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An Age-Proof Plan

December 5, 2019 By Dina Isola

It was supposed to be a quiet and uneventful Christmas.  Our family had been through a rough couple of years with various family members having had serious health issues and we were still twitching from it all.  Just about the time we were getting for the year to change from old to new, the call came that my mother’s health had taken a bad turn  – and off to Florida I went with some of my siblings.

We’d been in a similar situation with my father years before so we were better prepared this time around.  Additionally, my mother’s cognitive state was 100% on point; my father had not been so lucky.  We huddled at the doctor’s office and though we were there to ask questions and weigh-in, she was clearly steering her ship.  There would be no dialysis, no extraneous care, and no admission to the hospital.  Lu Lu, as we affectionately called her, wasn’t having any of it.

Our mission was pretty clear.  As her children, we were to do as she told us.  Her thoughts and opinions were well-formed.  Everything she wanted – or didn’t want – made perfect sense.  Had she predeceased my father instead of the other way around, our family would have had a difficult task, as my father suffered from Alzheimer’s disease.  My mother was instrumental in guiding his care, advocating for him and keeping us apprised of his changing state.  She told us when he was resisting turning over his car keys and enlisted our help.

Facing these decisions is the focus of one planner’s work.  Carolyn McClanahan, physician financial planner and co-founder of Whealthcare Planning, integrates health care and wealth planning into her practice and is changing the way her clients face their golden years.  Recently I had the pleasure of speaking with her for On Her Mind podcast.

We spoke about how to prepare for medical costs in retirement and she has an interesting perspective.  Carolyn believes that the pressure of having a hard stop on working might not make sense in a time when we are living longer and future healthcare costs are a looming, unknown variable.  Instead, she advocates that working less but for more years might be better for our finances and our mental well-being.

Whealthcare Planning has tools to support investment professionals and individuals in making a financial caretaking plan.  Questions discussed include:

  • Who will step in and pay bills, manage investments, and assist in healthcare decision-making?
  • Have cognitive changes begun to take place?
  • When are changes in lifestyle needed, such as stopping driving or moving to another home?

Carolyn contends that it is easier to implement an emergency strategy when it has been thought-through and planned out in advance.

Whether you need a plan yourself or are looking to ease into a conversation with older relatives, Carolyn’s perspective from both a medical and planning perspective is invaluable.

I wouldn’t call the last months of my mother’s life a fortunate situation, but it could have been worse.  If nothing else, my father’s long illness had forced my mother to get all the finances organized, specify her health-care wishes, and assign us specific roles years earlier.  Not everyone gets a “dress rehearsal” like we did.  There is no getting around that the tasks are unpleasant as a loved one’s life draws to an end, but knowing what needs to be done and who needs to do it offers a much-needed peace of mind.

 

Dragging out a College Degree is a Drag on Finances

October 10, 2019 By Dina Isola

Parents might focus on tuition and room and board prices and ignore another culprit that makes school more expensive: staying in college for longer than four years.

It’s a common problem, according to the National Center for Education Statistics.  Just 41% of full-time students attending college for the first time earn their bachelors’ degrees in four years.

Extra time at an institution is expensive.  For 2019-2020, the average costs for college tuition and fees are $10,116 (public, in-state); $22,577 (public, out-of-state); and $36,801 (private).

Parents can set expectations for their children, but having a game plan on how to achieve a four-year degree in four years (or less) is most useful.  This starts before college applications are underway:

Select the right major – The US Education Department’s National Center for Education Statistics found about one-third of students enrolled in bachelor’s programs change their major within the first three years of attendance.  Most teens aren’t sure what profession they want to pursue.  Even among those teens that have something in mind, the real world job experience might not match their expectations.  See what your high school district offers in terms of career counseling and internships.  In our district, students can job shadow or intern with businesses so they can gain exposure to job experiences.  This can help solidify – or change – career plans before one cent is paid on college tuition.

Lay the groundwork – Credits earned during the high school years at local community colleges and universities can reduce the time (and money) spent to earn a degree.  Again, getting exposure to different studies before a major is declared makes a student better informed about what major to pursue.  This, of course, has a domino effect because students are more apt to choose a school that fits their needs better (and accepts their credits), reducing the likelihood of transferring.  For college freshmen who are undecided about their studies, starting at a two-year community college that has a partnership with a university (i.e., the credits will transfer) is a cost-efficient way to go.

Meet the Requirements – Some colleges have extensive required courses.  If these courses are not offered every semester, or if they fill up quickly, upperclassmen may find themselves unable to graduate on time.  As early as freshmen year, students should look to get these courses out of the way.  Find out if taking these classes on-line or during a semester break at a local community college is an option and make sure to get approval with the institution before signing up.

Do Your Homework – Four-year graduation rates are often publicized by institutions, as they take great pride in that distinction.  U.S. News & World Report is a great resource.

The college selection process can be overwhelming.  Following these tips can help focus the college search and support graduating on-time with less drag on your finances.

 

Photo by Tim Gouw on Unsplash

Get into Giving

September 16, 2019 By Dina Isola

Exactly one year ago, I wrote a post, Hardwired to Help, which told about our front-row seat in the world of pediatric cancer.  My goal was two-fold: to raise awareness about pediatric cancers (September gold), but also to encourage others to find their cause, whatever that might be.  A happiness study I referenced in the post showed that helping others can have a positive effect on the body by lowering blood pressure.  So what holds people back from giving?

According to a 2016 report by Fidelity Charitable, “Overcoming Barriers to Giving,” 65% of the 3,200 American donors surveyed said they would give more if they understood the impact of their donations.  81% expressed concerns over the transparency and knowing the impact of the donation.

I’ve worked with clients who have struggled with these same issues.  It has kept them caught in limbo – wanting to help and knowing that they are failing to act.

For our family, deciding where to give was easy because we had been deeply moved by the work of several organizations that restored our son back to health.  It was the fortunate result of an unfortunate situation.  Not everyone gets this bird’s eye view.

Finding a mission that you identify with takes time, but it is time well spent.  The gratification that comes from knowing your funds have made a difference is priceless.

Volunteering your time to an organization is one of the best ways to see the needs and the impact of the work.  It also can give you an idea of a specific project you want to contribute to.

Not everyone has the extra time to volunteer, but simply paying attention to the dedication and work of an organization can open your eyes to giving possibilities.  For example, clients of ours had watched their granddaughter thrive in a new school and were so grateful that they donated funds to renovate the playground.

Research tools, such as Charity Navigator offer tips for donors on how to avoid scams and how to give during times of crisis.  It also assesses the transparency and impact of different charities.  The Center of High Impact Philanthropy offers donors guidance and highlights non-profits that are innovative.  They segment charities into very specific areas, such as education, health, democracy, women/girls issues, mental health, poverty and disaster relief, to name a few.

Once you have decided to make giving a priority, reach out to your financial advisor, who can build your contributions into your financial plan and set up a donor-advised fund, which allows for contributions of cash and assets (such as collectibles and investments).

You can overcome the barriers that prevent you from giving. Once you experience the true joy of charitable giving, you will wonder why you waited so long.

 

Photo by Billy Pasco on Unsplash

Reflect, but Remember to Act

September 13, 2019 By Dina Isola

Crises of any kind usually require all of our attention at once. After the immediate emergency or threat passes and the brain stops pinging, reflection is possible; such was the case for me in the months following September 11, 2001. It had taken a while for the shock to wear off, but when it did, my perspective was irreparably altered and my sense of urgency was acute – for a time, anyway.

On that fateful day, the World Trade Center was quite a distance from my midtown office.  I (along with the rest of the world) fixated on the lives that were being destroyed. Having worked in 2 World Trade for several miserable years of my career,  I knew people down there, including a former colleague.

He worked on the 69th floor of Tower 2.  He played Lotto faithfully, hoping to free himself of a job and a life that took more from him than it replenished.   (In fact, we had had a Lotto subscription as a department, mentioned in The Misery Index).

The thought that innocent people were murdered for the simple act of going to work was horrible enough; knowing that, for some, they died going to jobs that they had despised made it even more tragic.

Fortunately, my friend gathered his staff and acted quickly.  While walking down the stairs from floor 44, the second plane hit.  Had they remained on the higher floor, this story might have a different ending.

That day crystalized something we already know: No day is guaranteed.  And while being the victim of a terror attack may have never crossed our minds before 9-11, we have been forced to add that to a long list of things that can change our world in an eye blink.

That tragedy kicked my ass into high gear.  I didn’t want the life I was living.  It wasn’t a terrible existence, mind you, but it was hectic and kept me postponing experiences I craved, such as spending more time with my father who was slipping into the thick of Alzheimer’s disease, and becoming a mother.

At Christmas, we gathered my entire family (over 30 people) for a family celebration.  My parents spent two weeks with us.  By July, we were expecting twins – and there were many complications with the pregnancy that kept reminding me how precious life could be – not that I needed reminding.  I wanted my life filled with the connection and meaning that can sometimes fall into the background when you’re in a constant scramble.

But that’s not to say that the wisdom remained omnipresent in my mind.  We fall into routines and often start moving to a new beat that can easily take over, and I was no less susceptible.  Tony and I started our own firm, and it became a third child – perhaps even more demanding in some ways.  Every quarter-end, tax season, and year-end generated administrative, reconciliation and billing duties that filled me with dread.  Owning our own business was a source of pride, but it kept the lines between personal time and business time incredibly blurred.  In a two-person firm – when the two people are married – it makes truly unplugging on vacation impossible.  One of my deepest wishes, to visit my family in Italy and have my children meet these incredible people, kept being pushed back year after year.

It was five years ago this month that we had a conversation with Josh Brown, Barry Ritholtz and Kris Venne; and when we decided to join them, it made it possible to plan this trip.  And yet, it took almost five years before I made it happen.

A lot could have happened in those five years that would have prevented my dream from being realized; namely, no day is guaranteed.  I had forgotten that, somehow, in the thick of being busy.

We made it to Italy this summer, and my cousins chastised me for waiting 21 years to return.  As we sat in the valley between magnificent mountain ranges I sighed and said, “If I died right now, it would be okay.”

They all laughed and thought I was being funny.  Obviously, I’m not looking forward to my death, but this one burning wish was finally being realized and it made me feel sated in a way I couldn’t adequately express.

As if life had to knock me over the head, just to make sure I received the message, we returned home to one client nearing the end of an illness I was convinced she would beat.  She was a little younger than me with two sons, like me – and there she was at the end of life already.  It didn’t seem possible, and it certainly wasn’t fair.  Other clients of ours lost their adult daughter unexpectedly while we were away.  She had so much more road ahead of her; it didn’t seem possible that it had ended for her before it really began.  But, then again, heartbreak is never fair.

When I sit down with clients who have finally attained retirement age –there is usually hesitation, anxiety about not having a paycheck, about winding down; it is uncomfortable to realize that the meter is running faster and faster.  Denying it or depriving yourself of the experiences you have always dreamed of doesn’t keep the inevitable at bay.  And, importantly, crossing things off the bucket list isn’t a jinx.  It doesn’t fast-track kicking the bucket.

If there is one thing I can tell clients with certainty it’s that they will never regret having those experiences, but they may deeply regret falling ill suddenly while waiting for the “perfect time” to live it.

Planning is important, but if you don’t actually execute on your plan, life will see to it one way or another – with or without you.   Don’t let a crisis be your defining moment.

 

 

 

 

 

 

Living with Money Podcast

June 27, 2019 By Dina Isola

Recently, I had the pleasure of speaking with Tim Mullooly, the host of the Living with Money podcast.

There are plenty of times when I feel like I’m railing against the system, and that the industry is in need of a fire-hose spray down, but when I speak with fellow advisors who are doing right by investors it lifts me in ways I can’t adequately describe.

Such is the case with Tim.

He and his family have their own fee-only registered advisory firm, Mullooly Asset Management.  They built their practice as a family, which certainly puts the personal in personal finance.  They take the time to educate investors through blogs and podcasts.  They are thought-provoking, compassionate and I am inspired by them.

In this podcast, we covered many topics that affect millions of investors – like investor protections (or lack thereof), the importance of working with professionals who want to look out for investors’ well-being and the landmine that is the 403(b) retirement plan for America’s public school teachers.

In the interview, I referenced a blog post I wrote a long time ago: The Devil is in the Detail.

Every bit of this is as relevant today – maybe more so as regulators are blurring the lines between those who act as a fiduciary and those who only want to pose as such.

I hope you’ll give the podcast episode a listen and pass it along to someone who can use some plain-English explanations of personal finance issues.

I also hope you’ll explore Tim’s other podcasts as well as his top blog post links.   Share them with others.  It’s a small step, but maybe it will counterbalance the very conflicted messages that brokerage firms spend billions of advertising dollars on to give investors a false sense of security.

We have to start somewhere and I am happy to have the company of people like Tim and the Mullooly’s who are committed to providing investors with unconflicted information, for the simple fact that it is the right thing to do.

 

 

We Are ALL Teachers

May 19, 2019 By Dina Isola Leave a Comment

My colleague Dina Isola @RealSmartica testified before the US House of Representatives Financial Services Committee this morning in support of a strong fiduciary standard for all financial advisors.

She is armed with the most important weapon of all – the truth. pic.twitter.com/b26w3pJS4b

— Downtown Josh Brown (@ReformedBroker) March 14, 2019

Weeks ago, I found myself writing testimony I would deliver before the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets.  The topic was examining the SEC’s Best Interest Rule to see if this “replacement” for the fiduciary rule could ensure that investors’ needs would be put first by financial professionals.

Sorry to say, I felt like Dorothy in the Wizard of Oz after the curtain was pulled back – horrified at the bullying and cowardice on display.

Congress had no shortage of spin masters that day.  It disgusted me to watch as these conflicted politicians defended Regulation Best Interest even though it allows financial professionals to partake in sales quotas, contests, and sell higher costing product because it pays higher commissions (which is never in a client’s best interest). 

I walked away angry over the fact that those in a position of authority are tainted in the worst of ways and it enables them to politicize the issues and use ignorance and fear to keep the American public fleeced into thinking that lawmakers are looking out for them.

Now, in fairness, there were two bright spots that stood out – Rep. Katie Porter (CA) and Rep. Carolyn Maloney (NY) clearly were looking to strengthen investor protections.  So, if you happen to be lucky enough to have one of these fierce ladies representing you – congratulations!  They gave me a tiny glimmer of hope that not all politicians are looking to their next high-paying gig.

In the days and weeks following my testimony – I did a slow burn that kept intensifying and no amount of ranting seemed to get it out of me.  It percolated in me like a toxic sludge.

My poor husband who had endured the weeks of neurosis leading up to my testimony now had to deal with the aftermath, too.  Sometimes, life just isn’t fair.

Coincidentally, we had a number of financial literacy classes scheduled with high school students over the course of the next month.  It was there I found some peace.

If I couldn’t beat the bastards – I would work to educate others so they could not be taken advantage of.  Armed with the most passionate teacher I know (Tony), we set out and that seemed to be a therapy of sorts.

It reminded me of how, years earlier (before the fiduciary rule was even on the table) he and I would give Investor Self Defense presentations.  Over time, we had built up our clients and had less time to devote to these programs – but we had always enjoyed informing others.  It is truly at the heart of who we always have been.  Nothing has changed.

Today, our emphasis may be on the lack of protections afforded to teachers’ retirement plans – but as long as there is no fiduciary rule governing IRA accounts, college savings plans, and regular brokerage accounts – we are all teachers.  We are all vulnerable to fall prey to a convincing sales pitch.  We can all fall prey to conflicted salespeople purporting to be trusted advisors.  We can all be duped into thinking the sales guy is really working for us, when he is working for a firm who has made campaign contributions to sway politicians into weakening investor protections for their own benefit.

It’s even easier for us to become prey when the gatekeepers in Congress would rather prop up an outdated, inefficient and expensive business model than insist that they do better for investors.

It’s only a matter of time before the public catches on and finds fiduciaries to work with – or low-cost mutual fund companies, like Vanguard which allow investors to do an end-run around expensive product and unhelpful advice.  Firms like Betterment are also offering low-cost automated investment options. 

The financial services industry should support raising the bar on protections; higher standards give investors confidence and faith in our economic system.  That is an important ingredient for economic growth and robust markets. 

The brokerage and insurance industries best enjoy their gluttonous feast now because the purge will be violent.  And make no mistake – that day will come. 

Millennials are breaking with tradition and the old mold will be cracked open.  They don’t care who their parents used for investments.  In fact, they’re pretty mistrustful of the established way of doing things.  Good for them!

Our representatives in Congress should look to raise their standards above their own personal gains and interest.  Greater faith in the government is never a bad thing.  Apparently, members of Congress didn’t get the memo that Americans find them to be the most mistrusted group. 

Sadly, I have to agree.

Unfortunately not everyone realizes that it is open season on investors; we live in a buyer beware environment.   For those who are informed, the onus is on us make others aware so they can look out for themselves.

I had the pleasure of speaking with Barry Ritholtz about this experience and he asked me if testifying had been a waste of my time.  While it certainly felt fruitless, I did walk away feeling the need to scream from the rooftops: Watch out because the regulators aren’t watching out for you. 

Consider this my rooftop.  Now do a good turn and let someone less informed know.

Your Creative Solution

January 31, 2019 By Dina Isola Leave a Comment

I had the pleasure of interviewing Gabriela Pereira for On Her Mind podcast.  While her business focuses on writers, her message is universal: Our mindset can greatly limit our creative spirit.

I first encountered Gabriela when her book, DIY MFA (Do-it-yourself Master’s in Fine Arts) was released.  As one who loves to read and write fiction, her ability to boil down the critical components of this coveted degree intrigued me.

When would I find the time to pursue this degree? Probably never; but now I no longer had to wonder what I was missing, nor did the many others who bought her book.

Her desire to reach those writers that would be shut out from formal MFA programs due to geography, financial and/or time constraints, or genre (these programs can have a narrow focus) didn’t end with her book.

From there, this dynamo rolled out an interactive program to go through the lessons in the book in greater detail and with the support of others.  Then she unveiled a course to help writers build an audience and find a community for inspiration.

She accomplished this and managed to keep things fresh and exciting – while raising young children and managing bipolar disorder.  The challenges and constraints of life, she maintains, serve as fuel for the creative process.

Along the way, she has helped others tap their creative side – and not just through the traditional channels (art, music, writing and performance) but in everyday problem-solving – from getting co-workers to cooperate to having a child do homework.

Her TedX presentation, Creativity is a Craft and It Belongs to Everyone, pushes limits of how we think of our own creativity.  She also acknowledges that creativity can be fragile and is easily stomped out of a person.

In the world of personal finance, I see parallels.  There are people who need guidance, who would otherwise be ignored and who need this knowledge.  They are convinced that they’re just “not good at this,” so they check out and stop paying attention, barely save and cease looking for creative solutions to make life what it could be.  These are the people I hope to reach.

Her insight into how to fire up the synapses in our brain to be our most interesting, fulfilled creative selves is inspiring.  Gabriela challenges us to get unstuck, plug into our creative nature and express ourselves as only we can.

The solutions lie within.

Relentless Optimism

January 20, 2019 By Dina Isola Leave a Comment

Like most people, I have a real soft spot for the underdog.

Yanely Espinal has a unique story to tell, but the theme of trying to make a better life is at the core, and that story never grows old for me.

Her parents immigrated to the U.S. from the Dominican Republic and had little formal education.  As one of nine children growing up in a three-bedroom apartment in Bushwick, Brooklyn she hadn’t thought about money as abundant – and when she arrived on the campus of Brown University, her preconceived notions about money and affluence were tested.

Still, there was this undercurrent of shame and a feeling of scarcity that led her into spending more than she could afford.  One day, rather than simply pay her credit card minimum (as she had been doing), she decided to really look at what she was paying.  Though she had stopped using the card and continued paying her minimum due, she owed a lot more than she had the previous month.  What was going on?

It was then she discovered the perils of paying interest as it compounds (which is far less rewarding than earning compound interest).  She also found out what rate she was paying and made it a personal mission to get out of debt. About a year-and-a-half later she accomplished her goal and decided that the $1,000 a month she put towards her debt could now be put to a better goal – building wealth for herself.

Most important, she shared her journey for others to learn from as the aptly titled Miss Be Helpful.  With over 28,000 YouTube subscribers I would say there are plenty who crave her content and who can relate to her struggle.

I had the absolute pleasure of speaking with her for On Her Mind podcast – and like I said – her underdog tale struck a chord deep within me.

Perhaps my reasons go back to my family – my four grandparents who all came to this country from the same impoverished Sicilian town in the early 1900s; my grandmothers who sewed for sweatshop wages; my father who couldn’t afford an education so he joined the military as the threat of World War II loomed on the horizon – they all struggled in ways I have never had to.

Their experiences have also given me a relentless optimism; much is possible and their successes are proof.  My grandfather (who could barely read and write) founded a food import business that survived the devastation of the Great Depression; the proceeds from its sale and his investments would support my grandmother for the 59 years she spent widowed.  My father, a high-school dropout who earned his equivalency in his forties, would go on to head up the Cytology laboratory in a hospital and make a better life for his wife and seven children.

Yanely’s desire to help others face their challenges doesn’t end with her YouTube channel.  As Director of Educational Outreach, she is teaching a new generation of teens and educators about money through the non-profit NextGen Personal Finance (which offers free personal finance programs and training).  This knowledge could greatly alter a child’s future (and all the lives that child touches).

How others face their struggles, overcome their mistakes and ultimately find their way is a story that I never tire of hearing.  What unites us is when we can relate to someone’s experiences.  When we share these experiences and learn from one another, we find our own way.

At just 29 years old, she has much wisdom to share for those who feel baffled or overwhelmed by money.  And for all those underdogs out there — you won’t find a more enthusiastic cheerleader.

 

Attention Long Island Teachers:  NextGen Personal Finance is offering free FinCamp training on Monday, January 28, 2019, at The Old Field Club in Setauket.  To register, go to http://bit.ly/FinCampLongIsland.

 

Calling All Ladies

January 12, 2019 By Dina Isola Leave a Comment

I had the pleasure of catching up with my colleague, Blair duQuesnay, for an episode of On Her Mind podcast.

She shed some light on the history of women in the workforce and shared that, before 1973, newspapers had segregated the help wanted ads by gender. So it is a fairly recent development that women have been part of the professional business world.  This might explain why current workplace policies have not consistently addressed the challenges faced by dual-career couples raising children.  The lack of female representation on corporate boards is another.

The plight of the modern-day career woman is complicated. In spite of being better educated than ever before (and having more academic credentials than men) women get into the workforce and are faced with earning less pay and often are hampered in their advancement by gender biases (intentional or not) inherent in our society.  Yet, women are still thought of as the spouse primarily responsible for the household and child-rearing, all while she is also working full-time.

And, if that isn’t bad enough, the divorce rate is higher if she earns more than her husband.

It is a confusing time for women and men.  Breadwinner roles are not traditional anymore and there isn’t a tried and true map guiding us through these curves in the road.

In the world of finance, women are horribly represented and, of course, that is bad news not just for the industry but for the female client looking for an advisor she can relate to.

As Blair pointed out, girls didn’t get the memo that they can be interested in learning about money, banking or finance.  And, regardless of whether they want to study this as a career or not, any woman planning on having money will need to know how much to save and how to invest.  Women live longer and earn less, so the stakes are particularly high.

Getting involved on a personal level is critical.  If more women then decide to pursue this avenue as a career — that would be quite the added bonus.

I hope you will check out the interview, subscribe to the podcast and visit On Her Mind’s show archives.  If you like what you hear, please consider writing a review on iTunes.

This discussion is far from over.

I’d love to hear what is on your mind so I can create the most helpful content I can.  Please email me at onhermindpodcast@gmail.com.

I’ve received some wonderful words of encouragement and I thank you for listening and sharing the podcast with others.

 

 

Resolve to Beat the Odds

January 4, 2019 By Dina Isola 3 Comments

 

woman holding lips with black framed sunglasses

What if I told you that you could immediately accomplish a New Year’s resolution that most people fail at, all before January even comes to a close?

You can, and it won’t be that painful or time-consuming; I promise.

In “10 Top New Year’s Resolutions for Success and Happiness in 2019”, Peter Economy cites “saving more money” as one of the most popular goals people have.  Overall only 8% of people making resolutions succeed, and those seeking to improve their money situation have a higher rate of failure. Ouch.

Before you throw up your hands and decide it’s not worth trying to save more, let’s look at some ways you can defy the odds.

Often, people tell me they have no idea where their statements are.  Good news.  With year-end out of the way, statements will be arriving and will clearly show you what you have and how much you added to the account over the course of 2018.  This is your baseline on which you will improve.

Armed with this information, you can quickly assess the situation and make some changes today in 3 easy steps:

1. Look at your individual retirement accounts.  How much did you put away?

  • You have until April 15, 2019 to make a contribution for 2018 (this is a rare opportunity to right a wrong from 2018).
  • For 2018, the maximum you can put into an IRA or Roth IRA is $5,500 or $6,500 once you are age 50 or older; for 2019, these amounts are higher – $6,000 and $7,000, respectively.
  • For 2019, consider setting up a systematic investment program where a set amount gets invested every month right from your bank account.

Resolve to set yourself up for success by making a 2018 contribution and by using an automated system for investing in 2019, so you commit to monthly investments. Set it and forget it.

2. Now, take a look at your investments.

  • Do not panic if your investments are lower than when 2018 started. The market has been volatile.  On the upside, a down market means prices are lower, so your fixed monthly investments will buy more shares.
  • Do check what you are paying for your investments since excessive fees are always bad, but particularly devastating when market returns are nowhere to be found. Check your fund expenses with FINRA’s fund analyzer.
  • As a point of reference, look at what your fund expenses could be if you were in a low-cost option, like Vanguard funds. Simply swapping out an expensive investment for a lower-cost option can make you money regardless of what the market returns. Which would you rather own: a fund with a 5% sales load and fund fees of 1% or a no-load fund with expenses of 0.2%?  No, this is not a trick question.  The gaps in fees can be that wide.

Resolve to look at a down market as a long-term investor’s best friend because it encourages you to stick with your investment plan. 

AND

Resolve to not throw good money after bad; money is always better in your pocket than in someone else’s. Cut your fees to the bone.  

3. Look at your year-end pay stub.

  • Did you contribute to your employer-sponsored retirement plan? Did you get a match from your employer?  The benefits/payroll department will know what you need to contribute to get the match.  With or without a match, increasing your participation by as little as 1% is still an improvement.
  • For 2019, the maximum you can put into a 401(k), 457 or 403(b) is $19,000 or $25,000 if you are 50 or older. For Simple IRA plans, the maximums are $13,000 or $16,000, respectively.
  • You may be surprised to find that increasing your contributions to your retirement plan may not materially affect your take-home-pay, because it lowers your taxable income; your payroll department should be able to offer some guidance.  Here is a basic calculator to give you an idea.

Resolve to get involved in your employer-sponsored plan, get the match or increase your savings rate per paycheck.

Recently a client met with the payroll coordinator and she was shocked to discover that putting in $800 a month reduced her bi-monthly paycheck by just $50!  This would not affect her monthly budget one iota and yet it made a huge difference in her goal to save more money.

I’ve only scratched the surface.  There are many more elements to successfully handling your money, such as building a plan that reflects your goals/time frame and diversifying your investments appropriately.

But just developing the habit of putting money aside – and accomplishing that goal right away – may be the momentum you need to move the needle in the right direction and keep going.

Make 2019 the year you resolve to beat the odds.  I’m rooting for you.

 

Source:  “10 Top New Year’s Resolutions for Success and Happiness in 2019”, Peter Economy, Inc.com, January 1, 2019.

Photo by Andrej Nihil on Unsplash

From Disinterested to Fully Engaged

December 12, 2018 By Dina Isola Leave a Comment

For the better part of my career in the financial world, I was somewhat of a disinterested investor.  Even though contributions were made to my retirement account, bills were paid on time, debt was kept manageable, credit cards were paid on time, and the bank account was never overdrawn – I wasn’t fully engaged.

What drew me in was not my own situation, but my father’s illness that left my mother in need of help.  Suddenly, it was critical that I step up my knowledge and involvement.  The urgency (for someone else’s benefit) was just the push that I needed and it changed everything, right down to my career path.

I spoke with Tara Siegel Bernard, personal finance reporter for The New York Times for my podcast, On Her Mind, and discovered a kindred spirit.  She, too, did not set out with the goal of writing about personal finance, but as her knowledge grew she found herself “aching to write about people and their stories” and ultimately started writing for a broader audience.

That authenticity enables her to reach readers and inspire them to take a more active role in their financial lives.

As a female, she is in a unique position to demystify personal finance for women.  As a working mother with young children, she faces similar challenges that many can relate to, which makes her advice practical.

If you know a disinterested investor, share the podcast and introduce them to Tara’s column.  That might be the nudge they need to get going in the right direction.

Introducing On Her Mind Podcast

December 5, 2018 By Dina Isola 2 Comments

On Her Mind

Today I want to unveil my latest project:  On Her Mind, a podcast to address the many worries that weigh on a woman’s brain.  Whether you are a woman, or want to understand women better, this podcast sheds light on topics many want to learn about but resist asking about – things like money, careers, relationships, and aging parents.

My first guest is Carolyn McClanahan, who offers up insights on how to make a fresh start with your career path.  Carolyn has walked the walk by transitioning from ER physician to financial planner.  She shares the steps she took to design her life as her priorities changed, and offers practical advice on how to be brave enough to do the same.  I could have talked with her for hours; she is a wise soul with much insight to offer.

I hope you’ll listen, subscribe and offer feedback so I can make the podcast most useful to its listeners.

So why am I doing this?

Some 14 years ago, I found myself pushing my double-wide stroller into an unfamiliar church basement.  I was there for my kids, I told myself.  They needed to learn to separate from me.

The makeshift Mother’s Center had a Child Care Room that was manned by paid, experienced adults who were just one room away from the discussion room, in case the little ones needed a diaper change.  It was the perfect way to ease into separating while allowing for adult conversation.

This world was new to me.  I wasn’t one to join discussion groups and I wasn’t lonely or looking for friends.  In order to join, all mothers had to participate in an orientation class, which discussed their road to motherhood – from conception to birth and everything in between.

I wasn’t excited to share my tale of my difficult twin pregnancy that was in jeopardy almost from the moment we conceived.  I was tired of thinking about the bed rest, the hospital stays and their pre-term births.  Did I really need to dwell on how little sleep I was getting?  Did I want to tell total strangers what motherhood had changed in me?  Were there even words to describe the seismic shift?

There was another reason for my discomfort.  I wasn’t used to being in large crowds of women – my work experience in finance meant I had often been the only woman – or one of a few – in the room.  I didn’t want to hear gossip, judgment or backbiting and I wasn’t sure what the vibe would be in these discussion groups.  Even now, I am embarrassed by how judgmental I was being before I even entered the room.

Rarely in life have I been pleasantly surprised – but this was one of those times.

In a culture where no one likes to admit their struggles, these women shared their fears about losing themselves in motherhood, and trying to regain bits of themselves.  Some were slogging their way through post-partum depression, and released their feelings of loneliness and guilt.  Some had lost pregnancies or buried children and were dealing with trauma.  Others were grieving their deceased parents – or the fractured relationships that left them estranged.

We shared what successes we had in getting our kids to breastfeed, sleep through the night, and potty train; we shared our failures, too.  We swapped names of pediatricians.  We gave support to those dealing with marital or in-law stress.  We learned self-defense moves.  We encouraged one another to find parts of ourselves that were always there, before the children existed.  Some started businesses due to the boost in confidence they received there.

In a non-judgmental, supportive environment these women were a steel backbone for one another and frankly, I will always be grateful to them.  It was there I was asked to conduct a financial education group.  It was there I wrote my first personal finance article for the newsletter.

It was there I realized how ignorant these very capable women were about their money.  They were also particularly vulnerable, as many were stay-at-home moms who had left their careers to raise their kids.  Many were trusting that their husbands knew what to do – but they didn’t know for sure because they were not plugged in.  Motherhood was taking every bit of their bandwidth.

Fast-forward to today and I thought about the many roles we play in life.  Women, in particular, juggle many things – whether they have children or not.

I made a list of the most important roles I’ve served in my adult life – single career woman, married career woman, manager, daughter to aging/ailing parents, stay-at-home mom, parent-less daughter, mother to a seriously ill child,  entrepreneur/business partner, working mother … the list goes on.

I’m not unique.  We’ve all had experiences that have taught us invaluable lessons; these lessons would be much more valuable if shared with others struggling with these same challenges.

That is what I want to bring listeners every week.  I hope you’ll join me and share the podcast with others who could use some encouragement in all areas of their life — not just finance. I will tap the minds of successful women from diverse backgrounds, such as medical, legal, non-profit, media and business.  I will offer personal finance perspectives to demystify the jargon-filled world of investing and make it simple to understand.

Let me know what you struggle with because I want to help in any way I can.

My kids are now nearly 16 and a lot of living has gone on over the years, which means more ideas for content.

All I can say is stay tuned and see what you can apply to your life.

 

 

 

 

 

 

How an English Major Became an Advisor

December 2, 2018 By Dina Isola Leave a Comment

We live in a time when expressing an opinion and having an audience is as nearby as a cellphone.

We can always have lots of people agreeing with us, in fact – algorithms for social media, such as Facebook, guarantee that we will find our very own choir to preach to.

It makes us feel better to know others share our opinion; it makes us feel smarter, too.

If that is not enough, we get immediate gratification in the forms of likes, share, and retweets to make us feel bigger and more important than we really are.  If someone disagrees (respectfully, or not) we can fight them or block them – depending on how we feel that day.

But does this make us better, or just smug?

For someone in the position of advising clients – this can be dangerous.  Advisors can lose touch with what clients really need – which is first and foremost to be heard and understood.

A good advisor is like a doctor who cobbles together all the vague symptoms to get at what the real issues are.  It requires not latching on to an answer prematurely (like before questions have been asked).

Yes, sometimes things are fairly obvious and the course of action is straight-forward.  But, many times there are other fears, issues and concerns that are being expressed very subtly; and only a still mouth and focused ear can zero in on these details.

I had the pleasure of sitting on a panel to discuss deepening client relations.  The moderator was quite versed in social media, and we spent a lot of time discussing how to get more followers.  To be honest, that part of the discussion was not a place for me to add value.

While I use various social media platforms, that is not how I go deeper with my clients.  It is how others might find me and read my content.

My content (my blog) comes from what I hear, over and over from people too embarrassed, ashamed or nervous to share it with others.  It comes from walks I have walked (willingly and unwillingly).  In short, I try to share things I wished I had known, things that at times have baffled me or intimidated me — and continue to frustrate others.

When I was in college I had a lucrative side-job tutoring college prep kids.  Majoring in English, I mistakenly thought that writing would be a subject I would enjoy tutoring.  It turns out that the subjects I understood the best were like my ability to ride a bike – I had my balance, but couldn’t explain how others could find theirs.  It was hard to articulate what I intuitively knew.

I discovered my greatest talent was communicating subjects that had once challenged me (trigonometry and calculus, anyone?).  I understood what was confusing about the subject matter; and, most important, I had slogged my way out of the maze.

I liked putting others at ease so they could stop being self-conscious and learn.  Having found my way out, I delighted in giving others their chance to get on secure ground.  It energized me more than when I had rescued myself.

That is how an English major ended up an advisor.

My best clients are not the ones that want to talk about their rates of return.  They want to feel more in control of where they are headed.  They want to understand:

  • Why some of their fears are unwarranted (like worrying that an Index fund will go to 0);
  • Why some of their ideas are speculative (buying that “sure thing” marijuana stock);
  • What they can control (i.e., how much they invest, how long they stay invested, keeping their fees low, minimizing taxes, letting compound interest work its magic, and not selling when the market dips – but buying low, instead); and
  • Why they are not abnormal in their worries or ignorance (many are in the same boat).

I’m not interested in voicing my opinion to prove I know something; I’d much rather use my experiences to show others that I’ve been there, I understand, and I want to help them find some financial peace.

You can go ahead and tweet that.

 

Photo by Carolyn V on Unsplash

The Kids Will Be Alright

November 8, 2018 By admin Leave a Comment

 

“I’m mad at myself for wasting time,” he said.  “Nine whole years have passed that I won’t get back, and I did nothing!”

I suppressed a laugh, but I was not making fun; I was astonished.

I’ve heard this many, many times but this guy was different.  He was 25 years old, lamenting about what he did not do at age 16.

His wise grandmother had told him to start contributing to a Roth IRA when he was 16.  She showed him how $5,500 invested annually until he retired at 66 would likely grow to over $1 million if he received average market returns.

She was right to encourage him early on.  I always tell young people that it doesn’t take a lot of money to grow money – it takes time, discipline and consistency.  Those three components can super-charge a retirement fund.

In my experience, however, people mistakenly think that a small commitment is not worth making.  They wait to save up until they have a big stash to plunk in all at once.  Unfortunately, this usually falls by the wayside.  Other expenses creep in  — like getting a new car.

Or they become distracted by what the market is trading at and they stand on the sidelines waiting for the right time to jump in.

To someone young and not earning much, it can seem like there is no place at the grownup table – trust me, there is.

A consistent, disciplined plan (think automatic investments deducted from a bank account every month) is better for many reasons.  $100 a month might not be noticed in the monthly budget – but writing a check for $1,200 might cause a hand-freeze.

The market is up?  The market is down?  No big deal because shares are being bought monthly so the share price averages out.

In Tiny Improvements, Big Results, my colleague, Ben Carlson, shared just how meaningful small changes can be.  While this example is hypothetical and assumes a market return of 6% (not an unrealistically high return; but the market never generates a fixed, consistent return), the takeaway is how powerful compounding is, even when done in small increments.

Investing just $25 a month from ages 22 to 65 could result in an account worth over $60K, which is pretty impressive.  Who would miss $25?  That’s like $6.25 a week.

But, by increasing the amount to just $30 a month, the account could grow to over $215K.

And, if every year that monthly amount was increased – the results are astounding:

As Ben points out:

“Adding $5, $10, $25, and $50/month to your savings each year is an annual increase of just $60, $120, $300, and $600, respectively. These aren’t enormous sums of money but look at the massive differences in the ending balances.”

“Saving $25/month over the course of a year is only $300 in total but adding $50/month to that total every year using an incremental approach can add up to a fairly large sum of money through a combination of diligent saving and compound interest.”

So, if you’re young – know that your “little” savings can yield big results if you do three simple things:

  • invest consistently;
  • make time work for you; and
  • increase the amount you invest gradually.

Compounding does not discriminate.  It likes all contributions, big and small.

If you are reading this and you are already older and wiser, be like the grandma who encouraged her grandson.  Share this with someone who needs a reason to get started now.

As for that 25-year-old, I told him he still has miles of road ahead of him.  If he uses his remaining time well, he’ll stop beating himself up for missing out from ages 16-24.

I have no doubt he will.

Planning for the “Big” Day

October 27, 2018 By Dina Isola Leave a Comment

 

One of the greatest “gifts” I ever received from my parents did not feel like a gift a first; it was a torturous exercise, truth be told.  Involving me in their estate planning would be something that would offer my entire family peace of mind, but not until much later down the road.

I did not ask to be involved; I actually was uncomfortable looking at my parents’ finances; it felt like TMI.

To put things in perspective, I was not a financial advisor at the time, nor was Tony.  I was in charge of marketing communications for a mutual fund company and Tony (an avid investor) was teaching history.  It was our experience with my parents’ planning that led us to the work we do now.

One of my brothers had helped them take care of the legal part of the equation – wills, health care proxies, trusts, etc. were in place.  But now, we had to make sure everything was titled as it needed to be and that beneficiaries and contingent beneficiaries were properly named (with seven children that was a lot of form-filling).

Assets had to be consolidated from numerous accounts; stock certificates needed a better home than the bedroom closet; their portfolio needed to be realigned based on their increasing medical bills; and investments my father bought back in the 1960s needed a price at purchase (cost basis).  Tony spent a good chunk of his summer break researching average share prices in the library (this was pre-internet).

Here is where the gift part comes in – when my father died in 2004, and my mother in 2015, there was no guessing about anything (not even the music played at the funeral Mass).  Our family was able to focus on being together and mourning my parents; we were not caught scrambling in a panic over the loose ends that we should have tied up when they were alive.

Money had been set aside in a bank account in our names to pay for all the expenses that would arise before the funds were disbursed.  No one was forced to charge thousands on a credit card to pay for the funeral arrangements.

When the heart is heavy, any complications can feel overwhelming; minimizing decision-making is a tremendous help.

Yet, according to the Financial Awareness Foundation, a nonprofit organization dedicated to raising financial awareness and literacy, 120 million adults in the U.S. do not have an estate plan in place.  This leaves them and their loved ones in a precarious position.

People mistakenly think that estate planning is for millionaires, and not the average person.  That is simply not true.  Yes, people with significant assets have more complexities; but everyone needs to have a plan in place to ensure a smooth transition in the event of illness, mental incapacity or death.

I am fortunate that my colleague, Gary Pulford, has experience with the potential issues that can threaten a plan; he is a wealth of information.  You should consult with an estate planner to address your specific concerns, but here are a few basic elements you should have in place:

  • Planning for right now – It is more likely for you to become impaired than to die; becoming mentally incapacitated is not limited to a long-term illness, like dementia.  Anyone can have an unfortunate accident or suffer a stroke.
    • A durable power of attorney will enable someone to handle financial decision-making responsibilities (check-writing, managing assets, etc.). This form must be on file with each institution and on every account that you want to grant someone control over should you become unable to manage your affairs.
    • A living will enables you to state your wishes regarding medical care or end-of-life decisions and a health care proxy allows you to appoint someone to make health care decisions on your behalf.
  • Beneficiaries on IRAs/Roth IRAs and Retirement Plan Accounts – Assets in these accounts are not governed by the will, so make sure the beneficiaries/contingent beneficiaries are the appropriate people.  Divorces, deaths, and the arrival of children/grandchildren may have occurred since you last reviewed your accounts.  Those inheriting the accounts only need to provide the death certificate, so these assets can transition to the heirs very quickly.
  • TOD on Bank Accounts and Taxable Investment Accounts – TOD or “Transfer on Death” acts much like a beneficiary designation works on a retirement account. It allows assets to move seamlessly to heirs once a death certificate is provided.
  • Last Will and Testament – A will gives instructions on how an estate should be handled when someone passes.  It also appoints guardians (for the care of minor children or impaired adult children); trustees (to manage the money and the disbursements); and an executor (who collects and distributes the assets).  It can be used to distribute non-retirement investment assets (without a TOD in place); and hard assets, such as homes, real estate, vehicles and other personal property.  The will is only valid if it is in compliance with the probate laws of the state.  If you have moved to another state, your will should be reviewed.  Likewise, if your will is not current, you should review it to make sure it accurately reflects your wishes.

Among its free publications, the Financial Awareness Foundation has a free downloadable set of forms to organize and document your financial, personal, and family data.  It has an exhaustive list of items to gather, but do not be put off by this.  Rather, use the parts that are only relevant to you.

For a more basic list, check out a blog I wrote a long time ago when I deemed estate planning as an unpleasant task.

I understand why this is a chore many avoid – I really do.  But I can also say – as the daughter of parents who did the right thing – when you have this in place, it removes some stress off of your loved ones at a time when their hearts are burdened enough.

Let that be your parting gift.

Simple Does It

October 8, 2018 By Dina Isola Leave a Comment

Henry David Thoreau Quote

There are a few things that immediately make me more relaxed and happy to face the day:  a strong cup of coffee, a nice walk, and a hot shower.  It’s nice to know that I can guarantee myself a good start to the day with such simple things.

It got me thinking that people rarely do this with their finances.  Instead, financial matters are treated like an overstuffed, messy closet that needs to be dealt with but remains closed (and avoided).

Make no mistake, procrastination weighs on the brain.  Putting things off just makes it difficult to enjoy “down time” because there is this nagging sense that something needs to be addressed.

The good news is that a few quick changes can immediately get your finances moving in the right direction.  I have intentionally picked three things that you can (and should) do right away (and it will take less time than cleaning out a closet).  Tackle those three, and you might just become motivated to do more.

The best part is there is a deadline because there is no better motivator than a sense of urgency.

With less than three months left in the year, these changes may help you save on your federal and (if applicable) state taxes if you act quickly.

  1. Contribute the maximum to your employer-sponsored retirement plan. If you can’t afford to do that, get as close to the maximum as you can.  Remember, this lowers your taxable income.  The maximum contribution amounts are as follows:
  •  $18,500 ($24,500 for those ages 50 or older) for 401(k), 457 and 403(b) plans;
  • $12,500 ($15,500 for those ages 50 or older) for Simple IRA plans; and
  • For those with a 403(b) AND a 457 plan, you can contribute the maximum amounts into each plan for a total maximum of $37,000 or $49,000 (if 50 or older).

 2.  If you can’t contribute the maximum to your 401(k) plan, but your employer offers a match, contribute at least enough to get the match.  That is free money.

3.  If you are saving for college expenses, many states offer tax benefits for contributions made to in-state 529 plans. And some, like Arizona, Kansas, Missouri, Montana and Pennsylvania allow for tax benefits for contributions made to any state’s plan.  To learn more about tax deductions or 529 plans, visit Savingforcollege.com.  As always, fees matter, so be sure to look at your options from a fee perspective.

Even if taxes are not an issue for you, you can still fortify your retirement account by participating in your employer-sponsored plan (some even offer Roth 401(k) or Roth 403(b) plans).

If you do not have access to a company-sponsored retirement plan, remember you can still contribute to a Traditional IRA or Roth IRA ($5,500, or $6,500 for those age 50 or older).  Click here to learn more about the differences between the two accounts and the eligibility requirements.

You don’t need to completely overhaul your life to strengthen your finances; a few easy changes can get you on the right path, and, more important, can ease that nagging feeling that you are neglecting something important.

Sometimes the smallest of actions can give you the greatest peace of mind.

Hardwired to Help

September 20, 2018 By Dina Isola 3 Comments

 

Sometimes you find a cause to support, but when a cause finds you it means something in life has sunk its teeth in and has torn some of your flesh.

Such was the case for our family when, in 2014, our fifth-grade son showed me a lump on his neck.  What appeared to be an infected lymph node turned out to be Hodgkin’s Lymphoma.  And, while it was caught in its early stages and is one of the more curable cancers, the road to recovery was filled with a hot-coal walk no child should ever endure.

As parents, nothing is more excruciating than not being able to make a scary, ugly world safe again for your kid.

Unfortunately, this road is also well-traveled with scores of other young warriors (and their families) fighting cancers with far less certain outcomes.   We can never forget those we passed in the corridors (and those, sadly, who are now angels).

Prior to our son’s illness, I was blissfully unaware that cancer is the disease that claims more young lives than any other.  I didn’t know that only 4% of federal funding goes to pediatric cancer research.  I didn’t realize that September was earmarked as Childhood Cancer Awareness Month, signified by gold ribbons.

In 2015, I noticed, along with many pediatric oncology parents, that the world was not a sea of gold in September the way it turned pink in October.

Limited awareness results in limited support.

Thankfully, this is starting to change, but there still is much work to be done.

When I hear someone say that money is the root of all evil I know they have not found a cause, they have not seen the good works that money provides – the research, programs and support.

Our family will forever be indebted to Stony Brook Children’s Hospital for saving our son’s life, as well as scores of charities, like Make-A-Wish Suffolk, the Sunrise Fund, and the Ronald McDonald House that gave us hope and respite.

For us, the only way to heal from this is to ease the path for others who will share a similar, terrifying journey.

As humans, we are hardwired to help – and it is good for our health.

According to Elizabeth Dunn*, a psychology professor at the University of British Columbia in Canada who studies happiness, “People who donate money to charity are happier in poor and rich countries alike… Dunn said her more recent research suggests giving away money can tangibly improve one’s health.”

She measured the blood pressure of subjects before and after they gave away money.  When they spent money on themselves, their blood pressure remained unchanged but, when they gave away money it resulted in reduced blood pressure.

Dunn noted that when a donor is personally connected to a cause, the positive effects of giving are more pronounced.  She believes that giving is good for the heart.

Tony and I have had the pleasure of helping a number of our clients set up donor-advised funds, which allows for contributions of cash and assets (such as collectibles and investments).  Advantages to using these funds (as opposed to writing a check) include:

  • Donors contribute to the fund and take the deduction in the same year, but the donation does not need to be made right away, so donors have time to thoughtfully disperse the funds.
  • The account is invested and can grow over time, which may increase the amount the charity ultimately receives.
  • When donating appreciated assets held over one year (e.g., stocks, collectibles), donors can avoid paying capital gains taxes.
  • Recordkeeping of contributions/donations are handled by the fund.

Next time you meet with your financial advisor to discuss funding your many goals (college, weddings, vacations and retirement) consider that being generous to a cause has many rewards, including helping to mend a broken heart.

 

 

*Source:  “People who donate to charity are much happier and healthier” by Reuters, NYPost.com, September 3, 2015.

Your Silver Lining Financial Playbook

September 6, 2018 By Dina Isola Leave a Comment

Often, I have seen people burdened with a financial secret; something that they have not faced head-on or have been hiding from their families, and it leads to emotional overwhelm.

Over the last month, I have had several conversations with a successful career woman who has amassed credit card debt that she cannot pay off in full.  Though she has never been late or delinquent in paying her bills, the guilt and self-loathing she carries was keeping her stuck in place – paying the minimum or a little more when she could afford to do so.  She had no idea what her balances were on each and every card, nor did she know the rates she was paying.

When emotions run high, it is easy to be reflexive and ride the wave like a piece of Styrofoam in the ocean.  But if we can just believe we can control our emotions, then we can learn to manage our responses, according to Guy Winch, Ph.D. and author of “Why You Should Believe You Can Control Your Emotions.”

Winch explains that our natural response to troubling thoughts is to either distract ourselves or to suppress what we are feeling; neither response is useful.  Yet, the simple belief that we can have control over our emotions allows us to reframe the challenge as an opportunity and can “lessen the emotional impact” of the stressful situation.

While failing to manage emotions can harm your personal life, your financial health can also get compromised along the way, even if money hasn’t been an issue for you in the past.   It could look something like this:  Rather than face your dissatisfaction with your career advancement, you decide to renovate a perfectly good kitchen (distraction).   You take out a line of credit and that makes your monthly budget a little tight, but you push down those nagging feelings telling you to hold up on the remodel (suppression).

Money complicates emotions because it represents more than just currency.  It is the yardstick that measures success, status, and prestige.  It is easy to give the impression that you have more of it than you really do.  Fake it (cross your fingers) and hope you can make it.

Posting images of a successful life on FaceBook, Instagram or other social media outlets wouldn’t be as prevalent if we didn’t care how others see us.  Ironically, our emotional response to these social media posts is to feel bad about our own lives, which fuels the need to keep up (or at least pretend to).

In my opinion, the only thing worse than living life on a gerbil wheel is to live it on someone else’s gerbil wheel (and get into debt over it).

Though not my area of expertise, I wanted to help this woman find her way to higher ground.  I could not offer her credit counseling but I was able to help her get her emotions out of the way so she could move forward.  She was then inspired to speak with an expert on the topic and has called me to discuss her progress.  As I read the article by Dr. Winch, I was struck by the fact that she and I informally covered his five questions to find a silver lining and regulate emotions.  This is how we talked through her issue:

  1. What is the possible upside in this situation?   I will not allow myself to get into further debt.  I only go shopping for groceries.  I have stopped the bleeding and have made a plan to pay this off in four years.
  2. How can I use the situation to further another goal I might have?  I have wanted to look at my budget and dig into how I am spending my money and set aside something for retirement.  I will make a place in my budget now.  I am tired of only paying other people; I want to invest in myself.
  3. In what ways is the situation not as distressing as it first seemed?  When I sat down and listed all my card balances and then wrote down the interest rates I was paying, I was sick over it.  To continue what I was doing meant it would take decades to pay off the debt and it would cost me an additional $100K.  Now I won’t be wasting any more money.
  4. What would the situation look like if I took a different perspective?  Yes, I was irresponsible in my spending.  I am embarrassed I let it get to this.  But, I have been responsible in always paying my bills on time.  Now I will be proactive in paying it off sooner.  I am making it right and this will never happen again.
  5. What potential opportunities are there in the situation?  I want to explore why I have had an unhealthy relationship with money and fix it, which will also rebuild trust with my husband.  I want to educate my children about my mistakes, so they will make wise decisions with money.

At the time of our last conversation, her shame and guilt started to shift out of the way to make room for her more important work of fixing the situation.  Managing her emotions enabled her to make her own playbook, freeing her from paralysis.

She believes she can change this situation now; so do I.

Whether you are facing an imminent financial threat or realize that you have allowed day-to-day distractions to keep you from actively planning your financial future, these five questions can help you take control and not live at the mercy of your discomfort.

You can wring your hands over past mistakes and missed opportunities, or put them to work and make your own playbook.  Then, you can get busy going where it is you want to go.

 

Source:  “Why You Should Believe You Can Control Your Emotions” by Guy Winch Ph.D., Psychology Today.com, September 5, 2018.

Photo by rawpixel on Unsplash

Hooray for Me, and the Hell with You

August 8, 2018 By Dina Isola 1 Comment

black haired man in white crew neck t shirt

When my mother wanted me to be aware of someone’s self-serving nature she would say, “Hooray for me, and the hell with you!”

That one sentence was a much-needed warning as my tendency was to follow the Golden Rule (“Do unto others as you would have them do unto you.”).  The trouble is, sometimes you can feel like a bit of a patsy following that rule when everyone is muttering through a fake smile, “The hell with you!”

At a company like Wells Fargo, management has built their fortunes exploiting their clients in the most egregious of ways.

A July 27, 2018 Wall Street Journal article by Emily Glazer “Whistleblowers Detail Wells Fargo Wealth Management Woes” details how perverse sales goals greased the already oily fingertips of advisers who: “pushed clients into products that generated additional fees and often moved client assets between different products or investing platforms to generate more revenue and bigger bonuses…”

Add this ick to a long list of gripes against Wells Fargo, including manipulating banking data, opening fake customer accounts, hocking dangerous investments, using illegal lending practices in minority and low-income communities, not to mention claims of ripping off small business owners, mortgage holders and car insurance policy holders.

What I can’t figure out is how they have the audacity to outline their values on their website.  This is a direct lift from its site which put someone’s MFA degree in Creative Writing to tragic use:

Five primary values guide every action we take:

  • What’s right for customers. We place customers at the center of everything we do. We want to exceed customer expectations and build relationships that last a lifetime.
  • People as a competitive advantage. We strive to attract, develop, motivate, and retain the best team members — and collaborate across businesses and functions to serve customers.
  • Ethics. We’re committed to the highest standards of integrity, transparency, and principled performance. We do the right thing, in the right way, and hold ourselves accountable.
  • Diversity and inclusion. We value and promote diversity and inclusion in all aspects of business and at all levels. Success comes from inviting and incorporating diverse perspectives.
  • Leadership. We’re all called to be leaders. We want everyone to lead themselves, lead the team, and lead the business — in service to customers, communities, team members, and shareholders.

They say their vision is to make customers succeed financially.  Well, that just doesn’t add up in the land of hooray for me, and the hell with you.

What is baffling is its advisory arm manages $1.6 trillion in retail client assets!

For all its misdeeds Wells’ net income year-over-year went from $5.9 billion in the second quarter of 2017 to $5.2 billion in 2018 and revenue went from $22.2 billion to $21.6 billion over the same period.

Where’s karma when you need it?

Mistakes get made in life, but a predatory culture is hard to shake – and even more difficult to clean up.

If customers believe they are working with professionals who are doing a good job – that’s nice. But if those at the top of the food-chain have blood dripping from their teeth, I don’t much care how nice my bank rep/advisor is.

Wells is not alone.   The good news is an online search and a visit to FINRA’s BrokerCheck allows investors to research firms and individual representatives for disciplinary actions and infractions.

Always look at the firm’s record,  as well.  Remember: Culture is as culture does.

Separate out those firms who use the Golden Rule from those who thumb their noses at it, and at you.  Then, take your business elsewhere.

Waiting for Good Dough

July 30, 2018 By Dina Isola 2 Comments

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“…Let us not waste our time in idle discourse! Let us do something, while we have the chance….”  Vladimir, Waiting for Godot by Samuel Beckett

The characters in Waiting for Godot sit under a leafless tree waiting for Godot to show up and it is like groundhog’s day.  Time drags out and actions repeat in an endless loop.  The men insist they will not wait for Godot, and yet they continue to do so, even though they know it is useless.  It is maddening and futile.

It reminds me of something I often hear from would-be investors:

“When I have enough money to invest, you will be the first person I speak with.”

The odd thing is, I am frequently approached when I am minding my own business.  I can be reluctant to share what I do for a living because I have seen the anxiety and embarrassment it sometimes conjures up in others.

I rarely have follow-up conversations with these types that are hopeful.  I might run into them again at a gathering, and I will never bring up finances – but they will. They will tell me they haven’t forgotten about me and when they have money they will be sure and call.  They are right about one thing: they haven’t forgotten about me; they have forgotten about themselves.

They are waiting for “good dough” to invest; to which I say good luck.

Their lack of commitment to securing their finances is usually a lot less about actual resources available than it is about their priorities.  No matter what someone’s goals are –personal, professional, spiritual, financial – there comes a point when a first step is taken; a desired outcome is set and a series of action steps are taken.

I saw a headline on Charles Schwab’s 2018 Modern Wealth Index study: “Most Americans have no financial plan, and many think their wealth doesn’t deserve one.”

Sadly, it is true and with devastating results.

According to the survey, which looked at daily money behaviors, people who tend to plan are more likely to have an emergency fund and life insurance. 75% of planners pay their bills on time and still manage to save money every month versus 33% for non-planners.  They are less likely to carry a credit card balance and they are more apt to feel financially secure.

When it comes to their investing behavior, the gap between these two groups grows even wider:

  • 82% of planners consider their risk tolerance when investing versus 55% for non-planners;
  • 78% of planners are aware of fees and investment costs versus 44% for non-planners; and
  • 54% of planners regularly rebalance their portfolios versus 17% for non-planners.

Having a financial plan creates priorities and causes focus, which leads to action and improvement.   That is why it is not surprising to me that planners are more aware of the very things they can manage – the risk, fees and asset allocation.

Without focus, procrastination kicks in.  The next holiday season when I’m around the punch bowl I will hear the same nine million excuses about why nothing has changed since last year.

I’m not judging, mind you; but I know one thing.  I can’t help, either.  I’m the kind of person that if I’m told a problem, I will do my best to offer a few actionable steps to take.  When I just hear the worry with no commitment to taking action – suddenly the other person’s discomfort and anxiety become mine.  That may make me sound selfish, but I‘d rather help than worry.

Something as simple as putting aside $50 a week will amount to $1,000 after five months.  It’s a start.

Companies like TD Ameritrade and Vanguard will open accounts with no investment minimums and low trading costs.

Robo-advisors, like Liftoff, are another great option.  Based on an investor’s time horizon, goals and risk tolerance; an appropriate, low-cost, diversified portfolio is constructed and is rebalanced back to the original portfolio allocation.

Fear of not being able to achieve their financial goals may cause some people to waste the most precious ingredient to compounding interest: Time.

Time out of the market pays nothing, and the endless, senseless waiting begins; which, for some, never ends.  Maddening and futile; and so it goes…

 

 

Sources:  
Charles Schwab’s 2018 Modern Wealth Index Study. 
Lombardi, Esther. “Quotes and Themes from Waiting for Godot.” ThoughtCo, Feb. 19, 2018, thoughtco.com/waiting-for-godot-quotes-741824.

The Humble Express

July 16, 2018 By Dina Isola 2 Comments

Our sons have been playing in a summer basketball league and have entered the playoff season.  The first opponent they faced was a team they had beaten easily during the regular season.

“They don’t know how to play!  We’re going to kill them!” my son said.

“You played them at the beginning of the season, things could have come together by now,” I cautioned.  “Never underestimate your opponent in a game, or in life.”

Cue the eye roll – because you know that’s exactly how he responded.

As my son pointed out, I don’t know much about basketball. But there’s this little matter of having lived more than half a century and having seen a thing or two – especially upsets.

Going around thinking you’re the bomb can cause an explosion, all right.  Reality shows like Top Chef and Project Runaway delight in showing contestants openly bragging that this week’s challenge is their area of expertise and how they will smoke the competition. The episode usually ends with the contestant eating crow and heading back home or barely squeaking by – kind of like winning a basketball game by a measly five points, which is what happened.

With the EBI West Conference still fresh in my mind, I thought back to one of the speakers, Michael Lombardi, an America football executive.  He spoke about lessons for life and business.  Basically, he spoke about what makes great, great.

Mr. Lombardi worked as an assistant coach to one of the most successful football franchises, the New England Patriots, under the impressive (if not grumpy) Bill Belichick.  What separates the Patriots from other teams is the fact that they have appeared in more Super Bowls than any other team and eight of those 10 appearances were under the guiding hand of Belichick.

Lombardi credits a culture of humility as an important factor in the team’s historic successes.  Every season starts as if the previous season’s wins didn’t exist.  This explains why the locker room is bare.  Past triumphs matter not and they certainly won’t get the Team another championship.

Giving into an ego stroke would derail them – and that won’t help them establish themselves as the team with the most Super Bowl wins (that distinction belongs to the Pittsburgh Steelers, who have won six championships to the Patriot’s, five).

I have seen this happen with investors who have had a good run of things; though unlike a football franchise, often times luck – not skill, talent or discipline – was behind the success.  Pride blinds the eye to the truth and can poison future success.  Add into the equation exceptionally high, earned income and the hunger to make a better future can start to wane.

Life is good, it will always be good.  Aren’t I great?

To be successful in life – and investing – requires that you prepare yourself to perform in all environments – favorable and hostile; each has its own challenges.

Keeping a cool head requires a plan to keep the ego in check when things are going well and to not give in when you’re getting knocked around.

Here is what this might look like:

  • When times are good, save more. You can afford to and, when the market turns volatile you will feel better for having put more away when you could.  It also forces you to live off of less; being lean never hurt anyone.
  • Rebalance, rebalance, rebalance. Your advisor should help you determine the appropriate mix of investments given your time frame and your risk tolerance, but as the markets move your portfolio can get out of balance.  For example, if an allocation of 70% stocks and 30% bonds makes sense for you, and stocks go down in value, your allocation might shift to 60% stocks and 40% bonds.  Rebalancing forces you to sell the bonds (high) to buy the stocks (low) to return to the 70%/30% mix.  These adjustments needn’t take place frequently, but keep an eye out for major shifts in allocations.
  • Understand what you have and why. There is a temptation to load up on an asset class that has performed well.  A good portfolio has a mix of investments – both the top performers and the bottom performers.  You need to own them all in order to participate in the market shifts that topple last year’s “winners.”  If you know the role all these investments have in your portfolio, you will not over-weight one investment type because it is the latest rage.
  • Don’t pat yourself on the back too hard. Be happy for the successes you get, but understand that how you are prepared to handle the difficult times will dictate your long-term financial health more than your short-term wins. Let’s face it; it’s hard to go forward if you are grinning at yourself in the rearview mirror.  At best, you won’t move forward very fast – at worst, you’ll end up in the trunk of the person in front of you.
  • Share your painful lessons, especially if it will spare someone a similar fate or can help someone heal from their wounds. That’s just being a decent human being.

Long-term success is achieved when we push just as hard at the beginning of the journey as we do at the end.  Humility fuels that drive and allows us to start over again and again.

If we have the courage to be brutally honest with ourselves, it also can help us identify the blind spots that would threaten our well-being – just ask Bill Belichick.

Ancient, Relevant and Wise

July 5, 2018 By Dina Isola Leave a Comment

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Photo by Pixabay on Pexels.com

I had the pleasure of attending the EBI West last week.  For those of you unfamiliar with it, it is a conference for financial advisors and the theme is evidenced-based investing.  There were many distinguished speakers from the financial industry with interesting perspectives, but the content the “outsiders” to the industry brought was refreshing and enlightening; especially one who spoke about ancient Greek philosophy.  I am being quite serious.  He was riveting.

Ryan Holiday, a best-selling author and founder of Brass Check, spoke about Stoicism.  This ancient Greek philosophy is every bit as relevant today as when it guided philosophers, such as Seneca and Epictetus, as well as statesmen and emperors, such as Cato and Marcus Aurelius.  Some of our most notable American presidents, George Washington, Thomas Jefferson and Theodore Roosevelt, were inspired by this philosophy.

For those of you who think philosophy means sitting around and pondering life’s great questions, Stoicism is about behavior.

According to Holiday, “The philosophy asserts that virtue (such as wisdom) is happiness and judgment be based on behavior, rather than words. That we don’t control and cannot rely on external events, only ourselves and our responses.”

This way of thinking challenges us to make our obstacles our advantages and to realize that it is a waste to try and control that which we can’t; invest your time in what you do have power over.  Put your energy into living a good life, which means being virtuous – patient, honest, and sincere, for example.

It sounds so simple and yet there are many distractions we deal with in a modern life.  An endless news cycle entices us to gyrate to every hiccup, the non-stop barrage of social media dings and pings can dilute our focus – just to name a few.

For investors, the market noise can push our hands into acting when we should exercise restraint.  It’s a heck of a lot easier to do so when you put the work in up-front – into a financial plan – which enables you to control all those variables you can, instead of worrying about market returns (which is like worrying about the weather forecast in the future).

Barring extenuating circumstances, you can control how much you work and what you earn.  You can control how much you spend and how much you save.  You can decide when to retire –or whether you will seek out part-time employment in retirement.

Some of the devices you need to employ might not be easy – they may come at great sacrifice.  Only you can determine if the price is too steep.  It’s more productive to weigh the pros and cons of your options, rather than to worry about market volatility or to hope on the unlikely possibility of a winning lottery ticket.

When you do take control of what you can – expect a peace to settle over you.  Even if you have to work your tail off doing so, even if you make great sacrifices – it is empowering to focus your energy on actions that move the needle in the direction you want to head.

When Tony and I decided that I would stay home full-time with our infant sons, we were somewhat prepared; we had saved aggressively in the years leading up to their arrival.  It also gave us the incentive to start our own advisory firm.

In order to do so, we both had to take courses for the Series 65 license.   Tony was working full-time and made the time for this.   Our sons were poor sleepers and I often was in a fog of sleep deprivation – yet I managed (with lots of coffee) to stay awake reading what I had to so I could take the test.

That was certainly not the end of it.  Tony continued to teach full-time, which meant client meetings took place in the evenings or on the weekends.  His coveted school breaks were consumed by catching up and cramming in more meetings.  He set about working towards a Certified Financial PlannerTM designation, which was another worthwhile, yet time-consuming, endeavor.

Honestly, I had come to dread Christmas and summer breaks because there was always a false hope that it would be a vacation.  For years, it never was.

Controlling what we could made the difficult work easier because at least we knew what we were killing ourselves for – which is better than killing yourself for someone else’s benefit (which, trust me,  I could have easily added a decade to my lifespan had I been smarter in my youth).

Our actions were not merely driven by economics.  Here is where the virtue part comes in: What we had seen happen to others, at the hands of ill-intended financial salespeople, made our work important.  Our work could empower others and help them move towards financial security and the peace that comes from that.

Joining our efforts with Ritholtz Wealth Management was a way to help reach more people than we would have been able to as a two-person firm.  We were able to set up a program to rescue teachers from expensive options in their 403(b) plans.

Thanks to Mr. Holiday, I am inspired to learn more about Stoicism and how to apply it to all facets of my life.  That certainly is within my control and it’s up to me if I choose to act or merely ponder.

The same is true for you.  A good place to start is his website.

The Misery Index

June 19, 2018 By Dina Isola 5 Comments

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My senior year of college wasn’t filled with the dread that some of my classmates seemed to carry.  All the “countdown” parties went on without me; I didn’t feel the need to squeeze the last bit of juice out of my carefree days as a student.  I was itching to get on with it; the next big event in my life was hovering on the horizon and was taking forever to arrive.  I was impatient for my real life to begin.

Had I not been so doe-eyed, I might have clung to every moment of what was slipping through my hands.  I might have even curled up in the safe arms of another university to pursue a master’s or law degree.  But I was arrogant, ignorant and without a plan.  What could possibly go wrong?

It was the spring of 1987 when I graduated.  As my initiation into the business world, I went to various personnel agencies with the same results.  My fanny was promptly plunked before an electric typewriter and I was asked to type as fast and as accurately as I could in a minute.  No pressure.

I tried to tell them that there was some mistake because I had a degree; if my typing speed was a determining factor for employment, I was in deep trouble.  I looked to my left and I looked to my right – no guys were on the typewriters.  I guess this was a sign of the times.

I finally landed a job where my boss didn’t care how quickly I typed.  The only problem was within five months of starting this job and renting an apartment, the market crashed.  Many people lost their jobs as financial firms seemed to tumble like dominoes.

Being entry level, I was cheap labor and I managed to never be without work; yet, I also felt trapped into staying where I clearly didn’t want to belong.  But rent, bills and student loans were my responsibility, and I was raised to always meet my responsibilities (even if I felt like a trapped mink, ready to gnaw off a body part just to get free).

What did I have to complain about anyway?  I was 22, living on my own, paying my own way and I was employed.  This was no time for a pity party, but there was time during my hellish commute to lower Manhattan to fantasize about winning the lottery and buying my freedom from this mundane life I was living.

Fantasy gave way to reality; no, I didn’t win the lottery, but I began playing regularly.  It seemed one of the few things I could control and it sparked a bit of joy in me.  Had I just put some of that money away and invested it, maybe the more fulfilling moments of my life would have arrived sooner.  I’ll never know and I’ll never get back that time.

But, I did see a correlation between my lottery playing relative to my overall satisfaction with life; it was an inverse relationship, like a see-saw.  The lower I felt, the more I would play.  When I felt like I was moving in an upward direction, I didn’t even think about playing; I was excited enough by my life.  I had created my very own Misery Index and didn’t even know it.

At the heart of it, I was looking for something that money really couldn’t provide all by itself.  Yes, it might have helped speed things along, but it might have derailed me.  Misery can be a motivator to make changes; comfort can lead to complacency.

Over the last few days, I read three interesting blog posts from my colleagues.  Nick Maggiulli wrote about the life-altering effects of money and why it cannot be measured or predicted by data.  Barry Ritholtz wrote about the privilege of taking a thoughtful approach to being productive.   Josh Brown wrote about the importance of why we work. All three struck a chord with me.

Nick examines a lottery winner who had already been wealthy; in spite of his savvy and good intentions he implodes and loses everything.   This is an interesting twist, as it is typically the rags-to-riches-to rags stories we hear about.

How is it that someone with financial success, skill and knowledge could blow this?  Nick analyzes data to draw conclusions and there just isn’t data to predict the human response to the adrenaline rush a windfall can create.

My own personal hunch is that the hunger that led this wealthy man to look for a big win had absolutely nothing to do with money at all.  Money is a beautiful, quantifiable distraction when life is unsatisfying.  At the end of the day, looking at a big net worth number might take the sting out of the suck of life – but after a while that salve won’t ease what is really causing all that chafing.  If life is going off the rails money can speed up the process by miles, and it makes for a wickedly colorful crash and burn.

Barry addresses that by not operating on the gerbil wheel of chasing sales, we are able to slow down and be more deliberate and focused in our efforts as a firm.  This leads to a productivity that can be measured in fulfillment, and not merely output for output’s sake.  We are how we invest our time.  When that is in lock-step what we truly value, life becomes richer – and no, I’m not talking about the green stuff (and yes, it is a privilege).

Josh writes about another one of our colleagues, Alex Palumbo, who didn’t dilly-dally in getting on a career course that has meaning to him.  Like many of us, he started out in this industry in a soul-crushing way.  Unlike me (and Josh and many others) he got the hell out as soon as he could.  He wanted to work at something that had meaning to him and as a result, his career is off to an impressive start.

As Josh points out, “Alex needs a Why, not just a What or a How Much in order to find himself in the working world.”

I would argue we all need this in life – not just in work.  Without meaning, it is tempting to fill up on other excitements, such as lottery playing/gambling, boozing, drugging, and cheating, etc.

Having more money isn’t going to ease a dissatisfied life.

That Misery Index can soar off the charts for many reasons; take the time to discover what your reasons are before you buy that scratch-off.

Photo by Pixabay on Pexels.com

 

 

 

 

 

 

 

No Substitute for Personal Responsibility

June 12, 2018 By Dina Isola 2 Comments

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I had the privilege of attending a parent/student meeting at South Side High School in Rockville Centre the other night.  For a change, I was neither an attending parent nor a presenter; I was a very interested observer for a number of reasons.

As a mother to teenagers, I was happy to see a school district take a novel approach to support teens in making better choices.  It’s hard enough to do the right thing in life; when you’re young and inexperienced, filled with emotions and dying to be cool – it’s that much more difficult.

The event was mandatory for teens attending the Prom and their parents.  The expectations for a trouble-free, alcohol/substance-free weekend were firmly outlined; any sign of indulging would be met with a breathalyzer (when appropriate) and being removed from Prom and the graduation ceremony.  The PTA organizes a post-Prom party free to all students, filled with activities, food, music and cash giveaways to give students a safe after-party experience.

It was important to have the parents there as witnesses – there would be no room for negotiation on these rules.  Anyone violating the school policy during the Prom, graduation rehearsal or the graduation itself would not march in the procession.

After the rules and expectations were covered, students had the chance to meet a good friend of mine — someone who had the misfortune of making a critical error in judgment; one that would haunt him forever.  He was there to reinforce the fact that invincibility is a mirage for us mere mortals – especially for over-confident teens with impulsive tendencies.

It was December 1981 when Peter Hawkins (then 17) attended a party for a classmate.  To put the times in perspective –MADD and SADD were in their infancy.  In N.Y., the drinking age was 18 and a driver’s license was without an identifying photo.  In short, it was a pretty lax climate for underage drinking.

The party was held at a bar, though most of the kids were 17.  Peter decided not to drive that night, because he planned on drinking; he had a ride and so he was set to do what he wanted that evening.  And that is where this story goes off the rails.

At 17, the ability to make a good decision can be pretty difficult; add alcohol to the mix and it’s downright impossible.  And so, Peter made the mistake of trusting that his friend was okay to drive.  Had he been sober, he would have realized that his friend was also drunk; had he been sober, maybe he would have been the one driving and the night would have ended differently.

Instead, he promptly fell asleep in the passenger’s seat, without a seatbelt on.  His friend decided to cap off the evening with a drag race that ejected Peter from the car, severing his spinal cord, paralyzing him from the waist down.

A year older than me, I knew Peter as captain of our football team, an incredible athlete who, in spite of a slight frame was as tough as nails.  His accident had a deep impact on the entire school even for those, like me, who only knew him casually.  It was a few weeks before Christmas and this young man – a force of nature, known for his signature flip in the end-zone – was in a coma; the heaviness was felt by the entire school.

As he spoke to the students at South Side High, he didn’t spare himself blame; he didn’t hold back on personal details on how the accident did more than take his ability to use his legs; he held himself out as a cautionary tale.

For some mistakes in life, there is no do-over or ‘I’m sorry’ that erases the difficult consequences.  Giving away your personal responsibility to someone else doesn’t excuse you from owning the poor outcome.  Some things in life you get to wear, whether it is fair or not.

The best you can do is to share these mistakes in the hopes that someone else gets spared making these mistakes.  That is what Peter does every time he bares his journey to teens.

I can’t help but connect all this to financial health, which is my role in life.  How many times do I hear investors blame their plan on the fact that they turned over their power to someone else – someone who maybe wasn’t fully equipped to actually deliver good financial oversight or worse, someone with bad intentions?

Who you choose to look out for you is an important decision; one you should never take lightly.  Being “nice” is no substitute for being competent; being a “friend” doesn’t mean they are the best ones to look out for you.

Yet, people make this mistake every day by failing to look into the professional – or the financial firm – to check for violations or disciplinary actions.  They don’t ask questions that might be uncomfortable.  They work with people who have no legal obligation to look out for their best interests, and somehow they think the financial professional is going to give them care above and beyond what is required.

In fact, they don’t even know the difference between a salesperson and a fiduciary (one who must always put the client’s needs first).  And, they don’t realize that the vast majority of financial service professionals do not work as fiduciaries.

Every day I have to shake some shoulders and ask: “Why would you trust a business model that revolves around selling you stuff and not your end result?  Why would you put your long-term financial well-being into that kind of conflicted model?”

If everyone in life acted as a fiduciary in every aspect of life, the world would be a safer place for all.  Peter’s friend would not have gotten drunk and driven, and he certainly would not have chosen to drag race.

Peter’s fatal flaw was failing to realize that the first step starts with being clear-headed and carefully deciding into whose hands you place said trust.  It’s a mistake he offers up to spare someone that painful lesson.

Clearly, the administration of South Side High School is acting as a fiduciary in educating  students about the dangers that can derail a person’s journey and by supporting them so it is easier to choose wisely.

At the end of the night, I complimented the principal, John Murphy, for going to great lengths to keep the kids safe; noting that in the school district where I live it is fairly common for seniors to rent a house in the Hamptons, unsupervised for the weekend.  Many parents are afraid to be the spoiler so they allow their kids to go; knowing full well that this is a dangerous situation in the making (not to mention a potential lawsuit, should things go astray).

He said that he has taken flak from parents because the school keeps Prom, post-Prom, rehearsal and graduation on a narrow timeline so kids can’t engage in an unsupervised weekend, but I am sure there are plenty of parents who are relieved that someone is truly looking out for their kids.

I’m grateful for my friend, Peter, who decided long ago that it was worth revisiting a painful decision and sharing it if it prevents someone from making an irreversible mistake.  I’m inspired by what I saw that night.   In spite of what ugliness I have seen in the financial services industry, there are many people in life who choose to do the right thing to help others and who generously share their knowledge for good; and not because they have to.

Peter is one of those guys.

Investor Self Defense Checklist

May 30, 2018 By Dina Isola Leave a Comment

I had the pleasure of speaking  with Dina Cataldo of Soul Roadmap podcast to discuss “How to Reach Your Money Goals.”  She has put together an informative and inspiring show aimed at giving people tools and strategies to live their best lives, and she covers a myriad of topics.

It was a lively discussion and it inspired me to put together an Investor Self Defense Checklist to help make sure your financial plan works for you:

 ____I have an emergency fund of 3-6 months’ worth of living expenses (more, if self-employed).

____ I know what debt I carry, the rates I pay and am working towards paying off debt.

____ I participate in an employer-sponsored retirement plan (e.g., 401(k), 403(b), Simple IRA, etc.) because it lowers my taxable income and helps me save for retirement.

____ If I don’t have a retirement plan offered to me, I contribute every year to either a Roth IRA or Traditional IRA (maximum investment amount is $5,500 per year for those under 50; $6,500 for those 50 or older).

____ I save 20% of my income and, if not, I plan on reaching that percentage of savings in years by increasing the amount I am saving every year by __% (this includes all sources, and any contributions to retirement plans).

____ I contribute to my company retirement plan and get the employer match (free money).

____ I don’t own share class funds (A, B, C, D) which have sales charges / high fees.

____  I have gone to FINRA’s Fund Analyzer to look up my fund expenses.

____  My financial advisor, a fee-only fiduciary, does not earn commissions to sell product.

____  I do not own annuities in IRA, Roth IRA or other retirement account, such as a 403(b).

____  Money I need to fund short-term goals (5 years or less) is in cash.

____  Investments in stocks or mutual funds are with money not needed for 10 years or more.

____  I own a mix of stocks (U.S. and foreign) and bonds (high-quality U.S. bonds).

____  I understand why I own what I own in my portfolio.

____  I communicate with my advisor about any changes in my financial life (e.g., debt, employment, marital status, health, inheritance, birth of a child/grandchild, income).

____  I have a will, health care proxy, durable power of attorney and, for my minor children, a Guardian and Trustee set up in the event they are ever orphaned.

____  I have term life insurance that will cover my income until my children reach age 22.

 

Simple Questions, Convoluted Answers

May 24, 2018 By Dina Isola 2 Comments

 

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Photo by Pixabay on Pexels.com

 

A new client wanted to switch out of an annuity she had bought in her retirement account with a previous adviser.

Needless to say, my antenna goes up when I see annuities in a retirement account because it is both unnecessary and expensive to own these insurance products for their tax-deferral benefits, when this feature is “free” to retirement accounts.

As I waded through her paperwork, I clearly saw that she would be hit with a $3,000 surrender charge to get out —  and I suspected she was unaware of this.  On a $78,000 account, this fee was no small matter – it equated to a 3.8% charge.

The only other investment fees detailed on her statement was a 1.1% charge (or $858).  But, knowing what I know, and having seen what I’ve seen – I knew there was more where that came from.

She was upset, as she was eager to make a clean start and get away from this company.  She needed answers only the annuity company could provide.

I don’t think I have ever found a person enthusiastic about making this call; these interactions tend to be convoluted, confusing and sometimes even condescending. That is why I offered to call the company with her.  With me on the line, we would get the full story and I could call BS on any answer I knew was not the truth, the full truth and nothing but the truth.

In order for her to make a good decision, she needed the answer to two simple questions:

  • When would the surrender charges disappear?
  • What were all the fees she was paying? If she had to pay 3.8% to get out, what would she have to pay annually to stay?

We called and the answer to the first question was very straight-forward; constrictions usually are.   The surrender charge wouldn’t disappear until 2022 – in spite of the fact that she had owned this for many years.  She sat across from me, a look of disgust and disbelief on her face.

Next came the fee question.  Immediately the service rep said the fee was 1.1%.

“That’s it?” I asked.

“Yes, that’s the only fee.”

“What about the fees associated with the investment?” I asked.

“Oh,” a long pause.  “Oh, the subaccount charges 0.95%.”

“That’s it?” I asked.  “Are you sure?”

“That’s it,” he said confidently.

“Sounds thin to me.  What about insurance-related fees?” I pressed.

A very, very long pause followed, with a lot of “ums.”  Finally, he offered to check the prospectus and after putting us on hold for a while, he came back to tell us that there was another 0.99% fee.

So we went from fees of 1.1% to 3.04% in under five minutes.  Her options were very clear now:

  • Pay a one-time $3,000 surrender fee (3.8%); or
  • Pay $2,418 this year and possibly more every year, for the next four years (remember, any account growth or dividends reinvested would make her account balance – and the dollar amount of her 3.1% fee – increase).

The client gladly was willing to pay the $3,000 surrender fee and start fresh.

I told her there was no rush, she could discuss it with her husband, but she wanted out of this predatory relationship yesterday.

She thanked me, realizing that the rep would have told her 1.1% and she may have not pressed him any further.  Even if she had, his initial responses would have indicated there were no other fees and she would have dropped the matter.  She may have decided to keep the assets there, unknowingly paying 3.04% annually.

I have seen this many times.  These companies are always very clear when threatening investors with the surrender fees (after the annuity has been purchased, that is), but when it comes to spelling out the other fees, it chokes in their throats.

So here’s my good deed of the day — a customer service tip:

Talk straight and answer the question without omissions.  Better yet, stop offering grossly expensive products that you have to be ashamed of; that might make the next fee conversation so much easier on you both.

 

 

 

 

Dirty, Money Secrets

May 17, 2018 By Dina Isola Leave a Comment

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“You are my 50th birthday present to myself,” a woman said to me, as we sat down to meet.  “I’m tired of not feeling like an adult, it’s like I have a dirty money secret.”

I’ve heard variations of this same theme many times.  This is what women say to me when no one is listening.

I could fill a room with these women — then maybe they would see that many struggle with this very subject.

The trouble is no one wants to admit their deficiency – and if you stay silent, advice won’t find its way to you.  The longer you wait, the older you get; the embarrassment never goes away, it just deepens.

So for those of you who insist on silently flogging yourselves – start reading.  There are free courses online, such as Highbrow.  Every day a short email is sent, covering a specific topic.  Just five minutes a day spent reading these emails can inform you about basic concepts.

Share helpful links on your social media accounts and help other women who suffer from painfully shy financial curiosity.

Here are some of the top questions I get asked in a whisper:

  • What is the difference between a stock and a bond? Stock is ownership in a company (equity) and a bond is a loan.  Stocks have the potential to grow because the investor takes more risk to own it.  A bond owner collects interest on the money loaned to a company.
  • I have an IRA, what is that invested in? An IRA is a type of an account (Individual Retirement Account), not the actual investments. Think of the IRA as a bucket that holds investments.  You can own a wide variety of investments in there, such as stocks, bonds, and funds.  The IRA allows your investments to grow without the effect of taxes until you begin taking withdrawals (after age 59 ½ and no later than age 70).
  • What is a mutual fund? A mutual fund pools the money of all the investors to buy a mix of investments.  Funds can be broadly invested (total stock markets of the world) or can be very specific (energy stocks).  Funds can be actively managed (a portfolio manager chooses the investments) or passive (such as index funds, which own all the securities in the index).  An advantage of owning funds is that you own many securities and this diversification reduces the risk that comes from owning only individual securities.
  • What is an annuity? Annuities are an insurance contract.  This product offers the investors the ability to own investments and not be taxed on any gains or income from the investment until they take withdrawals.   Unfortunately, most people who own annuities do not need the extra tax sheltering provided by this investment. Many annuities have high fees as well as surrender fees and are sold because a salesperson earns a high commission on these products.  If you own one in a retirement account (IRA, 403(b), etc.) someone sold you this, because it makes no sense to pay extra for a tax-deferred investment when retirement accounts are already tax-deferred.
  • What is a 403(b) versus a 401(k)? Both are retirement plans offered by an employer. 403(b) plans are for people who work for non-profits such as schools, hospitals, churches.  401(k) plans are for employees of corporations. Both accounts grow without the effect of taxes; both allow employees to make contributions directly from their paycheck and lower their taxable income.  401(k) plans are generally more regulated and the employer must provide solid, low-cost options and education to the employees.  Most 403(b) plans are non-ERISA, which means there is little required of the employer in terms of vetting the investment choices or educating participants.
  • How do I know what I pay for my investments? It’s really important to know the answer to this, because fees are like overhead to a business.  The more you pay in fees, the more it cuts into your profit. FINRA’s Fund Analyzer allows you to look at the sales charges and fund fees associated with your investments.
  • I’m not retiring for 15 years. How can I keep this money safe?  When retirement is 10 years or longer into the future, being “safe” (keeping investments in CDs, money markets and short-term bonds) is very risky.  The whole point of investing is to grow your money for the future, which requires growing it faster than the rate of inflation.  Cash can’t do that.  In fact, keeping a lot in cash when you have a long time frame increases your risk of running out of money in retirement.

 I know there is so much more to know; hopefully, you take comfort in the fact I have been asked these very questions many times.  You are not alone; there is a way out of your confusion if you are brave enough to ask for help.

The good news is, there is no need to wait for your birthday.  Email me at dina@ritholtzwealth.com with your burning money question and I’ll answer it in a blog post – no naming names, of course.

Your secret is safe with me.

 

My Mother’s Heart

May 12, 2018 By Dina Isola Leave a Comment

MOM CLIMBING A TREEMy mom, Lucy, 1945

While I think of my mother numerous times throughout the day, this week, just days away from Mother’s Day, I got a little wink from her.

A client of ours sent us a note of appreciation.  He and his wife have worked with us since 2015.  Not to sound too sappy here, but that’s the kind of stuff that makes what we do so fulfilling.

What does my mother have to do with this?  Everything.

As was often the case with her, she gave money to numerous charities.  One such charity was Stony Brook Children’s Hospital, which has served my family incredibly well from the moment our sons were born prematurely.

My mother received many thank you notes for all of her donations, but she was particularly moved by the thank you note from the hospital.  She was compelled to thank them, but she wasn’t well.

I tried to explain to her that she needn’t write a thank you note for a thank you note, but she persisted.  Before I could resist, she had convinced me to send an email to the hospital’s chairman on her behalf.

He, in turn, forwarded my email (and my contact information) to other departments in the hospital.  One person who read my forwarded email was touched by it and, out of curiosity, he looked me up.  Coincidentally, he and his wife were looking to work with a financial advisor but hadn’t found one.

The rest, as they say, is history.

I’ve often written about my father; particularly because all that baffled me about him became very meaningful as I forged deeper into adulthood; in my younger years it was my mother who served as mediator and translator of his parables.

The relationship I had with my mother was easy.  While I may have hidden my emotions from others, too embarrassed by the depths of my feelings, I never had to do that with her. My heart was cut from hers.  We were profoundly affected by similar things; our empathy, a bountiful current.  Of all the many gifts I have received in life, being fully understood by my mother was the greatest of comforts.

I have always thought of my emotive nature as a detriment to my professional life in a male-dominated financial industry, and I have worked hard to stifle that side of me.  But now, a whole lot older and a smidgen wiser, I can say that when I am brave enough to tap what I am feeling for others – whether in my writing or when helping a client – it touches others in insightful ways.  And, it is so much easier to not waste my energy pushing down what comes naturally to me.

Every day I am grateful to have had a mother who taught me so much by the way she lived and the way she loved; by sharing her soft-hearted strength.

So, for those who celebrate – Happy Mother’s Day; and a deep gratitude to those mothers whose wisdom continues to guide our hearts in their absence.

A Way out of the 403(b) Maze

May 7, 2018 By Dina Isola 1 Comment

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It has been almost two years since Tony and I formally embarked on a mission to educate and free teachers from expensive and inappropriate investments in their 403(b) accounts.  Our main message has been buyer beware.

A teacher, Chase Malia, has taken it a giant leap forward – proposing Resolution #41 to his union, NYSUT, which would affect all of the members, not just his district.  The union acted to approve the resolution, which will protect members from financial predators by:

  • Educating members about the importance of lowering investment fees;
  • Providing members access to fee-only fiduciaries to provide un-conflicted advice;
  • Advising members on how they can add low-cost options to their district’s provider list; and
  • Seeking legislative action to offer fee-transparency and fiduciary protections that 401(k) participants currently enjoy.

Halleluiah!

Though this will all take time to get underway, it is a huge first step.

The good news is: If you are a teacher in NY, you do not need to wait for this undertaking to begin.

Tony and I, along with the help of motivated teachers, have been helping districts in NY improve their situation since 2016.  Our educational presentation has empowered teachers to demand better options and to control what they can by:

  • Explaining that they can choose to work with someone who puts their interests first (fiduciary) or settle for the suitability standard of insurance and financial salesmen.
  • Showing them that low fees are an investor’s best friend and teaching them how to determine what they paid for investments and how the representative was paid.
  • Informing them that the certainty of a pension is not enough to sustain a retirement that can last decades; investments are needed to grow assets to outpace inflation.
  • Diversifying their portfolio to mitigate risk. A portfolio needs to have a variety of asset classes to endure varied market conditions.
  • Reducing their taxable income by contributing to their 403(b).

I’m not going to lie – there have been times that I have lost faith in humanity, sickened by what I have seen done to unsuspecting teachers in the 403(b) arena, such as:

  • Charges of 2.25% and as high as 4.25% that the investor was completely unaware of.
  • Owning inappropriate annuities in a retirement account with surrender fees of thousands of dollars to get out.
  • Contaminating other financial assets, such as a spouse’s IRA or a child’s college fund into these same atrocious, expensive broker-sold investments.
  • Paying exorbitant prices for whole-life insurance policies that would barely provide enough coverage to replace a half a year’s worth of income.
  • Owning speculative and illiquid investments, such as junk bonds and private REITs, which subject investors to unnecessary risks that, of course, were never explained.

Every awful product I have seen teachers own can be traced back to one common thread: A “nice” sales guy made a ton of money peddling this garbage.

In short, teachers have been paying Maserati prices for a Yugo (an obsolete car company that had the decency to stop production of its lemons in 2008).

And yet, there have been moments of great hope, as informed teachers have spread the word to their colleagues and newbies.  Some have graciously shared their most embarrassing investing mistakes in order to spare someone an avoidable, costly mistake.

And some, like Chase, have demonstrated a tireless commitment to fairness; working unselfishly to get a better option for all.

Yes, my faith has been restored.

We’re here to help you, your colleagues and your district.  To learn more, visit us or email me at dina@ritholtzwealth.com.

There is a way out of this dizzying maze.  The question is: Are you ready?

When Values and Investing Align

May 3, 2018 By Dina Isola 1 Comment

Scott Dauenhauer, Tony and I caught up with Joey Fishman, Ritholtz Wealth Management’s ESG expert on the Planning to Teach and Retire Rich Podcast to discuss ESG and sustainable investing.

In a climate of less government regulation, some companies are taking a stance on environmental, social and governance issues to reflect their missions/values.

Investors, too, have become increasingly interested in where their money gets put to use and this is creating an opportunity for asset managers who craft ESG portfolios.

But, do these types of companies make for better investments?

According to Sonia Kowal, president of Zevin Asset Management, a $600 million firm specializing exclusively in ESG portfolios, “In general, companies with the strongest records on employee relations and environmental sustainability, for example, often have better financial performance over the long run than those with the weakest records… Given this, why wouldn’t you use this information advantage when looking for investment ideas?”*

We only scratched the surface of ESG and sustainable investing, but we plan on continuing the discussion with Joey Fishman, so stay tuned.

 

 

*Source:  “Is ESG investing going mainstream?” Jeff Benjamin, InvestmentNews, February 10, 2018

335 Days of Financial Illiteracy …

April 23, 2018 By Dina Isola 1 Comment

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Imagine: you give a teenager access to car keys when they have never driven a car or taken Driver’s Education.  You simply tell them to drive carefully and you hope for the best.

That would be setting them up for failure, and yet, we do this every day with personal finance.

The stakes might not be dying in a car crash, but racking up massive amounts of student loan debt before even starting a career may be a death of a certain kind, nonetheless.

According to The Student Loan Report, national student loan debt exceeds $1.4 trillion; the average debt per student borrower is $27,975.

GoBankingRates estimates 39% of Americans have $0 in savings, and 57% have less than $1,000 saved. For those aged 25-34 the results are worse: 41% have $0 saved and just 20% have less than $1,000 saved.

Exactly how are these young adults supposed to get ahead, buy a home, start a business, and live their lives with this burden on their backs straight out of the gate?

For all the advanced degrees swimming in this pool of debt – has no one been able to understand the power – and devastation – of compound interest?  Our system has failed; these students are not fluent in personal finance – and no matter what they earn or what they will become, their potential will be limited.

Instead, schools focus on standardized test taking; parents stress over how their kids score and what their rank is. Frankly, it is all meaningless if they can’t survive in the real world, which revolves around money.

If you never learned to drive a car, simply waiting an extra 10 years won’t make you skilled.  Money is like that, too.  There is no substitute for practice; developing good habits is key to minimizing debt and amassing savings/investments.

Growing older will not bestow someone with money wisdom; in fact, age without experience means more wasted time and more wasted money.

I have spoken with very accomplished adults with superior schooling and degrees far more impressive than my humble B.A. in English; I have had to tell them to take the $5,000 from their savings account (earning 0%) and pay off the credit card debt that is accruing at 19%.  It would be the equivalent of earning 19%, risk-free.

This can all be avoided, of course, if we start educating children.

Kids love to learn about money.  I have stood before elementary school students who appear shy and bored and, in a matter of minutes, their eyes widen.  They understand that they are not too young for this lesson – they can even do the math.  They become energized and ask about setting up their own investment accounts.  I have seen imaginations take flight – thinking of all the ways they can earn some money and get practicing.

So what gives?  Why are there only 17 states that have a personal finance requirement to graduate high school and only 22 that require an economics class to graduate?  Even when there is a class requirement – one class in senior year does not a financial wizard make.

Have schools become so unimaginative and uninspired that they are sticking to the same-old, same-old way of doing things?

The price of financial illiteracy is steep.  Eventually, taxes get raised to help support those who cannot support themselves.  Products and services cost more when people default and don’t pay their bills.

This is stupid-simple to understand – fixing this problem could create more jobs, make a more robust society; and enable others to climb up to a new rung of social advancement. With success comes progress and innovation.  Families, employers, nonprofits, municipalities are just a few of the beneficiaries of a more financially responsible society.

So why isn’t financial literacy an issue worthy of attention in schools?

Why aren’t parents complaining about this – and demanding more for their children?

Why doesn’t the financial industry do more to avail themselves to this mission?

Tony and I have gone to many schools, to educate students, parents and even teachers – but we are just two people.  Unfortunately, some schools express interest and then fail to follow-through.

April is supposed to be “National Financial Literacy Month” –  but without any real and consistent support, this is just lip service (which never pays the bills).

Until financial literacy is not a novelty month – but a regular and rigorous part of the on-going curriculum – our schools, colleges and universities will continue turning out very bright, but financially ignorant graduates.

Sorry, but that just doesn’t seem very smart to me.

 

Change Your Tune

April 19, 2018 By Dina Isola Leave a Comment

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My son considered his course options for next year. His dilemma was how to meet the visual arts requirement; art classes interest him like watching paint peel. We suggested a digital photography class.

“I hear it’s a lot of work!” he said, “It’s not easy, you have to know about camera settings – you don’t just go off and use the camera.”

I started to scold him that he was being lazy and not challenging himself, but the truth is I remember looking for the easy way out to classes that didn’t interest me.

In spite of my efforts, I can’t make him care.

I’m not sure exactly when my perspective changed but it energizes me to try things that I haven’t been good at. At my age, maybe failing to learn something new terrifies me more than trying and failing.

Just a year ago, I started taking guitar lessons. I had played the violin (badly) in elementary school and, back then, I had quickly learned that reading music took too long. My ear was fairly good and I thought that I was smarter than everyone else who toiled to read the notes when I could sound these simple tunes out rather quickly.

The trouble was, of course, the songs didn’t stay simple. My ear wasn’t prepared to keep up with the complexities of the music the orchestra had started to play. I sat there bewildered, fake-playing, knowing I was an imposter. I couldn’t catch up with everyone else – they had blown past me. There was only so far my short-cut could take me; it turns out I ended up getting nowhere fast, and I quit.

As I sat down for my first guitar lesson, my teacher asked what my goals were. I told him that reading music was something I wanted to do. Sure, I knew FACE for the space notes and Every Good Boy Deserves Fudge for the line notes, but I wanted to read the actual notes and play fluidly.

Unbeknownst to me, most guitar players do not read music and my teacher was thrilled to find someone who actually wanted to learn. I have stumbled around doing this, especially since learning to move the pinky and ring fingers independently takes all of my concentration at times. It’s one big brain multi-task exercise to read the music, move the fingers into the right positions, and strum in time.

I’m not very good, but I have made progress; in learning, there is no substitute for effort, patience and persistence. My ear has sharpened; how I listen to music has developed and my perspective is certainly wider.

When I hear people say they are not good with personal finance, I know it is a quick dismissal given without much effort or thought. Unlike playing the guitar, it matters if you are not good at this – it will impact your relationships; trap you in a job you detest but can’t afford to leave; limit the colleges your children can attend; and may mean you will work into your seventies just to make ends meet.

Ignorance will make you an easy mark for unscrupulous financial salespeople who will separate you from your money very easily. They will overcharge you and sell you unnecessary and expensive products that will rob you of precious time to reach your goals – and you won’t even realize it.

In fact, you’ll call him a “nice guy” and recommend him to others equally as disinterested in personal finance as you are; infecting some other poor unsuspecting souls.

You will be at the mercy of a stranger; simply hoping he will do right by you.

If you don’t care about your money, who will?

I wouldn’t count on the friendly neighborhood broker or insurance rep who is looking to qualify for a sales contest to Hawaii or Italy. (Yes, this really happens.)

I can’t make you care.

If you won’t pay attention, at least make sure that you haven’t hired a fox to guard your financial hen house. A fee-only fiduciary is the only way to go; you need someone to look at your options as if they were sitting in your shoes. That’s the best you can hope for.

The CFP board has a directory of planners – just make sure that the person you work with is strictly fee-only; fee-based is NOT the same thing – these professionals can earn commissions for selling product (which usually proves more beneficial to the person selling, not buying). This subtlety is something you wouldn’t notice unless you knew to take note.

The one thing you must pay attention to is who you allow to call your shots.

Ask yourself: What’s in it for them?

This is one homework assignment you can’t cop out of; you must do it yourself unless you want to discover that your short-cut turned out to be a painful and expensive lesson, which offers no refunds.

An Unforgettable Journey

April 12, 2018 By admin Leave a Comment

Dadphotos 006My Dad, 1991

We sat on the other side of the doctor’s desk.  My father was wedged between my mother and me, just in case he tried to make a break for it.

It turns out, I was the one who wanted to run.

The doctor started off in a light, conversational tone but my father, even in his confused state knew an interrogation was coming.  He looked to me, a weak nervous smile on his face, and I wanted to stop what was coming next. But we were there for answers – even if I didn’t really want to believe what those answers might be.

“How many children do you have?” The doctor asked.

My father broke into a wide smile; he knew the answer – lucky seven – like the back of his hand.  He even managed to name us all, which in his younger years would sometimes cause him trip over the names, as parents often do.

“Can you name their spouses?”

And with just the second question, everything began to unravel.  My father peered at me nervously, like a kid trying to cheat on a test; my hands started twisting.

I couldn’t run; I couldn’t help him and all that energy coiling in my gut started to knot my fingers. I blinked over and over, to stop any tears from building up.  To avoid eye contact with everyone in that room, I fished a pen out of my pocketbook and scribbled meaningless notes that I didn’t recognize as my own writing.  Occasionally, even blinking didn’t help; a fat tear would splatter the page, in spite of my best efforts.

He had overcome heart attacks and various brushes with cancer.  His mind, though, through all his life, was sharp; frighteningly so. He could spot a problem, mistruth or danger and stop it dead in its tracks.  Now his mind was just a trap door that kept opening and swallowing up precious memories.

“Technically, Alzheimer’s disease can only be diagnosed at autopsy,” the doctor said.

I didn’t need my father to die as proof of what was apparent; this disease was erasing bits of him in front of our eyes. I wondered how long his essence would last and how long we would grieve his loss before he actually did leave us for good.

Years after my father passed away, Tony and I stood in front of a group of family member/caregivers at an Alzheimer’s Association-sponsored seminar.  There were several presenters sharing their various areas of expertise – an elder care attorney, a visiting nurse, and a director of a facility for the memory-impaired.  Though we all had unique insights to give the attendees, the best perspectives we had to offer were that each and every one of us had had a front-row seat as the disease consumed a loved one.

We were there to talk about what my father’s illness taught us and what they needed to consider, such as:

  • How medical costs for someone with this disease would increase faster than inflation and the costs could last a long time – the average lifespan after diagnosis is eight to 10 years;
  • How to make sure assets were divided into short-term needs (five years of cash) with other assets invested to provide some future growth to tackle the rising costs of care;
  • Why a durable power of attorney was only useful if it was placed on every bank and investment account;
  • Why eliminating any high investment fees would make more money available for caregiving; and
  • Why locking the money up in complex investments and insurance policies could be a dangerous idea.

His illness led us to the most important work we have ever done.  Ultimately it resulted in a complete change in our respective career paths to financial advisors; it was the reason we were able to stand in front of that group and truly empathize.

The Centers for Disease Control and Prevention names Alzheimer’s disease and other dementias as the sixth leading cause of death in the U.S. (2014); the only major causes of death on the increase.  Of the 46 million Americans 65 years of age and older, an estimated 5.3 million suffer specifically from Alzheimer’s disease.  This is a far-reaching swipe that many will deal with directly (as a patient) or as a concerned family member.

Expect to hear more from me – and the financial services industry – about the challenges this presents and the importance of planning.

There was a time that I wished we didn’t understand this situation, but we do; we can’t un-walk that walk.

Now I see it for what it is — an unforgettable journey we were forced to take that just might help someone navigate that heartbreaking and treacherous terrain.

Why “Boring” Really is Beautiful

April 9, 2018 By admin Leave a Comment

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I have a bird’s-eye view into the many ways investors have been misdirected by their financial salespeople; but this past week I encountered a perplexing situation – which is rare, as I’ve seen a lot.

In the past, the usual “suspect-behavior” has been selling investors expensive mutual funds and annuities when better, lower cost options existed.  I’ve seen investors saddled with unnecessary surrender charges and no asset allocation strategy.  In short, I’ve seen no rhyme or reason to the recommendations that were made, but for one consistent theme:  It was really good for the person selling it; not the poor investor buying it.  This week, I can add illiquid, inappropriate investments to my list of worst things I’ve seen.

A new client came to me unhappy with his 403(b).  After we set about fixing that, he asked me to move over his IRA, as well.  That’s when the fun began.  The rollover request couldn’t go through, as the investments needed to be sold at the previous firm holding the assets.  The client and I called the firm together; the trading desk was very helpful but the trader informed us that there was one investment he couldn’t sell as it wasn’t held there.  He was kind enough to give us what contact information he had.

We set about on a hunt – probably about 30 minutes later we started to get some answers, but they were not good answers.

On an account worth under $20,000, more than half was invested in one position – an illiquid REIT (Real Estate Investment Trust).  The share price is 44% less than its purchase price – which tells me, someone collected a large commission to recommend this.

We were placed on hold as the rep dug around trying to find the right information/paperwork.  It turns out that in order to get out, the client had to apply during a limited period (tender) and, based on how many people were also putting in a request, and how many shares that constituted, they may or may not be able to liquidate all of the shares (at 44% less than what he purchased the shares for).

As if that wasn’t enough, they required a Medallion Signature Guarantee (i.e., an onerous roadblock) from a very specific entity (another roadblock) – and that entity would then be responsible for sending in the request to liquidate.  Then he would have to passively wait to hear when he could have his retirement funds, and how many shares would be available to him for liquidation.  The rep had no contact information for us to reach out to this entity that was integral to the liquidation process.

We were on the phone probably a total of 40 minutes.  During one of the many long periods we were on hold, I remarked, “For the record, we would never recommend anything to you that can’t be liquidated the same day.”

He laughed out of exasperation, not humor.  There was some embarrassment mixed in there, too.

Not that I needed reminding, but many people are overwhelmed with the process of getting out of these unfortunate investment choices because it is difficult, time-consuming and can feel like there is no end in sight to the hurdles and delays.  Often times, they give up and their assets remain hostage at a company they now have grown to hate.

Know this: It is a stall tactic to crush any desire to move forward.  What you need to decide is if you’re okay with someone else wagging your tail.

Furthermore, there are plenty of good straight-forward, low-cost index funds out there to satisfy a multitude of investment needs.  There is no need to put your money where you can’t access it without being tortured or gouged. That is never in your best interest.

The client was grateful that I had spent so much time on the phone trying to get him answers.  Companies like this make it very easy for clients to see why working with a fee-only fiduciary, like me, is a different, client-focused experience.

They did all the talking for me. I just wish it didn’t have to cost my new client so much wasted time and money.

 

 

 

 

 

Talkers Aren’t Walkers

March 15, 2018 By admin Leave a Comment

 

When asked by strangers what I do for a living, nothing makes people recoil more than realizing my profession has to do with financial matters.

If only they knew that, as a fee-only fiduciary, my role as a financial advisor is markedly different than what they have come to think of from a financial “professional.”

I have had the following hurled at me by people who assume that all of us in the industry are alike:

  • “Oh, you’re a salesman!” – Gender aside, no I’m not. Selling is as unnatural to me as writing with my less dominant hand.
  • “You must love money and all the trinkets it can buy.” This is comical since I drive a mini-van that is over a decade old. Yeah, status and stuff don’t ring my bell.
  • “You’re not going to want to talk to me; I don’t have any money.” Again, au contraire; I’m not all business and second, I love being helpful above all else. I derive great satisfaction from educating someone so they can avoid being taken advantage of.

I could take offense at being misjudged so quickly, but these misperceptions say a lot more about the state of the financial industry than my intentions.

The continued misleading practices by sales-driven firms to seem like they are advisors are confusing and damaging.   A google search of “financial advisor ratings” brings Ameriprise to the top of the search.  A stop at their homepage seems very investor-friendly, touting:

“When you put your client first they return the favor.”

They brag about how clients awarded Ameriprise with top ratings in customer service, customer loyalty and trustworthiness  I guess these clients haven’t heard what the SEC had to say:

“SEC Charges Ameriprise with Overcharging Retirement Account Customers for Mutual Fund Shares”

In short, some retirement accounts contained higher cost funds when lower cost funds were available.  Of course, clients were not presented with the lower cost options, nor did anyone explain that the firm would make more money (at the expense of the clients’ total returns).

It seems like clients should have awarded Ameriprise “Best BS Artist.”

There are plenty of other offenders. UBS was kind enough to spread their sunshine beyond just retail investors to include retirement accounts, such as 401(k) and 403(b) participants; and even charitable organizations.

They, too, failed to offer clients lower cost funds that were available; they chose to sell more expensive classes of mutual funds.  Nor did they disclose their conflicts of interest. Read about it here: “SEC Charges UBS with Supervisory Failures in Sale of Complex Products to Retail Investors.”

Cheating charities – does it get any lower?  Do they drown kittens as an encore?

It’s no wonder my profession is a hot button with strangers.

The industry has made oodles of escarole pretending to be something it is not, and it has brainwashed young, eager minds fresh out of school with the lure (or the lore) of “making a lot of money.”  It’s not a tough sell; don’t many parents push their kids into landing a profession based purely on earning potential?

Shortly after I graduated, I received a phone call from a guy I grew up with – a kind, smart, nice guy.  He asked me to purchase my college directory for him so that he could have a cold call list chock-full of country club, young (ignorant) career-minded individuals.

In spite of my naiveté, even I knew this smelled rotten.  I politely told him that I wouldn’t want my information passed on to a stranger and I would not do to someone what I wouldn’t want to be done to myself. (Oh, if only the industry and the world at large operated this way!)

He couldn’t understand why I would care.  He promised not to let anyone know where or how he had obtained the directory.  In his eyes, there was no moral dilemma.

It was hard to reach him because his eyes were already dancing, anticipating a glittering prize; and, it changed him.  They changed him, and he complied:

  • He grew facial hair, at the request of his manager, to look older than 22.
  • He was forbidden from taking his Toyota Supra to appointments; a more elegant Cadillac was leased for him so that he could appear older, wiser and more successful than he really was.
  • His speech changed into a fast-paced, “always working an angle” sales babble that made me twitch.
  • All conversations led to money – who was making what; who was living the good life; driving the right car; landing the trophy girl.

Basically, Wall Street the movie was being held out as the gold standard, and not the cautionary tale it should have been.

Sadly, but not surprisingly, we drifted apart.  This young man I had thought of like a brother had become a stranger to me; and an ugly one at that.

So, when someone mistakes me for this caricature that the industry created, I see the skepticism for what it really is: a series of bad experiences investors have had elsewhere.  It is my job to right these wrongs if they will let me.

If they take the time to get to know me, they can decide for themselves without pressuring tactics or smoke and mirrors because I don’t sell anything, nor do I pretend to be something I am not.

Some of us actually do walk the walk; and yes, we do sleep better at night for it.

That’s all the perk I need.

The Devil Is in the Detail

February 14, 2018 By admin 1 Comment

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As our sons started to dip their toes in online consumerism via eBay and Amazon, I realized it was time for an education. Armed with gift cards and trigger-happy index fingers, it was too easy to buy. They lacked the healthy skepticism smart consumers have. They would inadvertently buy an accessory to something, when they thought the main item was included, for example; or they were lured into knock-offs that they believed were real.
Investing can be tricky like that, especially if you are not working with a fee-only advisor (fiduciary) who must put your needs first. Often times, investors believe that the sales guy isn’t making commissions off the sale (they are) and that the investments are without a mark-up, just because fees or sales charges weren’t clearly discussed. Investors assume that things are the way they want them to be (no charges) when that could not be further from the truth.
My father, rest his soul, taught me this lesson when I came home from the mall with a pair of shoes I bought for a steal. I was thrilled until he started pressing me on what material they were made of. They looked like leather to me, and I thought that was good enough. But when he asked me where on the shoes or the shoe box did it say the actual word “leather” I had no answer.
I will never forget his response – because it pertains to so much more than just shoes.
“Leather is a premium item and if the shoes were made of leather the company would make sure you knew that. That is the selling point. You shouldn’t have to hunt for that on the label. They are hoping to fool you into thinking the shoes are leather.”
Embarrassed, now, by my cheapo faux leather shoes and the more galling thought that he was, once again, right; all I could do was hope they wouldn’t make my feet sweat too badly. They were on clearance and there was a no-return policy.
When investors tell me they do not think they pay anything for their investments – not only is it never true, but it ends up that they are paying a lot more than they needed to; especially for teachers in 403(b) plans – it can be as much as 400% more.
When I encourage them to look into what they are actually paying it is hard for them to figure this out.
I tell them, like leather, low fees are a selling point. If you have to dig to find out what the fees are, the answer won’t be pretty. Again, they are hoping to fool you into thinking there are no fees.
Here are just some of the lovely discoveries I have watched investors uncover:
• Sales charges of 5.25% every time a dollar was contributed through their payroll deduction.
• On-going fund fees of 1% or higher, in addition to a wrap fee, bringing total fees to over 3%.
• Annuities with surrender charges that seemingly never end  —  fees can last five years and, with every new dollar invested, a new five-year rolling period of fees begins. Or, surrender charges that last 15 years!

• Paying 4.75% for a college savings plan (529) when a superior option, charging just 0.17% is also available in their state.

I really do wish I was making this up.

My sons have wised up and have learned to read the fine print and to research the seller’s ratings, so they don’t do business with sketchy characters. One son has gotten very good at making complaints that have resulted in refunds, discounts and free stuff.

I wish it was as easy for investors to get swift justice.
For now, the best recourse is to be educated. FINRA’s Fund Analyzer is a great way to look at mutual fund fees. Teachers can go to sites like 403bwise and 403bcompare – but first, they need to learn that they have to take the lead on this.
My husband and business partner, Tony, recently recorded a podcast with Next Gen Personal Finance advocating for better 403(b) plans. If you are a teacher or know a teacher, pass it along.
You could be saving someone from something way worse than a vinyl-shoed fashion faux pas.

 

Hang Up Your Bell and Your Worries

January 4, 2018 By admin Leave a Comment

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I can worry about lots of things if I let myself – I am a mother after all, so that is fused with my DNA.  But one thing I’m really not worried about is an impending market crash.  Why?  Because that is what many people seem to be worrying about.

To be clear, a correction is certainly possible; I have no crystal ball.  But, being contrarian by nature, my reaction to what everyone is thinking is to move in the other direction.  I’m not “making a statement” or being snarky; nor am I smarter than everyone else; it is just the way I think.

I have been in the financial world for quite some time; many years as a complete novice.  But even as a novice, I noticed a pattern.

When everyone is so busy wearing their party hats and shaking the noise-makers, they fail to notice what looms on the horizon.  Euphoria tricks investors into thinking they are invincible and that markets can only go higher.

The louder the cheering, the more I quake.  From my experiences, the rosier the view, the closer we are to disaster.

In the summer of 1987, while working at (the long defunct) E.F. Hutton, the imposing sound of a ringing cow bell heralded every time the Dow Jones Industrial Average climbed higher.  The director of marketing took his job seriously, and would fixate on the ticker and let out whoops and hollers as he gleefully rang that stupid bell.  That’s what we should have called it:  the stupid bell.

Fast forward to just a few months later, October 19, 1987; the market crashed and panic permeated the squawk box chatter (the communications system brokers used).   The bell was likely put in a box and shoved into the back of the desk that the director was now clearing out.  We were for sale.  By Christmas, the firm was officially dead and many people were let go (including the cow-bell-ringing director).

A few years later, I ended up at a value investing firm.  The industry was still consolidating; many firms disappeared or merged; the industry was still pining for the glory days.

The value investors were quietly digging through the rubble; they weren’t lamenting over “the good old days.”  They were looking for the unpolished gems tucked in among the ashes.

They were strategic and measured.  They saw devastation as opportunity, which certainly took the sting out of fear.  It seemed reasonable and smart to me, and I took comfort in the fact that no one was doing a jig every time fund returns were decent.

I left that firm for one that was still finding its way.  Some value managers had been hired to round out the existing repertoire, which included growth, momentum, and technology – but my heart and head always seemed to quietly side with value.

As well-known tech investors (prior to the dot com craze) all eyes were on this firm to launch new and innovative tech investment products; the fans were obliged.  Elite tech funds, off-shore tech funds, and various versions of these funds were cranked out like counterfeit money.

I remember telling my boss that this fervor was making me jumpy.  It was like watching someone blow up a balloon beyond capacity.  Every breath caused me to cringe in anticipation of the explosion that was sure to come.  And, of course, it came – followed by the real explosions of 9-11, which put the final nails in the coffin.

I confess, I invested a small portion of my retirement account in one of the speculative funds. As a painful reminder of my folly, just last month I received a check for a whopping $77 for its final liquidation, over a decade after the fact.

So now clients, friends and family ask me: How long can this market gallop for?  They ask when the market will crash, as if I have been blessed with clairvoyance. But for now, I take comfort in the fact that people are nervous.  That keeps me calm.

Barry Ritholtz would probably tell me I am suffering from the recency effect – that my most recent experiences are telling me what might happen, even though it has no bearing on this situation, at this time.  There is no arguing with that; however, he would also say that being able to stick with your plan and control your behavior is key to being successful.  Agreed.

What has always given me comfort is looking at all situations in terms of the opportunity.  For long-term investors, corrections are a good thing, especially if regular, systematic investments are being made every month or every paycheck.  It is the equivalent of paying a clearance price for investments that ordinarily investors would have paid much more for, and gladly.

For the investor with a shorter time frame (nearing, or in retirement), these corrections can be terrifying.  New money may not be going into the account; in fact, monthly withdrawals may be needed to subsidize social security.

For those over age 70 1/2, required minimum distributions need to be made from retirement accounts.  In essence, selling low (one of the cardinal sins) may be inevitable; unless, of course, there is a plan in place.

For starters, think of money in terms of buckets.  Money for short-term needs (five years or less) should be in “safe” investments; available and secure.

What might this look like?  For someone who must take a required minimum distribution from an IRA, make sure that about five years’ worth of withdrawals are in short-term positions that do not fluctuate much in value (think cash, Treasuries, etc.).

The rest of the account can be invested more in stocks, but knowing that cash needs are met no matter how the market behaves gives some much-needed breathing room.

Most important, assets won’t need to be sold as their prices decline.  In fact, by rebalancing the long-term portion of the portfolio back to its original allocation, it guarantees that the asset classes being sold are the ones that have made money.  In turn, these proceeds buy the asset classes that are cheaper (buy low, sell high).

Having a strategy in place to pivot as needed can keep the mindset on a more even keel.  Bells might not be ringing, but on the bright side there will be no hangover after the party is long over.

 

Ladies, First!

November 30, 2017 By admin Leave a Comment

A little more than two months before my due date, panic set in.  Though I had much experience as an aunt and babysitter, and in spite of my life-long fantasies of motherhood, the moment was quickly approaching where my life would change forever.

Change, even joyous change, can be terrifying.  In my case, a difficult twin pregnancy kept very dire possibilities hanging in the balance.  My husband was eerily calm; if I didn’t know better I would have thought he was medicated.

I spoke to my sister-in-law, whose support was always there for me like a welcoming smile.

“Were you scared that you wouldn’t be able to do it?” I asked.

“Childbirth?” she laughed.

“No.  I can’t even think about that!  What if I can’t do this job?” I was near tears.

Every twin book I read described delirium to the point of doubling up on feeding one baby, while accidentally starving the other.  Was this really something I would do?

She laughed and gave me the best advice I have ever received, “Stop reading these books because what they can’t tell you is how you will feel about your babies.  You will throw yourself in front of a moving train for them, and you won’t think twice.  It’s a lot of work and you’ll be exhausted, but your heart will be so full of love that you will be able to do things you never imagined.”

She was right, of course.

Though my sons are no longer babies, that reflex to put their needs ahead of mine is very strong (even when it is not beneficial to them, or me).  I am not alone in having mastered this “talent.”

Perhaps it is biology, or maybe it’s not, but women (in general) are too good at putting themselves second or third.  We would be smart to remember that there are no awards for martyrs — just tombstones.

The data backs it up, of course.  Women earn less than men because their careers have often taken a backseat to caregiving for children or parents.   They have less saved for retirement, because of this — yet they live longer, on average, than men.

Many times I have talked a mother out of funding a college savings plan in favor of contributing to her malnourished retirement account.  The “carrot” is for her to get financially secure and then she can eventually set up a college fund.  It’s obvious, but needs to be repeated:  There are no loans for retirement.

The often-used cliché is true — if oxygen masks come tumbling down on an airplane, parents have to put on their masks first before helping their children.  Here is what this looks like in the world of personal finance:

  • Fund an IRA or Roth IRA (maximum contribution rates are $5,500 or $6,500 for those 50 or older).
  • Participate in your employer’s retirement plan – whether there is a match or not.  If you are already contributing, work towards funding it to the maximum.  My colleague, Bill Sweet, put together a checklist that gives guidance on funding minimums among other useful information that can help you sock away more money and reduce your tax burden.
  • Set aside money every month to pay yourself first.  This can be used for an emergency fund if you haven’t established one.  Make sure any short-term funds (for goals taking place in five years or less) are kept in cash; money for longer term goals can be invested.
  • Pay off high-interest credit card debt.  Unless you have a special 0% financing deal, pay off this debt ASAP.  Reverse compounding is devastating to long-term financial health.
  • Make sure you have adequate TERM life insurance that will get your child through the college years.
  • Do not neglect basic estate planning — have a will, durable power of attorney and health care proxy established.  If your children are minors, make sure that you select a guardian (to raise them in the event of your demise) and a trustee (who will handle the finances).
  • Check the beneficiaries on life insurance policies and retirement accounts to make sure they are current and accurate.

If you’ve tackled this list – congratulations!  Now is the fun part.  You get to plan for your financial future so that your goals are not merely wishful thinking.

Mothers, if you have trouble finding the time and motivation to get started — think of your kids.  Being financially secure is not a selfish indulgence — it is most beneficial to those you care about.  If you’re not sure where to start, check out this blog that I wrote earlier in the year.

By taking these steps, you won’t need to throw yourself in front of a moving train to help your kids.  You might just be there with your feet up and a tiny umbrella in your drink guiding your daughter to be the financially savvy woman you have become.

Tell me where you are on your journey or what questions you have by emailing me: dina@ritholtzwealth.com.

 

 

 

 

Shoot the Inner, Sitting Duck

November 19, 2017 By admin 1 Comment

 

My last post, “Nailing Financial Predators,”  may have left some feeling like an easy mark.  But what if we could take our six natural human responses to persuasion and make them work in our favor?  Well, we can.  Here are some ideas on how to proactively take charge and shoot that inner, sitting duck:

1. Authority – If we respond to the perception that someone has expertise or power over us, it’s best to make sure that that reverence is actually warranted before heeding their advice.  Seek out respected authorities on investing, such as Warren Buffett; who keeps his advice simple:

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

2. Reciprocity – When someone does a kindness (even with ulterior motives), we are tempted to do something kind in return.  What if the good starts with us?  Seek out a helpful resource, such as Vanguard’s tips for becoming financially responsible and pass it on.  Doesn’t that feel good?

3. Liking – We want to do business with people we like — there is no crime in that.  Just make sure that they can: give objective advice, keep costs low, provide a plan that is thoughtfully personalized, explain everything  – including fees, and not press for an immediate commitment.  If they can make good on that, there truly is a lot to like about this arrangement.

4. Scarcity – Salespeople love to create a sense of urgency so we will be manipulated into prematurely pulling the trigger.  What if we were to make attaining our goals the urgency — and the scarcity is time?  Every day we fail to plan is one more day we lose.  Stop procrastinating, make a plan and get at it already.  The meter is running.  Tools, such as Vanguard’s When Can I Retire? can be a great way to assess the current situation and start the process of goal-setting.

5. Social Proof – Because we tend to look to others to help us make decisions, this can get tricky if we turn to the wrong person.  Luckily, facts have no feelings, nor do they lie.  The Financial Industry Regulatory Authority (FINRA) has helpful resources to protect investors.  BrokerCheck is a great tool to investigate the background of a financial professional and a firm.  Make sure to look at the firm, as well. Why do business with a company that engages in questionable behavior?  Also on FINRA’s site are the very useful Fund Analyzer and 529 College Savings Plan Expense Analyzer, which allow investors to examine the costs associated with different investment options.  Remember Warren Buffett’s advice — keep costs low!  For teachers, understanding the fees associated with their 403(b) plans can be like solving an open-ended riddle.  Two great resources to help cut through the fog of ambiguity are 403bcompare and 403bwise.

6. Commitment and Consistency – Once we commit to something, it makes it uncomfortable to turn back on our word.  Instead of committing to someone else’s agenda, what if we commit to ourselves, our goals, and the financial well-being of our families?  When these become the motivation for our efforts — when we fear disappointing ourselves more than others — we can move in the right direction.  Systematically investing every paycheck, treating investing as a bill that must be paid every single month,  and increasing the amount every year — this consistency will turn commitment into meaningful action.

These six natural responses can be our best friend or worst enemy.  The decision is ours as to whether to sit like a duck and let others take aim, or make our efforts reflect the goals we aim for.  It seems like a pretty easy choice, doesn’t it?

 

Nailing Financial Predators

November 7, 2017 By admin Leave a Comment

“A prize fighter in a corner is told, hit where it hurts.  Silver and gold.”   – U2*

Every time Tony and I have met with prospective clients who have come from traditional brokerage channels (literally, every single time) there is an uncomfortable point in the meeting where they are ashamed at the fact that they received no financial plan; no real coherent diversification strategy to minimize risks; no exit strategy as to when they can jump off the hamster wheel and enjoy the fruits of their labor; and no clear handle on what they are paying.

Instead, we watch as realization spreads across their faces – they were sold something they may not have needed, paid more than was necessary and still have no sense as to whether financially they are on track.

The look we get is always the same — like they just dropped their towel and we saw more than we should have.

I always try to ease their embarrassment, discomfort and anger – because these emotions can be quite damaging and may cause paralysis.  The world seems pretty scary when being talked out of your money was so stupidly simple.  Yet, sitting on the sidelines is another form of self-inflicted punishment.

For those stuck in this zone of not knowing whom to trust, I say trust yourself.  Trust yourself to find credible sources of information.  A good starting point is learning how human nature can make you vulnerable.

In “6 Principles That Predators Will Use Against You,”  (Psychology Today, September 16, 2016)   Katherine Ramsland, Ph.D., highlights six ways people are persuaded.  I’ve taken these examples one step further to show how it plays out with a salesperson trying to get over on you:

  1. Authority – Someone who seems to be an expert and who exudes confidence is more readily trusted, and even obeyed. If technical, complicated concepts are tossed around, it could easily appear that someone knows what they are talking about, when they are really reading from a sales script (I know, I used to write them. Forgive me.) Don’t assume that they are experts in anything other than getting you to buy.
  2. Reciprocity – When someone is nice, we tend to want to do something nice back. So a “free” pizza, box of donuts, lunch or dinner can make someone open an account to do a good turn. Do not partake in a freebie and you won’t feel obligated.
  3. Liking ­– A good salesperson knows how to be likable and goes to great lengths to identify how best to relate to you. This usually involves referring to personal notes made after meeting you, such as: likes golf, has three kids, son plays football for local high school.  Then, these tidbits get woven into conversation so that it appears that he actually cares about what matters to you most.  Do your best to keep conversations strictly business-like to give yourself the inside edge.
  4. Scarcity ­– Imposing a deadline for an offer or making some opportunity seem exclusive creates irrational urgency that can get you into trouble.  Recently a friend of mine asked me whether he should turn over his life savings to an annuity, but he had an hour to decide.  Needless to say, I told him to run like hell.  If someone is pressuring you to make a decision, they are in a rush to get their money (from you).
  5. Social Proof ­–  When there is uncertainty, we look for direction.  “Helpful” sales guys always have the solution and it always benefits them.  I cannot tell you how many times I have seen someone talked out of their low-cost 529 College Savings Plan that involves no commissions, in favor for an inferior product laden with fees and heavy commissions.  I let it be known that NY has a great low-cost plan offered through Vanguard at  NY Saves.   I do this not because I earn a dime from that recommendation, but because it is the right thing to do (it’s where we have our sons’ college funds).  Innocently float out a question about a respected, low-cost option, such as Vanguard or the 529 plan I just mentioned.  If you are being steered elsewhere you need to question if the “advice” you are being given is truly good for you.
  6. Commitment and Consistency ­–  People like to make good on their promises, so when you agree to one small commitment it makes it that much easier to get you to agree to something more.  I have seen this especially with teachers and their retirement plans.  A sales guy who comes in to talk about their 403(b) retirement plan options first sells a horribly expensive annuity or over-priced mutual fund to the unsuspecting victim.  Then a crappy whole life insurance policy gets sold to them, followed by infiltrating the spouse’s accounts and the kid’s college funds.  Ask for all fees and terms in writing, signed and dated.  If that is a problem, you’ve got a problem.

Not sure how to undo the damage?  Find a fee-only fiduciary, who is also a Certified Financial PlannerTM (search for one here).  Just make sure under “compensation method” you look for fee-only – which means the advisor never earns commissions or compensation for recommending certain products.  This keeps the advice objective and serving your best interests.

Now that you know, and possibly recognize what may have been done to you, you only have one choice: hit them where they live – in the wallet.  Pull your accounts and never be prey again.

And, if you want to earn good humanitarian points, pass it along.  Not because you will earn anything from it, but because it’s the right thing to do.

Don’t you wish everyone worked that way?

 

*Source: U2. “Silver and Gold.” Rattle and Hum.  Island, 1988. Compact Disc.

Intelligence is no Match for Ignorance

June 22, 2017 By admin Leave a Comment

I remember the first time I helped a colleague of Tony’s switch out of a horrible 403(b).  Tony had come to me aghast over what he had seen; an annuity with 4% in fees and longstanding surrender fees.  We had no idea that this was not the exception to the rule; nor did we realize that this would become our full-time obsession.

Here was an educated, savvy woman who had absolutely no idea how badly she was being ripped off.  It turns out that there were many more teachers, just like her, who had listened to recommendations from esteemed (but ignorant) colleagues.  One-by-one they formed a chain of the blind leading the blind and, in spite of their intelligence; they all went right over the same cliff.

Secretly I wondered if I could have been one of these people, if I didn’t know what I knew.  The answer is probably.

Let’s face it; most people would rather not spend their free time researching where they should squirrel away funds for a rainy day some decades into the future.  If someone smart and confident gives a seal of approval on an investment choice, it would be like getting the Cliffs Notes to a torturous read.

Teachers, of all people, know there is no short-cut to learning something well and no substitution for diligence.  After all, a semester cannot be learned in a day.  And one must be well aware of the quality of the sources, to prevent propaganda from being mistaken for fact.

Because there is no curriculum to follow or tests along the way to measure retention, aptitude and mastery, many are unaware of just how ignorant they really are.

If I issued a final exam on their retirement plans, many teachers would end up in summer school – as students!

Why does this topic elude so many?  The math involved is nothing complex – it’s actually basic elementary school level.  From my experience these attitudes and perceptions are what handicap so many teachers:

  1. Complacency. “I have my pension, so I don’t have to contribute to my 403(b).”  I hear this all the time, and the data backs it up; only 30% of teachers participate in their plan. This is a very damaging mindset.  Retirement can last 35 years or more and, in that time, the dollar amount of the pension will remain unchanged while inflation will make everything – food, living expenses, and health care – more expensive.
  2. Intelligence with Ignorance. I have encountered teachers with multiple advanced degrees who are unaware of what they pay for their investments, how the advisor is paid and why they own what they own. But, because they are successful and accomplished professionals in their line of work, they think this intellect translates into areas where they are out-matched by a “nice” salesman telling them they pay nothing for their investments. (Spoiler alert: advisors are not working for free).  Being “smart” also means knowing what you don’t know.  If you haven’t taken the time to learn something, then your smartness is limited only to those areas of your expertise.  Tony is a very bright guy, but if I asked him to rewire the house, he would burn it to the ground.  What makes him particularly smart is that he would call my brothers and ask them for their very knowledgeable opinion and then hire a contractor they would recommend.  A Masters or PhD in education does not a savvy investor make; unless, of course, hard work has been put in to learn about investing.
  3. Fear. Maybe after years of threatening students with a trip to the principal’s office, a phone call home or “permanently marking” a transcript, teachers feel the need to walk the line and not cause trouble. (Note to teachers – this is how nefarious regimes have risen to power, just ask the history teachers you work with.) Sometimes in order to avoid a crappy fate, you have to make some noise and shake some trees.  Yet, when we point out how bad their options are, and tell them to approach their union or business office to ask for better options in their plan we are frequently told:
  • “I don’t want to start trouble;”
  • “I don’t have tenure yet;” or, my personal favorite
  • “The high ranking school official’s son/daughter/niece/nephew sells annuities in my school and I feel pressured to work with them.”

So, the answer is to look away and allow predators to take advantage, uncontested?  This is not an inspiring mindset; and certainly not good behavior for our children to model.

Luckily, we also have encountered teachers who are hungry to learn more and have become motivated vigilantes.  Once they understand the common problems, such as high fees, conflicts of interests, and unnecessarily owning annuities, they dive into their own accounts and research what they have.  They do not accept ridiculous answers like, “You are paying nothing.”  They get to work demanding better options for their school district.  They get their investments out of the shoddy choices.  They tell others.  They operate from a place of empowerment by:

  1. Getting informed. There has been no shortage of articles exposing the treacheries in the 403(b) arena and the importance of the fiduciary standard.  Reading these articles raises their awareness of the landmines under foot and inspires them to research their own set of circumstances.  They never like what they find.
  2. Using their outrage as motivation. Rather than feel helpless or fearful, these teachers get angry and do not delay in standing up and taking swift action.  If a company has exploited their ignorance, they take away every cent as soon as possible.  They do not tolerate being taken advantage of.
  3. Speaking out.  Teachers have told their colleagues what to look out for (and have expressed frustration at some of their co-workers’ inaction and apathy).  They have invited us in to their schools on their own time to educate and inform others.

So for those teachers who wish not to “go quietly into the night,” we’re here to help show you how to protect your best interests; because if there’s one thing I’m certain of, the insurance rep isn’t cutting it.

Becoming informed would be an intelligent first step, for those smart enough to realize it.

 

Matters of the Heart

June 6, 2017 By admin Leave a Comment

I learned, at a fairly young age, that life can change as quickly as it takes a heart to beat.

It was the day before Thanksgiving, 1973, when my father suffered a heart attack.  He was 56 and I was 8. As the sole breadwinner, I am sure all the worries he had about caring for his wife and seven kids (four of whom were minors) were pinging in his head, keeping time with his rapid pulse rate.

Thankfully, after several weeks in the hospital, he was allowed to come home in time for Christmas.  It was a gift; but frankly, the anxiety over his health issues would haunt me throughout his lifetime.  Fortunately, he lived into his late eighties; but having no way of knowing that he would be blessed with longevity, I began the egg-shell walk that would span decades.

It took me well into my adulthood before my fears eased up a bit.  Perhaps experiencing milestones that I worried might never come, like having my father walk me down the aisle, allowed me to exhale.

And now, at the age of 51, I think I have finally figured out a few things about that experience and how it shaped me and how it affects my interactions with clients.

I guess I’m a slow learner.

Discovering the up-side to this down-side has become most apparent in my profession.  It has influenced how I relate to others.  When clients come to me with their fears – real or imagined; likely or unlikely – their discomfort pulses in my stomach and I want to help them make it stop.

Though it has taken me some time to realize this, I fall into the pattern that my father had silently taught me.

He set about eliminating known threats and stresses that could undo him.  He did it without so much as an eye-blink.  He was methodical and the message was powerful:  Control what you can; prepare in advance for what you can and then do your best not to dwell.  Pay attention to new information that can change a situation and adjust accordingly, but don’t fixate.

Financial plans are all about that.  It gives me great comfort to take someone’s worries and systematically address what changes need to be made – save more, work longer, spend less, down size, work part time, start a small business … the list goes on.  I like giving them options – it puts the control back in their hands.

Even when the news isn’t as ideal as I would like, there is a sense of relief that comes from taking an honest look at a difficult situation and then making a plan.  Clients always feel better.

Sometimes, though, there is no “better” to a situation.  Over the years, I have helped clients get their affairs in order as the end of life approached.  I have ensured that heirs quickly received proceeds from IRA accounts; I have even brought paperwork to wakes and funerals so that out of town family members could sign what they needed to and I could explain things in person.  No amount of apologizing could ever make me feel like anything less than the grim reaper.

Eleven years after my father’s death, my mother passed away.  The job I had performed for many clients now fell in my lap.  There was no “me” to make it all go away.  I moved slowly, though I knew what I was doing.  It was as if dividing my mother’s assets was the final burial that I simply wasn’t ready for.

Thankfully, my siblings showed great understanding and realized that I was struggling with this morbid task.  They were more patient with me than I was with myself.

No matter how many times I have walked into a situation like this for a client, I am affected.  I can feel their sadness and uncertainty; and I think they know it.  Never once have I been met with anything but relief; they don’t want to have to worry about one more thing.

After years of doing this for others,  I finally see the gift I am able to give is more valuable than any inheritance: it is peace of mind that they are free to focus where they need to  —  on the more pressing matters of the heart.

 

 

 

 

 

 

Sexism, Lies and Videotape

June 1, 2017 By admin 5 Comments

 

 

 

I received an interesting call; or should I say my husband, Tony, did.  Though I introduced myself as Tony’s business partner, there was much reluctance to speak with me.  I guess this gentleman thought I was a ‘gal Friday.’

Finally, he decided to take up his solicitation with me, though it wouldn’t have mattered to whom he spoke with – the answer would have been the same.

He tried to sell me on the idea that we should reward our top clients with a trip to some elite golf tournament.  Never mind that the only person less interested in golf than me would be Tony – or me, were I buried six-feet under.

He argued that this would help us show our appreciation and allow us to hobnob with other prestigious and wealthy potential clients.  When I explained that we don’t operate that way he asked how we reward our top clients and how we attract prospects.

“By doing a damn good job,”  I said.   I went off on a tear.

“By always putting their needs first.  By offering comprehensive financial planning that includes advice on all that really matters to them — estate planning, taxes, insurance, charitable giving, college savings, and retirement planning.  By educating them through our blogs.  By investing in low-cost, diverse options. By being transparent in our fees.   By not charging them extra so that we can throw in ‘free’ perks that they actually pay for – like a golf tournament.”  I caught my breath, “And, they like us so much, they refer us.”

He was sorry he asked.

This reminded me of my early years at Dean Witter Reynolds (“DWR”) working in the Incentive Services department.  Being 23 and single, the firm probably thought they were doing me a favor, giving me exposure to wealthy, powerful men.  Judging by the gender and age of my counterparts, I would say we (unknowingly) fit some sort of “Stepford” profile.

The department’s sole purpose was to reward top producers with trinkets, trips and all the perks of being alpha-dog salesmen.   Items bearing the company logo, such as golf umbrellas, Gore-Tex® rain gear,  and Titleist® golf balls were handed out like Santa filling stockings of all the good little boys (that’s right, not a drop of estrogen to be found).

Our job was to make sure these producers felt pampered and worshiped.  Trips were to exclusive locations, like Monte Carlo.  All the arrangements from the caviar served at the cocktail hour to the golf foursomes were artfully selected.  A camera crew was flown in to capture the event so each participant could have a commemorative video keepsake.

Members of the Chairman’s Club, the consistent top performers, had their own custom-made, crested blue cashmere blazers as proof of their fraternity; they wore them on these trips.

The sales force was DWR’s biggest investment; the firm knew how to motivate them to compete against their fellow office mates.    And, as the cut-off for the contests would approach, brokers would ring our phones to check how much more they needed to sell to qualify.  

Numbers, numbers, numbers; they never lie; whether in sales or salary.

Unfortunately, the same can be said for sales charges and commissions.

I wonder how many clients were impressed by the framed certificates adorning the walls of their “club member” brokers.  Did they not realize that the accolades had more to do with their service to the firm than their service to their clients?

I am certain that if I had raised my objections to these incentives I would have been told that I don’t understand what motivates salespeople:  They are competitive; they like to win.  They will fight to the death to win a designer paperweight (in spite of the fact that the windows in their offices can’t open and there is no need for such an item).

Though I could never be motivated by these “carrots,” I do get it.  I just don’t like it; there’s a difference.  A zero-sum game is one I can live without.

I have a suggestion to these firms: Find people who are motivated by doing a good, honorable job for the client.  That is their reward.  That is their motivation.

It keeps their actions in line with pure intent.  Everyone wins: the clients and the firm; though the firm’s winnings may not be as lavish.  After all, if only the products that serve the needs of their clients are recommended, then expensive annuities and load-laden funds are not part of the repertoire.

When fat products feed the firm’s coffers, the client pays; always.

So I challenge these companies to adjust their compasses to align with their clients’ objectives.  It’s called being a fiduciary.

Then, seek out other like-minded financial professionals with the same values; who aren’t shallow enough to be enticed by a tote bag.

Maybe all the money that they save on trinkets and trips will bridge the gap from lost commissions.  Even if it doesn’t, perhaps they will be able to sleep better at night.  I know their clients will.

But as I dream of this nirvana, the industry fights the fiduciary rule, lying about it in the process.  They fail to see that advisors who do the right thing have good, solid businesses and clear consciences.

That is why attending a golf tournament isn’t our priority, or that of our clients (or prospective clients).

We wouldn’t have it any other way.

Morgan Stanley Clients: Assume the Position

May 8, 2017 By admin 1 Comment

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Morgan Stanley clients should think long and hard about what’s in it for them, seeing how that is all Morgan Stanley is thinking about.

According to Sarah Krouse and Michael Wursthorn of The Wall Street Journal, “Morgan Stanley has already decided that as of next week its brokers will no longer be able to sell clients new positions in Vanguard mutual funds.”

Because offering clients quality, low-cost funds is a horrible thing to do?

No, Morgan Stanley would rather push product that pays the firm more (even though it may be at the expense of clients’ returns).

Thank you, sir.  Can I have another?

It’s bad enough to get screwed over; but to pay for the privilege?  Pass!

Sadly, I’m not surprised.  In fact, almost 30 years ago I had a painful glimpse of the ugly underbelly of Dean Witter Reynolds (“DWR”).  Ironically, the firm merged with Morgan Stanley back in 1997; just one of many birds of a feather, I’m afraid.

I worked in the external mutual funds department; a group of five people dedicated to servicing brokers’ inquiries relating to those mutual funds outside of DWR’s proprietary InterCapital funds.

We were a hardworking bunch of red-haired step children.  No one paid attention to what we were doing, because the in-house funds were selling really well, and making the firm a ton of money.

I worked with a guy who loved numbers and analysis, and he decided it would be a great project to compile a list of funds that performed well relative to their respective categories.  Unlike many “recommended lists” out there, funds had to qualify based on history and real data.  (FYI — It’s not uncommon for funds to “pay” firms to be on a recommended list.)

In addition to the quarterly performance report, we made up a directory of all of the outside funds that the DWR brokers were permitted to sell and hold at the firm.  We even gave them information about no-load funds that clients might want to purchase; many brokers would assist (and build good will) by helping their clients purchase funds they would never be compensated for selling.

It was the late 1980s /early 1990s and the industry was still smarting from the October 1987 crash that kicked off massive consolidation in the industry.  Some brokers realized they may not stick around for that gold watch after all, and decided that selling funds that couldn’t move over to another firm wasn’t a good idea.

Even though they were paid more to sell the in-house InterCapital funds, many (aided by our department’s work) started selling external mutual funds instead.  No one noticed at first … until they did.

InterCapital, which had once accounted for 75% of all the firm’s mutual fund sales, gradually saw that ratio reverse in favor of external funds.

The department was told to cease and desist; all activities that would support external mutual fund sales were killed.  Gone were the directory and the list.

Some brokers tried to go rogue and sell the funds that they thought were the right fit for their clients.  They soon found out that their compensation was at risk.  For those true cowboys who still didn’t march in line, the firm went after their complicit Branch Managers, dinging their budget, compensation and bonuses until they were forced to cry “uncle.”   The choke collar was in place.

And while the Berlin Wall had come down just years earlier, it sure didn’t feel that way at DWR.

Unfortunately, many clients are oblivious to the motivations behind the “recommendations” brokerage firms force their brokers to make.

As the article accurately points out, “Brokerages including Morgan Stanley rely on their compensation plans to nudge advisers to focus on selling certain products and services. Morgan Stanley in recent years has started offering its advisers incentives to push banking products like mortgages, for example. By excluding Vanguard funds from its compensation structure, Morgan would effectively be giving advisers a disincentive to keep clients in those funds.”

They are discouraging brokers from using low-cost, investor-friendly funds.

I wouldn’t buy a box of Girl Scout cookies from Morgan Stanley (or from the many other puppet-masters with equally “established” and “respectable” names).

15,000 Morgan Stanley brokers oversee over $2 trillion in client assets; chances are you know at least one poor sucker who has an account with them.  Do your good deed of the day, and pass along The Wall Street Journal article.

Then let them decide if this obvious conflict of interest works for them.  If so, they can knowingly assume the position.

 

 

Pope Francis: The Best Case for Fiduciaries

May 5, 2017 By admin 1 Comment

Franciscus in 2015.jpg

 

Coming up on the (gasp) 30th anniversary of my graduation from Fairfield University, I find myself nostalgic for the courses that taught me so much beyond the classroom.

The (late) Dr. Art Anderson gave his Sociology students much to chew on, including this nugget:  “In the work world, all of you are ahead of the game.  You have straight white teeth and a nice smile.”

He wasn’t paying us a compliment though.  Being a Jesuit school with an emphasis on education and social justice, the underlying challenge was to be more than another fresh face in a fancy suit with a captivating smile. If you’re not familiar with Jesuits, think Pope Francis; the most outspoken Jesuit of all.

The financial services industry could use a little Jesuit influence, if you ask me; everyone would be a fee-only fiduciary.

Regardless of religious affiliation (or lack thereof), financial professionals would do well to take a page from the Pope’s book:

  • He puts the interests of others ahead of his own, with clear intentions;
  • He treats people with respect and compassion;
  • He guides them to realize their potential;
  • He says the difficult things that need to be said, for the good of correcting what must be righted; and
  • He never manipulates or takes advantage of others, but rather chooses to look out for them.

When I speak with people who are unhappy with their advisors, none of these attributes appears to be present.

These disgruntled people have felt shamed, embarrassed, ignored, marginalized or taken advantage of.  Intentional or not, these advisors spoke in a language that put their clients at a handicap at the get-go.  They never divulged the motivation behind their recommendations was directly tied to how much they earn; and it was reflected in portfolios “constructed” with no rhyme or reason.

In short, their actions were guided by transacting for the client to make the most money.

In a recent TED Talk, Why the Future Worth Building Includes Everyone, Pope Francis said, “Only by educating people to a true solidarity will we be able to overcome the “culture of waste,” which doesn’t concern only food and goods but, first and foremost, the people who are cast aside by our techno-economic systems which, without even realizing it, are now putting products at their core, instead of people.”

I don’t believe that the Pope was specifically referring to the financial services industry, but clearly it has application here – and to life in general.  Substitute any word for product (money, power, prestige) and everything shifts away from caring for people.  Nowhere has this been more apparent than in the Wild West of retirement plans for teachers, where I have seen people taken gross advantage of; the fact that it is legal turns my stomach.

I am very fortunate to be surrounded by colleagues who do care.  They support the endeavors of my husband, Tony, and me as we try to educate and right the wrongs we see in the 403(b) space; where teachers, and other non-profit employees have a minefield to navigate.

I can hear cynics everywhere asking, “What’s in it for you?  How much do you make off of them?”  Glad you asked: A whopping 0.40% per year.  On a $50,000 account, that comes to $200 for the year.

Working with clients in a meaningful way; addressing their fears and concerns; helping them plot a course through it all; and assuaging their discomfort is more rewarding than any fee I can be paid.  Making sure they don’t fall prey to unscrupulous salesmen just waiting to sell them an annuity with 3% in annual fees and surrender charges that last 15 years, is an added bonus.

I’ve been accused by some of being too Pollyanna for this industry.  I’ll take that as a compliment.

In the words of Pope Francis, “…each and everyone’s existence is deeply tied to that of others: life is not time merely passing by, life is about interactions.”

Amen.

Focusing on the quality of those interactions can make the future very bright, indeed.

Too bad some of us need reminding.

 

 

 

 

 

 

 

The Gift Daughters Really Need

April 29, 2017 By admin 2 Comments

When it comes to money, age won’t make someone wiser or give them confidence if there is no real-world experience backing it up; even having a career won’t.  For women, the situation is particularly dire.

According to the Global Financial Literacy Excellence Center’s Working Women’s Financial Capability Study, working women lag men in basic financial literacy (31% vs. 52%); the gap is more pronounced in advanced financial knowledge (12% vs. 24%).

As a mother to sons, I may be all wet on this one; but I am a daughter.  I credit my parents, my father in particular, with being diligent in raising independent daughters.

My father, born in 1917, was nearly 50 when I was born.  As a first- generation American of Italian descent, his thoughts on gender roles were traditional with a capital T.  My mother stayed at home with their seven children while he worked.  It wasn’t until I was a teenager that I discovered he had dropped out of high school, earning his equivalency in his 40s.

Yet, my father was progressive in many ways.  He valued education, though he himself had little formal training.  He also encouraged all of his children to be independent, resourceful, work hard and to save money.

He invested religiously and even opened an IRA for my mother; he had money invested in joint name (men of his generation thought of earnings as exclusively theirs).

Perhaps he wanted his daughters prepared in the event of a sudden change in marital status.  Either way, we were not indulged in the way that fathers might spoil their girls.

He was practical and there were expectations placed on us.  When I went off to college it was understood that my degree would take four years; there was no margin of error for a “bad semester.”  I had to  live up to my end of the bargain; frankly, it never occurred to me not to.

I watched how friends of mine seemed to have an easier time; they had their way paid for, they always had more frills than I did.  I was envious.

But, when I graduated, I had a tremendous sense of accomplishment that really didn’t have all that much to do with the degree I had earned.  It was how I had earned it — and what it had cost me — that made it more precious.

Earnings from my summer job paid for all my books and living expenses; and I worked while I was a full-time student, contributing to my room and board expenses.  I had amassed some very manageable loans (a starting point for my credit history).

I felt strong, free and capable; and not beholden to anyone.  My parents were not “Plan B.”

Adages like, “It’s as easy to marry a rich man as a poor man,” are damaging.  The underlying sentiment is, “You better hitch your cart to a wagon better than your’s, because your potential is quite limited, sweetheart.”   My father never thought of his daughters in need of protection because we were fragile or less than; he protected us because we meant the world to him, as did his sons.

When it comes to money, age won’t make someone wiser or give them confidence if there is no real world experience backing it up.  Even having a career won’t.

Allow your daughters (and sons) to experience money in the simplest ways:

  • Earn it – There is no greater way to value money than to earn it.
  • Save/Invest it – Money can continue working, even when the work day is done.
  • Spend it, wisely – When money has been painstakingly earned, it’s harder to part with it on impulsive buys.
  • Donate it – Causes near to the heart are worthy of good will.

Build their confidence and self-esteem by showing them that they are able to direct their financial future so they can choose self-possession over being someone’s possession.

 

Attention, Shoppers!

April 20, 2017 By admin 1 Comment

SALE sign printable instant download by BloomWhereverYouAre:

It’s a great paradox of life that people will clip coupons, or drive out of their way to save $5 at a sale and yet, when it comes to their personal finances, they ignore the chance to save thousands of dollars.  This opportunity is real: it is the employer-sponsored retirement plan.

Participating in – or increasing contributions to – a 401(k), 403(b), 457(b), Simple IRA, SARSEP, or a Single K reduces taxable income.  To quantify the value of this on a federal and state tax level let’s look at a NY resident earning $50,000.

After-tax income on this salary would be $38,856.  Now, if a 10% contribution is made into the retirement account (or $5,000) the federal and NY tax savings would amount to $1,560, making the real cost of the contribution just $3,440.

In other words:  $5,000 of investments would actually cost just $3,440.

Assuming a 24-paycheck year, this contribution would only cost $143 per check.

I am not even factoring in the value of the account compounding without the effect of taxes until retirement, or the added benefit some people get in the way of an employer match.

My last two blog posts, A Plan to Overcome Panic Paralysis and Destination Unknown? highlight the importance of defining your goals and making a financial plan to get there.  Contributing as much as you can to your retirement is a critical first step.

If you are suffering from a tax-day hangover, take special note. Making a large contribution to your employer-sponsored retirement account can be particularly beneficial to you.  Remember: income, not wealth, is taxed.

Even if your tax bracket isn’t a main concern, the truth is paying less for something worth considerably more (and that can appreciate in value) is a bargain too good to pass on.

A Plan to Overcome Panic Paralysis

April 5, 2017 By admin 6 Comments

The first time I discovered the power of panic paralysis, my husband and I were on the verge of moving out of a one-bedroom apartment and buying our first home.  We had been aggressively saving to buy our freedom from our landlord.

I liked stock-pile mode: we controlled it; and it was relatively simple – we put aside as much money as we could and we were able to go at our own pace.  We were building something, together.

But the prospects of turning all that money over made me feel beholden to the bank and more out of control.

“What if the oil burner blows, the transmission on the car gives out, the roof springs a leak and I find out I’m pregnant – all in the same week?” I would ask my husband at 11 pm on a work night, just as his head was hitting the pillow.

To his credit, he didn’t run away; but he didn’t indulge me, either.

“We’re not having this conversation before bed,” he would sigh.  One night he had had enough and said, “Fine.  We don’t have to buy a house.  We will stay in this crappy, one-bedroom apartment the rest of our lives.”

His words had a sobering effect on me, like a splash of ice water to the face:  What I wanted versus what I needed – how could I ever bridge the gap?

I wanted to have a home and have our money go toward building equity for us and not our landlord.  Ah, but what I needed were assurances.  I needed control.  With so many variables, how could I have control?

Once we sat down and did the math, and saw how much we could continue to put aside toward savings/investing every month, I felt I could breathe a little easier.  Keeping our emergency cash reserve intact (and increasing it) also gave me a degree of comfort.

People often feel that way about investing.  Who knows what the market will do?  Who knows what the economy will be like; where interest rates will be; and what inflation will like in a year, etc.?  The list of worries goes on and on.

That cacophony can drown out rational thought and kill any forward momentum.  And, while standing might feel like control, it’s really a case of the tail wagging the dog.

Recently, I was interviewed by Anora  Mahnudova of MarketWatch  for “How investors can learn to stop worrying and love a stock-market correction.”  Clearly the writing is on the wall: investors are already worried that the market is climbing higher and they need reassurance for the inevitable market volatility  — whenever that might be.

I told Anora that investors need to be thoughtful planners; considering what they want, what they need, and articulating their goals.  This obvious first step is one that many avoid.

Without getting a handle on where you are and outlining where you want to be, you have no control and no direction.

Procrastination sets in followed by the equally unproductive hand-wringing.

As I tell clients: Sit and do this exercise with me; gather what you need and swallow your fear.  Once we lay everything out and get a sense of what you have; what you will need and how long you have to get there, we can then make a viable plan.

Even when the news is sobering, they breathe easier because now they are able to face and address every nagging issue.  Doing something about their situation gives them forward momentum.

They see they have control over many things, such as the amount of money they will invest; the level of risk they are willing to take; and when they will actually retire.

The conversation shifts from worrying about random things they can’t control (like market returns) to something constructive, like how can they move the needle for their own financial well-being.  They no longer ask if they are buying in at market highs; they no longer talk about timing when they invest.  They see market corrections as a time to add to their investments.

If you are ready to climb into the driver seat, start by writing down your financial goals.

  • What age do you want to retire?
  • How much will you need?
  • Take inventory of the money you live off of every month.
  • Find out what income you will have in retirement (pension, social security, etc.).
  • Write down all the investments/cash you currently have in all accounts (retirement and taxable accounts).

Then stay tuned.  My next post will address more steps to take to kill the panic paralysis and seize control.   I speak from experience: it is much better to put your energy in to creating the future you want than worrying while you sit on your hands. That’s what I call a great investment of your time.

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Dina Isola

Since 2002, Dina Isola has worked closely with investors, hearing their concerns. Drawing on her experiences and challenges, Real$martica was born, which focuses on making personal finance issues relatable to women, children and families and educating investors to make informed decisions. A contributor to A Teachable Moment, she is a client relations specialist at Ritholtz Wealth Management. She also serves on Stony Brook Children’s Hospital Task Force.

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