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9-Minutes To Change Your “Financial” Life

The suicide deaths of celebrities like Anthony Bourdain and Kate Spade has brought an uncomfortable and tragic attention to a growing problem. According to a recent report by the Centers for Disease Control and Prevention, rates of death by suicide in the U.S. have risen by close to 25% over the last 20 years.

We’re not here to debate how and why. It’s not our area of expertise. However, suicide is a choice. Not a good choice. Suicide doesn’t know age, success, color, social status. Suicide knows demons. When they overwhelm, you listen.

Coming from a family where suicide and depression runs deep, to this day I wonder if I should have saved my mother the third time she tried to take her life. I needed 6 months absence from junior high school to care for her.

Before a person takes a horrible step, before you would make the choice, look for divine intervention. Search for a message, a sign, anything. That it’s not your time.

As I work on a few big projects, one being a book with business partner and individual I greatly respect, Lance Roberts, I try my best to listen to what I usually ignore. The divine intervention reaches to me through the tall pines that surround my house. When I assist someone overcome a money obstacle, I consider it divine intervention, too.

I firmly believe divine intervention was involved when I saved my mother for the third time.

She never attempted suicide again, but her existence was far from happy. So occasionally, I wonder.

Was saving her the best choice?

In your life, many questions will remain unanswered.

“You just learn to live with open circles, I guess.”

Lucas McCain delivers these words in my screenplay to bring the 50s western, “The Rifleman,” to the big screen.

Many of us must don’t learn to close open circles when it comes to poor financial decisions. Even the worst money habits can be turned around, changed for the better. It doesn’t take much effort to identify poor financial paths and initiate small steps to turn the tide.

The tragic events over the last two weeks reminded me of an incident that occurred when I was a boy. It was back then I realized that minutes can slow down and feel like forever.

Here are some lessons I learned back in 1976.

“Another nine minutes. She’d be dead.”

I wonder what he meant.

Almost 4 decades ago.

As memories fade leaving pin-hole punctures wrapped in thick haze of distant moments, there remain a few clear snapshots left in my head of what happened that August morning.

You know. Nine minutes that border life and death.

So specific. So odd.

Her body was glowing cold. Dressed in the previous day’s outfit. Low faded jeans, bell bottom style. Shoes. A floral halter top circa 1976.

Tight in a fetal position. Her head and neck awkwardly stuck between the bottom shelf of the refrigerator and a crisper bin.

The paramedic pulled 92-pounds of stiff limbs from a cold cage. He heaved her to the linoleum kitchen floor as easy as a person tosses a used candy wrapper.

She was solid.

An overdose of pills and booze.

I was certain it was rigor mortis. I’d witnessed enough of it spending time staging G.I. Joe adventures in the plush red-draped lobby of the neighborhood funeral parlor owned by my best friend Joey.

But she wasn’t dead.

The paramedic said in nine more minutes things would have been different.

But how did he know?

I looked up at the kitchen clock. He said those words with such confidence. Who was I to doubt him?


In nine more.

Game over: 3:00am.


May not be full release of the mortal coil but some kind of game changer is imminent.

As you read this a thousand of your skin cells just died.

A cancer you don’t know about yet grows larger.

The love of your life is about to enter your space.

You’re on track for an encounter with a jerk or the greatest inspiration you ever met.

A phone call away from a life-changer. A drive. A walk. A run. A jog.

You just made a purchase of something you really don’t need.

A fall. A rise.

Minutes humble you. Not years. Years mellow you. Minutes keep the receptors open. Allow the flood of your life and the lives of others to fill where you stand. The next move you make can change your world whether you want it to or not.


Never question why a challenge, a person, an illness, an opportunity, a setback, gets thrown in your groove. The intersection came upon you from a source you’ll never be able to explain or completely understand. It’s a waste of time to trace what lead you here but worth the minutes to live the steps you’re taking now.

Signs are all around if you just let go of skepticism, lessen the noise. Whose life remains in the balance once you open your eyes, mind and heart to the signs? When a change places a purpose in the road, your brain will hum endlessly until you follow it and hum the tune every day.


I can write the best 250 words of my life in 9 minutes. I can watch my pup Rosie monitor the neighborhood from the open blinds in the living room and ponder how happy I am to have adopted her from the animal shelter.

Greatness is defined by the whispers of time. In the small of actions that move and make you stronger, life is lived large. It’s when greatness appears.

Greatness is not earned through the validation of others. It comes when you recognize and develop talents you’ve had since youth.

When you positively affect one life, you’ve earned prominence.

We answer money questions, bust Wall Street myths, set lives on the right financial path every day. If we affect one life positively, help one individual meet a retirement goal, we’ve accomplished a noble mission.

Like a paramedic who believed he was nine minutes early. Able to save a life.

An unassuming master of greatness.


How many people do you know who died long ago?

You see them daily. They live in a perpetual fetal position. Stiff. Lifeless. Nine minutes closer to a dirt nap.

They work little corporate jobs, have little middle managers who define their big fates. They don’t have time to bask in their kids or the live life stories that add richness.

My former regional manager at Charles Schwab, told me “you don’t need to see your kids play baseball or attend dance recitals. You need to be at work.”

Not for me: I pulled my head out of the fridge.

Do something in nine minutes every day that makes you glad to be here. Breathe deep. Take your life back. Start a book from our RIA Reading List. Nine minutes of reading a day. Observe what happens over a year based on only nine minutes of reading a day.


Yes, I know we live to complicate things in the financial services business. Complicated is designed to sell product you don’t need. Simplicity is the key to financial success. The best long-term asset allocations are those designed using low-cost investment vehicles along with rules to manage risk which include liquidating stocks to minimize the effects of the time required to break even and meet financial goals.

If I ask, you already know what your greatest money weakness is. Take nine minutes to write it out. Spend another nine to consider one specific action to improve.

Ask yourself: Are you happy right now? Where is resistance coming from? Are you working for a future that never appears? When the future is the present do you look ahead to another future? In the silent noise that vibrates in the back of your head is there regret? Anxiety? Look inside yourself for answers. Others can’t be blamed. They’re not the cause. You’ll never discover truth if you’re not accountable.

In nine minutes can you write nine reasons why you feel the way you do? That’s the flow of your life. The time that bridges big events is where flow is discovered. Or changed, re-directed, improved.

Your choice.

We alternated nights in the only bed. Mom and I.

Monday couch (no sleep), Tuesday bed (sleep). There was a full-length mirror in our three-room walk up. I recall dad cursing, fighting to secure the clunky structure to the hall-closet door.

At the right angle the mirror provided a clear view of the kitchen. From the bedroom you could observe everything. The present events. Now I understand how it saw the future too.

Since mom always seemed to gravitate to the kitchen late at night, the reflection in the mirror of her pacing back and forth was not uncommon. I was a light sleeper. My habit was to wake, look in the mirror, turn away to the darkness of the wall. Many nights I was forced to get up and close the bedroom door, so I couldn’t see what was going on in the rest of the apartment.

10pm: Wake up. Glance in mirror. Observe kitchen. Fridge door open. More beer for mom I was sure. 12:02am: Wake up. Look in mirror. See kitchen. Fridge door open? Heavy drinking binge. Turn. 2:16 am: Wake up. Turn. Look in mirror. See kitchen. Fridge door ajar. Again? Still?


I was mad. So mad. I got up to see what was going on. Mom half on the floor. On her side. Tangled in the extra-long, engine-red cord of a dead Trimline phone. Her head inside the bottom shelf of the fridge. I touched her shoulder. Felt the freeze of her body.


I happened to glance at that damn kitschy cat clock. Waggy tail. Shifting eyes.

Tick. Tail. Tick. Tail. Eyes right. Eyes left.

Never forgot 2:18. Plastic cat eyes.

Taunting me.

A human accordion. She wouldn’t unfold. Still breathing. Shallow. I noticed the slight movement of a tiny chest. Up and down. Slow. Mouth open. Tongue shriveled. Lips colorless. Light blue.

I was in a panic. Half asleep. My mind reeling.


Cat eyes away.

Suddenly calm, I sat on the floor. Staring at her.


I watched mom’s chest go choppy. Still. Move. Move. Nothing.

Cat tail. Swing left. Right.

Extended on the exhale. Awaiting permanent stillness. Hoped for it. 2:22.

Crossroad. Intersection.

Whatever you call it. The power to make a decision that would change all. Slowed down everything. An inside voice, one I never heard before. Kept asking. Slightly teasing. The repetition of the question felt forbidden. But continued. Cat tick-tock.

A thousand pounds tied to a melamine tail.

Live or die? Choose. Now. No time left.


In nine minutes. Decide.

Go on the way you have been.

Or live.



Fiscally-fit people wait before making a purchase, especially a significant one. Waiting lessens the impulse to part with money for something you don’t need. Wait nine minutes. Then nine hours. Nine days. If you still want the item, buy it. Most likely the heat will pass. Your desire will grow cold.

The epidemic of suicide is real. And spreading. If you know of someone in crisis, reach out. The National Suicide Prevention Hotline is 1-800-273-8255.

The 4-Mistakes In Your Financial Plan

So, you’ve decided to undertake comprehensive financial planning.

A properly designed financial plan will cover important elements like retirement savings, insurance analysis and estate review; a qualified planner will target and outline specific areas of strength and weakness along with flexible, realistic routes to each financial goal.

If you’re stressing over the process, how long it takes to get a plan together: Don’t. Yes, there’s a financial self-discovery period on your part and that will take effort and homework. However, a plan can be modular based on your most important concern first, then built on over time.

Let me be one of the first to say congratulations on your decision!

You must be serious about financial awareness. After all, there are none of the day-to-day highs and lows of the stock market.

No sizzle. So boring.

Financial planning doesn’t make headlines or capture the attention of media talking heads.

It flies under the radar.

And to that I say:

Thank goodness.

Consider financial planning the mundane sentinel which forms the foundation of money awareness. When plans are attached to goals or life benchmarks as I call them, they take on a life of their own as progress markers along the path to a successful financial life.

A plan is a complete diagnostic of money chemistry. And the numbers don’t lie.

At times, it’s is validation, other times, an awakening.

On occasion, a warning.

See? Perhaps planning is exciting (we’ll keep that between us. Our own little secret).

Now that I have your attention and you’re ready to go, I’ll share 4-hidden dangers for investors to heed.

Mistake #1: You depend on the wrong tools to get the job done.

Online publicly-available financial planning calculators are the junk food of finance posing as nutritious choices. I guess it’s better than nothing, however just because a planning calculator is available from a reputable firm like Vanguard or Charles Schwab surprisingly doesn’t make it worthy of consideration.

As a matter of fact, per a study, the efficacy of publicly-available retirement planning tools from 36 popular financial websites was challenged and results were extremely misleading.

These quick (worthless) financial empty-calories don’t provide enough input variables to provide a level of accuracy. Most egregious is the dramatic over-estimation of returns and plan success.

If you trust an online calculator to adequately plan for retirement or any other long-term financial life benchmark and feel confident in the output (most likely because it provided a positive outcome,) then you’re ostensibly setting yourself for dangerous surprises.

Avoid them. They’re not worth it. Best not to do any planning at all if it’s this route.

Mistake #2 – The plan is used to sell product.

Antoinette Koerner, a professor of entrepreneurial finance and chair of the finance department at the MIT Sloan School of Management, along with two co-authors, set out to analyze the quality of financial advice provided to clients in the greater Boston area.

They employed “mystery shoppers” to impersonate customers looking for advice on how to invest their retirement savings. Unfortunately, it didn’t work out too well.

Advisors interviewed tended to sell expensive and high-fee products and favored actively-managed funds over inexpensive index fund alternatives. Less than 8% of the advisors encouraged an index fund approach.

The researchers found it disconcerting how advisor incentives were designed to motivate clients away from existing investment strategies regardless of their merit. They found that a majority of the professionals interviewed were willing to place clients in worse positions to secure personal, financial gain.

So, let me ask:

“Would you rather have a comprehensive plan completed by a professional who adheres to a fiduciary standard where your financial health and plan are paramount, or a broker tied to an incentive to sell product?”

Brokerage firms are willing to offer financial plans at no cost. However, the price ultimately paid for products and lack of objectivity, is not worth a ‘free’ plan. It’s in a consumer’s best interest to find a financial partner who works on an hourly-fee basis or is paid to do the work, not based on investments sold.

Last month, I met with a gentleman whose comprehensive financial plan inspired most of this blog post. The financial plan completed by his advisor was fraught with conflicts of interest and mistakes I’ll expand upon. The plan was not designed for an individual who was about to “cross over,” as I define it.

In other words, the plan was not designed for an individual preparing to retire within 5 years and look to begin a lifetime income distribution strategy. Nothing about longevity assessment (which we do through analysis to help people plan realistically based on health habits and family history), zero about proper Social Security strategy including spousal retirement and survivor benefits maximization, nada about how or if he should take his pension, along with erroneous inflation rates.

What stood out was the recommendation of a sizable investment in a variable annuity.

I couldn’t understand why an annuity was recommended, especially a variable choice with an income rider that was not required. Based on my analysis, this successful earner, saver and investor had enough to meet joint fixed expenses for life based on pension and Social Security optimization alone.

Annuities are usually sold, not planned.

However, in this case a plan was purposely engineered to roll a lump-sum investment into a product that wasn’t needed. No other option for the pension was provided but to roll it over into an annuity without further investigation.

It felt like the plan was patchworked to conclude in a product sale. A variable annuity may have been suitable, but it certainly wasn’t in the highest and best or fiduciary interest of the prospective investor. Be careful out there. Get a second opinion from a registered investment adviser who offers a fiduciary level of care.

Mistake #3 – Beware of the inflation-scare method 

At Clarity we provide countless second opinions on financial plans; a trend that consistently emerges is the omnipotent annual 3% inflation rate. Regardless of the expense goal, even medical (which should be higher), the 3% blanket annual inflation rate in my opinion is left in as the default selection that never gets updated perhaps as a method to scare investors into managed product and possibly overweight stocks. Candidly, many financial professionals do not understand inflation.

When having a financial plan completed, consumers must be smarter about inflation rates and make sure their planners are knowledgeable when it comes tying applicable rates of inflation to each goal.

Keep in mind – inflation is personal to and differs for every household.

My household’s inflation rate differs from yours.

Thanks to an inflation project undertaken by the Federal Reserve Bank of Atlanta, there’s now a method to calculate a personal inflation rate. A smart idea is to compare the results of their analysis to the inflation factor your financial professional employs in retirement and financial planning. Instruct your adviser to complete an additional planning scenario which incorporates your personalized consumer price index and see how it affects your end results or outcomes.

The bank has undertaken a massive project to break down and study the elements of inflation along with the creation of a myCPI tool which captures the uniqueness of goods that individuals purchase.

Researchers estimate average expenditures using a calculation which incorporates various cross-demographic information including sex, age, income, education and housing status. The result is 144 different market baskets that may reflect a closer approximation to household’s personal cost of living vs. the average consumer. It’s easy to use and sign up for updates. Try it!

My personal CPI peaked in July 2008 at an annualized rate of 5.2%. Currently, it’s closer to 1.2%. For retirement planning income purposes, I use the average over the last decade which comes in at 2.3%.

The tool can help users become less emotional and gain rational perspective about inflation. Inflation tends to be a touchy subject as prices for everything must always go higher (which isn’t the case). I’ve witnessed how as a collective, we experience brain drain when we rationalize how inflation impacts our financial well-being. It’s a challenge to think in real (adjusted for inflation) vs. nominal terms.

I hear investors lament about the “good old days,” often where rates on certificates of deposit paid handsomely. For example, in 1989, the year I started in financial services, a one-year CD yield averaged 7.95%. Inflation at the time was 5.39%. After taxes, investors barely earned anything, but boy, those good old days were really somethin’ weren’t they?

We’re so-called inflation experts because it co-exists with us. It’s an insidious financial shadow. It follows us everywhere. We just lose perspective at times as the shadow ebbs and flows, shrinks and expands depending on our spending behavior. Interestingly, as humans, we tend to anchor to times when inflation hit us the hardest.

Worried about inflation in retirement? Let’s whittle down this myth of massive inflation in retirement. Decreased spending in retirement offsets price increases based on conclusions of multiple studies. For example, according to David Blanchett, CFA, CFP® Head of Retirement Research at Morningstar in his Working Paper titled “Estimating the True Cost of Retirement,”  the following holds true:

While a replacement rate between 70% and 80% may be a reasonable starting place for many households, when we modeled actual spending patterns over a couple’s life expectancy, rather than a fixed 30-year period, the data shows that many retirees may need approximately 20% less in savings than the common assumptions would indicate.

Real retiree expenditures don’t rise (or fall) in nominal terms simply as a function of broad-based inflation or expected health care inflation. The retirement consumption path, or “spending curve,” will be a function of the household-specific consumption basket as well as total consumption and funding levels.

When correctly modeled, the true cost of retirement is highly personalized based on each household’s unique facts and circumstances.”

A generic inflation rate used by most planners overstates the inflation risk most retirees will experience.

While at Clarity we use a 1.7% inflation rate in planning for most needs (except certain categories of healthcare, higher education and long-term care costs which we increase at 4.5% annually), a personalized rate for those who go through the myCPI is highly recommended.

According to an insightful myth-busting analysis by John Kador for www.wealthmanagement.com, prices don’t inflate equally. Now if more financial professionals would get the picture and use the information for accurate planning purposes (let’s not hold our breaths).

Mistake #4 – Market return projections only for vampires

I am 100% confident that stocks always move higher in the long run.

I know for certain the Dow will reach 60,000. I probably won’t be alive to witness it, but I know it’s going to happen. I do. Markets are infinite. Unfortunately, humans are finite. Unless you’re a vampire, there are going to be times when you’ll battle through return headwinds or glide easy thanks to tailwinds. There will be extended periods (hopefully not yours), when dollar-cost averaging will seem like treading wealth through thick sludge. Other times, it’ll feel like your money is lithe and positive returns occur with minimal or zero effort.

As Lance Roberts states:

“The most obvious is that investors do NOT have 118 years to invest. Given that most investors do not start seriously saving for retirement until the age of 35, or older, most investors have just one market cycle to reach their goals. If that cycle happens to include a 10-15 year period in which total returns are flat, the odds of achieving their savings goals are massively diminished. If an investor’s 30-year investment cycle happens to end with a major market crash, the result was devastating. Time, duration and ending dates are crucially important to expected investor outcomes.”

What if you’re in retirement and distribution mode? Market headwinds can be devastating.

James B. Sandidge, JD in his study “Adaptive Distribution Theory,” for the Investments Wealth Institute, provides several eye-opening examples of drawdown risk. As we monitor portfolio distributions over rolling three-year periods, Clarity is prepared to have retirees make changes to withdrawal rates or dollars as they cannot count on time to breakeven from combined market and portfolio distribution erosion. What does matter is the timing of returns, especially losses.

Whether you retire in a market head or tailwind is good or bad luck.

If recently retired, we believe at RIA that you’re going to expect overall market headwinds over the next 10 years (sorry) and must prepare to reduce portfolio distributions.

I’m sorry. Again, it’s just a drawing of the straws. Nothing personal.

James includes several effective charts and tables in his work. Table 4 hits home for me.

An investor in a 60/40 portfolio who retired at the end of February 2008 suffered a 26.8% loss in the first 12 months of retirement. A 5% withdrawal was recommended for living expenses through that period. This hits home for me personally because I witnessed financial professionals suggesting 4-5% withdrawals that year and recite the “stocks always move higher in the long run,” mantra. It was almost like these pros wouldn’t believe what was happening and couldn’t help retirees adjust their spending expectations. The triple deadly combo of market loss, unrealistic withdrawal rate and investment managements fees lead to a first-year devastating principal erosion of 32.8%!

In 2010, the new retiree is probably anxious to return to the workforce. Subsequently, with a smaller asset base of $672,000, a 5% withdrawal is no longer $50,000. It’s $33,600. What a horrific life-changing experience. I never want to be the adviser on the other side of the desk delivering this bad news.

James outlines –

Thus the “risk three-step” – a rapid reduction of principal, followed by a reduction in cash flow, followed by investor panic. Many retires can tolerate gradual principal erosion, but many fewer would find a 33-percent drop in principal and cash flow acceptable after one year of retirement.”

Lance Roberts and I had to adjust down our return estimates for every asset class in our planning software; international and emerging markets have the greatest opportunities for long-term asset class returns, however they’re adjusted lower, too. If we model higher returns, the risk to get those returns increases thus putting clients in danger of not reaching their financial goals unless they increase their savings rates, reduce debts/expenses or work longer than anticipated.

Most likely, your plan investment return estimates are too optimistic. Again – Designed more for blood suckers. Not people.

To a broker, flat or bear market cycles don’t exist. Realistically, the dogma is false narrative. If you fall for it, you may wind up spending an investment life making up for losses or breaking even.

Most financial planning software generates outcomes based on something called “Monte Carlo” simulation. It’s as close as planners get to represent the variability of market returns over time.

Monte Carlo generates randomness to a portfolio and simulates, perhaps thousands of times, around an average rate of return. Unfortunately, asset-class returns most Monte Carlo tools incorporate tend to be optimistic.

In addition, even though Monte Carlo simulates volatility of returns, it does a very poor job representing sequence of returns which I think of as a tethered rope of successive poor or rich returns.

Per friend and mentor Jim Otar, a financial planner, speaker and writer in Canada:

“Markets are random in the short term, cyclical in the medium term, and trending in the long term. They are neither random, nor average, nor trending in all time frames. Secular trends can last as long as 20 years (up down or sideways). The randomness of the markets are piggybacked onto these secular trends. Assuming an average growth and adding randomness to it does not provide a good model for the market behavior over the long term and it makes the model to “forget” the black swan events.” 

It’s why at Clarity, as a backstop, we employ various planning methodologies which incorporate how market cycles operate and where your goals may fall within them.

Granted, a comprehensive plan experience won’t be the talk of your next cocktail party. However, it just may allow you the freedom and peace of mind to enjoy the benchmarks you work hard every day to reach.

Last, the only person who will succumb to the hidden dangers in financial plans, is you. However, you’re now aware of the financial minefields that are a ‘must avoid.’

The Care And Nurturing Of An Imperfect Retirement

“Dad, that grass looks fake!” – Spring, 2018.

My daughter recalls how she couldn’t determine the difference between the once lush landscape of my front yard and the set for a movie about the aftermath of nuclear blast. The grass was a sea of brown bestrewed by tiny islands of a green Southern lawn fighting for life.

Azaleas once thriving were reduced to long thin brittle branches that resembled skeletal fingers rising from the dust.

One summer of zero care and nurturing destroyed years of prosperous growth.

I’ve given myself credit for being a good saver and respectable steward of money. I better be as financial planner and money manager. Consistent at socking away 30% of my gross income. I’ve been fortunate to earn enough to be in the top 5% U.S. households.

Then life got in the way.

I needed to resign from a long-term employer due to my beliefs that the institution was ethically breached. Subsequently, I got sued and the stress caused permanent breakdown in the function of my right kidney. Oh, and then there was a divorce and the start of a new business. All in my late 40s.

At an age I should have been winding down, thinking of retirement, I was starting up again. My life was wrought through a wash/dry cycle and spinning completely different than originally planned.  My decades of savings began to rapidly dwindle. Divorce, attorney costs, medical costs, and the capital required to grow a business took me back financially to a net worth I haven’t benchmarked since my early 30s. Thankfully, my daughter has a well-funded 529 for college or that would be yet another formidable expense or financial setback.

Great starts to late starts and later finishes. The road of life can deviate far off an anticipated course; even tenured navigators with the most sophisticated of tools can lose their way.  Like riding out a storm, you get through it with what you got then assess the aftermath. For me personally, the irony wasn’t lost. Here I was assisting others financially map out imperfect retirements. Little did I realize that I too was about to embark on an all-too-similar journey.

Care and nurturing encouraged by a healthy dose of current reality, forced me settle in, get comfortable in a thinner fiscal skin. I began to reevaluate an imperfect retirement plan. One that was very different than what began twenty years ago. Thankfully, the money I accumulated over the years was sufficient to make it through the shocks. However, when it came to my retirement goal, I was back in the first inning, batting for the minors. A financial landscape that once thrived was as unhealthy as my lawn. I decided to get to work. It all began with the basics, breaking my situation down to the foundation. I had to rewind. Start digging. And it was deep in the soil that I learned how far I was willing to go to get back on track.

First step: A holistic, micro-assessment of what makes me, ‘me,’ or: Do I have the stamina to rebuild?

I had to emotionally prepare to move forward. The bucolic retirement I originally designed was postponed indefinitely. The past as a weight on me had to be lifted. As Ramit Sethi author of the New York Times’ best seller “I Will Teach You To Be Rich,” says – “To launch a rich life you must first acknowledge where you are, then trust it’s the start.” Easier said than done. The truth in the statement motivated me to realize that the game wasn’t over. I made the decision to hit the restart button and acknowledge. No. Enthusiastically embrace where I was now.

I began to painfully and objectively question each potential obstacle to rebuilding wealth. I had to be tough. There was little room for compromise. From a thorough assessment of the new money management firm’s lofty goals and formal business plan progress (ahead of schedule; good to begin on a positive note), downsizing my primary residence which meant returning to a modest home in the ‘burbs that served as a rental property (formerly occupied by a responsible young couple who didn’t know much about landscape care), to my overall physical condition which included a dramatic change/improvement in my diet and exercise regimen that impressed my physicians, I was beginning the journey of the care and nurturing of an imperfect retirement.

It’s well-documented how healthcare has the potential to be an eternal cash-outflow concern in retirement, especially as life expectancies increase. Fidelity estimates that a healthy 65-year-old couple retiring today will require $280,000 to cover healthcare costs in retirement. Of course, this isn’t a lump sum a retiree needs to shell out. However, I think seeing costs in total is an effective “scared straight” tactic; it hits one in the face with reality that being unhealthy in retirement can a formidable, ongoing expense. Keep in mind, this is Fidelity Investment’s assessment of AVERAGE healthcare costs which include premiums for Medicare Part B and D. It doesn’t include the cost of long-term care.

The analysis assumes retirees are healthy. Based on my analysis of retirement distribution plans over two decades, poor health in retirement increases Fidelity’s total by 30%. Flip your mindset: Consider lifestyle changes such as regular workouts, diet improvements and annual checkups complete with full diagnostics, as investments. For example, when clients look to cut expenses, the gym membership is one of the first on the chopping block. It’s the one expense I urge them to continue. Consider every workout, each diet change, as dollars added to a future retirement investment bucket or as less distribution dollars spent on health and more on bucket list activities.

Medicare Part B, D, and supplemental medical (Medigap) premiums allow planners like me to better estimate healthcare costs for retirees. It’s important for future retirees to understand and account for the impact of inflation on these expenses. As a rule of thumb, consider healthcare inflation at double the current U.S. annual inflation rate of 2.36% (as of March 2018), in your planning.

The Kaiser Foundation estimated using the 2016 Consumer Expenditure Survey from the Bureau of Labor Statistics, that the share of average total household spending on health-related expenses was more than twice as large for Medicare households than for non-Medicare households in 2016. Middle-income Medicare households allocated a greater share of their household spending to health-related expenses than either the lowest or highest-income Medicare households.

You got me. Consider this my attempt at a “scare straight” moment. It scared me. A future retiree cannot avoid the inflation in Medicare premiums. However, a healthy individual can look to work longer, retire later, and save more to minimize the pain of the annual growth in Medicare beneficiary costs which leads in to my next personal hurdle.

Second step: I hit turbo-drive on savings and investment contributions combined with working longer.

Along with the big hit to the net worth, my savings rate went on hiatus. Well, actually, it hit ground zero. Goose egg. For three years. Downsizing the primary residence, cutting the mortgage payment by 70% combined with expense reduction has provided an opportunity to turbocharge my savings rate to 40% of annual gross income that I’ll need to accomplish consistently over the next decade. Working until 70 is now a reality because I love what I do; I’ll find a way to add flexibility into my schedule over the years. The life blood of a successful retirement plan is income. Pre-retirees who boost their savings rate and work on average an additional two years beyond a planned retirement date can dramatically increase retirement plan positive outcomes.

Third step: Mitigate potentially devastating financial risks & let an insurance company take the hit.

Three out of every five financial plans I create reflect deficiencies to meet long-term care expenses. If my health continues to fire on all cylinders, then it’s likely I’ve added years to my life and will require assistance with activities of daily living. Medical insurance like Medicare does not cover long-term care expenses – a common misperception.

The Genworth Cost of Care Survey has been tracking long-term care costs across 440 regions across the United States since 2004.

Genworth’s results assume an annual 3% inflation rate. In today’s dollars a home-health aide who assists with cleaning, cooking, and other responsibilities for those who seek to age in place or require temporary assistance with activities of daily living, can cost over $45,000 a year in the Houston area where I reside. On average, these services may be required for 3 years – a hefty sum of $137,000. We use a 4.25-4.5% inflation rate for financial planning purposes to reflect recent median annual costs for assisted living and nursing home care.

Long-term care insurance is becoming cost prohibitive. Not only is insurance underwriting to qualify draconian to say the least, insurers are increasing annual premiums at alarming rates. In some cases, by more than 90% ostensibly forcing seniors to drop coverage or find part-time work to pay premiums.

In addition, the number of insurers available is dwindling. Today there are less than 12 major insurers when at one time there were 106.

As I examine policies issued recently vs. those 10 years or later, it’s glaringly obvious that coverage isn’t as comprehensive and costs more prohibitive. The long-term care crisis is rarely addressed by the media; there isn’t a governmental solution to the growing needs of an aging population. Unfortunately, the majority of those who require assistance will place the burden on ill-prepared family member caretakers or need to undertake drastic measures to liquidate assets. According to Genworth, roughly 70% of people over 65 will require long-term care at some point in their lives.

So, what to do?

One option is to consider a reverse mortgage. The horror stories about these products are way overblown. The most astute of planners and academics study and understand how for those who seek to age in place, incorporating the equity from a primary residence in a retirement income strategy or as a method to meet long-term care costs can no longer be ignored. Those who talk down these products are speaking out of lack of knowledge and falling easily for overblown, pervasive false narratives.

Reverse mortgages have several layers of costs (nothing like they were in the past), and it pays for consumers to shop around for the best deals. Understand to qualify for a reverse mortgage, the homeowner must be 62, the home must be a primary residence and the debt limited to mortgage debt. There are several ways to receive payouts.

One of the smartest strategies is to establish a reverse mortgage line of credit at age 62, leave it untapped and allowed to grow along with the value of the home. The line may be tapped for long-term care expenses if needed or to mitigate sequence of poor return risk in portfolios. Simply, in years where portfolios are down, the reverse mortgage line can be used for income thus buying time for the portfolio to recover. Once assets do recover, rebalancing proceeds or gains may be used to pay back the reverse mortgage loan consequently restoring the line of credit.

Our planning software allows our team to consider a reverse mortgage in the analysis. Those plans have a high probability of success. We explain that income is as necessary as water when it comes to retirement. For many retirees, converting the glacier of a home into the water of income using a reverse mortgage is going to be required for retirement survival and especially long-term care expenses.

American College Professor Wade Pfau along with Bob French, CFA are thought leaders on reverse mortgage education and have created the best reverse mortgage calculator I’ve studied. To access the calculator and invaluable analysis of reverse mortgages click here.

Insurance companies are currently creating products that have similar benefits of current long-term care policies along with features that allow beneficiaries to receive a policy’s full death benefit equal to or greater than the premiums paid. The long-term care coverage which is linked to a fixed-premium universal life policy, allows for payments to informal caregivers such as family or friends, does not require you to submit monthly bills and receipts, have less stringent underwriting criteria and allow an option to recover premiums paid if services are not rendered (after a specified period).

Unfortunately, to purchase these policies you’ll need to come up with a policy premium of $50,000 either in a lump sum or paid over five to ten years. However, for example, paying monthly for 10 years can be more cost effective than traditional long-term care policies, payments remain fixed throughout the period (a big plus), and there’s an opportunity to have premiums returned to you if long-term care isn’t necessary (usually five years from the time your $50,000 premium is paid in full). Benefit periods can range from 3-7 years and provide two to five times worth of premium paid for qualified long-term care expenses. As a benchmark, keep in mind the average nursing home stay is three years.

I decided on this hybrid strategy. For a total of $60,000 in premium, I purchased six years of coverage, indexed for inflation, for a total benefit of close to $190,000 in future dollars.

It’s crucial to complete a comprehensive financial plan before investigating available long-term care products. A plan will help quantify how much coverage is necessary. In other words, your long-term care plan can be subsidized by a reverse mortgage or liquidation of assets. From there, a financial and insurance professional educated in long-term care can assist with the proper amount of coverage required.

Fourth step: Annuitize a portion of my future income and maximize Social Security retirement benefits.

Do not underestimate the lifetime income that Social Security can provide. After generating hundreds of Social Security benefits payout scenarios it’s rare I recommend future recipients claim benefits before age 70 especially if I must consider survivor benefits for a younger, lower-earning spouse.

According to a The Nationwide Retirement Institute® Consumer Social Security PR Study conducted by Harris Poll, it’s not surprising to discover than ½ of a retiree’s fixed expenses are covered by Social Security benefits.

Per the study, surprisingly few retirees have a financial advisor who provides advice on Social Security strategies. The total incidence of having a financial advisor who provided Social Security advice was a dismal 11%.

A 2015 study by the Consumer Financial Protection Bureau indicates that more than 2 million consumers choose when to begin collecting Social Security retirement benefits. Many make the decision based on limited or incorrect information.

Of those given Social Security advice by their advisors, roughly half or more had to initiate the discussion themselves.

Now with pensions all but gone, Social Security is the only guaranteed monthly income for roughly 69% of older Americans.

Unfortunately, in 2013, 75% of retirees chose to start collecting before full retirement age which results in a permanent reduction in lifetime benefits. This may be a very shortsighted decision.

As Wade Pfau, Ph.D., CFA and professor at the American College outlines in the 2nd edition of his Retirement Researcher’s Guide to Reverse Mortgages:

“Delaying Social Security is a form of insurance that helps to support the increasing costs associated with living a long life. It provides inflation-adjusted lifetime benefits for a retiree and surviving spouse, and those lifetime benefits will be 76 percent larger in inflation-adjusted terms for those who claim at seventy instead of sixty-two.”

According to Social Security expert Elaine Floyd, ignorance is the primary reason. The CFPB report outlines studies that represent how much people don’t know about claiming. One study for example outlined that only 12% of pre-retirees knew how benefits differed if benefits were claimed before, at, or after full retirement age.

If you’re having a difficult time finding the help required, it’s worth the investment in a comprehensive Social Security analysis tool. The one I suggest was created by Laurence Kotlikoff, Professor of Economics at Boston University and available at www.maximizemysocialsecurity.com. The tool will guide you to the highest benefit you or you and a spouse may receive from Social Security.  It will assess thousands of strategies before it suggests the one that maximizes lifetime benefits. The output is easy to interpret. There’s the ability to run “what if” scenarios, too.

The $40 annual license for a household is good for a year and worth the cost.

Respected Professor Emeritus of Finance at the Yale School of Management and Chairman, Chief Investment Officer for Zebra Capital Management, LLC Roger G. Ibbotson, PhD, in a comprehensive white paper released recently, outlined how fixed indexed annuities which provide upside market participation and zero downside impact may be attractive alternatives to traditional fixed income like bonds.

In an environment where forecasted stock market returns may be muted due to rich valuations and bond yields still at historic lows, FIAs eliminate downside stock market risk and offer the prospect of higher returns than traditional asset classes.

Per Roger Ibbotson:

“Generic FIA using a large cap equity index in simulation has bond-like risk but with returns tied to positive movements in equities, allowing for equity upside participation. For these reasons, an FIA may be an attractive alternative to (long-term government bonds) to consider.”

In financial services, Ibbotson is a god. Brokers and advisors have been misrepresenting to consumers his seminal chart of 100-year stock market returns for as long as I’ve been in the business. The chart outlines how domestic large and small company stocks compound at 10-12% and beat the heck out of bonds, bills and inflation; financial professionals showcase the lofty past returns and convince customers that without buying and holding stocks for the long term (whatever that is), they’ll succumb to the vagaries of inflation. Adhere to the chart and your portfolio will have it made in the shade! (if invested in stocks for 100 years plus).

In all fairness to Roger Ibbotson, it’s not his fault that his data and graphics have been used to seduce investors to bet their hard-earned wealth on investment fantasy. He’s been in favor of annuities in retirement portfolios and in accumulation portfolios leading up to retirement for years.

I found his study compelling enough to allocate 30% of my investment dollars to a fixed index annuity.

So, what are fixed indexed annuities?

First, they are not products that invest directly in stock markets. They are insurance vehicles that provide the potential for interest to be credited based on performance of specific market indexes. Selections within these fixed annuities allow owners to participate in a fixed percentage of the upside of a market index or earn a maximum rate of interest that’s based on the percentage change in an index from one anniversary date (effective date of ownership), to the next. A strategy identified as “point-to-point.”

Second, fixed indexed annuities are characterized by a ‘zero floor,’ which simply means there’s no risk of market downside. Owners may get a goose-egg of a return for a year, that’s true. However, there’s no need to make up for market losses, either.

As stated in the academic research published by Mr. Ibbotson:

“This downside protection is very powerful and attractive to many individuals planning for retirement. In exchange for giving up some upside performance (the 60% participation rate), the insurance company bears the risk of the price index falling below 0%. The floor is one way to mitigate financial market risk, but also gain exposure to potentially higher equity performance than traditional fixed income investments.”

Third, Roger Ibbotson and his team analyzed fixed index annuities performance compared to periods of outperformance and underperformance for long-term government bonds. They isolated 15 three-year periods where bonds performed below the median like above, where the average 3-year annualized return was 1.87% compared to the FIA average of 4.42%. Through fifteen 3-year timeframes where bonds performed above median, returns for bonds and fixed index annuities averaged 9% and 7.55%, respectively.

Last, the research is limited to a simulation of the net performance of a fixed index annuity tied to a large cap equity index with uncapped participation rates. A participation index rate strategy is mostly effective under strong stock market conditions as interest credited is a predetermined percentage multiplied by the annual increase in a market index’s return. For example, a fixed indexed annuity offers an uncapped point-to-point option with a 40% participation rate. If the chosen market index the participation rate is connected to increases by 10%, your return for the year will be 4%. The participation percentage may be changed annually.

A “point-to-point” cap index strategy incorporates a ceiling on the upside and will not perform as well during periods when stocks are characterized by strong performance. The point-to-point cap index choice is best when markets are expected to provide limited growth potential and provides 100% participation up to the annual cap set by the insurance company. Let’s say a fixed indexed annuity has a 3% index cap rate and is tied to the performance of the S&P 500. For the year, the S&P 500 returns 2%. The interest credited to your account would be 2%, which is under the 3% cap. Under the participation index rate strategy outlined above, interest credited would be less at 40% of the S&P return, or .8%.

Since credited interest increases the original investment and downside protection is provided, money compounds in the true sense of the definition since compounding works only when there is NO CHANCE of principal loss.

I’m assured with a fixed indexed annuity as part of my overall portfolio that may be converted to an income stream I cannot outlive, to not suffer downside risk; along the way perhaps I’ll earn better returns than a traditional stock and bond allocation to top it off.

Fifth step: Reduce portfolio risk due to below average estimated future returns.

I’m bracing for a future of low returns for risk assets like stocks and bonds. You should too. Despite the unprecedented stock market volatility so far this year, the Shiller P/E, a measure of inflation-adjusted earnings over rolling prior ten-year periods at 32.34X, has not worked off excess valuations.

The Shiller P/E is a poor predictor of short-term market performance; over long periods, lofty valuations today portend lower future returns. Displayed below is our analysis of the growth of $1,000 over 30 years when the Shiller PE is at 20X or higher.

I’m preparing for a minimum of one decade of investment-return stagnation; therefore, I reduced my asset allocation to stocks last year from 70% to 40%. In our firm’s planning software, we reduced return estimates for every domestic asset class, with the greatest long-term return potential coming from international investments including emerging markets (where valuations are attractive compared to the United States). Shorter-term, we don’t see a reason to enter developed international and emerging markets. However, we monitor daily; Lance Roberts informs clients and newsletter readers of our asset allocation changes on a regular basis.

When creating comprehensive financial plans for clients, we explain and show through in-house analysis, how going forward until valuations normalize, greater risk will not lead to a commensurate increase in return. In fact, all additional risk is going to do is add risk and dampen returns.

Today, my front lawn is the finest in the neighborhood.

Two years later after care and nurturing of the soil, the grass is as robust and greener than it has ever been. So green that it compelled my daughter to do a double-take as she remembered how hopeless the situation appeared back then.

The creation of an imperfect retirement can require tough decisions, hard work and discipline, but the results can be magnificent.

10-Effective Habits Of The Fiscally Fit

We wonder how they do it.

Those who make handling money look effortless.

I have documented and monitored the money habits of fiscally-fit people for years.

The following ten appear prominently on the list.

1 – The fiscally-fit crowd considers “paying yourself first” sacrosanct.

They passionately believe that saving is equally as important as paying fixed expenses like rents or mortgages. This rule has been a part of their lives early on. Back to their youth. They never compromise this habit.

The “pay yourself” mindset is the foundation to their overall financial success. Whether a specific dollar amount or a percentage of income is directed monthly into savings or investments, the action is as important as the money itself. It represents a display of control which in turn enhances confidence.

2 – Thinking in monthly payments is detrimental to long-term financial health.

The fiscally-fit are not compelled to take on recurring obligations because they can afford the payments. The long-term financial impact of the liability is a deciding factor. For example, a $30,000 auto loan at 3% interest for 3 years results in a monthly outlay of $872.44. A 5 year loan calculates to $539.06. Many consumers gravitate towards lower payments. This crowd is motivated to pay less in total interest charges. With a saving of $937 over the life of the loan, the 3-year obligation is favored.

3 – Money is a consistent and healthy “worry.”

Like a low hum in the background of their lives, worry is a factor that resonates throughout the minds of the fiscally fit. A dose of worry is perceived as healthy since it fosters discipline, encourages patience and prevents this group from becoming complacent when it comes to monitoring financial progress. Professionals who preach a “don’t sweat it I’ll make the investment decisions,” mantra and come across as overconfident are dismissed. Financial advisors especially are sought as partners and sounding boards. Decisions are not made in haste.

4 – Unforeseen risk is right around the corner.

These individuals anxiously plan for risks that can hurt their financial standing no matter how remote the possibilities. They perceive disabilities, accidents or deaths as foreseeable threats. They prepare through formal insurance planning, usually in partnership with an objective financial professional. Insurance benefits available at work are maximized first. From there, additional coverage is purchased to cover spouses and fill in gaps that employer benefits do not. Term and permanent life insurance options are popular.

5 – Credit card debt is anathema.

Credit cards are popular to gain rewards and perks. Although having access to credit is important, debt is paid in full monthly to avoid usurious interest rate charges. Travel benefits are especially attractive. NerdWallet has identified the best travel cards. At the end of the year, credit card statements which consolidate expenditures and organize them by categories are utilized as a self-check on spending patterns and areas of overspending are target for correction.

6 – Planning especially for retirement, strengthens financial success.

Formal planning validates good habits, uncovers weaknesses and outlines actionable steps to meet goals. There’s no fear or denial when it comes to facing money truths that emerge when a written plan is developed. A clear plan should prioritize financial life goals that motivate the fiscally fit to achieve results based on personalized return benchmarks and not some comparison to an arbitrary stock index.

There’s little discouragement when monetary changes occur as a good plan allows flexibility for various outcomes. Occasionally, expectations need to be tempered as progress doesn’t meet expectations. I’ve known members of this set who have taken radical steps to secure a strong financial future including massive shifts in spending and impressive downsizing in lifestyles.

7 – Paying retail is not an option.  

They’re not cheap, just savvy shoppers. There’s no such thing as immediate gratification when it comes to purchasing goods and services like autos, appliances and furniture. Even organizing vacations is an assignment in frugality. This group does their homework and are endless seekers of deals. They favor used and are known to scoop up floor models. Even “lightly damaged” items are not out of the question. Blemishes are usually cosmetic in nature and prices too attractive to pass up on washers, dryers, refrigerators and other durables. They do not fall for long-term “no-interest” offers unless the debt can be paid off before interest charges are applied.

8 – Money mistakes are forever lessons.

Financial mishaps are never forgotten. The fiscally-fit do not languish in the past. They take responsibility for mistakes and never repeat them. Whether it’s an investment “too good to be true” that busted or lending money to friends or family that was never paid back, they are not afraid to say no, mark financial boundaries and move on without guilt.

9 – Emergency reserves are a priority.

There’s a passion, a slight paranoiato preserve capital for emergency spending. Anywhere from three to six months of fixed living expenses is optimum. If reserves fall, resources are re-directed even if it means postponing retirement funding until replenished. Online banks are increasingly popular compared to brick-and-mortar options due to higher yields, no monthly fees and surprisingly easy access to funds when needed. Want to run with this elite financial pack? Examine NerdWallet’s list of top high yield online savings accounts.

10 – A 401(k) isn’t all that.

The fiscally fit use several investment vehicles that complement tax-deferred accounts like 401(k) plans. This provides flexibility when distributions are required at retirement. Having various buckets that allow retirees to blend tax free, capital gain and ordinary income results in greater tax control and can make a difference to how much Social Security is taxed.

Financial success comes down to good habits.

These habits are common sense forged to simple actions applied long term.

However, simple is never as easy as it sounds, is it?

Don’t fret.

Small improvements lead to big results over time.

The Value Proposition Of “Likeability”

Written By Byron Kidder and Richard Rosso, CFP.

“Let me introduce an entity called You, Inc. This is a small, tightly controlled, privately-held company with the bulk of its productive assets invested in nontraded units of your future salary and wages. Your objective as CEO, CFO, and chairman of the board is to maximize shareholder value of You, Inc. while minimizing the financial risks faced by the corporation.” – Moshe A. Milevsky, Ph.D. – Author of “Are You A Stock Or A Bond?”

We get so tied up in our work and performing that we forget or (worse) put off the Human Capital Investment until we have time between projects.  It drops on our priority list because there is never any “left over” time available after our commitments are finished.

The human capital investment means YOU are your greatest investment.  A lifetime money-making powerhouse.  You need to be higher on the priority list.

Rosso’s Input:

The top .01% of American households have ruled the roost, foremost since the Great Recession where stocks and real estate have been blessed with turbo tailwinds to returns (thank central banks and low/manipulated rates for much of the windfall).

Ostensibly, owners of capital have seen their wealth move far ahead since the 1970s. Those who build wealth through household income and rely on wages haven’t been so fortunate as the annual percentage change of real hourly wages for the bottom 80% of workers have been on a steady downward slope, especially since the onset of the financial crisis.

Those in the bottom 90% of household wealth held 35% of the nation’s wealth in the mid-1980s. Three decades later, the percentage has fallen 12 points or exactly as much as the wealth of the .01 percent rose according to Matthew Stewart in an enlightening and thorough analysis titled “The 9.9 Percent Is the New American Aristocracy,” where he describes the 9.9% as meritocratic winners who left the 90% or “middle class,” in the dust. They are the professionals – lawyers, doctors, dentists, mid-level investment bankers, MBAs. You get the picture.

Per Stewart’s analysis, as of 2016 it took $1.2 million in net worth to make it into the 9.9 percent, $2.4 million to reach the group’s median and $10 million to get into the top .9 percent.

What am I getting at with all this data? Do you perceive opportunity or discouragement?

An investment in YOU, education, mastering a technical skill that’s in demand, increases the odds of escaping the bottom 90%, especially if synergized by likeability. In fact, likeability can get you hired. A field study by Chad A. Higgins & Timothy A. Judge in the Journal of Applied Psychology outlines how ingratiation (likeability), wins over self-promotion when it comes recruiter perception of fit.

In the popular book “The Science Of Likeability” by Patrick King, likeability is the ability to be more human, to appear genuinely approachable and relatable which could be a challenge in the age of electronic communication such as e-mail and text.

Back to Byron Kidder:

We have become desensitized to the fundamental skills necessary for social and business interactions in our quest for improving efficiency and productivity.  My book, “It’s All About Everything,” is an easy to read step-by-step guide that refreshes these skills while simultaneously awakens your sought-after desire to reconnect with your passion, re-engage with those around you, and produce your vision of success.

Fundamentally, people want to be around and associated with people they like but far too many have difficulty in this area.  They may have picked up bad habits or felt like being likable contrasted with being successful.  Being likable will positively affect your growth, promotions, relationships, etc.  You don’t need to sacrifice being likable to being successful.  It is not a tradeoff.  The great news is that likability can be learned!

Rule 7: Being likable.

Being likable is high on the list since it is Rule 7 of my book and let me assure you that it is in your power to raise your overall likability.  How many times have you worked with somebody who is not likable?

They may have been arrogant, abusive, braggart, inattentive, malicious, or lacked integrity.  After you have worked with them, do you choose to be around them again?  Realistically, you would avoid working with them in the future if possible even if it means a cut to your bottom line.  If you are like me, you remember unlikable people as well as the likable people, just for all the wrong reasons.

Being unlikable is not a career-ending move nor does it mean you should succumb to fate that comes with it.  Few people start out unlikable but end up stuck in a set of patterns that turns into second nature.  Bad habits can be ingrained just as well as good habits.  You may be in a stressful situation, so you start getting grumpier as an attempt to cope.  You may have in your mind a certain personality that is required to do your job, which dictates you need to behave a certain way, but it isn’t part of your natural personality and you are tired of pretending to be something you’re not.

Likeability encompasses a myriad of actions or attitudes that can be learned and changed.  The goal is to increase the positive traits that compliment your integrity.  If you have some set value system in place that dictates how you respond, interact, or live when nobody is watching, then you have a foundation that all scenarios can be measured against and dealt with accordingly.

Ever notice that negative people tend to attract each other?  The same is true for those with integrity.  Your reputation is bolstered by the company you keep.  In my experience, integrity is everything and is the foundation of my book.  I don’t want to have to think about somebody’s motives.  Start small and add likable traits over time.  Rome wasn’t built in a day.  If you act with integrity, your positive energy will draw people to you.  This leads to being consistently inspirational, which is a likable trait.

As with most things in life, there are a few traits that can be implemented for a quick reward and ROI.  Try these first and expand your repertoire over a span of weeks to months.  This includes being:

  • Attentive and focused.
  • Sincere and authentic.
  • Intellectually curious and anxious to learn.

Being attentive to those you work with – a client, colleague, or vendor, will help you provide best in class service.  You would not be successful if it were not for people choosing to do business with you.  Because of this, never let appreciation for your clients go unsaid.  I regularly share with clients that I enjoy working with them and value their relationships.

Get to know internal and external clients.  Internal clients include colleagues, bosses, receptionists – everybody you encounter should have a positive impression of you.  Small tokens of appreciation can simply come down to remembering birthdays or favorite hobbies.

Inform clients how you will be there. Provide several points of contact including a cell phone number. Accept calls above and beyond normal business hours. Back up words with actions.  How many times have people told you they’ll be there if you need anything but disappear or disappoint when needed the most?  Being present when things go wrong will boost reliability and reputation.  When the inevitable happens and mistakes are made, face them head on, never make excuses.  Own up to them. Then propose a corrective plan of action. You’ve now forged a relationship, made a client for life. Based on your reputation for follow-up and follow-through, odds are your chance of promotion will increase, too.

Etiquette cannot be emphasized enough because it shows empathy and inherently directs your focus on serving others. An action as simple as smiling when talking on the phone can make your voice sound more pleasant and confident.

Respond to inquiries quickly and professionally, even if to say you will follow up within the next few hours.  You know the golden rule – treat others as you expect to be treated.

Sincerity and Authenticity Leads to Stronger Relationships.

Focus on client needs is valuable and produces amazing results only if you are sincere and authentic.  Otherwise, you run the risk of coming across as fake or shady.  When positive and focused on others, the energy is contagious.  You are essentially creating a positive feedback loop.  As my buddy Richard Rosso, says, “You know within 3 minutes if someone is genuine or not.”  Likability inherently means you exhibit a certain amount of vulnerability when you are authentic.

Face-to-face meetings with clients are important to building likeability.  You are showing them that you will always be there in a reliable fashion while adding value to the relationship.  Only time can reinforce that you are walking the walk. Trust is the end result of consistently showing attention, care, and appreciation.  Being likable helps get you the time and interactions necessary to build trust.

Trust is built over time, maintained through a myriad of actions and is a big component of likability.  Don’t be afraid to show vulnerability (it’s human!)  Richard has pointed out that “this adds to your memorability.”  He is right.  Likability will be one reason you’re remembered and called upon for repeat business or to handle an important task for superiors.

Intellectually curious and anxious to learn.

Likeability and genuine curiosity are linked. To be curious about other’s interests, family, hobbies, and concerns allows people to open up, share their stories. Taking the time to learn about the people you interact with exhibits care and authenticity.  Focus allows you to understand a client’s unique situation so that solutions may be recommended. Working for a company? Be a detective and learn as much as possible. Study the annual report, learn the mission statement, ask questions to display genuine interest and likeability may gain you a mentor in influential places!

Being likable is a habit; habits are formed through routine and consistency.  Self-assessment and objective discovery are crucial. What are those traits that make you likeable?  Which skills seem foreign but worthwhile to learn?  Taking an internal inventory will allow you to prioritize areas of improvement. Likeable people aren’t afraid or hesitant to ask for help or ask questions to gain understanding, either.

What if you feel overwhelmed and struggle to remain motivated? It’s easy to grow discouraged as wage growth has remained stagnant; most likely you’ll be expected to accomplish tasks that years ago were delegated to two employees. Listen, you’re human. You’re going to feel frustrated. It’s important to remain centered on the positive. For example, a morning ritual of gratefulness, catching and stopping yourself from complaining and focusing on the bigger picture of serving others will help work through tough periods.

Bottom line? People want to work with people they like.  Likability is one part innate, another part learned behavior. Control over your attitude will boost likability. There are going to be times you won’t care about being likeable.  We all have rough days. The goal is to prevent a string of bad days from changing your personality. Negativity spreads quickly. Likeability and negativity do not mix.

The rules listed in my book, “It’s All About Everything,” will help you raise the bar on likability.  Be yourself, be vulnerable; focus on others and watch the positive energy returned to you.

Have fun with it.  You’ve got this.

You’re on the right path to master likeability!

The Greatest Financial Mismatches In History

The spectacle of modern investment markets has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage, except by reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only.  – John Maynard Keynes

It’s time we expose a few of the greatest financial mismatches in history. At the top of my mind, due to a myriad of behavioral and cognitive hiccups, are select retail investors (you know who you are), who must come to grips with how they’re handling current stock market volatility.

It’s a moment of truth

Too many investors possess a hook-up mentality with stocks. Holding periods are at historic lows. According to the New York Stock Exchange’s extensive database, the average holding period for stocks in 1960 was 8 years, 4 months.

As of December 2016, it was 8.3 months.

Last year’s unprecedented stock market performance for the S&P 500 was the worst event for investor psyche.

I’ll explain.

No doubt, it was a magical year. The market closed higher every month (first time in history). The Sharpe Ratio, or returns on the S&P relative to the risk-free (Treasury Bills) and volatility was 3.7. Since volatility was non-existent last year, risk-adjusted returns for the market were among the best I ever lived through; at least the highest in over 50 years.

Think of it like dating the most popular girl (or guy), in high school. In the beginning, you wonder how the heck it happened. Such luck! Eventually, you believe you’re entitled to dating prom kings and queens in perpetuity. The problem is ego. You convince yourself the perfect prom date is the norm and begin to compare every date after to “the one.” What a great way to set yourself up for failure, missed opportunities and myopia that slaughters portfolio returns (and possibly, relationships!)

In 2017, equity investors witnessed a storybook investment scenario. This year so far? Reality bites. It’s not that your adviser doesn’t know what he or she is doing; it’s not the market doing anything out of the ordinary, either. The nature of the market is volatility, jagged edges and fractals. The sojourn, the Sunday drive in perfect weather with the top down on a newly-paved road in 2017, was an outlier. The environment you’re investing through today is the norm; therefore, the problem must be the driver, the investor who doesn’t realize the road conditions are back to resembling 5pm rush-hour in a downpour.

Do you experience frustration with a purchase your adviser implements or recommends if the price doesn’t quickly move in your favor? Do you question every move (or lack thereof), a financial partner makes?

How often do you say to yourself – “She didn’t take enough profit. Why did he buy that dog? Why isn’t he or she doing anything? (Sometimes doing nothing is the best strategy, btw).

Do you constantly compare portfolio performance every quarter with a stock market index that has nothing to do with returns required to meet a personalized benchmark or long-term goal like retirement?

Ostensibly, the ugly truth is there may be a mismatch between your brain and your brain on investments. Listen, stocks aren’t for everyone. Bonds can be your worst enemy. Even the highest quality bond fluctuates and can be sold at a loss before maturity. This is the year as an investor you’re going to need to accept that volatility is the entrance fee to play this investment game.

According to Crestmont Research, volatility for the S&P 500 tends to average near 15%. However, volatile is well, volatile. Most periods generally fall within a band of 10% to 20% volatility with pockets of unusually high and low periods.

The space between gray lines represents four-year periods. Observe how volatility collapsed in 2017, lower than it’s been in this decades-long series.

Per Crestmont:

“High or rising volatility often corresponds to declining markets; low or falling volatility is associated with good markets. Periods of low volatility are reflections of a good market, not a predictor of good markets in the future.”

So, as an investor, what are the greatest financial mismatches you’ll face today?

Recency Bias

Recency bias or “the imprint,” as I call it, is a cognitive affliction that convinces me the trade I made last Thursday should work like it did when I placed a trade on a Thursday in 2017 when the highway was glazed smooth for max-market performance velocity. This cognitive hiccup deep in my brain makes me predisposed to recall and be seduced by incidents I’ve observed in the recent past.

The imprint of recent events falsely forms the foundation of everything that will occur in the present and future (at least in my head). Recency bias is a mental master and we are slaves to it. It’s human. It’s the habit we can’t break (hey, it works for me). In my opinion, recency bias is what separates traders from long-term owners of risk assets.

When you allow volatility to deviate you from rules or a process of investing, think about Silly Putty. Remember Silly Putty? Your brain on recency bias operates much like this clammy mysterious goo.

Consider the market conditions. The brain attaches to recent news, preconceived notions or the financial pundit commentary comic-of-the-day and believes these conditions will not change. To sidestep this bias, at Clarity and RIA we adhere to rules, a process to add or subtract portfolio positions.

Unfortunately, rules do not prevent market losses. Rules are there to manage risk in long-term portfolio allocations.

Losses are to be minimized but if you’re in the stock market you’re gonna experience losses. They are inevitable. It’s what you do (or don’t do), in the face of those losses that define you. And if you’re making those decisions based on imprinting or Silly Putty thinking, you are not cognitively equipped to own stocks.

Hindsight Bias

When you question your adviser’s every trade or the big ones you personally missed, you’re suffering from hindsight bias. Hindsight bias is deception. You falsely believe the actual outcome had to be the only outcome when in fact an infinite number of outcomes had as equal a chance. It’s the ego run amok. An overestimation of an ability to predict the future.

The market in the short-term is full of surprises. A financial partner doesn’t possess a crystal ball. For example, to keep my own hindsight bias under control, I never take credit for an investment that works gainfully for a client. The market must be respected. Investors, pros or not, must remain humble and in infinite awe of Mr. Market. A winning trade in the short term is luck or good timing. Nothing more.

With that being said, stock investing is difficult. Unlike the pervasive, cancerous dogma communicated by money managers like Ken Fisher who boldly states that in the long-run, stocks are safer than cash, stocks are not less risky the longer you hold them. Unfortunately, academic research that contradicts the Wall Street machine rarely filters down to retail investors. One such analysis is entitled “On The Risk Of Stocks In The Long Run,” by prolific author Zvi Bodie, the Norman and Adele Barron Professor of Management at Boston University.

I had a once-in-a-lifetime opportunity to break bread with Dr. Bodie recently in Nashville and spend quality time picking his brain. I’m grateful for his thoughts. He expressed lightheartedly how his retail books don’t get much attention although the textbook Financial Economics co-written with Robert C. Merton and David L. Cleeton is the one of choice in many university programs.

In a joking manner, he calls Wharton School professor and author of the seminal tome “Stocks for the Long Run,” Jeremy Siegel his “nemesis.” He mentions his goal is to help “everyday” people invest, understand personal finance and be wary of the financial industry’s entrenched stories about long-term stock performance. He’s a man after my own heart. He’ll be interviewed on the Real Investment Hour in early June.

In the study, he busts the conventional wisdom that riskiness of stocks diminishes with the length of one’s time horizon. The basis of Wall Street’s counter-argument is the observation that the longer the time horizon, the smaller the probability of a shortfall. Therefore, stocks are less risky the longer they’re held. In Ken Fisher’s opinion, stocks are less risky than the risk-free rate of interest (or cash) in the long run. Well, then it should be plausible for the cost of insuring against earning less than the risk-free rate of interest to decline as the length of the investment horizon increases.

Dr. Bodie contends the probability of a shortfall is a flawed measure of risk because it completely ignores how large the potential shortfall might be. Sound familiar? It should. We write of this dilemma frequently here on the blog. Using the probability of a shortfall as the measure of risk, no distinction is made between a loss of 20% or a loss of 99%.

If it were true that stocks are less risky in the long run, it should portend to a lower cost to insure against that risk the longer the holding period. The opposite is true. Dr. Bodie uses modern option pricing methodology i.e., put options to validate the truth.

Using a simplified form of the Black-Scholes formula, he outlines how the cost of insurance rises with time. For a one-year horizon, the cost is 8% of the investment. For a 10-year horizon it is 25%, for a 50-year time frame, the cost is 52%.

As the length of horizon increases without limit, the cost of insuring against loss approaches 100% of the investment. The longer you hold stocks the greater a chance of encountering tail risk. That’s the bottom line (or your bottom is eventually on the line).

Short-term, emotions can destroy portfolios; long term, it’s the ever-present possibility of tail risks or “Black Swans.” I know. Tail risks like market bubbles and financial crises don’t come along often. However, only one is required to blow financial plans out of the water.

An investor (if he or she decides to take on the responsibility), must follow rules to manage risk of long-term positions that include taking profits or an outright reduction to stock allocations. It’s never an “all-or-none” premise. Those who wholesale enter and exit markets based on “gut” feelings or are convinced the stocks have reached a top or bottom and act upon those convictions are best to avoid the stock market altogether.

The Pre-Retirement Preparation Checklist

Are you prepared?

Most important: Are you aware? Aware of the common mishaps and misperceptions that may curtail a happy & healthy retirement?

The Real Investment Advice and Clarity Financial pre-retirement preparation checklist can help identify potential mistakes and navigate a smooth transition to a revitalized and fulfilling retirement.


Do you maintain an exercise regimen that includes activities such as yoga, Pilates, weight training, walking and other types of aerobic activities for at least 30 minutes a day?  Y / N

Leisure-time physical activity is associated with longer life expectancy, even at relatively low levels of activity and regardless of body weight, according to a study by a team of researchers led by the National Cancer Institute (NCI), part of the National Institutes of Health.  The study, which found that people who engaged in leisure-time physical activity had life expectancy gains of as much as 4.5 years.

Do long life expectancies run in your family?  Y / N

Your parents may largely dictate how long you’re going to live. And your mom appears to have most of the control over your “aging gene.”

Do you smoke or a regular user of nicotine products?  Y / N

Cigarette smoking causes more than 480,000 deaths each year in the United States. This is nearly one in five deaths.

Do you consume alcohol more than twice a week?  Y / N

Alcohol use is related to a wide variety of negative health outcomes including morbidity, mortality, and disability. Research on alcohol–related morbidity and mortality takes into account the varying effects of overall alcohol consumption and drinking patterns. Alcohol use increases the risk for many chronic health consequences (e.g., diseases) and acute consequences (e.g., traffic crashes), but a certain pattern of regular light–to–moderate drinking may have beneficial effects on coronary heart disease.

Have you taken advantage of a life-expectancy calculator to better plan for the length of portfolio withdrawals needed in retirement?  Y / N

The Living to 100 Life Expectancy Calculator uses the most current and carefully researched medical and scientific data in order to estimate how old you will live to be. Most people score in their late eighties… how about you? Check it out at www.livingto100.com.

Medical costs affect retirees differently. Unfortunately, it’s tough as we age to avoid healthcare costs and the onerous inflation attached to them. Thankfully, proper Medicare planning is a measurable financial plan expense as a majority of a retiree’s healthcare costs will be covered by Medicare along with Medigap or supplemental coverage.

At Clarity, we use an annual inflation factor of 4.5% for additional medical expenses (depending on current health of the client), and the cost of long-term care.

Good health is a significant contributor to financial and physical wellness in retirement. 

In a report from Healthview Services, a provider of cost-projections software, healthcare costs in retirement are rising twice as fast as the typical annual increase in Social Security benefits.

Latest estimates outline total out-of-pocket spending for an average 65-year old couple retiring today could exceed $400,000 when Medicare premiums, supplemental insurance and deductibles are included. Keep in mind that cost-of-living adjustments for Social Security are overwhelmed by the rising costs of Medicare Part B premiums.

Healthview Services projects a 5.5% annual increase in healthcare costs over the next decade.

Per Medicare Trustees as reported by Savvy Medicare, a training program for financial planners, Part B and Part D insurance costs have averaged an annual increase of 5.6% and 7.7% respectively, over the last 5 years and are expected to grow by 6.9% and 10.6% over the next five years.

Preventative actions such as regular workout regimens, eating properly and healthy sleep habits can work to reduce the financial stress of the most significant costs retirees face.


Are you prepared for the emotional transition to retirement?  Y / N

There exists a level of anxiety for new retirees even though we as professionals feel a sense of accomplishment. Years ago, I deemed this discomfort as “crossover risk.” Clients who told me they were going to “retire,” were back at work a year later and the opposite occurred too.

Eventually, crossover risk lessens. However, the first year of retirement, the bridge, has become increasingly stressful. Enough to where I now call the first year: “The Black Hole”

Have you given thought to your social networks or activities you’ll partake in during retirement?  Y / N

The closer retirement gets, the nearer the exit sign, the stronger your commitment to go through a return-on-life exercise should become. A successful evolution occurs when new retirees redefine success on their own terms.

Transition steps that I’ve seen initiated successfully: Working part-time to ease into a retirement mindset, giving of time to a favorite charity, family vacations especially with grandkids, a new pet, a house renovation project, courses on photography and cooking, and rigorous physical endeavors like yoga and aerobics.


Have you undertaken comprehensive financial planning to determine whether you’re on track?  Y / N

A plan that assesses income, medical and housing needs along with wishes and wants can crystallize actions that need to be taken to succeed, validate current habits and expose financial vulnerabilities. A holistic plan encompasses all assets, liabilities, insurance, savings, investments and employs realistic rates of returns for risk assets like stocks and bonds.

Financial planning is far from perfect. After all, working with projected returns on risk assets like stocks, estimating how long a person may live and where inflation may be at the time of retirement, is an intelligent guessing game at best.

Consider the plan a snapshot of your progress toward financial life benchmarks. Where you are, outlined direction of where you need to go. Are you on track to meet your needs, wants and wishes? A plan is a diagnostic; the exercise is one of financial awareness.

Studies show that people who follow a retirement plan are more successful than those who don’t. But know the common pitfalls you’ll face, depending on the professional who creates the plan and where his or her loyalties lie.

Unfortunately, most planning systems as well as planners tend to provide overly-optimistic outcomes with asset return projections and life expectancies that may be far from what you’ll experience living in real world.


Most financial plans are created to push product. They’re a means to a lucrative end for brokers. An afterthought.

When in fact, a comprehensive financial plan should stand alone as a roadmap to financial success, and that includes recognition of how stock markets flow through cycles – bull, bear, flat and realistic assessments of inflation and life expectancies.

Consider a second opinion of a completed plan if your first was generated by an employee of a big box financial retailer. Always seek a Certified Financial Planner who acts as fiduciary.

Have you considered a formal retirement income strategy?  Y/N

To re-create a paycheck in retirement, you’ll seek to prepare for a steady, middle lane approach to an income stream. In other words, a withdrawal rate that meets requirements to meet fixed expenses and reasonable discretionary spending, then tested through a simulation of real market returns over decades.

Unfortunately, when traveling retirement road there will always be unforeseen curves throughout the journey.

We believe at Real Investment Advice and Clarity Financial, that distribution portfolios may be in for an extended period of a sequence of low or flat returns for stocks and bonds. This will require a right lane shift to less income or a lower portfolio distribution rate for a sustained period. At the minimum, distribution portfolios will require ambitious monitoring.

Wade D. Pfau, Ph.D., CFA and professor of Retirement Income at The American College in a study titled Capital Market Expectations and Monte Carlo Simulations for the Journal of Financial Planning, outlines how sequence-of-returns risk can send your financial car into a ditch. He writes–

“…with less time and flexibility to make adjustments to their financial plans, portfolio losses can have a bigger impact on remaining lifetime standards of living once retirees have left the workforce.”

It’s recommended to assess withdrawal rates and spending habits over rolling three-year periods. This ongoing exercise helps to identify cyclical trends and whether adjustments need to be made.

Have you incorporated Social Security and Medicare planning into your analysis?  Y / N

Social Security is an inflation-adjusted income you cannot outlive. Make sure pre-conceived notions aren’t part of your strategy. Read: The One Social Security Myth.

The correct Medicare strategies can save thousands of dollars in lifetime penalties. Read: 4 Ways To Plan For The Retirement Apocalypse.

These topics are uncomfortable for many financial professionals. The wrong decisions may cost you thousands of dollars in retirement. At Clarity, we are trained and well-versed in Social Security and Medicare planning strategies.

This checklist isn’t intended as a pass/fail. It should be perceived as a wake-up call.

Retirement just doesn’t happen. There’s work to be done. Small improvements like cutting expenses and working two years longer than originally planned can add exponential positive impact.

Investors Must Be Their Own Fiduciaries

The latest confusion front-and-center in financial industry news is how the SEC is seeking to define how the brokerage business should consider clients’ interests first.

The latest attempt to create an “advice rule” by the SEC (Release No. 34-83062; File No. S7-07-18), is a 900+ page alt-fiduciary universe. This best interest of clients/brokerage combo doesn’t mix easy. It clashes. The ethos of brokerage is to sell products. A fiduciary standard and the brokerage industry get along like the silver balls and bumpers in a pinball machine.

What the SEC’s “Advice Rule,” or a “Regulation Best Interest,” (you can’t make this stuff up,) may do is confuse consumers more than ever. For the life of me, I can’t split the hare’s hair to decipher the difference between a Registered Investment Adviser’s fiduciary role vs. a broker-dealer’s “Best Interest” standard. I don’t see any changes to the dog; the SEC just added another flea to it.

At the end of all this is a proposed 4-page handout for customers or a “Disclosure Form CRS,” that every brokerage financial representative or Registered Investment Adviser would be obligated to provide clients and prospects. There are 8 sections to the disclosure that appear to read like an investor “how-to” or educational guide to brokerage and/or investment advisory services, fees and costs, conflicts of interest and account types. Surprisingly, the disclosure documentation appears to be decent financial education material if only clients and prospects will study it. Hey, some people require a product solution to fill a need and thus a transactional relationship works and still must exist. Others require ongoing, holistic financial advice that a fiduciary can provide. The disclosure helps consumers better understand the differences.

I have no clue what the final SEC rule is going to be. In my albeit naïve opinion, until the industry guard dogs discourage endless sales quotas and helps retrain front-line representatives to focus on customer best interests over the fear of failure (and possible job loss), to meet senior management initiatives, I don’t expect much change to current operating procedures.

I’ve observed and been told by investors (including family members), that several brokerage organizations are ‘politely nudging’ or downright threatening (“you won’t be able to work with me if to don’t do this,”) clients to transfer their assets to accounts under a ‘Fiduciary Standard’ which generate fees for the firm and appear to include an immoderate allocation to proprietary products.

So, clients who weren’t paying ongoing fees previously are now doing so. They’re also getting sold out of investments they’ve held for years to be positioned into an asset allocation in a box. Financial big-box retailer compliance departments are going to make sure a Fiduciary or Best Interests Rule is primarily followed to protect the firms they serve. Financial retailers are going to make it their business to morph  any rule into an incredibly profitable venture for their organizations.

I’m glad there’s attention. In some cases, there’s a firestorm around doing what’s highest and best for clients. Even the CFP Board is jumping on the bandwagon. Under a new rule and revised ethics standards that become effective on October 1, 2019, a Certified Financial Planner® mark holder who is employed by a brokerage firm must disclose and manage conflicts of interest and act in a client’s best interest. Listen, this is a big deal.

Many CFPs employed by brokerage firms use the marks to gain credibility with prospects and grease the wheels of the selling process. I mean, if a CFP recommends a product it must be in a client’s best interest, correct? Not necessarily.

Today, CFP Standards include what I perceive as an ‘out-clause’ which outlines expected loyalty to an employer. Ostensibly, the CFP marks aren’t attached to any kind of fiduciary responsibility to the client first unless the scope of the engagement is financial planning.

The revised CFP Board standard doesn’t appear to be going over well with the broker-dealer industry; I find their discourse encouraging. Don’t be surprised to see less Certified Financial Planners employed by brokerage firms over the next few years. Nor will obtaining the marks be paid for or encouraged by these organizations. Frankly, it’s a proper and very bold move by the CFP Board and it makes me proud to maintain the certification.

Bottom line: Should it be so difficult to do what’s in the best interest of the client and still make a respectable living? Common sense portends that doing right by the client should lead to more clients and increased profits. 

Currently, there are multiple bureaucratic hands taking shots at crystalizing or postponing fiduciary or “fiduciary-like” standard initiatives. On a positive note, at least the discussions continue.

Investors must be vocal about what they expect from their financial professionals. They must gain confidence to know what they want, what they expect to foster trust, write it out and share those expectations.

Here are several ways, as an investor, you may forge a path and form a PFS, a “Personal Fiduciary Standard.”

The journey starts with asking yourself tough, self-reflective questions that delve into personal motivations, fears which place you in the shoes of an adviser who you hope would connect with you on a higher, perhaps emotional level. Keep in mind, your needs and concerns are fiduciary in nature. Unless, you don’t want the highest and best for you and your family. Highly unlikely.

For example, I’ve always followed my own ethical compass when it came to directions I’ve taken for clients and their money. I envisioned “what would clients ask for from me?” and then wrote down my thoughts.

I listen to my gut. After more than two decades in the business, I trust my gut to alert me to ethical boundaries crossed.  I made a promise to myself that even if the ethical breach emanated from an employer, I’d still do what I needed to do for clients. Clearly, I was willing to breach the loyalty to a firm over loyalty to a client. I just believed it would never happen. That I’d never need to worry about it. Until I did. I then followed through on my personal promise. You know what I learned? If a broker seeks to take on a fiduciary mentality, his or her career will be in great danger.

Here are several questions I ask(ed) myself. I created them after my first experience at a brokerage firm. My first job in finance as a broker. I was sponsored for my industry licenses by an organization named J.T. Moran, after its founder. The company was the inspiration for the 2000 theatrical movie “Boiler Room,” which starred Vin Diesel in his first major film role.  Little did I know what I was walking into. An unscrupulous penny-stock peddler. A den of thieves. The questions I created for myself back then still work. They’re as effective now as they ever were. They motivated me to flee from that environment in the late 80s. Literally. I walked in early one work day, threw the stuff off my desk into a waste basket and fled out the back of the Garden City, Long Island facility.

  1. Would I personally own or purchase for people I love the same investment or product I suggest to clients?
  2. Would I sell an investment an employer suggested I hold for clients?
  3. Could I represent an employer that expected or allowed every client to own the flavor of the month?
  4. Will I earn more compensation if I offer a specific product or investment over another? How will it affect my judgment?

As an investor and consumer, you require insightful questions which define your expectations from a fiduciary or a professional who has your highest and best interest in mind. Just a few examples to kick-start your process. Consider the series of queries the spirit of the knowledge you wish to gain.

After all, how in heck do you expect regulatory bodies to define “highest and best” if you can’t? The industry can’t seem to pin it all down. So, you must as a client or prospective consumer of financial products. I’m sorry, but this falls responsibility falls on all of us who partner with financial professionals to meet our goals.

  1. Is my financial professional paid more for product A over product B. Why?
  2. Does my financial partner own what is recommended?
  3. Will he or she liquidate or move me away from an investment that no longer serves our needs due to a material change to that investment or our situation, even if it means giving up income?

Investors must perceive themselves as ultimately responsible for the growth and safeguarding of their wealth. Empowerment comes from asking financial partners tough questions and trusting your gut to walk if you don’t like the answers received.

I’ve outlined crucial questions to ask.

“Suitability” guides a broker to recommend an investment that is appropriates for your situation, is not held to the same standard. A broker is required to know your risk tolerance, tax bracket, and time frame for the money you seek to invest. All skeletal in nature. Yet legitimate. Well, it’s suitable. This may be fine for what you require. If there’s a financial product you’re looking to purchase, then suitability is well, suitable for your needs. If there’s something more required like a holistic, ongoing relationship. Think fiduciary over suitability.

Are you a fiduciary? Yes or no?

The Fiduciary Standard is a high calling. It’s there to position the client front and center in the financial advice model, as it should be for every professional who assists consumers with their financial decisions.

How much will I/we pay for your services?

Simple question deserves a simple answer. Unfortunately, not so simple. People share with me their frustration as they’re unclear how their current financial professionals get paid or are compensated for selling investment products.

It’s especially perplexing for mutual fund investors sold multiple share classes and perpetually unclear of how charges are incurred. A clear comprehension of the class share alphabet (A, B, C), is as thick and jumbled as the inside of Campbell’s Soup can. B &C share classes are popular selections on the product-push list. They represent the finest alchemy in financial marketing.

 As consumers are generally hesitant to pay up-front sales loads like in the case of A shares (even though when taking into account all internal fees and expenses, they’re the most cost-effective choice for long-term investors,) B & C shares were created to mollify the behavioral waters.

To avoid having a difficult conversation or facing reluctance about opening your wallet and shelling out 1-4% in front-end charges that reduce the principal amount invested, the path of least resistance is to offer share classes with internal fees, marketing charges and deferred sales charges. Either way you pay.

With B & C shares generally, you pay more. However, big fees reduce returns, they’re stealth. Thus, they feel less painful to invest in (even though they’re not). A financial professional may be compensated hourly, by annual flat fee, a percentage based on assets under management, commissions or perhaps a combination.

Regardless, to make an informed decision, you must understand how your adviser puts food on the table. If you can, get it in writing. There’s no ‘right way’ to be compensated as long as it’s fair and reasonable for services rendered. You also want to understand what motivates your broker or adviser to recommend investment vehicles.

How do you incorporate my spouse, life partner and children when it comes to planning?

You don’t exist in a vacuum. An adviser should maintain a holistic approach to financial planning and that includes communicating with loved ones and teaching children how to be strong stewards of money. The meetings, communication must be ongoing. At least semi-annually.

Why did you select financial services as a career?

This question should be used to gauge a perspective financial partner’s penchant for helping others and passion for his or her role as a mission, not a job. How do you know whether a professional sincerely cares about your financial situation and goals? You’ll know it, intuitively.

What are your outside interests?

A successful life is about balance. This question gets to the weekend and evening person behind the financial professional you observe from behind a desk, charts, book, and computers. You may discover activities you have in common and develop rapport on a personal level, possibly for decades. To gain a complete picture of the kind of person you’re entrusting with your investments is a crucial element of your interviewing process. By the way, it’s not prying. It’s curiosity. Ostensibly, you should like the individual you and your family may be working with, possibly for decades.

Please tell me about your firm’s service standards.

You want to know how many times a year you’ll be meeting with your financial partner whether in person (preferably), over the phone or web meeting like Go-To-Meeting®. Is it quarterly? Every six months? How would you like to communicate as a client? What are your preferences? Will I be receiving calls and e-mails throughout the year about topics important to your financial situation like the market, economic conditions, financial planning, and fiscal changes that may affect us/me?

What is your personal investment philosophy?

You seek to discover whether an individual is towing the employer’s line or does outside research and shares his or her personal opinion based on independent research and study. In other words, does your prospective partner have a passion for ongoing education and learning?

How do you manage for portfolio and investment risks?

Markets can’t be timed. That’s true. However, risk management is about controlling downside risk which can be devastating compared to possible gains. Your broker or adviser should have a strategy you believe in to guard against market storms. Whether it’s a conservative asset allocation right from the beginning, or a specific sell and re-entry discipline to minimize portfolio damage, a risk-management strategy is crucial. Academics and influential financial service providers are on the band wagon when it comes to sell disciplines. Whether it’s Dalbar, the nation’s leading financial services market research firm, or MIT Professor of Finance Andrew Lo, there’s a growing body of work that shows how investors spend most of their investment life (20-30 years), making up for losses, playing catch up. Losses are inevitable. Significant losses must be avoided.

How often do you review my accounts and investments?

With this question you’re attempting to gain understanding of a financial partner’s workload and number of families served. There’s no ‘right’ answer. It’s based on how comfortable you feel with the response. Monthly, quarterly schedules are generally acceptable. Weekly, even better. Now, that doesn’t mean changes will be made. The query is about engagement with and monitoring of investment selections.

How do I/we have access to you and your team?

A caring pro will make sure you possess the ability to text, access to a cell phone number, phone contacts and e-mails of support staff and make you feel comfortable to reach out at any time. You should also expect a prompt response to voice mails – usually within 24 hours or less.

I have no idea when or how all this fiduciary regulatory scramble settles out. I do know however, that the definition of fiduciary begins with you: The client, the customer, the investor.

Questions will help you to define what you want and subsequently find a financial professional you’re comfortable with.

Questions are an integral part of any relationship.

You’re not being nosy.

You’re seeking information to make an informed decision regarding a topic close to your heart: Financial well-being.

No questions asked.

For a PDF copy of these questions along with adequate space to document responses, please click here and download for free, the “The BS (Broker Survival) Guide” or any of the several other guides located there to help you as well.