ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 19, 1996 TAG: 9605170089
SECTION: SENIOR STYLE PAGE: 4 EDITION: METRO
SOURCE: SARAH COX
"The little old lady in tennis shoes who wants to trade options we see very little of,'' said Suzn Head, branch manager of Dean Witter's Roanoke office.
What money managers such as Head do see a lot of is extremely cautious, conservative seniors who may err on the side of being too careful.
Once retired, she said, many seniors believe they don't have the time left to replace funds they may lose investing in stocks.
"Capital preservation is critical to them,'' said Head.
Dean Witter's Brian Wilson, who recently completed a retirement-planning course, said most seniors equate safety with low-growth investments, and that just isn't realistic.
"A lot of safety can come from diversity, including aggressive growth,'' he said. Many who are retired or getting ready to retire have been close to the Great Depression, he explained, and this is part of the reason for their hesitation.
But, he said, "if they're getting 5 percent on a CD and they're in the 15 percent tax bracket, they'll lose a portion of that investment income.'' And that's not playing it safe.
Another tendency, said Robert Brailsford of Wheat First Butcher Singer, is for the newly singled senior to be paralyzed by overwhelming options and simply opt to do nothing.
"A lot will leave all their assets in the joint name, and this will increase the eventual cost. If they don't settle the estate properly, within a certain time frame, they could be penalized by the IRS,'' he explained.
In addition, he said some will get advice from a very close friend whom they envision as knowledgeable.
"This could be a costly mistake,'' he said. Instead, he suggested interviewing different financial advisors, ask what they specialize in, how they do business, and how they charge. Then, give them your information and ask how they would handle your business. You should interview at least three candidates, and you can get some names by talking to people in situations similar to your own.
"You'll get a sense of whether they have your best interests at heart,'' Brailsford said.
Head said it's imperative to find someone whose personality matches your own - someone you can identify with. Information, she said, is not the antidote for fear. Investors have to come around themselves. They have to be comfortable with their investment.
"Fear and greed and emotional decisions take over, and brokers hold clients to the line. The main reason to use a broker is to protect clients from themselves,'' she said. Head suggested attending a few financial seminars.
Brailsford conducts a seminar called "Investment and Financial Planning Strategies" through the continuing education departments of Botetourt and Roanoke counties.
"You will certainly learn some things you don't want to invest in," he said.
Once you interview financial planners you will get a feel for the firm and the person.
Head said a potential investor linvestor needs to analyze investment objectives. An objective can vary - it may be primarily income, safety of principle, growth, tax savings or a combination of any or all of them.
"You cannot judge performance without knowing your objective,'' she said. The next step is for the advisor to analyze the client's risk tolerance.
Dean Witter has new clients fill out an extensive questionnaire for this purpose.
Wilson, who said about 85 percent of his client base is seniors, stressed the importance of structuring a well-balanced portfolio so that one does not outlive one's money.
Nowadays, you have to plan for a lengthy retirement. People are living longer. And Social Security, which was originally designed to be used only as a safety net, he said, has been mistaken for a form of retirement. It no longer can be regarded as such.
"Social Security will be here, but there will be less money. We used to have 15 to 20 people funding the account for every person drawing from it. Now that's a 5-to-1 ratio, and it won't be long before there will be more retired than people contributing,'' said Wilson.
Brailsford said it's really the same ball game, investing when you're young or older. Investments are like tools you pull out of your tool box. You just use them to achieve a goal. In addition to your investment objective, you must also integrate liquidity, risk tolerance and your tax situation into the formula.
"I feel that all your investments should be safe investments," Brailsford said. "People ought to be comfortable with their investments. The purpose of investing is to supplement other things in your life that make you happy,'' he said.
One cautionary note that Brailsford and Wilson both brought up: An investor should be willing to wait out a slump.
"During '94, when we had such a bad market, we held our clients' hands. We need to be there for objectivity,'' said Wilson.
LENGTH: Medium: 93 lines ILLUSTRATION: PHOTO: 1. Brian Wilson\Dean Witter. 2. Robert Brailsford\Wheatby CNBFirst Butcher Singer.