On August 28, 2015, Principal and Family CFO Diane Compardo was featured on the St. Louis Business Journal’s Table of Experts discussing Women in Finance. If you are a subscriber, you can read the full, twelve-page special supplement by clicking here (it starts on page 74).
If you are not a subscriber, you can read Diane’s responses below.
STLBJ: What are some of the biggest financial concerns women–especially Millennials and Boomers–are facing today?
Diane Compardo: Two things come to mind, longevity and preparing for wealth transfer. As women continue to live longer, there is an increasing concern regarding whether their level of assets will be sufficient to maintain their current standard of living and independence. Women generally don’t want to be a burden to their family and therefore tend to supplement their core financial assets with protection for long-term care and certain medical costs. We’re also starting to see the biggest transfer of generational wealth in history and that is going to put women more into the forefront of playing the role of being the financial steward for their families. It speaks to the need for women to become more financially savvy so they can be prepared to assume their role and to also help educate the next generation.
STLBJ: How do you talk to your kids about money?
Diane Compardo: It’s important to start these conversations early in ways that are productive for all parties within the family unit. Any conversations about money should be grounded in discussions regarding the particular family’s values and core beliefs. For instance, why do we work (if we work at all)? How do we utilize our free time to help others? How do we look beyond ourselves and find purpose in advancing our broader community? Knowing how all of these issues fit into each family’s particular dynamics will help children build a foundation so they are better positioned to make sound financial decisions as they grow up.
STLBJ: So when’s early?
You can start at a relatively young age since kids today tend to be extremely aware of their surroundings. They can understand when you lead by example – whether that’s the collection basket at church, donating to a family charity, or setting expectations around helping on the home front. As they mature, you can further increase the expectations about money by creating accountability and responsibility – perhaps by paying for chores around the house, and expecting them to save and also pay for special items.
STLBJ: What kind of financial tax incentives should women business owners be aware of?
Diane Compardo: One of the things that always sticks out when I’m working with business owners – whether it be a woman or a man, is that they tend not to plan appropriately in advance to achieve the expected value from their exit strategy. There is a critical need to have a well thought out business plan that becomes the foundation of a sustainable business and just as importantly – a salable business, whether that is to an outside financial or strategic buyer, or a next-generation family member(s). I believe in today’s business world that women benefit from having a strong support network. That is generally obtained through a combination of formal networks and third party advisors.
STLBJ: What investment opportunities are you seeing in this environment?
Diane Compardo: With interest rates hovering around historic lows, and the expectation that they will remain low for the foreseeable future, we’ve taken the opportunity to rethink the defensive portion of our clients’ investment portfolios. About five years ago we added a Director of Alternatives to our investment department who was charged with building out a robust platform of alternative investments to work in conjunction with our current fixed income portfolios and serve as an additional line of defense. The objective of these alternative investments is to provide investors a return somewhere between stocks and bonds, not be dependent on stock or bond directionality (be different), focus on capital preservation and risk management, and be a combination of diverse strategies, each of which will have good and bad ‘seasons.’
STLBJ: How can women maximize the personal, financial and tax benefits of charitable gifts?
Diane Compardo: Having a comprehensive charitable plan in place for the family is really important. For example, many times charitable giving is only considered to be financial giving – giving back with one’s time can also be very rewarding, but is also something for which a financial benefit cannot be measured. On the financial side, there are many vehicles for donating that provide both income tax and estate tax benefits. For example, pre-funding charitable gifts utilizing a donor advised fun and donating appreciated stock is a great way to maximize the income tax benefit, but also allows for the family to get their children involved as part of the philanthropic decision making process. Ultimately, the greatest personal satisfaction comes when the donor gets involved with the organization and sees first-hand the fruits of their donations – whether that is financial, time, or both.
STLBJ: What qualities should you seek in an adviser?
Diane Compardo: Generally we tend to maintain lifelong relationships with our clients, many times covering multiple generations. Why is that? Our clients have told us that they want to work with an advisor who is technically competent and trustworthy. A key element of a trusting relationship is to have a model that allows the advisor to provide advice that is independent and objective, and solely in the client’s best interest (adhering to a fiduciary standard of care) – no commission products, no revenue sharing, or other outside fees. Regarding technical competency, it is important that the advisor not only have the necessary experience, but also makes the effort to obtain appropriate professional designations such as CERTIFIED FINANCIAL PLANNER, Certified Public Accountant, and Accredited Wealth Management Advisor, so that they are best prepared to understand a client’s often complex family situation. This could be anything from helping children and possibly grandchildren through various life stages, second marriages, assisting with adult parents, and other key life events or issues. Lastly, clients are looking for an advisor that is often part of a larger team environment or part of a firm that has a well-thought out succession plan so that when the advisor’s retirement approaches, the transition/impact to the client is a non-event.