Wednesday, May 11, 2016

DOL Conflict of Interest Rule Web Site Issue

Wow! Wow! Wow! Government regulation has hit guys like me with a sledgehammer. This new DOL Conflict of Interest Final Rule has caused me to modify my firm's documents and add a ton of new ones. For example, if I advise someone on their 401k, then I have an agreement for that. If I advise someone who only wants a Goals Based Financial Plan, then I have an agreement for that. If I advise someone who needs their portfolio managed, then I have an agreement for that. These are only for Florida clients. If they live in another state, then I have multiple agreements for those other states.

However, that is only the easy part. The hard part is when you are moving money from a 401k to an IRA, or an IRA to an IRA, or a Roth 401k to a Roth IRA, or an IRA annuity to an IRA. I could go on and on with these examples, because there are close to two dozen different scenarios that I can think of where I will now have to present clients with another form. This new form needs to explain all of the distribution options to a client. For example, if you are moving money from a 401k to an IRA, then that is considered a distribution. Further, you have to tell clients if they can leave their money where it is, too. In addition, you have to spell out all of the fees for the client's current account and compare that to a proposed account that I may be offering.

In addition, to creating all of these forms, then I have to put them up on my web site. Now this one factor in the rule is very interesting. I do not think the gravity of this situation has hit home yet with financial industry trade publications. I have seen no news on this issue. Think about this fact. If everyone, myself included has to put up their master agreements on their web site, then doesn't that mean that "lazy" financial advisors will try and copy them for their own use? In my mind, it certainly means that all lot of copying will be going on. I don't know if I like that fact that I can spend countless hours creating and revising my documents and find that some "yea who" has stolen them right off of my web site. It is true that I can restrict the documents from being printed or copied, but if someone really wanted to copy it, they could sit down and re-type my documents word for word. I do not have a real good feeling about this web site issue. I can tell you that straight up. If financial advisors will steal your money, then they certainly would not have a problem stealing my documents.

In addition, to putting up my master agreements, I have to also put on my web site my specific policies and procedures as it pertains to this DOL Conflict of Interest Rule. Right now, my policies and procedures document is 130 plus pages, because it includes a sample of each form and agreement, plus our standard disclosure documents for our firm and our investment adviser representatives. This new DOL Conflict of Interest Rule says that I have to do this like it or not. Prospective clients might flip through it on the web, but there is a loophole. As long as I put it on the web site to be viewed, then I am compliant with the rule. I cannot imagine a prospective client wanting to print off 130 plus pages of my policies and procedures. However, I am worried about "yea who" financial advisors trying to steal my stuff.

You can probably surmise that every financial advisor will have their own agreements on their web site. Think about that for a moment. As a prospective client, you will be able to see the policies and procedures, plus master agreements, and disclosure forms of any financial advisor in the country prior to entering into an arrangement with that financial advisor. I suppose this is a good thing for prospective clients in the know, but what about those who are not in the know?

So, with this new DOL rule, you can compare my forms against another financial advisor's forms. Hopefully, you will see the brilliance behind mine and realize that I know what I'm doing. Also, if you see my forms copied on another financial advisor's web site, then I would appreciate it if you let me know. I might want to sue them for copyright infringement.

After already spending countless hours creating these documents, I have to say that I am rather proud of what I have accomplished. In addition, the first thing that pops into my mind is to sell them as a service to other financial advisors. If the amount of time that I put into making these documents is any indication, then perhaps, I will offer them for sale to other financial advisors for a tidy fee. One thing for sure is there will be a legend on my documents that says:

Copyright May 9, 2016 by Richard Allison Johnson. All rights reserved.

Friday, March 25, 2016

Zero to One

Zero to One is a fabulous book written by  Peter Thiel. One of his main points that I gleaned from reading it is that most people just copy what their competitors are doing. In other words, they just tweak things a little, put a different spin on it, then try and differientiate themselves or their company based on that. Most people are doomed to mediocracy as a result. 

What you really want to do is to create a whole new channel of service, product or innovation. It makes so much sense when you think about it. 

One of the quotes from the book that Mr Thiel likes to use in job interviews is..."What important truth do very few people agree with you on?" This question forces you to take a stand with your answer which may be immensely unpopular, but is very telling about what type of person you are. Most people are too scared to reveal themselves in a job interview, but here is one of America's greatest innovators telling you that is precisely what you should do. "I want to help people" or "I want to make a difference" will never get you a job. 

The point is that if you are seeking a job, then take a stand. If you are starting a business, then do not copy someone else. 

Thursday, February 18, 2016

Investment Realities

Well, it has finally happened. The stock market has pulled back enough to pretty much knock all major portfolio managers down to size. I just took a look at some of the largest and best portfolio managers in the country and their recent performance. Most of them have returned as of January 31, 2016, -8% for the last year, a return of around 2% for the last three years and around 4% over the last five years. This is rather eye opening, don't you agree?

What generally happens in these situations is that the clients of investment firms see these dismal numbers on their account statements and blame it on their financial advisor. What they normally do is move their accounts to another advisor thinking that this is going to make a difference. However, the brutal truth is that the likelihood of a new advisor to significantly outperform your last financial adviser is slim to none. 

As much as it pains me to say it, you may be better off having a meeting with your financial advisor and letting them show you their market numbers for the last year, three years and five years. If their numbers are seriously out of whack from the numbers mentioned above, then you have good reason to move your accounts. However, if they have returned around 2% for the last three years and around 4% for the last five years, then they have been in a properly diversified portfolio of investments. I know this doesn't sound good, but it proves the point that leaving your financial adviser and moving to another one thinking your investment performance will improve significantly is really a fool's game.

If you really wanted to check up on how you are doing, then I have an idea for you. What if you could find a CFP® who could evaluate your investment performance for you without you having to move any of your investment accounts? In addition, what if this same CFP® could do this for the laughingly low fee of $500 per year?

Did you get that? You do not have to move any of your investment accounts and you have a highly qualified person to give your portfolio an annual look for only $500 per year. I call it Keep Your Assets. Take My Advice.™ Let someone, (that being me), be your overlay financial advisor and run a report on your accounts that shows you how you have done for the last one, three and five years. All I need is your account statements and I can go to work. You can even black out the account numbers. I don't need them to do my work.

Think of me as your financial quarterback directing the offense. If you are interested in a great service at a extraordinarily fair fee, then let me know and I will get to work on your behalf. 

My Form ADV 2A Registered Investment Adviser disclosure and my background disclosure, Form 2B is available on my web site at on the bottom right of our home page.


Wednesday, December 9, 2015

It's the Voters Stupid

I am just amazed these days at the number of stupid people who still do not get it. The days of controlling the American Voter by disparaging, villifying and attempting to destroy candidates is over. The hilarious part is that these political pundits and prognosticators actually believe that their words are so profound and important that they can easily sway the American Voters. The truth is those days are over and they are just besides themselves as to why what has always worked in the past is no longer working. Isn't this the description of elitism? That's what I thought.