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As the end of the year approaches, many of us will reflect on the challenges and accomplishments of the previous twelve months, and begin to make our resolutions for the upcoming year. This is also an excellent time to analyze our finances by assessing the previous year and planning for the future. In the Madison area, there are many excellent financial professionals who can help you do just that.
Rob Van Nevel, vice president and chief member solutions officer at UW Credit Union, explains that part of his organization's core mission is to provide financial education to consumers. "We have the opportunity to provide our members with much more than just easy and convenient access to the Credit Union's basic services," he says. "We're also here to counsel them, to help them achieve financial success. There are many ways we do this, including our free seminars on everything from budgeting to buying your first home."
Last year UW Credit Union provided two hundred free financial seminars, reaching more than eight thousand people. In addition, UW Credit Union supports the Volunteer Income Tax Assistance program and provides free consultations to help members understand credit responsibilities and find ways to reduce debt.
What is Van Nevel's advice to consumers who want to set themselves up for financial success in the new year? It begins with careful budgeting, he says. "We advise our members to develop a spending plan," he explains, "looking for ways to reduce expenses and save for long-term success." Van Nevel urges individuals to anticipate increases in heating costs and any large purchases, such as replacing a vehicle. He also suggests establishing a budget for holiday spending, saying that it will help consumers avoid making decisions in the moment, which can lead to overspending.
In addition, Van Nevel advises members to proactively plan for tax bills. "Property taxes are due at the beginning of the year, and you'll want to make sure that you've saved or escrowed enough money to cover your bill," he says. "Income taxes are also right around the corner. When determining your budget, account for any potential refunds or if you'll need to pay in."
To finish the year strong, Van Nevel suggests making charitable donations for 2014 as soon as possible, as well as maximizing retirement contributions and meeting with a financial consultant to evaluate your taxable portfolio.
Looking ahead to banking trends for the new year and beyond, Van Nevel says he expects to see more tools that make banking easier for consumers. "It's increasingly important for financial institutions to offer mobile banking," he says. "Consumers expect to bank whenever and wherever they want without having to visit a traditional branch location."
UW Credit Union is already committed to giving its members access to the latest technology, Van Nevel says, explaining "We offer a full suite of services geared toward mobile users including mobile and text banking. In addition, we've launched a fully responsive design for our online banking site, Web Branch. This means that members accessing the site with a smartphone or tablet enjoy the same user-friendly experience as with a desktop computer. Mobile device users can also complete more complicated tasks like paying bills or applying for a loan."
According to Jason M. Weber, mortgage banking officer/vice president for Starion Financial, the banking industry's most important trend is unfolding right now. "The big news in residential lending is that mortgage rates are the best they've been all year," he says. "This is a great time to buy a house, refinance, or start looking at building a home. Even if you've purchased a house in the last eighteen months, the interest rates have continued to go down. Financially, it's in your best interest to run the numbers and see if you can lock in a lower mortgage rate."
And even though potential buyers may dismiss the idea of starting construction on a new home just as winter descends on the state, Weber doesn't see the season as an obstacle. "If you get a great rate now, you can be in your brand new house in the spring," he says. "Of course no one has a crystal ball, but it's unlikely that the rates are going to stay this low. It's important for customers to take advantage of that opportunity now."
To illustrate his point Weber says, "If you're buying a $250,000 home with five percent as a down payment, even a difference of half a percent in mortgage rates is going to be $69 per month. Over the life of a thirty-year mortgage that's going to add up."
Weber also notes that Starion underwrites and processes all loans in-house. "It's a big differentiator when you are looking for a mortgage," he says. "Customers want a personal relationship with their mortgage officer. They want someone who knows the market and understands the community. Processing loans in-house, Starion is also able to be more efficient."
Weber says he is also excited about the changes in store for Starion Financial in the coming year. The bank is expanding from two branches to three in the Madison area, as they recently entered into a definitive to acquire WPS Community Bank. The transaction, allowing Starion to expand its presence and increase its commitment to the community, is expected to be complete in the first quarter of 2015.
Tom Dott, vice president of commercial banking at First Business Bank, sees future banking trends in his market sector as focusing on technology, automation and efficiency.
"First of all," he explains, "there's a growing desire among commercial clients for banks to provide more services, to help them work faster and smarter. Partnering with a bank that understands business needs, these small businesses can actually outsource some of their processes like lock-boxing receivables."
According to Dott, a small business would use a lockbox processing service to collect, record and process payments from clients, then deposit them in the business's account at the bank. The process is not only faster and more efficient, it transfers the deposit processing tasks to professionals at the bank, streamlining communication and recordkeeping.
As businesses become more technologically advanced and conduct more of their transactions online, they also risk an increased potential for cyber security breaches and fraud. "But banks can help moderate that risk," says Dott, "particularly in check and cyber fraud." Bank services not only protect businesses from immediate losses, they insert an extra line of defense between computer hackers and the business's bank accounts. "All services have a cost, but they have a greater value in prevention," Dott explains.
Another consideration is that, as the Internet matches customers from all over the world with the goods and services offered by small businesses, those proprietors may develop an international clientele, almost by accident. Banks specializing in small businesses can also help navigate those challenges. "You get an order from the UK, from Japan, now suddenly you need to know how to work across currencies, within a global economy," says Dott. As a result, he says, First Business Bank can help their clients manage international commerce, fraud prevention and other risk exposures.
"It's a complex set of challenges, but we can help," says Dott. "We're all about making sure people know about their options. And we have a lot of good options for businesses."
Jeff Supple, trust officer and financial planner for the Wealth Management Division of State Bank of Cross Plains, spends most of his time working on financial planning for individuals, specifically retirement planning. He believes that seeking the advice of a professional to evaluate your unique financial position is a good exercise anytime, but especially at the end of the year.
Working closely with clients, Supple offers advice on practical timelines for retirement, matching investment risk with cash flow needs, and ensuring that a client's money will last as long as they do. "Increased longevity, low interest rates, and the deterioration of the traditional pension are all issues that make planning for, and maintaining a prosperous retirement more challenging these days," he says.
When reviewing your financial situation, Supple and his colleagues advise clients to pay special attention to these three common pitfalls:
Fidelity Benefits Consulting estimates that a couple who are sixty-five and retiring this year will need $220,000 to cover medical expenses during retirement. But many individuals over-estimate the amount that Medicare will cover, while underestimating the financial impact of long-term care. Consideration must also be made for supplemental policy premiums, prescription drug costs, and other un-reimbursed expenses.
Supple cautions that one solution does not fit every family or every portfolio. "Just because your neighbor took Social Security benefits at age sixty-two doesn't necessarily mean you should," he says. "Putting the house in the kids' names might have been a strategy that worked for your parents but it may have a detrimental impact for you." Constant changes in taxes, trusts and estates, Supple says, necessitate frequent review.
"A sustainable withdrawal rate, or the rate at which you can pull money out of your accounts while making it last, is a challenge for many individuals," Supple explains. "A riskier or more volatile investment portfolio might produce a higher rate of return pre-retirement but be unsuitable once you start pulling dollars out of it." He elaborates that the concept of sustainable withdrawal rates has become increasingly important as traditional pensions have been replaced by programs such as 401(k)s, where retirees generally have to decide how to handle a lump sum of money as opposed to the guaranteed monthly income generated by pensions.
Jim Hegenbarth, president/CEO of Park Bank, has seen many trends come and go in his thirty years of banking experience. But, he says, "In many ways, Park Bank is the same financial institution today as when it started as a single branch in 1966. We are dedicated to the same friendly, personalized service that our associates provided to our early clients, offering an alternative to our larger competitors."
Park Bank is also intent on keeping up with the latest innovations in the industry, utilizing new technology and offering new programs to serve their customers.
For example, building on the popular "buy local" idea, Park Bank recently rolled out Buzz Points, a free rewards program. When customers use their debit cards to make purchases at local businesses, they earn points that can be redeemed for gift cards, cash cards, or even donations to area charities. "Buzz Points allows us to play an even greater role in strengthening the area's economy by rewarding customers for spending in our community," Hegenbarth says.
Two other trends in banking that Hegenbarth anticipates, and that Park Bank is embracing, include Interactive Teller Machines, a video-based service similar to an ATM to conduct transactions with a teller, and bank branches that capitalize on the latest technology while occupying a smaller footprint.
Earlier this year, Park Bank opened a 2,400-square-foot branch located across from Hilldale Shopping Center that features a drive-in lane, a walk-up ATM that performs traditional transactions as well as printing transaction images on the receipt, a self-service coin counter, and free WiFi. In addition, Park Bank employees can demonstrate services such as online banking and Park Bank's smartphone apps on tablets and large screen TVs. The branch extends Park Bank's "caring before calculating" philosophy, offering a small children's play area, free coffee service, free popcorn on Fridays, and a conference room that can be used for community meetings.
"With new banking technology, we find that all age groups—whether you're twenty or sixty—enjoy the convenience of banking on their own hours and their own choice of devices," Hegenbarth says, "but they still want face-to-face interaction at their local branches. They want the personal experience as well as local knowledge of our market from Park Bank."
River Valley Bank is a relative newcomer to the Madison area, but Market President Jan Patrick Hogan has had a long career in leading community banks to success. After working for another financial institution for thirty-two years, Hogan retired to a quieter life—but only briefly. He was lured back to the banking business by the opportunity to build River Valley Bank's presence in Dane County, effectively growing a customer base from the ground up. "I guess the challenge of starting fresh, expanding this organization into new territory, was too great to resist," Hogan says, with a smile.
Based in Wausau with sixteen branches in central and northern Wisconsin and Michigan's Upper Peninsula, River Valley Bank established an office in Madison three years ago, primarily focusing on residential and business lending. "Now," says Hogan, "we're transitioning from a mainly transactional bank to a full-service bank." His first task in expanding the institution's reach and services was to hire financial professionals with a great deal of experience in this market, who were dedicated to helping customers manage and improve their financial situations. "We have a great team in place, that will help us move forward," he says.
As the end of the year approaches, Hogan's advice for consumers is to thoroughly organize their financial information and meet with a financial advisor or tax professional who can accurately assess their financial position. "It's good to get into the habit of doing a personal financial statement at year end to know where you—and your assets—are going," he says. "Has your net worth changed? Is your liquidity growing? Is it a good time to consolidate or refinance debt? Do you have a large tax liability? Even in December, it's not too late to make contributions to 401(k)s, to IRAs, to Health Savings Accounts; the earlier you can answer those questions, the easier it is to do something about it."
Within his industry Hogan predicts that banks will be held to higher standards through federal regulations in the coming year, but that there will also be an increase in lending to families and small businesses. "As the economy shows more signs of recovery, more businesses are investing in equipment and infrastructure," he says.
In 2015, River Valley Bank will be investing in capital projects of their own: After achieving record earnings in 2014, the company will build a new branch on Murphy Drive in Middleton, projected to open in the spring. "It's a very exciting time to be working at River Valley Bank," says Hogan.