There is Hope in #Fintwit

I am a student of prior wars. One of the craziest wars was World War I, sometimes called the Great War. Parts of this war took place in Northern France, Belgium and Southern Germany via trenches. The Germans advanced and dug large trenches over a vast stretch of land and then defended it. The Europeans also dug trenches very close to where the Germans dug their trenches. The Generals on both sides periodically ordered their men over the side of the trenches to advance to the other trenches. If you failed to get out of your trench when ordered, then you were likely to be shot dead right there by your own side. If you got out of your trench, then you were likely to be shot by the enemy. This insanity repeated itself for several years with neither side advancing. All that happened is thousands upon thousands of people were needlessly killed by incompetent military leaders.

Today's political climate reminds me of this trench warfare. Instead of playing out on a battlefield somewhere, it is playing out on Twitter®. This is just pure stupidity in more ways than one. First of all, nobody should believe that their opinion on Twitter matters in the grand scheme of things. Secondarily, if you are espousing your political beliefs on Twitter, then you will most certainly get attacked and perhaps even some will try and cause you to lose your job. This is all totally ridiculous. It really should stop. I have started to see it rear its ugly head in #fintwit. This is disturbing to me, because our industry already has to fight off all these stinking Ponzi schemers. We do not need to be sullying our reputations as a group over mindless political opinions.

Twitter is today's trench warfare. A bunch of people with way too much time on their hands send out tweets and foolishly believe that their words carry a lot of weight. The truth is Democrats do not care about a Republican's opinion and vice-versa. So, I am going to double cancel culture the both of you Democrats and Republicans. Cut it out. You are giving our profession a black eye.

I notice some things about our industry having been a part of it since 1988. For most of my career, other financial advisors have mostly looked at each other as competition. I recently had a financial advisor with an office in my building tell me that we were competitors. I told him that we were not. He disagreed. I tried to reason with him that the people that he knows in his circle are in a different circle than the people in my circle. He was unconvinced. Although, I could have offered a ton of help to this younger advisor, he was totally opposed to the idea of even having a further conversation, much less help from a competitor. I thought how sad. He was trying to branch out on his own, but months later, I noticed that he took a salaried job at Citibank. No surprise.

I met another financial advisor who once told me that he knew how much assets under management that I had. I replied, "You're kidding?" He said, "No. In fact, I have a list of every financial advisor in town and how much they have in AUM on an Excel spreadsheet." I was stunned. Why is this guy wasting his time worrying about what other advisors in town are doing? Seems pretty dumb to me. Must be a male ego thing, I guess.

There are some young people coming up today who are making changes in that attitude. Specifically, Jason Wenk, Tyrone V. Ross, Jr. Dasarte Yarnway, Brittany Castro, Emlen Miles-Mattingly, Douglas Boneparth, Ryan Hughes, Alex Rosenberg, Taylor Shulte, Justin Castelli, Breanna Reish , Alex C. (the Armenian) and Kyle Van Pelt. Forgive me, if I left you out. Those are the names that came to my immediate mind. These folks are all about helping each other. They do online seminars, video blogs and reach out to each other by social media. Others have businesses that help young advisors. These people are doing great things for our industry. I can tell you confidently that the future of the financial profession is in good hands with these young professionals. They get it and frankly, I do not care what their political beliefs are since they have no effect on what they are trying to accomplish and I strongly believe will accomplish. 

Let me know if I can be a resource.

https://riarules.com

https://marianfs.com

Who is investing with these fools?

Are people really this stupid? Sadly, apparently so. Some promoter of investments in Texas promised investors a return of 20% per year over two years. In addition, this Texas promoter promised that each investor would potentially receive another $15,000 to $18,000 over five years, plus even more crazy incentives.

I am not sure how many stupid fools invested with this guy, but the Texas State Securities Board's Enforcement Division stepped in and put a stop to it. Or, at least they thought so. The brazen nature of this promoter is unbelievable. While the promoter met with the Enforcement Division, after promising to stop his sham, he was still promoting it to investors on that very same day!

My book, Meet Wall Street. The Reason You're Stupid, 2nd Edition is on sale right now for $0.99 as an eBook at https://books.apple.com/us/book/meet-wally-street-the-reason-youre-stupid/id816020421?mt=11&app=itunes. The subtitle is very apropos for anyone fool enough to invest with this promoter. Hopefully the Texas State Securities Board stopped him before he stole too much money from investors. You can read the press release from the Texas State Securities Board here: https://www.ssb.texas.gov/news-publications/commissioner-enters-order-against-georgetown-promoter-fraudulent-medical.

If you had read my book, then you would not have fallen for an investment promoter like this guy. Let's have a little class on this, shall we? Your first clue to this being a sham was the 20% per year return promised over two years. He was only asking for $50,000 from each investor. That was your second clue. Your third clue was the additional return promised of another $15,000 to $18,000 over five years. Add these clues up and you have a sham investment of a 76% return on your money in five years. How can these guys even say this crap with a straight face? I would report a guy like this so fast they would not know what hit them. I majored in Criminal Justice and I believe in law and order. Besides, I am out here doing the right thing by people and these investment promoter types are ruining it for honest advisers like me.

Readers of my eBook will know that this type of investment violated my rules of investing. One of my rules is to "Keep it Public." By keeping it public, I mean that you should only invest in publicly traded investments listed on a stock exchange.  My other rule is to "Keep it Liquid." This investment was certainly not liquid. Once you gave this promoter your money, then that would likely be the last time you saw it. How are you going to comply with my two rules? This sham investment was not publicly traded and it was not liquid where you can get your money in as little as two business days. Therefore, as readers of my eBook know, this was a big, red flag and they would have never fallen for this investment promoter.

Oh by the way, did these investors check this guy's background? That's what I thought. Another egregious failure. Did they check to see if this was a securities offering registered in the State of Texas or granted an exemption from registration from the State of Texas? Of course, they did not. They just blindly hand their money over to investment promoters like this all the time. You can check an advisor's background at https://www.investor.gov/crs.

Ninety-nine cents will provide you the information to protect you from investment promoters like this guy. Now do you see why the subtitle of my book is "The Reason You're Stupid"? Unfortunately, you are very, very stupid if you invest with someone like this.

You need me in your corner. I am telling you.

https://www.marianfs.com

Direct Indexing

There is a new change coming in the area of investing called Direct Indexing. What is Direct Indexing? This is where you invest in a pool of stocks that follows a particular index such as the S&P 500® or the Dow Jones Industrial Average for example. Right now, financial advisors use ETF's that invest in a multitude of different indexes. Generally, most index fund charge fees for managing the funds. Recent competitive pressures have forced a lot of these management fees to come down significantly. These management fees can range from 0.50% down to as low as 0.03%. There are some funds with management fees higher than 0.50%, but for the most part, most of the well known fund sponsors with index funds charge less than 0.50%. If you are investing in one of these ETF's, then this is the fee that you pay the fund sponsor to manage the pool of money.

Direct Indexing is going to change the investing world significantly.  Suppose your financial advisor has you invested in a portfolio of ETF's. The total management fee is based on your financial advisor's fund selections. Let's assume that your total management fee is 0.50% per year. With Direct Indexing and free trading commissions your financial advisor will be able eliminate this 0.50% fee altogether. Now, this is not something that is going to happen immediately, but it will happen. The key to this is two fold. One is zero trading costs and the other big one is the ability to buy fractional shares.

You long had the ability to buy Mutual Funds in fractional shares, but you could not buy fractional shares of ETF's. ETF's trade like a stock. You cannot buy 0.3478 shares of a stock...unless you have a brokerage firm that has the software capability to allow it. The major players like Schwab, Fidelity, TD Ameritrade, E*TRADE and others will soon be allowing you to buy fractional shares in your account, if they are not already. This fractional share issue is the key to Direct Indexing. You may have seen an ad on television for Schwab Stock Slices. This is a form of Direct Indexing, but not the full freedom that financial advisors like me prefer. We want complete freedom to choose as many stocks as we want in each client account. This is when Direct Indexing will really take off.

For taxable accounts, Individual, Joint or Trust accounts, there is a tax advantage utilizing Direct Indexing. Stocks by themselves are tax deferred. After you buy a stock and hold it, you only pay taxes if you sell it. Of course, the amount of taxes that you pay depends on the time period that you held the stock (i.e., short-term capital gain or long-term capital gain) and whether you have a profit or a loss. You can still do Direct Indexing in your IRA and Roth type accounts. There just will not be any tax advantage in doing it. However, you will save in management fees from a formerly all ETF portfolio.

In the very near future, probably in 2021, your financial advisor may come to you to discuss Direct Indexing with you. Direct Indexing will allow you to hold a portfolio of, for example, 500 stocks in fractional shares in your Individual account without having to pay an ETF management fee. This will save you somewhere between 0.03% and 0.50% or higher in fees each and every year. Your financial advisor will be fairly compensated by their normal assets-under-management fee or annual flat fee that they charge. The reason this is true is because, they have to research the 500 fractional share stocks to put into your account! This takes a lot of time and their time is valuable.

I am working on a new relationship with a firm that will be able to offer this sometime late this year or perhaps early next year. It is something that I am personally really excited about. More to come.

Let me know you I can help you today. Visit https://www.marianfs.com give me a call and/or request a Zoom Meeting via email.

2018 Census Data vs Local Police Forces

Wikipedia defines critical thinking in this manner.  

"Critical thinking is the analysis of facts to form a judgment. The subject is complex, and several different definitions exist, which generally include the rational, skeptical, unbiased analysis, or evaluation of factual evidence. Critical thinking is self-directed, self-disciplined, self-monitored, and self-corrective thinking."

Count me in the group who are normally skeptical, require unbiased analysis and factual evidence. This is especially true in matters of media reports and political statements.

Keep in mind that this is just a blog post and not a peer reviewed data study. However, I will provide sources. In order to keep things simple, my sources are: 

https://data.census.gov/cedsci/all?q=Race%20and%20Ethnicity&tid=ACSDP1Y2018.DP05&vintage=2018&hidePreview=false 

https://www.bjs.gov/index.cfm?ty=tp&tid=71 (Local Police Departments, 2016: Personnel, Full Report)

I will start this blog with the question..."How many White people, Black people, Hispanic people, Asian people, Native American people, mixed race people and Native Hawaiians should we have in our local police forces?"

According to the latest Census, specifically 2018, we should have the following percentages:

• Black or African American - 12.3%
• White - 60.2%
• American Indian or Alaskan - 0.7%
• Asian - 5.6%
• Native Hawaii or Other Pacific - 0.2%
• Hispanic - 18.3%
• Two or more races/other 2.7%

Then, I wanted to compare what the 2016 Bureau of Justice Statistics says about local police forces. Here is what I found.

• Black or African American - 11.4%
• White 71.5%
• Hispanic - 12.5%
• Other/Unknown 4.7%

This local police study did not exactly correlate with the Census numbers, but I was amazed at how closely the local police forces tracks our overall Census population. Remember, we are taking a macro or helicopter view meaning we are just looking at the entire population of the United States versus the entire population of local police forces.

Where is the problem? If anything, I would say that Hispanics and Asians are underrepresented. Blacks or African Americans are pretty representative with a 12.3% versus 11.4%. 

My critical thinking conclusions would be that we need more Hispanics and Asians in the local police forces across America. Further, I feel that the distrust of local police forces in Black and Hispanic communities probably contributes to them being under represented. More so for Hispanics, than Blacks. Asians, at the risk of sounding racist here, teach their children that their education is the most important thing in life. Asian parents expect exceptional educational performance from their children. It stands to reason that local police force education requirements and the compensation that goes with it conflicts greatly with what Asian families teach their children.

I do not really think we have a problem as far as race and ethnicity is concerned with local police forces. Now, if you disagree with that, then you must answer this question:  

"What is the correct percentage for each race that should be employed by local police forces?" 

You cannot answer that question. All you can do is make an assumption that there is a problem that requires "fixing." If you do make an assumption, then I would conclude your critical thinking skills to be lacking. Show me your data to back up your assumption. When you do that, then you have begun to think critically.

I majored in Criminal Justice, in case you were wondering why I have a blog post like this one, plus my father was a former Chief of Police in California and Arkansas.