Frequently Asked Questions

Financial Planning

What should I expect when I come in to see you?

First of all, a warm welcome and a cup of coffee.  We’ll meet in one of the conference rooms at our Miami office.  We’ll give you a bit of personal introduction, and will be interested to learn how you came to us.

From there, we listen.  We want a general snapshot of your financial position, and we’ll really want to understand your specific concerns and goals for our engagement.

This is a time of seeing if we’re a good fit.  You want to know if you feel comfortable with us. We want to know if you have reasonable expectations (i.e. you don’t want a 15% return per year with no risk).  If all seems a go, we’ll enter into a financial consulting arrangement.

How many visits will this take?

It depends upon what you want done – but at least two; often more.  In our first meeting we get together and see if we’re a good fit.

Next in the process is an evaluation of your current situation. You can either mail, scan/email, or bring the documents we request in person.

Once that is completed we’re in a position to make recommendation(s).  You are welcome to implement these recommendations with other advisers, but our hope is that you’ll keep your business with us.

What's parking like?

Easy.  There is parking in the building. Just drive up to the kiosk and take a ticket. We will validate your parking for your visit.

¿Hablan español?

¡Claro que si! At least Jonathan does.  You wouldn’t know it from his name, but he is ½ Cubano and is as at ease doing business in Spanish as well as English. Glenn gets along pretty well, and can understand lo mayor.

Do you make house visits?

Sure – for our older clients for whom getting around is an issue.  We prefer office appointments, because that’s where we have our computers and all the resources we need to serve you.  If, for example, we need a form, we can simply print it for you.  Traveling to appointments takes time, and is reflected in the fee we mutually agree upon.

Are Saturday appointments available? Evenings?

Yes, of course.  Glenn is more limited on Saturdays, due to his CFP teaching schedule. You are most welcome to see our calendar and book an appointment here.

Can we communicate by text?

Short answer:   Yes, for something inconsequential – you’re running late, for example.  Please understand that we work in a very heavily regulated environment.  We are free to communicate with you by phone and using our business email addresses.  In this way various software programs we use can archive all of our communication for compliance purposes.  By the way, our email system encrypts both ingoing and outgoing emails which contain personally identifiable information.  This is for client data protection and confidentiality purposes.

Are you willing to work with my other advisers?

Yes of course. Our work frequently involves related professionals – typically the accountant or the attorney. We’re glad to work with those whom you already know.  If you do not already have a relationship with an attorney or accountant, we will be glad to make recommendations.  BTW, there is never a quid pro quo involved.  As a matter of business policy and ethics we neither pay nor accept referral fees from other professionals, nor do we accept any liability for their actions.

Why do you charge fees? Other advisers with whom I've worked with don't.

To quote St. Paul, the workman is worthy of his hire.  We go to work every day to earn our living just as anyone else does.  In life we find that one gets what one pays for.  What is cheap may turn out to be very dear indeed – especially when considering how much financial mistakes can cost.

Advisers who do not charge fees may be working on commission.  They hope that you’ll eventually purchase a product from them.  When you pay us a fee, we know (1) you are serious about the work being proposed, and will follow through with producing requested documents and attendance at meetings; (2) you expect and insist upon high quality service from us.  This is as it should be.  If nothing has been paid, there is no accountability.  We offer a fully transparent process – you can rest assured that our fiduciary standard of customer care means that our recommendations are made to benefit you and you alone – and not to generate a commission for ourselves.

What's wrong with working on commission?

Nothing at all, as long as the fact is fully disclosed to the client.  If you’ve ever purchased tickets from a travel agent or ordered movie tickets online, that agent or vendor has been paid a commission.  Insurance and annuity products are sold on a commission basis by the representative.  We pride ourselves on a transparent process.  If a commission is to be earned, that fact will be fully disclosed to you before you sign anything.

If you're getting a commission, why do you still charge a planning fee?

In most cases we make no recommendations before completing the planning process.  If the planning process points to the need for a commissioned product, then yes, the client would still have paid us for our planning time.

Investments

In what should I be invested?

We make no recommendations before completing our due diligence.  Only after we have a clear picture of your risk tolerance, income needs, tax situation, time horizon, and cash flow position do we make any recommendation.

There’s no such thing as a perfect investment.  Each investment product on the market was designed to accomplish a specific purpose, and has its own risk and reward characteristics.    So whether it is a managed account with mutual funds, ETFs, individual securities, bonds, annuities and insurance products, our job is to match you with the appropriate vehicle.

Will you do socially responsible investing for me?

Yes of course.  There are several mutual fund companies that screen their underlying investments by various social criteria.

How much do I need to retire on?

We can do a projection for you.  For example, we can plug these assumptions into my calculator:  you want to retire 10 years from now; you want to have an income of $100,000 in today’s dollars; you expect to earn overall an 8% rate of return; inflation is anticipated to be 3.5% over that time; and you have a life expectancy of 30 years.  Given those inputs, you’d want to have some $2.44 million in your investment account at retirement.  This is rarely how real life works, however.  Will your home be paid off, thereby reducing the cash flow needs?  Will there be an inheritance?  Do you want us to factor social security income into the equation?  Do you have rental property income?  All of these are considerations.

A TV adviser I like recommends growth index funds. What do you think?

So he does.  But investing is not a one-size-fits-all proposition. Our recommendations are tailored to you and your situation specifically.

Each mutual fund has a stated objective:  long term large cap growth is one of them.  That means that the fund manager invests in large companies for the long term that have good growth prospects.  There are funds that invest on a value basis (the fund manager analyzes each holding’s fundamentals and looks for good growth prospects).  Others invest in smaller companies.  Still others are sector funds – investing in energy, or raw materials, or precious metals, for example.

Are you stockbrokers?

No.  CameronDowning is a Registered Investment Advisory firm.  As such, we are paid by our clients for advice. Our fee for that advice is often taken, with the client’s permission, from his or her investment account and calculated as a percentage of the assets under management.  Our clients often also give us discretion to place trades on their behalf. You should know that we never take custody of client assets.

We are not active traders.  We have no hot tips for you.  We focus on the long-term planning, and invest for the long term. So if you’re looking for someone to actively trade your account and produce a lot of short-term gain, we’re not a good fit for you.

What are ETFs?

ETFs, or Exchange Traded Funds, began as investments in a basket of individual securities that track an index. They are traded like stocks, meaning that they can be bought and sold during the course of the trading day. You can use limit orders in ETF trading.  The indices tracked by ETFs can be most anything, including currencies; specific raw materials; and stock market indices.  There are many ETFs now that are actively managed, meaning they do not attempt to track an index, but are focused on growth.

A popular adviser on TV hates annuities. Do you?

It would seem she does.  Again, each investment product is designed for a specific purpose and situation.  If the tool fits the job, use it.

Annuities generally have two phases – an accumulation phase and a payout phase.  During the accumulation earnings can be either fixed; variable (from mutual fund like subaccounts) or indexed (to the S&P 500 or other stock market indices).  The plus is that they offer tax deferral during accumulation.  The minus is that income is taxed on a gain over basis at ordinary income tax rates.  There is also no step-up in basis at death.  Still, for the self-employed individual, this is a way to purchase a pension.

I am a foreign national who travels to Miami frequently. Can I open an account with you?

Yes.  If you have a taxpayer ID in the United States, yes we can.  There is a $500,000 minimum account size for doing so.

Do you do IRA rollovers?

Yes.  An IRA rollover means that you are moving money out of your qualified plan at work due to some triggering event – usually your separation from service with that employer.  You do a tax-free rollover of the qualified plan balance to your individual retirement account.  This should be undertaken with care, as employer sponsored plans may have features not available in IRAs – specifically loan provisions and availability of withdrawals from an employer sponsored plan at age 55 without a 10% penalty – which is 4 ½ years earlier than from an IRA.

How should I invest my IRA?

That depends upon all of the factors mentioned in the first question above.  The IRA can be invested in financial assets:  stocks, bonds, mutual funds, CDs, and money markets.  IRAs cannot hold life insurance. Also, an investor cannot margin securities nor trade options with an IRA.

What are the options for college savings?

There are quite a few. First, you can simply invest in your child’s name.  The child owns the account.  This may save you some taxes on the growth, but there may be a kiddie tax involved.

There is the Uniform Transfer to Minors Act account, or UTMA.  It is an account with a trustee – the assets are held in trust by a trustee for the benefit of the minor.  At the age of majority – 18 in Florida – the minor has full access to the funds.  These earnings may also trigger a kiddie tax issue.

529 College Savings plans are also popular.  These are sponsored by the various states.  There are two types – the prepaid and the mutual fund type.  Florida sponsors the prepaid tuition variety. This can be purchased at a bank or online during a specific offering period each year.  Other states offer mutual fund plans.  The advantage is in taxation.  Money goes into the account on an after-tax basis.  If used for qualified education expenses, money comes out of the plan with no taxation at all – meaning the earnings are never taxed.  In states where there is an income tax the selection of a 529 plan sponsor becomes more important, as there may be state tax advantages as well.

What tax considerations go into your investment recommendations?

Taxes are a big factor. Your investment earnings can be taxed on a capital gains basis (0%; 15%; or 20% rate depending upon overall tax bracket). Dividends and distributions from IRAs and annuities are always taxed at one’s ordinary income tax rate.

Your need for income is a big part of it too. If, say, you want to retire at age 55, income planning becomes crucial, as you are below the 59 ½ age at which one can withdraw from an IRA without a 10% tax penalty.  Taking into account your entire income tax situation is crucial in making any investment recommendation.  That is why we request a copy of your recent tax returns.

Insurance

What kinds of insurance do you offer?

Life insurance, disability income insurance, and long-term care insurance.  In obtaining Insurance coverage for our clients, we act as brokers and shop the market for the most suitable product at the best price.

Can I get auto or homeowner's through you?

No – that requires another license which we do not hold.  As part of a complete financial planning engagement we will evaluate the client’s risk exposure in these areas, and recommend coverage changes as appropriate.  We are glad to refer you to insurance agents who can assist you with these policies.  By the way, we neither pay to nor accept referral fees from other professionals, nor do we accept any liability for their actions.

What role does life insurance play in a financial plan?

A crucial part.  A life insurance death benefit can complete the overall plan in the event of an untimely death. For a fuller explanation, see our page on insurances.

Tell me about life insurance for tax-free income.

The strategy is to purchase a policy in such a way that maximizes the cash paid in relative to the policy death benefit.  In other words, you want to keep the death benefit low and the cash value high.  With compound interest over time, one can generate a substantial tax-free income. If a life policy does not become a modified endowment contract, monies loaned out are tax-free to the policy owner.  There are some caveats, of course:  the underlying policy must be kept in force, or all distributions to the extent of gain over basis paid in become immediately taxable.

Can I get long-term care benefits in a life policy?

Yes – a substantial measure of benefit. Today’s policies don’t just benefit the beneficiary – there are significant benefits for the policy owner as well.  In many policies the death benefit can be advanced, on a discounted basis, should the insured become terminally, chronically, or critically ill.  Although not a substitute for long-term care insurance today’s policies can be a substantial resource toward meeting long-term care needs.

Are my assets protected in a life insurance or annuity contract if I am sued?

There is a significant degree of asset protection in Florida with funds in life and annuity policies. Florida courts have long held that such assets are judgment proof, meaning that should you lose a civil suit, these funds are not available for attachment by the plaintiff.  There are lots of ins and outs to this, and you should consult an attorney to be sure.

Who can get life insurance?

Anyone who can medically qualify for it and afford to pay the premium.  If you just had a cancer diagnosis last week, you’re not going to get life insurance.  If you had a triple bypass last Wednesday, you’re not going to get life insurance. Unfortunately, most people want to purchase it when they have a health scare. Insurance companies call this adverse selection, and therefore medically underwrite each life policy.  This keeps the insurance companies in business. If not for underwriting, no one would purchase life insurance until he became sick.

I live outside the US, but travel to Miami frequently on business. Can I buy a life policy from you?

Possibly, yes.  You’d need to have demonstrable US ties (i.e. business interests here; real estate here), a US tax-payer ID, and premiums must be paid in US dollars.  The application and medical exam must be done here in Miami.

What does medical underwriting involve?

An examiner will come to your home and complete a medical questionnaire with you and do a brief physical. The examiner will draw blood, and you’ll pee into a cup. Depending upon the amount of insurance, there may be an EKG. The company will most likely also order your medical records from your physician.

Should I purchase disability insurance?

The purpose of DI, as we call it, is to insure your future stream of income.  It is most often purchased by professional people who have invested substantial time and money into their professional educations.  Typically one can insure anywhere from 60% to perhaps 65% of one’s income up to a cap. The benefits received on an individual policy are tax-free if they have not been deducted somewhere else.  There are lots of moving parts to DI – from policy definitions to benefits & pricing.

Is disability insurance expensive?

There are many factors that go into the pricing of a DI policy. These include your age; the amount of income to be insured; the elimination period (sort of an initial deductible, during which no benefits are paid); the benefit period (for example, 3 years, or to age 65); the inflation adjustment, if any. Expect to pay between 3 – 5% of your insured income.

How do I sign up for disability insurance?

There is not only medical but financial underwriting.  The medical underwriting can actually be a little more stringent than for life insurance.   What may not kill you may lay you up in bed, causing a claim.  For the financial underwriting you’ll have to submit tax returns to demonstrate the income that you want to insure.

Do I really need long-term care insurance?

Long Term Care insurance (LTC) is designed to pay for the necessary care for a long-lasting debilitating illness, such as Alzheimer’s, thereby preserving the retirement nest egg for the surviving spouse.What is your primary retirement concern? 10 out of 10 people will tell us that it is outliving their money. What happens if one spouse becomes ill?  Probably like most people, you will put yourself, as the survivor, at risk.

What happens if I never use the LTC policy?

What happens if you go 6 months without crashing your car?  You paid for coverage, and you’re glad you didn’t crash your car.  Still, a commonly cited statistic is that by age 75, 75% of us will need some type of long term care.

My spouse is just now showing signs of early Alzheimer's. Can I still by LTC?

Probably not.  There is medical underwriting involved, and part of that underwriting will be cognitive tests. For example, you may be asked to come up with a list of 10 items.  A little later on the examiner may ask you to recall those 10, or use some of them in a sentence.   In ways like this cognitive impairment is discerned.