Archive for the ‘Wealth Management’ Category
He then had the gall to call me back and ask whether I think he is paying too much for his new advisor. Here is what he said.
My advisor puts me in low cost ETFs and meets with me every quarter. But otherwise he does nothing with my portfolio, so what exactly do I pay him $15k for?
I know this gentleman has a sizable portfolio, and $15k means a fee of well below 1%. So I told him what I thought.
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The fee is very competitive.
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The advisor did the right thing by putting his money in low cost EFTs.
- Doing nothing with a portfolio is the only right thing to do!
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I go to great lengths to meet with my clients regularly. For instance, many of my clients live across the country. I fly to them.
Some might ask: what value is there in meeting regularly? There can be about $100k of value in it, let me tell ya!
Meeting regularly allows me to uncover hidden issues and potential opportunities, thereby helping my clients make smart financial decisions.
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1. ThinkAdvisor highlighted a Maryland study which showed that states which pay the highest fees to Wall Street (for managing pensions) have the lowest returns. That says it all about Wall Street. No wonder Rick Ferri wants you to steer clear of actively managed funds.
2. Reuters Money reported how Health Savings Accounts (HSAs) can be used as retirement savings accounts. This information is especially useful for small business owners and self-employed individuals who tend to neglect their retirement savings and face high deductibility in their health insurance. Here is the garden variety of ways they can save for retirement.
3. DIY Investor Robert Wasilewski encountered a bear while hiking. He survived to write about it, but he mused that the same reactions that kept him in the gene pool will surely “eliminate you from the investment pool.”
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10. How Often Do Market Corrections Happen?
9. How I Make a Client 17% Wealthier
8. Variable Annuity Fees You Don’t Know You are Paying
7. Why you should avoid hedge funds
6. Be Careful When Buying a Condo as a Rental Property
5. Profit from Harry Dent’s prediction? think again
4. Is a Fidelity Personal Retirement Annuity (FPRA) a Good Investment?
2. The High Cost of Fee-Based Financial Advisors
1. P2P Lending: A New Asset Class?
Also see Top 10 in June.
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How I Make a Client 17% Wealthier
Posted on: July 16, 2013
I got a new client recently. The first step I took was to totally redo his portfolio. His old portfolio looked something like this.
Fund Symbol Expense
YAFFX 1.26%
UMBWX 0.99%
TWCGX 0.97%
SGRKX 0.96%
SCETX 1.20%
RYTFX 1.39%
ODMAX 1.36%
OAKIX 1.06%
OAKEX 1.41%
…..
AEMGX 1.31%
Altogether there were 39 funds in his portfolio. I skipped over a bunch in the list above, but anybody who has read my blog for any period of time should be nearly shouting out what’s wrong with this portfolio.
These Fund Expenses are Too High!
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1. Chuck Jaffe of MarketWatch’s, “No Such Thing as Risk Free Investments” informs us that instead of looking for risk free returns, investors should know the risks. To that end, you may want to read “Taking Investment Risks”, which summarizes nine types of investment risks and classifies them into good, bad and ugly. You may also like to read “Managing Investment Risks” which shows you how to “take the good risks, control the bad risks, and avoid the ugly risks.”
2. I read this news, “Investment Banks Eye Hedge Funds for the Masses” with alarm. It is not surprising though after the JOBS Act relaxed hedge fund (marketing) rules, bankers and hedge fund managers can’t wait to go after the average Joe’s pocket. Before you handover your money though, heed David Swensen’s warning, and read “Why You Should Avoid Hedge Funds.”
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10. How Often Do Market Corrections Happen?
9. Variable Annuity Fees You Don’t Know You are Paying
8. Multi-family Office: The High Cost of Exclusivity
7. Do you want to be Morgan Stanley’s production?
6. Portfolio rebalancing is like earning a ‘bonus’
5. Why Asset Class Diversification is Superior
3. Be Careful When Buying a Condo as a Rental Property
2. Profit from Harry Dent’s prediction? think again
1. The High Cost of Fee-Based Financial Advisors
Also see Top 10 in May.
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Is the Sky Clear Enough Yet?
Posted on: June 28, 2013
Wise words written by myself two years ago: “The whole idea of investing only when “the sky is clear” is flawed. When the sky is clear, it can’t get any better; you can be sure another storm is brewing just beyond the horizon.”
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[I wrote this two weeks ago.]
On September 12, a client of mine called me to get out of stocks altogether.
He used a vivid analogy: “The storm is raging; I will wait until the sky clears before I get in again.” The storm he referred to was the European debt crisis. Judging by my many interactions with investors, he is not alone.
This morning, I woke up to great news: the Europeans have finally hammered out a debt deal in which Greece only needs to pay 50% of what they owe to the banks. With this debt reorganization, it looks like we will not have a Greek default (even though this is really a default by another name, but that’s the subject of another piece).
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The other day, I was invited to visit a multi-family office that only serve super-wealthy families that have $10mm and above.
I was curious what set them apart from my firm, which mostly serves folks in the $1mm to $5mm wealth range.
I came away with one word: exclusivity.
The name
What they do is no different from wealth management, but they call themselves “multi-family office.” Just in case you don’t know what family offices are, they are offices billionaire families set up to manage their own complex financial affairs. A family office serves only one family. By adding “multi-” to “family office,” a wealth management firm can make their millionaire clients feel like they are billionaires.
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Why I Am Bullish About The Market?
Posted on: June 9, 2013
I wrote this article in October of 2011 after the market had a brutal summer. I made a bullish call. Since then, the S&P 500 is up 44%. I must say I am less bullish now than I was then.
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What happened to the market in August and September?
Between July and the end of September, markets lost between 13.5% (Dow) and 27% (Emerging markets) depending on which market you are looking at.
I pored through economic data and could not see any marked deterioration in the economy. In fact, on balance, I see continued slow improvements.
Pundits attribute the market tumble to 1) political gridlock in Washington and 2) the European debt crisis. I don’t buy either of these explanations.
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10. How Often Do Market Corrections Happen?
9 Variable Annuity Fees You Don’t Know You are Paying
8. Morgan Stanley Wealth Management Makes My Life Easy
7. Why Asset Class Diversification is Superior
6. Physicians: Qualified Retirement Plan for Asset Protection
5. Lessons learned from three prospective clients
4. The High Cost of Fee-based Financial Advisors
3. Profit from Harry Dent’s predictions? Think again
2. Be Careful When Buying a Condo as a Rental Property
Also see Top 10 in April.
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I wrote this article at the thick of the financial crisis. I followed his advice and my clients were able to get back even before many other investors. My first client to get even was on Christmas of 2010. The overall market only gets back to pre-crisis level in January of 2013. Here is how I implemented his four point advice:
- Though it was extremely uncomfortable, I kept my clients on their asset allocation plans. In fact, we rebalanced into equity at the bottom of the market.
- We rebalance out of the rallying treasuries to invest in tanking corporate bonds.
- We know the limit of our intelligence, we just keep to our asset allocation plans.
- We only invest in index funds and asset class funds. No actively managed funds were used at all.
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This is based on an interview David Swensen done on Fox News Network.
1. Have a strong decision-marking process
Investing success requires sticking with decisions made uncomfortable by the variance of opinions. In his own words:
Think carefully how it is that you are gonna allocate your assets and stick with it. Too many individuals were excited about the equity market 18 months ago and were despairing 3 months ago. It should have been the other way around. They should have been concerned about valuation 18 months ago and excited about the opportunity to put money to work at lower prices 3 months ago.
2. Sell mania-induced excess, buy despair-driven value
On his favorite area of despair-driven value, David Swensen has this to say:
I think the most interesting area is the credit market. Bank loans are trading at extraordinary low value. High-grade corporate debts, below investment grade corporate debts…
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It has been one year since Facebook IPO. Most of my top 10 reasons last year arguing against buying FB stocks are still true today. Remember the hype leading up to the IPO, then ponder this line of mine: “The more successful the Wall Street money machine is, the less likely you will get rich.”
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坚强点
1. Facebook is a great service to help you keep in touch with friends and family. But a great service does not equal great investment.
2. When was the last time you clicked on a Facebook ad? I can’t recall when I ever did. The click-through rate for Facebook ads is 10% that for Google ads, for good reason. Google ads are delivered at the moment you have actionable intent, while Facebook ads are delivered when you don’t want any distraction.
3. As more and more people use mobile devices to access Facebook, this will present a big challenge since it is nearly impossible to display distracting ads on tiny mobile screens.
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10. Why Asset Class Diversification is Superior
9. Are Financial Advisors Required to Disclose Fees?
8. Lessons learned from three prospective clients
7. How Often Do Market Corrections Happen?
6. Physicians: Qualified Retirement Plan for Asset Protection
5. Variable Annuity Fees You Don’t Know You are Paying
3. Profit from Harry Dent’s predictions? Think again
2. The High Cost of Fee-based Financial Advisors
1. Be Careful When Buying a Condo as a Rental Property
Also see Top 10 in February.
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
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I met with three prospective clients on my trip to Los Angeles last week. I did a quick financial review with each one of them and gathered some lessons learned as well.
Prospective client A is a physician in his late 60s. He has already reached retirement age but he needs to keep working since he has less than $1mm saved for his retirement.
All that money is in tax deferred accounts, meaning far less than $1mm is available for his retirement. This is NOT retirement security.
Client A is not an extravagant person, so why is he in such dire straits?
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Medicine is a profession fraught with legal risk. According to an AMA survey for the period 2007-2008, for every 100 doctors, there were 95 lawsuits.
The survey also reveals that physicians 55 years and older are eight times more likely to get sued than physicians 40 years and younger.
Not that they make eight times more medical errors, just that they are richer lawsuit bait.
That reminds me of a joke. Why won’t a shark attack a lawyer? Professional courtesy.
Back to the topic at hand, many physicians in solo or small practice simply use a SEP IRA as their retirement plan. It is very simple to set up, and the contribution limit is a generous 25% of earned income or an annual limit of $49,000. What is there not to like about it?
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