The status quo of the financial services industry training employees on how to select investments has been an abysmal failure, as the recent February 2015 White House report has revealed.  This clear-cut conflict of interest has cost and is costing the average American combined over $17 billion annually as this straight-forward article reported at Marketwatch on April 1, 2015, “Conflicted Advice hurts IRA investors.”

Bona fide “education” is not provided by conflicted academics or by industry in the workplace, as The Derivative Project has highlighted in several posts.  Financial services firms, selling product, moving into the workplace, such as Financial Engines and Financial Finesse, under the false pretense of “independence” seek to maintain the status quo of:

(1) Lack of transparency of true investment performance and a means to avoid audited performance at the SEC

(2) Another generation of employees who succumb to “learned helplessness” and do not take charge of their future.

(3)  Ongoing fraud, Ponzi schemes and needless losses that increase not only taxpayer regulatory costs, but take 1/3 to 1/2 of every dollar saved by America’s stagnant and shrinking middle class.

We urge employees to request of their employers, the next generation alternative, bona fide, independent financial investment selection education, right here.

We close with an excerpt of a repeat of a September 2013 Blog Post at The Derivative Project, “FINRA Survey Reveals Rampant Fraud by Advisors”.  A change in calling a salesman a “fiduciary” without any change in the oversight by FINRA of this industry is not change.

Screen Shot 2015-12-09 at 10.02.10 AM

 

The FINRA Investor Education Foundation released a September 2013 study, Financial Fraud and Susceptibility in the United States on rampant fraud in the retail investment arena, where 1 in 4 retail investors have been subject to fraud.

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The executive summary of this survey states:

1. The ubiquity of fraud solicitations, coupled with the inability of many people to recognize the red flags of fraud, place a large number of Americans at risk of losing money to scams—with older Americans at greatest risk.

2.  Financial fraud solicitations are commonplace. A new survey by the FINRA Investor Education Foundation found that more than 8 in 10 respondents were solicited to participate in a potentially fraudulent offer. And 11% of all respondents lost a significant amount of money after engaging with an offer.”

A Table from the FINRA Survey indicates, ironically, many of the most common sources of fraud are standard practices today by the bulk of “financial advisors”.  Sales techniques, masquerading as “education” in the form of free lunch sales pitches and cold calls are common place techniques endorsed by every large “financial planning firm”, including SEC registered investment advisors (RIA’s) and all major brokerage firms today.

Free educational seminars offered by “advisors” in the workplace to employees, is one of the most common ways for “advisors” to pitch their product.  Employees are invited to an “educational” seminar.  It is not an educational seminar.  It is a misleading sales tactic to lure employees into a “seminar”, then a “free-consultation” and then a sales pitch to sell a product that is in the best interests of the advisor, not the employee.

Why can’t consumers distinguish between a “good advisor” and a “bad advisor”?  Having worked in the financial services industry for decades, in addition to the personal finance sector, the answer is clear:  This industry is rotten to the core.  There is no way to distinguish between a good actor and a bad actor.  There are no industry standards and performance measurement tools to aid the retail investor to begin to distinguish between the good and the bad actors.

There is indeed a retirement crisis. Americans are rapidly losing their life savings to not only fraud, but also excessive fees and poor performance due to the lack of performance measurement tools.

Can one fairly compare the results of this survey’s “rampant fraud” to the players in the “advice” industry today?  Yes, it is the industry that has created the environment to allow this crisis level of fraud to permeate the retail investment sector today.

Retirement Crisis 101  - The Roots of the Crisis

  • FINRA has allowed an “advice” industry to thrive in the shadows by prohibiting any retail retirement investor from filing a claim in the U.S. Court system.  Every fraud, scam and securities law breach in an IRA today is subject to mandatory arbitration.  FINRA writes the rules and enforces their rules to benefit the financial services industry.  The result: rampant fraud that never sees the light of day.
  • The SEC has never enforced administrative proceedings against a registered investment adviser who has breached its fiduciary duty against an IRA investor.  The IRA investor has no right of private action. The fraud, the deceit and the breach of securities laws are allowed to continue in the shadows.

The Answer to End the Fraud

Due to the regulatory capture and the powerful financial services lobby, there is but one answer to alleviate the plight of the retail retirement saver today. The Answer combines three key elements:

1      Workplace education provided by bona-fide, independent capital markets/asset management professionals, with no ties to the financial services industry

2      The tools provided to every retirement saver to analyze any proposed investment

3      An understanding by the retirement investor of the scope of the fraud created by financial intermediaries today.  A national PR initiative, such as that to end smoking, to alert every American to the dangers of every financial intermediary and the benefits of taking charge, is long overdue.

The current debate at the Department of Labor and the SEC on advisor “fiduciary standards” is a complete waste of time and taxpayer money. Fine print contract disclosures on conflicts of interest allowed by the SEC and dual registration of brokers and RIA’s says it all.  There are no fiduciaries in the retirement advice market and modifications in the current advisor structure and industry cannot change that.

The only solution is to provide retail investors the proper tools, benchmarks and education to make a determination, on their own, on what investment is in their best interest.  It is a simple vision that is indeed possible, with the prevalence of online technologies today.

“Tell me and I forget, teach me and I may remember, involve me and I learn.”

–Benjamin Franklin

Actually, for Wall Street, nothing has changed since the 1970′s.

The IRA was created in the early 1970′s with a so-called “loophole” that not even the latest White House Report on conflicted investment advice described.  The scope of the issue is significant, (one) that this so-called “loophole” has existed to the detriment of every retirement saver for 40 years and (two), because the media has yet to report it and cover its implications and (three), it doesn’t need public comments at the Department of Labor to change it:

Congress should insist the IRS Code be updated today to eliminate this loophole, with $7.1 trillion dollars at stake and subject to this “loophole”.

The “loophole” allows SEC Registered Investment Advisors, under the Investment Advisers Act of 1940, to avoid that Act’s fiduciary requirements.

The significance is many Americans have been paying for investment advice for their IRA for over 40 years, to a SEC registered investment advisor, believing this advisor was paid a quarterly fee to monitor their IRA investments on a regular basis.  When the IRA investor goes to FINRA because they have suffered losses due to a fiduciary breach, under the Investment Advisers Act of 1940,  the FINRA arbitration panel agrees to this Wall Street loop hole, “You may have been paying us a fee for investment advice, but we did not agree that we were providing you investment advice on a regular basis. Check the fine print!”

Brillant loophole, simply brilliant.

Brief History of Investment Adviser Act of 1940

Following the Great Depression, Congress enacted several securities laws to protect investors, including the Investment Advisers Act of 1940, which the SEC describes here, the fiduciary duty of anyone provided advice on investments:

Study on Investment Advisers and Broker-Dealers

“Investment Advisers: An investment adviser is a fiduciary whose duty is to serve the best interests of its clients, including an obligation not to subordinate clients’ interests to its own. Included in the fiduciary standard are the duties of loyalty and care. An adviser that has a material conflict of interest must either eliminate that conflict or fully disclose to its clients all material facts relating to the conflict.”

How Is “Investment Advice” Defined by the SEC and Interpreted by the Courts?

If a regular fee is paid for investment advice, the Advisor providing the “advice” is subject to the fiduciary standard and must place the interests of their client ahead of their own.  To the contrary, a stockbroker can place his employer’s interests first and ensure the product recommended is “suitable” at the time it is sold.

Example:  A retirement investor pays a quarterly fee to an “advisor”, an intermediary, registered with the SEC, an RIA, a “fiduciary” for ongoing advice on what product to buy and hold in their IRA.  This “advisor” also is a broker, like the Charles Schwab, Fidelity or Vanguard model or many “CFP’s” advisors that charge a quarterly fee for “investment advice” for managing your IRA.

The retirement investor is led to believe this advisor is a fiduciary.  They are told that.  The retirement investor believes that since he is paying a quarterly fee, that the advisor is looking at the investments and monitoring them.  That is what the “advice” fee is for.

The “Loop Hole” that Negates the Investment Advisers Act of 1940

IRS Code in IRA’s, written in the early 1970′s, provided an avenue for Wall Street firms to negate the fiduciary standard of the Investment Advisers Act of 1940.

The loophole:  The IRA retirement investor pays a quarterly fee to a SEC Registered Advisor, for selection and monitoring of all the  investments in his IRA.  He believes this SEC Registered Advisor (RIA) is monitoring what he was recommended on an ongoing basis for the quarterly fee.

No, Wall Street added to the IRS Code in 1975, the “loophole”;  “We have to mutually agree that we are providing you investment advice”.  Thus, Wall Street adds to its IRA Client Agreements:

“(Name of Wall Street firm) will make investment recommendations for your Portfolio, you are free to disregard those recommendations….”You acknowledge and understand that this is not a mutual agreement between you and (Wall Street firm) under which (Wall Street firm) provides recommendations on a regular basis, individualized for your IRA or other retirement plan, that serves as a primary basis for the plan’s investment decisions.”

The significance of this breach of securities law, The Investment Advisers Act of 1940

Nothing has changed since the 1970′s, except IRA’s have grown to over $7 trillion dollars and Americans have been schooled through Wall Street advertising, as disclosed in this Public Interest Arbitration Association Report, that they are dealing with fiduciaries that have their best interest before theirs.

The reality is much worse than the Public Interest Arbitration Association Report or President Obama’s report on $17 billion dollars in losses annually due to conflicted advice.  American investors paid Wall Street an “investment advice” fee on a quarterly basis, yet Wall Street had no legal duty to monitor the IRA investments that they recommended, despite the ongoing fee!

The reality is the SEC registered fiduciaries, at Charles Schwab for example, are breaching securities laws, through a “loophole” no American retirement investor is aware of.  The media has not told IRA investors of this loophole, nor has the SEC or FINRA.  Main Street has been duped by Wall Street, for over 40 years, by a very, very clever scheme.

What evidence does one need?  Wall Street will never be a fiduciary.  Is it not unconscionable to set up laws in IRS code to evade existing securities laws?

Wall Street’s chance has come and gone. No more intermediaries.  The retirement investor does have a choice.

 

 

Dissect the news:  The financial reporting that impacts where and how you invest your retirement nest egg, has never been more complicated and apparently self-serving.

Today, most retirement investing news is sponsored by Wall Street, designed to deliver a message to change the individual retirement investor’s behavior, to sell more financial product, principally to retirement investors, now a $14 trillion market in assets under management.  Take a look at some of the headlines over the past year:

“Everyone Needs A Financial Advisor:  Financial Planning for the Masses.”  What if you could save money and have increased performance without an advisor.  It is possible.

“Active Investing is Dead”  Really.  Active mutual fund managers, that charge high fees and mimic index funds, should be thrown out, but hold the baby and don’t toss him out with the bath water.

“High Net Worth Women Love Liquid Alternative Investments”  Really?  We have discussed that before here:  “Liquid Alts, Wall Street, and Media Frenzies that Drive Retirement Investors’ Behavior.”

“Retirement Investors Love Advisors that are Both Broker and Advisor:  The Dual Registrant Model”  The dual model is a recipe for disaster, if a retirement investor is ever harmed.  Fees are higher and roles of the broker and the advisor are very confusing to the retirement investor. Wall Street has it engineered through FINRA’s arbitration process that if an investor is harmed, FINRA will simply say they were wearing what ever “hat” that protects them, not the retirement investor.

Not On My Nickel is pleased to help our retirement investors dissect most of the articles that are simply pushing Wall Street product.

Today’s example is from The New York Times, “How Many Mutual Funds Routinely Rout the Market: Zero”, March 14, 2015 by Jeff Sommer.

Yes, it is indeed true, very few active managers outperform their relevant index. However, there are some that have, they are dedicated professionals, that operate in the best interest of their customer, with low fees and a very transparent consistent style.

There are some active managers worth investing your retirement nest egg with.  ZERO is simply a hyperbole to push a product.

What is the issue with this article?  This article appears to be written by a Wall Street firm selling Wall Street product.

Jeff Sommer writes in his article, which should be, but is not, marked “Sponsored Content”:

“I wrote about the initial findings of that study last summer. It is called “Does Past Performance Matter? The Persistence Scorecard,” and it is conducted by S.&P. Dow Jones Indices twice a year. The edition of the study that I focused on began in March 2009, the start of the bull market.”

Mr. Sommer concludes:  “The study seemed to support the considerable body of evidence suggesting that most people shouldn’t even try to beat the market: Just pick low-cost index funds, assemble a balanced and appropriate portfolio for your specific needs, and give up on active fund management.”

Who did the study?  S.&P. Dow Jones Indices

S&P Dow Jones Indices, a division of McGraw Hill Financial, sells Index product.

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Unfortunately, the article does not provide any links to the actual study to determine what funds were in this study.  The periods they were looking at, were not clear.

Why does it matter to the retirement investor? This article is simply pushing a portfolio of index funds and there are no links to the actual study.  However that raises several questions for the retirement investor:

How does one know what index funds to include in the portfolio?  Are they filing their annual audited performance, with the SEC, of their portfolio of index funds?

Who can one trust to manage your nest egg in an index portfolio that does not provide audited returns to the SEC?  What is that individual’s track record of assembling a portfolio over a minimum of five years?

How does the return of this index portfolio after all fees, from portfolio manager fees, to embedded ETF fees, to custody and administration fees, compare to the top active fund portfolio managers, after all fees?

Time to filter the news and not be sold a theory, promoted with no actual data for the reader, that is designed to sell product.  A picture is worth a million words. Sure looks like an active fund outperforming the S&P in our picture below.  We would not label this “Zero” as Mr. Sommer did at The New York Times.

 

Active Management V S&P 500

 

 

It is time for 21st century investing, with the necessary legal protections for America’s IRA’s. Ban mandatory arbitration, and give IRA’s a private right of action.   The photo is from the SEC’s historical files on self-regulation in the securities industry.  Not much has changed since this photo was taken as a recent report reveals.SEC Historical Society Photo on Industry Self-regualtion

Retirement investors must pay attention to this recent study:  Industry-run FINRA Arbritrator Pool Panels Lack Diversity and Fails to Detect and Communicate Biases.

This study underscores how disastrous the situation is for every IRA investor.  There are over $6 trillion dollars in America’s IRA accounts.  Securities laws are breached day in and day out costing retirement investors cumulatively billions through poor performance and high, excessive fees from conflicted intermediaries–investment product salesmen, calling themselves “advisors”, to distribute their investment products.

You can read more at our retirement investor advocate Blog, Blog.thederivativeproject.com.

An IRA, opened up in a brokerage account, has absolutely no legal recourse.  “You have no right of private action” in your IRA and you are also subject to mandatory arbitration  Both these two legal issues must change and adapt to the reality of today–Americans’ retirement savings are all they have–  they deserve 21st century legal protection to go with their life savings.

Almost every IRA is in a brokerage account and is subject to mandatory arbitration before FINRA, which is Wall Street.  They hear your claim and you can bet the arbitrators will not rule in your favor.

University of Minnesota’s Carlson School of Management Professor Akshay Rao stated in this report:  “It is my opinion the process is illusory and especially harms claimant investors.”

Do not hold your breath for Congress to do anything with Minnesota Congressman Keith Ellison (D-MN) sponsored bill the “Investor Choice Act of 2013″.

What Should a Retirement Investor Do for Protection Against this Unfair Legal System?

You have but one choice if you want the best returns at the lowest cost.  Use Not On My Nickel’s benchmarking platform and new cloud-based interactive tools to go directly to the best performing and least expensive SEC money managers.  You eliminate the salesmen and the brokerage account, the only safe option for your retirement assets in this dangerous retirement investing marketplace.

You will save yourself a minimum of $155,000, according to this study and have piece of mind, through less risk.  (See Part II of this Blog Post.)

Learn How to Go Direct and Eliminate A Brokerage Account, FINRA, for Your IRA

You do not have to open up an IRA with a brokerage firm. You do not have to go through FINRA’s kangaroo court and conflicted intermediaries.

We show you how to protect your life savings from the flawed brokerage account system and their self-regulator, FINRA.  You do have an alternative and we will show you how to do it.

Join our 21st century way of investing.  We do not rely on costly, archaic distribution systems that the retirement industry is determined to push, to support their bottom line, which just reduces your nest egg.

We use technology to enable your retirement assets–to go direct to the best, at the least cost.  You need to decide for yourself with our transparency, tools and platform —on active or passive. Not On My Nickel does not sell any investment product or give investment advice.  We are 100% independent.  Not On My Nickel Seven Criteria

With our tools and benchmarking platform, the Consumer Reports of America’s top money managers (passive or active), you are in charge and empowered to make an informed decision, for the very first time.

Take a look at our seven criteria, to the right, for a money manager to make it to the Not On My Nickel benchmarking platform.  Every Not On My Nickel manager is required to file holdings and performance to the Securities and Exchange Commission, on a regular basis. We urge you to only access money managers that do so.  Your financial advisor does not file their performance with the SEC, on what investments they select for you and neither do new “robo advisors”.  That is too great a risk to take with your life savings to not be able to look at an audited history of a minimum of five year performance, after all fees.

Your nest egg will no longer be in one of the 8000 poorly performing mutual funds.  Low cost does not mean better. Get all the facts before you invest. Poorly performing new robo advisor passive strategies carry great risks, interest rate, currency and political risks —and these firms may be trading your retirement assets in dark pools, that reduces your returns, but gives them trading income on your nickel.

Email us to get on the list to access our platform and cloud based interactive tools first!  info@nullnotonmynickel.com

You may also want to ask your employer to give you access to our interactive tools and benchmarking educational platform for your 401k.

 

Uber Proof your Portolio

It is time to Uber your retirement portfolio.  What do you get when you Not On My Nickel?  You are in the driver’s seat.  You get a road-map. You have the tools to choose what is in your best interest.  It is a pretty picture, not to mention empowering and pleasurable to take charge.  No more headaches of Ponzi schemes or being duped or needlessly sacrificing over 1/3 to 1/2 of your nest egg for the pleasure of having your hand held by a salesman.

There is something new under the Sun.  We spent the weekend in San Francisco. Wow.  Uber is a bona-fide disruptor and a pleasure.  Let’s start with ease of use, followed by cost and a more pleasurable experience.  One appreciates transparency, beauty and cost.

Not On My Nickel delivers transparency and tools — a pretty, sunny, real-time picture:

  • Performance measurement with transparency of returns and costs – In simple, clean charts, you quickly have Performance, updated daily, after all fees.  For the very first time you are able to measure your performance, something your financial advisor has yet to provide you, after all fees. Not On My Nickel believes in evidenced-based investing.  Show me the money, the performance and the actual results, after all fees, not some fancy sales pitch.

 

  • You are in the driver’s seat.  You do not have to wait.  You know exact where your money is, how it is being invested, since you are no longer dependent on an intermediary.  You have direct access to the money manager’s investment philosophy and learn first when there are any changes.  There is no more dependency on an intermediary who filters what you see.

 

  • Crowd sourcing – Our website is a social hub.  Did your advisor testify to the Financial Stablility Oversight Council about the systemic risks of money market mutual funds?  Not a one did!  Not On My Nickel’s advocate did on your behalf.  Advisors will not tell you about the critical issues, nor fight for what is in society’s best interest,  if it detracts from their revenues. As you Not On My Nickel, you know the issues that advisors do not tell you about, before they detract from your performance,  such as:
  1. Why a money market fund might not be in your best interest.  How do they pose systemic risk?
  2. Has your Advisor told you about the SEC’s proposed changes and new exit fees in money market mutual funds?  You may have limited access to your cash in money market mutual funds for over ten days if Wall Street causes another run on your money, as in 2008, with the Reserve Money Market fund.
  3. What is voluntary recapture in a money market fund?
  4. What are the issues with Target Date Funds?
  • Access to superior money managers, based on the most critical Not On My Nickel seven criteria.  Not On My Nickel shows you how to know if you are paying more, in trading costs, if your advisor’s firm is trading in dark pools.  Is your Advisor?

 

  • Dynamic rebalancing – Let the pros do it. Do not let sales personnel, with no investment management experience or some computer algorithm, a so-called “disruptor”, based on historical trends, decide when it is time to rebalance, Not On My Nickel your portfolio and let the pros, the experienced money managers, do it for you.

Remember every “trusted adviser” must file with the SEC in their ADV:

 “Registration of an investment adviser does not imply any level of skill or training.”

As Neil Irwin wrote in The New York Times today:  “Why Can’t the Banking Industry Solve its Ethics Problems?“,  “The complexity of modern finance, the greed and gullibility of individual financial consumers…and financial sharp practices that fall short of fraud…”,

There is a reason why financial advisors’ profits are sky high, as reported in Investment News today:

Ameriprise Advice Unit Reports 29% Increase in Pretax Profit”

There is a reason why financial advisors select the mutual funds that pay them the most:

“DFA, American Funds Retain Top Spot — and Most Money Fund Advisors”

Advisors skim from your retirement nest egg, without adding any value, after all fees.

You can access superior money managers to DFA and American Funds, without paying an Advisor one percent, such as DFA Advisors. One distributor of DFA Funds, Buckingham Asset Management LLC charges 1.25 % (portfolio up to $500,000) to sell DFA Funds. American funds charges a 5.75 % up front-end load.

Every Nickel You Pay to an Advisor is a Nickel that is not Invested in Your Retirement

It is time to DIY your retirement savings and go direct to the best portfolio managers, without a conflicted intermediary.

On a $25,000 retirement account, to purchase a DFA small cap fund, one would pay Buckingham Asset Management $313, annually, or and American Funds, $1437.50, upfront, in addition to their 12B-1 fee, that goes to the Advisor annually–for an additional $60.  Note, the American Fund’s advisor, has no requirement by law, to monitor the investment for you (Non-discretionary portfolio.)  Yes, it is annual income to the Advisor for doing absolutely nothing.

Time to Uber-proof your retirement portfolio.  Learn how to access superior performance, at less cost, with an upfront investment of your time, that will pay dividends each year in greater returns. Take charge with the tools that show you the picture that you have been waiting for:

Look at the Performance Chart Below

The green line is what you could have chosen, on your own, if you had Not On My Nickel’d earlier this year.

The blue line is what your Advisor will sell you for one percent.

The red line is what the so-called Silicon Valley “disruptors”, like Wealthfront or Betterment, will sell you–an Index fund that is cheap, but under performs seasoned money managers.

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Do not be greedy and do not be gullible.  Take charge, as you have the power of compounding on your side.  If you wait, the advantage of time is gone.

Time to Uber – proof your portfolio and take charge, where you are in the driver’s seat.  It is time to Not On My Nickel on our soon to-be released retirement platform.

Time to end the learned helplessness and dependency on conflicted sales personnel, whose objective is their bottom line, not yours.

 

 

 

Chris Farrell, Economics Editor at Minnesota Public Radio (Marketplace Money) writes today,  New Thinking on When to File for Social Security“.  This is more media-induced nonsense Screen Shot 2014-05-06 at 11.24.35 AMsimply to get you to pay more for Wall Street’s advice services, promoted through media shills, in this case the Minneapolis Star Tribune and Minnesota Public Radio, a leader in promoting expensive financial intermediaries, on your nickel.

Why Financial Literacy Efforts Failed:  Wall Street Wrote the Curriculum and Spread the Message with the Help of Public Radio.

Remember, Minnesota Public Radio obtains “sponsorship revenues” from Wall Street firms, such as Financial Engines and the Minneapolis Star Tribune prominently places “financial advisor” ads, next to Chris Farrell’s article.  We would label this piece by Mr. Farrell, “Paid Advertising” and think it only proper for the Star Tribune to do so.

Wall Street’s latest push —”everyone needs a financial advisor” is now a PR Blitz that everyone needs an advisor to understand social security’s complexities.  It is their way to get you in the door and cross sell all their other expensive intermediary services.

Listen to Financial Engines 2/20/14 Analyst Call, in the upper left box..  In this call you will hear Financial Engines describe their strategy to increase the American retirement investor’s dependency on their service: “The social security” strategy.  We aren’t making this up. The facts are on the Analyst Call (2/20/14) linked to above.

You might also want to listen in this afternoon to see how Financial Engines Q1 results are with their new social security entrapment strategy for workplace retirement investors.

As Chris Farrell is telling you, on behalf of Financial Engines,  Social Security is so complicated you now need a financial advisor, such as Financial Engines, to run it through their computer, to determine when you and you spouse should take the benefits.  This is Wall Street’s ongoing push to create brain-dead Americans who are incapable of thinking or feeling, without paying Wall Street a fee.

Financial Engines has moved into your corporate 401k and now are pushing your employer to take greater and greater fees from you for Financial Engines paid “advice” services. 90% of the services Financial Engines offers, one can obtain on the Web, for free. One of the supposed new “value-added” services is when you should take social security.  You are fully capable of determining this on your own.  Take out your annual Social Security statement and you can calculate yourself how much you and your spouse get under varying scenarios.  The puzzle is quite easy to determine, based on your own needs and desires, particularly when many couples have worked their entire lives and may be close to getting the max from social security.  That limits the options and quickly reduces the “8000″ permutations for most people.

Here is an excerpt from Mr. Farrell’s, New Thinking on When to File Social Security – his latest syndicated piece, promoting Financial Engines:

“Here’s the thing: Social Security is immensely complicated. The program has been revised ever since it was signed into law in 1935. For example, married couples have an estimated 8,000 permutations for deciding when and how to file for their Social Security benefits, according to Christopher Jones, chief investment officer at Financial Engines, the online 401(k) adviser.

The U.S. retirement system is like a pyramid. The base is Social Security. Additional layers are homeownership, employer-sponsored retirement plans (private and government, defined benefit and defined contribution plans), IRAs, and other assets such as bank deposits and savings accounts. In an interview, Jones emphasized the importance of understanding how all these assets affect each other during retirement.”

Mr. Farrell, as Minnesota Public Radio’s economics editor, we would expect more.  (Star Tribune, lets label articles “paid advertising”, when it should be labeled such). Tell the average American how they can analyze their social security statement on their own to make this determination.  It is possible without a computer and without going to an Advisor. Don’t push the already stretched middle class American to pay more intermediary fees, that they simply cannot afford on stagnant wages, as you are well aware.

Let us know if you would like Not On My Nickel to do a follow-up education on the five easy steps to determine when to take social security, without paying onerous fees to do so. That adds value, not another Wall Street wolves’ scheme to extract more …from a turnip.

 

Professor Shiller Says Everyone Needs a Financial Advisor and the Government Should Help Pay for Them  

Screen Shot 2013-11-03 at 7.42.39 AMProfessor Shiller received the Nobel Prize for his work in behavioral economics.  On October 15, 2013, the Washington Posts Neil Irwin interviewed Professor Shiller, as described here:  “On Monday, the Nobel Prize committee awarded three American economists, Eugene Fama, Lars Peter Hansen, and Robert Shiller, the world’s leading economic prize. Shiller won for his work explaining some of the limits of the hypothesis — advanced in no small part by Fama — that financial markets are efficient. Shiller, a professor at Yale, spoke with me by phone on Monday afternoon”.

What Does a Real 401k Investor think of Professor Shiller’s views that the government should provide everyone a Financial Advisor?

The first comment to the Washington Post article linked to above is, verbatim:

“Excuse me, but this talk about 401Ks has me very interested… If anyone wanted to know what REAL people do and how they act if they’re “fortunate” enough to have one, they’d ask REAL people. It isn’t that REAL people aren’t “interested” in managing “their portfolios.” It is that most REAL people don’t even know what a portfolio is. Or what it’s supposed to do. They’re intimidated by financial talk. They’re too busy working all the time or trying to figure out how to survive and pursue happiness, the little bit of time they’re not working. 401K? We have one. Used to have two. In 2008, we had $50K stolen in the middle of the night! And you want to talk about we need “financial advisors?” Ha! There’s NO ONE we can trust, and we are not economists, we are human beings. We just want to live, survive, eat real healthy food, have roofs over our heads, love and nurture our children and have something to smile about once in awhile. But that just seems like too much to ask anymore. Instead, we give and give and give our lifeblood, everything for the grind that takes more and more and leaves us depleted and defeated. There’s so much expected of us, not by the poor or the sick, or the downtrodden, but by those who exploit us. There’s some real life behavior for you. All you had to do is ask.”

Not On My Nickel was created for the “real” 401k investor, who has limited time, energy and just wishes to spend their precious time with their family and not give every last penny to aggressive, selfish intermediaries. They are devastated by their children drowning in student debt and unable to find a job. They scared about their future job prospects. They want to trust someone.  They want real tools and education, no more hidden fine print disclosures of never-ending conflicts of interest.  Of course, they want to be in the lowest cost and best performing blue chip investment.  They honestly believed that is what their employer would choose for them.  Why wouldn’t their employer give them the best investment alternatives?  They are not.  It is what the economists call lack of “price transparency.”  If you have more interest on the ins and outs, you may read more here from our retirement investor advocacy group, The Derivative Project.

Look hard at the chart, below. If you are a retirement investor would you choose:

Option A – The Department of Labor mandated Target Date Fund (HLHAX) option in your 401(k) that automatically deducts a fee for “financial advice” from your savings, without your prior approval? Your Employer places you in this Department of Labor selection, Target Date Fund, if you did not have the time to choose, or

Option B – The Not On My Nickel researched balanced fund (PRWCX) that meets all Department of Labor standards, but provides you $20,000 more on the average 401(k) balance ($80,000) after 5 years. Yes, better performance, lower fees and a long-term track record with a well defined investment strategy you can understand.

Hint:  Your 401(k) does not currently provide you Option B – Not On My Nickel tools, reserach and education to make an informed choice.  In reality, you are stuck with Option A.  Ask your employer to give you the Not On My Nickel option to understand what is the better alternative that places your limited time and needs ahead of the old type of defined contribution plan designed by Wall Street, not designed for the 401k investor.

Does this Chart Give you A Headache?

Does the Chart, below right stress you out?  Now our readers know where the Washington Post comment comes from.  Exhaustion from an industry that keeps taking and taking without delivering any value.

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Yes, this chart is exhausting. In fact it is beyond outrageous that over $1.75 billion dollars of retirement savings have actually been invested in this fund, NLHAX, a State Farm Target Date Fund.  Please, if you know anyone that is so unlucky to be in this Fund, let us know.  They have options!

The performance of NLHAX is abysmal. The fees are excessive. And we are not done.  You are being automatically charged by your employer a fee that goes directly to pay for “financial advice” fees to help you retire–without your prior approval!  Whoa, that is aggressive.  We honestly cannot think of any other industry that has convinced the government to take money directly from your paycheck without your prior approval.  Can you?  If so, please send us an email at info@nullnotonmynickel.com.

You Now Have a New Choice!

Retirement Investing Defined Contribution Plan 2.0 at Not On My Nickel

Everyone has a choice. It is a small investment in time, but once you understand the process, your time will be limited, you will understand what is of value and the never ending fees will be eliminated.  You will be able to measure the good from the bad, as to performance.  You will protect your self from Ponzi schemes and rogue advisors. You will be empowered and the clouds and confusion, the unhealthy dependency on Wall Street, will all disappear.  You will begin again to trust.

Not On My Nickel is completely independent from all financial services providers.  We give you the tools, education and research to end the dependency on an industry that places their profits ahead of your family and financial well-being.  We designed this new service for investors such as the Washington Post commenter.  We tried for five years of meeting after meeting with the SEC, Department of Labor, FINRA and Congress to change the abysmal chart on the right.  They refused.  It is called “regulatory capture.”  Money gives Wall Street the access to the government officials to keep their profit model that is in their best interest, not yours, flourishing.  The Derivative Project would need millions upon millions to match their access and influence.  We do not have that. Only you can make the change to end the current cycle.  It can be done.

Your only choice is to take charge and not be a victim.  The tools, training and research are now available. It is a small investment of time in your future, that research has shown will save you hundreds of thousands of dollars.  The tools will get you excited to finally understand the simplicity of selecting the best portfolio manager, on your own.  Come take a look. Email us today and we will get started.  We look forward to hearing from you.

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The concept of “Fiduciary” is meaningless today when discussing the financial advice industry, whether that be a stockbroker or a RIA*

Are financial advisors worth the money?  Are they adding any value in investment selection?

In an article yesterday, pictured to the left, The Financial Times is asking the questions that American media and  our Department of Labor, tasked with regulating retirement plans, refuse to ask.  Whether it is a new unproven passive strategy, a mutual fund that is loaded with fees and poor performance or a financial advisor that overcharges you to select one of these high-fee mutual funds, it is long over-due for the US media to follow the media coverage lead of those across the “pond “. As this article states, ” The question financial advisors have to ask are the moral and ethical questions, as the Financial Times wrote:

“Asked by an audience member how asset managers could stop their reputation becoming as bad as that of estate agents and second-hand car salesmen, Mr Utermann said managers have to question whether they are delivering value for money to clients.”

 

The Goal of American Fiduciary Advisors is Singular:  Gather More Assets Under Management – Not Am I Adding Value

What value are financial advisors, for investment selection, delivering to American retirement investors, after all fees?

What is the primary focus of US financial intermediaries today?  A picture, below, is worth a thousand Screen Shot 2013-11-25 at 4.23.15 AMwords.  This is from an article in a trade journal for financial advisors, published last week.  The primary focus of the financial advice industry is to gather as many assets they can, at the lowest possible cost, and then see how much money that can charge the retirement investor, without the investor crying foul. “100 Billion or Bust”. It is just that simple.

Performance, after all fees is not relevant to advisors and advice firms.  They have never been held accountable. There are now trillions of dollars in 401(k) plans and IRA plans these financial advisors are salivating over and the smoothest salesmen or those with the best guerilla marketing plans, such as Dimensional Fund Advisors, are coming out the winners.  Your retirement performance, after all advisor fees, is never revealed by any of these “fiduciary” advisors.

Ironically, the new “passive” movement has yet to provide performance results, after all fees.  For example Dimensional Fund Advisors, charges 1 percent to purchase a predominantly passive strategy.  Hint:  If you pay one percent to buy an “index” your performance is one percent below the index.

When you buy a car or a house, there are “lemon laws” and home inspections, documenting all the potential pitfalls of what you may be buying.  You can comparison shop online for cars.  You have full transparency. The new breed “online advisors” believe they are above full transparency and because they are not placing you in high-fee mutual funds, their new-fangled service must be better.  You must trust their computer model and their theories, even though many academics have proven them wrong.

Are these new services any better?  Unless, they can provide you with at a minimum a five year past performance history, based on their model, after all fees, including theirs, and you can then compare their results to comparable top performing active or passive managers, who can provide 5 – 20 year history, why would you run the risk of selecting underperformance over a proven strategy?

Car Salesmen and Real Estate Agents Have Full Transparency

Buyer beware, these new breed “advisors” should not be compared to real estate agents or car salesmen—at least there you know what you are paying for and have full transparency.  The financial advice industry is far worse. There is no transparency or accountability for performance after all fees.

At Not On My Nickel, we are not a stockbroker or a financial advisor.  We are the first and only independent financial education and research service that gives you the tools to compare the value of your traditional advisor or the new-fangled passive strategies to the proven portfolio managers that have outperformed indices for decades, after all fees.  We have run the numbers.  Not On My Nickel researched portfolio managers outperform the new-fangled passive modern portfolio theory computer models, after all fees every time. Yes, you are also diversified and the portfolio managers, human beings, do the rebalancing for you, not a computer model.

There are not many portfolio managers that have-outperformed- but why not invest with them if your performance far out performs, after all fees?  Who are these active or passive portfolio managers, you can easily access directly without paying an advisor 1 -2 percent?

*RIA is the term for a SEC registered investment advisor, who is supposedly held to the strict “fiduciary” standard in the Investment Advisers Act of 1940.

An Exception to the Free Market Economy – Something Just Doesn’t Add Up with So Many Poorly Performing Mutual Funds

Many studies repeat the theory that there are approximately 10,000 mutual funds and 75% under perform their relevant index.  We all know a free market economy is based on free choice and competition. If a free market is based on free choice and competition why is anyone investing in these perennial under performers?  Wall Street has some explaining to do–why are there so many poorly performing mutual funds if there is a competitive marketplace?

Screen Shot 2013-11-12 at 3.35.33 PMWho is investing in all the poorly performing mutual funds?

  • Who are the advisors recommending these funds to their retirement clients?
  • Why hasn’t anyone given retirement investors the tools to make an informed choice and not select the poorly performing/high fee funds?
  • Why do employers put poorly performing Funds in their 401(k)’s?
  • Why do paid CFP’s and other Defined Contribution Plan consultants recommend these poorly performing funds to employers?
  • Why is the Department of Labor allowing poorly performing/high fee funds in your 401(k) plan?

Listen to this video interview with a Financial Advisor, conducted by the Financial Times’ Financial Advsor IQ, on how an Advisor selects a mutual fund.  The reality, as the last financial advisor in this interview told the Financial Advisor IQ, is one needs an Advisor to sort through all these poorly performing funds.  The industry, “Wall Street” has created the need for a “financial advisor” by stuffing thousands of poorly performing mutual funds with retirement investor assets and into 401(k) Plans.

In the article linked to above, Michael Rosen, Financial Advisor told the Financial Times Financial IQ:

“Hey, you could just throw a dart at a board. No, realistically, there’s a million of them out there, but there’s plenty of tools that you can break them down, like tenure of the manager, the volatility of the fund, then doing a fact-find on what the client’s looking to do and then you try and put it together and make the best decision. But, again, that’s why you need a financial advisor, because there are a million different choices out there and you try and simplify it for the client.”

Not On My Nickel’s concept is simply you select the one or two portfolio managers that will do all the work for you, with top performance and low fees.

Your results:

  • Less Fees to the mutual fund manager
  • Proven investment strategy from top portfolio manager, that has a 10-15 year track record of out-performing their relevant index
  • No Fee to a Financial Advisor, who you do not know if they are any good at selecting Funds for you or if they may have conflicts on what they select for you
  • The tools and training for you to decide what portfolio manager/mutual fund is in your best interests.

Remember, just because Wall Street has created over 10,000 poorly performing mutual funds, you do not need to pay an Advisor to select one of these poorly performing funds for you, as they have in the past. Not On My Nickel gives you the tools and the confidence to select the portfolio manager, the investment style and a top performing Portfolio Manager to manage your retirement nest egg.

Further, how do you know if the financial advice you have been given is any good, in terms of investment selection?  You do not know unless you can compare the Advisor’s recommendations against a benchmark.  Chances are you are losing thousands of dollars in worthless fees and poor performance.

Not On My Nickel is the education service that shows you how to evaluate the investment selection advice you are given, through tools and the benchmark.  When there are a few top portfolio managers that have demonstrated they can out perform the relevant index, why would you ever settle for an index fund or a passive investment or poorly performing fund. You are guaranteed to under perform the index, if you pay an Advisor for a passive investment or a package of passive ETF’s, based on a computer model.

Help Us Return to A Free Market, A Competitive Market Place for Mutual Funds

Once you exercise your informed choice and select the top performing mutual funds, the poorly performing funds will disappear. It is call free and open competition. You are in charge of restructuring this flawed marketplace, littered with thousands of poorly performing, high fee mutual funds.

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Someone Has Made Picking a Mutual Fund Way Too Complicated

It just isn’t that tough to do, with the proper tools, training and benchmarks.  Here is a very simple secret.  Before the advent of 401(k)’s,  individuals with some accumulated wealth were able to locate a top performing fiduciary portfolio manager without a financial intermediary.  Not On My Nickel takes you back to those days.

There is a debate going on at both the Securities and Exchange Commission and the Department of Labor on whether or not a stockbroker should act in your best interests, to the “fiduciary” standard of ERISA or the “fiduciary” standard of the Investment Advisers Act of 1940 or the “suitability” standard of the stockbroker.  The reality is it really doesn’t matter for the average retirement investor.  Why?  Both types of Advisors are conflicted and the only solution for the average retirement investor is to learn how to use the simple tools to make an informed choice themselves. Neither stockbroker nor fee only planner provides any performance results after all fees.  You simply do not know the value of either intermediary – stockbroker or fee-only fiduciary planner.  Based on Not On My Nickel’s analysis comparing the returns of the top performing active balanced fund managers and blended growth and mid-cap growth funds, to the very few performance records available for fee-only planners, you are losing out significantly to high fee and poor performance selections using either type of intermediary.

Listen to Representative Hurt (Republican VA) speak on why you need access to a stockbroker’s advice to pick a mutual fund, Congressman Hurt Floor Speech on HR 2374.  

Ask Congressman Hurt why it makes sense to pay more each and every year for the exact same product that you can buy yourself at a discount brokerage firm, or directly from the Fund firm, without these high fees, using tools, research and information through educational services, such as Not On My Nickel?  (For the record, Not On My Nickel offered to show our analysis to the House Financial Services Committee prior to their vote on HR 2374.  They refused to accept the information and refused to meet with us to understand another alternative for today’s retirement investors, that might be in their best interest.)

Do you really believe it is worth paying more money to a stockbroker each year for the exact same product?  Do you think you should pay your real estate agent a finders fee each year for the wonderful home she found for you?  Also, remember the Stockbroker has no ongoing duty to monitor this Fund they told you to buy.  That is your responsibility.

  • Do you know what your investment performance is after all fees, when you pay an intermediary for advice?
  • Do you know how that compares to if you simply invested, yourself, in the top performing balanced fund and growth funds that have out performed their relevant indices for decades?
  • Do you know if your returns are better after 10 years based on a computerized portfolio management model based on modern portfolio theory, in active or passive funds and paying a fee for advice, compared to selecting these Funds yourself, based on targeted research?

It is more than beyond time that you are given the answers to these questions.  Not On My Nickel helps you gather these answers so you can know what you are paying for in all-in asset management fess, just as easily as you can determine what is a fair fee to pay today for the IPad Air.  However, the difference is you need this transparency as the costs have estimated to impact you in the $100,000′s of dollars – a far greater impactful decision that saving $20 on the IPad Air.

How To Save Hundreds of Thousands of Dollars Over Your Retirement Investing Lifetime

Today we will share with you how you can purchase the same mutual fund, yourself, and save thousands upon thousands of dollars over your investing lifetime in one simple step.

As the concept of Target Date Funds is suggesting, the average retirement investor just needs one or two low fee, consistently managed balanced funds and for the young, one or two top growth funds. The problem is the Target Date Funds currently offered carry higher fees and poor performance compared to the select top balanced funds that NOMN has researched.

As NOMN wrote on August 2, 2013:  Target Date Funds Carry Greater Risk and Cost More: Why is the Department of Labor Allowing Them?

Let us a assume you buy the T. Rowe Price moderate allocation fund (PRWCX) directly from  a discount brokerage, such as Scottrade, your self.  You pay Scottrade a one-time fee of $17. You can also buy the Fund directly from T. Rowe price and save any transaction fee.

If you buy the same fund through a stock broker you will pay greater fees each year, for the exact same Fund, or precisely .35% more of your outstanding balance, than if you purchased the Fund on your own.

Think about this.  Your are paying more for the exact same product, year after year, after year.  What other industry allows this type of dysfunctional pricing?  What are you getting for paying hundreds of dollars more for the same product?  Nothing. Under the “suitability” standard the stockbroker has no further obligation to you.  Once you buy the fund, his responsibility ends, even though you keep paying him an annual fee!

The Drawback of the Stockbroker – How Much You Lose Each Year By Using a Stockbroker in Dollars and Cents

Here is the chart from the moderate allocation mutual fund, PRWCX, T. Rowe Price’s 6-30-13 semi-annual prospectus, filed with the SEC.  Take a look at how much you are giving to the stockbroker and the financial services firm for using an intermediary. You pay 1.04% each year of the outstanding balance if you buy the Fund from a stockbroker. If you buy it your self, you pay only .73% each year!

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The Fund firm, T. Rowe Price, also shows you how much you lose in performance on your investment by buying the mutual fund through a stockbroker in this chart below:

 

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What the above chart tells you, for the year ending June 30, 2013, if you had purchased the Mutual Fund PRWCX from the stockbroker you would have made on $200,000, $35,780.  If you bought the Fund on your own, you would have made on a $200,000 investment, $36,520 or $740 more in one year!  Remember, through the power of compounding and as your balance grows, your loss for purchasing this fund from the stockbroker will grow larger and larger each year, as you will always pay expenses at the “Advisor Class” rate.  Again, under the “Suitability” standard, the stockbroker does not even owe you a telephone call for the extra fees you are paying.

Do You Know Where to Get the Best Price on the New I Pad Air?

Of course you do.  There is complete transparency on the new I Pad Air pricing.  It is called capitalism and a free and competitive marketplace.  Read today’s article from “tom’s Hardware.”

Apple, Staples, Best Buy, Matching I Pad Air Pricing

The financial services firms provide the “financial education” in your workplace.  There control the message and information flow. There is not any transparency, which is a major contribution to our current retirement crisis and “financial literacy.”  Retirement investors have been made to depend on all these high-fee intermediaries and have no idea about how to value the pricing and performance of the advice they are paying for. Of course, these intermediaries are conflicted.  Their livelihood depends on you buying mutual funds from them and not on your own. We are certain very few employees are trained in their workplace by the financial services firms on the devastating impact these fees have on the growth of your retirement portfolio.

Not On My Nickel seeks to provide retirement investors the same pricing transparency you can get from tom’s Hardware, so one can make an informed choice on the largest investment of their lifetime.

Part II of this post is forthcoming on why a “Fee Only Planner” costs you as much or more as a stockbroker and may even be less of a fiduciary, despite their claims that they are.