Archive for the ‘Finance’ Category

At Least a Little Good News

CFO Magazine reported that a survey of Chief Financial Officers found that “. . . 18% expect a significant increase in overall consumer demand this year versus last, and 57% expect some increase. Only 7% expect a decrease of any kind.” In the U.S. “30% of the respondents expect to see increased consumer demand this year, while 40% expect to see it next year.” I sure hope the majority is right.

That’s Depressing

According to a recent CNBC release, “The US Housing Crisis Is Now Worse Than Great Depression….Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data…According to Case Shiller, which provides the most closely followed housing industry data, prices dropped 1.9 percent in the first quarter, a move that the firm interpreted as a clear double dip in prices.”

Fingers crossed it turns back around quickly; however, in the interim, you might want to touch base with your clients to at least let them know you’re staying abreast of the latest developments.

Heads Up

I don’t believe it’s a case of “if,” it’s a question of “when” we will see a significant change in the tax code. A good example of what may be coming is reflected in the recently proposed “Bipartisan Tax Fairness and Simplification Act of 2011” sponsored by Senator Ron Wyden (D-Ore.) and Dan Coats (R-Ind). One item that deserves advisor attention is the proposal that would eliminate tax-exempt interest for new state and local debt, requiring those entities to issue tax-credit bonds, which would be taxable. Don’t know if that will ultimately pass but it’s been suggested by more than one Congressman. We continue to live in interesting times.

Try your luck at balancing the Federal Budget

The Committee for a Responsible Federal Budget has prepared an online Budget simulator that allows you to personally balance our Federal Budget. Well, maybe not balance. The goal is to stabilize the debt at 60% of GDP by 2016. Turns out it’s not so easy but working through the process is enlightening (and sobering). You can find it at

Cheat Sheet

We’re likely to be living with the results of the Dodd-Frank legislation for a long time but it’s nearly 1,000 pages of legalese. Wall Street & Technology offers a free “Cheat Sheet” (actually about 39 pages; underwritten by Intel). You can download it at

Heads Up

Don’t know if you’ve been following the proposed DOL changes in the definition of “fiduciary” but you probably should. If you don’t advise clients on issues related to their pension plan investments why do you care? Because the new rule will also apply to IRAs. I’ve highlighted a few of the most significant issues.

Currently the agency goes by a five-part fiduciary test. According to the current rule, established in 1975, an advisor is not treated as a fiduciary unless, with respect to advice, he or she (1) makes recommendations on investing in, purchasing or selling securities or other property, or give advice as to their value (2) on a regular basis (3) pursuant to a mutual understanding that the advice (4) will serve as a primary basis for investment decisions, and (5) will be individualized to the particular needs of the plan.

The new proposed rule provides:

A person gives fiduciary investment advice if, for a direct or indirect fee, he or she –

Provides the requisite type of advice:

  • Appraisals or fairness opinions about the value of securities or other property;
  • Recommendations on investing in, purchasing, holding, or selling securities; or
  • Recommendations as to the management of securities or other property;

And meets one of the following conditions:

  • Represents to a plan, participant or beneficiary that the individual is acting as an ERISA fiduciary;
  • Is already an ERISA fiduciary to the plan by virtue of having any control over the management or disposition of plan assets, or by having discretionary authority over the administration of the plan;
  • Is an investment adviser under the Investment Advisers Act of 1940; or
  • Provides the advice pursuant to an agreement or understanding that the advice may be considered in connection with investment or management decisions with respect to plan assets and will be individualized to the needs of the plan.

Limitations recognizing that certain activities should not result in fiduciary status:

  • Persons who do not represent themselves to be ERISA fiduciaries, and who make it clear to the plan that they are acting for a purchaser/ seller on the opposite side of the transaction from the plan rather than providing impartial advice.
  • Employers who provide general financial/ investment information, such as recommendations on asset allocation to 401(k) participants under existing DOL guidance on investment education.
  • Persons who market investment option platforms to 401(k) plan fiduciaries on a non-individualized basis and disclose in writing that they are not providing impartial advice.
  • Appraisers who provide investment values to plans to use only for reporting their assets to the DOL and IRS.

Many financial services firms and organizations are actively working to have the rule proposed modified so, so far, the final result is still unknown. Stay tuned.

Handwriting on the Wall?

My client just contacted Social Security to get an updated copy of his Social Security statement and received the following note:

In light of the current budget situation, we have suspended issuing Social Security Statements.

You may be able to estimate your retirement benefit using our online Retirement Estimator.

You might want to give your retired clients a “heads up” so they’re not surprised.

According to RetirementRevised “The agency plans to save $30 million by suspending mailings for the remainder of the current fiscal year, which ends in September, and an additional $60 million next year by restricting mailings to workers 60 and older…. it’s working on an online download option for everyone else.”


With the markets roiled by the chaos in the Mid East and the three pronged Japanese earthquake/tsunami/nuclear tragedy I believe now is the time good advisors earn their keep. Although we can’t control markets we can at least be proactive in our communications. Toward that end, below is a link to a letter we sent to clients yesterday. We had been calling them over the last few days and will follow up this letter with a call by our investment committee tomorrow. This is all in conjunction with our inviting our clients to come in to the office where we update their MoneyGuidePro plan to review both how they are currently doing as well as reviewing the downside protection they might have based on their acceptable goals. It’s a process we followed during the Grand Recession and found our clients were immensely appreciative of our efforts.

This Client Letter (PDF) includes my current perspective on the market impact of the events in Japan, and a lengthy summary of the nuclear crisis as it has unfolded.

In Retirement Living is Risky

February 21,2011

We’re used to cautioning our clients that although they may be retiring, they still have a long planning horizon but that reality doesn’t necessarily resonate with some clients. In reviewing some old emails, I came across an article by Linda Stern for Reuters on The Retirement Process and in it Linda provided what I believe is an excellent layman’s description of “Retirement Risk” that you may find helpful in education your clients’ to their reality.

“On the day that you retire, you’re still looking ahead at major purchases as well as everyday expenses. You can expect to have to pay for at least 21,900 meals, 240 months of electric, phone and cable service and 20 years of property taxes, homeowners insurance or rent. But not all of your expenses will be handled with a fixed monthly draw from your investments. You’ll probably buy a couple of cars after you retire, and spend 20 holiday seasons buying gifts for your friends and family. Maybe you’ll want to take a celebratory trip. Oh, and leaky roofs and broken washing machines respect no man’s (or woman’s) retirement.” That adds up to BIG dollars.

You can find the full article at

Health Reform Hits Main Street

Don’t know about you but I find the 1,000+ page Health Care Reform Act a bit confusing. Knowing that, John Gilliam, a friend and professor in financial planning at Texas Tech who teaches classes on risk management sent me this link – It’s a cute 9 minute cartoon video, produced by the Kaiser Family Foundation that explains the issues and the terms of the act.