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

 

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

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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.