Screen Shot 2013-11-02 at 7.11.10 AM

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!

Screen Shot 2013-11-02 at 5.47.54 AM

 

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:

 

Screen Shot 2013-11-02 at 5.48.18 AM

 

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.

 

Academic Study Reveals many large investors are “throwing away billions of dollars a year on worthless advice from investment consultants”.

Screen Shot 2013-09-27 at 5.04.29 AMThe Derivative Project, our retirement investor advocacy group, just tweeted a September 21 article in the Financial Times that reports a recent academic study found large investors are throwing away billions of dollars a year on “worthless advice from investment consultants.”  Not On My Nickel’s tools demonstrate the same concept is valid for every retirement investor.

As the Financial Times reported from this study:

“Since consultants do not disclose their individual recommendations, pension funds are allocating assets on advice the quality of which is impossible to judge,” said Mr Jones, who contrasted the situation with consultants’ “ruthless” scrutiny of fund managers.
“It is high time that pension funds or regulators required consultants to disclose their past recommendations. Unless investment consultants are ashamed of their performance, they should come out of the shadows.”

Not On My Nickel Provides the Tools to Determine if the Advice is Any Good

Not On My Nickel is the new service that gives you the tools and bona-fide education to determine if the advice you receive is providing better returns.  We believe the “proof is in the pudding.”  The rule is very simple.

Do you have five years past history of investment style and performance against an agreed upon, SEC approved, performance index that proves the Advisors “advice” will add value, after all fees?  If not, do not take the advice.  Go with what you know.  The risks are too great for your life savings.  You now have a more conservative option – invest directly with the top US portfolio managers that have 5, 10 and sometimes 15 year history of out-performing their relevant index.

Not On My Nickel Now Provides You An Option to Poor Investment Advice or Advice You Cannot Measure, while you save thousands of dollars 

Here are Not On My Nickel’s rules.  We provide the training. Invest in educating yourself:

1.  Past performance is not indicative of future performance, but it can be used as a guide.  Ideally only choose a portfolio manager with over 10 years of performance that outperforms their relevant index.

2.  There are only a handful, in the United States, of portfolio managers that fall into the requirement of Not On My Nickel’s Number 1 rule.  We give you the tools and education to find them. We do not give advice.  Not On My Nickel provides you with the transparency, the tools and the access to information for you to make an informed decision.

3. Eliminate the middleman fee:

  • It costs you more money and detracts from your performance, unless you have the “Proof” that their advice will deliver superior returns to the top US portfolio managers
  • It eliminates the risk that the advisor may put you into a poorly performing investment.  You are in control and no where your money will be and can watch it grow.
  • It eliminates the risk the advisor will put you into a product that enriches their bottom line but exposes you to a money losing scheme such as Charles Schwab’s High Yield Mutual Fund or auction rate securities
  • It eliminates the risk you will be subject to a Ponzi scheme.
  • It gives you peace of mind and the satisfaction of empowerment – you are in control, through transparency and tools of your destiny.

Remember the “proof is in the pudding.” Measurable results are the only thing that counts.  If the Advisor cannot give you, at a minimum, five years history of how their advice outperforms the returns of our nation’s top portfolio managers, do not pay them a fee.

Bona-fide financial education is the alternative today to conflicted 401(k) plans

Screen Shot 2013-09-23 at 10.09.46 AMFidelity employees are suing their employer, Fidelity, over high-fee mutual funds in their 401(k) plans, as reported today by CNN Money.

Am I Better Off With an Index Fund or An Actively Managed Mutual Fund?

With an actively managed fund, the portfolio manager will do all the work for you. With passive investing, you may not know what indices to choose.  If you pay an advisor to select the indices, you have the risk they will not choose the right indices and you will underperform the market after the advisor fees.  The most conservative option is to go with one of the few portfolio managers that has proven they can outperform their index.

Use independent education and the proper tools to choose the very few funds that have consistently outperformed the relevant index.  The concept is very simple.  Out of the 10,000 actively managed funds, which are the very few that outperform the index with trusted managers, with low fees, with low portfolio turnover?

There are just a hand-ful of these portfolio managers that have withstood the test of time.

If you were invested in Index Funds this year, you would have lost out significantly, as Not On My Nickel bona fide education and tools will show you.  Can you understand this Yahoo Chart below? Has your Fidelity Advisor or CFP taken you through the steps to learn how to select the few actively managed funds that consistently outperform the relevant index?

Come join us at Not On My Nickel and we will give you the education and tools to select the best mutual funds out of the 10,000.  All you need is one or two balanced and growth funds, if you are young and starting out.  In the chart below we compare Fidelity’s Target Date Fund 2045 to three NOMN researched funds, a balanced fund, a growth fund and an aggressive growth fund.  The NOMN growth fund has outperformed the S&P Index for over 20 years by over 5% over the past 15 years.  The balanced fund is below the S&P index since it holds bonds. but it still outperforms the Fidelity Target Date Fund.  The blue line is the Fidelity 2045 Target Date fund.  The red and green lines represent all the lost potential, by not in investing in proven portfolio managers who outperform their index, with low fees, over many years, sometimes two decades. The red and green lines represent the opportunity costs of investing in passive funds, when there are a handful of top fiduciary portfolio managers that have consistently beaten the relevant index.

There are a handful of true fiduciaries that operate in the best interest of the retirement investor.  Remember your advisors do not file regular performance results.  It is significantly more conservative going with the portfolio managers that do file performance results with the SEC.

Screen Shot 2013-09-23 at 10.45.15 AM

Education = FutMP900341471Not On My Nickel is Do It Your Self, but only from the standpoint of selecting a Portfolio Manager

How do you achieve the best retirement returns?  First, understand performance does matter.  Poor advice will detract from your performance and how much money you will have at retirement.

At Not On My Nickel you learn how to determine what is good and what is bad advice. At Not On My Nickel, you are not doing it yourself. You are given the tools, research and education to select your portfolio manager, who will do all the retirement investment management for you.

Ideally, one does not change managers very frequently. Not On My Nickel helps learn how to research portfolio managers that have been in the business for decades and have the performance results that exceed their relevant indices. There are not many that consistently outperform their index. Not On My Nickel believes in strictly investing with the few portfolio managers that do.

Passive vs Active Management

Not On My Nickel believes in principally active management, but solely with our nation’s top portfolio managers that have proven their worth and have out-performed their index for years.  They must meet our six strict criteria, as defined on our home page here, Save Your Sanity”  and have prudent and reasonable fees, as one believes in “an honest day’s work, for an honest day’s pay.”  These are the true fiduciaries, not middleman that keep you in the dark as to performance and unnecessary fees on top of fees.  By definition, that model is NOT a fiduciary business model.  It is simply a model that developed with the advent of 401(k)’s in the early 1980′s.  It is a redundant business model.

This business model and the “financial planning” industry is now focusing on lower fee mutual funds and ETF passive investing, solely as a means to keep their high fees of 1%- 3%.  Why?  In this low interest rate environment, once you pay your “advisor” your returns may be negative.  Thus the advice industry is able to retain their fees, if the asset manager (who is actually managing your money) has lower fees, which is the case with passive investing.

There may be instances when passive management is warranted, but a blind adherence to passive investing, guarantees performance, after fees, below an index.

Not On My Nickel’s Vision

We are here to change the current business model for retirement investing. Ideally, everyone would have defined benefit pensions, but that is no longer the case and probably will not be the case. What is the next best alternative today? We believe that in today’s retirement investing marketplace “assets under management fees”, on top of mutual fund fees, are simply a scheme to defraud a retirement investor of savings that belong rightfully to them.  We provide the tools and education to help retirement investors take charge.

Screen Shot 2013-08-19 at 5.34.26 AMTake a look at this chart on the left of a 401k investor’s dreadful returns compared to a Not On My Nickel researched portfolio manager, PRWCX. How much is lost, in many of the 401(k) plans today? So much money is needlessly lost, particularly from newly-designed target date options. Yes, in most 401(K) plans, you are often losing your hard-earned savings to fees and poor returns. The returns on the left are the actual returns, filed per SEC reporting standards.

retirement savings per robert hiltonsmith

Robert HIltonsmith’s retirement reality with a focus on hidden fees

In the instance on the left, if you have a State Farm sponsored plan, managed by Black Rock, as the chart on the left depicts, and are in one of their Target Date Fund options(NLHAX), you could be giving up thousands of dollars needlessly for advice fees, 401(k) fees and poor returns. Further in this instance on the left, your employer may have allowed Charles Schwab/Guided Choice to further charge you an advice fee to select a poorly performing Target Date Fund.

Read the study to the right, prepared by Robert Hiltonsmith. You are losing hundreds of thousands of dollars to worthless fees in most 401(k) plans.  Not On My Nickel further highlights the worthless advice fees, not mentioned in this study, that are being skimmed from your nest-egg by “Advisors” and the poor returns of today’s Target Date Funds or packaged exchange traded funds, (ETF’s) that have no performance history!  It is like throwing money into the wind.

You can change this picture today!  Despite the promotion by main stream media, described in this Blog Series, Part I, by the Wall Street Journal and the New York Times, financial advice for everyone, is not the option. Employer sponsored 401(k) education is conflicted and therefore of little value. Conflicted advice and education, provided by a sales force, selling products, is not advice and education. The result is financial illiteracy. Bona fide retirement investing education that provides real transparency and the tools to make informed choice is the solution.

Education = FutMP900341471Remember Not On My Nickel’s Number One Rule

Make only informed choices through proper education and financial tools. Do not take advice or pay an assets under management fee to any “investment advisor” or “financial advisor” that does not file regular performance returns, against a widely published index, with the Securities and Exchange Commission, SEC.

This includes paying for investment advice to a CFP or to new online start-ups, such as Betterment or Wealthfront While their intermdediary fees are lower, it is still the same flawed “assets under management” business model. Until any investment adviser can deliver published performance returns against an agreed upon index, (for a minimum of five years and ideally 20 years) do not do business with them. The risks are too great.

Remember, just because the business model is online and costs less, it is not necessarily any better. Performance does matter. Modern Portfolio Theory, that these online services are based upon, has significantly detracted from retirement savings performance. Not On My Nickel experiential education and tools help you understand the pros and cons of Modern Portfolio Theory. It is in your best interest to make an informed choice on why or why not you would want such an online service to manage your money. Without the education and the proper tools, you cannot make an informed choice.

The Incredible Power of Informed Choice and Education in Leveling the Playing Field

If Americans would begin to follow Not On My Nickel’s most simple rule an industry would be transformed. Through the elimination of this financial intermediary, the financial advisor, societal benefits would be profound:

  • Senior fraud, through confusing certifications, would be close to being eliminated, since these intermediaries are redundant. Informed choice and education would reveal that..
  • Regulatory costs would be close to cut in half as most investment fraud and Ponzi schemes could be eliminated through transparency and bona-fide education. The SEC budget would decline and save significant tax-payer dollars.
  • 401(k) plans and 403(b) plans would change immediately, if every employee used their brokerage window and placed their money with the top performing portfolio managers. The poorly performing mutual funds would simply go out of business.
  • Americans would have significantly more money in their retirement nest egg. Significant sources of revenue would shift from financial service firms into the pockets of middle class Americans at their retirement.
  • Many jobs would be lost, yet new ones would be created in areas that add value to society overall. Financial service firms would be forced to focus on the true societal benefit, prudently managing retirement assets and the best way to deliver the best performance, not skimming off easy middle-man fees.
  • High-fee fund of fund Target Date funds that solely benefit financial service providers, not retirement investors, would disappear.

Why Do I Not Know About the Services of Not On My Nickel?

The Wall Street Journal or the New York Times and most press sources simply report on the firms that generate a revenue stream for them or they agree to the story due to a PR team that gets them to cover it or are connected to the firm since they have “Silicon Valley” venture capital funds. Not On My Nickel does not fit any of those categories.  Not On My Nickel is a new business model different from current financial services firms:

  • Financial service firms will never train you or educate you on how to take charge on your own. They will not provide transparency. Their future is dependent on taking a percentage of your retirement assets or annual planning fees. That is their business model, whether or not it adds any value to your nest egg. Not On My Nickel represents transparency and information to enable informed choice, so one can determine why or why not they should have or not have a “middle-man.”
  • Not On My Nickel takes a little work, for the retirement investor, upfront. Therefore, not many people will “like” us on Facebook or Twitter. We are not the easiest and quickest solution, but we are the best and only solution today. One has to have the inclination to invest some time to learn how to select a portfolio manager on one’s own. Not On My Nickel completely understands that taking the time to do so, is not easy. Work hours are long, families need attention, the house needs to be cleaned. One wants to have some down time on the weekend.
  • Not On My Nickel strictly focuses on the tools that enable an experiential learning to involve every level of investor in their bottom line immediately.  There is not sorting through difficult investment concepts from ‘growth’ to ‘value’ to ‘small-cap’ to ‘mid-cap’.  The learning rewards are immediate allowing excitement in the ability to take charge of one’s financial affairs.

We understand the realities of time constraints and a ‘boring subject’ matter.  We have the techniques to overcome these issues. We will work with you to make you feel comfortable taking charge.. We are up against the media and the financial services firms whose future depends on a chunk of your retirement. We are up against the trillions of dollars of ad budgets, TV budgets, Congress, and the SEC that are all promoting this failed business model that is NOT in the best interest of the retirement saver or society overall.  We are up against an industry that wants to keep you in the dark.

servicesHow to Maximize Your Retirement Returns?  

Join us today and get started on maximizing your retirement investment returns, that will increase substantially through bona-fide financial education and transparency, not self-serving financial advice.    Please read our Part IV Blog, tomorrow, for more information and details on how to get started.  We look forward to hearing from you.

 

Education = FutMP900341471Where Should I Go For Investment Advice? I Do Not Know Where to Begin

Not On My Nickel is here to provide you the basic education and ongoing research so you can hire your portfolio manager on your own, who will provide you investment advice that is not conflicted and where there are no hidden fees. It is the first and only fully transparent bona-fide retirement investing education service and portfolio manager research service.

Not On My Nickel works with you to provide you with the tools so you no longer need to be dependent on untrained, conflicted, self-serving sales personnel. We start with the basics and give you the life-long tools to manage your retirement savings, through transparency, education and unbiased research. We help you learn how to make these most critical decisions on your own:

 

  • How do I select the best portfolio manager(s) for my 401(k) or IRA?
  • Do I need to trade my IRA or 401(k)? Why you should not do so. That is why you hire a professional, experienced portfolio manager.
  • What are the best choices for my small business, to offer retirement savings to my employees?
  • What about asset allocation? You will learn about cash investments, why to avoid money market funds in today’s unprecedented interest rate markets, what is “voluntary recapture”, the dangers of bond funds and how to select the best long-term investment strategies from portfolio managers who have proven styles that have withstood the test of time.

In sum, you will be given bona fide education and the proper tools and training to effectively manage your retirement nest egg.

Not On My Nickel has six strict criteria that you will learn to aid you in evaluating who should manage your retirement nest egg–whether you have just started saving or have amassed a large retirement nest egg.

Not On My Nickel’s Experiential and Independent Curriculum

Not On My Nickel is the very first experiential curriculum for retirement investing that empowers you to cut through all the advertising and the self-serving advice designed to benefit the Advisor. We provide you the financial tools to help you make the determination on why one portfolio manager is better than another. Remember that the “advice” from your 401(k) or 403(b) financial advisor, providing Department of Labor mandated financial “education” is not really education. It is simply comments designed to get you to work with their firm, buy more financial products from their firm, save more in their products or pay annual fees for managing your life savings.

Not On My Nickel is not dependent on any financial services firm. We do not receive any form of payment from any financial services firm. We are the only bona-fide retirement education firm, independent education and research firm, that exists today.

Visit Not On My Nickel’s Blog tomorrow for Part III in our series “Best Retirement Returns Come From Transparency and Education, Not Conflicted Advice.”

 

 

Don’t Be Fooled Anymore – Get The Audited Numbers on Your Performance, Based on a BenchmarkDunce Holding Paper Money

In this Blog we take you through the steps to learn how to:

  Compare a fund manager’s performance to the appropriate index.

  Learn how a mutual fund’s performance is regulated by the SEC, but your Advisor’s performance is not audited or regulated by the SEC.

In general, financial advisors are not actually managing your money. They place your money with various portfolio managers or some combination of passively managed exchange traded funds (ETF’s). In last week’s Blog we reviewed how America’s top “Advisor” is the best salesperson, according to Barron’s. Read the fine print of your contract. Once your Advisor selects an investment for you, your Advisor has no ongoing duty to monitor that investment, even if they are charging you a fee to do so!

What are the risks for having a salesman managing your nest egg?

As the SEC has warned, your advisor has no training, education or professional qualification to select these portfolio managers; it is not mandated by the SEC.  In its March 13, 2013 Report on the Regulation of Investment Advisers the SEC warned investors that:

“Unlike the laws of many other countries, the U.S. federal securities laws do not prescribe minimum experience or qualification requirements for persons providing investment advice.”

Your Advisor may pick one good ETF or Fund, but may also pick several that drag down the performance of the strong fund, due to lack of experience and training.

Your Advisor does not prepare audited returns that are filed with the SEC, so there is no benchmark to see how you are actually doing, based on the Advisor’s selections, for your retirement nest egg, after the Advisor’s fees.

Your Advisor does not continue to monitor the investments they place you in! It is your responsibility.

There are many Ponzi schemes because there are no standards for Advisors and many “crooks” thus enter this business and prey on your emotions and promise high returns. (Bernie Madoff has warned from jail – “Madoff, Other Felons Say Markets Unfair.”

Eliminate these great risks and investment directly with the Portfolio Manager in a mutual fund(s) that you select and can monitor, based on ongoing professional research and education.

The SEC has defined the benefits of a mutual fund at their website.

Professional Management. The fund managers do the research for you. They select the securities and monitor the performance.

Diversification or “Do not put all your eggs in one basket.” Mutual funds typically invest in a range of companies and industries. This helps to lower your risk if one company fails.

Affordability. Most mutual funds set a relatively low dollar amount for initial investment and subsequent purchases.

Liquidity. Mutual fund investors can easily redeem their shares at any time, for the current net asset value (NAV) plus any redemption fees.

Audited Performance Standards by Your Mutual Fund Portfolio Manager

Mutual funds are regulated by the Investment Company Act of 1940 which
requires:

  The mutual fund company must disclose publicly its financial health on a
regular basis.

  By law, each mutual fund is required to file a prospectus and regular
shareholder reports with the SEC

  It has to register with the SEC and file quarterly reports with the SEC.

  The mutual fund manager has a fiduciary duty to act in your best interests,
not hers, while the SEC permits your financial advisor to act in
their best interest

  There are strict controls for where the securities are held and who has access
to them, which is examined by an independent accountant at least three
times each year.  Do you know where your Advisor is placing your funds and how often it is audited by an accountant?

Here is the format that the SEC requires that the Mutual Fund adhere to for reporting:

Screen Shot 2013-07-29 at 7.02.09 AM

 

Not On My Nickel provides you monthly audited performance figures, per SEC standards (except for taxes, since they are not relevant until distribution in 401K or IRA) on a monthly basis for the mutual funds that you choose. In future Blog Posts we will show you how to determine your overall return if you are in multiple funds and give you a simple format to plug in your own numbers to watch your savings grow.

Here is an example of a researched NOMN balanced fund (Blue Line) and NOMN aggressive growth fund (Red Line) compared to a State Farm Target Date Fund (Green Line).  Do you know how to compare your performance, based on your Advisor’s recommendations in this graph?,  If not, it is time to take charge and get access to the best returns, at the lowest cost, based on audited performance standards.

Screen Shot 2013-07-29 at 8.49.29 AM

So, without audited performance, that the SEC mandates for SEC registered portfolio managers, but not financial advisors, you are throwing your money into the wind. Time to take charge, eliminate the redundant fees and place your money directly with the SEC fiduciary portfolio manager.

 

stock investment

As most would agree, the most important quality in selecting the doctor to operate on your heart is, “Is she the best? Is she technically qualified? Does she have my best interests in mind? Do I also want this amazing doctor to become my partner in life to coach me to do what is in my best interest…to help me with my home purchase, prepare my will or help me with my taxes?

As one well knows, the qualities that make your heart doctor the best in saving your life and operating on your heart—his years of experience and professional training are why you selected this doctor. You want your doctor to be continually focused on advancements in heart surgery, not advising you on how to structure a business venture.

The “wealth management” or “financial planning” industry has crafted the message that they are there for everything you need, insurance, budgeting, and expert investment advisor without professional training in any of these fields.

What are the Factors That Barron’s Uses to Rank the Top Advisors?
Barron’s Top Advisors – 2013

“Factors included in the rankings: assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. Investment performance isn’t an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment-picking abilities”, according to this Barron’s article.

Here is the Red Flag: Investment performance –returns – is not a component in the rankings!

What does this survey tell you about the people managing your life savings?

1. The industry has decided for you the top advisor is the one who is best at sales and marketing. The top advisors are those advisors who have amassed the most assets under management and brought in the most revenue for the firm. Your results and the growth of your savings is not the most important issue.
2. There are no uniform professional standards for the “advisors” managing your money. No education requirements, no experience necessary – high school diploma, nice; but not necessary, college degree; the same. Yes, there are NO professional standards for who is managing your money. There are no government regulations on who can manage your retirement savings.
3. Is a CFP a trusted professional standard for managing your money? No. The CFP has but one basic course on “Investments”. A CFP is not a professional in managing investments or selecting the best investments for your retirement savings.
4. There are absolutely no performance standards for the investments that the financial advisor chooses which is why Barron’s provides no rankings for the MOST important criteria, audited quarterly performance.

Who Are the Professional Investment Managers?

SEC registered investment firms that manage your retirement savings, actively managed mutual funds, are the professional managers that you must place your money with directly so you can have audited professional results of your performance. Over $2 trillion dollars was lost in retirement savings during the last financial crisis. Why? Professionals were not managing retirement savings. Sales personnel were and they are paid less if they move your life savings out of the equity markets, even temporarily.

What Do I Need To Select the Top Investment Manager, Portfolio Manager?

• Audited, professional results compared against an agreed upon index
• 5, 10, 20 Year track record
• What is the professional background of the portfolio manager: Is his style consistent?
• Does the firm operate in my best interests and the interests of society overall?
• Are the investment management fees reasonable?

There are many claims today that active management is no longer viable. The problems with going with strictly passive management are several:

  • Who is going to choose the passive Exchange Traded Funds to put your retirement savings in? Are they professionals? What is their experience in doing so?
  • There are no audited statements and five and ten year histories on the selections of the multitudes of permutations and combinations of ETF’s. Most of the selections are based on computer algorithms that failed miserably in the 2008 financial crisis.
  • The new Target Date funds have high fees and are performing very poorly compared to the track records of the top active managers.

What is the Most Conservative Strategy Given the Failures of the Financial Services Industry?

Place your money directly with a professional money manager, who files regular reports with the SEC and who has multiple ratings from numerous rating services including Morningstar, Lipper, Zacks and Not On My Nickel.

Look at the audited performance returns against the relevant index before you place your money with this manager – Does this manager outperform the index over time? 5 years? 10 years?

Never trust a salesman, a “financial advisor” to select where you will place your retirement savings.

The Lesson

When selecting where to place your retirement savings, only trust the true professional:

Who provides you with quarterly audited performance statements

Whose only focus is on managing your money and watching the ever-changing global capital markets to determine how best to adjust your savings?

The myth that you need a “financial advisor” to hold your hand is not only a waste of money it is preventing you from placing your money directly with the top professional money managers.

Next Week’s Blog Post: Learn How to Compare Fund Manager’s Performance: How It is Audited and Regulated by the SEC, unlike Advisor’s Investment Selections, which are not audited or do not conform to any uniform indices for measurement.