How The "SECURE Act" Will Affect Americans' Retirement
1. Overview – What is the “SECURE Act”? 2. The Retirement Savings Crisis in America 3. One Potentially Serious Knock on the SECURE Act 4. SECURE Act is Currently Tangled Up in the Senate
Is It Time to Worry about Debt?
The economic calendar is normal with a focus on housing. Some will be parsing the Fed minutes while others watch the impeachment hearings. This week’s topic may not be a media focus for the week ahead, but it gets constant attention. With a government shutdown and the debt ceiling on the agenda, let’s seize the moment and ask: Is it time to worry about debt? I suspect that many readers believe it is way past time!
How to Get Your Clients Help with Medicare
Should you be comfortable referring your clients to CPAs or other professionals who also handle annuities, investments and insurance?
Safety-First Retirement Planning
It is important to understand the complex way insurance products work for retirement income. Here is a list of important questions to answer for the three major types of annuity products.
3 Ideas to Help You Achieve the Income You Need
Patrick Nolan offers his top tips to help your money deliver.
The Five Most Common Misconceptions by Clients
Some clients are surprised at how I look at critical financial decisions. But when I reframe them from the conventional way of looking at those decisions, I can get clients to shift longstanding beliefs and make changes.
Weighing the Week Ahead: Is Falling Confidence a Threat to Markets?
The economic calendar is more important than usual. There is an emphasis on housing data as well as reports on leading indicators, industrial production, and regional Fed surveys. The most important story of the week will be the Fed’s Wednesday rate decision.
Selecting Insurers for Lifetime Income: Help Is on the Way
When it comes to implementing a secure lifetime income solution for a defined contribution (DC) plan, sponsors may balk at the task of evaluating insurers and different types of retirement income options. But fiduciary help is already available, with additional services and innovations on the way.
Weighing the Week Ahead: Is it Time to Worry about Crowded Trades?
The economic calendar is normal with an emphasis on the consumer. Both PPI and CPI data will be reported, but little change is expected. Central bank fans will have to make do with the ECB Thursday announcement.
Does Your Target-Date Glide Path Suit Your Workforce?
Plan sponsors evaluating packaged and custom target-date solutions should take a close look at the demographics of their plan participants and how they stack up against those of a “typical” plan. It’s critical information when making a glide-path decision.
An Actuarial Process for Better Decisions in Retirement
Incorporating actuarial methodology and the popular floor-and-upside approach to financial planning, I show how advisors can help their retired (or soon-to-be retired) clients make better financial decisions.
8-Reasons To Hold Some Extra Cash
With the political, fundamental, and economic backdrop becoming much more hostile toward investors in the intermediate term, understanding the value of cash as a “hedge” against loss becomes much more important.
Annuities Do Not Belong In 401(k) Plans
Annuities have no place being owned by an IRA or, as the SECURE Act would allow, a 401(k) plan.
A Financial Planning Nightmare
The most thoughtful and comprehensive financial plans will be derailed by an extreme, but unfortunately common event…
What History Tells Us About Venture Capital Investing
For long periods in the past, the best VC firms had spectacular returns, as their outside investors or “limited partners” participated in the emergence of great companies such as Intel, Microsoft, Apple, and Amazon. But, going forward, can VC investors expect the same returns? Or are we in a new era of lower returns and a more challenging environment?
How to Begin a Great Client Relationship
Is there a plan? Is it still working? How are we doing, and are we going to be okay? What are we missing, either as opportunity or risk? What’s most urgent? When starting a client relationship, how can you and your clients agree on which of these questions (translated to their life circumstances) you can help them with, and whether you are the right person for them?
The Future of Advisor Education
A proper education is an essential start to a financial advisor’s career. That education can and should encompass the multiple dimensions of skills that an advisor must master: technical competency (financial planning, portfolio construction, risk management), practice management (operations, technology, business development) and “human” factors, such as behavioral finance, life coaching, and presentation skills.
Why Are Clients So Bad with Probabilities - and Worse with Consequences?
Recently, a client came to Allan Roth with a net worth well over $10 million. He had enough money to support his family’s desired lifestyle for the rest of their lives, but not so much that he could withstand a large loss without cutting back substantially. Yet this client owned more than 130% in risky assets, meaning he had far more debt than fixed income. Much of the debt was in a variable rate margin loan against his brokerage account. Listen to Allan discuss what happened to this client.
Bridging the Gap Between Fiduciary Advice and Annuity Usage
Holistic tools are sorely needed to give fiduciary advisors a bridge between investment-oriented income generation and annuity-oriented approaches to retirement income.
What Advisors Miss When it Comes to Inflation and Annuities
The fact only roughly 1 in 20 annuity quotes include a COLA suggests that advisors are not considering, and retirees are not being provided with, information that is essential for determining the optimal annuity benefit payment structure.
Weighing the Week Ahead: Are You Part of the Dumb Money?
The economic calendar is light but includes some home sales data and the (old news) Q2 GDP first estimates. Fed speakers will be on the sidelines for the pre-meeting quiet period. Earnings reports remain the most important fresh data for both traders and investors.
Weighing the Week Ahead: Chinese Fireworks?
The economic calendar is a big one, featuring the employment situation report on Friday. The rest of the data – ADP employment, auto sales, and the ISM surveys – will be released over 2 ½ days. The US Independence Day celebration on Thursday will provide one type of fireworks.
Which Annuities Offer the Best Inflation Protection?
I expand on recent articles by David Blanchett, Zvi Bodie and Dirk Cotton by comparing the income-generating properties of SPIAs to VAs and FIAs with guaranteed lifetime withdrawal benefits (GLWBs), and place particular emphasis on how inflation risk impacts income.
Hedging Against Inflation Risk with Real Annuities
The only retirement contract that both insures against longevity risk and hedges against inflation is a real annuity that is linked to the CPI. Nominal annuities include a speculative bet on future inflation rates and the potential for substantial losses of purchasing power should high rates of inflation return, while real annuities do not.
The Fateful Choice Facing CFP Fiduciaries
Legions of CFPs face a choice: Either act as a fiduciary, as their CFP certification will require as of October 1, or surrender their credentials in order to work for firms that push products upon their customers that meet the weak “suitability” standard.
Inflation-Linked SPIAs Are a Bad Deal
I recently traded emails with someone who is provably smarter than me. He was very interested in buying a SPIA with payments linked to inflation, which is also called a real annuity. Real annuities are often depicted as perfect for a retiree. But after obtaining some quotes and running an analysis, I concluded the idea was “nuts.”
Weighing the Week Ahead: What Determines the Agenda for Investment News?
The economic calendar is one of the lightest, and a long holiday weekend impends. How will this news vacuum be filled? Probably with celebrity news, following the latest tweets, analyzing any new Democrats running for President, and interviews with B-level guests.
Annuity Taxes — What Your Clients Need to Know
Many of your clients may face uncertainty about whether they should claim various investment income on their taxes and, if so, how. This is especially true in light of recent tax code changes signed into law — the first major revisions since 1986.
How to Know If Your Website is Worthless
More than half of advisor websites are worthless. Read on to learn if yours is one and, if so, what a better option is for your marketing dollars.
First Quarter 2019
Q1 2019 proved to be the exact opposite of Q4 2018; it was the quarter where nearly everything worked. Virtually all asset classes produced positive returns, from U.S. and International equities of all sizes and sectors, to higher quality bonds and junk bonds, and, yes, even commodities floated with the rising tide.
The Major Technology Breakthrough to Guide Portfolio Choice
Optimizing retirement outcomes means funding the highest standard of living, both before and after retirement, with a smooth transition in between. Planning for that economics-based outcome, known as “consumption smoothing,” is computationally intensive. But a recent technological breakthrough gives advisors a tool that improves portfolio choice.
Bill Sharpe and the Challenge of Retirement Planning
Bill Sharpe has focused the most recent phase of his career on retirement-income analysis. A big part of that work has been the creation of an online textbook covering the various subjects related to retirement planning.
Rationality and Retirement: Mutually Exclusive?
Behavioral finance may help to overcome cognitive biases.
Are Annuities the Best Strategy to Fund One’s Retirement?
Suppose you are retired, or soon-to-be retired, and you have no reason to leave a bequest. You just want to assure yourself of as much income as possible while you are alive. What is your best course of action? My research shows it’s almost impossible to beat an annuity.
The Hidden Risks of Equities When Saving for Retirement: Part 2
The prevalent approach of saving a fixed percentage of income every year can miss the retirement target by a wide margin, but adjusting annual savings contributions can run into problems as well. Here, I’ll introduce new ways to measure the performance of pre-retirement strategies, test two new strategies and discuss the potential for more sophisticated approaches.
How SIFMA, FSI , FINRA and the SEC Conspired to Doom the Advisory Profession
Through “harmonization” – the broker-dealer community, aided and abetted by the SEC, is destroying the fiduciary standard, while imposing only new “casual disclosure” obligations upon broker-dealers. At its very core, this is an effort to make RIAs/IARs and BDs/RRs look identical. Once this is accomplished, FINRA will swoop in to seek oversight over the “harmonized” broker and investment adviser communities.
There is More Value to be Found in the Finance Sector than in any other Sector: Part 9
I found more value in the Finance Sector than I did in any other sector that I screened. All in all, I identified 131 attractively valued companies out of the 1,888 companies in the Finance Sector.
What is an LIRP and Why Should Clients Use Them?
One of the most important ways a financial planner helps clients is by minimizing the taxation on their income. Tax-deferred qualified plans receive much of the focus during the accumulation years, but what about reducing taxes in retirement?
Weighing the Week Ahead: Should Investors Worry about the 200-day Moving Average?
We have a normal economic calendar, and 1/3 of S&P 500 companies have not yet reported Q418 earnings. Corporate earnings are not confirming those who thought the market was signaling a recession. Both the economy and earnings remain in the background. Daily market moves, even small ones, and the often-erroneous explanations dominate the financial news.
A Superb New Book on Financial Planning
This book tells a story about planning that is intuitive, easy to follow and checklist driven, making the seemingly impossible achievable.
The Coming Demise of Robo Advisors
Robo advisors suffer from a common flaw, according to Zvi Bodie. They don’t use a “safety first” methodology and are exposing users to unnecessary risks.
How Paul Volcker Saved our Country
In Keeping At It: The Quest for Sound Money and Good Government, a beautifully crafted autobiography, Pau Volcker recounts the many struggles involved in achieving his aims.
How to Recreate a Defined Benefit Plan
How can an individual build a defined-benefit element into his or her retirement-income portfolio? Is there a way to structure a floor income during retirement that can’t be outlived?
NewsLetter - January 2019
Harold Evensky's quarterly letter to his readers.
A Close Look at Ibbotson’s Research on FIAs
We did a careful analysis of two fixed-indexed annuities (FIAs) that were the basis of a recent research study by Roger Ibbotson. Our conclusion is that these products are not a bad choice for an investor who is extremely sensitive to loss of capital. But a simpler, do-it-yourself alternative is better.
“Bad” Advice Can Add Value
I deal with many advisors. Some of them give advice that could be considered “bad,” but the benefit to their clients is tangible. Here are a few examples.
Fourth Quarter 2018 - The Year When Nothing Worked
2018 will be broadly remembered as a year when nothing worked and daily stock market volatility spiked. This contrasted with 2017 where seemingly everything pushed higher, and volatility was low. But in 2018, nearly every single asset class and all but one major stock market index (Brazil) around the globe posted negative returns.
An Annuity Hater Revisits SPIAs
I take a lot of flak when I write about annuities. That criticism has come from the insurance industry, because I have been highly critical of products like fee-laden variable annuities with complex menus of riders. But recent discussions and a new analysis have led me to reconsider SPIAs as a source of longevity insurance at a reasonable cost.
Three Ways to Maximize Clients’ Charitable Impact – a Conversation with Jeff Raikes
As 2018 comes to a close, it is a great time to discuss clients’ charitable giving strategies for next year and beyond.
The Five Challenges Facing Advisors in 2019
After talking with hundreds of advisors and interacting online with thousands more, I’ve identified five ominous challenges the profession will face and trends it will need to adapt to in the coming year.
The World's Poor Preparation for Retirement
Private, public and international pension plans are all due for a reckoning.
The 13 Rules for Networking at a Holiday Party
Connecting at holiday shindigs is different from the usual chamber meeting or networking event. Here are 13 quick tips on how to “work the room” while socializing and celebrating. Cheers!
The Hidden Risks of Equities When Saving for Retirement
Should those further from retirement safely allocate more to stocks? I’ll use an example to challenge the popular notion that those with many years left until retirement can safely allocate heavily to stocks. I’ll then demonstrate that pre-retirement investment challenges are more difficult to deal with than generating income after retirement.
How to Assess Unwanted Legacy Annuities
As an insurance consultant to RIAs, I review legacy annuities. Every case is unique, but often I’m reminded why commission-based annuities are one of the biggest violators of consumer value within financial services.
The Four Investment Topics that Generate the Most Hate Mail
I don’t enjoy receiving hate mail, but I do view it as a sign that my columns in the media are opening a dialogue, albeit at times insulting and hostile.
How Risk Aversion Impacts Wealth Management
When the market gets choppy, investors naturally shift course toward calmer waters. But there are better ports in a storm than cash.
Weighing the Week Ahead: Major Market Misperceptions
We have a light economic calendar with a focus on housing. Earnings season would normally be the most important market theme. For now, observers are seeing what they want to see in earnings reports.
Funding Retirement in Post-4% Rule World
It's time to think differently about building sustainable retirement income streams. Since many retirees fund their retirement using a traditional IRA, it makes sense to use a portion of that asset to fund a variable annuity with a GLWB.
Goldilocks and the Three Fears
It is hard to say with certainty what drives trading on any particular day, but it doesn’t seem a stretch to say that over the past few months a combination of tariffs and Federal Reserve rate hike fears have broadly impacted both equity and fixed income markets.
Income is the Wrong Goal for Your Clients
One of the biggest threats clients face in retirement is chasing higher investment income. I’ve seen people go back to work because they concentrated on income and lost their principal. Income is the wrong goal, particularly since much of so-called income is just a ruse allowed by regulators.
The Investment World According to Harold Evensky
I had the bittersweet privilege of attending Harold Evensky’s final presentation on investing. Evensky, who is by far the most decorated member of the advisory industry, is retiring and plans no further public talks.
Planning Advice from Nobel Laureate Kenneth Arrow
The boring truth of financial analysis and portfolio management is that the majority of our days are spent visiting with clients, reading, reading, reading, and when required, making decisions. Years ago it would have included quite a bit of time on a calculator, but thanks to the low cost of computers and software, most of the number crunching can now be completed with the push of button.
Weighing the Week Ahead: All About Jobs!
There is a huge economic calendar in a holiday-shortened week. The mid-term elections impend, so politicians will be on the stump. With Labor Day setting the stage and the week loaded with key employment reports, expect plenty of attention to employment issues. Much of this will be confusing and unproductive spinning.
Weighing the Week Ahead: Should Investors Worry about the Yield Curve?
Once again, the economic calendar is fairly light. Vacations continue for many. The upcoming Labor Day weekend will tempt many market participants to end this week early. Financial news seems more like political news these days. Much of the punditry is focused on a death watch for the bull market, with daily discuss of the flattening yield curve and speculation about when it will “invert.” This is not the right question. Pundits should be asking: Should investors be worried about the yield curve?
Can You Retire Your Retirement Risk?
Many (if not most) people think about retirement in terms of saving for the day they leave the workforce and won’t be collecting a paycheck any longer. The prospect of outliving one’s savings is therefore a top source of stress, along with being able to pay escalating health care costs.
Why RIAs are Slow to Adopt No-load Annuities
For industry veterans, annuities conjure the “bad old days” of pushy insurance companies offering rich commissions to snake-oil salesmen with Rolex-knockoffs peeking out from French cuffs.
How to Dodge the Debt Train
An active manager worth his or her salt will manage risk as part of the deal, and risk management is exactly what you need when you live on a railroad track. It doesn’t have to be perfect, just good enough to mitigate the major drawdowns. If everybody else loses 40% and you only lose 25%, you’ll be way ahead of the crowd. And the right manager should avoid even that scenario and keep you near break-even.
Second Quarter 2018: Unique But Not Different
For much of this recovery and expansion, many have opined that this economic cycle would ultimately end very differently than those of the past. We have resisted this narrative and instead explained our belief that this cycle will indeed follow the same path and end like all others.
Weighing the Week Ahead: Inflation on the Horizon?
The economic calendar is a light one, and many regular participants are on vacation. The most important data include PPI, CPI, and JOLTS, the best read on a tightening labor market.
Insights from Life-Cycle Financial Planning
Life-cycle economics contributes two foundational concepts to financial planning. The first is that individuals and couples must accumulate savings during their working years to support themselves in retirement. The second is consumption smoothing – clients prefer to maintain a steady standard of living over the full cycle of accumulation and decumulation.
CEO View: What’s Changed 10 Years After the Global Financial Crisis?
At Franklin Templeton’s recent Global Investor Forum in New York, our CEO Greg Johnson participated in a panel discussion with three other CEOs in the financial services industry: James Gorman of Morgan Stanley; Jay Hooley of State Street and Barry Stowe of Jackson National Life.
Weighing the Week Ahead: Is it Time to Worry About a Trade War?
The economic calendar is light. Most of the “financial” news flow relates to non-core stories. Of the various geo-political themes, there is one that is most significant for investors.
Five Warning Signs When Examining a Variable Annuity
Kudzu invaded the South, obliterating the healthy and attractive vegetation carefully planted by homeowners. Variable annuity owners are likewise being strangled by excessive fees.
Weighing the Week Ahead: Which Stocks Benefit Most from Trump Policy Changes?
The economic calendar is normal, but there will be a lot of competing news – Korean talks, China negotiations, and the Trump legal team’s announcement about whether the President will meet with Special Counsel Mueller. And those are just the items we know about!
Planning for a Successful Transition to a New Firm
You have undoubtedly heard stories about brokers changing firms who experienced everything from a minor disruption in revenue to an all-out career catastrophe. While you cannot anticipate every event, there is one thing you can do: Plan your work, and work your plan.
Implications of DOL Fiduciary Rule Decisions and RESA Legislation
Some new developments in Washington and recent court rulings have implications for those saving and investing for retirement. Drew Carrington, head of Institutional Defined Contribution at Franklin Templeton Investments, along with Michael Doshier, head of retirement marketing, examine the status of the Retirement Enhancement and Savings Act (RESA) and what it might mean for both plan sponsors and participants.
Weighing the Week Ahead: Have Stock Prices Veered from the Fundamentals?
The economic calendar has several of the most important reports. The managerial rosters will be back at full strength, perhaps after an extra day or two off. Investment committees will consider implications from Q1 results. Pundits will try to explain what it all means.
A New Platform that Offers Insurance Products to Fee-Only Advisors
David Lau is the founder and CEO of DPL Financial Partners, a firm focused on the distribution of commission-free insurance products geared toward the RIA and fee-based advisor channel. In this interview, he discusses his suite of products and related services.
The Four Horsemen of the Retirement Apocalypse
In biblical tradition, the four horsemen of the apocalypse are a quartet of immensely powerful entities personifying the four prime concepts – war, famine, pestilence and death – that drive the apocalypse. For today’s investors, the equivalent is historically high equity valuations, historically low bond yields, increasing longevity and, as a result, the increasing need for what can be very expensive long-term care.
How to Rescue an Underfunded Retirement
Americans have under-saved and will need more than withdrawals from savings to survive retirement. An optimal withdrawal strategy and asset allocation, delaying Social Security, annuitizing, tapping home equity and possibly working longer need to be evaluated. Let’s take a typical American couple and evaluate which options improve retirement consumption.
Weighing the Week Ahead: Will Inflation Data Spark Another Leg Down?
The economic calendar is heavy. In the battle of competing explanations for the market declines, the inflation story has taken center stage. With both PPI and CPI scheduled for release this week, I expect many to be asking: Will rising inflation spark another leg down for bonds and stocks?
The Best Strategy for Retiring Without Adequate Savings
Most research on retirement strategies assumes that people have saved adequately. But data on household savings shows that many households fall short, and will need to call on relatives or other sources for support. This raises questions about the best withdrawal or annuity strategies when savings are insufficient. It turns out that which strategy works best is different than for adequately funded retirements.
Wade Pfau’s Important Book on Retirement Planning
Wade Pfau has written an important book: How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies. It should be read by not just financial planners, but also all investment advisors who work with individual accounts.
Insurance & Annuities Poll: The Results
Annual Beneficiary Audits: As Important as a Will
Many investors assume a will dictates where their assets will go. But without properly designated beneficiaries, investors may not reach their legacy goals.
Retirement Income Planning Takes a Flexible Approach
If you are like many people, you probably have put plenty of thought into what your ideal retirement would look like. Maybe it involves exotic travel, pursuing a favorite hobby or spending more time with friends and family.
What’s Behind the Anti-Fiduciary Mindset?
In case you missed it, on September 7, APViewpoint hosted one of the best debates ever regarding the fiduciary standard and the DOL rule. It was notable because unlike most of what you’ve been reading, it covered both sides of the topic, and the debaters forced each other to provide deeper rationales for their beliefs. Here are my key insights, particularly those that illustrate the thinking behind the anti-fiduciary mindset.
Coping with Sequence Risk: How Variable Withdrawal and Annuitization Improve Retirement Outcomes
A strategy that combines variable withdrawals with partial annuitization using a single-premium immediate annuity maximizes the cash available for consumption.
Income Opportunities in CEFs and Emerging Markets
Closed-end funds and emerging-market debt offer opportunities for income investors. We also look at Vanguard’s most recent announcement about its bond ETF and what to expect from the FOMC this month.
Masters Series Interview with Richard H. Thaler, PhD
Richard Thaler, PhD, is considered one of the founding fathers of behavioral economics, the nexus of economics and psychology—specifically how people and organizations make decisions that may have negative consequences and how they frequently repeat these mistakes.