Tuesday, August 9, 2016

The Future of Financial Planning

Imagine a future, if you will, where you can hire a CFP® professional to prepare a Goals Based Financial Plan for you. Where your identity is protected. Where you do not have to give the CFP® professional your Social Security number. Where you do not have to disclose any of your account numbers. Where you are totally protected from a Ponzi scheme.

It is kind of hard to imagine, isn't it? The reason it is hard to imagine is because you have been trained to hand over you Social Security number, make copies of all your account statements and blindly hand them over to a financial advisor so they can give you a free financial plan. You as the client hope that:

  1. That you can trust the financial advisor.
  2. They will not charge you too much in assets-under-management fees.
  3. They will not sell you too many products that pay a commission.
  4. They will not stick you in products with no liquidity.
  5. They will act as a fiduciary.
  6. And, they will not steal your money.
All that just to get a free financial plan.

Why do you think financial advisors want to see all of your accounts? The more money you have, the more it benefits the financial advisor. Further, your financial advisor may be slanted towards selling you products that pay him or her commissions, too. Of course, do not forget that you have to transfer some, if not all, of your accounts in order to get this free financial plan.

Think about this business model for a moment. Step outside of the box that we have all been taught for years and years. Broker-dealers want you to move your accounts to their firm. Financial Advisors want you to move your accounts to their firm. Insurance agents want you to move your accounts to their firm. The reason? They all want to make money from your money. This is their primary goal. Either they want to charge you an assets-under-management fee, or sell you products that pay commissions. It is all about generating revenue from you. Sure you get that free financial plan, but what is the real cost of it?

What if there was a better way? Thankfully, now there is.

At our firm, we can provide you with a Goals Based Financial Plan and we do not need your accounts. We do not need your account numbers. We do not even need your Social Security numbers. Why? Because, we are not making you move any accounts to our firm. We are not selling you any products, nor charging you any assets-under-management fees.

How is this possible? With technology. Technology that allows you to authorize us to design our Goals Based Financial Plan by sending us only what we need to design it for you. For example, when you authorize us to see your IRA or 401k for example, we only see the holdings, ticker symbols and values. We do not see your account numbers or Social Security numbers. You simply log in, create your own password, and then authorize the accounts that you want us to see in order to design your Goals Based Financial Plan. This whole process takes less than two minutes. The only thing you do is name the accounts for us, so we know what it is, like an IRA or 401k, for example. If your situation changes, like you inherit some money, then all you have to do is hit "sync" and let us know that you need an updated Goals Based Financial Plan.

Imagine the old way that most financial advisors operate under today. They commit you to the time consuming and tedious process of gathering all your information. You may not even be fully sure if you trust them yet. After all, you are handing over your Social Security and account numbers, are you not? The old ways of financial advisors have not even proven themselves to you at this point. Again, thinking outside the box, is this a good way to do business? We do not think so.

With our firm, a couple of clicks, name your accounts such as joint account, IRA, Roth or 401k, and then you are done. We can get to work right away.

Here are the pluses of our model:

  1. We act as a fiduciary.
  2. We can give you investment recommendations on the investments in each of your accounts.
  3. We design a thoughtful Goals Based Financial Plan for you.
  4. We do not need your account numbers.
  5. We do not need your Social Security numbers.
Of course, we do need your goals. Think about this fact. We have essentially removed every conceivable conflict of interest from our Goals Based Financial Planning service. If we think your Roth account is not properly diversified for example, we will give you advice on how to properly diversify it. We are not going to try and get you to move your Roth into an annuity, or an assets-under-management account. Where is the conflict of interest? There is none. Imagine it. Pure advice without any hidden agendas. Isn't this what you wanted in the first place?

I know what you are thinking. How do we get paid? It is simple. We charge a flat fee retainer of $1,200 per year to design a Goals Based Financial Plan that can be updated on the fly as your situation changes. We will even let you pay us semi-annually, quarterly or monthly. We can bill you via Square® or Quickbooks® which allows a draft from your bank account or a debit/credit card.

The only caveats are that we are doing a pilot program in Florida only right now. We will expand it to other states in the future.

Hopefully, this sounds intriguing and you will agree with this outside the box thinking. If you want to get started, then call me, Rick Johnson at 904-547-2913.

Tuesday, July 12, 2016

Son of a Cop

My father was the Chief of Police at a small town in Arkansas when he died at the age of 39. I was only 17 at the time. My dad's cousin, his brother-in-law and my brother-in-law were also law enforcement officers. Personally, I majored in Criminal Justice and I am still working to finish my degree. As you can imagine, I am pro-law enforcement.

I wanted to give you a view of an interaction that I had with a law enforcement officer here locally. One night, I was on my way home and came to a four way stop. There was this law enforcement officer second in line behind another car to my left. I waited and let the car on my right go before me, then I let the car in front of the police officer go next. Once this second car started into the intersection, I began to go. As I traveled down towards my home, I noticed that this car in front of the police officer had a tail light out. This car turned into my neighborhood, I followed and the police lights came on. I assumed that the police officer was going after the guy with the tail light out, so I pulled into my driveway which was the third house on the right. To me surprise, he wanted to stop me. He pulled his car sideways into my driveway, like I was going to try and get away or something. Curious, I got out of my car and walked back towards his car. He yelled at me and told me to get back towards my car. Once he got out of his car, he said he could have shot me for approaching his car. I was shocked at this comment. I was wearing a T-shirt and shorts. I had no weapon on me. Where would I have put it anyway?

When he got out of his car, he was in this real defensive posture like he was ready for me to attack him. He started to speak and lectured me about approaching his car, almost pulling his gun on me, then said that he was pulling me over for running the stop sign. Of course, this kind of infuriated me since I had waited for two cars to go before me and I had not run the stop sign. It was obvious to me that this cop had his head in his computer and when he looked up, he saw me already moving in the intersection. He went on and on about how I just blew through the intersection.

I have to tell you. This guy was a 24 carat jerk. He went on and on about me running the stop sign. I tried to explain to him that I didn't, but he said he wasn't going to argue with me. Eventually, after giving me the riot act, telling me how lucky I was that he didn't shoot me, then he finally went back to his car and looked up my driving record. Of course, he didn't find anything on it, so he got back out of his car, still in this defensive posture like I was going to attack him, then told me he was going to "let me off" for running the stop sign. At the end, I asked him, "Can I talk now?" He relented and I went on to tell him that I didn't run the stop sign and in fact had waited for two cars to go before me. Yet, this jerk still stuck to his guns. He was "absolutely certain" that I ran the stop sign. Again he reiterated that he wasn't going to "argue with me." I told him that I was telling him the truth, but he didn't want to hear that. I was so stinking mad at this guy that he refused to admit he was wrong. If he was so sure, then why didn't he write me a ticket for running the stop sign?

I was flabbergasted at this guy's treatment of me. Oh by the way, I am a white guy. Yes, it is true that white guys are also subject to bad treatment by white cops and threatened with their guns.

My suggestion to you whether you are black, white or otherwise is to quit falling into the Democratic Party and Black Lives Matter dribble that wants you to believe their crap and keep us all divided. Quit being a damn victim! Don't you see that you are falling right in line with what the Democrats and Black Lives Matter want you to do? Can you not see how they are using you for their political purposes? Stop listening to their talking points and realize that you are not the only one that has had bad experiences with police officers. Even fans of the police have bad experiences and the fact that I was white has nothing to do with it. Divisiveness needs to end. We are all Americans.

By the way, I pray for the families of the fallen in Dallas. I can still remember the police presence at my father's funeral. It was one of the positive things about his funeral. However, I also know what the children of the fallen will experience in their lives. It will be hard and they will need prayers and support from family, friends and others. I am almost 60 years old now and it is still very difficult for me having lost my father all these years later.

Readjust and reevaluate your thinking. We all need to be pro-law enforcement even if we fall victim to a bad cop every now and then. Regardless whether we are black, white or otherwise.

Thursday, June 23, 2016

Avoiding Bad Advisors and Ponzi Schemes

It has happened again. Another high profile Ponzi scheme has been uncovered by the SEC that impacted professional athletes, Jake Peavy, Roy Oswalt, Mark Sanchez and others. How can, not only professional athletes, but regular investors avoid this same fate? Now, there is a way.

Although, it would be poo-pooed by the financial industry itself, I think the time has come for the complete removal of accounts from financial advisor access. Yes. You read that right. What is at the core of what good financial advisors do? They give advice. Can they give advice without having access to client accounts? Yes, they can.

The challenge has been to get access to the information from a client and historically, clients have had to move their accounts to a new advisor in order to provide that information or at the very least, copies of their account statements. Often times, financial advisors will give away a financial plan as long as the client will move their accounts to that particular advisor. This is the old, obsolete way.

The futuristic option is using an advisor who has a financial planning program that has account aggregation that authorizes the advisor to see the client’s holdings, but not their account numbers. Advicent Solutions has just such a software program called Narrator Clients™. As an advisor, all they really need to know is what type of account it is and the holdings within. In fact, account aggregation sends over the holdings without the account numbers and it even keeps the custodian hidden from the advisor. Imagine that. When you really think about it, if you really are a good advisor, then this is all you need. If you are a client, then doesn’t this make more sense? This allows the advisor to give much needed advice, but with absolutely no fear on the client’s part of the advisor stealing their money. I know what you are thinking, “Why didn’t somebody tell me this before?”

Of course, the advisor would be confused about how they get paid under this model which brings us to the new Department of Labor Conflict of Interest Rule. In my opinion, the DOL’s main goal was to force advisors to disclose all fees, commissions and conflicts of interest and recommend transactions that are in the client’s best interest. This rule is infinitely more complex than this simple statement, but this explanation is close enough for government work. It is funny to watch all these financial industry people jumping up and down over this new rule, but they are looking at it from the gathering client assets point of view. A big mistake in my opinion. Please bear with me and allow me to rescue both clients from Ponzi schemes and financial advisors from a bleak future.

In the DOL rule, there is a clause about Level Fee Fiduciaries. According to their definition, Level Fee Fiduciaries are advisors who charge a fee based on assets-under-management, or a fixed fee. Herein lies the solution for both clients and financial advisors. Instead of the fee based on the assets-under-management, clients would be better served by a fixed fee that is direct billed to the client. A lot of financial advisors would balk at this fixed fee method of earning fees. They are so used to gathering client accounts and charging an assets-under-management fee that they cannot see the future. Well, I hate to be the one to break the bad news to advisors, but fee compression is well under way with the advent of robo-advisors. Further, the major name brand custodians are getting in the robo-advisor game and doing exceptionally well at it I might add. The point being that this method of charging an assets-under-management fee is going the way of the dinosaurs.

Picture this, if you will. In order to take as much risk as possible away from getting financial advice, clients should pay a fixed fee to a financial advisor for their advice and keep their account at a major name brand custodian. In addition, do not let your financial advisor have access to any of your account numbers or social security numbers. All they need is the number of shares held and the name of the holding and type of account. If you do not move your accounts to a financial advisor, then you do not have to give them your social security number either. Isn’t that great? A good advisor would still be able to give you much needed advice and earn a living by setting an appropriate fixed fee for the amount of services they deliver.

In this future model of financial advice, how is a Ponzi scheme going to happen? I got your attention now, don’t I? The bad advisor would not have access to your accounts, your account numbers or your social security numbers, or even know where your account is held for that matter and therefore they cannot steal from you. Now, if you write the guy a check to invest in his Ponzi scheme, or excuse me, I meant can’t lose business venture, then I cannot help you.

Included in the DOL rule, advisors will now have to tell clients what they do for their fee. In other words, describe what services they will provide for their fee. With this fixed fee approach, I do believe clients would be more apt to go this route, especially when you consider they are taking the risk of being fleeced by a Ponzi scheme out of the picture. Plus, they cannot run off with your money! That is as long as you don’t write them a check for that can’t lose business venture.

If you are a financial advisor, then you need to change your ways. If you are a client seeking financial advice, then this is your future. A Ponzi scheme-less future to believe in.