Monday, September 26, 2011

Routine Advice Makes for Difficult Choices Later

For the record, I am not an attorney and I do not provide legal advice.

I still meet people who have no wills, or worse wills that they have not updated in over a decade. Then, of course there are the people who have gone to an attorney's Living Trust Seminar. Generally, they get a Living Trust completed and think everything is fine. I am amazed to see these client's of local attorneys who have Living Trusts, but have not transferred any of their assets into their new Living Trusts. There is a reason for this that I will discuss later. Wills and Living Trusts that are properly designed and implemented are useful tools for the "what if you die" scenario. However, what if you do not die, but rather have a prolonged illness that requires Long Term Care?

The choices to pay for Long Term Care are simple.
  1. Long Term Care Insurance.
  2. Use your own money.
  3. Public benefits like Medicaid or VA that you have to qualify to receive.
I dare to say that none of these choices are choices that anyone really likes. Most people do not buy Long Term Care Insurance, because of the costs. Most people do not want to use their own money to pay for Long Term Care costs and expenses, either. Finally, most people do not want to think of themselves as having to take handouts from the government. Nevertheless, these are the choices. You can plan for it, or not.

Sadly, if you do not have any Long Term Care insurance, then you have to use your own money, unless you can qualify for Medicaid or VA benefits. In order to qualify for Medicaid, you can have about $2,000 in cash. If you have more than that, then the state that you live in expects you to pay your own way.

Here is the inescapable truth: If you do not plan, then you will pay out of our own pocket.

With proper planning however, there are things that you can do to protect your assets.

A lot of older Living Trusts and Wills were what is known as "I Love You" trusts or wills. This means that the husband leaves everything to the wife and the wife leaves everything to the husband, then when they both die, everything goes to the kids. There may be reasons why leaving everything to your spouse could be a bad idea. Especially, if your spouse has qualified for Medicaid and is in a nursing home. Suppose the healthy spouse dies and leaves everything to the Medicaid patient husband in the nursing home! Yikes!!! This would be an irrevocable scenario where the family would receive nothing until after Medicaid was fully reimbursed.

As adult children, we assume that our parents have hired the right attorney, the right financial adviser and the right accountant and everything should be in order. I can tell you that in most cases, everything is not in order. The main reason is that the attorney wants to earn their fee and generally does not work with the financial adviser or accountant. The financial adviser does not want to have roadblocks like attorneys and accountants to get in the way of their advice. The accountant does have any time as it is since most people wait until the last minute to file their taxes. The last thing the accountant wants to do is chase down some attorney or financial adviser on April 15th and tell them what they are filing on behalf of their client. The point is that there is a strong likelihood that your parents financial situation is not in order like you may think. It is worth it to take a look see.

Of course, some people do not have attorneys, accountants or financial advisers at all, but are do-it-yourself-ers. These people go to Legal Zoom® for legal documents, online brokerage firms to manage their own money and they use Turbo Tax® to file their taxes. I can guarantee you these people have not properly planned for a prolonged illness.

We have a process to help you through this complex area of life. Instead of using an attorney to sell you a Living Trust, a financial adviser to recommend investments or an accountant to file your taxes, you might want to think about using someone like us to help you navigate the complexity of what happens if you or a loved one has a prolonged illness requiring you to spend all of your hard earn money. In conjunction with an Elder Care Attorney, we can help devise a plan to protect your assets.

Our next seminars are October 6, 2011 at 2 pm or 6 pm at the aloft Tapestry Park Hotel at the Southeast corner of Southside Blvd and Gate Parkway (across from Claude Nolan Cadillac) in Jacksonville, Florida. R. Kellen Bryant, Elder Care Attorney who is a member of the National Academy of Elder Law Attorneys, WealthCounsel, Medicaid Planning Systems and who is a VA accredited attorney will be the guest speaker. You can RSVP to 800-769-8516.

Monday, September 19, 2011

Beware of Misleading Seminar Invitations

I received an invitation to a steak dinner over the weekend! It happens to be at a very popular place here in Jacksonville and it is not cheap either. I told my wife when I received it that..."what do you want to bet that this person does not even have an office of his own, is not licensed as an investment adviser and probably not licensed with a broker-dealer either?" She did not want to bet me, because she knew that I was probably right.

The postcard invitation implies investment expertise. The name of the firm listed is "__________ Financial Strategies" There is a slogan for the firm that uses the word "Wealth" in it, which again implies investment expertise.

One of the bullet points on the postcard says the following:

If I can stop you from paying taxes on money in Stocks, Bonds, Mutual Funds and CD's by redirecting - you would keep more of your money.

The other bullet points told me that this was probably an insurance agent. Being a compliance oriented person, I know how to check people's backgrounds. First I went to the SEC site, located at An investment adviser search for the firm name and the "advisor's" name (don't make me laugh) turned up nothing.

Then, I thought, surely this guy is affiliated with a broker-dealer. So, I went to the FINRA Broker Check site located at and did a search for this "self annointed advisor" who is going to advise people on when to "redirect" their stocks, bonds, mutual funds and CD's. Again, I was sadly disappointed to not find any record of this advisor.

Lastly, I knew that I could look up his insurance record to see if he is insurance licensed. Sure enough, he is licensed with a boat load of insurance companies a lot of whom are in the annuity business. Now, there is nothing wrong with earning a living. However, I do not take to kindly to people who break the rules while we ethical people in the business adhere to the rules.

An insurance agent cannot advise people whether or not to sell their stocks, bonds, mutual funds, or any other investments. They are NOT LICENSED to do so. Apparently though, they have no problems implying that they are licensed to do so.

Sadly, several people will go to this seminar. This advisor will get some appointments out of it and most likely will convince some of these people to sell their stocks, bonds and mutual funds and buy the annuities that he has as his end game. In doing so, he will violate the rules around investment advice in Florida, but he will probably get away with it.

When I was the former branch manager at Charles Schwab, we used a location in the same building as our Schwab office for client seminars and meetings. Strangely, this advisor has this same address as his office. I recognized the address on the postcard right away as the same address. This office and meeting complex is one of those places that rents offices to business people for their appointments. The postcard implies that this is his office which is not true. When you go into this office and seminar complex, you will think that this is his office, unless you are like me and have been there before. Is it just me, or is this just a tad bit misleading?

Let's evaluate this, shall we? If he is misleading on his postcard about his licenses and qualifications and he is misleading on his office location, or lack thereof, then what else might he be misleading about? He has no qualms about implying investment expertise. He has no qualms about implying that he has an office in a four star office building. Can you really expect ethical objective advice from someone like this? I'll let you answer that question.

My wife was smart not to bet with me on this one. I was right on with my analysis. No investment adviser license, no affiliation with a broker-dealer and no registered representative license. Further no office! Only an insurance agent trying to sell everyone he meets annuities. This is just a wee bit of a conflict of interest, don't you think?.

Readers of this blog will know that doing business with banks, insurance agents and Wall Street firms benefits them, not you. The best choice is to use a registered investment adviser who does not work for a bank, who is an insurance agent only (not licensed to give investment advice) or who works for a Wall Street firm. Even if it is not me!

I will be able to look across the street and watch the herd go in for their steak dinners this week. The restaurant is right out my office window. If only they did a little research ahead of time, then they would have stayed away. Perhaps, they would have saved themselves a lot of headaches, too.

Until next time.

Wednesday, September 14, 2011

Brainwashed Thinking

I was at a meeting recently and I had some conversations with some insurance agents, some bank representatives and registered representatives. This was just idle chit chat about what I do and what they do. I was very surprised how brainwashed these people are by their affiliations. They have no clue what it means to be a fiduciary and deliver advice in a client's best interest.

The SEC is currently evaluating how to apply a fiduciary standard to these type of professionals. I can tell you, the SEC is facing an uphill battle.

One of the people I spoke with in my idle chit chat was an insurance agent. I told this person that I recently had a seminar with planning ideas to help seniors qualify for Medicaid Planning and Veterans Benefits. This person's first question was ..."what products do you sell to them?" Those of you who have read my book, or seen my latest brochure will know that insurance agents are compensated by product sales. Unfortunately, this is all they know. They know that they get paid by product sales. When someone asks..."what product do you sell to them?", then that tells me what they focus on with their clients. They focus on themselves. This of course, is contrary to a fiduciary standard of care.

My answer to to this person was that I did not sell products to them, but rather I did what was in their best interest and only charged a fee for my services. This person persisted with...'but, you have to be selling some products. What products are you selling?" I was really taken aback about how the blinders over this person's eyes are affecting their objectivity. I may be reaching a little bit here, but the concept of charging a fee and doing something in the best interest of a client seemed to be so far removed from this person's thinking that it was not even a remote possibility.

Quite frankly, I was astonished. Sadly, most of the people in my business work at banks, insurance companies or Wall Street firms. They have all the marketing dollars and political power. They are so brainwashed into the product sales mentality that they cannot even imagine what it takes to do something in a client's best interest. Like I mentioned earlier, the SEC is facing an uphill battle.

Another person that I chatted with wanted to know if I was in the Financial Planning Association. The FPA is made up of CFP's and other professionals who are mostly people who work at banks, insurance companies and Wall Street firms. Take a guess how excited I would be to run around with a bunch of people like these folks.

This person saw my CFP lapel pin and said that I should join. I then said, "Why?" He said, "because you are a CFP and the FPA is for CFP's." I said to this person, "you are going to have to do better than that." The attorney standing next to me laughed when I said that. This person, who was a bank representative by the way, went on to try and convince me of the wonderful educational opportunities and continuing education available. As a courtesy, I gave this person my business card, but I have to admit that I am kind of like Groucho Marx in this area. I will not join any organization that wants me to join. The truth is the FPA is in decline and they are losing a lot of members each year. Every time I run into one of these people, they are trying to convince me to join the FPA. If it truly was a good organization, then no one would have to recruit for it. This tells me that it is a lobbyist organization with a bunch of fat cat salaried people trying to justify their existence. I will not be giving them any of my money.

The last thing I want to do is go to a meeting where insurance company home office people are telling me how great their products and commissions are for insurance agents.

I am very comfy in my own little world of the fiduciary standard and doing what is in the best interests of my clients, thank you very much.

Later my friends.

Wednesday, September 7, 2011

Investing Pundits

I am always fascinated watching these "investment advice givers" on television and their view of "what to do now." In addition, there are a group of people who routinely appear on television and in the Wall Street Journal and other print publications. The producers and journalists have their trusty list of contacts and they always seem to use the same people. The question is always the same. "Where should people put their money now?"

The answer is usually targeted to the kinds of clients that the person being interviewed has in their business. Rarely ever, is the advice good advice for the general public. There is a reason for this fact. This reason is that there is no good advice for the general public. Each individual's circumstances are different and the advice should also be different.

There are times, however, when advice can be consistent for all. In the year 2008, I had enough of the insanity going on at the time, so on October 6th, 2008, I went to 100% cash. This decision was easy for me. It is my job to protect my client's assets in the best possible manner. This is what I did back then.

Fast forward to the recent past. On August 8th, 2011, approximately one month ago, I sold all equity investments in our client's accounts. I kept short term bonds, gold, managed futures and commodities for those who already held these in their accounts. Some clients I kept 100% in cash, because it did not make sense to run up transactions costs. Nor did it make sense to buy assets classes like Gold when they had already run up so much.

So, why did I do this again?

I evaluated the world's economies, along with my partner, Stan Rosenthal and after validating what we believe to be happening right now, we made the decisions that we did. By evaluating the world's economies, this is what I mean:

Europe has shown an unwillingness to really address their fiscal problems and uniformity of austerity decisions seems unlikely. I believe that the markets will force their hand. United States institutions most likely hold European sovereign debt. Sovereign debt is debt issued by the country in question. Such as Greek debt, Italy debt and so on. If the U.S. is currently holding the sovereign debt of Europe, then there will be a domino effect on our markets. Do we know how much sovereign debt our institutions hold today? Does anyone really know for certain? No, I do not think so. Therefore, it stands to reason if Europe goes, then so goes the world economies, including the U.S. A double dip recession would be certain.

Another concern of mine is China. Can we really trust what the government of China says? I look at the U.S. economy and I see a stark lack of demand. The lament from all businesses is that we do not have the demand. It does not take a smart fellow to figure out that if our businesses are not seeing the demand, then can China continue to export their products to our economy without any demand? I do not think so. They have to be feeling the effects of our lack of demand.

In addition, in China, they appear to be having a real estate bubble. They have built and overbuilt buildings for the anticipated growth of their economy. I suspect that the Chinese government will institute some controls to slow things down a little, but being a true neophyte on capitalism, I doubt that they will be able to control things like they think. There is a business cycle of booms and busts and there always will be. It makes no difference if it is China, the U.S. or any other capitalism based country.

When you factor in the political implications of Washington, D.C. politicians, overly burdensome regulations, the government trying to "make the banks pay" for 2008, then you have all these things combine to make you want to call a timeout.

Now, they are talking about "writing down" mortgages to currently appraised values. This means that there are going to be a lot of losses if this happens. Who is going to decide whose mortgage gets written down and whose doesn't? I can see lots of real estate investors and banks losing lots of money if this happens. This will not be good if it does. Lawsuits will come flying from everywhere. You wait and see.

Technical analysis is something that I follow very strongly. I look at Technical Analysis on new housing sales, existing home sales, employment trends, retail sales, manufacturing, GDP and other areas. Other people look at the numbers. It is better to look at the charts, because you can clearly see the trends. Nothing in these charts gives me "turnaround confidence".

Further, when I look at the major indexes from a Technical Analysis standpoint, I see a waterfall in August and an attempt to establish a base in September. A waterfall is where the price of the index drops off a cliff similar to a real waterfall. A base in technical analysis terms is when the price of the index is going sideways. There appears to be a ceiling on the upside, or not enough buying volume to sustain upward momentum. In addition, we are into an uncanny period of moves up and down over triple digits. Contrary to popular belief, this is not the "new normal".

These investment pundits trot out there everyday and say "this is a good buying opportunity." Hogwash! They also talk about "missing out on a great return." More Hogwash! What great return has the market given us over the last 10 years?

Here is something to really think about. The Baby Boomers are getting into their retirement years. I doubt very seriously that they will be holding 80, 90 or 100% stocks as they get closer to retirement. This means that they will be selling. There will be lots of selling. In my mind, in order to be successful in a selling environment, (like this country has never seen before), you are going to have to pick your spots. Sometimes, you have to go against the status quo of advice you hear on television and read in publications.

I'm afraid that in order to be successful at advising clients on their investments, then you are going to have to be prepared to sit on the sidelines sometimes. So, what if you sit in cash for a few months. You will still have that cash after a few months. The trick, as I discuss in detail in my book, is to not take big losses. Also, you never want to hold 80, 90 or 100% in equities.

Keep Your Assets. Take My Advice. It is Easier to Climb Out of a Shallow Hole.

Good advice for all.