Finance

A New Era of Wealth Management

Generations of Americans trusted in the bank as an institution and as a symbol of how working hard and saving money could help us get ahead. From Main Street to Wall Street, banks represented the foundation of our economy, both in our pocketbooks and in our mindsets. When big banks failed, that foundation was badly shaken.

Elizabeth Eden, principal of Diastole Wealth Management, has been working with financial clients for 35 years and witnessed this shift in investing strategies and confidence that took place immediately after the banking debacle of 2009.

“People are more aware now of banking and the economy,” Eden said. “Banks are not considered quite as safe as they used to be, so people are diversifying a little bit more to keep their assets safer.”

Eden explained that it’s now common for people to spread their assets out to avoid keeping too much in any single institution.

If shaken confidence in banking has affected where clients keep their assets, Eden noted that it is rapid ballooning of costs that is changing how people approach debt and wealth management. By looking historically at prices for many major expenses – houses, tuition and healthcare – it’s easy to see how costs have outpaced inflation because of the financial systems now in place to pay for them.

As one example, “because we finance so much of the house purchase, the house can cost more” Eden explained. “It’s all predicated now on how much debt you can support.”

Eden added that twenty years ago, college loans were much smaller. “All of a sudden we came to a place where college loans became very, very generous. As the government started to assist in funding college educations, we began to see a 7 percent increase in tuitions, but not before that time. Before that time, the tuitions increased along with inflation,” she said.

“We are pushing children in that direction,” she said, adding that the debt culture is driving prices up and encouraging students to acquire consumer debt while in college, even before having an income to make credit card payments. This is “drawing young people down a path that’s focused on debt – and that’s unfortunate for them.”

Eden hopes to see an increase in online tools and games to help teach the younger generations how to create better, savvier financial habits. Early learning, combined with fun, is important for building a good relationship with money.

“With my own son and grandson, and with a lot of clients’ children,” Eden said, “we recommend that they be allowed to choose one share of one stock each month, that they’d like to own to slowly build portfolios as children. Of course, they choose stocks of companies they understand, like Apple, and they put little tiny portfolios together, watch the stocks, and think it’s wonderful fun.”
Eden explained the importance of parents finding creative ways to help children learn about managing money and how the U.S. economy works. “We don’t teach children in schools how to handle money at all. That’s unfortunate, and it leaves them ill-prepared and vulnerable.”

While the costs of healthcare aren’t financed like other major purchases, Eden explained that healthcare expenses began skyrocketing, outpacing normal inflation, once HMOs were introduced. 
“Back in the old days,” she said, “we had 80/20 coverage, so consumers paid 20 percent of their healthcare costs, and they knew what those costs were. Then we went to HMOs where you didn’t really pay any of your healthcare costs, just a $20 copay. At that point, we saw huge inflation in healthcare prices because there could be.”

The huge jump in healthcare costs are now impacting long-term care costs and planning. Many long term care insurers “underestimated the incredible increase in the cost of healthcare,” Eden explained, adding, “A lot of long-term care insurers will have problems going forward.” Consequently, this adds the burden of those expenses back onto clients, making the strategic and comprehensive planning she provides even more necessary.

Eden specializes in creating customized solutions that start with a comprehensive plan. Once that’s in place, she said that she checks in with clients every month to see if they’ve experienced any changes that may alter their plan.

“Because we start out with a comprehensive plan,” she explained, “we know exactly where we’ll be at any given time. When a client gets ready to retire, their money is there. We will tell a person when they have enough money to support the cash flow they need. That way they don’t retire prematurely. If they are forced to retire prematurely, obviously, it requires more planning.”
Diastole offers free planning and has no asset minimums, which means Eden often helps clients who won’t have much retirement savings. “We’ll help them to know how much they can spend without running out of money.”

For clients with assets invested in the market, Eden understands the importance of helping them weather volatility. “The very best thing we can do for them is to keep them from selling in a crash or downturn,” she said.

“If people just hang on, they’ll be okay. It’s pretty simple, but it helps to have somebody holding their hands in that process, because when it’s your money and half of it disappears overnight, it’s pretty scary.”

Eden’s approach is one of preparation and staying ahead of changes, ensuring that her clients always have the confidence of knowing they’ll have the financial security they need when they need it.

For more information visit: www.dwinvest.com

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