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Do You Need to File a Tax Return This Year?
5 days ago
SPEND, SPEND, SPEND (It's Your Duty)
Even in the best of times is our economy well-designed? There is an oft-cited statistic about the percentage of our economy that is driven by consumer spending. The percentage is a staggering 70%. I find myself wondering, is this the way to design any economy? Does it make sense for our economic prosperity to be almost entirely predicated on our ability and willingness to spend?
It seems to me that saving is a certain losing proposition in this type of economy, despite its unquestioned importance. We need to spend in order for our economy to prosper so that our savings can compound. But how do we save when we need to be spending? In fact, I can't count the number of times I've heard an expert make a comment to the effect of "get out and spend!" since our current economic malaise began. That might be great advice for our collective economy, but horrible advice for an individual.
I don't have any answers, just questions today. (As if I ever have answers!) How do we find balance? Does it require a social agreement that growth has to be muted so that we have the ability to save for our future selves?
Investing - Why Overpriced May Be Better Than Inexpensive
Are you the type of individual who recognizes you shouldn't trade stocks, mutual funds and ETFs frequently, but simply can't seem to stop? Or are you a financial advisor who trades more often than you would like to? Let me propose an unorthodox solution to provide some negative reinforcement each time you trade.
This is a solution I don't believe many financial advisors would endorse and certainly one I would not use from a pure dollars-and-cents perspective. This is a solution that should only be considered if you have trouble minimizing your trading addiction.
If you are a frequent trader, you are likely using a discount broker who offers trades at very low fees or even no fee in some cases. There is no instant disincentive to trading frequently. When you want to trade, you can do so without giving much pause to the cost of your action.
My solution is the following. Move your investment accounts to an old-fashioned brokerage that charges an arm and a leg for each trade. Instead of looking for the least expensive trading solution, select the most expensive institution that makes the hit you take on each trade as painful as possible. Use this painful, expensive trading expense to make you take pause and think through your trading decision more fully. Allow this pause to give you the time to allow emotion to ebb from your decision-making. Take the time to consider why you think something has changed from your original purchase.
Making good financial decisions is almost entirely about recognizing when our decision-making process runs astray, then putting in place mechanisms and processes to short-circuit those processes. Making trading excessively expensive is one example of doing this and may be a large enough barrier to minimize your trading habit effectively.
Financial Advice - Why Not Put Your Clients' Interests First?
Yesterday a reader sent a copy of the most recent NAIFA newsletter to me pointing out that the last page proudly proclaims that they helped defeat a fiduciary standard in the recently passed financial reform legislation. I've ranted against NAIFA once before and don't intend on attacking that organization again today. But this newsletter did reignite my "clients' interests first" wick!
My position is that anyone offering financial advice (or implying they offer financial advice) should be willing and wanting to put their clients' interests first. An advice-based business where an individual entrusts a professional with skills and training the individual lacks to help them and the professional willingly accepts that trust automatically creates a fiduciary relationship. That is basically the definition of a fiduciary relationship. So, I want to ask the following question and genuinely hope to hear feedback opposing my position.
Can anybody articulate an argument against people offering financial advice putting their clients' interests first?
I have heard the arguments made to date and, in my not so humble opinion, they carry no weight. The primary argument made is that a fiduciary standard will make advice too expensive for most people. That argument is garbage, for a number of reasons. Most important among those reasons is that bad advice, whether affordable or not, is worse than no advice. And that more "affordable" advice is not generally more affordable...it's simply more difficult to understand what one is actually paying.
So, let me hear it. Why should financial advisors not have to uphold a fiduciary duty? I just don't understand how individuals continue to argue against putting clients' interests first. I want to understand and see the other side. All I see is companies and organizations using the guise of wanting to help and being trustworthy and forthright while fighting against having to do what's right for you in the name of profits.
I've Got My Series 7, Now I'm Ready To Help People
Today I feel like taking on a title and designation I have seen being used by some individuals with the apparent purpose of signifying a high degree of training and education. The title is "registered representative" and the designation is a "Series 7." Your Financial Advisor may list these among their qualifications.
When I began in this industry, the title of this post was my belief.
Being a registered representative or holding a Series 7 license does not provide you the education necessary to dispense good financial advice. These designate nothing more than that an individual has met the minimum requirements to sell financial products. Yes, SELL financial products, not provide advice.
I once held a Series 7 when working for an insurance company. I spent a couple weeks reading a book, than took an exam. I scored a 93% on the exam. When I informed my sales manager that I had passed and provided my score, his first comment was "You studied 23% too much!" Odd. I was trying to learn as much as I could because I thought it would allow me to help people better, and my boss tells me it is a waste of time. This attitude is not isolated to this one individual.
So next time you see a financial advisor who proudly proclaims that he's a registered representative and holds a Series 7 license, understand how little weight that proclamation carries. Not only is the educational material very thin, but the belief is to only do enough to pass because knowing the material well is not important to selling product. Let me say that again...knowing the material will is not important to selling product!
And did you notice that there's nothing in there about helping you?
Northeast Wisconsin - You Deserve Better Financial Advice!
Recently I have been thinking about writing posts designed to help you select a good financial advisor or financial planner. Today I wanted to go through the process I was of finding a few names to interview I was going to outline by using my location as an example to walk through.
Step One
After attempting the first step in the process (looking for independent financial planners on the NAPFA National Association of Personal Financial Advisors website), I had to stop. There were only two advisors listed in my immediate area! Expanding the search area to 100 miles added twelve more firms to the list. A 100 mile radius captures a great deal of Wisconsin...and only twelve NAPFA members. So, using the first filter I was going to suggest in this "Pick A Planner" post yielded only 14 potential firms to work with assuming you are willing to travel.
Northeast Wisconsin, you deserve better than that. I can't even write about my second step because the first step doesn't give you enough choice. Do I think you absolutely must work with a NAPFA member? No, I know you can get good advice outside NAPFA, although I do think it is the place to go for the highest probability of getting high quality financial advice. Nevertheless, let's look at an alternative...let's review the FPA (Financial Planning Association) website, searching for independent financial planners.
Step One (Second Attempt)
A search on that website using my zip code yields fifteen FPA members within twenty miles. A much better start than the two NAPFA yielded. Dig in a bit deeper, and only seven of the fifteen are independent. These seven advisors represented four unique firms. So, here we are on the second best option, and you only have four choices available to you. I believe you will struggle to find good financial advice and an advisor whom you feel comfortable with and offers the services you desire.
Why Is The Selection So Poor?
Why is this the case? I think there are two reasons. First, citizens of Northeast Wisconsin, you continue to pay for financial advice through commissions instead of paying for the advice directly. It's a bad way to pay for advice. Until you demand that financial planners do better for you, there is no incentive to change. Advisors and planners are making plenty of money selling you products and giving you conflicted advice. The second reason falls squarely on planners and advisors. Not enough planners in the area have bothered to learn about alternative ways of delivering advice and better compensation models. This speaks to the quality of advice you are receiving, also.
So, Northeast Wisconsin, you may be happy with the advice you are getting. I don't think it's good enough, however. In fact, I suspect you are often overpaying and having advice under-delivered. You should expect and demand more.
For now, I can't write my post about how to select a financial planner for my local market.
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