Quote of the Week
Rooted in Reality – The most ominous danger we face comes from the marginalization and destruction of institutions, including the courts, academia, legislative bodies, cultural organizations and the press, that once ensured that civil discourse was rooted in reality and fact, helping us distinguish lies from truth, and facilitated justice. – Chris Hedges, author, America: The Farewell Tour
This is Tuesday morning and we have decided to exit all our equity positions last week except for Sharespost mutual fund.
The month of October has not been kind to the stock markets and we are afraid that this trend will continue down. It is time to go to safety because of multiple reasons.
From a market perspective, I am concerned that with the election today, the Democrats will win the House of Representatives. If the Democrats win the House, they will start investigative hearings into many areas of the Trump Administration including the run up to the election. This I believe will cause major disruptions in Mr. Trump’s ability to govern and will also disrupt the markets. The markets hate the unknown.
I am also concerned that Mr. Trump will not back off on the tariff situation with China. He has upped the ante with China by saying that he will put a 25% tariff on all goods imported from China to the U.S. Mr. Trump also just announced that the U.S. is limiting vital technology and parts to Chinese companies, thus throwing more fuel on the fire. I don’t know where this will end, but I am not encouraged.
Another issue I am concerned about is that the rest of the world in starting into negative territory as far as growth. The Emerging Markets are in free fall which could start a contagion which could spread quickly and get out of control. Europe’s growth is now about to turn negative and with near zero interest rates, the European Union can’t lower interest rates to stimulate the economy.
As you have read recently in this letter, I am very concerned about the debt the U.S. is running up in the form of a deficit which is now over $20 billion and is projected to rise by over a billion each year. Mr. Trump is now proposing another “Middle Class Tax Cut” of 10% because the vast majority of the recent tax cut really went to the wealthy. We can’t continue to run up our debt.
Nothing is trending in the right direction so we took the risk off the table. This has happened before, just not as fast, and we have recovered. We will be lying low waiting for the storm to blow over and then get back into the markets.
If you would like to talk about any of these issues, just give me a call. As most of you know I love talking about markets and economics.
I recently ran across an article in a newspaper about choosing a Financial Planner. The article does a great job on the legal landscape that rules my industry and goes into depth on the Certified Financial Planner TM designation and the importance of finding a qualified financial planner.
If you have friends that are looking for a financial planner, I hope that you would recommend us. If they want to go their separate way, at least they will have a roadmap to follow. Please feel free to forward this on to anyone who you might think could use this advice.
In Choosing a Financial Planner, Know How Planners are Regulated
A longtime reader of the (San Jose, Calif.) Mercury News wants to know: ‘What should someone look for when shopping for a financial planner?’ In this column, let me set the foundation. In the next one, I’ll help you shop.
J.M. and her husband are in their 60s, are living on Social Security and are ‘asset rich but income poor like many seniors.’ Previously, they had a good experience with a financial planner who is now retired.
While I have written about the financial-services industry and how different ‘advisers’ are regulated, I have not addressed how to choose a financial planner.
A key reason deals with how financial planners are regulated – or not regulated. It is a complicated subject, and as someone who got her start on Wall Street as a lawyer and who is currently the principal of a money management firm regulated by the U.S. Securities and Exchange Commission, I feel this is the most important piece of the puzzle. How a planner is regulated will set the stage for the planner’s offerings.
First, quoting FINRA (the regulator of the brokerage industry): ‘The financial planning profession does not have its own regulator. Instead, individuals who call themselves financial planners may be regulated in relation to other services they provide’ (https://www.finra.org/investors/ financial-planners).
For example, a financial planner who sells investments is regulated by FINRA as a broker. Someone who sells immediate annuities or life insurance would be regulated under state insurance laws. A financial planner who acts as an investment adviser is regulated by either the SEC (large firms) or by the state where the adviser does business (smaller firms).
There are financial-planning services that are not regulated, such as the creation of a financial plan or bill paying, for example. That is why it is essential to understand the scope of services desired.
Second, quoting the CFP Board (a nonprofit organization that seeks to foster professional standards in personal financial planning): ‘Any person may hold himself or herself out as a ‘financial planner’ without being required to meet basic competency or ethical standards.’
However, there are some planners who earn credentials that do require adherence to standards, such as the Certified Financial Planner, a designation conferred by the CFP Board of Standards Inc.
To earn that designation, the planner has to show experience, complete the CFP course, pass a test and keep up with continuing education requirements.
There are resources available to look up the CFP and over 150 other designations, notably FINRA’s https://www.finra.org/investors/professional-designations tool. There you’ll find the qualifications, standards of conduct and other useful information.
A planner having initials behind his or her name is not enough, of course.
‘Some financial planners might use designations that require little experience, study or continuing education- or which lack processes for verifying if the person actually holds the credential or for filing complaints,’ according to FINRA.
Third, you’ll want to check out the person’s background.
This resource, https://www. finra.org/investors/state-securities-regulators, can help you find finding state-registered advisers. To look up brokers and SEC-registered advisers, go to the https://brokercheck.finra.org/ website. To check someone’s insurance license, go to your state’s site (California’s is https://www. insurance.ca.gov/0200-industry/ 0008-check-license-status/).
Fourth, because there are so many ways financial-planning services can be delivered, it’s important to understand the actual service being offered.
‘If planners or their business associates sell financial products, their recommendations typically will correspond with the products or services they sell,’ according to FINRA.
‘For example, an insurance agent will tell you about insurance products (such as life insurance and annuities), but likely won’t discuss other investment choices (such as stocks, bonds or mutual funds).’
You can see why the regulatory structure is so important.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and author, welcomes your questions/comments ([email protected]). Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.”
Jason, Julie. “In Choosing A Financial Planner, Know How Planners Are Regulated.” The Mercury New, https://www.mercurynews.com/2018/10/01/how-do-you-choose-a-financial-planner-first-know-how-planners-are-regulated/ Accessed 5 November 2018
By the Numbers
“NOT A PENNY – 39% of Millennials have accumulated no funds for their eventual retirement. Millennials were born between 1981-97 and are age 21-37 in 2018(source: Personal Capital) – Michael A. Higley, BTN 11-05-2018
If you have friends or family in need of financial life planning services,
It would be the honor of Laurence Lof Financial Advisors to assist them.
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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.
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