Archive for the ‘Prudence & Fiduciary Duty’ Category
Government Retirees Beware: Your Financial Advisor May Not Be Your Friend
Posted by: Michael Zhuang on: January 14, 2012
I have a client (Let’s call him John) who retired 12 years ago from the government. He had a pension, and he had the option of taking out a lump sum of about $800k or drawing a monthly check of more than $4,400 per month until death. John took his options to his financial advisor [...]
A 2011 Investment Recap
Posted by: Michael Zhuang on: January 8, 2012
My investment approach can be summed up by three principles: Globally diversified Small cap value tilt Short duration tilt This approach endured extraordinary challenges in 2011. 1. Globally diversified Even though the US equity market largely ended up where it started, the global equity markets did a lot worse: the MSCI EAFA Index (world developed [...]
How to Tell if Your Financial Advisor is a Crook? Very Easy!
Posted by: Michael Zhuang on: December 10, 2011
This week, a business woman came to my office for a second opinion financial review. She explained why she came to see me: she bought a permanent life insurance policy because her financial advisor told her it is a great investment. She has been paying $3000 a month for that, and so far she has [...]
The Perils of Chasing a ‘Hot’ Fund Manager
Posted by: Michael Zhuang on: December 8, 2011
On November 17, Bill Miller announced that he would step down as manager of Legg Mason Capital Management Value Trust (LMVTX). From 1991 to 2005, under Miller’s stewardship the fund outperformed the S&P 500 index for an astounding 15 straight years. Since then, the fund has underperformed the index in all but one year, and [...]
How I helped a doctor set up a 401k plan
Posted by: Michael Zhuang on: September 29, 2011
Dr. Smith is a client of mine. He is a facial plastic surgeon with a booming solo practice supported by five non-essential staff members. His staff turnover is very high; no one stays more than three years. This has allowed him to contribute the maximum amount to his SEP IRA without contributing anything to his [...]
When I failed as a financial advisor
Posted by: Michael Zhuang on: September 14, 2011
On March 6, 2009, about lunch time, I got a call from Mrs. C. Apparently she was in some sort of a panic; she asked me when the market would stop falling. I couldn’t predict the future, all I could tell her: the market will eventually turn around, and when it does, it will stage [...]
How can an investor prepare for market corrections?
Posted by: Michael Zhuang on: August 11, 2011
The common approach to dealing with a market correction is trying to get out of the way at the first sign of trouble before the big one hits, like getting out after a 5% dip before the 30% drop hits. This approach requires perfect foresight. God can do that, not you, and certainly not a [...]
How an Insurance Company Misleads Its Annuity Customers
Posted by: Michael Zhuang on: May 30, 2011
I was called a “wing nut” by a commenter for pointing out all the malpractices of insurance companies. Indeed, I could go nuts seeing how they mislead their customers into financial peril. They know full well that their customers are not going to read beyond the first few pages of their hundred-page contract, so they [...]
A Balanced Portfolio to Avoid (II): Hedge Funds Don’t Deliver Outstanding Returns
Posted by: Michael Zhuang on: April 28, 2011
Hedge funds are often peddled as a unique asset class that has outstanding returns that are uncorrelated with the market. In reality, hedge funds are as much an asset class as Las Vegas is. Hedge funds are a general description of private investment companies that are organized as limited partnerships with fund managers as the [...]
Are Financial Advisors Required to Disclose Fees?
Posted by: Michael Zhuang on: April 8, 2011
You may not believe it: the term “financial advisor” is a free title. Anybody can use it; there is no legal requirement, nor educational qualification. In practice, though, generally there are three types of people who use this title: insurance agents, stockbrokers, and registered investment advisors (RIAs). Whether they are required to disclose fees all [...]
America’s Top Financial Advisors: How Are They Made?
Posted by: Michael Zhuang on: March 24, 2011
I must confess: I have fallen short of the standards and requirements to become one of America’s Best Financial Advisors. To be exact, I am $497 short. In March of last year, I received an email with a congratulatory title: “You Have Been Nominated To Be One of America’s Top Advisors.” I eagerly opened the [...]
Variable Annuity Fees You Don’t Know You are Paying
Posted by: Michael Zhuang on: March 18, 2011
Recently, a client of mine brought me the variable annuity he bought a few years ago. Prominently displayed on the first page are the benefits of the annuity: Death Benefit: Enhanced Guaranteed Minimum Death Benefit Living Benefit: Lincoln Lifetime Income Advantage as well as the fact that the money will earn an fixed annualized rate [...]
Would You Buy This Variable Annuity with Income Guarantees?
Posted by: Michael Zhuang on: March 10, 2011
Recently, I was approached by a prospective client named John, who has all of his retirement in one annuity. I have always been intrigued by how annuities and life insurance are sold. Listening to John explain his decision-making process and reading through the annuity contract is like turning on the light bulb in my head. [...]
Taking Investment Risks
Posted by: Michael Zhuang on: September 30, 2010
Risk taking is an integral part of investing, yet most investors are blissfully unaware of the risks they are taking, let alone managing them well. In this post, you will quickly learn the good, the bad, and the ugly of investment risks. Idiosyncratic risk is defined as risk that is specific to a particular company. [...]
Will Greece sink your portfolio?
Posted by: Michael Zhuang on: May 6, 2010
In the last few days, news of Greece’s bankruptcy has rattled the markets. Pundits are predicting a spiraling debt crisis spreading to other PIIGS (Portugal, Ireland, Italy, Greece, and Spain) countries. Investors are worrying out loud that the crisis is going to sink their portfolios, again. Not if they have a balanced portfolio. Here is [...]
Do you know your financial advisor?
Posted by: Michael Zhuang on: February 17, 2010
Few people know that there are 2,613,000 financial advisors in the U.S. It is the fifth largest vocation, right after truck drivers and before janitors. Even fewer people know that, unlike attorney and CPA, financial advisor is a free title – there is no uniform legal standard or educational requirement for the title. Nobody will [...]
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