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.