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.”

 

Education = FutMP900341471Not On My Nickel presents revolutionary change in retirement investing:  Transparency and bona-fide financial education, with regular performance reporting— the key to superior retirement performance

 

 

 

Not On My Nickel’s Number One Retirement Investing Rule to Achieve Superior Performance

How do you achieve the best retirement performance? Do not take advice or pay an assets under management fee to any  “financial advisor” that does not file regular performance results, against a widely published index, with the Securities and Exchange Commission, SEC.  Only make informed choices.

Take the time to get the proper education and the tools to make informed decisions.  It is simply a one-time, up-front investment in time to learn what you need to do to make an informed choice on how to invest your retirement savings.

The Media and the Financial Advice Industry

The media is a master of convincing the public they need financial advice. Why?  It generates advertising revenue for them from financial services firms.  The latest media blitz focuses on the need for the public to have access to “financial advice.”  Financial advice does one thing—it detracts from your investment returns.  There is yet to be a published study that can show it will increase your returns.  Ignore the media hype in articles such as these two:

“A Start-up Aims to Bring Financial Planning to the Masses”  New York Times, July 26, 2013.

“401(k) Plans Add More Personalized Advice” Wall Street Journal, September 5, 2013

Not On My Nickel can state unequivocally your retirement savings returns will increase if you take the time to understand just a few key concepts.  Your returns will increase in two ways:

(1)  You will have ready access to the top performing portfolio mutual fund managers through information and education and (2) you will save the costs for the advice fees that are simply a drain on your retirement savings.  They do not add extra value, by definition.  They are financial intermediary fees that can easily be avoided through transparency, use of education, proper tools and effort.

Why You Do NOT Want to Pay a “Financial Advisor” a Fee for Investment Advice:  It is Conflicted and Not Bona-fide Financial Education

Let us first distinguish between investment advice and financial planning and budgeting.  If you want help with learning how to prepare a budget or financial plan, pay a “financial planner” an hourly fee to learn how to do a budget or a financial plan.  Follow these simple rules:

  • If you need life insurance, buy term insurance from a top rated insurance company for 20 or 30 years.  Never buy “cash value” life insurance.  Learn about life insurance online.  Here is one source: Life Insurance – Wikipedia.  Do not take any retirement investment advice from a life insurance salesman, even if they say there are a “financial advisor”.  They are not trained in portfolio management.
  • If you need a will, go directly online and learn how to draft a will or go to an estate attorney.  There is no reason to pay a middleman, “financial advisor” to tell you that you need to go to an attorney to draft a will.
  • If you need tax advice, go directly to an accountant.
  • If you are in debt and need assistance, there are many free consulting services there to help, such as Debtor’s Anonymous.

Read Helaine Olen’s Book for more background information on the dangers of the advice industry, Pound Foolish. Exposing the Dark Side of the Personal Finance Industry.

If you need investment advice, hire a portfolio manager, who is a fiduciary, registered with the SEC to manage your retirement assets.  A financial advisor, a CFP,  is in 99% of the cases, not a fiduciary, even if they are registered with the SEC. They are not specialists in investments and portfolio management.  Deal only with a specialist, a portfolio manager, registered with the SEC who provides you five- year and ideally, ten- year performance returns, that have been filed with the SEC.

“Financial advisors” DO NOT file performance returns with the SEC and they do not specialize in portfolio management.  Financial advisors are generalists.  Go directly to the best, the portfolio manager for your investment advice and day-to-day investment management.  Not On My Nickel’s research service puts you directly in touch with a short list of the top performing specialists, the mutual fund portfolio managers and keeps you updated on these portfolio managers and their mutual funds, on a regular basis.

Join us tomorrow for Part II of our Blog: Best Retirement Performance Comes from Education, Transparency, Not servicesConflicted Financial Advice.  Or email us today to get started on your curriculum that will shape your retirement investing future.  Ask your employer to incorporate Not On My Nickel’s experiential curriculum in your workplace.

Here is the link to the Not On My Nickel Slide Show for Employers

 

Happy businessmen
With the advent of the Internet, retirement investors can now take control of their nest-eggs with the proper tools and research
With the advent of the Internet and easy access to information, many people are now buying airplane tickets and booking hotels online. The intermediary, the travel agent, has been eliminated in many transactions. Why? One can obtain the same thing through less money and through their own research, perhaps delivering a better vacation by exploring the alternatives that best fit their life styles.

Not On My Nickel believes with the proper tools, real education and transparency, retirement investors can get engaged and pick their own portfolio managers. Why is this so critical today?

No Transparency

(1) In most cases you have no idea what the performance will be for the selections that your financial advisor is recommending for your retirement nest egg. See Not On My Nickel’s Blog on the lack of audited performance standards for Advisors. They are using asset allocation models and placing you in so many asset classes, you really do not know if it is better or worse for your returns.

Redundant Fees that Deliver No Value

(2) You are paying the financial intermediary in most cases an unnecessary fee and you are guaranteed to do worse than an index fund, if you are in an index fund, as a result of this fee.

Advisor Created Obfuscation in Employer Plans – Get A Simple Straightforward List of the BEST Portfolio Managers, with Proper Education, at Not On My Nickel

(3) If you are provided a simple list of the very, very few top portfolio managers/mutual funds that have outperformed the index for many years, after fees, you will most likely do better, since you are saving the advisor fee and your returns are not being diluted by poorly performing funds.

Advisors Subject Your Savings to Potential for Fraud - Not On My Nickel Eliminates the Risk of Advisor Fraud

(4) You eliminate the risk of Ponzi schemes! Here is a another one reported recently in Investment News: FINRA alleged that from December 2010 to January 2013, he converted customer assets in two trust accounts, using at least 50 transactions falsely characterized as loans, and transferred the money to two of his friends. One victim was a 77-year-old retired homemaker with Alzheimer’s who lived in a nursing home, FINRA said in the settlement agreement. Mr. Thornes diverted about $1.7 million from the homemaker’s $2 million trust account, FINRA said.

Why Hasn’t The Retirement Investor Taken Charge Sooner?  Workplace Financial Education Has Been Designed To Move Your Towards Hiring a Financial Advisor

Assume for a moment you go to your 401(k) menu selections, how do you know which one to pick?

• Does the financial education package provided by your employer, as mandated by the Department of Labor, show you how to select the best fund for your
needs? Not normally.

• Does the financial education package provided by your employer, as mandated by the Department of Labor highlight the additional costs and risks of going
with a Target Date Fund? (Read SEC Investor Advisory Committee’s List of Risks with Target Date funds here –  It is a long list!)

• Does your financial education package encourage you to get help in picking a mutual fund?  No, there is no employer provided education on how to measure what mutual fund is best for you!  Here is the typical response you get for any employer plan option:  “Yes, click here to hire an advisor.”

• Does your prospective financial advisor show you your monthly returns for your total portfolio after all fees, including the advisor fee, before you choose to invest with them? If not, it is time to take over.

Example – a Fidelity 403(b) Plan

One Employer’s Defined Contribution offers 353 options! Wow, where do you begin?

Now for this plan, administered by Fidelity Investments, it does provide a good screening option for the investments they offer. Say you want to select a Balanced Fund, with low fees. You run Fidelity’s screener using low expenses and here is what you get, shown in the Chart Below:

Screen Shot 2013-07-29 at 12.33.35 PM

Do not hit the button after you take a look at this graph – “I need help, I need a financial advisor!”  Through Not On My Nickel’s real financial education curriculum, that is hands-on, pragmatic and straight-forward, you will be on your way. It is the first and only retirement curriculum designed for you to take charge of your retirement savings, without an unnecessary layer of a financial advisor that operates in their interest.  Learn through Not On My Nickel straight-forward curriculum how to read this chart, what each item means and how to make the choices in your best interest.  Learn why you would never want to select the Target Date Option. Learn how much money you are losing if you are in the Target Date Option.  Learn the fees associated with each option.

Remember from NOMN’s last week’s Blog Post on audited performance standards, if your financial advisor does not post their performance standards monthly on their website, and are measured against an approved index, caution. Note that is a red flag and cause for concern.

Learn more about Not On My Nickel tools, educational services and how to research the select few top performing mutual funds for your retirement nest egg today. Invest a few hours of time and you will be on your way to taking charge of your retirement nest-egg with portfolio managers you believe in, without the high fees and associated risks of the unknown.

Brokerage Window

Remember, if you are in a 401(k) plan with options that have high fees and poor performance, you have an alternative today!  You may use your 401(k) Plan’s Brokerage Window with the research and education provided by a Not On My Nickel subscription, whose annual costs are less than the Load Charge on a typical mutual fund and provides the tools, research and education to eliminate all these fees detracting from the performance of your retirement savings.

 

 

Businessman climbing LadderMP900382636
If you are in a Charles Schwab sponsored retirement plan, chances are your paycheck may be automatically debited for worthless* “advice” fees that will go directly to Charles Schwab and its partner

Charles Schwab believes they know what is best for you. They have made arrangements with GuidedChoice to automatically charge your paycheck for their self-serving investment advice. They are so certain what you need, they moved ahead and may have your employer taking money from your paycheck to pay for questionable “advice services”, without even checking with you first.  In this Blog Post, Not On My Nickel will demonstrate this ‘low-cost’ advice is clearly not in your interest and may be a breach of ERISA fiduciary standards.

The most egregious part of this “taking” is the advice model delivers results below the index!  The more money you save, the greater rate you will provide income to Schwab and GuidedChoice.  It is the retirement scam of the 21st Century: assets under management advice fees that take a percentage of your savings, with no measurable return parameters.

Here is a link to a Reuters article that describes this arrangement, “A New 401(k) Success Formula: Low Cost Plus Advice.”

The article states: “The plan also auto-enrolls participants in an investment advisory service that adds another 45 basis points to expenses (A basis point is .01 percent.) It’s possible to opt out, but nearly 90 percent of participants use the service, Schwab says. In return for their 45 basis points, savers get fairly comprehensive planning: Regular personalized consultations on allocation and rebalancing help from advisers from the third-party service GuidedChoice.”

Not On My Nickel is in favor of any new service that can deliver top returns at low fees. However, as we pointed out in our Blog Post on July 29, if the Advisors, in this case Charles Schwab and GuidedChoice, are not providing any history of audited performance returns, after all fees, do not touch their service. It is in a four letter word: a sham.

In analyzing GuidedChoice’s website, there is absolutely no indication of the success of their advice and how it compares to that of select portfolio managers, who are professional fiduciaries and who have spent a lifetime buidling a bona-fide career and profession in fiduciary investment management.  There are not many of these true fiduciary managers today, but Not On My Nickel has identified the very few to whom you would feel comfortable entrusting your retirement savings.

*Not On My Nickel is compelled to use the term ‘worthless’ for two reasons:

(1)  Employees have no benchmark to measure the performance of the investment advice provided, it is not “audited” performance

(2)  Schwab and GuidedChoice do not provide SEC filings on the compositions of their recommended portfolios, yet as assets grow they take larger fees from the employee.

GuidedChoice Confirms They Have No Published BenchMark for Gauging The Value of Their Fees

In checking with GuidedChoice directly, by telephone, Not On My Nickel asked GuidedChoice if they had any past history of returns, based on their advice. They informed us there is no published history since it is all “individualized”. That is code word for no-transparency, since their published results will reveal you will underperform top performing portfolio managers, after GuidedChoice fees and Schwab’s index investment management costs.

Oh yes, you may “Opt Out” if you discover that Schwab is automatically charging your account for a new “financial advice” service, which was hidden in a Size 4 Font disclosure document. People are very busy and rarely can find the time to read the fine print, as we all know.  At a minimum, Charles Schwab should ask the employee if they would like their services/GuidedChoice’s advice services.  This is clearly not appropriate for any entity to deduct automatically from an employee’s paycheck without prior approval for a service that is not in the employees’ best interest.

You Did Not Select This Advice Firm, GuidedChoice. What are Its Qualifications?

As with all financial advisors, be aware of these key facts:

• There are no minimum professional standards for Advisors.

• They are not fiduciaries and they may act in their best interest, not yours, based on the fine-print disclosure documents.

• If they breach securities laws, you have no right of private action in your IRA and you are subject to mandatory arbitration, so you have no legal recourse.  Charles Schwab actually banned class action lawsuits in their brokerage account agreements and have just temporarily removed the ban until further court proceedings rule in their favor.  You may read more here.

• There are no past performance results, so one has absolutely no idea about the quality of the advice. There are no standardized performance measures to determine if the advice is any good.  They do not file performance results, semi-annually, with the SEC.  In sum, this service has no accountability and adds no measurable value to your life savings in your 401K plan or IRA.

Remember, GuidedChoice employees are NOT trained portfolio managers who specialize in portfolio management. If they have a CFP, they may have had one easy course on “Investments” which is no criteria for advising any retirement saver on where to invest their life savings.  Those decisions should be left to professionals, those that design and monitor portfolios daily, who specialize in portfolio management, who have a professional career in investment management.

What Are the Qualifications of Not On My Nickel Researched Portfolio Managers?

Remember that the most important factor in selecting any firm or entity for advising on your retirement savings:  Do they provide regular performance results, against an accepted benchmark, with the SEC?  Do they file portfolio holdings, regularly with the SEC?  If they do not, do not take ANY investment advice from them.  Do not invest in their investment offerings.

Here is a benchmark for a professional investment manager, that Not On My Nickel uses for selection of fiduciary portfolio managers.  Not On My Nickel analyzes the SEC filings of every SEC registered investment adviser and investment adviser firm that is considered worthy of strict ERISA standards.  Every Not On My Nickel researched portfolio manager must file regular reports with the SEC on their investment experience and history, their fees, their portfolio objectives, their holdings and their performance, against an accepted index.  Here is one such portfolio manager and Fund:

SEC Filings on Primecap Management

Yahoo Finance description of Primecap Odyssey and Tools to Compare their Performance Against Industry Benchmarks

Theo A. Kolokotrones, Portfolio Manager, PRIMECAP INVESTMENTS Odyssey Fund (POAGX)

B.A. University of Chicago,
M.B.A. Harvard University

According to Morningstar, “The five listed managers on the Primecap Odyssey funds are an experienced bunch, averaging more than 30 years in the investment field. They’ve aligned their own interests strongly with those of investors: Each of the five managers has more than $1 million of his own money invested in each of the three Primecap Odyssey funds.”

In the chart below, Not On My Nickel has included the returns of Mr. Kolokotrones’ fund, PrimeCap Odyssey, as a comparison to the index funds and advice fees that Charles Schwab and GuidedChoice are taking .45% to advise you, in addition to a .15% investment management fee.  You be the judge. You are paying Charles Schwab and GuidedChoice .60% for unknown performance, that is guaranteed to underperform the index.  Alternatively, for example, you could pay Mr. Kolokotrone’s .70% for his years of experience in monitoring global capital markets and selecting investments, based on market and security selection fundamental analysis. Would you prefer a professional fiduciary that places your interests over theirs, or an unproven computer model, combined with a salesforce, who provides you unknown, unmeasurable, indeterminable “advice”, with no proven results?  Would you prefer a portfolio manager that files its returns, regularly with the SEC, against an agreed upon benchmark, or placing your life savings in the hands of a computer model and salesforce with no proven history or professional experience in managing money?

What does GuidedChoice base its advice to you on? A backward-looking computer model.

GuidedChoice and Schwab can service thousands of employees, with no time invested, other than running it through a computer model, that may take less than 3 minutes.

According to its SEC Filings, GuidedChoice has 500,000 clients and only FIVE employees who perform advisory functions, including research.

Reuters reported, last May, and SEC filings reveal that the average 401(k) balance is now $80,900 in Schwab’s Index Advantage. Schwab and GuidedChoice, based on the Reuters article, linked to earlier, and Guided Choice’s ADV filed with the SEC, charge .45% per participant for “advice.”  GuidedChoice’s 500,000 clients, with an average 401(k) balance of $80,900, would generate income to Schwab and GuidedChoice of $364 per client.  This equates to annual revenues of $182,000,000, with no measuring stick to evaluate their worth to you or any retirement saver. $182,000,000 in revenues to Schwab and GuidedChoice, derived from deductions to employee paychecks without their prior approval, is quite a smart business model.

Neither Schwab nor GuidedChoice have furnished the Department of Labor or the SEC any past performance figures or benchmark to evaluate the worth of their business model to the retirement saver.  It is all “hearsay.”  Are Schwab and GuidedChoice true fiduciaries under ERISA?  Not On My Nickel believes they are not fiduciaries, simply because there exist more cost-effective solutions for employees, that generate better performance results for employees. Conflicted financial education provided by untrained GuidedChoice advisors may be doing more harm than good and creating a false dependency for retirement investors on a conflicted salesforce providing ‘advice’ of an unknown value.

If Schwab and GuidedChoice cannot show the performance, after all fees, for their asset management charges, the employee cannot evaluate the worth of the service. It is time to eliminate these add-on “advice services” based on assets under management. If employees want advice, let them pay an hourly fee, at an established market rate for the “advice.”

How Do I Know if The Schwab/GuidedChoice Computer Model is Any Good?

You do not know. GuidedChoice does not provide any audited, measurable returns.  GuidedChoice bases its advice on Modern Portfolio Theory. Harry Markowitz who developed this model is on the Board of GuidedChoice. Here is the link from their website.

Here is the type of portfolio they will more than likely design for you, shown in the chart below, based on the Reuters article linked to above.  They use a computer model to select passive Exchange Traded Funds or ETF’s. However, what the experts are now saying is all this diversification may be detracting from your returns. Many professionals are now recommending excluding the asset class of commodities from your portfolio.

You be the judge.  Here are the returns for a Target Date ETF portfolio, designed by BlackRock for State Farm’s 401(k)’s. It is comparable to what Schwab and GuidedChoice’s computer would design for you.  We compare the returns of this Modern Porfolio Theory designed 401(k) to simply holding a NOMN researched Balanced Fund, where the portfolio manager, who specializes in portfolio design, makes all the decisions for you, not a computer model.

This NOMN researched portfolio manager is actively taking into account aberrations in global capital markets, such as the unprecedented relationship between the stock market and interest rates, due to the quantitative easing by the Federal Reserve Bank, since the financial crisis in 2008.  A backward looking model, such as Modern Portfolio Theory does not account for these abberrations, that could be significantly detracting from your returns based on a current very, very low interest rate environment.  We also included returns for a professional investment adviser, Theo A. Kolokotrones, Portfolio Manager of Primecap Odyssey to show you the results that a trained, experienced professional investment adviser can deliver against agreed upon benchmarks. (The red line is for the Fund that Mr. Kolokotrones manages, Prime Cap Odyssey.)  We exclude Primecap Odyssey results from the comparison of returns, between a Not On My Nickel researched balanced fund and the passively managed alternative presented by GuidedChoice and Schwab.

Please note, the larger your balances grow, the more that Schwab and GuidedChoice take from your retirement savings for their advice. that cannot be measured against a benchmark to determine the value.  The formula is .45% times your outstanding retirement savings balance.  If you save $150,000, they may then take $675 each year, without providing any increased service or value.

With the Not On My Nickel  education model, you eliminate the conflicted advice and you will have access to the tools to learn how to select the top fiduciary portfolio managers on your own.  Soon you will be confident in selecting true professional fiduciaries to manage your retirement savings, thus eliminating the conflicted financial intermediary that skims off ever- increasing fees from your returns.

The Chart Below Compares the Hypothetical Performance of a Schwab/GuidedChoice Account to a Not On My Nickel Researched Balanced Fund

The green line, on the graph below, is a NOMN researched Balanced Fund and the blue line is a passively managed Target Date Fund, designed based on Modern Portfolio Theory, comparable to the “Managed Account” provided to you by GuidedChoice and Schwab’s Managed Account. The red line is an actively managed aggressive growth fund, a choice available through Not On My Nickel researched portfolio managers, that could be added for those willing to take on more risk.

We are forced to use this ETF portfolio in the example below since Schwab and GuidedChoice refuse to provide investors any past returns.  Why?  Their model is bait and switch.  You pay a lower fee for computerized investment management, but Schwab makes it up in the advice component, charging the 401(k) participant for “advice” delivered by sales personnel and based on a  computer model.  The objective of the Schwab/GuidedChoice model is to simply gather more assets and thus income, from you, without regard to outcome.  You can see with the Schwab/Guided Choice option, your investment performance is guaranteed to underperform the index, after fees!

Screen Shot 2013-08-19 at 8.38.16 AM

 

 

 

 

In the Green Comparison Chart below left, is the Analysis of How Much a 401(k) Participant Stands to Lose Through Schwab/GuidedChoice’s New “Advice” 401(k) Model

Screen Shot 2013-08-19 at 5.34.26 AM

As you can see in the Chart below, through selection of a professional investment manager, in lieu of a computerized model and GuidedChoice/Schwab sales force, you stand to more than double your money with the NOMN researched option.  In addition you have significant risks with the Schwab/Guided Choice option:

 Many ETFs risk not tracking their index.  What is the past performance of the Schwab selected indices?  How close is their performance to the relevant index?

 Many ETF’s cannot withstand unusual market volatility, causing trade settlement issues as described in this article in Institutional Investor.

 Modern Portfolio Theory is under attack for numerous reasons, including the failure of certain diversification strategies in time of crisis and the dilution of returns.

What should I do for Advice?

Given the lack of action on the part of the Department of Labor and the SEC, the regulatory bodies that are there to protect retirement investors, you have absolutely no choice but to take one or two hours of your time to take action to protect your life savings. Not On My Nickel provides you with the tools, education and research to select top portfolio managers, such as Mr. Kolokothrones (yes, the red line on the chart above!) at PrimeCap Odyssey, on your own.  You save the financial intermediary fees and you earn better performance from trained and experience portfolio managers that are true ERISA fiduciaries.

Learn how to do access these portfolio managers yourself. Not On My Nickel provides you the bona fide financial education and the tools to evaluate and understand the benchmarks, to end the dependency on the poor advice and poor financial education provided by your employer in today’s marketplace.

Not On My Nickel’s service is easy and it is empowering.  It does take a little time up front, which is time well spent.  If you have the time to do the ongoing monitoring of your selected portfolio managers, you may not even need Not On My Nickel after the first year.  The satisfaction from taking charge and watching your retirement savings grow, with the help of a true fiduciary professional manager is immense.  Ignore the hype of these armies of sales personnel, such as Charles Schwab and GuidedChoice that are simply looking for ongoing schemes to take a slice of your retirement savings, through their ever-so-lucrative percentage of assets under management business model, that is clearly a breach of ERISA fiduciary standards.  Take charge and use Not On My Nickel’s research and tools to access bona-fide fiduciary managers.

Coin Dropping Into Piggy Bank

Mandatory Retirement Savings is a Concept You Might Want to Investigate

We wrote in an August 3rd Blog on how employers take automatic deductions from employee’s paychecks and place into Department of Labor approved Target Date Funds that carry high fees and poor performance. Many employers are already taking 3% of salary for many employees that do not “Opt Out” of the deduction. You probably were not even aware of this, as it was probably given to you in a long disclosure document in Size 4 font, that you did not have time to read.

Just where is your paycheck going?  Time to investigate.  The answers will shock you; very little of the deduction is going into your retirement fund!  In last week’s Blog we analyzed the costs of being in a “default option” Target Date Fund.

Compare the Results of a Not On My Nickel researched fund to a Target Date fund.

Take a look at the shocking analysis below, Comparison of State Farm Target Date Fund with Not On My Nickel Researched Fund.

Screen Shot 2013-07-30 at 9.00.46 AM
On a $10,000 investment in your 401(k) with the State Farm Target Date Fund (NLHAX) you lose money in the first year. After five years, you generate a gain of $715! Note, this $715 could diminished to nothing or negative if you are paying typical advisor fees from .25% – 2.50% asset under management fees. With a Not On My Nickel researched fund, after expenses, you earn approximately $3860 for the same period. That is 5 times greater than your employer selected Target Date Fund, designed and created by BlackRock.

Wall Street is Pushing a Mandatory Savings Model – Up to 10% of your Paycheck Annually

“CEO Larry Fink thinks Americans are not saving enough for retirement. Fink said on CNBC Wednesday morning that the U.S. needs a mandatory savings policy to help Americans accumulate wealth for lengthening lifetimes that will require more retirement income. “ Now there is a push by Wall Street to take out another 9 -10% of your salary automatically to fund your retirement or is it Mr. Fink’s retirement?

Remember from our (August 3 Blog), Mr. Fink is CEO of BlackRock, a creator of mutual funds and exchange traded funds (ETF’s) held in many retirement accounts. State Farm’s Target Date fund advisor works for Mr. Fink at BlackRock, who selected principally BlackRock ETF’s for the fund, as we reported in last week’s Blog.

Screen Shot 2013-07-30 at 4.44.46 AMThe fact remains that many Americans are already having 3% deducted from their payroll and have no idea where it is.

If the financial services industry is now pushing to have 9% or 10% taken directly from your paycheck, annually, it may be time to take charge, take control and monitor where your life savings is going.

Let’s assume you make $60,000 per year and your spouse makes $30,000.  You would immediately have $9000 taken from your earnings, assuming the financial services industry gets their way.  While one cannot argue the need to save more for retirement, one can argue you must stand up and choose and understand where that $9000 is going.  As the August 3 Blog Post showed you, your lack of inaction will cost you thousands upon thousands of dollars each year.  Forget clipping coupons.  This is real money to go after and it really belongs to you, not to an asset manager firm or sales person who calls themselves an ‘asset manager’ or  ‘advisor’.

Above,  is a reaction on Twitter to BlackRock’s Mr. Fink’s pronouncement about mandatory retirement savings, in this Twitter post by Zerohedge.

 

Problems MP900387715

 

Target Date Funds are the default option in your 401(k) or 403(b) account.

Here are a few definitions to get started on this Blog Post:

Target Date Fund: “The funds generally are set up so that investors can put their entire nest egg into a single one linked to the year they expect to retire, in effect putting a savings strategy on autopilot,” as the Wall Street Journal reported in “Missing the Target” on June 14, 2013.

Default Option: Many employees are not aware that if they do not sign up for their 401k or “Opt Out”, their employer will automatically deduct from their paycheck for their retirement savings. Where does your hard-earned money go? Into a highly risky, very expensive, unproven Target Date Fund approved by the SEC and Department of Labor. Why would regulators do that? Wall Street convinced them to.  Here are the risks and solutions as reported by the SEC Investor Advisory Committee.

Simplicity for Retirement Investors: The government likes them because they are simple for investors. Just put your money in one spot. One can do the same at Not On My Nickel education. Learn how to compare what is in your best interest with Not On My Nickel education. There is a comparison below on what you are losing out on by allowing these default options, but first a few more definitions.

Not On My Nickel: A revolutionary retirement research and education service that engages retirement savers to take control of their retirement savings through choosing, on their own, one or two mutual funds.  Not On My Nickel provides ongoing monthly research and education on these funds for the investor. What is the difference between most Target Funds and Not on My Nickel researched funds?  Not On My Nickel researched mutual funds carry less risk, significantly lower fees and proven portfolio manager performance that outperforms indices. It is simple, easy and much more conservative than a Target Date Fund.

Regulatory Capture: The influence of big-monied lobbyists on our nation’s financial services regulators, on behalf of the financial services industry.

Government Oversight: The Department of Labor knows these funds are fatally flawed, but Wall Street likes them. That is what is called regulatory capture. Wall Street determines the investments that go into the Fund. The more assets in the Funds, the more the financial services firms make.

Who Wins: Wall Street- Target Date Funds generate significantly more fees for financial services firms. Take a look at what the holdings are in the State Street 2030 LifePath Index Target Date Fund in the Chart on the lower left:

Screen Shot 2013-07-30 at 3.46.35 AM

Asset manager, BlackRock wins in this case. You will note that most of the holdings in this Target Date Fund, State Farm Life Path 2030 are Blackrock ETF’s or IShares. Who is the lead advisor to State Farm on this Target Date Fund? Blackrock’s Amy Whiteslaw, the Director of Blackrock Institutional Trust Company. Ms. Whiteslaw is one of the Portfolio Managers for State Farm, with an employment history of designing defined compensation plan holdings.  No conflict there?

The unlucky retirement investors that have been placed in the State Farm 2030 Life Path Fund or the TIAA-CREF 2030 Index Fund or TIAA-CREF 2030 Target Date Fund are losing due to higher fees and poor performance compared to Not On My Nickel researched funds.  These retirement investors now have a choice.  Not On My Nickel research and education provides the tools every retirement investor needs to take charge and invest in a few easy steps on your own.

Power of Compounding: The longer you wait to take action the greater you lose. See what waiting costs you at this compounding calculator at the SEC website.

As the Wall Street Journal reported: “Target-date funds, which are often composed of separate underlying funds, also carry widely disparate fees, and higher-cost funds can cut into investor returns. Some of these underlying funds passively track indexes, while others actively try to beat the market—an approach that can push fees up and lead to diverging performance.”

Here is a comparison between the performance of three Target Funds and a NOMN researched fund for your retirement savings.  One can easily select the NOMN researched balanced fund and invest in it, in place of a Target Date Fund. This is accomplished through your 401(k) Brokerage Window or your IRA.  The comparison is compelling.  Less fees, proven performance, less risk…what are you waiting for!  Screen Shot 2013-07-30 at 5.00.16 AM

The green line is a core Balanced Fund (PRWCX) researched by Not On My Nickel. It has proven performance, lower fees and less risk compared to the State Farm 2030 Life Path NLHAX, represented by the Blue Line and TIAA Cref (TCLNX), red line, Target Date 2030 Fund or TIAA Cref 2030 Index Fund (TLHIX), purple line.

The State Farm Target Date has an Expense Ratio of 1.6%, Brokers get paid .25% (12b-1) fee each year (!) for selling it to you and you pay the stockbroker or financial planner a 5% load to buy it!

What are you waiting for. Take action and move out of your default option. Remember the power of compounding.  Next week’s Blog will show you how much you are losing in Target Date Funds, such as this State Farm one, designed by BlackRock.