. Investors need to understand that they are not just gaining exposure to a ‘different financial product’, but they could be unwittingly increasing their exposure to real estate investment trusts, banks and other financial companies.

IMPORTANT NOTE: This blog is for informational purposes only and comments will not be posted on this site.

[1] Article by Jason Zweig (Wall Street Journal August 12, 2016).
[2] Jason Zweig (Wall Street Journal August 12, 2016).
[3] Jason Zweig (Wall Street Journal August 12, 2016).

Nearly Half of Physicians Behind in Preparing for Retirement

According to a recent report prepared by the American Medical Association Insurance Agency, nearly half of the physicians who responded to a recent survey consider themselves behind in preparing for the financial future of themselves and their families. The survey results indicated gaps in personal financial knowledge and lack of confidence in financial decisions related to retirement savings, life and disability insurance coverage and estate planning.

Only half of the physicians reported reviewing their personal finances on a quarterly basis, while less than 30% reviewed them annually and less than 15% only reviewed them ‘as the need arose.’

In the report, only 6% of the physicians said they are ahead of schedule in retirement planning. More than half, particularly those under the age of fifty, stated they are behind in planning and saving for retirement.

Physicians under 40 were very concerned about having enough money for retirement, paying off their own medical school debt, funding children’s college educations, taking care of aging parents and having enough life insurance.

“It makes sense that physicians would have little time to spend on their own financial situations,” said J. Christopher Burke of the AMA Insurance Agency.

Planning for retirement is not just a matter of building up a large sum in a 401(k) or profit sharing plan. In addition, many physicians and dentists have a substantial amount of equity in their practices – an asset that can potentially be converted into an income stream during retirement years.

At Plotkin Financial Advisors we help physicians and dentists prepare not only for retirement, but also a profitable exit strategy for their practices.

For more information contact Shim Plotkin, CFP® at 301-907-9790 or by email at

IMPORTANT NOTE: This blog is for informational purposes only and comments will not be posted on this site. If you would like to contact the author, please email us at

Little Known CSRS Government Employee Benefit

federal-government-programsFor federal government employees under CSRS or CSRS Offset, the Voluntary Contributions Program (VCP) allows you to set aside extra money for retirement.  Contributions to the program are after-tax money and you can contribute up to 10% of all of the base pay you’ve earned over your entire CSRS career.  You must be still working to take advantage of this special benefit or separated from service butnot retired.

As an example, if you have worked for 20 years and your average base pay during this time was $70,000, your aggregate total salary is $1,400,000.  Of course, your base pay will have changed over the years, but for this example we will assume the base pay did not change.

Under the VCP, you can contribute up to $140,000 (10% of $1,400,000), either as a lump sum or over a period of time.

The VCP was originally established to allow CSRS employees to set aside more money in order to buy a higher pension.; and you can use the VCP this way.

But here is the unique part of the program – you can also max fund a Roth IRA.  For those of you who think you make too much money to fund a Roth IRA, this is a fantastic option.  The income limits do not applywhen you transfer to a Roth IRA from the VCP.  All growth in the Roth IRA is tax free and there are no required minimum distributions.

Very few people have heard about the VCP, let alone the ability to max fund a Roth IRA.  If you are a current CSRS government employee, or know someone who is, contact us so you can learn how to take advantage of this government program.

IMPORTANT NOTE: This blog is for informational purposes only and comments will not be posted on this site.  If you would like to contact the author, please email us at

Shim Plotkin, President of Plotkin Financial Advisors, Elected to the REISA Board of Directors

PRLog (Press Release)Nov. 13, 2012 – Plotkin Financial Advisors, LLC is proud to announce that Shim Plotkin, President of Plotkin Financial Advisors, has been elected to the Real Estate Investment Securities Association (REISA) Board of Directors.

On his election to the board, Shim said “A strong and resourceful REISA will undoubtedly help all of us provide our clients with a more diverse portfolio of investments.  And in the long run the public, broker/dealers, sponsors and advisors will recognize REISA as an organization that promotes excellence among all the members.  I look forward to working with REISA’s Board and membership in achieving its goals.”

Said REISA President Daniel Oschin “We congratulate both those newly elected and those re-elected, and look forward to their contributions to the board and the association.  As a democratic organization, REISA is proud of its members’ clear voices in the selection of its leadership.”

REISA is a national trade association serving alternative investments and securities industry professionals.  The association was founded in 2003 and has over 800 members who are key decision makers representing over 30,000 professionals throughout the United States.  REISA works to maintain the integrity and reputation of the industry by promoting the highest ethical standard to its members and providing educational, networking opportunities and resources.Plotkin Financial Advisors was founded by Shimshon Plotkin in 2000 and now oversees over $100 million worth of assets for clients around the Washington D.C. area.  The financial advisors at the firm focus on making a difference in the lives of their clients through education of diverse, yet prudent, investment strategies.  To learn more about the firm, please visit:

Securities offered through Independent Financial Group, LLC, memberFINRA ( ( and advisory services offered through Plotkin Financial Advisors, LLC, a registered investment advisor.  Plotkin Financial Advisors, LLC and Independent Financial Group, LLC are not related entities.