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.

Friday, June 17, 2016

Vote For or Against Change This November

The GOP Elites love to talk about Ronald Reagan and how great a President he was while in office. While I would agree wholeheartedly that he was a great President, what the GOP Elites fail to understand is how he was able to be a great President. He appealed to most all of the American voters.

These GOP Elites have taken some of the qualities of Reagan and tried to duplicate these into the GOP Party Platform over the years. Things like strong Christian values, tax reform, a strong military, and exceptional economic growth have all been touted by the GOP Elites as the things that we need to move this country forward. If this is true, then why have you put up John McCain and Mitt Romney as your last two Presidential candidates?

The political pundits in D.C. tell the Republicans that they need to put forth someone that can reach across the aisle, form consensus and get things done on the Hill. Well, supposedly John McCain and Mitt Romney both fit that bill. However, I have to ask, how did that work out? Not so well. The truth is that these GOP Elites have been lying all along. They want divided government, so they can keep things the same.

Right now, we are witnessing an unprecedented Presidential election season. The GOP Elites have tried everything in their power to stop Donald Trump from getting the nomination. Even after he has gotten enough delegates to get the nomination, these GOP Elites are still trying to figure out a way that Mr. Trump does not get the nomination at the Republican convention. This is truly astounding. These elitists favor not voting at all, or perhaps even voting for the Democratic candidate which would be a unprecedented and fateful decision.

Poor Mr. Trump. He won the nomination fair and square and yet day after day we hear of Republican politicians and pundits who say "they will not support him." He had to beat back 16 challengers in the Republican primaries and succeeded. This is what successful people do. They win.

These GOP Elites are some arrogant bastards. Write down their names when you hear them. If they are a politician, then vote them out of office. All of these SOB's. They do not represent the American people in any way, shape, or form. They are simply trying to protect their turf. They are trying to protect the money flow in D.C. that flows into their personal bank accounts. Mr. Trump said he didn't need the political pundits. These people lost thousands, tens of thousands and sometimes hundreds of thousands of dollars, because Mr. Trump didn't need their "expertise."

The emperor has no clothes. I am not talking about Mr. Trump, but rather these GOP Elites. Mr. Trump has proven beyond a shadow of a doubt that Washington, D.C. is nothing short of a cesspool of politicians who care nothing about the American citizens. All these GOP Elites care about is themselves. The proof is in how they are acting towards Mr. Trump.

If you are a Trump supporter, then do not be disheartened by the polls that show such an unfavorable rating for Mr. Trump. 

Those polls are done by the people who didn't get paid those thousands of dollars that they normally get every election cycle.

Mr. Trump did not need these pollsters, so now they are paying him back with these "rigged polls" showing his supposed unfavorable ratings. The purpose of polls is to dissuade voters from voting. I do not think it is going to work this year. The American voter is more informed now. We'll see how it all works out. So far, the old tried and true ways of Washington, D.C. have not worked to take out Mr. Trump.

It is not any better on the Democratic side. Hillary Clinton is being investigated by the FBI. Will she be indicted, or is the fix in already? Does she have inside knowledge that she will not be indicted? If so, then why hasn't the FBI stopped investigating her? Mrs. Clinton has said over and over again that there is "zero chance" of her being indicted. What is she doing by making these kind of bold statements? Does she have some kind of secret agreement with the President that he will quickly pardon her if she is indicted? Is she "daring" a grand jury to indict her? What in the hell is she doing? It seems to me that she is not dropping out, even if she is indicted. Obviously, the American voter has no right to know the truth. Who gives a rat's ass about us?

With the terrorist attack in Orlando, the FBI was all over the news. We even heard of a grand jury being put in place within days of the horrific event. The FBI investigation has moved swiftly. All kinds of new information has come out from the FBI about the terrorist and his wife. It kind of makes you wonder doesn't it? In a terrorist attack, the FBI can move swiftly, but when it comes to Hillary Clinton, they have dragged her investigation out over several months. They can't seem to get a grand jury in place to review Mrs. Clinton's activities. Seems like there is a defugalty here. I do not think this is the FBI's fault at all. There is something going on behind the scenes that we do not know about. If Mrs. Clinton wins, then we will never know about it.

If Mrs. Clinton is not indicted, then what does this mean? Regardless whether or not she gets indicted, one thing is certain. The status quo in Washington, D.C. will remain the same for the Democrats. Hillary's supporters will vote for her even if she is indicted. You can bank on that fact. The Democratic money flow will continue.

Poor Bernie Sanders. He has not dropped out, because I am sure that he is expecting an FBI indictment any day now. Mr. Sanders must believe that he can swoop in and get the nomination after Hillary bows out. I am sorry to be the one to say it, but Hillary Clinton is not bowing out regardless whether or not she gets indicted. Bernie supporters should be furious and vote for Mr. Trump.

On the other side, if the GOP Elites are successful in stopping Mr. Trump from being elected, then the status quo will remain the same for them, too. Both parties want things to stay the same, regardless of what you hear, read about or watch on television. There are wolves in the hen house.

The reason why Hillary Clinton is running for President is because she wants the power and historical legacy of being the first woman President and the first husband and wife Presidents. The reason why Donald Trump is running for President is that he wants to help the American people and make America great again. A stark difference.

This Presidential election boils down to this simple conclusion. If you vote for Hillary Clinton, then you are voting against changes in Washington, D.C.

On the other hand, if you vote for Donald Trump, then you are voting for change in Washington, D.C.

Now, the big question for the American voters is:

Do we, the American people, want things in Washington, D.C. to change or not?

If you can honestly answer this question, then you know how to vote in November. Don't vote for a woman and don't vote for a businessman. Vote only for whether you want change in Washington, D.C. or not. It boils down to this one issue. Let's hope that the American people win this November, not the status quo.

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 http://www.marianfs.com on the bottom right of our home page.