8 Ways To Go “Money Active” With Your Kids.

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Children are naturally curious. 

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How do you spark an interest in money?

As a child, I was an observer. My mother didn’t have money and my dad always lived for the moment. He died with nothing.

Today, with your children bombarded with messages you need to attempt to “sneak” money lessons in whenever possible.

Success comes from changing up old beliefs about how you think you should go “money-active” with the kids, creative thinking, remaining interactive.

Praying helps.

Random Thoughts:

Be an Example – Here’s an easy one because you don’t need to say a word – your actions are enough.

You children are monitoring your feelings about finances. What is your outward expression towards debt, savings and general household financial management, especially when communicating with the family?

If your relationship with money is positive or one of control and discipline, your children will learn from the example. If your relationship with money is negative, stressful, extravagant or reckless, the kids will pick up on that, too. Smart money beliefs and actions can lead to smart money imprints by the younger generations around you.

Anytime is the Right Time – One simple question framed in a positive tone may provide the right spark to get a money conversation underway. I call it “financial curiosity.” And you can be financially curious with your child anywhere – at the mall, at the supermarket, in his or her room.  If your teen makes a purchase, inquire about it with sincere interest. Out of non-threatening curiosity I ask my daughter for her reasons behind purchases and services she uses. She never feels like I’m prying (at least I don’t think so).

What compelled your child to buy a particular item? What does it do? What other choices are available? Is this item something the family may find useful? How does it work? Will this make their lives better, easier, more fun? How so? Was it a challenge to save up? You’ll gain information about the motives behind purchases and discussions regarding other money matters will blossom.

Get Them Involved – Talking about money is fine, however, it doesn’t compare to having your kids experience money management firsthand – something I call “money active.” Have the kids be responsible for specific money projects, let them fully experience the rewards and feel the sense of accomplishment when the plan is executed.

For example, provide children an opportunity to budget a family vacation or weekend getaway and then all enjoy the fruits of the labor. Partner with them to set savings goals for future purchases, especially the bigger-ticket items. Assist your teens with the research, or offer to match a percentage of the purchase price as a reward for good money habits.

Are the products or services the kids are using viable investment prospects? Now open the door to the investing conversation. And what better way to ignite the money flame — a possible investment into a company that manufactures a product or provides a service the children are passionate about.

 It’s OK to Seek Help – So you’re still having difficulty getting the conversation going? Let someone else help you get the fire started. Seek assistance from an objective person who would be willing to provide money lessons to the kids; perhaps someone in the family, or a friend successful with money management, would be excited to share an experience. Don’t be reluctant to seek assistance and allow someone else to tee up your involvement. I’ve witnessed grandparents do a great job at getting through to the grandkids with stories and financial lessons.

Make Money Real Life – Be candid. Your kids like to know you’re human, and occasionally make financial mistakes. They also want to understand what you did to correct a money mishap. You may need to be a bit creative; children are accustomed to movies loaded with action and special effects.

Take time to compose a compelling story about how you faced a financial obstacle head on and came out a winner. Or if the story doesn’t end well, explain specifically what you learned.

Kids are very comfortable with technology so become “money active,” and take advantage of online money-management tools to help kids achieve financial success. For example, at www.moneyasyougrow.org  there are activities that guide you to help the children work through money milestones grouped by age, beginning at 3-5 year-olds.

Begin a Money Mindset. Out of each dollar of allowance, figure out how much goes to savings, to charity and to spending. You need to help children establish guidelines early on. There are several products that make this division of money fun. Like the Money Box available from www.Moonjar.com. Also, there is an item called Money Conversations To Go which can jumpstart fun family discussions about money.

Have Children Handle Coins  – It’s a great way to get very young children comfortable with money – When my daughter Haley was 3 I had her handle nickels, dimes and quarters, they were shiny and fascinated her. From an early age I would have her place the coins in a bank and shake up that bank from time to time and it would sound like a rattle of sorts. Placing the coins in the bank was a sense of accomplishment for her and it started her on the road to fiscal success – Now, at age 16, she’s become a first-rate saver!

How About a Funky Money Diary? Purchase a three-subject notebook to help the younger kids keep track of the money they want to spend, share & save. Decorate with stickers related to money or cutouts of items the kids want to purchase in the future.  Interactive fun!

The most memorable interactions with children about money are ones you may overlook.

You’ll find discussing money at different times, in various places.

Out of nowhere.

It’ll become so routine, you’ll be smitten with delight.

Then you can focus on the tough discussions.

Like sex.

I’m still not ready.

kid shock

4 Sweet Money Lessons – Straight From The Toaster.

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As featured at http://www.nerdwallet.com. 

Pop Tarts almost killed me.

pop tart gun

The foundation of Mom’s parenting philosophy was the use of food to pacify me. Pop Tarts, either hot from the toaster or “raw,” as I called them, straight out of the box, were my favorite. My reward for good behavior was delectable, grape and occasionally iced.

Three boxes a week for seven years. Do the math. No wonder I have a permanent roll of fat around my belly.

The iconic Kellogg’s toaster happiness is turning 51 with no signs that its 32-year streak of increasing annual sales is in danger. And my ability to discover money messages in unusual places continues as well.

Money lessons arise like the fruity-sweet smoke of a hot toaster with a pastry left in just a little too long.

Here are four random thoughts that will help you add a healthy balance (pun intended) to your financial health.

1. Finances don’t need to be so serious all the time

It’s OK when money is sweet and replete with empty calories — in moderation. For example, I buy a scratch-off lottery ticket on occasion just for fun. The odds of winning are not a factor in my decision. The thrill and anticipation of the remote chance of winning is worth $2. The ROF (return on fantasy) is a bargain. Pop Tarts and other sweet foods were considered a staple in my childhood household. That’s not a good idea. It’s OK to splurge; I encourage it as long as spending limits are established and monitored.

2. Patience has rewards

Did you know Kellogg’s was sued for damages after a Pop Tart caught fire in a toaster? Boxes now carry a warning about fire risk in a toaster. Those things can get hot. As a kid, most of the time I wouldn’t wait and forged right ahead — I’d take a piping-hot mouthful of fruit filling without worrying about the repercussions.

The length of time people hold onto stocks has been falling rapidly since the 1960s and now stands at roughly six months. Investing, especially in stocks, is a long-term discipline. If your holding period is three years or less, then you’re not investing, you’re gambling. Prepare to be burned. Work with a professional to understand your underlying motivations for investing and try to match your life goals or benchmarks with the appropriate financial vehicles. You’re more apt to enjoy the cool sweetness of being a successful — or at least a levelheaded — steward of money.

3. Variety isn’t diversification

Pop Tarts come in 25 flavors. Over the years, Kellogg’s has experimented with different shapes, offbeat themes (like Ice-Cream Shoppe flavors), even a Pop Tart variety that was split down the middle with two separate flavors in one pastry. Most of those variations lasted only a couple of years. The original flavors like grape, strawberry and brown sugar-cinnamon have endured.

The financial services industry is, for the most part, a “popped-up” marketing machine, full of air and seeking to create products that promise diversification but often fail to do so. Costly hedge funds, and inverse products that promise protection in down markets, are not necessary to achieve diversification or enhanced returns. If you’re seeking true diversification from stocks, consider guaranteed investments like U.S. Treasury securities and cash, which are part of a lean and levelheaded diversified portfolio.

4. Icing is fun, but it’s not everything

The first frosted Pop Tarts debuted in 1967 when Kellogg’s discovered that icing could withstand the heat of a toaster. The foundational concept of this legendary confection remains basic: sweet filling surrounded by a plain, pre-baked, flaky pastry crust. Yet the simple brilliance of a Pop Tart has endured for decades.

When managing finances, the least complicated rules are still worth following. Saving at least 10% of your income annually, monitoring spending, keeping credit card and other unsecured debt levels to a minimum, establishing an emergency cash reserve and investing to reach longer-term goals — these never go out of style or lose appeal.

Sure, it’s fine to add a sweet kick to money basics. For example, taking calculated risks like investing a portion of your assets in emerging-markets stocks and bonds, placing money in sectors or asset classes that have recently underperformed, and investing in learning new skills to increase your value in the workplace can top your basics off nicely.

As with Pop Tarts or any sweet treats, moderation is important. It’s the same with your money behavior. You shouldn’t pursue either extreme deprivation or all-out splurging.

Wealth is built in moderation.

I blacked out from eating three boxes of Pop Tarts during a 1970s Saturday morning cartoon block. I’m not proud of that experience, but I am wiser for it.

groovy ghoulies

Just like the advertising campaign claims they’re “crazy good,” so can you be by following the lessons straight from a beloved toaster pastry.

Five Financial Sanctuaries that Place your Retirement in Jeopardy.

Richard Rosso:

I believe disclosure of sales goals is important. Understanding if your adviser is a fiduciary and focuses on your interests first, or a broker that has his or her employer’s objectives as a primary focus, will help you find the right long-term partner or clarify a relationship you currently enjoy (or question).

Originally posted on Random Thoughts of a Money Muse:

Originally appeared in MarketWatch’s Retirement Weekly.

In the AMC smash-hit television drama “The Walking Dead,” a group of road-hardened survivors of a zombie apocalypse seek protection from the undead (and the living who pose greater dangers than cannibalistic walking corpses.)

The fifth-season opener finds the weary characters fighting for their lives against a community of cannibals who lured them to a so-called safe zone called “Terminus.”

terminus

Handwritten signs and maps along roads and rails of rural Georgia guided the crew to a final destination, sanctuary was promised for all who arrived.

Sanctuary

On the surface, it appeared to be a dream come true. Warm smiles, comforting words, hot food.

Underneath, Terminus was nothing as promised or perceived. Victims were lured in to be placed in rail cars like cattle and eventually slaughtered.

rail car

As there is a fine line between fact and fiction, this harrowing situation got me thinking about portfolios in…

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5 Ways To Master A “Super Saver” Mentality.

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“I can never retire.”

never retire

At the wake for a client’s son, in the lobby of a plush funeral parlor, a woman I was introduced to seconds earlier looked at me and confessed four impactful words. I wasn’t aware of her personal situation however I felt the weight of her conviction.

I asked: “So, how will you make the best of the situation?”

I hear this sentiment so often, it no longer surprises me. No matter where I go. As soon as people discover I’m a financial adviser, they’re compelled to vent or share concerns, which I value. I’m honored how others find it easy to confess their fears to me. Unfortunately, I rarely listen to good stories especially when it comes to the harsh reality of present-day finances.

Saving money whether it’s for a long-term benchmark like retirement or having enough cash for future emergencies is an overwhelming task for households and this condition has improved marginally since the financial crisis ended over six years ago.

According to a June 2013 study by Bankrate.com, 76% of American families live paycheck-to-paycheck.

Is that a surprising fact?

Consider your own experience. When was your last pay raise?

no rise office

Wage growth has failed to keep up with inflation and productivity for years. During the heat of the great recession in 2009, you most likely endured a cut in pay from which you never fully recovered.

On top of that, you’re probably juggling multiple responsibilities outside your original job description. To say the least, attempting to bolster savings is an ongoing challenge post financial crisis.

To develop a super-saver mindset you need to first accept the new reality and make peace with the present economic environment. Steady wage growth and job security are becoming as rare as pensions. The below-average economic conditions are more permanent than “experts” are willing to admit.

Before a change in behavior can occur, an attitude adjustment is required as saving is first and foremost, a mental exercise. For example, a super-saver feels empowered after all monthly expenses are paid, and a surplus exists in his or her checking account.

Instead of experiencing a “spending high,” super savers are happier and feel empowered when their household cash inflow exceeds expense outflow on a consistent basis.

You can feel this way, too.

I’ve witnessed hardcore spenders transform into passionate savers by thinking differently and keeping an open mind to the following…

Random Thoughts:

Embrace a simple, honest saving philosophy.

Start with tough questions and honest answers to uncover truth about your past and current saving behavior.

You can go through the grind of daily life and still not fully comprehend your motivations behind anything, including money. Ostensibly, it comes down to an inner peace over your current situation, an objective review of resources (financial and otherwise), identification of those factors that prevent you from saving more and then creating a plan to improve at a pace that agrees with who you are. A strategy that fits your life and attitude.

The questions you ask yourself should be simple and thought-provoking.

Why aren’t you saving enough? Perhaps you just don’t find joy in saving because you don’t see a purpose or a clear direction for the action. Long-term change begins with a vision for every dollar you set aside. Whether it’s for a daughter’s wedding or a child’s education, saving money is a mental re-adjustment based on a strong desire to meet a personal financial benchmarks.

What’s the end game? It’s not saving forever with no end in sight, right? Perceive saving as a way to move closer to accomplishing a milestone, something that will bring you and others happiness or relieve financial stress in case of emergencies. A reason, a goal, a purpose for the dollars. Eventually savings are to be spent or invested.

Recently, I read a story in a financial newspaper about a retired janitor who lived like a pauper yet it was discovered upon his death, that he possessed millions. What’s the joy in that? Did this gentleman have an end game? I couldn’t determine from the article whether this hoarding of wealth was a good or bad thing. I believe it’s unhealthy.

Living frugally and dying wealthy doesn’t seem to be a thought-out process or at the least an enjoyable one. The messages drummed in your head from financial services are designed to stress you out; they’re based on generating fear and doubt.  And fear is a horrible reason to save, joy isn’t.

dead money

Form an honest and simple philosophy that outlines specific reasons why you need to save or increase savings. Approach it positively, three sentences max to describe your current perspective, why you’re willing to improve (focus on the benefits, the end game) then allow your mind to think freely about how you will fulfill your goals. Don’t listen to others who believe they found a better system. Find your own groove and work it on a regular basis.

Much of what you heard about saving money is false and will lead you down a path of disappointment.

The “gurus” who tell you that paying off your mortgage early is a good idea didn’t generate wealth by saving (or paying off a mortgage early). They made it by investing in their businesses and taking formidable risks to create multiple, lucrative income streams.

So before you buy in understand the personal agenda behind the messages. “Worn” personal finance advice like cutting out a favorite coffee drink and saving $3 bucks sounds terrific in theory but in the long run, means little to your bottom line. The needle won’t budge. And you’ll feel deprived to boot.

Financial media laments pervasively how you aren’t saving enough. From my experience, this message is not helpful; it fosters a defeatist attitude. People become frustrated, some decide to throw in the towel. They figure the situation is overwhelming and hopeless.

Don’t listen! Well, it’s ok to listen but don’t beat yourself up.

Saving money is personal. Meet with an objective financial adviser and don’t give much relevance to broad-based messages you hear about saving; it’s not one size fits all. Create a personalized savings plan with the end result in mind and be flexible in your approach.  Appreciate the opportunity to improve at your own pace, to reach the destination for each path you create. Just the fact you’re saving money is important. The action itself is the greatest hurdle. Strive to save an additional 1% each year; it can make a difference. If not for your bank account, for your confidence.

Compound interest is a cool story, but that’s about it.

Albert Einstein is credited with saying “compound interest is the eighth wonder of the world.”  Well, that’s not the entire quote. Here’s the rest: “He who understands it, earns it; he who doesn’t pays it.”

I’m not going to argue the brilliance of Einstein although I think when it comes down to today’s interest-rate environment he would be quite skeptical (and he was known for his skepticism) of the real-world application of this “wonder.”

First, Mr. Einstein must have been considering an interest rate with enough “fire power” to make a dent in your account balance. Over the last six years, short-term interest rates have remained at close to zero, long term rates are deep below historical averages and are expected to remain that way for some time. Certainly compounding can occur as long as the rate of reinvestment is greater than zero, but there’s nothing magical about the “snowballing” effect of compounding in today’s environment.

Also, compounding is most effective when there’s little chance of principal loss. It’s a linear wealth-building perspective that no longer has the same effectiveness considering two devastating stock market collapses which have inflicted long-term damage on household wealth. What good is compounding when the foundation of what I invested in is crumbling?

Perhaps you should focus on the “he who understands it, earns it; he who doesn’t pays it.”

I asked a super saver what that means to him. This gentleman interpreted it as the joy of being a lender and the toil of being a borrower. True power to a super saver ironically comes from living simply, avoiding credit card debt, searching out deals on the big stuff like automobiles and appliances.

Super-savers don’t focus much on compound interest any longer. As a matter of fact they believe it’s more a story than reality. They are passionate about fine-tuning what they can control and that primarily has to do with outflow or expenses.

This group ambitiously sets rules:

“I never purchase new autos.”

“My mortgage will never exceed twice my gross salary.”

“I never carry a credit card balance.”

“I’ll never purchase the newest and most expensive electronics.”

I know people who earn $40,000 a year save and invest 40% of their income. Then I’m acquainted with those who make $100,000 and can’t save a penny. Pick your road.

Making tough lifestyle decisions aren’t easy but doable.

I believe the eighth wonder of the world is human resolve in the face of the new economic reality. Not compound interest.

Sorry, Einstein.

einstein half the crap

Place greater emphasis on ROY (Return-On-You).

The greatest return on investment is when you allocate financial resources to increase the value of your human capital. In other words, developing your skill set is an investment that has the best potential to generate savings and wealth. Your house isn’t your biggest investment (as you’ve been told). It’s your greatest liability.

Many workers were required to re-invent themselves during or after the financial crisis. Their jobs were gone. In some cases, the industries that employed them for years were history, too. If you still need to work then you must consider directing as much as your resources as possible to multiply the ROY.

Take a realistic self-assessment of your skills, sharpen those that fit into the new economy or gain new ones to boost inflow (income). If you must stop saving to do it, do it. The increase in your income over ten to thirty years is real compounding.

People are finally beginning to understand that their current job is a dead end for wage increases or promotions. Finally, the status quo isn’t good enough, and that’s a great motivator to a ROY.

Increase inflow, decrease outflow.

Let’s take an example – You earn $50,000 a year. You save 4% annually, that’s $2,000.  If you achieve a 3% return on that money annually after 20 years that comes to $54,607.91. It’s admirable; some goals can be met along the way. However, if you’re looking to retire at the end of 20 years, big changes are necessary.

Super savers embrace the math and take on big lifestyle shifts to increase cash inflow. They’re willing to take on new skills, consider bold career moves, postpone retirement, and downsize to save additional income for investment and add time to work their plan. Everything is open for discussion.

The results have been overwhelmingly positive. Super savers maintain tremendous resolve to stay in control of their household balance sheets. Emotionally this group seems less stressed removed from the chains of debt. They tell me they have achieved control over their finances.

You can’t put a price on that.

To embrace a super-saver mentality peel away habits and lessons you believed were correct and take on a different set of rules; a new, perhaps slightly unorthodox mindset.

Super savers definitely walk in tune with a different drummer.

And they’re happier for it.

no stress beyond

 

Is Your Money Sub-Optimized – 6 Methods To Making The Most Of Your Money & Life.

Originally posted on Random Thoughts of a Money Muse:

“I think we’re doing the right things with money but we feel sub-optimized.”

money burning

Twenty-four years guiding others through financial challenges, thousands of words, and oddly I experienced personal angst over this one -“sub-optimized.”

It’s rare the word arises, if at all. There was something about it that captured my ear and mind. I wondered about the obstacles that create what I call “dollar drag,” whereby the highest and best use of our money is overlooked or ignored.

Sub-optimization is an equal opportunity offender. We all are afflicted, even if our track record of handling money is better than average. There can be great intentions, even respectable core money habits and yet sub-optimization thrives because we’re human.

As in the case of this forty-something couple: Six-figure wage earners, ambitious savers who set aside 20% of income for retirement, well-funded 529 plans for young children and saddled with dangerous credit card debt…

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The Five Money Mishaps of Newly-Divorced Couples.

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A variation of this writing appeared on http://www.nasdaq.com.

Money is blood.

blood money

My grandfather would lob sentences like this at me all the time.

Then walk away leaving me confused.

I never forgot this one; I have a clearer understanding of what he meant. At the time, I thought he was silly.

Heck, I was in first grade. What do you expect?

The people most successful at managing finances detect, understand and respect how strong feelings and on occasion, irrational thoughts, affect their net worth.

Emotions flow deep and dark like the ink in cash. Don’t kid yourself about it.

Money has the potential to become “emotions squared” during and after a separation or divorce.

emoitional money

Decision-making fueled by vulnerability, can weaken financial foundations. Nobody’s immune.  Unclear thinking followed by poor short-term actions has the potential to wreak years of financial havoc just at a time when you need to be most diligent with debt, spending and savings.

I’ve counseled people through money mishaps; I’ve witnessed even the most level-headed individuals make numerous money mistakes through this tumultuous time.

So how do you do your best to avoid the top money mistakes I’ve witnessed over the last 27 years?

Random Thoughts:

Watch vanity expenses. From expensive plastic surgery to lavish trips and wallet-busting new wardrobes, people have a tendency to spend impulsively and deal with the mounting debt later. Restraint is lost and stuff becomes salve for ailing pride. An attitude of “I deserve this: I’m working through a tough time,” has the potential to override common fiscal sense. Before blowing up credit card debt, consider a “FGS” exercise – (Feel-Good Spending) Exercise!

Start a wish list. Boundaries don’t exist when it comes to feel-good wishes. What will it take financially to enhance your handsome, pretty, smart, and your self-esteem?

Total the expenses required to turn desires into reality. Now, cut the sum in half. Next, categorize items from the least to most expensive. Splurge on the first two. This exercise will help you think through each purchase ostensibly minimizing emotional reaction. Also, crossing off a couple of the items can foster a positive feelings which may be enough to halt further spending on the more expensive items.

Rein in the ego dollars. I’ve seen it many times, especially with newly-divorced men. They’ll shower expensive gifts, dinners and excursions on (mostly younger) members of the opposite sex to impress and feed their bruised egos.

I’ve witnessed the spending border on reckless so much that I have helped ego spenders create “sugar-momma” and “sugar-daddy” budgets. Having an objective, non-judgmental discussion with a trusted financial partner about these expenditures can help avoid financial pitfalls and rein in the ego dollars.

For example, a gentleman asked me my thoughts about his new girlfriend’s request for $10,000 for cosmetic dentistry. We both talked through providing $2,000 (still a lot but an improvement), for a less expensive option. Unfortunately, she was upset by the offering and moved on; fortunately, a hefty financial mistake was avoided and a lesson gained.

Don’t allow anger to cost you big bucks in the long term.  On occasion, separating parties are so blinded by anger they fail to comprehend how it can truly cost them. I worked with a couple who decided to split amicably.

They came in to discuss the impact of divorce on their finances which was minimal due in part to reasonable legal costs – less than $7,000, until a fight erupted over who would be primarily responsible for the family dog. The attorneys involved created additional doubts which made the situation worse. Now this once amicable, reasonable couple have spent $37,000 in legal fees with no resolution in sight. I explained they could have worked out a plan and just split the $30,000, keeping the assets for their own balance sheets, not the lawyers.

Seek perspective on every expense greater than $200. Yes, you’re an adult. However, you’re an adult with much on your mind and about to face a big life transition. The perspective is primarily about keeping one foot outside of the situation and gathering feedback from a trusted friend or financial partner. Think of it as validation for keeping a level head about spending and a good habit to consider in the early stages of a breakup. It’s also a potential confidence builder, a foundation to rebuilding self-esteem if your thought processes and expenses are validated by a confidante.

Take a full accounting of all assets and liabilities. What’s fair is fair: Make sure you receive what is due. Party members will occasionally bend over backwards to relinquish assets or overlook a full accounting based on the faith that conflicts will work out and ultimately reconciliation. Hope is one thing. Protection is another.

In good faith, a couple should be transparent with all assets and liabilities. Also, each person should prepare an “impact” budget to determine new lifestyle costs. It’s a vision of your household expenses post-divorce or separation.

A second income could be lost – that’s an impact. You may require greater childcare expenses if you’re a working adult with custody. Perhaps a smaller residence is required and you’re renting now, which can affect deductions. How will your tax situation be affected? Is there alimony or child support – how long will it last? Good questions for professionals. Best to envision what’s to come and begin a budgeting exercise.

Divorce is never easy. In the early stage, there’s a raw, emotional cord that can vibrate and throw off your financial footing.

It’s best to step back and recognize possible mental pitfalls early on.

divorce money

 

 

The RoboWars Begin – Nash vs. Bettinger: The Winner? You.

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Once upon a time, (allegedly), there was a dude named Moses who delivered chosen people from a horrific situation. Important man. Very Popular. Scruffy. Like Rick Grimes (Google if you must).

Beards are in, people.

rick grimes beard

Then there was God, a prolific writer with his finger (imagine) who decides (who’s gonna argue?) that Moses was to be the recipient of two stone tablets which pretty much outlined the Big Guy’s marching orders for humanity. I’m talking serious stuff.

I wonder what happened to those historic slabs.

I imagine them as Carl Icahn’s cocktail coasters or used to gain traction in snow wedged underneath the rear wheels of Mark Cuban’s Land Rover. Many heroic things die cowardly deaths. Keeps me grounded to think that way. I know. Sad.

Anyway.

The words, the commandments, ten of them, were as heavy as the rock parchment they were carved into.

Three out of the Ten Commandments focus on “coveting.” Wives, animals, houses, servants. Coveting is definitely a big no-no.What’s coveting?

According to Merriam-Webster it’s a verb. It means:

To want (something that you do not have) very much.

Oh you were able to take a decent stab at the definition. You did good.

You’ll see where I’m going here, be patient. Jesus, our attention spans are down to the time of the sex life of a tsetse fly (they mate once and then I think they die). Thanks internet!

What I’ve learned after 27 years serving clients, 14 of them at the “client-first” (more on that later,) branded financial-services behemoth Charles Schwab & Co,  is that this marketing and legal locomotive that blows money like engine steam, aggressively seeks to barrel over everything it touches. Once they’re done, you may as well be as flat as a nickel on heated rails.

Actually, covet is too polite. Way too generous.

To be clear: Once the Schwab Kraken is released on anything or anyone, the beast attacks, grabs and seeks to destroy its prey. You are property, lock stock and barrel of the Schwab brand. Your former identity is a cold shadow of the past. Whatever was once noble, honorable, fiduciary, ostensibly is digested by the venerable appetite of frenzied shareholders. 

Whatever remains of the target is regurgitated; never to resemble its original form.

For example, who’s the brilliant guy who ran Windhaven, a separately managed account, after Schwab purchased the company he founded? I can’t even find him in cyberspace.

According to a WSJ article:

“Mr. Cucchiaro left Windhaven “for personal reasons,” according to a news release issued Friday by Schwab. A spokesman for Schwab said there was “no relationship” between Windhaven’s recent performance and Mr. Cucchiaro’s departure.”

Hey I know. He changed his identity and is now living on a remote island replete with pina coladas and coconuts; or perhaps he was cast away and a soccer ball named Chuck is his cherubic best friend.

All I’m saying is once you’re swallowed and spit out by the Schwab soul sucker, you’re sort of different. Perhaps you’re missing a part of yourself. Oh hell, maybe you’re just missing (literally).

God speed, Mr. Windhaven.

Heck even the dead aren’t safe from the clutches of the corporate creature.

From what I learned firsthand (no kidding), as a client you’re worth more dead than alive. Your mortal coil may have shuffled, but at Schwab, that coil remains as warm as a newborn baby’s head during a ten-hour breech birth.

Your beloved assets shall be entombed in an eight-digit account number fortress. Money interred. Not only that, surprisingly, your heirs will deposit even more of your money at Schwab, after the last of the flowers wither on your grave and dead leaves wind blow into a pile at the foot of dear Aunt Millie’s gravestone.

I don’t know about you, but that makes me fuzzy all over. Such a caring organization. Can you feel Uncle Chuck’s death grip embrace your eternal liquid net worth?  My cockles are warm. Cockles.

Are yours?

frozen dead

So, why should you care? Why does it matter that two financial services companies are having a very public fight over a product and sort of punching below the belt?

For me it sort of feels like the first time I watched “Godzilla vs. Mothra.” I mean I love this stuff. Pass the popcorn.

godzilla vs mothra

If you use financial services of any kind, there are very important messages for you here. Pay attention because as an investor you’re a winner; you’ll be a winner. Competition will benefit you.

And Adam Nash, CEO of WealthFront like Davy Crockett at the Alamo, is willing to fight.

First, Mr Nash, this isn’t Charles Schwab. It’s Charles Schwab & Co. They are not the same. I’m sorry. I learned the hard way. I paid with a kidney and half a million bucks. Throw in a family, too while you’re at it.

It’s shareholders and a CEO (Walt Bettinger) who is turning (turned) a brand into something so far from Chuck’s values and visions, that when I asked various management types in 2012, what exactly is the company’s values and visions? I could not get an answer. Zero.

schwab values

You see, that above (good book from Mr. John Kador), is fantasy land now. That was 2005. Might as well be 1805.

Ancient history.

It’s Strawberry Shortcake starring in Fast & The Furious 8. Not going to happen. And you see that customer first verbiage? It’s shareholder first. Regional management told me that. Shareholders first, THEN customers. I was told.

To my face.

So you know what Mr. Nash, you win. And so do Schwab clients and other retail investors who read your words. I could feel your disheartened spirit, your awakening, your suspicion. Although I could argue specifics about fundamental indexes, in all fairness to the Schwab Robo, I find benefits to the strategy over WealthFront’s.

BUT THAT DOESN’T MATTER. 

What matters is you have a vision I wasn’t aware of. I was wrong about WealthFront’s motives. What matters is you ripped a hole to expose the hypocrisy (client first on the surface, a bitch to margins, underneath), that has permeated and changed permanently the Schwab culture. And now people will know. And that’s worth something in a world post-financial crisis, which seems to be owned more than ever by financial services and central banks. Broken values and bottom lines sum up the financial sector since 2010, in my opinion.

You have a passionate mission. Unfortunately, you’ll sell out. We all do. But we can come back. We all get a chance to come back. I did. Perhaps Mr N you will have a chance, too.

Mr. Nash? I have confidence in you.

I have more confidence that you would come back because the Kraken can’t. You can’t turn the heart of the beast into Hello Kitty no matter how idealistic you seem to be in your writing.

Oh, and I really like the beard. Did you shave it? Grow it back. Because like Rick Grimes in The Walking Dead, you are now at war.

And a beard works on you.

nash

I hope you win. I did.

Here’s Mr. Nash’s first attack.

Copy and paste (darn you, WordPress).

View profile at Medium.com

Bottom Line: The brokerage gods gave Chuck (Moses) the insights on how to treat clients and employees – the 10 commandments (which he wrote,) and then Moses shattered them and decided that coveting was OK, especially if it benefits your stock price. 

                               greediness

Random Thoughts (for investors):

I’m not sure of this whole roboadvisor thing. It was created out of the failure of all of us in the business to do what we said we would do: Tax harvest, rebalance portfolios, be objective, provide low-cost options, and to examine a client’s financial picture. holistically before making recommendations.

I got in trouble for that at Schwab. I was there to SELL product, not help clients reach dreams. I was a Certified Financial Planner who worked at Enterprise Rent-A-Car. Which fee-based car can I get you in? Then wave goodbye.

Frankly, fuck Walt Bettinger’s dreams, I could care less. I hope he gets cast off to an island like Mr. Windhaven. Chuck needs to take his company back (again) and align with clients and employees. Only he can kill the Kraken. Wasn’t that Liam Neeson in Clash Of The Titans?

Ohhhh, that’s what this is between Robos – Clash of the titans.

liam neeson kraken

I also do not believe in efficient markets which is how all robos operate. In other words, there’s no such things as asset bubbles in this arena. Well, let’s consult an expert, professor Bob Shiller from his latest edition of Irrational Exuberance.

“The point I made in 1981 was that stock prices appear to be too volatile to be considered in accord with efficient markets. Assuming that stock prices are supposed to be an optimal predictor of the dividend present value, then they should not jump around erratically if the true fundamental value is growing along a smooth trend.”

More.

“Fluctuations in stock prices, if they are interpretable in terms of the efficient markets theory, must instead be due to new information about the longer-run outlook for real dividends. Yet in the entire history of the U.S. stock market, we have never seen such longer-run fluctuations, since dividends have closely followed a steady growth path.”

Still more.

“There is a troublesome split between efficient markets enthusiasts (who believe that market prices accurately incorporate all public information, and so doubt that bubbles even exist) and those who believe in behavioral finance (who tend to believe that bubbles and other such contradictions to efficient markets can be understood only with reference to other social sciences, such as psychology).”

And investors were sold the story, are buying in strong to the story again, that stocks always outperform other investments.

More again from the professor (last one I promise, I’m a big fan):

“The public is said to have learned that stocks must always outperform other investments, such as bonds, over the long run, and so long-run investors will always do better in stocks. We have seen evidence that people do largely think this. But again they have gotten their facts wrong. Stocks have not always outperformed other investments over decades-longs intervals, and there is certainly no reason to think they must in the future.”

You gettin’ it, yet?

You’ve been sold a bill of goods to set a portfolio, always remain invested and don’t worry about the real earnings or valuation of the markets at the time you commit capital.

You see it’s easier for the financial services industry, whether it’s through the front door like WealthFront or backdoor like Schwab, when it comes to a robo, if you buy into it, to capture your assets during a bull market. And low cost is BIG volume.

And of course, it’s all long term. Long-term is a fuzzy blanket compliance departments love.

Sell is a dirty, four-letter word. Sell my stocks? Protect my capital? We can’t do that.

Did you forget about asset bubbles? Your portfolio hasn’t. I bet it hasn’t recovered from the 2000 Tech bubble, yet let alone the devastation from the financial crisis. And as an ultimate kick in the groin, your house went down the toilet, too.

haans moleman football

Nope. I’m not buy and hold for me or clients. I never will be. I have sell rules because the math of loss is more devastating than the wealth from gains. But I tell you this, if I did invest that way, I’d give my money to Adam Nash because his heart is in the right place.

Yea so, I like some of the research that went into the Schwab product but you seem less like cattle with WealthFront and more the butcher. And you never want to be the cattle.

At Schwab, whether you’re an employee or client, you are expendable and a number. OK, I’m not saying WealthFront is altruistic (although after examining their numbers I still don’t get how they make money for themselves) but at least there’s a vision for Christ’s sake.

At Schwab, you’re cattle to milk the bottom line. Even after you’re dead. I’m certain of it.

butcher of the cattle

Whether you invest with one or not, find a fiduciary to consult at least on an hourly basis. A fiduciary is there to help you make big, holistic life and money decisions and assist with your portfolio allocation in an objective manner. The financial services industry doesn’t want employees to be fiduciaries, to place client interests first.

It’s fine we make “suitable” recommendations, but to me that means what makes the most for the firm and ourselves. Suitability is there to protect the firm. Not you, the client. It’s to make sure that company asses are covered and boxes checked in case you get ticked off and seek to take civil action. Tax bracket, got it. I’m covered. Sell you a product, move on.

I had to pay half a million bucks to be told by a Schwab-hired attorney that “Richard Rosso, you are not a fiduciary.” No shit.

Now I am. I acted as such then and would do it again.

I’m interested to see how this battle turns out.

I’m on the side of investors, and now, Adam Nash.

I hope he prevails.

Maybe I just have a bone to pick with a large company that sought to destroy my life.

Could be.

I can’t rule it out.

All I know is we need more thought leaders like Adam to provide candid, heartfelt communication.

It’s long overdue.

And it makes me happy.

You should be too.