Secrets of 6 top financial advisers

Secrets of 6 top financial advisers
Some of the financial planning profession's most respected veterans reveal their favorite strategies for tough times.

Strategies from those who know

• Send feedback to Money MagazineWhen you're paddling in rough financial waters, it helps to have an experienced guide. That's why we've taken some of the most pressing money questions you have and posed them to people who tackle these problems every day.
These half-dozen pros are among the most esteemed advisers in the field. Some serve only wealthy clients, some the merely affluent.
But whatever their outlook, they share wisdom based on years of experience - a grand total of 158 years - and thousands of hours working with people who, like you, want the best possible future for their families.
Let the learning begin.
By George Mannes, Money Magazine senior writer

The secret to staying cool in this market

Years in business: 23Client assets: $50 millionKnown for: Leading planner voice in the Latino community
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Know what you can control
Louis Barajas - The coachLouis Barajas, Wealth Planning Santa Fe Springs, Calif.
Obviously, it's okay to feel upset. If you're really interested in helping yourself, think about what is within your control - and what isn't.
You can control how much money you're spending. You can control whether you're becoming more valuable at work. You can't control your office being shut down. You can control whether you put a résumé together and start looking for a job.
You're saying, "I've lost $50,000. I've lost $100,000." You can't change the event. What you need to focus on is the outcome you want. I've gone through this with a lot of clients: "What was the money for?" I ask. "For my retirement," they say. "I just wanted to play golf a couple of times a week and travel once in a while."
And we've sat down and looked at their portfolios. A lot of times they're still on target for that retirement. Or maybe instead of playing golf three times a week, they're going to be able to play twice a week. The feeling of having lost control of outcomes is what creates panic and fear. Don't forget that you do have options.

The secret to creating the right mix

Years in business: 39Client assets: $500 millionKnown for: Wrote the textbook "Personal Financial Planning;" teaches at Pace University
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Tailor the averages to who you are
Lew Altfest - The teacherL.J. Altfest & Co., New York City
Start out with a portfolio that's 65% stocks and 35% bonds and cash. That's my clients' average asset allocation. That's moderate: It gives you the upside of stock with significant protection for times such as now.
Then you have to take into account your personality and your circumstances. How safe is your job, how much money have you accumulated, can you afford to take risks?
If you're young and have decent risk tolerance, you could go to 80% stocks. If a lot of your money goes toward debt repayment, shift more toward bonds. But if your portfolio is less than 50% stocks, be prepared to accept a lower standard of living in retirement.
You can make tactical moves too. I think you should be overweighted in stocks now because you have the potential for above-average returns. Pull back when everybody says, "Why did we ever doubt the market?"
People want to tilt a portfolio toward that which has performed well and away from the areas that have not performed well. You should be doing the opposite. The thing that you should do robotically is rebalance and get back to your original allocation every quarter or once a year.

The secret to saving more money

Years in business: 29Client assets: $120 millionKnown for: Former chairwoman, National Association of Personal Financial Advisors
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Fund your goals before you spend
Peggy Cabaniss - The calm voiceHC Financial Advisors, Lafayette, Calif.
It's easy to fritter money away. What you need is a plan.
Let's say you make $10,000 a month gross. Write that down. Take out what your income tax is and what you pay for Social Security. Take out whatever is deducted from your paycheck for your health plan and your 401(k).Notice that I set out goals first. What 95% of people do is, money comes into their checking account, they spend it, and at the end of the month there's nothing left. Of course they don't accomplish their goals.
On the day that money hits your checking account, have a certain amount automatically transferred to a savings or brokerage account. The main thing is that it doesn't sit around tempting you to spend.

The secret making your money last

Years in business: 27Client assets: $650 millionKnown for: Former chairman, Certified Financial Planner Board of Standards
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Keep two years in cash
Harold Evensky - The deanEvensky & Katz, Coral Gables, Fla.
In retirement, if you start taking money out of stocks at the wrong time, you're in trouble: "Gosh, the market's down, but I've got to sell because I need groceries." So I developed the cash-flow-reserve strategy.
We don't believe in investing in stocks or bonds unless we expect to hold on for at least five years. Problem is, carving five years' worth of cash out of a portfolio puts too big a chunk in money markets. There's an opportunity cost to not being in the market. Two years of cash provides a significant cushion.
So if someone has a million dollars and needs 5% a year - $50,000 - we have two portfolios: a $900,000 stock and bond portfolio, and a $100,000 cash reserve. Maybe put the first year in a money-market account and the second in a short-term bond fund.
We've never run out of cash, but if we did, we would simply sell short-term bonds in the investment portfolio. We wouldn't have to sell stocks or long-term bonds when they're in the tank. The system worked well in the crash of '87 and the tech crash, and it's working very well now.

The secret to avoiding a high tax bill

Years in business: 26Client assets: $150 millionKnown for: Helped establish the personal financial specialist designation for C.P.A.s.
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Shelter your best investments
Jim Shambo - The tax cutterLifetime Planning Concepts, Colorado Springs, Colo.
You should always maximize tax-deferred 401(k)s and IRAs, but what assets do you hold in them? The usual argument is to keep stocks outside your 401(k) so that when you sell you're taxed on the capital gain, not ordinary income.
But most people ignore a fund's portfolio turnover to their detriment. Even if you don't sell a single share of your actively managed stock fund, you're going to have gains because the whole portfolio turns over every five years, maybe less. The longer you hold the fund, the better off you are having it in a tax-deferred account. If you're under 40, you've got maybe 40 years of tax deferral.
Outside an IRA you're paying capital-gains taxes every year. Turnover is why I like index funds. Their portfolios turn over maybe once every 20 years. If you invest only in index funds, keeping stocks on the outside of an IRA and a 401(k) and bonds inside makes sense.
Actually, it's important to have a blend of stocks and bonds inside and out of your retirement accounts so you have the flexibility to rebalance in the IRAs. You don't want to sell stocks in a taxable account and generate gains.

The secret to balancing goals

Years in business: 14Client assets: $40 millionKnown for: Wrote "The Young Couple's Guide to Growing Rich Together"
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Make long-term targets No.1
Jill Gianola - The family's helperGianola Financial Planning, Columbus, Ohio
I start with clients' longest-term goals first - usually retirement - and see what it would take to fund those. Then I work backward. Their second-longest- term goal is often their children's college. The furthest goals are usually the big ones; if you don't start working on them now, you're not going to make it.
People are willing to rearrange their short-term goals - "Okay, we can't buy the house for another couple of years" - but they don't necessarily want to postpone retirement. You have to make progress on several fronts to make sure you get to the finish line.Start with the minimum. With a 401(k), the minimum is to get the match. For me the minimum on a credit card is what it takes to pay it off in three years. If you have enough to meet both goals, you're good to go.

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