The Godfather Gets Robbed - 8/24/2013

Don't get whacked by the IRS. Is this email not displaying correctly? View it in your browser.

Mob Boss Makes a Small Fortune   James Gandolfini, the Hollywood actor and star of the HBO series The Sopranos recently died at the age of 51 vacationing in Rome.  He leaves behind his children, wife, siblings...and a ton of money to the IRS. At Wiser, it is during times of change we work hardest for our clients.  But we do our best to help our clients prepare before life shifts occur.  Today I present an actionable perspective to consider when it comes to financial preparedness. During his short time with us, Mr. Gandolfini accumulated a sizable fortune estimated to be around $70 million dollars.  Unfortunately it appears that he planned poorly leaving a burdensome tax bill, daunting decisions and irrevocable exposure to his heirs. Teresa Amord of AccountingWeb writes: “The terms of his will made it clear…because of the way the actor left his money, the IRS will be the single largest benefactor, taking almost half of Gandolfini's amassed wealth. The will left 80 percent of the money to his sisters and his nine-month-old daughter. That money will be subject to the 55 percent death tax, which calculates to over $30 million going to the IRS. Only the remaining 20 percent is left to his wife, Deborah Lin. Making it even worse for Lin, the will also states the shares will be paid out after the tax bill is settled. Twenty percent of the pre-tax amount would have been $14 million, but because of the after-tax stipulation, she will get closer to $8 million. Like many wealthy individuals, Gandolfini's assets were mostly non-liquid. This means the family will be scrambling to sell off his properties to pay the tax bill.” Mark Costley, Managing Partner of the local estate planning firm, Walker Lambe, remarks: "The whole thing is a mess, devastating from a tax perspective, but just as bad from the standpoint of taking care of how the property was handled for those he left behind.  The plan wasn’t just poor, it was incomplete. From a standpoint of protecting the family from taxes, court fees, administrative fees, and legal fees, it’s more accurate to say there was no plan.  Tens of millions of dollars were lost. The hardest choice to understand, however, was the choice to plan with a Will rather than a Revocable Living Trust.  With the trust, the probate process could have been avoided and you would not be reading about this now.  The whole estate would have been a private family matter.” Estate Attorney William Zabel told the New York Daily News, "By early next year, a tax bill of roughly $30 million will be due and payable. The government doesn't accept the fact that it's difficult to come up with the money." The above commentary reminds me of the adage: “How do you make a small fortune? First, you start with a large fortune.”  Case in point. The sad irony is that ample estate planning strategies exist to minimize taxes and keep estate details private.  While estate tax is the only voluntary tax, it is also a tacit consent tax: failing to implement a plan while living means your heirs are stuck with the tax bill - and whatever fallout arises from public knowledge of your estate. You can decide for yourself what kind of fallout you'd be dealing with if the world knewyou had to raise 30 million from selling real estate by next February.  If you are thinking this doesn’t apply to you because you’re not a deca-millionaire, think again.  Having a prudent financial and estate plan in place is the only way to go through the ups and downs life presents with confidence and our private matters just that, private. If you have any questions or concerns about your investment portfolio, life insurance, health insurance, tax or estate planning, please let us know.  As Churchill said, “A failure to plan, is a plan for failure.” I welcome your questions and comments. Marc Becker, Accredited Investment Fiduciary Managing Partner, Wiser Financial Coaching, LLC Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm To read more about this subject, click here.

Investor Resolutions - 1/26/13

In this week's edition:  What will 2013 bring to you? Is this email not displaying correctly? View it in your browser.

Investor Resolutions 2013 Of new year resolutions GK Chesterton once wrote: "Unless a person replaces his senses and backbone, he will certainly do nothing effective."  I'm going to quit smoking, lose weight, or save more, are merely statements reflecting on changes we've already thought about.  Until we start perceiving them differently, as something threatening to the core of who we want to be, changing is unlikely. Nature abhors a vacuum.   If we stop doing something we have to replace it by doing something else we perceive vital…or we'll usually just keep doing the same thing. Consider this statement:  If I don't stop doing this and start doing that I'm going to waste my life and probably die before it's necessary.   Not quite the same as a typical resolution, but now we're onto something vital. So, here are a few investor resolutions and behavior replacement options to kick off the new year.  Not all of them are financial per se; but each will contribute to the three most important "Cs" -  clarity, confidence and comfort. 1.      I WILL IGNORE FINANCIAL MEDIA AND ITS PREDICTIONS The fastest way to prove ourselves wrong is to make a precise prediction about what is going to happen.  Every situation comes with an endless supply of possible outcomes.  Picking one and being right is akin to winning the lottery.  Of this, media experts are not immune. Most pundits reasonably predicted a double dip recession and falling market in 2012 amidst the Euro Zone catastrophe and uncertain election year.  Neither occurred, in fact it was a stellar year for global stocks - up 17% on average.  Oops.   Prudent investors already have a long term allocation in place and understand it has purpose throughout the ups and downs.  That means it is not to be trifled with in light of the worries of the day. So instead of pontificating about which prediction is right and what you need to do now, read about something you love, spend time with your family, or engage in resolution # 7. 2.      I WILL NOT CHANGE MY PORTFOLIO UNTIL AFTER A ONE-WEEK COOLING OFF PERIOD. Things that are urgent are rarely important, and things that are important are rarely urgent.  Making a change in your retirement portfolio is ALWAYS important.  Don't do so at the height of your emotions, i.e., when your gut is screaming at you to do it right now. Instead, do something else that helps you release tension.  Talk to your advisor, go to the gun range, smash golf balls as far as you can without worrying about where they go, or ask your love out on a special date.  Chances are you won't regret not doing that thing with your money that seemed so urgent. 3.      I WILL TAKE A LONG WALK (at least once a week with my phone off). Not to get all "THOREAU" on you, but walking is good for the heart and soul.  It allows us to unplug from the ubiquitous man made distractions and reconnect with the things nature deems important.   And you shouldn't argue with Mother Nature. Instead of watching that show you really don't care about or reading that thing that will be obsolete tomorrow, go for a walk.  And if you're fortunate enough to have someone around you like, ask that person to go with. 4.      I WILL GIVE MY SHREDDER A BREAK AND GO PAPERLESS Old habits die hard, but the amount of paper we receive is unnecessary, burdensome and wasteful.  Almost every vendor and service provider wants you to request email statements - some even incentivize the change.  And if you're not interested in the junk mail you receive, take yourself off the direct mail list (similar to the do not call list).  For more information on how to do this, visit this link. 5.    I WILL REVIEW INSURANCE COVERAGES Risk management extends beyond investing. The beginning of the year is a good time to take inventory of your insurance coverage, including making sure beneficiaries are correctly listed.  If you are not sure what you are looking for or how to do this, ask your advisor to help.  If you haven't already done so, look into Long Term Care Insurance with your advisor as well.  A long term care event can drain your retirement funds by far more than the cost you will pay for coverage.  And one of the worst things that can happen is to get well after a long recovery period only to find you are then broke.    6.      EAT HEALTHIER This is one of the toughest resolutions to keep as it seems far easier to not do so. You don't need me to tell you the reasons why, but I'll add eating healthy requires the discipline to manage desired immediate gratification and laziness - which comes in handy in lots of areas outside of eating. Instead of driving through the land of double bacon cheeseburgers…walk into a grocery with a salad bar.  For a few extra minutes you get in a walk, wind up with a variety of tasty foods, and save yourself half the calories for about the same price as Combo #2.   If you're into technology there are APPS that can help.  One I like is called "LOSE IT."  For more information click this link: The Eight Best Smart Phone APPS. 7.  LEARN A NEW HOBBY OR SKILL Neuroscience has shown for years exercising our brains as we age is just as important as our bodies for stress reduction and longevity.  One of the best ways to do this is to experience new things.  Take a class, join a focus group, or pick up a new hobby.  As Helen Keller said, "Life is a grand adventure…or it is nothing at all." We wish you a prosperous, peaceful and blessed grand adventure in 2013! As always, I welcome your questions and comments.   Marc Becker, AIF Managing Partner, Wiser Financial Coaching Columnist, The Advisor Sherpa  becker@wiserfinancial.com To read past articles and view past videos, visit: www.marcbecker.tv * Source: CapitalSpectator.com, returns represent 1/1/2012 through 12/31/2012

Time to Hurry up and Wait? - 2/9/13

In this week's edition:  The market's up, should I invest now? Is this email not displaying correctly? View it in your browser.

Time to Hurry Up and Wait? This weeks' newsletter emerges from a client submitted question: 'Given the current market valuations I'm agreeable to waiting a short while to purchase equities if you feel a delay would be beneficial ..and prudent.  Thanks for your help,' GB in NC G,   This is a great question.  After stocks world wide have neared all time highs - how can anyone watching not wonder if a better buying opportunity will come soon?   Since the rise in stock prices beginning March 2009, a spread of about 8% became commonplace.  For example, the DOW would break out over 10,000 and go up to 10,800 or so...and then it would go back down, and then back up, etc., between those two points before breaking out 8% higher or lower later on.       Though I've yet to hear anyone claim profit success on this, in hindsight it should have been a market timer's paradise.  More important than this though, was money continued to pourout of stocks even as prices were dramatically rising.  Most of this money went into cash, bonds, and gold.     Money flowing to "safety" during a scary and uncertain period, while imprudent, could be considered logical.  The market going up all the while, however, is illogical.  All I can say about that is it's illustrative of the natural state of the market: Illogical and Unpredictable.       My most poignant observation regarding your question started last November.  At that time, monthly inflows into the stock market eclipsed outflows for the first time since 2008.  I can't help but notice as traders began taking profits over the last several months the market hasn't shot back down, which would be the logical market response.   The obvious explanation for this (though not necessarily correlated given the natural state of the market and all...) is that more money continues to go in than is coming out, even from the profit takers.  For the last two weeks major indices have been trading within a tight range.   In investing this is referred to as "coiling."  The reference relates to the analogy of a spring.  The tighter it is compacted the more energy is stored within the coils.     The cool thing about a compacting spring is that we know it is going to unwind at some point.  The not so cool thing is that we don't know when, we don't know how much, and since the spring is suspended in a weightless vacuum, we don't know which direction the thing will let loose.     So this is what I have to go on:  more money is going into stocks - there is far more money in cash, bonds and gold than ever before - the stock market appears to be less scary and the only option making money presently - and, most importantly, the market is always impossible to predict in the short term, even in the face of dramatically suggestive evidence.   During times like this I fall back on the academic adage, "Now is always the best time to invest."  That doesn't mean that prices won't be lower next month.  What it means is the most successful investors tend to worry less about the day their dollar goes in and more about how quickly they can put capital to work.     I invest every month.  I know where the market closes virtually everyday. Like you, I contemplate potential benefits by waiting.  But I do not deviate from getting my money in when available, because I also know 2 years from now I won't remember where the market closed today.   A substantial part of my return will come from interest and dividends I earn over time, regardless of inevitable market fluctuations.  This is one reason the most important aspect of return is the total time invested, not the entry point.  Therefore, the most prudent thing for me to do is to invest now.     As always, I welcome your questions and comments.   Marc Becker, AIF Managing Partner, Wiser Financial Coaching Columnist, The Advisor Sherpa  becker@wiserfinancial.com To read past articles and view past videos, visit: www.marcbecker.tv

Welcome to the Twilight Zone - 3/22/13

In this week's edition:  Enter at your own risk! Is this email not displaying correctly? View it in your browser.

Welcome to the Twilight Zone When the DOW reached a new high recently, an investor asked if she should sell stock to capture the gains and wait for a better time to buy back into the market.  A famous television commentator's suggestion precipitated this question. I follow investing media, not because there is anything useful there, but because investors expect me to be at the ready to field questions about what they see. While the list of topics is broad, the list of questions generally is not.  1) Should I get out of my investments because of (insert prediction here); or 2) (Insert investment here) looks good, should I buy? Most people know what they've seen has already been incorporated by the market  and no one knows what's going to happen next.  But by the time an investor presents either question, he has already decided the idea to do something different is a good one - otherwise he wouldn't ask.   For example, no one has ever asked, "The market is tanking and things are scary, changing my allocation would be stupid, right?"  Even the least sophisticated investor understands selling low is a bad idea.  But when emotions are piqued we tend to disregard things intrinsically known, opting instead for trying to think our way out of reality. You've got to love the brain.  You can't go crazy without one. My job is not to convince the questioner the concept and source is wrong.  It is to make a reasonable argument enough doubt exists that what appears obvious…isn't.  It is "a strange intersection in a shadow land called, The Twilight Zone." Being honest, calling these difficult conversations Twilight Zone experiences is an exaggeration.  But labeling my experience observing financial media in this way is not.  It would, in fact, make for a particularly scary episode. To explain, I find financial media to be one long advertisement, where the actual commercials convey information more useful than the programming.  Most consumers are not aware that many of the "gurus" who appear on financial channels are not correspondents; they have paid boo-koo bucks to get a few seconds air time with their company banner prominently displayed behind them. Knowing that, the effort is obvious:  the appearance of being called on as an expert lends itself to credibility...which lends itself to capturing more clients.  Even more confounding is sometimes those who are correspondents are doing the same thing.  I frequently receive the following:  "If you have a $500,000 portfolio, you should download the latest report by Forbes columnist ___________." "This must-read report tells you where we think the stock market is headed and why - and provides analysis you can use in your portfolio right now." The website further touts: "In addition to our stock market outlook, we include our views on: What is likely to impact markets in 2013...and what isn't - Why inflation likely isn't a risk in 2013 - Why this bull market has room to run - Why 2013's gridlock is good for stocks" Conspicuously absent is an offer for a Palm Reading session. Oh well, it's still awfully compelling.  This isn't some obscure prognosticator, it's an actual writer for a leading financial magazine with an inside scoop…AND a crystal ball.  But before I gave this guy my money I thought a little due diligence was in order.  So I started snooting around to see how good he is at reading the future.  A few predictions from November of 2007:  "we definitely are in a New Era of above-average returns... I'm expecting another above-average year ahead, an easy one...buy stocks and be happy." Lawsuits ensued, including a retired couple that this guy's investment company converted from all bonds to all stocks in 2007 based on his predictions.  In that case the company was required to make amends of nearly $400,000 as apparently no consideration was given to the needs of the client when swapping out very low risk for the most risk available. And the company's response for being found guilty of "breaching its fiduciary duty?"  "…losing arbitration once every seven years is a record far better than any major competitor, which underscores the integrity of our firm." If I'm not mistaken, this super genius (VP in charge of corporate communications) said that being found guilty of screwing fewer people than other companies means you're trustworthy.   I brought up the Twilight Zone thing already…right? Don't get me wrong, I can't blame a guy for parlaying the credibility of being a Forbes columnist into a mega investment advisory firm with 25,000 clients and $42 billion under management…even if his crystal ball seems to be less than reliable and his firm's advice less than suitable at times.  After all, as long as you're making more money than you lose in legal disputes, you're still…as Charlie Sheen might say…WINNING! But this example is another revolving door in the mega-structure we know as high finance, where one position benefits the other and vice versa, whether or not it benefits the consumer.   The prospect it will, however, is a tonic that makes us feel better temporarily. Of course, when we wake up hung-over the next day we realize the tonic was mostly booze.  It helped us forget about our ills momentarily but now we are worse for the wear.  Unfortunately, some pay the entirety of their life savings for the bottle of snake oil advertised in and around what would seem reliable and reputable sources. Welcome to the Twilight Zone...of Investing. I welcome your questions and comments,   Marc Becker, AIF Managing Partner, Wiser Financial Coaching Columnist, The Advisor Sherpa  becker@wiserfinancial.com To read past articles and view past videos, visit: www.marcbecker.tv Sources for this article: http://www.advisorone.com/2011/07/08/fines-awards-slapped-on-jp-morgan-fisher-investmen http://www.bogleheads.org/forum/viewtopic.php?t=37820 http://www.lawyersandsettlements.com/lawsuit/fisher-investments-losses-kenneth.html#.UUjogByG2RQ http://www.investorlawyers.net/fisher-investments-client-wins-award-in-arbitration/ *paraphrased – see the first source link for the full comment

It's a Battle of the Sexes - 3/2/13

In this week's edition:  It's a battle of the sexes. . . Is this email not displaying correctly? View it in your browser.

Men vs. Women Men Take the Trade; Women Take the Money As James Brown once crooned/screamed "This is a man's world…" Of course Brown wasn't referring to investing, but the statement does have application. Neuroscientist John Coates at Cambridge University, asserted that the overwhelmingly male composition of the Street is problematic. 'Men have 90% more testosterone than women, which spikes after a trade does well.  This amplifies hunger and tolerance for risk…while impairing critical thinking.  95% of the trading world is young men.  If there were more women . . . there might be more stability.' * Over the last 20 years, investing research reveals evidence that women fare better than men when it comes to long-term investing results.  I know guys, I'm just as insulted as you about this.  But I must confess, knowing what I do about investor psychology, I'm not surprised. New York Post columnist Maureen Callahan, opened a recent article with this question: "They say that if women ran the world, there would be no wars. If women ran Wall Street, would there have been no recession?" According Dr. Alok Kumar at the University of Texas the answer is: "Yep."   Kumar justifies this with data showing men are far more likely to bet when the odds are against them. You may remember the financial industry placing this odds off bet recently: lending anyamount of money to anyone who says he/she can pay it back won't turn around and bite us because "real estate values always rise."   But that isn't how things have ever worked, so calling this a risky bet is an understatement. When looking at the cast involved; not only on the executive level of the institutions laying these mines, but the policy makers making the field available in the first place…there's a bunch of men…and virtually no women. I admit, that's just an observation of your humble writer.  But more evidence exists. Callahan went on to report: 'Female CFOs are consistently better at maximizing revenue than their male counterparts. Looking for a larger pattern, Kumar broke apart Thomson Reuters' International Brokers Estimate System which contains every Wall Street Analyst since 1983, encompassing 3 million projections. Women were better predictors - often with less experience than men. Of the market's 48 disparate industries, female analysts outdid the men in 33 of them. There were more female "all-star" analysts than male and they far outpaced their male counterparts.' * The recent book "Top Dog: The Science of Winning and Losing," concluded that women are not averse to risk, but they assess risk better than men.  Men have greater confidence that the odds are in their favor when in fact they may not be.  Collectively, this tends to result in less than stellar outcomes for men when compared to those for women. In the 2001 publishing, "Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment," data collected from 35,000 households showed males trade 45% more than females. Further, guys generally "exhibit substantially greater self-assurance" even when the outcome proved they shouldn't have.  So what to make of these studies?   First, I want to make clear that the male impulse to "believe/bet against all odds," is neither stupid nor wasted...sometimes.  War may not exist without male involvement, but there are no shortage of instances where it earned freedom over oppression.   So...chin up guys.  Without us there may be no such thing as a free market to invest in in the first place.  But the fact is, sometimes the tactics necessary to create a legacy do not lend themselves to longevity. And the nature of successful investing, from General Warren Buffet down through the ranks, has more to do with perseverance than creation.   Our investment outcomes don't have to hinge on biological determination. Ultimately our outcome is based on our ability to cognitively manage our urges.  It is not our inclinations which have the greatest impact on our results, it is our behavior. For men and women alike, having a trusted advisor and advocate to talk to when managing feelings and opportunities involving money is priceless.  So if you're concerned (or perhaps even uniquely confident...guys), it's a great time to stay in touch with your trusted advisor.  If you don't have one, get one. As always, I welcome your questions and comments.   Marc Becker, AIF Managing Partner, Wiser Financial Coaching Columnist, The Advisor Sherpa  becker@wiserfinancial.com To read past articles and view past videos, visit: www.marcbecker.tv *(Paraphrased)

2012 Tax Update - 4/9/13

Is this email not displaying correctly? View it in your browser.

2012 Roth Contribution Deadline-- Thursday Apr. 11th at 4:00 PM If you are planning to make a contribution to your Roth IRA account for 2012, the last day we can accept checks is this Thursday, April 11th.  Checks must be received before 4:00 PM.  For 2012, the maximum contribution is $5,000 with an additional $1,000 catch-up contribution (total of $6,000) for people over 50. Important Cost Basis information for 1099s Because if new IRS regulations, cost basis information included on some 1099s may be incomplete.  This only applies to individual, joint, and other non-IRA accounts (NOT applicable to IRAs, Roth IRAs, etc.)  Contact Wiser at 919-477-3355 or tammie@wiserfinancial.com to request your complete cost basis information or if you have questions. Happy Spring! -The Wiser Team

follow on Twitter | visit www.marcbecker.tv | forward to a friend  The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources.  Articles are written by Marc Becker.  All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright ©  2013 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC

Was That a POP I just Heard? - 4/15/13

Special edition:  Was that a "pop!" I just heard? Is this email not displaying correctly? View it in your browser.

SPECIAL EDITION:  The Gold Flush First: Our thoughts and prayers go out to everyone affected by the explosions in Boston this afternoon. If you read my posts you've seen my concern for gold investors over the last year.  Gold topped out at about $1900 an ounce in the summer of 2011 when stocks plummeted on fears Greece would collapse the Euro Zone. Since then gold has acted as a tire with a nail in it.  Last year gold struggled to hold $1800/oz.  That's when I started making comments such as, "everything that has quintupled in price over a short period has always been a bubble."   Gold has continued to slowly deflate, but plummeted below $1400/oz. today.  It is down over $140 (9.5%) and continues to decline after market.  Media pontificators point to the possibility Cypress may have to sell $522 million in "excess reserves" of the precious metal to help finance its bailout.  While it sucks to be Cypress, that is a pittance relative to the entire gold market. So how can this precipitate such a devastating effect on the overall price of gold? Welcome to the wild world of speculation, the birthplace of every bubble.  Anyone conscious at some point in the last 5 years has heard things like: "gold is the safe play for your money," "it never goes down in value," and "is a must to own when the economy collapses." Individual investors, pensions plans, endowments, and governments large and small have been stockpiling gold and gold producing company stocks (which are also suffering dramatically) over the last 5 years.   Most gold owners have underwater positions at $1500/oz.  And now that one governmentmay be selling, worries abound others will follow suit. Keep in mind this hasn't actually happened, it's speculation.  But in the commodities world, speculation is the only thing driving prices.  Unfortunately the prices drive business. For example: as gold prices increased, gold producing companies ramped up to meet the demand.  So much so that the cost to produce an ounce of gold has risen from about $500 in 2009 to approximately $1,200 today. The additional cost has been incurred for exploration, facilities, equipment, etc.; all things that can't be undone.  At $1,400/oz. the margin is slim.  I doubt I need talk about what happens if the price continues to drop.  While there is no guarantee it will, here are a few current observations by gold investing experts:  Dennis Gartman, founder of "The Gartman Letter" told CNBC this morning, "There are a lot of people throwing up their hands, throwing positions overboard. Panic is everywhere. I've never seen anything like this. I mean it. Here we are under [$1,400] and who would have thought it? Not I." J.P. Morgan Natural Resources fund manager James Sutton agreed.  He stated, "the fund is taking precautions, trimming its gold holdings to lows not seen since the financial crisis. Many gold businesses could fold." "As you get closer to the production cost for gold people get nervous," said Jonathan Barratt, founder of Barratt's Bulletin. "Oh my, I think I just heard something pop," said…....me. In the world of institutional investors it is times like these when the game goes like this: first one out loses the least.  That is to say, it is better to pull your head out and clean up after the swirly than to get flushed altogether.  If you own gold for investment purposes, you may wish to keep that in mind. I welcome your questions and comments. Warmly, Marc Becker, AIF For more insight on this topic: http://www.cnbc.com/id/100641133 http://www.cnbc.com/id/100640665 http://goldnews.bullionvault.com/gold-mining-062820123 To read past articles and view past videos, visit: www.marcbecker.tv

Life is like a Box of Chocolates - 4/13/13

In this week's edition:  Life is like a box of chocolates. . . Is this email not displaying correctly? View it in your browser.

Retirement Date Funds and Chocolate No doubt you've heard the maxim; "Life is like a box of chocolates…."  Interestingly this metaphor holds true with things that seem to promise what you are going to get in advance, like Target Date Funds.   Target Date (also known as Retirement Date and "Lifestyle" Funds) have grown in popularity - particularly in retirement plans.  The idea behind these "set it and forget it" funds is simple: Choose a year you plan to retire and then invest in a fund with the closest year - 2015, 2020, 2030 etc., –   The idea behind Target Date Funds is good: a comprehensive portfolio that becomes more conservative as retirement nears.  But the concept has been lost in the manufacturing process.  So lost, one reporter calls them "a dangerous rip off."  One reason for scrutiny is that with Target Date funds, like chocolates, "you never know what you're gonna' get."  But this is where the similarity ends.  With chocolates you usually wind up with something good either way.  Not so with these funds.  Dozens of fund families offer Target Date funds.  But differences in fees, allocation, and returns are staggering.  Tim Middleton of MSN Money reported in 2008 the Oppenheimer Transition 2010 fund lost 41.5% compared to 3.6% of another Target 2010 fund.  Of the problems inherent in Retirement Date Funds, arbitrary risk modeling is the most dangerous. "They (pre-retirees) got run over by a truck and didn't know why," said David Krasnow of Pension Advisors.  Investors generally conclude these funds take a protective stance – diversifying and decreasing potential losses over time.  This should create an appropriate investing "glidepath;" the same as a guidance system directing a landing plan would. Oddly, there has been no discussion, let alone consensus, let alone a standardized method for determining the glidepath for investors.  Some funds are aggressive while others are mostly cash by the retirement date.  Many find out which plane they are on when it crashes. So how does a good idea go awry?   Target Date Funds utilize a "fund of funds" design.  The Target Date fund "hosts" other mutual funds by investing in them to make up the portfolio.  The underlying funds have management fees and are often actively traded, incurring additional costs.  The host fund adds another layer of fees to manage often already expensive funds.  Manufacturers argue additional fees are deserved for managing the underlying funds.  I won't argue they don't have methods, but I note these methods are their own What they will be managing next year isn't knowable and the underlying funds are most often manufactured by the same company or by another with a fee sharing arrangement in place.  Read in what you will - but excessive fee complaints abound. Further, when employees invest in Target Date Funds, fund options offered by other providers in the plan are disregarded.  This creates the possibility the Target Date Fund manufacturer may corner the market in the plan, regardless of whether other options perform better or cost less. As an example, I recently looked at the retirement fund options offered by a very large company with over a hundred million dollars in its 401(k) plan.  It offered 27 investment options, 16 of which were target date funds.  While other options exist at in the plan at half the cost, they are predominately all U.S. large growth funds.  So if the employee wants to diversify at all, he has no choice but to put money in the Target Date Funds.  When I looked at the underlying holdings of those funds, they weren't significantly more diversified. And, according to academic standards, the majority of Target Date funds have this problem.  They weight toward large U.S. companies and intermediate bonds, scattering very small percentages across other asset classes. Historically, this approach has not significantly reduced relative risk or increased return.  These are the reasons we diversify in the first place.  MIT PhD Zvi Bodie states, "The damage is done by the inherently misleading name of the fund. They have nothing whatsoever to do with target dates. Nothing happens on the target date.  Nothing is promised on the target date.  So why call them target date?" Recently I showed a client how he would have previously boosted his return by over 2% per year by putting 50% in a broad stock market fund and 50% in a broad market bond fund instead of a balanced Target Date Fund – all of which were available in his retirement plan. He concluded, "It looks like they are double charging me for owning one fund instead of two."  To be fair there is more to it than that, just nothing of value to an investor.  What can I say?  It's a good gig if you can get it. I welcome your questions and comments. Warmly, Marc Becker For more insight on Target Date Funds: Stop the 401(k) Rip-off!: Eliminate Costly Hidden Fees to Improve Your Life http://www.thestreet.com/story/10389236/1/beware-excessive-fees-on-target-date-funds.html http://articles.moneycentral.msn.com/Investing/MutualFunds/target-date-funds-aim-elsewhere.aspx http://www.kiplinger.com/magazine/archives/2008/02/target_funds_under_fire.html http://www.iplanretirement.com/retirementblog/asset-allocation-a-dangerous-rip-off/ To read past articles and view past videos, visit: www.marcbecker.tv

OMG - 5/4/13

In this week's edition:  OMG Is this email not displaying correctly? View it in your browser.

THE RETIREMENT GAMBLE 401(k) plans and IRAs have all but replaced pension plans.  This has resulted in the direst impending economic catastrophe this country has ever had to contemplate.  Forget about sequestration, fiscal cliffs, banking collapse, the great depression…and even the civil war. Shifting the responsibility of creating retirement incomes from professional pension managers to individual employees may result in over 40 million retirees having nothing more than social security (if it still exists) to live on 20 years from now. Currently, more than half of all households going into retirement have not saved enough money to last their lifetimes.  Given that the financial burden will then shift to family (and even worse…the government/taxpayer), America is well on its way to becoming the next third world country. Not an exaggeration.  Not a joke.  This is the first installment of a series I'll be writing on this topic.  I am currently in the pre-release phase of my new book "Rabbits Garden, Fables for your 401(k)." co-authored and illustrated by Wendy Wilkins of Wiser.  More on that later. For now, if you are investing in a retirement plan offered by your employer or on your own, you must watch the Frontline expose' at the link below. I'll warn you, this is over a half hour long.  BUT BEFORE YOU SCOFF, think about how much time you spend considering your retirement savings.  Studies show most people spend more time each year planning a vacation than planning their retirement.          I know none of you asked for this job.  I know most of you are not experienced or knowledgeable enough about creating a lifetime income stream from investments to take this job on.  That said, like it or not, qualified or not, it's now your job.  So start doing it…now. This first part might make you angry and/or scared.  So we might as well get that out of the way.  If you hang with me through this series I'll deliver what I believe achievable solutions to improve a situation warranting dread. If you don't watch this now we both know the chances that you will diminish drastically.  Even if you don't have time to watch the whole thing, a few minutes considering your retirement is better than none - so go ahead and click the link now. http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/ I welcome your questions and comments, simply reply to this email. Marc Becker, AIF Managing Partner, Wiser Financial Coaching, LLC Wiser Financial is a Registered Investment Advisor Firm To read past articles and view past videos, visit: www.marcbecker.tv

Wiser is Hiring - 5/13

Is this email not displaying correctly? View it in your browser.

Stay tuned next week for Part 2 of "If you have a 401(k), you MUST see this!" Wiser is looking for a great person to join our team! Please feel free to forward this to your friends and family who may know a potential candidate. Wiser Financial Coaching, a growing, energetic, and progressive financial services firm seeks a motivated and organized candidate to join our team.  Successful candidates are outgoing, excellent networkers and communicators, and excel in a busy small-office environment.  This position is responsible for working closely with and delivering excellent service and advice for current clients, as well as acquiring new clients.  Duties include successful development and coordination of client relationships, development of financial plans and recommendations, networking initiatives and activities, and light administrative duties.   Candidates must have a college degree and financial planning experience. CFP Certification or similar, securities license, and/or insurance license are preferred.  Ideal applicants will be proficient using MS Office, internet marketing, and other computer skills.  This is a full time position with a low base salary, benefits package, and unlimited income potential.  Qualified candidates should submit a resume and cover letter to wendy@wiserfinancial.com. Warmly, Marc Becker, AIF Managing Partner, Wiser Financial Coaching, LLC Wiser Financial is a Registered Investment Advisor Firm

OMG Part 2 - 5/25/13

In this week's edition:  OMG Part 2

Wiser Financial will be closed Monday in honor of Memorial Day.  Have a wonderful holiday weekend!   Financial Companies Lobby to Keep 401(k)s Broken Part 1 of this series was on the recent Frontline 401(k) expose'.  It includes the financial industry's belief employees don't need advisors who uphold their best interest and its confession it is unaware many 401(k) products under-perform the market. Watch this if you haven't.  The link is below.[1] In this segment I'm highlighting a specific example of the power the financial industry has in controlling the 401(k) market. The Department of Labor (DOL) has tried to level the playing field for people contributing to 401(k) accounts.  This is because a stage is being set on which tens of millions will run out of money.  The DOL has also noted companies providing retirement plans have been allowed to create their own rules for decades, and correctly concluded the two are linked. Its effort to improve the system to better benefit the consumer, however, has been thwarted by the financial industry.  Shocking, I know.  Last year the DOL was able to make fee disclosure a requirement.  After 20+ years…now the plan provider has to tell you what you are paying…kind of.[2]  This year the DOL attempted to expand the definition of fiduciary, making plan vendors and representatives responsible for the plans they are selling.  Fiduciary:  An individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another's benefit.[3] This sounds like a relationship you'd want…right?  If you have a 401(k) account though, you are more likely familiar with this scenario: 1)      You get a list of funds with recent returns next to them. 2)      You pick which funds to invest in. 3)      You hope the funds do well. To the investment company the scenario looks like this: 1)      It provides a list of funds to a company, but the company is responsible for the funds offered. 2)      The employees invest in the funds the company agreed to include. 3)      The investment company hopes the funds do well, but gets paid either way. For the investment company it's big returns with no risk...which is the dream of the employees investing in the plan.  Ironic.   Plan vendors, however, are often making their returns from fee sharing arrangements inside the funds, not from the success of participants using their products. Participating in an effort to halt the DOL from expanding responsibility to plan manufacturers, Ronald O'Hanley, President of Asset Management and Corporate Services for Fidelity Investments addressed Congress. Mr. O'Hanley started well: "Significant reforms need to be made to the retirement system now because an increasing number of Americans are marching towards retirement with little hope of maintaining their standard of living." But then he insisted including plan vendors and brokers as responsible parties to a retirement plan would "blur the line between education and advice and eliminate valuable education and guidance (401K) investors receive today." In my experience the biggest complaint of plan participants is the lack of advice. You can decide for yourself how much education and guidance your 401(k) plan offers you. He went on, "Advisors and brokerage firms could face legal liabilities that would compel them to abandon a commission based model and potentially exit the retirement market altogether…and this will hurt average and low income Americans."[4] Mr. O'Hanley agrees the system is broken and requires immediate change to curtail a retirement crisis.  His recommendation was that Congress consider forcing higher contributions and more education.  If I understand, that means keep doing the same thing, just more of it.  I've yet to encounter a situation in which Will Rogers advice, "if you find yourself in a hole, first, stop digging," was more important. Fidelity makes no bones about wanting the commission based model to be left intact. The reason is because if the manufacturer and advisor receive commission revenue it creates a conflict of interest in the client relationship. If this sounds like a bad thing its because it is, unless you are selling retirement plans. Because of this conflict, the firm is not allowed to act as a fiduciary.  Just like a divorce attorney can't represent both spouses, a plan provider can't represent both the manufacturer and the consumer.  The industry could not be more clear on whose interest it prefers to uphold. With that in mind Mr. O'Hanley's argument is: "You can't make us fiduciaries because then we can't make commissions.  If we can't make commissions then we have to charge fees.  If we charge fees then the "valuable education" we provide would be considered "advice."  If we are giving advice we have a responsibility to uphold our client's best interest.  So we have to make commissions, otherwise Americans will lose their valuable education." Circular Reasoning: "The reasoner begins with what he or she is trying to end up with. Circular logic cannot prove a conclusion because, if the conclusion is doubted, the premise which leads to it will also be doubted."[5] Frankly, I doubt Fidelity's conclusion.  Unfortunately, Congress does not and halted the DOL from making plan providers more responsible for the plans they sell. Most employers and employees don't have time to be educated on investing and retirement planning, let alone want it.  What they need is someone to advise them on how much they need to save and what funds to put it in, preferably from someone who will stand behind that advice. I promised in Part one if you stick with me through this series I will provide reasonable solutions to the retirement crisis.  Here's solution #1:  If you act as an advisor or supply funds in a plan, you are required to act as a fiduciary.  I welcome your questions and comments. Marc Becker, Accredited Investment Fiduciary Managing Partner, Wiser Financial Coaching, LLC Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm   P.S. – If you Google "employees sue Fidelity" that's kind of interesting too. [1]  Frontline 401(k)expose: http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/   [2] Misleading 401(k) fee disclosure: http://fiduciarynews.com/2010/12/will-dol%E2%80%99s-new-mutual-fund-fee-disclosures-mislead-401k-investors/ [3] Full definition of fiduciary: http://legal-dictionary.thefreedictionary.com/fiduciary   [4] Mr. O'Hanley's Congressional Testimony: http://www.financial-planning.com/news/New-Fiduciary-Rules-Could-Worsen-Retirement-Crisis-Fidelity-Chief-Warns-2684241-1.html?zkPrintable=1&nopagination=1 [5] Full definition of circular reasoning: http://en.wikipedia.org/wiki/Circular_reasoning

Rabbit's Garden

Finally, a book about investing a child can understand! Is this email not displaying correctly? View it in your browser.

Check Out Our New Book!       Friends, I am happy to announce the release of "Rabbits's Garden, Fables for your 401(k)," coming in September.  Wendy and I have been working on this project for 2 years and we are thrilled with the finished product.   Above is the book cover.  Readers will enjoy the lively artwork continuing throughout which does a fantastic job of illustrating the narrative.  Rabbit's Garden has already received significant positive feedback within the industry and we are receiving orders for use with 401(k) sponsors and participants. Mac McNeil, President of The Advisor Lab, asked me to do an interview about the book earlier this year for use with financial advisors throughout the country.   You can check out the audio interview by clicking here. We will be hosting a release event in the fall and hope you will be able to join us.  Invitations are forthcoming. I welcome your questions and comments. Marc Becker, Accredited Investment Fiduciary Managing Partner, Wiser Financial Coaching, LLC Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm

Solutions to the 401(k) Crisis

 

Can 401(k)s be fixed? Is this email not displaying correctly? View it in your browser.       Fixing the 401(k) Crisis   Summarizing the first 3 installments in this series:  America is facing the disastrous prospect of millions of retirees running out of money in the coming decades.  In large part this problem has arisen from 401(k) plans replacing traditional pension plans.  This is because employers generally lack the expertise to understand costs and investment options that best benefit their employees.  In turn, employees generally understand little about how to build a prudent retirement portfolio with the options presented. So how does this get fixed? 1)      Require any broker or advisor (or financial company installing the plan if no advisor exists) to be a fiduciary to the retirement plan.  This would mean anyone being paid has a legal obligation to uphold the best interests of the participants. If this sounds simple, right, logical, or obvious, it's because it is all of the above.  And it would be the easiest resolution if the financial industry were not fighting tooth and nail to absolve itself of the responsibility and liability that comes from making such a commitment.  The DOL recently tried to expand the definition of fiduciary for this purpose only to be halted by a heavily lobbied Congress.   This is unfortunate as plan participants lost professional fiduciary management of their retirement funds once 401(k)s took over.  Unlike 401(k) plans, pensions were directed by investment professionals in a manner that would likely yield a life-long annuity to maintain retirees' standard of living.  This likelihood was dependent on the portfolio manager's adherence to prudent investing principles and a deep ongoing understanding of structuring investments and retirement incomes.  The 401(k) plan is nothing short of a Do-It-Yourself system wherein participants get a few funds to pick from and are expected to build and maintain a strategy that will yield the same outcome. To say this is an unrealistic expectation is to say a tornado is breezy. By making brokers and plan advisors a fiduciary to a plan, at least the sponsoring company and its employees would have someone in place who is trained in these matters.  More importantly, as a fiduciary those people would be on the hook for the recommendations and advice given.  2)      Create a new retirement plan, the 401(f) (the f stands for fiduciary). If the big brokerage firms are going to be allowed to market and implement their 401(k) without a fiduciary obligation, then create another plan category that requires an independent fiduciary is in place to help monitor the plan and make recommendations to participants. Once plan sponsors are aware they have an option that enlists a fiduciary my guess is they will migrate to it, even if it isn't a requirement.  After all, plans that have a professional fiduciary in place are often lower in cost and generally absolve the company of a great deal of liability it incurs just from offering a plan. 3)      Create the IRA(k).    Currently, employees contributing to a 401(k) face restrictions in also contributing to a traditional IRA account.  Even if this were not the case there is still the problem that contribution limits for a traditional IRA are far lower than 401(k) accounts.    As it stands now participants have no say in who they get advice from and what investment options they can use in their primary retirement plan.  If the 401(k) market is to be left unchanged, at least allow employees to direct pre-tax funds to the service provider of their choice.    IRA(k) advisors should be required to uphold a fiduciary role to account holders.  The contribution and other limitations for an IRA(k) should be the same as a 401(k); except the employee decides who she wants as an advisor and has access to many investment options unavailable in most 401(k) plans.   This resolution would create extra work for payroll offices.  At the same time, however, it would absolve the employer of liability for employees participating outside the company sponsored plan.    With an IRA(k), the company simply sends the contribution where the employee directs.  Of course this idea is so compelling many companies might close down their plans altogether and just let the employee pick where she wants to invest contributions and company match.    The financial industry would probably like this idea even less than being made fiduciaries to 401(k) plans..   4)      Immediate Automatic Enrollment Currently companies have the choice of automatically enrolling new hires after their probationary period, but most companies require that the employee "opt in" to the plan.  Employers who match contributions are financially incentivized to do this, as fewer employees wind up participating so the company has to match fewer contributions. In the days of the pension, when someone was hired a portion of their pay was automatically contributed to the retirement plan the day he started and that was the end of it.  Reinstating this as a requirement would perhaps have the greatest beneficial effect on the retirement crisis we are facing.    The reason I have included this be immediate – start on the date of hire – is if the income deferral begins after the employee has become accustomed to his paycheck, it is more likely he will opt out.  Some may argue that "forced" retirement contributions are not fair or even unconstitutional.  I would argue the current retirement plan system is not fair as it is set up to fail.  And fail it has.  Last I checked, I am forced to pay taxes.  And last I checked, it is the taxpayer who winds up supporting people who run out of money.  At least in a "forced" retirement account you get to keep the money. In conclusion:  the current 401(k) structure could hardly be more antithetical to free market capitalism.  Big brokerage firms have so far been successful in maintaining their self-regulated monopoly over the 401(k) market in which everyone but them is responsible for what's in and how to use a plan. The root of my suggestions lies in expanding the market place either in existing plans or by creating alternatives that mirror what has been successful in the past. However it's accomplished, improving the status quo isn't rocket science.  People and companies who are compensated for working with those saving for retirement are required to uphold the client's best interest.  And everyone who wants to retire sometime is compelled to save enough…somewhere… that this is a possible outcome. I welcome your questions and comments. Marc Becker, Accredited Investment Fiduciary Managing Partner, Wiser Financial Coaching, LLC Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm   Trivia Time   This week's question:  It's still July and we are already on our fourth named storm of the 2013 Atlantic hurricane season.  Since there are only 21 designated names per season, how are storms named if more than 21 named tropical storms occur in the Atlantic in a single season? Do you know?  E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase.  Then brag to all your friends about how smart you are.  The answer will be in next week's newsletter! Last week's question: At about 2 2/3 football fields long, what is the largest (by length) aircraft every flown? Answer:  The LZ-129 Hindenburg airship. Congratulations to Jerry S., Brett B., and Dick W. for getting the correct answer!  What smart people!  follow on Twitter | visit www.marcbecker.tv | forward to a friend  The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources.  Articles are written by Marc Becker.  All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright ©  2013 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC  unsubscribe from this list | update subscription preferences| view email in browser

This email was sent to wendy@wiserfinancial.com why did I get this?    unsubscribe from this list    update subscription preferences Wiser Financial Coaching, LLC · 2741 Campus Walk Ave · Bldg. 400 Ste 400 · Durham, NC 27703