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.

 

 

Retirement Lessons: Rolled From A Rock.

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A version of this post appeared on MarketWatch.

“How much does your money weigh?”

If people want to engage me and discuss retirement planning, the request I have is for them to take time and think back to their first memories around money. I want them to re-engage with how their views formed in the past, shape their present actions and motivations.

We undertake journeys together – back to the genesis of financial and investment philosophies.

I maintain a passion for client stories. Money plays a significant role in each; it’s a larger-than-life character in the human chapters of life.

Many of the conversations are emotional fire starters; over time, the discussions, although relevant, share commonalities. There are the ones you never forget, too.

I had someone share how adult money attitudes were shaped by spending much of his childhood summers exploring a neighborhood historic cemetery.

So, when I encountered a retiree who learned about handling finances from a rock, well, I anxiously listened.

He said – “everything I learned financially for me began with a rock.”

rock

You see, this 69 year-old gentleman is the seventh and youngest child of a large family from Oklahoma. At 10, he discovered quiet and space and off a rural route. A wooded, gravelly patch cordoned off less than a mile from the homestead.

A perfect (and creative) location to secure his valuables from prying siblings. Over time it became a sanctuary from the vestiges of conflicts that erupt among large families.

From pre-teen to teen, an elaborate system was devised. A natural roadmap outlined on a napkin and changed often to throw off those who may become a bit curious. It was a plan which marked how valuables including baseball trading cards, cash and coins would be secured underneath a labyrinth of various-sized rocks. On a regular schedule, the hiding rocks were changed up, covered or replaced by holes under several dead trees. On numerous occasions, items were lost. Eaten.

Dug up and carried off by small animals.

He employed cigar boxes, plastic sandwich bags with yellow paper covered wire to secure them, empty Wonder Bread wrappers printed with the memorable red, yellow and blue balloons.

I couldn’t imagine what was learned from all this effort. Well, I had ideas, however, I never heard of anything like this before in over two decades helping others make financial decisions.

As we met a few times, I began to understand how weathered rocks forged this man’s money behavior. How he rolled along through retirement remembering back so many years. The cold weather, the dirty hands, the lost treasures formed invaluable habits.

So, what were the lessons learned?

Random Thoughts:

Dig deep into your financial foundation on a regular basis. Lift the rock, move earth, start digging. Get dirty, expose what’s been hidden. Before financial planning, it’s time to expose the deepest fears about retirement.  If frozen by fear, your outlook will suffer; you won’t take actions (even small ones) to get you to retirement; you’ll feel hopeless.

The mind has a tendency to head straight for worst-case scenarios which most of the time, are far from reality. I find when people begin exposing what makes them anxious about retirement and progressively talk openly with those they trust, practical habits are started and forged. Stress is reduced. Make a list of what you fear the most about saving for and living in retirement. Move one rock at a time. Work with a financial professional to create a goals-based, fear-minimizing game plan.

Focus on what weighs heavy on your retirement budget. For the majority of people I counsel, fixed expenses are like boulders which press hard on their abilities to enjoy retirement. I’m not going to make it sound easy to lighten up. It isn’t. It takes some tough decisions. It could mean selling a family homestead to downsize, taking inventory of material possessions to gift, sell or donate.

My greatest friend, mentor and best-selling author James Altucher and his wife Claudia recently dug through and discarded almost every physical item they own – family photos, furniture, clothing. Rows of green plastic garbage bags out to the curb for trash pickup (I saw the photos). Ok, I’m not advising to go to this extreme: I was shocked myself. However, the lesson here is to devise a strategy that works for you to minimize overhead expenses; a liquidation and downsizing mindset is empowering. It allows you to take great control over cash flow, relieves the pressure of big fixed costs throughout retirement.

Move mental rocks and check on things. Let’s face it: Many people think of their company retirement plans as dark, mysterious holes. They may salary defer the maximum contribution yet still have little knowledge about available investment choices, how money is currently allocated or they fail to rebalance holdings on a scheduled basis. In other words, to be an active saver is admirable however, once earnings are syphoned into retirement plans, many of us grow passive about digging into them and shifting the location of financial treasure. The money is buried so deep under the rock, it’s forgotten. It might as well be lost.

A company retirement account is most likely your greatest liquid asset, so it makes sense to check on its progress. Make a point to dig under the surface at least annually. Compare your current allocations to choices provided by your employer and examine how investments are divided. Sell down what’s done the best and reallocate proceeds into underperforming asset classes.

For example, in 2014 U.S. or domestic-based large-company stocks and bonds were outperformers. The majority of financial “pundits” were touting how in 2015, domestic-based stocks would continue a winning run. So far, it’s apparent that international stocks are improving due to favorable valuations and aggressive action by the European Central Bank to purchase bonds, much like our Federal Reserve has done in the past.

Get your hands dirty and expose yourself to uncomfortable conditions. I partner with several retirees who refuse to undertake actions that temporarily feel unpleasant. For a few, avoiding proper estate planning (who really wants to deal with their own mortality?), failing to embrace healthy lifestyle choices like annual health physicals, and transferring potential devastating financial risks though the use of insurance, has led to family stress and negative outcomes for retirement portfolios.

A roadmap based on maintenance of health, proper estate planning and use of insurance where it’s needed, can make a tremendous positive impact on the quality of retirement.

Through the years, this gentleman who learned so much from rocks and dirt as a child, started to understand how keeping the location of his buried treasure so secret, was not such a terrific idea. He began to comprehend how secrecy may lead to great loss. He has a trusted partner, his wife, who keeps him accountable for fitness goals, regular meetings with his financial advisor (me), his board-certified estate planner and a physician for annual head-to-toe checkups.

Recently, one of his grandsons, knowing the well-told story of the rocks, began to do some digging at the same location near the homestead (still in the family). After months of work he unearthed a plastic bag. In it was a 1955 Topps Baseball Box made of tin with 10 trading cards inside including one of legendary player Ernie Banks.

There are lessons right in front of all of us. Some we can trip over (literally).

If we dig deep and often, potential dangers can be uncovered, avoided; treasures can be revealed.

The graveled road of retirement can be a blessing or a curse.

A lesson is to unearth early on what concerns you the most and expose them to bright lights from trusted professionals and loved ones.

Your retirement path will be a challenge, but like a rock, you can weather it and remain structurally intact for decades.

And keep rolling…

rolling rock