Although some investors seek out “get rich quick” investments, the best way to build wealth continues to be investing for the long haul.
Katie Bruno, financial advisor with Morey & Quinn Wealth Partners, said she is seeing a trend toward the incorporation of cryptocurrencies and crypto assets into investor portfolios.
“There are more than 75,000 different cryptocurrencies on the market,” she said. “We’ve seen these assets grow at a rapid pace in recent years.
“I think a lot of retail investors are looking for exposure to cryptocurrencies, but they really do not understand what they own. Because of this, I think there is a substantial amount of risk in the digital currency market, and we will likely see more regulation and government policy around cryptocurrency.”
The financial industry is seeing a movement toward greater use of technology — like artificial intelligence and robo-advisers — in delivering service to clients, according to Brian Moreland, senior vice president of marketing and sales for Core Bank’s private client group.
A robo-adviser is a technology platform where individuals sign onto a system and fill out a questionnaire. Based on the outcome of the questionnaire, the robo-adviser recommends stocks to invest in and suggests an allocation that is appropriate for the investor.
“I think it’s important that we employ technology but more from a service standpoint,” Moreland said. “Our clients are looking for us to provide them with advice, and that’s difficult to do when you rely solely on technology. I think there’s a balance on what we call high-touch and high-tech. We can’t really understand our clients and help solve their issues without one-on-one conversations with them.”
The infrastructure bill passed in November 2021 included a set of new reporting requirements for cryptocurrency transactions. The anti-money laundering requirement to report transactions in excess of $10,000 to the IRS was amended to include digital assets. This will take effect on Jan. 1, 2023.
Starting in 2022, cryptocurrency investors are required to report their taxable transactions involving digital assets to the federal government on their 2021 tax return. The bill included a tax reporting provision that goes into effect in 2024, requiring cryptocurrency brokers to report cryptocurrency gains in a 1099 form.
“Another piece of legislation that’s out there regarding cryptocurrencies, but has not been passed, is to impose wash-sale rules on currencies and digital assets,” Bruno said. “The Wash-Sale Rule states that if an investment is sold at a loss and then repurchased within 30 days, the initial loss cannot be claimed for tax purposes. This means that you cannot buy back the same cryptocurrency after selling at a loss.”
New IRA regulations went into effect on Feb. 1, which require transfers out of a retirement plan or from one IRA to another IRA to have certain disclosures and processes involved in determining fees and how they benefit the client.
“I think the focus is for firms that don’t provide advice under a fiduciary capacity,” Moreland said. “For [some] organizations it could be a substantial difference in the way they conduct business. From our standpoint [as fiduciaries] it is more inconvenient for the customer and more paperwork involved to transfer client assets over.”
The first step the average person can take to build wealth is to manage and control their debt.
“Managing your debt starts with rewiring how you manage your money and everyday spending and being selective about how you use credit,” Bruno said.
Build savings, not only for short-term goals, but for long-term investing. Treat savings like a bill by automating and having money go to a separate account every month.
“The best way to make sure that you actually save is to set that money aside before you even have a chance to spend it,” Bruno said. “No matter how much you save, look for ways to increase your savings over time.”
Investing can be one of the most powerful ways to build wealth for the long term. The sooner one starts putting money to work, the more time they have for compound interest to work in their favor and the more they can expect to have later down the road.
“The easiest way to start investing is to participate in a retirement plan,” Bruno said. “Many employers offer a retirement savings plan and several of them will provide a match to your contributions. Whatever the match is, it amounts to free money added to your retirement savings, so it’s best not to leave it on the table.”
Moreland said, “We encourage people to have six months of expenses socked away for liquidity purposes, but in the current inflationary position and with rates this low they aren’t making enough in a savings account. [With] 15 to 20 basis points versus an inflation rate of 7%, you’re just not going to get ahead.”
Think about the three tiers of finances — spending on daily needs, saving six months of expenses, and investing — and plan to invest over 15, 20, or even 40 years.
“If you stick with it and are appropriately diversified and allocated, you’ll come out ahead, and you’ll beat inflation,” Moreland said.
Although it may be tempting to go for the quick buck through bitcoin or the latest trading methods, it’s best to invest for the long haul. It’s also important to be properly diversified, have an allocation that’s comfortable, and avoid becoming emotional when buying or selling.
“When the market’s down and everything seems to be coming apart from a financial perspective, it’s not a time to get panicked and sell your assets,” Moreland said. “Work with an adviser, understand your long-term goals, and rebalance according to what the market gives you based on what’s on sale.”
To help students prepare for a career in finance, Metropolitan Community College offers the CFP-Board Certified Financial Planning Program and the AFCPE Approved Financial Counseling Program, according to Applied Finance Institute Program Director Ashley Peters.
“Among the certifications in the finance industry, the CFP and the AFC are the gold standard,” she said. “We offer a Financial Counseling Career Certificate and a Financial Planning Certificate of Achievement. Most students believe both programs are essential to building knowledge and skills in finance and want to ensure the best possible experience for their clients.”
Most students complete both programs simultaneously over the course of one to two years. Upon graduation they will have opportunities to work for nonprofit organizations, broker dealers, banks, credit unions, or even open their own financial planning and counseling firms.
The University of Nebraska at Omaha has three different majors in the area of general finance, according to David Volkman, chair of the department of finance, banking and real estate in the College of Business Administration.
UNO’s undergraduate major in investment science and portfolio management, a four-year degree, offers a number of classes that will help students embark on careers in financial consulting.
“We have a class that helps them prepare for their SEI exam,” Volkman said. “When students come out, they’re prepared to sit for the SEI exam. We also have a chartered financial analyst course that will help students prepare for their CFA (chartered financial analyst) exams, the premier designation for investment managers.”
UNO also has a course called Principles in Investing that gives students the foundation of learning about investment, such as how to value and analyze a stock, and how to value and analyze a bond.
“We have an advanced class called Portfolio Management,” Volkman said. “[Students] take information they learned about how to value investments, and they can learn how to combine all of that into an optimal portfolio for a potential client. They learn about the benefits of diversification, how to structure portfolios to meet the client’s needs, they learn about those concepts of managing a policy for a client.”
UNO’s College of Business has a student-managed fund called the Maverick Investment Fund. It was started in 2001 when alumnus, Col. Guy M. Cloud, gave the students $200,000 to start an investment portfolio.
“Every year, except two, they beat the S&P 500,” Volkman said. “The last time I looked [the fund] was worth $1.4 million.”
UNO’s College of Business Administration places many of its students into intern positions with firms ranging from trust departments in banks to large investment firms and investment banks.
“The most effective [learning tool] is when we have corporate leaders from those investment houses come in and talk to students,” Volkman said. “It’s a great career to go into right now. We have a large group of Baby Boomers who are retiring or will retire over the next 10 years and are looking for people to help them manage their 401(k)s and their retirement accounts. There’s a big demand for individuals who go into financial advising.”