Everyone was waiting with bated breath over the Department of Labor fiduciary ruling that came down recently. I for one actually thought the tide might have been turning against Wall Street firms and insurance companies, but boy was I wrong. I was foolish to believe that the Department of Labor was going to level the playing field in the retirement plan area when it came to fee disclosure. This just didn't happen.
I recall when I was the Branch Manager II for Charles Schwab in Jacksonville, (almost 8 years ago now) we had a retirement plan guy come in to speak to my team about their retirement plan services. The spill was the usual non-speak..."we are the best and to hell with all the rest." However, I wasn't quite convinced. So, I began to question the young fellow as to how much the fees were inside their 401k plan that they wanted us to sell. He replied that "there was no fee to the plan participants." I knew this was not true because of revenue sharing offered by mutual funds. You see, mutual funds have 12(b)-1 fees which they use to pay firms to market their funds. In the retirement plan arena, fees have long been hidden from participants, but make no mistake they exist.
Typically, the sales pitch is made to the employer that "you can save on your administration costs by taking the revenue sharing from the mutual fund 12(b)-1 fees as an offset." So, when that young man was telling me that there was no fee to the plan participants, what he really meant is that he could reduce or eliminate the fees to administer the retirement plan by utilizing the 12(b)-1 revenue. The plan participants would never see any fees and the employer could possibly not have to pay any administration fees. It was a win-win situation for both.
Fast forward to the recent ruling by the Department of Labor on fiduciaries and fee disclosure. Retirement plan advisers who charge fees will have to disclose their fees to plan participants and employers. However, if you can believe this, 12(b)-1 fees can continue to be hidden from view! Wall Street firms and insurance companies win again!
As a result of this ruling, it will be business as usual for Wall Street firms and insurance companies who use 12(b)-1 revenue sharing arrangements to sell their retirement plans to employers. What has changed for them? Absolutely nothing.
However, retirement plan advisers who charge fees will now have to disclose their fees in writing, while the Wall Street firms and insurance companies do not have to disclose their 12(b)-1 fees. Are you getting this picture? Wall Street firms and insurance companies want to squash their fee based competitors and it looks like they have succeeded.
If this is any indication of the power and influence that these groups have over registered investment advisers, then I shudder to think how the SEC will come down with their interpretation of fiduciary rules. In my mind, this is proof that nothing will change for Wall Street firms and insurance companies. It is likely that registered investment advisers will be subject to more onerous rules, costs and requirements. The goal of course is to squash the competition. Sadly, the competition, registered investment advisers, are the best choice for retirement plans, in my opinion, yet they will not appear that way to employers and participants.
Tuesday, June 26, 2012
Thursday, June 7, 2012
Testing Investor Discipline
The last six weeks has been a nail biter for a lot of people in regards to the overall stock markets. We started May 1st with $140.74 closing price on the S&P 500 SPDR ETF (ticker symbol SPY). Barely a month later, on June 4th, the SPY was down to $128.10. That is almost a 9% drop in about 30 days. If you go back another month to April 1st, then you are looking at a 10% drop in price for the SPY. They say that a 10% drop in price signals a bear market.
I can tell from my technical analysis charts that I follow that there were several investors who threw in the towel the first few days of June. Sadly, those that did would have pretty much picked the low point for the year. This is typical investor behavior. They sell when their fear gauge goes up.
Those investors who stayed the course would have been rewarded, because the last three days the SPY has climbed back from $128.10 to over $133.00 a share. That is a 4% bounce back from the low and that 4% gain happened in just three days. Did you stay the course?
As I describe in my book, Keep Your Assets. Take My Advice, investors tend to look at the high point for the year as a measuring stick. In other words, they would look at their account as of the April 1 or May 1 price of around $141 and surmise that they are down 6% on SPY, since SPY is trading at $133 or so today. However, they would be totally wrong. The first day of the year, the SPY opened at $127.76. So, even though an investor would "feel" as if they had lost money and were down 6%, the truth is that they would actually be up on the year! They would be up over 4% on the year!
Think about all that is going on right now with Greece, Spain, unemployment, political contests and loads of other uncertainty. Yet, through it all, the SPY is up over 4% on the year. Can you imagine what the market may do when there are good times ahead? Suppose the SCOTUS over turns Obama's Health Care legislation. Suppose we not only get a new POTUS, but also a major change in the do-nothing Congress. This is what appears to me to be headed our way. If some or all of this happens, then I suspect the investors will be well rewarded for staying the course.
I will admit that the month of May was pretty much a downhill slide, but you cannot invest in America without being willing to take some ups and downs in the market. I can empathize with the fact that 2008 is still very vivid in a lot of investors minds. However, the solution to investing cannot be to jump in and out of the market every time that your fear gauge goes up.
You have to be brave to be rewarded.
I can tell from my technical analysis charts that I follow that there were several investors who threw in the towel the first few days of June. Sadly, those that did would have pretty much picked the low point for the year. This is typical investor behavior. They sell when their fear gauge goes up.
Those investors who stayed the course would have been rewarded, because the last three days the SPY has climbed back from $128.10 to over $133.00 a share. That is a 4% bounce back from the low and that 4% gain happened in just three days. Did you stay the course?
As I describe in my book, Keep Your Assets. Take My Advice, investors tend to look at the high point for the year as a measuring stick. In other words, they would look at their account as of the April 1 or May 1 price of around $141 and surmise that they are down 6% on SPY, since SPY is trading at $133 or so today. However, they would be totally wrong. The first day of the year, the SPY opened at $127.76. So, even though an investor would "feel" as if they had lost money and were down 6%, the truth is that they would actually be up on the year! They would be up over 4% on the year!
Think about all that is going on right now with Greece, Spain, unemployment, political contests and loads of other uncertainty. Yet, through it all, the SPY is up over 4% on the year. Can you imagine what the market may do when there are good times ahead? Suppose the SCOTUS over turns Obama's Health Care legislation. Suppose we not only get a new POTUS, but also a major change in the do-nothing Congress. This is what appears to me to be headed our way. If some or all of this happens, then I suspect the investors will be well rewarded for staying the course.
I will admit that the month of May was pretty much a downhill slide, but you cannot invest in America without being willing to take some ups and downs in the market. I can empathize with the fact that 2008 is still very vivid in a lot of investors minds. However, the solution to investing cannot be to jump in and out of the market every time that your fear gauge goes up.
You have to be brave to be rewarded.
Wednesday, May 30, 2012
Are you having any fun?
The television is full of negatives these days. Greece, Spain and the rest of Europe are struggling to figure out how they can calm their markets. The US markets seems to have a knee jerk reaction to every bit of news out of Europe. Sometimes you have to step back and take a different view of things.
Can you or I really control what is going on in Europe? Can we control what is going on in the US markets? No, so why worry about it? Jesus taught us how foolish it is to worry. He said look at the birds in the sky. God takes care of them and he will take care of you also. There is no need to worry.
Can we control what we watch on television? Yes we can. Think about this. If the Dow Jones goes up 100 points or down a 100 points should that really make you happy or sad? Where are your priorities if your happiness, (or sadness for that matter) is dictated by what happens to the Dow Jones Industrial Average?
If this sounds like you, then you need to step out and have some fun. What is it that you really like to do? Is it walking, volunteering, teaching or mentoring others, spending time with your kids or grand kids? Whatever it is, then go do it and that is an order!
In my case, my stress release is baseball. As crazy as it seems, I am turning 56 this year and I play baseball. For me, it is a great outlet to have some fun. This Memorial Day Weekend, I drove 6 hours to Atlanta to play baseball with some baseball buddies from Savannah, GA. Who do you know that drives 6 hours to play baseball?
The Savannah guys were kind enough to allow me to play with them, when I have not done so in the past on this particular team. One of my friends, threw me right into the frying pan by telling the coach that I was a lead off hitter and left fielder. When the line up card came out, I was playing left field and batting lead off. In case you do not know, batting lead off is a very key position in baseball. You are the one that has to start the game off with a bang. Your teammates are depending on you to get a hit, lay down a bunt or do whatever it takes to get on base. In my case, I had the added pressure of performing for my friends sake. I could not let him down, so I didn't.
In the four games that we played, I had a triple, three doubles and three singles, plus I got on base two other times. I hit .467 with a .600 on base percentage, scored several runs and had a few RBI's. Two of my hits were close to going out of the park. (I need more muscles!) I had seven hits in four games which ended up being one of the most hits on the team. Not bad for an old guy. Now that is how you have some fun!
Life is short. Go have some fun and quit living your life watching television.
Can you or I really control what is going on in Europe? Can we control what is going on in the US markets? No, so why worry about it? Jesus taught us how foolish it is to worry. He said look at the birds in the sky. God takes care of them and he will take care of you also. There is no need to worry.
Can we control what we watch on television? Yes we can. Think about this. If the Dow Jones goes up 100 points or down a 100 points should that really make you happy or sad? Where are your priorities if your happiness, (or sadness for that matter) is dictated by what happens to the Dow Jones Industrial Average?
If this sounds like you, then you need to step out and have some fun. What is it that you really like to do? Is it walking, volunteering, teaching or mentoring others, spending time with your kids or grand kids? Whatever it is, then go do it and that is an order!
In my case, my stress release is baseball. As crazy as it seems, I am turning 56 this year and I play baseball. For me, it is a great outlet to have some fun. This Memorial Day Weekend, I drove 6 hours to Atlanta to play baseball with some baseball buddies from Savannah, GA. Who do you know that drives 6 hours to play baseball?
The Savannah guys were kind enough to allow me to play with them, when I have not done so in the past on this particular team. One of my friends, threw me right into the frying pan by telling the coach that I was a lead off hitter and left fielder. When the line up card came out, I was playing left field and batting lead off. In case you do not know, batting lead off is a very key position in baseball. You are the one that has to start the game off with a bang. Your teammates are depending on you to get a hit, lay down a bunt or do whatever it takes to get on base. In my case, I had the added pressure of performing for my friends sake. I could not let him down, so I didn't.
In the four games that we played, I had a triple, three doubles and three singles, plus I got on base two other times. I hit .467 with a .600 on base percentage, scored several runs and had a few RBI's. Two of my hits were close to going out of the park. (I need more muscles!) I had seven hits in four games which ended up being one of the most hits on the team. Not bad for an old guy. Now that is how you have some fun!
Life is short. Go have some fun and quit living your life watching television.
Wednesday, May 9, 2012
Visual Financial Planning?
Wouldn't it be nice to visualize all the important financial aspects of your life? With our firm, that is entirely possible.
Let's face the facts. No one wants to look at 73 pages of financial jargon that is hard to get your arms around. Instead, it makes a lot more sense if you could truly visualize your financial plan.
Here is a quick snapshot video (4:53) of the Visual Financial Planning offered by yours truly.
http://www.youtube.com/embed/19m0Q_CsuWs
Thanks for watching.
Let's face the facts. No one wants to look at 73 pages of financial jargon that is hard to get your arms around. Instead, it makes a lot more sense if you could truly visualize your financial plan.
Here is a quick snapshot video (4:53) of the Visual Financial Planning offered by yours truly.
http://www.youtube.com/embed/19m0Q_CsuWs
Thanks for watching.
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