Recently, I was asked to begin writing for Forbes.com. I thought an interesting topic for my first article would be a focus on how a financial plan can help at different stages in one’s life. That first column is below, and as I add additional columns, I’ll likely include them on the Minerva website as well.

For the tip of the month, we take another look at health insurance and specifically experiences I’ve had recently in negotiating medical bills. Finally, the question of the month explains why you might see a temporary drop in the value of your account when securities are purchased.

As always, feel free to forward our newsletter on to friends or family if you think it would be useful to them and don’t hesitate to send questions or feedback about the content.

Best regards,
Micah Porter, CFA, CFP®


Early Career, Starting A Family Or Retirement: A Financial Plan For Every Stage In Life
Micah Porter, CFA, CFP®

One of the first questions to answer when  considering a financial plan is whether or not you need one. While most people would be better prepared with at least a rudimentary financial plan, there are certain times when having a solid, comprehensive financial plan can change your life’s trajectory. Here are a few examples from my own life and practice:

Early Career
Years ago, when I was single and worked in Corporate America, I didn’t consider working with  a financial planner. I was young, earned a good income, maxed out my 401k and received stock and options.  I assumed that financial advice would be of little value to me since  I thought I was doing everything right – but I was wrong.

With benefit of hindsight and experience, I can identify several tactics that would have left me more financially well off.  Of even more value, though, would have been the exercise of putting a plan in place and given real thought to long-term financial goals and what it would take to achieve them. I could have, if necessary, adjusted my savings rates and understood how aggressively I would be invested. And with that framework in place, I could have made adjustments should life have thrown me  a curveball.

What’s Needed Here: Financial plan with a savings/investment focus. Can be self-implemented as opposed to entering into a retainer with the advisor.

Mid-life
As I’ve moved into mid-life, I’ve found that life has become more complicated. From marriage to a child on the way, my life has become more intertwined with others and financial responsibilities have grown. I find the same is true for many couples with whom I’ve worked. In general, their combined incomes are extremely good and savings isn’t an issue, but they have neither the time nor the inclination to ensure they’re making the optimal financial decisions.

Given that these couples have high incomes, they tend to have already saved a good amount, meaning investment management and risk management via insurance are key. Furthermore, if kids are involved estate planning is also a critical issue.

What’s Needed Here: A comprehensive plan covering investments, insurance and estate planning. Tax mitigation may also be an issue. Can be self-directed, but depending upon time and inclination, an ongoing wealth management arrangement might be in order.

Retirement
When pensions were the norm, retirement was a much simpler proposition from a financial perspective. Between social security and pension income, most retirees could expect a regular stream of income that would in many cases approach what they earned when they worked. Unfortunately, pensions by and large have gone by the boards, shifting the risk of generating a steady stream of income to retirees. Maximizing the likelihood that this stream of income remains steady and safe throughout retirement is the number one issue for retirees and near retirees with whom I work. Many also seek assistance in understanding the ins and outs of Medicare and social security, as well as the possible need for long term care insurance.

What’s Needed Here: A comprehensive plan focusing on an income generating portfolio, making the optimal choices with regards to Medicare and Social Security and ensuring risks are covered and estate documents are in order. As is the case with mid-life, those at or near retirement can opt to implement the plan themselves, but many clients at this stage elect to enter into an ongoing relationship with an advisor.

Clearly, the above list isn’t meant to be all encompassing – certain events, regardless of when they occur in life can make having a plan in place that much more critical. Nevertheless, making the decision to speak with a financial advisor can certainly be beneficial for many people at various stages in life.


Financial Planning Tip – Negotiating Medical Bills
Micah Porter, CFA, CFP®

One of the recurring themes in newsletters over the past several years has been healthcare. Part of the reason is that the Affordable Care Act drove a good deal of discussion. The other reason is that healthcare comprises a sizable percentage of most clients’ budgets.

Although I’m a business owner, the rules surrounding group policies in Georgia  are such that group insurance doesn’t make sense for us. So, we insure via an individual policy which means that I deal directly with the insurance company fairly regularly to discuss how claims were treated. Knowing when to question our insurer on treatment of a claim has saved us several hundred dollars over the last few months, and will potentially save us nearly a thousand dollars more in the next month or two. Based on that, I thought it might be helpful to share what I’ve done.

Treatment denied as unneeded – about 6 months ago, our insurer denied a routine treatment our doctor had prescribed. The entire amount was passed on to us at standard provider rates (more on that below). I called the insurer and politely explained the treatment and why the doctor had prescribed it. The representative said she’d re-submit to see if the insurer would cover it, and in the end they did saving us well over $500.

Testing not covered by policy – about 2 months ago, Jennifer had some routine testing done for pregnancy. Her obstetrician recommended the testing, but our  policy didn’t cover it. Furthermore, because the policy wouldn’t cover it, we were charged the standard rate for the tests as opposed to the insurer’s negotiated rate — and our rate was 60% higher. Once again, I called the insurer to see if they would reconsider and they refused. I then tried calling the vendor to see if they would charge us the rate they had negotiated with the insurer, and they refused as well. There are services that will negotiate medical bills on your behalf, and at this point, I’m going to give that a try. If that route is successful, I’ll write about it in a future column.

The lessons I’ve taken away from my experience in dealing with insurance companies are straightforward:

  • Read the statements your insurer sends you to see what they’re covering and, more importantly, what they’re passing on to you.
  • Don’t hesitate to contact the insurer to see if they’ll reconsider failure to cover an expense if you think it should be covered.
  • If the insurer refuses to reconsider, try calling the medical service provider to negotiate a lower bill.

If you’re covered by a group policy or by Medicare and Medigap, you’ll probably run into fewer issues with your insurer than those of us who have individual policies. Still, given our current system, chances are all of us will have a billing issue at some point and following the above pointers could well result in real savings for you.


Client Question of the Month – Why Does My Account Value Temporarily Drop When Securities Are Purchased?
Micah Porter, CFA, CFP®

For those of you who  track your portfolio value fairly frequently, you might have noticed that after a purchase is made, your portfolio value temporarily drops. If the market is down over this timeframe, part of the drop is attributable to the market, but most is likely due to how TD Ameritrade accounts for the purchase.

The first part  to understand in answering this question is that your brokerage account is a sweep account. More specifically, in every brokerage account, you have both a money market holding and a placeholder for cash. Whenever you take money out of the account – either by making a withdrawal or by purchasing a security – the cash placeholder is debited. So, if the cash placeholder had a value of zero and you then withdrew $1,000, the cash placeholder would reflect a balance of -$1,000. The next business day, $1,000 is swept from the money market account to cover the negative balance in cash, and the balance of the cash placeholder returns to zero.

Things are a bit more complicated when securities are purchased, and the reason is that delivery of the security typically does not happen on the same day they are purchased. For mutual funds, the funds are delivered the next business day, and for stocks and bonds, delivery – technically known as settlement – can take 3 or more days. Nevertheless, TD needs to set aside the cash needed once settlement occurs and they do this by debiting the cash placeholder. However, because the security hasn’t been delivered, it looks as if the account has dropped in value by the amount of the purchase. This temporary decrease is cleared up once the purchased security is delivered. In addition, because it was just a cash placeholder that was debited as opposed to money market, you continue to earn interest on the money market until delivery of the security.