The Best, Boring Investment Advice You’ll Ever Receive

Posted on October 3, 2012 by Tony — No Comments ↓

The Wall Street bullies want you to believe that they can predict the future. They want you to believe they can capture all the great returns and avoid all losses. It is amazing that the public continually fall for this scam. NO ONE can predict the future. You should own equities, globally diversify and rebalance. If you follow this recipe, long term, you will succeed in reaching your long term financial goals.

It’s unfortunate that most investors succumb to the sales pitch of brokers and advisers who tell them they can “beat the markets.” If your broker falls into this category (and almost all of them do), ask her to describe her methodology. If it is based on past performance, is she able to predict tomorrow’s news? Since tomorrow’s news is what will affect stock and bond prices, why does looking backward have any predictive value?If there was a reliable way to “beat the market,” you can be sure it would be uncovered by the millions of investors and thousands of academics focused on the market every day. It would also be published in a peer-review journal. I have yet to find any credible evidence of investment expertise permitting anyone to consistently “beat the market.”

I issue the same challenge to brokers every day. Tell me your methodology for beating the market. Demonstrate that it works. I will check it out and will publish the results. I am still waiting for takers.

via huffingtonpost.com

NO one can predict the future, yet most brokers make you believe they can. If you want a main street solution to a Wall Street problem stop listening to brokers and invest in a globally diversified portfolio.

Please comment or call to discuss how this can help take the stress out of investing.

Posted via email from Curated 401k Plan Content

An Investor Protection Plan

Posted on March 14, 2012 by Tony — No Comments ↓

Does your brokerfollow the fiduciary standard or the suitability standard? Brokerage and insurance firms have been fighting the fiduciary standard with zeal. Why?

Debunk Their “Expertise”A broker who loses a client to index funds typically responds with a dismissive statement indicating that he and his firm have the ability to select “market beating” fund managers. As discussed above, ask him to show you a peer reviewed article demonstrating the reliability of his methodology. In addition, ask him to provide you with a long term (10 years or more) analysis comparing the returns of the proprietary mutual funds of his firm (funds that have the name of the firm as part of the name of the fund) with their Morningstar assigned benchmark. After all, if they can pick superior managers, wouldn’t those managers be running their branded mutual funds? This is another report you are unlikely to receive.

There is an easier way to avoid becoming a victim. Don’t use any retail broker or adviser who tells you they have the ability to “beat the markets”.

via huffingtonpost.com

If your broker or agent really could beat the market why would they need you? Another question to ask yourself is, if the big brokerage firms really knew who was going to be the best fund manager why do they have over 100 managers?

Please comment or call to discuss how this affects you and your portfolio.

Managed Futures Mutual Funds Exposed (managed-futures-blog.attaincapital.com)
Invest With the Silent Minority (money.usnews.com)
Morningstar’s Fund Manager of the Year: A Slippery Slope (401kplanadvisors.com)

Steps Every Boomer Should Take Before Leaving the Workforce

Posted on February 24, 2012 by Tony — No Comments ↓

The best advice I can give to boomers is to seek and pay for the advice of an objective professional adviser. A fee only financial advisor will most likely follow the fiduciary standard. In other words an adviser who puts the interest of the client first.

FORTUNE Brainstorm (Photo credit: jurvetson)

5. Know the difference between a brokerage firm and an advisory firm.A lot of baby boomers don’t understand the difference between a broker and an advisor. A broker is someone who sells something for a commission, and sells products like mutual funds, variable annuities, etc. An advisor provides investment recommendations.

Brokers and brokerage firms don’t have a fiduciary standard to the client, they only have a suitability standard to the client. That means whatever they recommend must be suitable for you, but it doesn’t have to be in your best interest.

On the other side, an advisor has a fiduciary standard to the client. What an advisor recommends to the client has to be in their best interest.

via foxbusiness.com

When anyone is preparing to retire they should seek the advice of an adviser following the fiduciary standard. Most people do not understand the difference. By working with a brokerage firm you will have to wonder if there is a conflict of interest.

Please comment or call to discuss.

For boomers, it’s a new era of ‘work til you drop’ (essentialiving.wordpress.com)
Older Workers Want to Stay In the Workforce (momentumtoday.com)
Busted Boomers and Beyond: Living with Less from Social Security and Pensions (dailyfinance.com)

2011 Winners Can Make You a 2012 Loser

Posted on January 12, 2012 by Tony — No Comments ↓

: Image via Wikipedia

No one can predict the future. Yet the financial institutions has convinced the public that they can beat the market. The best solution for investors is to own equities, globally diversify and rebalance. Any other strategy makes more money for Wall Street and less for Main Street.

Arends looked at the “most hated” stockswith the most analyst “sell” recommendations. The top 10 of these stocks underperformed the most “loved” stocks by less than 1%.The overwhelming evidence that no one can predict which asset classes (much less which stocks or mutual funds) will perform well in the future has not deterred the same “experts” from making predictions for 2012. I want to get in on the action so here are my predictions:

1. A majority of investors will continue to believe brokers have the ability to pick outperforming stocks and actively managed mutual funds and to provide guidance on “what is happening” in the market;

2. A minority of investors will cancel their retail brokerage accounts and invest in a globally diversified portfolio of low management fee index funds in an asset allocation appropriate for them.

3. Over time, the returns of the minority of investors described in #2 are likely to outperform those of the majority of investors described in #1.

4. The primary beneficiary of perpetuating the myth that retail brokers and financial pundits can predict the future will be those dispensing this advice. The victims will be those relying on it

via huffingtonpost.com

Process beats predictions over time. No one can consistently predict the future.

Please comment or call to discuss.

Births & Deaths in the Mutual Fund Industry in 2011. (savinginvestors.wordpress.com)
Investors Should Embrace Uncertainty (money.usnews.com)
10 Best-Performing Stocks Defy Prediction (thestreet.com)

New Rules Will Have Fiduciary Impact

Posted on November 15, 2011 by Tony — No Comments ↓

The by product of minimizing your fiduciary responsibilities and risks si your employees will have the necessary tools to successfully retire. Remember the plan sponsor has an awesome responsibility to provide the best plan possible. The result is a happy and productive employee.

Image via Wikipedia

Proactive Steps

To avoid becoming the target of lawsuits and regulatory sanctions, companies must act now to make the extensive preparations necessary to deal with the new DOL rules. The first step is to conduct a full plan review, either internally or by using a consultant or adviser who is completely independent and is thus free of conflicts of interest.

Federal rules prohibit brokers from engaging in the fiduciary activity of advising employees on the suitability of specific investments. Despite this, brokers typically have the lead role in servicing 401(k) plans. Because brokers can’t be fiduciaries, the responsibilities for fiduciary duties for these plans — and the risks involved — stay with the employers.

By contrast, registered investment advisers (registered with the U.S. Securities and Exchange Commission) are legally permitted to be fiduciaries. Under the new DOL rules, service providers are required to disclose whether they are fiduciaries, and employers are required to ask.

These rules also require employers to evaluate newly required disclosures from consultants and providers concerning any compensation arrangements they may have with other companies. If service providers receive any compensation from plan providers, this could taint their advice.

via hreonline.com

Plan sponsors should be aware that their fiduciary responsibilities are expanding. More importantly, in most cases, they alone are responsible and not their current provider.

Please comment or call to discuss how this affects you and your organization.

Fiduciary Revolution. (401kplanadvisors.com)
Action Can Reduce Fiduciary Risk When Stock Markets Swoon (401kplanadvisors.com)
Why Should 401k Plan Sponsors Care What Others Think About the Fiduciary Standard? (401kplanadvisors.com)

Industry Fights Hard to Exclude IRAs from Fiduciary Standard

Posted on September 8, 2011 by Tony — No Comments ↓

Perhaps the real issue is the financial services industryis unwilling to properly train their representatives. The fiduciary standard might result in better advice to all investors.

Claims have been made, as a result of industry sponsored research, suggesting upwards to 7 million IRA holders will find themselves without an adviser should the DOL’s proposed new fiduciary rule be extended to cover IRAs. The Wall Street Journaleditorial even goes so far as to state “Brokers would have to weigh the cost of higher regulatory complianceagainst staying in the business.”Factually, this is an incorrect statement. The DOL has repeatedly saidbrokers can continue to provide brokerage services to IRA holders (and ERISA plans in general) without changing their existing business model even after the new fiduciary rule is adopted. What brokers can’t do, according to the DOL’s proposal, is offer investment advice under the current model. Presently, the SEC allows brokers to offer “incidental” investment advice without requiring them to register under the 1940 Investment Advisers Act (“40 Act”). The DOL cannot require brokers to register (that’s the SEC’s job), but it can enforce the fiduciary standard by defining broker adviser services under the same umbrella as it does RIA adviser services.

At the heart of this issue lies the “conflict-of-interest” dilemma. Under trust law, fiduciaries are prohibited from taking an economic interest in transactions executed on behalf of a beneficiary. This means, normally, an RIA would not be permitted to collect a commission (or 12b-1 fee) from a mutual fund company it invests a client’s money into. Oddly, while the 40 Act does indeed prohibit self-dealing transactions, the DOL has issued at least two opinions that exempt fiduciaries from this prohibition if the fiduciary discloses such a conflict-of-interest exists and the client signs off on it and the fiduciary uses those commissions (or 12b-1 fees) only to offset their normal fee. The DOL has not said anything to indicate this exemption would be removed under the proposed new definition of fiduciary. (This matter, by the way, has disturbed many fiduciary advocates.)

via fiduciarynews.com

The question really becomes why is the financial services industry against the fiduciary standard for IRA owners? Shouldn’t the clients interest always comes first?

Please comment or call to discuss how this affects you.

Department of labor fiduciary rule: Major unintended consequences (thehill.com)
Phyllis Borzi Wants to Save Your IRA (money.usnews.com)
Momentum Builds to Place IRAs Under Fiduciary Umbrella (401kplanadvisors.com)

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The Best, Boring Investment Advice You’ll Ever Receive

An Investor Protection Plan

Steps Every Boomer Should Take Before Leaving the Workforce

2011 Winners Can Make You a 2012 Loser

New Rules Will Have Fiduciary Impact

Industry Fights Hard to Exclude IRAs from Fiduciary Standard

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