Being Smart with $$ - New Required Fee Table Let's You See What You're Getting Charged

You probably don’t know how you are getting charged by your financial adviser.  That’s why Massachusetts will soon require advisers to provide a one-page fee table to all clients that is designed to simplify the different ways investors may be charged and make it easier for them to understand.  I attended a recent session with the Massachusetts Securities Division where advisers learned about this new requirement.  Many questions posed to the regulators addressed the fact that advisers charge so many different fees that they can’t see how they can get it onto one page.  When an adviser charges commissions and takes a percentage of assets for themselves and then takes a percentage of assets for an outside money manager and then takes referral fees and who knows what else, it’s hard to get it onto one page.  But what if an adviser charged a simple hourly fee and never received commissions or referral fees and doesn’t take a percentage of assets annually?  That would be how Client Priority Financial Advisors LLC charges clients and why one page is more than enough. This hourly model lets the adviser avoid conflicts of interest and be free to choose only the best solutions for your needs. 

Larry Pike, CFA
Client Priority Financial Advisors LLC
www.clientpriority.com

Being Smart with $$ -- Money Not Earned is Money Lost

Is it worse to lose $100,000 in the stock market or not earn $100,000 that you should have earned? Most of us look at our financial statements and notice the money we earned or lost, but rarely do we notice the money we didn’t earn but should have. Each of us has a percentage allocation to stocks that is advisable for our own circumstances. But many advisers love to guess on the direction of stocks and gamble with your money. If your adviser loaded you up on stocks far beyond an appropriate amount and you lost $100,000, you’d be furious. But this year I have seen many advisers bet that a crash is coming and REDUCE their clients’ stock holdings below what is appropriate and this has cost clients a fortune since the market is UP over 20% year to date. If your adviser sold $500,000 of your stocks at the beginning of the year on a gamble, they cost you $100,000! It’s time to notice the money you should have earned as a loss and tell your adviser to stop gambling with your money. Or better yet, get a new adviser who won’t do it.

Larry Pike, CFA

Client Priority Financial Advisors LLC

www.clientpriority.com

Being Smart with $$ -- Save Now to Have More Later

Would you rather work in your 70s because you want to or because you have to?  If you are behind on your savings, it’s never too late to start making changes that will help us later. If you are 15 years from retirement and save an extra $1,000 per month while working, you may have an extra $1,000 to spend every month for a 30-year retirement. Start 20 years before retirement and you may have an extra $1,500 to spend every month in retirement.  There’s always a way to make choices and changes now. (Assumes 6% investment returns while working.)

Larry Pike, CFA
Client Priority Financial Advisors LLC
www.clientpriority.com

Being Smart with $$ - Stocks Go Up Because Companies Make Money

Are you tempted to bet against stocks? It’s a little like betting you can win in a casino. You might win in the short term but will likely lose in the end.  A diversified portfolio of stocks provides a return from annual dividend payments or rising share prices because companies make money every year.  Yes, it is true stocks don’t go up every year even though companies are generating profits.  But how long do you want to bet against this annual creation of new value?  Many smart investors have tried to time the market and predict a crash and many of those found themselves sent to the loser’s table.  Similarly, casino operators know that when millions of dollars change hands at the tables, some gamblers will win but the house will ultimately collect a percentage of the total because the odds are in their favor.  Some people will be lucky in casinos and some will be lucky making short-term bets against stocks.  But most will experience what the odds predict: they will lose the bet.  This year alone, many financial advisers have gambled with their clients’ money and reduced stock allocations only to watch the U.S. market rise over 18% since New Year’s. They bet wrong and might need the market to fall quite a bit now just to get back in at the same price where they sold.   (Note that stock investments are appropriate for those with a long-term time horizon and the money allocated to stocks should be for your needs in the distant years ahead.  Investments earmarked for near-term needs should be invested in less volatile assets.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
Hourly financial advice.  No commissions,  No automatic, recurring adviser fees.
www.clientpriority.com
Blog: clientpriority.blogspot.com

Being Smart With $$ - Financial Advisers Act Emotionally and Shouldn't

Financial advisers buy and sell at the wrong time based on emotion says legendary billionaire investor Ron Baron and he takes advantage of this and increases his purchases when they are panicking.  Don’t let your financial adviser manage your portfolio with emotion rather than rationality.  A proper long-term investment plan does not include panic selling. 

https://www.cnbc.com/2019/08/20/ron-baron-says-he-tripled-normal-stock-buys-during-recent-wild-swings.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

Larry Pike, CFA

Client Priority Financial Advisors LLC

Timing was the subject of an old Steve Martin joke where he said it is the basis of success in comedy.  Of course, in his bit he said the word all wrong with the accent on the second syllable as if it referred to an ancient Chinese dynasty.  If you get timing wrong in comedy, the joke doesn’t work.  If you get timing wrong in your portfolio, you lose money.  The best timing with investing involves not timing the market at all and staying invested in a proper allocation for your needs.  Most investors will find that their total time in the market is what matters in the long run and not when to dart in and out of it.  Some investors believe they can jump out of the stock market before a crash and avoid losses.  The problem here is that expected crashes often don’t come and then you are sitting out the market as it marches higher.  Then it is hard to get back in when you intended to avoid losses but instead lost money by sitting it out.  And if you do dump stocks and the market subsequently falls, the next hurdle is to figure out when to get back in.  Investors often make the mistake of expecting further declines and then miss all the upside.  The long-term trend for stocks is always higher as prices will reflect all the profits generated by global companies every year even though there will be corrections now and then.  Many have been predicting a crash for years and they have been punished by missing a 3-year return in large-cap stocks of over 13% annually!  In comedy, you have to get your timing right and in investing the best timing strategy is not to time the market at all.

Larry Pike, CFA
Client Priority Financial Advisors LLC
www.clientpriority.com

Being Smart with $$ -- Vape or Have $1 Million. You Choose.

Vaping or $1 MILLION.  You choose.  Maybe your kids will ignore your health warnings and sneak off to vape behind the school when no one is looking.  But what if they knew the true long-term financial cost?  An average user may go through a pod per day at $4 each.  So let your kids know that if they throw that $4 per day into the stock market, instead of vaping, from their senior year of high school through all their working years, it will likely be worth almost $1 MILLION which they can spend in retirement.   Lighter users might be looking at less but still substantial money. Vaping or $1 million.  It seems like an easy choice. (Assumes 8.5% annual stock-market returns which are below long-term averages, over 50 years.  Past results may not be a predicter of future results.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com
Blog: clientpriority.blogspot.com