Article courtesy of Parsons Financial Advisors.

January 2012— With all the volatility we experienced in the stock market during 2011, many are wondering what the markets may hold for 2012, and better yet, what they should do about it in order to protect themselves.

Investors are often puzzled when a financial advisor recommends using a third-party asset manager to help supervise their portfolios. What are the benefits of turning this piece of the financial puzzle over to someone else?

The resources and portfolio management capabilities of a single advisor or small group of advisors can pale in comparison to what an outside money manager can provide. For example, one of the third-party managers our firm uses has over 120 professionals on its investment team, each with his own specialty and role in the investment portfolio process.

Most financial advisors devote the majority of their time to helping with the big picture of their clients’ financial lives, whether that may be retirement planning, protection planning, projections, estate- and legacy-planning issues, etc. Using a qualified third-party money manager can allow an advisor to expand his scope of services, thus creating a huge value for the investor.

A financial advisory firm does not take this decision lightly, and there is quite a bit of due diligence that goes into choosing the right partner. The firm will evaluate the third-party manager’s approach, investment philosophy, performance and communication practices — as well as the makeup and culture of the organization, its list of products, and its fund managers. Even though the third-party manager is responsible for the day-to-day trading, the advisor has a fiduciary responsibility to his clients to make sure that the clients’ hard-earned money is being invested wisely, and constant monitoring and ongoing due diligence is a must.

By using a third-party manager, clients can gain access to more sophisticated and institutional-quality management they otherwise would not have access to. With the volatility that we have experienced in the last few years, it is important to know how your investments are being handled, because we believe that volatility is here to stay.

Here are some other tips to think about for the New Year:

Roth Conversions

While you may no longer spread the income from a Roth IRA conversion across two years of tax returns, converting to a traditional IRA still might make sense, as taxes may be higher in 2013. Congress has extended the Bush-era tax cuts through the end of 2012, but that may be the end of the road for them.

Withholding

It may be time to adjust your withholding if:

• You tend to pay a large tax bill annually.

• You tend to get a large refund annually.

• You recently got married or divorced.

• A family member recently passed away.

• You have a new job or recently got a raise.

• You started a new business.

• You expect your income to change significantly this year.

Thinking of buying a new house?

With interest rates at an all-time low and the recent drops in home prices, this may be the year to look at purchasing your dream home!

Parsons Andersen CPAs and Parsons Financial Advisors have been a staple on the Coastside for over 25 years. Located in Half Moon Bay, Parsons Andersen CPAs’ services include tax preparation, business accounting, QuickBooks setup and training, and business planning. Parsons Financial Advisors’ services include investment management, retirement planning, protection and estate planning, and more. Visit www.parsonsandersencpa.com or www.parsons financialadvisors.com for more details.

Securities offered through Foothill Securities, Inc., Member FINRA/SIPC. Investment advisory services including fee-based asset management accounts are offered through Foothill Securities, Inc. All other financial planning services are offered through Parsons Financial Advisors. Parsons Financial Advisors and Foothill Securities are not affiliated companies.