Friday, December 20, 2019

Secure Act


The Secure Act has several provisions in it that will affect most people at one point or another. Once the President signs it, then the Secure Act will go into effect with several of these provisions summarized for easy interpretation.

The required minimum distribution age will be raised from 70 ½ to 72. In addition, there are new minimum distribution tables being prepared that will factor into this change. Right now, if you have an IRA, you can choose to re-calculate your RMD each year and pull out that amount. This is based on an IRS Table and this will be changing to allow people a slight benefit meaning that they will be able to pull less out of their IRA’s and let more of their IRA’s continue to grow. 

A negative impact of the Secure Act is related to Inherited IRA’s for non-spouse beneficiaries. In the past, if you inherited your parent’s IRA account for example, then you could roll it over to an Inherited IRA account and pull out RMD’s based on your age theoretically “stretching” it out over your lifetime. This is why they called it a “Stretch IRA.” Now, with the Secure Act, you are going to have to pull it all out within ten (10) years. I believe that this is going to be effective for Inherited IRA’s after January 1, 2020 and the IRS has to issue guidance in the first quarter of next year. I also believe that there will no longer be any RMD’s required from these Inherited IRA’s. You will just have to pull it all out within 10 years.

There will be penalty free withdrawals for expenses related to the birth or adoption of a child form retirement plans.
 

In regard to 529 plans, they will now be able to be used to pay student loan payments.
 

Small businesses will be able to join forces with other small businesses to establish retirement plans. For example, several small dry cleaners could band together and establish a multiple employer retirement plan thereby becoming eligible for lower costs to administer it and better investment choices. Administrative expenses would be shared among the dry cleaners in this example. Not sure how this will work in real life as competitors may not want to work together, but it could be any small businesses who band together like a dry cleaners shop, an auto repair shop and a small survey company.
 

Lifetime income annuities will be allowed in pension plans. This is the insurance lobby at work and totally unnecessary in my opinion. Lifetime income annuities pay a guaranteed income for as long as you live and once you die, then there is no balance left for heirs. Unless of course, you choose a lower payout for yourself with a beneficiary option. (This means lose cash flow in retirement.) The returns on these income annuities are typically very, very low and any good portfolio manager worth their salt can do better with just systematically paying cash flow from principal. With an annuity, you are giving your money to the insurance company, not your heirs. Beneficiary options will be structured so that your most money paid out to you is while you are living and a poor payout if you want a beneficiary.  Further, there is even a provision that favors insurance companies. Basically, if a retirement plan does not offer lifetime annuities, then you can do an IRA rollover of your 401(k) and purchase the annuity in your IRA rollover account. Again, this favors insurance companies, not you. I would be adamantly against these lifetime income annuities inside of retirement plans and IRA accounts, personally. They simply are not needed.

Unearned income for children in the past was taxed at very high trust and estate rates. Now, this will be changed to the tax bracket of the parents. Unless, there are no parents, then they would still be taxed at the trust and estate tax rates.
 

Next year, retirement plans can be started (adopted) as late as the tax filing deadline. In the past, they had to be established by December 31st. This will be a benefit to businesses.
 

There is a three-year tax credit for start-up retirement plans for small employers who include automatic enrollment for their employees in their plans. Also, the maximum percentage for automatically enrolling participates will be raised from 10% to 15%. The employer chooses the figure from 1% to 15%.

You will now be able to contribute to an IRA after 70 ½ if you have earned income. In the past, you could not contribute past age 70 ½ if you had earned income.
 

Those are the highlights of the Secure Act. Of course, there are other provisions too numerous to mention, but most do not apply to regular people.

 


Monday, November 25, 2019

Whatever Happened to Common Sense Regulations?

The truth is that there never has been any such thing as common sense regulations when it comes to Registered Investment Advisers (RIA's). Do not get me wrong. I am on the side of disclosure and regulation, because every time you turn around, there is another Ponzi scheme happening. Sadly however, the good guys are stuck complying while the bad guys are out there stealing people's money.

The Securities and Exchange Commission has instituted a new Form for RIA's called a Form CRS which stands for customer or client relationship summary. This is to be kept to two pages by RIA's like my firms.

The Form ADV 2A is also required and that is 22 pages long. The corresponding Form ADV 2B that goes with it is another 14 pages long. My firm's Investment Advisory Agreement is 12 pages.

Of course, because I am a CFP®, I am now subject to even more disclosure to clients. I felt the need to create a new CFP® disclosure document that is 5 pages.

Oh, I almost forgot, if I refer a client to Morningstar to let them manage the client account, then I have to provide their disclosures. This is another 24 pages. But wait. There is more. Morningstar requires a Request for Proposal for each client which varies, but generally you can count on another 20 plus pages.

So, if I take out my trusty HP-12C calculator and add all this up, I come to the laughingly low figure of 85 pages of disclosures.

Oops! I forgot. We have to fill out the paperwork from the qualified custodian, Charles Schwab & Co. Inc. or Fidelity Investments. That will get us up to over 100 pages easily.

Don't you think 85 pages of disclosures is a little too much? Are you going to read all of that from cover to cover, each and every word of it?

See what I mean when I say there is no such thing as common sense these days when it comes to regulations. The good guys are being penalized for the bad guys' bad behavior.

We need to get the requirements down to a simple two or four page requirement and refer the client to our web site if they want more details. That's just my lone opinion from someone out here in the wilderness.


Wednesday, October 23, 2019

Coach John vs. Coach David

People always view the world from their own perspective and sometimes it is hard to get them to think critically and see the other side of the coin. There is a lack of critical thinking in the financial services industry today and we need to right the ship. 

Today, there is rapid change going on right now and unfortunately, there is no shortage of opinions about winners and losers. Sometimes, it is best to express an opinion through the use of an analogy.

Let us look at two imaginary baseball coaches. Coach John is a very successful college baseball coach. His goal in life has been to further his career. He started out coaching kids, quickly jumped to high school baseball and ended up as a college baseball coach. Coach John's style is to recruit the best and win at all costs. When he was coaching kids, he was brutal. He didn't want bad players as he quickly ran them off. At the high school level, he was figuring out how to get the best baseball players to move to his district by convincing their families to move, so their kid could play for him. His high school baseball team soon after won multiple state championships and it didn't take long before major colleges started calling. Coach John took his skills to a major college and recruited the best high school players to come to his college. He only recruited the best. Of course, since he was successful at recruiting, his college teams were also successful. Coach John's goal all along was to be a successful baseball coach and he achieved that goal.

Coach David on the other hand was also a coach of young kids, high school players and college players too, but with a major difference. When he coached young kids, instead of dispensing with the players who were not star athletes, he encouraged them and taught them the game of baseball. He took the time to teach every player on his team the game of baseball. He taught them how to throw a baseball. He taught them how to stand in the batters box. He taught them how to hit and how to bunt. He taught them how to catch a ground ball. He taught them how to catch a fly ball. He taught them how to run the bases and he taught them how to be a team player. Coach David carried this same coaching philosophy on to his high school and finally college coaching career where he too was a success.

Coach John was all about Coach John. He looked at the world from his viewpoint that he wanted to be a successful coach and that what was most important to him. Coach David on the other hand, looked at each individual player on his teams and his goal was to teach these players the game of baseball, how to handle disappointment and challenges in life and be a team player, so that they would go on in life with the skill set they needed to succeed.

Which coach would you rather have played for?

In the financial industry today, we have a lot of people who act like Coach John. They are all about their own egos, building the biggest business, becoming a thought leader, speaking at industry conferences, making the most money they can and stepping on and over anyone in their way. The do not mind calling out the compensation models of other advisors from their "ivory towers". They look at the world from their "pure as the wind driven snow" perspective. They think everyone else is overcharging investors while they have the "best" method of compensation. A lot of times, these Coach John people in our industry have somehow convinced enough people in the industry to be a "thought leader". This gives them the audience and the platform to continue to preach and talk down to other financial industry professionals. At the same time, they do not even realize the effect they are having on the young "players" just coming into the profession.

The Coach David people in our industry are critical thinkers. They see a rapidly changing industry. They see a huge unfilled market of young investors that would not get to open an account with Coach John. You see, Coach John only wants people who pay him according to his "pristine" business model. Kind of like the baseball Coach John who only wanted the best players to reach his personal goals and was not concerned with teaching anyone anything. After all, if you only recruit the best players (people with money), then why do you need to teach them anything? They are already great players (successful people).

The Coach Davids see fee commoditization. They see zero commissions on trading from the major custodians of RIA firms. They see the threats to mutual fund and ETF companies from direct indexing and the move to fractional shares. They see this huge unmet need of younger investors, so these Coach Davids choose to educate and encourage these young investors (players.) Coach David would never show these young investors the door. He believes in giving them the skill set they need to be successful in life.

Coach John also has a problem with the Coach Davids of the world. He routinely calls them out as overcharging clients, ripping off these young investors and criticizing their compensation models. In reality though, the Coach Davids of the world are the ones who are encouraging the young black woman to get into our industry. He is the one who is encouraging the Indian-American to get into our industry. He is the one encouraging the young black man to get into our industry. He is the one encouraging more women to join our industry. Coach David is the one taking the time to teach young investors the best ways to plan for their future and charging a fair fee based on his valued teaching and coaching skills. Coach David is the one encouraging diversity at every opportunity and who is a mentor to young advisors who want to join our industry.

Coach John is all about Coach John. He doesn't encourage anyone unless it fulfills his pocketbook. He routinely beats up on other financial service industry professionals as ripping people off. Coach John is not a thought leader. Far from it. He is narcissistic. I feel sorry for Coach John's clients. Little do they know that he doesn't really care about their future. He only cares about making money from them, if they meet his "recruiting" criteria.

Personally, I do not think we need any more Coach Johns in our industry. I would rather see more Coach Davids. We need advisors like Coach David who not only encourage young investors, but also young advisors to get into our industry and help them determine how best to run their businesses. Coach David's value is immeasurable when it comes down to it, because he is having such an impact not only on young investors by teaching them financial planning strategies, but also helping young advisors from diverse backgrounds to join our industry and be the best advisors they can be.

I would rather be a Coach David any day. What type of coach are you?

https://www.firstcoastplanning.com and https://www.marianfs.com

Wednesday, September 18, 2019

New CFP Disclosure

Effective October 1, 2019, The CFP® Board of Standards has done a complete re-write of their Code of Ethics and Standards of Conduct for Certified Financial Planners®. The purpose as stated in the recently released "Roadmap" is as follows:

"CFP Board's Code of Ethics and Standards of Conduct reflects the commitment that all CFP® professionals make to high standards of competency and ethics. The Code of Ethics applies at all times, and sets forth principles that guide the behavior of CFP® professionals, ... The cornerstone of the Code of Standards is a CFP® professional's duty to act as a fiduciary and, therefore, act in the best interest of the Client at all times when providing Financial Advice."

Things just got a whole lot more complicated for CFP® professionals.

Under the "Duty to Provide Information to a Client", we will now need two disclosures, or one combined disclosure. The first one is a "Financial Advice Engagement Disclosure" and the other one is a "Financial Planning Engagement Disclosure." What's the difference? I'm glad you asked. The Financial Advice Engagement Disclosure is for clients who only want financial advice and not a financial plan. Whereas, the Financial Planning Engagement Disclosure is for clients who want a Financial Plan that may also include financial advice. Got that?

Well, it might help to understand what the steps are to a Financial Plan first. Here they are:

  1. Understanding the Client's Personal and Financial Circumstances
  2. Identifying and Selecting Goals
  3. Analyzing the Client's Current Course of Action and Potential Alternative Course(s) of Action
  4. Developing the Financial Planning Recommendation(s)
  5. Presenting the Financial Planning Recommendation(s)
  6. Implementing the Financial Planning Recommendation(s)
  7. Monitoring Progress and Updating
If you will notice, there is nothing in that list that mentions financial advice. Financial advice is a small sub-set of a Financial Plan, but it is often misunderstood by potential clients as the primary thing that Financial Planners do. However, that would be a wildly incorrect assumption.

Here are some items that a CFP® professional reviews as part of a Financial Plan:
  1. Net Worth
  2. Balance Sheet
  3. Liquidity
  4. Budget
  5. Debt
  6. Student Loans
  7. Tax Returns - Most Recent and Projected
  8. Asset Allocation
  9. Taxable Accounts
  10. Tax-deferred and Retirement Accounts
  11. Sector and Style Concentration
  12. Retirement Income
  13. Retirement Income Taxation
  14. Retirement Income Stress Tests - Worst Case Scenarios
  15. Social Security Optimization
  16. Medicare
  17. Cash Flows - Current and Future
  18. Life Insurance
  19. Disability Insurance
  20. Long Term Care
  21. Property and Casualty
  22. Education Planning
  23. Account Titling and Re-Titling
  24. Wills and Pour-over Wills
  25. Revocable Trusts - Beneficiaries and Successor Trustees
  26. Health Care Proxies and Living Wills
  27. Real Estate Titling
Now do you see what a CFP® professional does that is different from someone who gives financial advice? I hope so.

If you are a consumer of Financial Advice or Financial Planning, then be prepared to receive more communication from your CFP® professional in the form of written disclosures. Right now, I have a combined document of four (4) pages. Add that to my Investment Advisory Agreement which is ten (10) pages. Of course, my Form ADV 2A is twenty-five (25) pages. Don't forget my Form ADV 2B which is fourteen (14) pages. Further still, there is the new Form CRS that is another two (2) pages. Just to be safe, I think that I will need to add another three (3) pages to describe my services and a fee comparison, so potential clients can see what they are getting for their money. All totaled, we are looking at a total of fifty-eight (58) pages of disclosures. FIFTY-EIGHT PAGES!

Of course, if you are a consumer of Financial Advice or Financial Planning, then I fully expect you to read all 58 pages and sign off on the fact that you did.

Forgive me for being a little bit sarcastic, but does the United States Securities and Exchange Commission, better known as the SEC, truly believe in their heart of hearts that people are going to read fifty-eight (58) pages of disclosures? How about the CFP® Board? Do they believe it?

Written disclosures are not for the benefit of clients. It is for the benefit of regulators and attorneys who draft the documents. It is job security for both.

https://firstcoastplanning.com

Wednesday, September 11, 2019

When Subscription Fees Work

I just read this article in Financial Advisor Magazine online.

When Subscription Fees Work: A different business model for an emerging clientele.

Looks like my firm, First Coast Planning, LLC is on the right track. My subscription model is $100 per month for one income families and $150 per month for two income families. According to this article, I may be priced too low!

You can read my firm's Form ADV 2A and 2B at the bottom of my web site at https://www.firstcoastplanning.com

Tuesday, September 10, 2019

I Love the CFP Board, But...

I love the CFP Board, but for solo-entreprenuers, trying to come up with a disclosure form that meets the SEC's Regulation Best Interest and the CFP Board's new Code of Ethics and Standards of Conduct means that I will have to develop two disclosure forms. There is no way on God's green earth that the Regulation Best Interest disclosure that I painstakingly came up with is going to qualify as a disclosure that meets the CFP Board's new Code of Ethics and Standards of Conduct.

Lucky for me, I have been doing this since December 1, 1992 and I have a lot of experience. I feel sorry for those CFP's who do not have my level of expertise. There was a chart that I saw recently on Twitter that used the Securities and Exchange Commission's estimate of costs to prepare the Regulation Best Interest Disclosure and it was staggering. The cost was between $4,000 to $8,000 per year, if I recall correctly. Don't forget to add on top of that, the cost to design a CFP disclosure that meets the new Code of Ethics and Standards of Conduct. That's probably easily another $5,000 per year. Of course, there is already the cost of Form ADV 2A and 2B disclosures that already cost in the $5,000 per year range. So, if we tally all this up, if you are a CFP and a Registered Investment Adviser, then you are probably looking at spending $15,000 per year just on disclosure forms.

If you are a client of a CFP, let me ask you, did you read from cover to cover and ask pertinent questions of your CFP and their business model as a result of their Form ADV 2A and 2B disclosures? Or, did you just trust them? What happens if now, in addition to the Form ADV 2A and 2B disclosures, your CFP now piles on top of that this new disclosure related to the Code of Ethics and Standards of Conduct and also, the SEC's Regulation Best Interest disclosure? If you did not read the Form ADV 2A and 2B before, are you really going to read these additional pages of disclosures?

This is what drives me batty about regulations in the financial services industry. The powers that be always believe that more disclosure is better than less disclosure. In my opinion, more disclosure increases the likelihood of someone not reading your disclosures. Let's face the truth, who wants to read 50 pages of stuff and sign over and over again in multiple locations that you are aware of this and agree with that? It is just going to be more confusing and harder to get new clients!!! People will freeze up and not do anything. More regulation, in my opinion does not protect clients from unscrupulous financial advisors. If you do not believe me, read my prior post about California Alcohol Licensee "Investments." Those "advisors" did not disclose doodle squat. They just stole people's money.

It is the same thing with gun control and these crooked advisors. One crooked advisor rips people off, then ALL advisors have to have more regulation as a result. It is not going to stop crooked advisors from stealing people's money. They will continue to steal people's money no matter what the regulations, because like criminals who manage to obtain guns illegally despite laws against it, these kind of "advisors" do not care about laws and regulations. Why? Because they are criminals, too. It is the same line of thinking that making law abiding gun owners subject to more gun laws will do absolutely nothing to stop guns from getting into the hands of criminals. The criminals will just break into more houses and more cars to get the guns they need to commit their crimes. A new gun law is not going to stop them, just like more regulations for financial advisors is not going to stop crooked advisors from stealing people's money.

Again, I will do the grunt work and come up with the proper forms and disclosures, but brother do I feel sorry for people without my level of expertise.

Maybe, just maybe, if you are a client of a financial advisor, then you might be a little forgiving about the things we have to go through just for the privilege of giving you advice. Further, have a little compassion when your financial advisor asks you to sign their CFP disclosure and their other forms, now that you know what goes into it.


Wednesday, September 4, 2019

California Alcohol Licensee "Investments"

This one takes the cake as far as Ponzi schemes go.

"I have a great investment for you. We loan money to California Alcohol Licensees who need funds to apply for a California Liquor License. When they get the license, then they will pay you back at a rate of 12% interest once they open their liquor store."

Well, I do not know for sure what the sales pitch was, but I do know that $300,000,000 was stolen from investors who fell for this. Think of it. Investors actually put $300,000,000 into this so called "investment." THREE HUNDRED MILLION DOLLARS OF STUPIDITY!

Are we this dumb and stupid America? Or, is this just the result of pure unadulterated greed?

Readers of my book, Meet Wally Street. The Reason You're Stupid, 2nd edition (aptly named in this case) know full well that Ponzi schemers sell investments that are unregulated and do not exist. If these "investors" had read my book, then they would have never invested in this "investment." The problem is that I'm just a little peon in the grand scheme of things. Nobody knows who I am nationally, therefore most Americans miss out on some valuable Ponzi scheme protection for only $19.95. My 2nd edition book is available most everywhere, like Apple Books, Amazon, Barnes & Noble and others.

"Well, gee Rick. You are nothing but a self-promoter hawking your book." If you think that, then you are stupider than I thought. The choice is to lose your money to a Ponzi scheme, or buy my book for $19.95. Duh! I would venture to guess that everyone who loses their money to a Ponzi scheme, loses a whole lot more than $19.95. Yes, I called you stupid, because you are stupid, if you are one of the ones that invested in this California Alcohol Licensee scam. In fact, this one has to be at the top of the stupidity list. I'm not worried about missing out on you people as a client, since you proved to me your stupidity. I like smart clients who take my fiduciary advice.

Of course, the U.S. Securities and Exchange Commission is on the case and working to get your money back. Who knows how long this will take? Further, who knows how much of your original "investment" you will get back, if any? You can read all about it here: https://www.sec.gov/news/press-release/2019-168

What if you could find a fiduciary who did not want you to open a new account or transfer your assets to their firm? You're looking at him. No risk of a Ponzi scheme from me either, since I do not make you open or transfer accounts before getting a Financial Plan. This is the Future of Advice, in case you did not know.

https://www.firstcoastplanning.com

Thursday, August 22, 2019

Reg BI - Advisors Will Write Big Checks For This Rule

One of the things that I do as a Financial Planner and Professional Money Manager is stay abreast of what's going on in my industry. Sometimes, because of new regulations, I have no choice in the matter. This is one of those times.

The SEC has passed a new Final Rule called Regulation Best Interest, or Reg BI. This rule requires different things to happen as far as disclosure is concerned. It depends on how the financial advisor is licensed. If they work for only a brokerage firm and not a registered investment adviser, then they have to have a two (2) page disclosure. Insurance agents come to mind for this category.

If they are dual registered, meaning if they are licensed with a brokerage firm and a registered investment adviser, then they have to have a four (4) page disclosure, or they can give 2 two-page disclosures for a total of four pages. One two page disclosure for their brokerage firm and then another two page disclosure for their registered investment adviser firm for a total of four (4) pages. (I hope they do not forget to give prospective clients both two page disclosures, or all four pages!) Big brokerage firms come to mind for this category.

If the adviser is licensed only as a registered investment adviser, then there is a two (2) page disclosure. Both of these required disclosures essentially repeat items currently disclosed in Form ADV 2A documents already required to be disclosed to clients. The new items are called Conversation Starters. The SEC thinks we need to have a conversation with our clients and prospective clients which is a good thing I suppose, but seems a little artificial to me. These RIA's are generally advisers who charge a fee of some type, but as a caveat may also be able to sell commission products.

Now, as a result of this SEC Reg BI Final Rule, we will be adding two pages to our disclosures.

Why is more complexity in the way of disclosures always the answer when it comes to the government, specifically the SEC?

I believe the SEC adds complexity, because it is a way to keep a thriving legal and compliance community in business.

The costs of compliance for brokerage firms is not an issue. They have plenty of money to pay people, or hire outside compliance experts to draft a two or four page Reg BI disclosure for them. In the same vein, large registered investment adviser firms also can hire outside compliance experts to draft the Reg BI disclosure for them.

Where the pain of the Reg BI falls is on smaller firms. Luckily for me, I have thirty-one (31) years of adapting to changing rules and have garnered compliance experience from small brokerage firms, large brokerage firms and several registered investment adviser firms. This is not to say that I am the most expert person on compliance that ever existed, but I have a secret. I can read. When these Final Rules come out, I simply take a very deliberate approach and read these Final Rules over and over again, until I am comfortable with what the disclosure should say. Even then, sometimes when I go through state securities examinations, there are some things that I may have missed. Most of these misses are generally minor in nature, like forgetting to check a box or something, but nevertheless, it shows that even someone with years, even decades of experience does not always get it 100% right.

Now, imagine if you do not have my experience, nor my compliance skills. Reg BI creates a problem for you. The experience and understanding to draft this Reg BI disclosure on your own is either simply not there, or you have more important things to do, like running your business. What is your choice? You have to hire or have on staff a compliance expert to tackle this Reg BI disclosure. If you have to hire an outside compliance expert, then what is that going to cost? If you hire a lawyer, then odds are it will cost more than hiring a compliance firm. Think about this fact. You have a registered investment adviser firm and you have to have this Reg BI disclosure document. The window opens on October 1, 2019 and is fully required to be implemented by June 30, 2020. After that, your Reg BI disclosure document has to be completed and given to all current and prospective clients, put on your web site prominently and other requirements related to how you can deliver it.

Have you ever heard the term, "Someone has you over-a-barrel."? It means that you need their services and you do not have a lot of choice, unless you try and do it yourself. From a capitalist viewpoint, if you need someone's services and they know it, do you really think they are going to charge a low fee? Of course not. They will charge the highest fee that they can get away with. After all, the main release document by the SEC was 771 pages long. Even though the output required is only two (2) pages, your outside compliance expert is going to have to "study up" on those 771 pages.

If you understand these 771 page documents like I do, then you will know that the bulk of 771 pages is an explanation of how the SEC arrived at the Final Rule and their response to comments on the Final Rule that they received when Reg BI was a Proposed Rule. The actual rule starts on page 764 and ends seven (7) pages later on page 771. However, if you do not read the rule and just trust an outside compliance firm to draft this document for you, then undoubtedly they will go on and on about how complicated the rule is and the fact that it is 771 pages long. Of course, they do this to justify their "having you over-a-barrel" fee that they will charge you. Further still, their fee will go up depending on the size of your firm. The bigger the firm, the more they will charge you.

Personally, I can tell you that I have spent at least twenty (20) hours to forty (40) hours on this Reg BI disclosure document. You can figure a $200 hourly rate times 20 hours to be conservative and then you can easily see how much Reg BI will cost firms without someone like me. All this for a (2) page disclosure that pretty much repeats what is already in Form ADV 2A, but adds Conversation Starters.

Can you see how new regulations benefit attorneys and compliance professionals and really do not do much for clients and prospects of investment firms?

Don't you hate people who complain and do not offer a better solution? I do too, so I will offer mine.

A much simpler solution is always staring regulators in the face. If you work for a brokerage firm, then you are licensed as a registered representative. If you work for a registered investment adviser, then you are licensed as an investment adviser representative. The simple solution is if the SEC just said, "if you are a registered representative, then you are a commission advisor. If you are an investment adviser representative, then you are a fee adviser." Industry trade groups would howl at the moon over this simplicity. Of course, there would have to be another rule for dual registrants - those who are both a registered representative and an investment adviser representative. Well, we started simply, but now we are moving to complexity.

What if the SEC said, you have to disclose whether you are a registered representative with commission products for sale? All registered representatives by their nature can sell products that pay commissions. It should not matter that they are dually licensed as an investment adviser representative, because where are the conflicts of interest? With the commission products, of course. Therefore, we can forget about this dual registration stuff and require all registered representatives to be labeled as "registered representative-commissions." Well not quite. If they are dual registrants, like they are today with both licensed as a registered representative and an investment adviser representative, then in order to not have these people howling at the moon, we have to make an exception for them. So, these dual registrants would be labeled as "registered representative-commission and fees."

Now, let's look at investment adviser representatives. Do investment adviser representatives offer products for a commission? Some do if they are also insurance licensed. Therefore, they would have to be labeled as "investment adviser representative-commissions and fees." It doesn't matter whether or not they sell commission products or not, but if they are licensed to do so, then they must be labeled "investment adviser representative-commissions and fees."

Well, what if they are not licensed to sell any commission products? I am glad you asked. This makes it simple. These professionals would be labeled "investment adviser representative-fees."

Our end result is four categories that covers everything.

  • Registered representative-commissions
  • Registered representative-commissions and fees
  • Investment adviser representative-commissions and fees
  • Investment adviser representative-fees

Doesn't this provide simplicity for clients and prospects? Let's evaluate this.

  • Registered representative-commissions
    • These will be brokerage only employees not licensed as investment adviser representatives and will include insurance agents.
  • Registered representative-commissions and fees
    • These will be the people who love wearing two hats, but they will no longer be able to call themselves investment adviser representatives. We have to make things simple, so, if they have a registered representative license, then that is all that matters. These people can sell commission products and also charge fees for money management and financial planning in any combination or assortment, I might add.
  • Investment adviser representative-commissions and fees
    • These will be people who are fee and commissions and also wear two hats and charge a mix of commissions and fees in any assortment. The bulk of their business will likely be fees, but they may be insurance licensed and sell some insurance products as part of a financial plan. 
    • This category could also include primarily insurance agents who sell mostly commission products, but just needed to be licensed as an investment adviser representative in order to advise you to liquidate your brokerage account so they could sell you that 10% commission annuity.
  • Investment adviser representative-fees
    • This is the clearest and easiest to understand. No commissions allowed. They only charge fees for their advice. This could be an assets-under-management fee, a flat annual retainer fee, or an hourly fee.

If you are a client or prospect, doesn't this simplify things for you? Can you not see and understand what type of advisor you have a choice in hiring? The truth is that we do not need the SEC to make this a new rule. I just explained to you the four types of advisers out there, so now it should be easier for you to know who to hire.

If you do not hire me, I hope you hire another adviser. You need our help whether you think you do or not.

By the way, if you need a Reg BI disclosure document for your small registered investment adviser firm (state regulated), then you can reach out to me at (904) 460-2700. I have this down to a science, so I can probably save you a bunch of moolah.



Tuesday, August 13, 2019

Behaviorial Biases

The last two weeks is a perfect example of why you must not panic and sell when the stock market goes through a period of volatility. If you panic and sell, then you miss out on the rebounds. If you did that, then guess what? You've just discovered two things. One is that you are not a savvy investor and the other is that you need a professional money manager. Trying to skimp on paying a financial advisor just got blown to smithereens by you selling out in a panic. You didn't save anything. Instead you lost money. If you had a professional money manager, then you would not have lost anything and most likely, you would not have created a tax liability either.

The truth is that your knowledge of stock markets, financial planning, understanding investments and the like does not hold a thimble full of knowledge compared to my 31 years of experience. I know that sounds egotistical, but the truth is that if you were a CPA or an attorney for 31 years, then odds are that you would know more about your profession than any outsider using TurboTax or Legal Zoom. Think about it. Can you really disagree with me? Even if you worked construction for 31 years, or were in real estate for 31 years, then the odds are that a first time house flipper, or someone selling their house on their own could not hold a candle to these professionals. Consequentially, I am not really being egotistical when I say that you cannot hold a candle to my level of expertise.

The value of someone like me is the knowledge and experience that they have built over the years and this benefits you. If you choose to take advantage of it.

www.firstcoastplanning.com.





Friday, August 2, 2019

Where Are You Spending Your Time?

"Do not try to understand things that are too difficult for you, or try to discover what is beyond your powers." - Ecclesiasticus/Sirach - Chapter 3 - Verse 21

When I think of politics, I think of a subject that is too difficult for me to understand. Trying to understand the political landscape is beyond my powers.

When you really think about it, out of over three hundred million people, I have one vote. More importantly, I have one life. Should I spend my life worrying about what one political party is threatening to do versus another? Or, should I spend it doing the things that make me happy?

Does politics make you happy? Most likely, it does not. Probably, it gets you mad and upset and makes you scream at the television. The truth is that no matter what side of the equation you are on, politics is a big negative that you and I really do not have any control over whatsoever other than our one vote. Sure, you could donate money or time to a political campaign, but is this time well spent?

What if you quit worrying about politics, or spending your time on political campaigns? You would have more time for things that matter and the things that you can control.

What if you focused on something that could have a major positive effect on your life? 

A Financial Plan that simplified your life.

What if you could obtain a Financial Plan without having to move any accounts, or open any new accounts?

What if you could obtain a Financial Plan without having to pay an assets-under-management fee?

What if you could obtain a Financial Plan without having to buy any investment or insurance products?

What if you did not have to disclose any of your account numbers for any of your accounts whether they be investment, retirement, insurance, credit cards, mortgages, checking, savings or student loans in order to obtain this Financial Plan?

What if the person helping you with this Financial Plan was a fiduciary and not wearing multiple hats like brokers and insurance agents do?

What if you could pay a subscription fee for this Financial Plan that was extraordinarily reasonable for both single persons or one income families and couples or two income families?

It would be time well spent to look into it.

Sunday, June 2, 2019

What's in a Surname?


On April 3rd, 2019, after years of contemplating, I went down to the St. Johns County Court House and appeared before Judge John M. Alexander to restore my legal name. When I was born, my name was Richard Mark Allison and on April 3rd, I restored it back to that name. My mother, Donna and my father, Billy Joe Allison were married at very young ages. He was 21 and she was only 19 years old. A year later, I was born. Shortly thereafter, they divorced.
My mother quickly remarried a man from Sardis, Mississippi named Hillman Johnson. They were married when I was only two years old, so as you can imagine, Hillman was the father that I grew up with and the only father that I knew. Hillman and my mother went on to have three children together named Sharri, David and Gary. Unfortunately, my brother David was killed in a car wreck at age 32 back in 1993. Hillman passed away a few years later in 1996 at the age 57 of cancer. I miss them both dearly.
I can vividly remember my first day of school at Meadowcliff Elementary School when my mother pulled me aside and told me that she had changed my name to Richard Allison Johnson. I also remember crying about it. I didn’t like it at all. I knew my name to be Richard Mark Allison and I didn’t want my name to change. Truth be told, I have been mad about it ever since. I always had a problem with my name being changed. Looking back, I had a hard time believing that my father Bill signed off on an adoption when I was six years old. I was told on more than one occasion that I was adopted by Hillman Johnson. I never really thought to ask Hillman about it. I just took my mother’s word for it.
A few years ago, I looked into the process for legally changing my name. In St. Johns County, the court’s instructions said that I had to get the original court order of any previous name change if I was wanting to restore a former name. A few years ago, I decided to contact the State of Arkansas and get a copy of the court order for what I thought would be my adoption papers where my name was changed. When I got the court order, I was stunned by what I found. I was never adopted. My mother simply had changed my name. All this time, I had thought that I was adopted. My mother didn’t change it when I was in the first grade, either. She changed it when I was about to go into Catholic High School for Boys when I was almost 15 years old! Everything that I had been told about when my name was changed, the fact that I was adopted, how Bill Allison had signed off on the adoption, all of these statements were simply not true. Even my sister Tami Allison thought that I was adopted. Tami had told me how upset my father was when my name was changed. He had just moved to Arkansas around this time, too. I’m not sure if that was a factor, or whether my mother had to change it to get me into Catholic High. My elementary and junior high records were under Richard Allison Johnson and I needed to have that name in order to gain admittance into Catholic High. That is my best guess.
Quite simply, I was flabbergasted by what I had discovered. Of course, my first thoughts were the universe needs to be restored and that meant that my birth name needed to be restored. However, I did not want to hurt the feelings of my mother. I am sure she thought she was doing the best thing for me. Plus, I did not want to hurt my Johnson siblings by them jumping to conclusions that I was favoring my Allison siblings over them. So, I gave it all very thoughtful deliberation. I spent a couple of years thinking about it, in fact. I finally came to the conclusion that it has nothing to do with my mother, or my Johnson or Allison siblings. My first son’s name was Reese Cannon Johnson and he died of SIDS in 1989 and I certainly gave a lot of thought to restoring my former name, because of him, too. After, all I could not change Reese’s last name, or rightfully expect my wife Natalie, son Marshall and daughter Rudi to change their names, because of what at first glance may seem like a “hair brained idea” to most people. In the end, my reason for changing my name is out of respect for my father Billy Joe Allison. Pure and simple. He was a true American hero and I think most anyone would agree with me learning the facts about his life.
My father Bill joined the Army in February of 1950 when he was only 15 years old. He joined the Army and quickly went off to fight in the Korean War. Imagine serving in the Korean War as a teenager! All Korean War Veterans received medals and decorations not only from the U.S., but also from the Republic of Korea (South Korea) and the United Nations. Bill served eleven months and eighteen days in Korea. I am still trying to piece together his Korean War Army record, because as some of you may be aware, there was a fire in St. Louis that destroyed almost all the Army records prior to 1973. As a result, I am on a scavenger hunt looking for clues.
My father was born in Cabot, Arkansas and after serving six years and six months in the Army, he decided to join the Air Force as his marriage with my mother was ending. I am still investigating this fact, but I believe that he literally walked out of the Army right into the Air Force without much time in between on September 10, 1956. I was born about two weeks after he joined the Air Force. Bill was awarded several medals and decorations during his time in the military. He spent a total of ten years, six months and six days serving his country which amounted to a significant portion of his life as you will see later.
There were a lot of family dynamics in place in September of 1956 that kind of forced Bill and Donna towards divorce. About all my mother would ever tell me about it was there was some infidelity involved and that was her reason for getting a divorce. However, I do believe my grandfather was a major influence too. He was the domineering type. I am sure that he did not want his 20-year-old and only daughter to leave Arkansas and her family with a new born baby.
Bill Allison, like my mother, remarried right away. He married his second wife Margaret also when I was two years old. This was not exactly the activity of a womanizing philanderer. If he was that kind of individual, he would have never jumped into another marriage. Instead, he would have spent his 20’s chasing women, don’t you think? This did not happen. I am sure my mother was heartbroken at the time that her marriage to Bill didn’t work out, but in retrospect, there are a whole lot of people in both the Johnson and Allison families that would have never existed if they did not get divorced. Children and grandchildren specifically. Think about that for a moment. Sometimes things happen for a reason. A lot of very good people came into being as a result of Bill and Donna’s divorce, so their divorce turned out to be a blessing! It was all part of God’s plan.
When Bill was in the Air Force, he was an aircraft electrician and mechanic. I am still researching this fact, but I believe that he was stationed at Big Springs Air Force Base which was later renamed to Webb Air Force Base in Big Springs, Texas. Bill met Margaret while in Big Springs and they had their first child, Tami. After a short stint in Midland, Texas, they moved to Arroyo Grande, California to be with the rest of Bill’s family. Bill and Margaret went on to have a son named Jon and another daughter named Kelly who were both born in California. After moving to Arroyo Grande, Bill became a police officer. After several years, the Chief of Police position became available in a nearby city, Grover Beach and my father applied for it and was awarded the job. Now you and I both know that not just anyone gets a Chief of Police position. There has to be a lot of good qualities to get a job like that. Leadership, respect among peers and others, not to mention the politics involved. Obviously, Bill Allison fit those requirements and knew how to navigate the political aspect of it.
As I was growing up in the Johnson family, I never had any contact with Bill Allison. I suspect it was because my mother, in her mind, was protecting me in some way. I can understand that, but how I wish it was not that way. Her relationship with him was so short, so I always wondered, what did she really know about him? After all, they were not even married for two years. Her knowledge of him had to be very limited. My mother was not the source of information that I needed.
When I was starting high school, Bill Allison accepted the Chief of Police job in Camden, Arkansas. I was told later by my sister Tami that he wanted to have a relationship with me when I turned eighteen years of age. His wife Margaret also verified this fact to me. At that point, I would be free to make my own decisions. Of course, I would have loved to have met my father and gotten to know him. Unfortunately, it was not to be.  He passed away when I was finishing my senior year of high school. I was 17 years old at the time. Bill was only 39 years old when he died. I will never forget his funeral. If you have never seen a police officer’s funeral in person, let me tell you it is quite a spectacle. The thing that made such an impression on me at the time was the local police and especially, the Arkansas State Police in attendance. It was quite an impressive turnout. It was like all of the Arkansas State Police was at his funeral.
This was the only time that I was able to see my father. My first encounter with him was when he was lying in that casket with his Chief of Police uniform on. I touched him and immediately began to cry. I cried for what was lost between us. The missed opportunity. We were both in the State of Arkansas. So close, yet so far away. Bill did not get a chance to meet me as he had hoped and planned on. Tami had told me one time that whenever they had talked about the three kids in the Allison family, he would always correct them and remind them that there was one more Allison kid, …Ricky.
 Being born in 1934, a soldier in Korea in the early 1950’s, and a paratrooper, these Army guys tended to smoke cigarettes. A lot of cigarettes in fact. Of course, cigarettes back then were not very good for you as we all know today. He smoked as a teenager until his death at age 39 when he died from atherosclerosis. He was having chest pains while at Oaklawn Park in Hot Springs, Arkansas and they took him to the hospital. The doctors at the hospital told him that he had a heart attack and he was going to have to change his diet, quit smoking and reduce stress. When they came back into his hospital room later to check on him, he had died. His parents requested an autopsy, because they could not believe it. After all, 39-year old men do not drop dead ordinarily. That kind of thing that had not happened before in the Allison family tree. I got a copy of the autopsy report myself, because I wanted to see it, too. If this would have happened to him today, they would have put a few stents in him, or done bypass surgery and he still would have been around, but it was 1974. Things were different back then. The sad reality.
Imagine if you will, growing up wanting to know your father, but never having the opportunity. Let me tell you. It is an awful feeling. All I ever got out of my mother was the infidelity story. I have never been swayed that he was a bad person. His actions prove otherwise. I knew in my heart that he was not a bad person. In my mind, he was instead the opposite of that, an American hero. The fact that I never knew or met my father has always been a black hole in my life. I’ve always called it “the black hole”, because there is so much information that I would love to know. In an attempt to try and fill this black hole, I went about trying to piece things together on my own. It first started well over twenty years ago when I reached out to my Aunt Betty. I wrote her a letter and said that I would like to meet my sisters, Tami, Kelly and brother Jon Allison. We ended up meeting and it was kind of like the show Long Lost Family, if you have ever watched it.
Like any family, the Allison side of my family has had our share of tragedies. Tami died at age 53 of Lupus and other complications and in March of 2019, my 54-year-old brother Jon died of a heart attack. Jon was a smoker and I cannot tell you how many times that I told him to quit smoking, but to no avail. It is hard to quit those cigarettes. They killed my father and now my brother Jon. About four years ago, Jon had major bypass surgery, but shortly thereafter, resumed his smoking. Jon was such a sweet soul and loved golfing, fishing and his little dog Whoopi. I probably have 500 pictures of that stinking dog in my phone. I went to California with my sister Kelly the first week of May for his Celebration of Life ceremony. Jon was so happy to have a big brother and I was so happy to be his big brother. The last time that I texted Jon was on the anniversary of our dad’s death. I had sent him a picture of our dad that I had edited with Adobe Photoshop. How’s that for goosebumps? Perhaps, our dad wanted to bring him home.
His Celebration of Life was sad at first but ended well as I got to meet his close friends and hear a lot of stories about Jon’s life in California. He had some good friends, a lot of whom were British guys. He used to work at some British Auto shops there in San Luis Obispo and those guys came over to Dena’s house (Jon’s wife) and told some stories and shared some laughs. I wish I could have visited Jon more often. The miles between us made it difficult.
Now, let me ask you something. What if your father wanted to serve his country and joined the Army at the age of 15? What if he knew a war was going on yet joined the Army anyway? What if you knew he was a brave-as-they-come paratrooper who jumped out of those airplanes probably built in the 1940’s? What if he was a decorated Korean War Veteran with a 10 plus year military career? What if your father spent the rest of his life in law enforcement and he was the Chief of Police in not one, but two different cities? Finally, what if you knew he was a dedicated family man and loved his children, even a son that he never knew?
Let me ask you. If you were his son, wouldn’t you be proud to bear his surname of Allison? I have a Bachelor of Arts in Criminal Justice that I earned at age 60 in honor of him and his dedication to his career in law enforcement. Today, I have the honor and privilege of bearing his last name once again. I am the son of an American hero. Why shouldn’t I be proud of that? Now you know why I changed my name back to Richard Mark Allison. The universe has been restored to its former glory.



Richard Mark Allison
Proud son of Billy Joe Allison
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Tuesday, May 14, 2019

Jon Terry Allison's Roots


Back in 1675, a man was born in Londonderry, Northern Ireland by the name of John Allison. He grew up and married a Scottish gal by the name of Jennet Helmer. One day, they decided to come to the British Colonies and settled in Lancaster County in the Pennsylvania Colony. They had 7 children, one of whom was named William Allison. They were Presbyterians.

Their son, William Allison was also born in Londonderry, Northern Ireland settled in the same Lancaster County area and married a lady name Grizzell and they had 6 children, one of whom was named John Robert Allison.

John Robert Allison was named after his grandfather John and his uncle Robert. He married a lady whom they called “Mattie” and they had 14 children together. They moved away from Lancaster County and made their home in Hillsborough, North Carolina Colony. One of their children was named Joseph H. Allison.

Joseph H. Allison was a Lieutenant in the Revolutionary War and helped secure America’s freedom. He married three times and had 17 children in all. He and most of his family moved to White County, Tennessee, but left behind his son, Joseph Stuart Allison who chose to stay in Hillsborough, North Carolina.

Joseph Stuart Allison was a General in the North Carolina State Militia. He married a lady whom they called “Patsy” and they had 11 children, one of whom was named John James Allison.

John James Allison became a Medical Doctor and moved to Comanche County, Texas. They called him Dr. J.J. Allison. He married a lady named Mary and they had 9 children together, one of whom was named William L. S. Allison.

William L.S. Allison was a member of the Texas Rangers Frontier Battalion in Brownwood, Texas. He married a lady named Julia. They moved to Hattieville, Arkansas and one day after going to the general store, William never came home. It was thought he was killed by the Indians, but no one knew for sure. William and Julia had one child named John Washington Allison. The Allison family tree almost ended right here. But God had a plan.

John Washington Allison lived in Hattieville, Arkansas, married a lady whom they called “Cassie” and they had two children together, one of whom was my grandfather Terry Francis Allison. My brother Jon bears his middle name. John Washington Allison remarried and had 6 more children with his second wife whom they called Lizzie. They all lived in Arkansas at the time.

Terry Francis Allison met his wife, Ollie, my grandmother in Arkansas. They had four children together, Eva Dean, Betty, Billy Joe and Nancy. Eventually, they moved to Arroyo Grande, California and they all had children of their own. Billy Joe married my mother Donna at a very young age and their marriage did not last long. Only a year or two in fact. However, this was meant to be.

It is strange how God has a plan for all of us.

When I think about my great-great grandfather William L.S. Allison going off to the general store and never coming back, I have to wonder… what if he didn’t have his son John Washington Allison before he died? He was an only child. The Allison family would have ended right there, but God had a plan.

My maternal grandmother Ollie is pictured above along with my grandfather Terry. Her father Francis Utley fell off a wagon and died from a broken neck when he was only 22. His wife, my great-grandmother Nancy was pregnant at the time with my grandmother Ollie who ended up marrying my grandfather Terry Allison. They had a son name Billy Joe Allison who was Jon, Tami, Kelly and my father. What if Ollie’s mother was not pregnant at that precise time? The Allison family would have ended right there and I would have never existed. But God had a plan.

What if my mom didn’t get that divorce from Billy Joe Allison, then all the children and grandchildren that have followed would have never existed, but God had a plan.

God’s plan was for Billy Joe Allison to marry Margaret Bryson, the woman he was meant to be with. Bill and Margaret had three children together. Tami, Jon and Kelly. God’s plan was that he wanted Tami to be born along with her children Alyssa and Teri. Also included in God’s plan was Kelly and her 3 children Devin, Jace and Joe plus, Devin and Jace’s 5 children. And, of course, God wanted Jon to be born so he could marry Dena so they could have their son Riley (pictured left).

It is at times like these that we tend to question things. Why did this have to happen? Why did Jon have to die at this young age of 54? It was simply, God’s plan. Jon had an effect on all of us and he will continue to have an effect on us for as long as we live. We will cherish his memories and remember the times we had with him. His imprint on our hearts will be everlasting. He had a lot of friends that I met at his Celebration of Life. It was an honor to meet them. Especially, Casey, Todd, Terry, Dean, Darrin, Phil, Scott, Brian F., Martin, Scott, his brother Brian and the many others.

Well over 20 years ago, I wrote a letter to my Aunt Betty wanting to meet my sisters, Tami, Kelly and brother Jon. I thought it was pretty stupid to have two sisters and a brother out there somewhere and not have a relationship with them. Well, we all met way back then and it is one of the best decisions that I ever made. We kept in touch ever since until fate intervened. My sister Tami passed away in 2014 at the age of 53 and now Jon at age 54.

Jon (pictured left) and I went fishing together one time and I had not been fishing in a while. I caught a 2lb 2oz bass and man oh man, I was so proud of myself. But, Jon, being the expert fisherman that he was, promptly reeled in a 5lb 5oz bass and put me to shame! He got his picture in the paper! If you ever want to feel puny. Put a 2lb bass up next to a 5lb one.

Those of you who knew Jon know he was good as gold. His friend Todd told me they talked about his belief in God. He was a believer. He loved to play golf and fish and he was very proud of his son Riley and loved Dena more than she probably knows. But, the one that he loved the most was of course was Whoopi. Whoopi liked to play golf and go fishing, too. I think I have about 500 pictures of Whoopi in my iPhone that Jon texted to me. Pictured to the left are me and Dena, Jon's sweet wife and of course, Whoopi at Jon's Celebration of Life event.

This will give you goose bumps. The last day I texted Jon was on the anniversary of our dad’s death, February 19th. I had Photoshop-ed an old picture of our dad in his Arroyo Grande police uniform and I wanted him to have it. I was going to surprise him soon, because until recently, my name was Richard Allison Johnson, but on April 3rd, I changed my name back to the name I was born with, Richard Mark Allison. I told Jon that I was thinking about doing it awhile back, but I wish I would have told him that I actually did it. This is my silly regret.

My sister Kelly asked me if I wanted to go to a San Diego Padres game after Jon's Celebration of Life event. She didn’t know that me and Jon went to a Padres game together. I have to think Jon arranged that baseball game for us. He knows how much I love baseball and Kelly, too.
Anyway, I have rambled on enough. Just wanted to let each and every one of you know that God has a plan for all of you. You are all very important to your family and all the descendants that will follow in your family tree. Just look what has happened since John and Jennet Allison came to the Pennsylvania Colony way back in the late 1600’s. It is simply amazing and of course, God's plan.

Thank you and God Bless you.


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Tuesday, April 30, 2019

Texas Investor Guide

The Texas State Securities Board has published a really nice guide for investors. The Investor Guide explains a lot of things about investing in general with a glossary of terms. In addition, it explains the differences in registration types for financial advisors. The best part to me is the validation of what I wrote about in my book, Meet Wally Street. The Reason You're Stupid. 2nd Edition and of course, the validation is how fraudsters steal your money and the tactics that they use.

I have been writing about investment scams for years with my three basic rules of investing. If you follow these three simple rules, then you stand a fighting chance against all the fraudsters out there trying to steal your money. You always have to be on guard however. Nothing is ever fool proof. 

  1. Keep it Public
  2. Keep it Liquid
  3. Do Your Homework
Keep it public means to only buy investments that are publicly traded on a major stock exchange like stocks, bonds, CD's, mutual funds and exchange traded funds.

Keep it liquid means to only buy investments that you can get your money back within normal trade settlement within one or two business days. No exceptions!!!!

Do your homework means do a easy online checkup on your financial advisor and make sure they are licensed in your state for one thing. You can do this at Investor.gov. After you do that first critical step, then follow up and see if they have any complaints on their record and if so, what are the details of those complaints. Also, check other licenses like CFP, or other financial designations. Don't forget about insurance agent licensing either. You will have to go to the individual state insurance department web site for this information and you may have to dig around for it. It might be just as easy to call them for the information.

In the Texas State Securities Board's Investor Guide they talk about some of the scams that I have been writing about for years. Promissory notes, Non-Publicly Traded REIT's, Private Placements and other hocus-pocus investments that do not exist. All of these fail the first of my two rules above. None of these are publicly traded and none of these are liquid. That ought to be your first clue. If it isn't liquid and it isn't publicly traded, then hold onto your wallet. Somebody is out to steal money from you. Most Ponzi schemes come from these areas as pointed out in the Texas Investor Guide.

I highly recommend this Texas Investor Guide and you can get your copy by visiting the Texas State Securities Board web site here:

https://www.ssb.texas.gov/news-publications/order-2019-texas-investor-guide

My book Meet Wally Street. The Reason You're Stupid. 2nd Edition is available here and at your favorite ebook retailer. Make sure it is the 2nd edition!

 https://www.amazon.com/Meet-Wally-Street-Reason-Stupid/dp/1720401543

Monday, April 29, 2019

Economic Inflation Worries

Economic inflation worries are overblown. They have always been overblown ever since Jimmy Carter was President. Back then, banks were hawking CD's at unsustainable rates of 15% and more. Insurance companies were promising annuity rates just as high. Mortgage rates were also similarly high. Auto loans were equally ridiculous. There was an oil embargo that caused the price of oil to sky rocket and the supply to shrink. The people or economists who lived through this all blame "inflation" as the culprit.

It was not inflation. It was simply idiots in charge of everything. What kind of idiot was in charge of the bank making 30 year mortgages at 15% interest and expecting people to be able to pay that rate over the life of the loan? Or, how about a 15% auto loan? Really? I would have loved to be in the Board of Directors meeting listening to one of these idiots explaining why we needed to offer 30 year mortgages at 15% interest. I would have fired them on the spot for being so stupid.

What kind of idiot was in charge of the bank who paid CD's at the rate of 15% for a one year CD?  What kind of idiot was in charge of the insurance companies who promised annuity rates of 15% for 5 years no less? You read that right. For 5 years! They were doing it back then, believe it or not.

Paul Volcker, the Federal Reserve chairman was heralded as the savior who saved America from the evil culprit of "inflation." What a joke. He didn't save anything. The markets adjusted to the stupidity of the people running the banks and insurance companies. These bank executives and their Board of Directors finally got a clue that they could not pay 15% CD rates, loan money profitably on a 30 year mortgage at 15%, or a car loan for that matter. Paul Volcker did not have anything to do with it. Although, economists everywhere give him the credit for saving America from the ravages of "inflation." The market adjusted. It is called capitalism at work.

"Inflation" was not the problem. Stupidity was the problem. Ever since this period in our economy happened, we have been stuck with these Federal Reserve policy makers who are so scared of "inflation" that they think a 2% cap on "inflation" is all that we can handle. TWO-PERCENT! Are you kidding me? What is wrong with these people? They are so scared that we will see a repeat of the Jimmy Carter days of "inflation" that they have to stop it from happening at all costs! Anytime that the economy starts to do well, these Federal Reserve governors step in and put the brakes on. All in the name of saving the economy from the ravages of "inflation." They did it last December and the stock market immediately tanked as a result. Their justification was they were trying to get back to "neutral". Neutral? Neutral? Now, they are inserting a new Federal Reserve policy. Neutrality. What the hell is neutrality? It is some arbitrary number that they want to achieve that gives them some warm and fuzzy feeling. This is so freaking stupid it is simply unbelievable. Stupid is my favorite word, by the way. Read my latest version of Meet Wally Street. The Reason You're Stupid. 2nd Edition. https://www.amazon.com/Meet-Wally-Street-Reason-Stupid/dp/1720401543

Sadly, there is no common sense in the Federal Reserve's way of thinking. They are way over-thinking it. Take a moment and spend a few minutes looking at this page and you should come to the same conclusion that I did. The Federal Reserve has done an awful job of raising and lowering interest rates over time. https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

Who bears the brunt of these poor decisions? The middle class. The people with a 401(k) who are trying to save for retirement. Just when the market gets going in the right direction, these Federal Reserve Governors, slam the brakes on the economy by raising interest rates at the most inopportune time, like December 2017. This kills the growth in the average middle class 401(k) account. Why on earth would the Federal Reserve Governors have a policy that stymies growth? Their answer is because they are worried about the "inflation" that they experienced personally when Jimmy Carter was President. They have never really evaluated this period in time. Like I said above. Stupidity was the problem, not "inflation."

Does anyone have any good old fashion common sense any more? I would make the case that "inflation" is a good thing and the market will correct on its own without intervention from these brilliant Federal Reserve Governors. Even in the most notorious inflationary period in recent memory, the Jimmy Carter Presidency, the markets corrected. It is called capitalism at work.

Alas, what can a peon like me do about it? All I can do is make my point and hope to change some ingrained (stupid) ways of thinking.


Tuesday, February 26, 2019

Research & Evaluation After December Swoon

I always like to look at how specific investments perform in a sharp down draft like we had in December of 2018. This gives me clues as to what works and what does not work. This past December was one of those market swoons where everything went down pretty much. The trick is to study what was affected the most and what was affected the least.

What I discovered was that value investments tended to do very poorly in comparison with low volatility. In the past, value investments were the only choice when it came to buying low and selling high investments. However, with the advent of factor investing, we now have more choices such as equal weighting and low volatility investments. These two categories held up better than value did last December.

In addition, there is another very niche category that I like developed by Morningstar. This niche category revolves around their Moat process. This Moat process is where they evaluate publicly traded companies that are almost monopolistic and or have very strong barriers to entry from competitors. In addition, they generate a lot of free cash flow. Think of Amazon, or FedEx as companies with Moats. VanEck Vector Funds have signed on with Morningstar for their Moat strategies and are now offering a few different Moat based ETF's.

If you ever read one of my books, then you know the secret to investing is not to kill it on the upside, but rather to minimize the downside (volatility). These equal weighted, low volatility or minimum volatility investments have now had their mettle tested with the December swoon and they performed as advertised. You have to be careful however, and not just invest based on a name, because some funds may have these words in their name, but not perform as expected. Instead of looking at up performance, what you really want to do is evaluate down performance, specifically, December 2018.

Who cares if an investment went up 5% in November? If it lost 14% in December, then it is too volatile. That is not the kind of volatility that is advantageous for your portfolio. Okay Kemosabe? I can say that because I am part Native American, so get off my back, will you? I only have to go back to my maternal grandmother to find my Native American heritage. I am not like some people who are having to go back 9 generations to find a link.

Sorry, I digressed. Of course, I am way oversimplifying things here in this post, but there is a way to build a portfolio with moats, equal weighting and low or minimum volatility that should hold up well in this next swoon. However, you might need someone who knows how to do this. Hint: That would be me!

If I can help you, then give me a call at 904-460-2700 or reach out to me at rick@marianfs.com