Over the last few weeks I’ve had the opportunity and fortune to work with graduate students on a number of financial and ethical issues presented to them in their classes. Of the many issues presented there was one issue that we discussed (argued) over more than any other topic; it was the suitability versus fiduciary standard. Most of our readers know that our firm not only follows but embraces the fiduciary standard where we are legally bound to act in the best interests of our clients. This brings me to the title question of this piece – should insurance agents provide financial, advice and or financial services?
fee-only
Apple Pie and Ice Cream…Vanilla Ice Cream
From time to time we get asked by our clients and prospective clients why we manage our clients’ money the way that we do. Some even gravitate to our firm because of the way that we invest and our philosophy. Others shy away because they are looking for management that will beat the market and always make money and never lose money. Note: This is impossible. But hey, some folks still chase that illusion. As many of our readers know our investment philosophy is pretty plain – like apple pie and ice cream. To make this summer analogy more apropos, when you go to the store to buy ice cream vanilla is generally cheaper and in more supply. As you peruse further into the freezer you start to come across more exotic flavors, combinations and brand names that not only look (and may taste) more appealing, but are also more […]
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Emergency Fund vs. Credit Card
During moments in our lives we are faced with bad luck or simply things that go awry and inevitably cost us money. From a car needing repairs to the water heater going out, or an unexpected doctor bill we don’t plan for these to happen, but we can in place in case they do. As financial planners we generally recommend that our clients have emergency funds in the event that such events are going to happen. On different occasions I will get the argument that an emergency fund isn’t necessary if one has a credit card to simply pay for the unplanned expenses when they happen. Generally, in an emergency a credit card can come in handy as one may not have quick access to cash, etc. However, the flaw with thinking that a credit card can be used in place of an emergency lies here: How do you pay […]
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The Designation Everybody Should Be Aware Of
At some point in your life you have probably started a new job, applied for life insurance, started an IRA or retirement account, or opened a bank account. You may remember when filling out the paperwork that the form asked for a beneficiary – both primary and contingent. This is simply telling the account’s custodian to whom you want your account to go to should you pass away. Your primary beneficiary is the first (hence the name primary) that receives account balance or death benefit. The contingent is who receives the account balance in the event your primary beneficiary predeceases you. When choosing beneficiaries you had the choice of allocating a certain percentage to the primary and some to the contingent if needed. You may have even had two or more primary beneficiaries that you allocated a certain percent of your account to totaling 100% Then you may have forgotten […]
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A Quick Trick to Reduce Your Tax Liability
Now that most folks are recovering from tax time there may be some individuals that paid an excessive amount of tax to Uncle Sam and are looking for ways to reduce their tax liability for next year. This post will be short and sweet, but hopefully it will drive a few points home. The best way to explain this is through an example. Let’s say that Mary and her husband Paul both work and file their taxes jointly. Their tax liability for 2013 was $4,000 – meaning that’s the amount of the check they wrote to the IRS. Needless to say, they are both looking for a potential way to reduce that liability – at least in the here and now. In this case, their marginal tax rate is 25%. The quick trick in this example is to take their tax rate which is 25% and divide it into their […]
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New Advisor?
This article is geared mainly toward advisors and planners new to the business or considering changing careers to become a financial advisor or planner; but it can also be useful to folks considering working with an advisor. As you start your new vocation it’s important to know what vocation you are actually in. What I mean by this is don’t be fooled by your future manager or company in to thinking that your job title is what you’ll be doing. For example, your job title might be financial advisor, insurance advisor, financial consultant, etc. You need to consider what it is you’re doing. If your main job (and the main method you get paid) is by selling a product, then your primary job title is salesperson, not financial advisor. This isn’t necessarily a bad thing (unless you don’t like doing it) but it’s important to understand what you’re really doing. […]
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More Money Isn’t the Answer
How many times have we said or heard the phrase, “If I only had more money…”? Whether wanting to purchase a new car, house or trying to pay down bills such as credit card debt and student loans we can fall into the trap of thinking that more money will be the answer to our problems. Most often, this is not the case. The question we face is how we manage our money – not how much we make. Granted folks need a certain amount of money to survive (although there are some extremists that would argue otherwise) but think of it this way: if someone is poor at managing their money they currently make, how is an increase in income going to make them a better money manager? Let’s give this some perspective (shout out to last week’s post). Let’s say you were a bank and you were lending […]
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Perspective
Over that last week I’ve had the chance to talk more in depth and think about the word perspective. In other words, how do we look at things? How do we see the world? Granted this may be pretty deep for a financial blog, however perspective is important when it comes to finances. Here are few examples to ponder: A millionaire does his or her best to legally reduce their tax bill and some would say that they are making too much money and should pay more in taxes. Looking at it differently the millionaire gave several hundreds of thousands of dollars away to charity (thus reducing their tax bill) and they are a philanthropist. A person investing in the market watches it crash and liquidates their entire portfolio. Another investor sees this as the market trading at fire-sale prices and buys as much as they can – buying low, […]
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Trust, But Verify
Since late 2012 I have had the honor to provide financial counseling to our service members generally going to different military installations to talk to soldiers and their families regarding financial issues such as buying a home, saving for retirement, reducing and eliminating debt, or simply creating a budget. On my very first assignment I ever did, I pulled up to the base entrance – a heavily fortified gate and entrance – and was asked to park my vehicle to the side while they ran my ID and searched my vehicle for any contraband. There’s something humbling yet cool about being searched by military police with automatic weapons. Naturally, other than remnants of a snack left over from my kids or an empty water bottle there was no contraband and I was free to close my vehicle up and drive to where I would be working for the day. This […]
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Be Careful When Converting
When converting from a 401(k), traditional IRA, 403(b), SIMPLE IRA, SEP or 457(b) to a Roth IRA there are some important tax considerations to keep in mind. First, converting from a tax deferred plan to a tax free plan it’s not always the best idea. Generally, it’s going to make sense to convert if the tax payer believes that he or she will be in a higher income tax bracket in retirement. For example, John, age 28 has a 401(k) and recently left his employer. He’s currently in the 15% bracket but expects to be in the 28% bracket or higher in retirement. It may make sense for John to convert his 401(k) to his Roth IRA. This makes sense for John because when he converts from a pre-tax, employer sponsored plan like the 401(k) it’s money that has not yet been taxed. If he converts while in the 15% […]
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Do Unto Others?
In the financial services industry there has been considerable discussion on the application of the fiduciary standard of care for clients versus the suitability standard of care. There are generally two sides to the argument: on the fiduciary side the standard of care is to act in the best interests of the client (the standard that Jim and I are held to and embrace) and the other side which is a suitability standard of care in which the recommendation needs to be suitable, but not necessarily in the best interest of the client. This is where things get sticky. Acting in the best interest of the client is pretty cut and dry. After extensive questioning and gathering of information a recommendation is made to the client based on what is best for their situation. This means recommending keeping the current course of action, following a designed and carefully thought out […]
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Should You Pay Off Your Mortgage Early?
As individuals pursue the American Dream of buying their first or next home the question may arise on whether or not it’s a good idea to pay down the mortgage and have no mortgage debt or pay the normal monthly payment and invest the extra money that would have gone to pay down the mortgage early in a place (the stock market) that offers the potential for higher returns over the long run. There are many fierce advocates for paying off debt, any debt early. While this is a wise choice regarding high interest debts such as credit cards, student loans and other high interest loans it may not necessarily be the case for home mortgage debt. Here’s a situation where for some folks it may make sense to pay down early and for others they may wish to consider invested the extra money elsewhere. Generally, the younger a person […]
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Have a HEART
Yes, I am organizing this writing around Valentine’s Day as a clever way to introduce a benefit military service members and their families can take advantage of as well as tie it into the title itself. The Heroes Earnings Assistance and Relief Tax Act or HEART Act provides service members and their families with certain pension and tax benefits while living or in the event of the service member’s death. According to http://myarmybenefits.us.army.mil/ these are some of the benefits that can be taken advantage of due to the HEART ACT: Accelerated vesting in the retirement plan (but not any imputed additional benefit accruals for the period of military service) Additional life insurance benefits Other survivor’s benefits depending on the benefits of the employer Employers also have the choice of treating the disabled or deceased service member as if they had returned to work the day before the disability or death occurred. […]
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Codes of Ethics – A Reflection
Codes of ethics can be an effective means of guiding and directing personal behavior – I believe this is true as long as the person adhering to the codes actually adheres to and believes in them. Otherwise it’s just words memorized for an exam or used in vain in a feeble marketing attempt to gain clients. Perhaps I am being too harsh or too opinionated, but for me, codes of ethics or any type of code for that matter such as the Code of Law, the Internal Revenue Code are pretty uniform and significant words that are to be followed appropriately. As mentioned above however, the Code of Law or the Internal Revenue Code are only going to be followed and upheld by those who believe in following them – there will of course be those that choose not to follow those codes and break the law. Granted, codes of […]
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Disclosure or Maximum Information?
In the financial services industry there are many products, services, business owners and employees that one would think would have one common goal – the welfare of the people they serve through investments, financial planning, insurance and other financial areas. Unfortunately, in an industry rampant with conflicts of interest it has become the norm, not the exception that people in the industry push forward in spite of the conflicts, not once the conflicts have been disclosed and resolved. Examples of conflicts of interest include salespeople that are paid only if they succeed in selling a client a product. This is what happens in most commission-only sales positions. Other conflicts arise when fee-only planners persuade a client to move their money to the planner in order to help them manage it, when in fact the planner is really not a planner at all, but simply an asset gatherer and the client […]
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Why Watching the Stock Market Can Make You Sick
I recently read a fascinating article on the correlation between market declines and admission rates to hospitals. The authors point out that almost instantaneously; the effects of a market decline affect mental health such as anxiety. In a nutshell, the authors describe that expectations about the future play a role in investor’s utility (happiness) today. The research in this article can be beneficial on two fronts. One the one hand, the information can be beneficial to advisors in educating their clients that once proper assets allocation for a particular client is achieved there is little to be gained by logging into an account and watching the daily and even hourly fluctuations of the market. And every asset class will fluctuate – which is why we diversify and allocate assets accordingly such as real estate, large cap stock, small cap stocks, commodities, bonds, etc. It’s important to note that at any […]
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Who’s Got Your Back?
We all have people we look to for advice and people whom we trust deeply with our thoughts, feelings, money, fears and dreams. These people could be loved ones, friends, family and professionals such a s doctors, psychologists, counselors and planners. Naturally we don’t trust just anyone with our most intimate thoughts, feelings and dreams. These are reserved for those people that we feel have earned that privilege. For the last week I have been working at my first residency for my PhD in Financial and Retirement Planning at The American College in Bryn Mawr, Pa. One of the courses involves the subject of ethics – and not just a list of commandments of what we should do, but more of a mentality of what we owe to ourselves, loved ones clients and people we come into contact with on a daily basis. There has been a lot of theory […]
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Chasing Returns
Looking at this morning’s financial section of the paper inevitably had a piece regarding the assets classes and the respective investors (gamblers) that did exceptionally well in 2013. There was mention of a firm that bet heavily on Japanese stocks and did very well, another investor bet against gold and achieved glamorous returns and a hedge fund that bet on US stocks and looked like gods among mortals. But that’s the problem with these scenarios – we are mortal. Pick up any financial magazine that reports on funds or stock returns and you’ll see examples of mutual funds, stocks and bonds that have either beaten or done worse than their counterparts. For example, US stocks did very well in 2013 – so a domestic large cap fund would look amazing based on what it did for 2013. Herein lies the problem; the publication is reporting what the fund did, not […]
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Goals for 2014
Goals setting and resolutions are among the top things on peoples’ minds when they start the New Year. And rightfully so. A new year signals a fresh, start a new beginning, a clean slate. Feeling refreshed and ready, most people start on their resolutions with the best of intentions – for about a week or two. Then they either give up, forget, fall back onto the same habits and routines that they promised they’d get out of the year before. It’s great to have resolutions – but they must be accompanied by resolve. What is resolve? Resolve, according to Merriam-Webster’s dictionary is to make a definite and serious decision to do something. This means planning ahead, expecting obstacles and figuring out ways to push through and achieve your goals. I recommend writing your goals or resolutions down. Here’s how: To begin write out your financial, fitness, work, eating, etc. goals […]
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What’s in Store for 2014?
A few weeks ago I was interviewed by a local business journal about our firm’s thoughts as to how the market would react in 2014 and how to best prepare for that reaction. Essentially, the journal was asking us to predict where the market would be in 2014. Most of our clients know the answer I am about to write, which was, “No one can predict the direction of the market with any degree of accuracy.” “If that were the case, (as I told the interviewer) neither she nor I would be having this interview.” In other words, we’d be clinking our glasses on our respective tropical beaches because we’d have gotten filthy rich predicting and timing the moves of the market. Markets are pretty efficient – meaning that the price of any particular stock in any particular sector, industry or country is generally priced based on all available information […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
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An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.