Archive for the ‘Prudence & Fiduciary Duty’ Category
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 [...]
“Good intentions” doesn’t cut it
Posted by: Michael Zhuang on: January 25, 2010
There are inherent conflicts of interests between for-profit mutual fund companies and the investors in funds run by such companies. For example: Investors benefit from low expense ratios. Fund management benefits from high expense ratios. Investors benefit from plain-English, thorough disclosures regarding costs and conflicts of interests. Fund management benefits from poor disclosures. A reader [...]
Baby boomer demographic and stock returns
Posted by: Michael Zhuang on: December 20, 2009
MIT economics Prof. James Poterba has conducted very rigorous research on the subject of demographic trends and asset returns. His research examined the relationship between demographic structure and returns on Treasury bills, long-term government bonds, and stocks, using data from the United States, Canada, and the United Kingdom. What he found? From his research, Poterba concluded: [...]
Stable value funds: they look good until you look closer
Posted by: Michael Zhuang on: August 7, 2009
If you are a typical 401(k) participant, you have stuffed 32% of your retirement money in a stable value fund offered by your company’s retirement plan. Throughout this crisis, stable value funds have lived up to their billing as “money market funds with better yields” or “intermediate bond funds sans the volatility.” But do you [...]
How Madoff did it
Posted by: Michael Zhuang on: July 3, 2009
This week, Bernie Madoff was sentenced to 150 years in prison by New York District Judge, Denny Chin. With the trial now over, Madoff’s victims are still fighting over what little is left of his fund. They want to know: Where was the SEC? More appropriate questions should be: How did Madoff do it? What [...]
Do you have “cancer” in your portfolio?
Posted by: Michael Zhuang on: June 7, 2009
“They are the cancer of the institutional investment world.” – David Swensen Would you consider forming a partnership with someone you don’t know, in which you would contribute the money and that someone would conduct a business that you don’t understand, and do the accounting as well? Most business owners would respond with a resounding [...]
How to Lost Money to Conflict of Interest
Posted by: Michael Zhuang on: April 8, 2009
“Avoid conflicts of interest.” – David Swensen, Yale Endowment CIO. Jose is the head of a ultra high-net-worth family. He has a number of accounts with Merrill Lynch (ML), the storied brokerage firm that paid their senior executives $4 billion in bonuses last year. Three of his accounts lost a great deal of money, not [...]
Does your financial advisor engage in “fee-ing frenzy”?
Posted by: Michael Zhuang on: February 26, 2009
“Avoid the fee-ing frenzy,” says David Swensen. Marion banks at Wachovia. When she needs to rollover her 401(k) into an IRA account, she naturally asks a Wachovia financial advisor for help. He helps her open an account and recommends she buy the Evergreen Asset Allocation Fund (EAAFX). Is there anything wrong with this picture? Plenty! [...]
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