Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

Print
PDF

The F-Word (Fiduciary) is Becoming the Antidote

Written by Les Detterbeck.

fiduciary and salespersonFiduciary: n. from the Latin fiducia, meaning “trust.”  For Registered Investment Advisers, the legal obligation to always put their clients’ interest first and be proactive in disclosure of any potential conflicts of interest. 

Contrast that with a commissioned salesperson.

When you buy a car you know that the salesperson is going to earn a commission.  You know the salesman is there to sell you a car at the highest price you’ll accept and then try to get you to sign up for extras.  It’s your job to do your homework beforehand; know what you need and can afford, and then fight for the best deal you can.  Caveat emptor- buyer beware.

Unfortunately, in the arena of financial services it’s also caveat emptor.  You may think that the commissioned salesperson is there to help you.    They may call themselves “financial consultant,” financial advisor,” or “financial planner,” and may have a business card with some interesting initials or designation as a V.P.  Regardless, if they are paid commission, they are generally focused on selling you products that are best for them and their employer, not you.  There is a fundamental conflict of interest that works against you.  Often the highest commissioned products include large upfront and/or ongoing fees to recoup the big commissions.  The future performance of your investments is diminished dollar for dollar for these excessive fees.

In the 1980s and 1990s, when economic growth and higher inflation pushed equity returns into annual double digit returns, high fees might have been overlooked.  But, when today’s lower growth and inflation produce lower returns, a 1% annual difference in fees, for example, makes a huge difference. Fortunately, astute investors have been moving away from high-cost, conflicted advice and toward low-cost investment advice and total wealth management where the adviser acts in their best interests.  Members of National Association of Personal Financial Advisors (NAPFA), such as DWM, have seen major upticks in business and are helping more and more families reach their financial goals.  NAPFA is the country’s leading professional organization of Fee-Only financial advisors.  Its members sign the NAPFA Fiduciary Oath legally requiring all of us to always put your interests first and disclose any potential conflicts of interest.  See the oath: http://www.napfa.org/consumer/NAPFAFiduciaryOath.asp

Not surprisingly, the big banks and brokerages have tried to limit their continuing losses of business by trying to confuse the issue.   Most have set up a part of their business as “fee-only” and describe their total offering as “fee-based.”  Caveat emptor- “fee based” means the big banks and brokers charge you a fee to begin with and then get commissions on top of that for products they can sell you.

Last summer, the Department of Labor (“DOL”), which is responsible for safeguarding employees, issued a ruling that as of April 1, 2017 all investment professionals who work with retirement plans or provide retirement planning advice would be legally bound to act as fiduciaries, putting the clients’ interests first. This rule would impact trillions of employee retirement dollars and likely save participants billions annually in fees. As expected, Wall Street and the related lobbyists have attacked the ruling.  Their complaint is threefold: 1) it would limit choices to participants (yes, it would reduce many of the toxic overpriced funds currently used), 2) trigger dislocations in the retirement services industry (yes, like modifying the behavior of the bad guys or eliminating them), and 3) causing increased costs for consumers (no, it wouldn’t- this is simply an “alternative fact.”).  Last week, as expected, President Trump issued a presidential memorandum to direct the Labor secretary to begin a new rulemaking process to modify the DOL rule.  Of course, NAPFA, the Financial Planning Association (FPA) and the CFP Board all applaud the new rule and are working diligently to put it in place, keep it there and expand it.  We do too.

We support sensible regulation to protect consumers in the area of financial advice and the requirement of fiduciary responsibility to be in place for all investments.  It is estimated that the shifting of $5 trillion of investments from high-cost, ineffective products to low-cost products could save consumers $50 billion per year, transferring those excess commissions and fees from Wall Street, big banks and brokers to your pocket.

Here’s the best part:  Neither Washington nor Wall Street can stop the movement. The DOL fiduciary rule is not shaping investor behavior, it is simply catching up with it.  Vanguard, the industry leader in low-cost indexing, had $1 trillion in assets before the financial crisis, now it has $4 trillion.  Total Wealth Management firms like DWM, which provide both independent investment advisory services and value-added financial services on a fee-only, fiduciary basis, are working with more and more families.

Consumers know what’s best for them- fee-only fiduciaries who put their interests first. They are voting with their feet and their money away from the old toxic models of the big banks and brokers.  The F-Word (Fiduciary) is becoming the antidote to the sale of commissioned financial products.

Print
PDF

Feliz Jubilación!

Written by Ginny Wilson.

Jubilation 002We loved recently learning the word for retirement in Spanish …Jubilación!  It has a much more festive ring to it than “retirement” or even “financial independence”, as we say in the U.S.  In France, they use the word for retreat or “retraite” to define this time of life.  We don’t think many of us want to retreat, exactly, or hide away from anything!  And in England or Italy, they use a derivative of pension to describe a ‘retiree’ – ‘pensioner’ or ‘pensionato’, while in Spanish, you are a ‘jubilado’!  While they all mean the same general thing, we think this transition in life should be celebratory and warmly anticipated without any anxiety or trepidation.  As wealth managers at DWM, our goal is to make this transition so easy that you are indeed… jubilant!

So how can this transition truly be smooth and worry-free?  We do think that there are some things that you can do for yourself and then some things where your financial advocate, like DWM, can be very helpful.  Let’s start with some of the administrative items that come up at “a certain age”.  In fact, at DWM, we keep track of the important dates and significant milestones in our clients’ lives so we can remind them of the things that they will soon want to do.  For example, at age 50, you can start increasing your IRA or 401(k) contributions each year.  At 55, we like to discuss the pros and cons of long term care for you and your family and around age 60 or 62, we like to discuss Social Security strategies and help you with plans to start thinking about Medicare sign-ups.  We are always available to help analyze the proper benefits, help you schedule sign-ups or meet with professionals to assist you.  We also help with tax strategies and account transitions as you leave your job and need to understand your employer retirement benefits packages.  And when you hit 70 and it is almost time to start taking your required minimum distributions from your IRA’s, we are also here to guide you and manage this.  There are a few things that need to be done, but we like to educate our clients on the process and then help to guide them through it. 

It is also important to make sure that your resources are protected and wisely invested to maximize your success in achieving your goals.  Assessing your resources and making a realistic plan will allow you to make the best choices for your future.  As wealth managers, we are always mindful of taxes, asset allocations, estate planning and risk management, as we look for ways to make the most of what you have.  We want to help you realize your goals with a comprehensive financial plan and a roadmap to success.  Money certainly isn’t everything, but having your finances in order and the details understood can make this transition much more worry-free and enjoyable.  Looking at all of your goals and assets with honest and realistic expectations will allow your plan to reach its highest potential.

The other question to ask yourself is what is your passion?  How would you like to spend your time, now that it is yours to spend?  Will you continue working?  Will you travel? Will you move to a new home?  Some people find that they can now spend their time doing exactly what they have always wanted to be doing, but just aren’t sure what that may be!  There are many things to investigate and you can now take some time to explore your options - whether it is continuing to work, volunteer, travel or take up a hobby that might have always interested you.  The goal here is to look at it as a wonderful opportunity where you embrace the change and get excited to find a happy “new normal”.  It may take some time and some patience to make this adjustment smoothly.  Staying healthy, active and engaged with others are all great tips to helping with the emotional transition.  You may have to adjust to your new identity and staying busy and connected with others can definitely support you through this process.

This should be a wonderful time in your life and we are here to help in any way we can as you move forward into “retirement”.  Just remember, you have earned the ability to celebrate – this is your lifetime achievement award!   As your financial advisor, we look forward to helping you look at this time with joyous and resounding JUBILATION!

Print
PDF

Warning: Alternative Facts May be Hazardous to your Portfolio Returns

Written by Les Detterbeck.

geo washington alternative factsAlternative facts may work sometimes in business and politics, but they don’t work with investments.  Returns are based on reality, which can be complicated, random and uncertain.

30 years ago, in his book, “The Art of the Deal,” Mr. Trump extolled the virtues of “truthful hyperbole” which he described as “an innocent form of hyperbole-and a very effective form of promotion.”  In interviews over the years, Mr. Trump has inflated everything from the size of his speaking fees to the cost of his golf club memberships to the number of units he had sold in his new Trump buildings.   His decades of habitually inflating claims about his business acumen and his wealth have helped produce lucrative licensing deals for the Trump brand around the world.

It is no surprise that President Trump has continued his pattern in his first days in office.  He has made inflated claims about how many people attended his inauguration, his insistence (contradicted by his own Twitter posts) that he had not feuded with the intelligence community, or his claim that Hillary Clinton won the popular vote only because millions of people voted for her illegally.  No worries. Trump adviser Kellyanne Conway simply refers to these as “alternative facts.”  Others might call these falsehoods, some would call them lies.  Regardless, they are part of the “post-truth” era in politics.  Very disturbing but apparently part of the current political landscape. Overall, it reminds some people of George Orwell’s “1984” in which the Ministry of Truth had three slogans:  “War is peace.  Freedom is slavery.  Ignorance is strength.” Yes, very scary.

Even so, in business and politics, alternative facts may be effective.  Voters live in their own bubbles of perception and confirmation bias.  Once they lock in on a candidate, it’s tough to change their minds regardless of subsequent facts.  It’s true- all of us have patterns of irrationality.   We all get lead astray.  This is described brilliantly in Michael Lewis’s new bestseller, “The Undoing Project.”  We can become victimized by the “halo effect” in which our thinking about one positive attribute causes us to perceive other strengths that aren’t really there.  Another is “representativeness” which leads us to see cause and effect when we should accept uncertainty or randomness.  Mr. Lewis showed how pioneer behavioral economists Daniel Kahneman and Amos Tversky demonstrated that all of us misanalyse all sorts of situations, in business, politics, and everyday life.  We accept alternative facts rather than true reality.

Investors can lose lots of money when their beliefs diverge from the reality and they are led by alternative facts and subjective reality.  They believe they understand major issues; such as how tax reform might impact corporate earnings, the odds for a recession, and repatriation of overseas capital.  The real problem is their absolute certainty in areas which are, in reality, uncertain or random.  (The U.S. election results and the markets’ behavior thereafter is a great example).

The subjective reality investor imagines they can understand complex issues and predict what the marketplace will do and even how specific sectors and individual securities will perform.  They exhibit “representativeness,” believing they understand the cause and effect, when it fact they should accept uncertainty or randomness.  Subjective reality investors often believe they know how to “time the market” which has been shown to be a losing strategy over and over again.  Even full-time mutual fund “active” managers consistently underperform benchmarks over time.  Using alternative facts and subjective reality, these subjective reality investors put their (and others) capital at far more risk than they should.  Sometimes they get lucky, most often they don’t. 

What really gets these subjective reality investors in trouble is the difference between fact and opinion and falling prey to overconfidence.  No one knows the future.  None of us can possibly comprehend all the forces at work every day and how these continually change.  Each of us has our own baggage we bring to our decision-making every day that turns facts into opinions and often truth into alternative facts.

At DWM, we always say, focus on what you can control and respect what you can’t.  Establish a diversified portfolio with an asset allocation commensurate with your risk profile.  Keep costs low.  Stay tax efficient.  Stay invested.  Stay disciplined.  Monitor results and rebalance as necessary.  Don’t try to time the market.  Don’t think you’ve found the “silver bullet.”  Don’t kid yourself-your subjective beliefs and alternative facts can be hazardous to your portfolio returns.

Let's Get Acquainted

We offer a complimentary "Get Acquainted" meeting to describe our services, and to see if our services are right for you.

Contact Us