New York Financial Planner - NYC Financial Advisor

Are Exchange-Traded Funds Really Ruining the Market?

Thu, 17 May 2012 14:39:32 -0500

In my opinion, no, that’s ridiculous. As I wrote in my book back in 2007, I believe ETFs are one of the best financial innovations to hit the market in decades, perhaps since the mutual fund made its debut. ETFs allow investors to own broad, diversified portfolios at low annual costs. That’s what mutual funds offered back in the day but people ultimately realized that some fund expenses weren’t so low and the performance wasn’t so hot. I believe ETFs offer a solid way to own a passive portfolio which covers a broad cross-section of the market. Couple that with the fact that they are transparent, trade on exchanges like stocks, and are tax-efficient. Now to clarify, when I refer to ETFs, I am referring to large, popular indexes such as the S&P 500* which do not employ leverage. Please read on to hear some professional opinions about how ETFs may have contributed to market volatility:

Understanding the SIMPLE IRA Plan

Tue, 08 May 2012 16:28:53 -0500

In the world of small business retirement plans, there are many options. Some plans give the employer sole authority to make contributions, others are contributed to by employees only, and some are a hybrid of the two in which employees make contributions and employers can make matching payments or make random contributions to the plan. The SIMPLE IRA is an interesting option for small and mid-sized businesses (up to 100 employees) which allows a mix of employer and employee contributions. Some would say IRA plans like the SIMPLE are becoming obsolete as the 401k vehicle has become more flexible but that’s not entirely true. 401k plans still have more onerous rules on business owners in terms of tax reporting requirements and the fairness surrounding contribution levels. For that reason many people stick with plans like the SIMPLE IRA which have lower contributions limits but are easy to administer and achieve the goal of socking away tax-deferred funds for retirement.

Featured in Financial Advisor Magazine!

Fri, 13 Apr 2012 14:41:50 -0500

I don't usually blog about my press mentions, but this month I had a pretty cool feature in one of my industry's most prominent publications. Financial Advisor Magazine interviewed me for a story on social media and how advisors are dealing with the opportunities and challenges it presents. As a blogger, I've always been an advocate of using the Internet as a tool for helping advisors grow their business. However, the social media movement takes web marketing opportunities well beyond that of a traditional website or blog. Advisors who follow the new and very specific rules about how to use social media may have a leg up on those who rely strictly on more traditional methods of client acquisition and retention.

Financial Planning: What’s Your Process?

Thu, 09 Feb 2012 13:15:41 -0500

I’ve been in the business for a while at this point. I’ve heard many stories from financial advisors about how they lead initial consultations and what the different methods are which they use to extract vital information from clients. The problem we often face as advisors is that clients offer us a decent amount of ‘hard’ information such as income and expenses but we have a more difficult time getting through to the ‘soft’ information such as a true tolerance for risk, attitudes about money and spending, attitudes about charity and legacy planning, etc. At the end of the day, it’s a relationship that involves trust; the more an advisor understands about the client’s truest feelings, the more they can think through ideas and come up with the best possible solutions for handling one’s financial life. So what’s the solution?

What's the Real Story with Inflation Lately?

Mon, 06 Feb 2012 15:45:41 -0500

Part of what is allowing the Federal Reserve to continue promising an endless period of low interest rates is the fact that – or at least they claim – we aren’t yet experiencing any inflation here in the US. I get the logic: the big pitfall of keeping rates so low for so long is inflation but with an economy that is barely growing, we can ignore inflation for now (or even cry deflation) and continue the path to devaluing the dollar for greater short-term economic benefits. Perhaps the reason why Bernanke isn’t so concerned is that if banks actually start deploying capital at some point the Fed should be able to drain liquidity fast enough to cut inflation before it became a serious problem. However, whether or not the Fed can actually do that is a much bigger question mark than some people realize.

Between the Lines: Interesting Reading from First Allied Asset Management

Wed, 18 Jan 2012 13:55:25 -0500

This post from The Wall Street Journal’s The Source blog provides a brief overview of the current natural gas production boom in the U.S. and why Europe is unlikely to benefit from it any time soon. In short, the infrastructure necessary to export the gas will take several years at a minimum to build out and environmental concerns are likely to keep a similar production boom from occurring in Europe. The inability to export is likely to keep domestic natural gas prices depressed for the foreseeable future. “In the U.K. last week, politicians hailed the good news as utilities cut a meager 5 percent from their customers’ sky-high gas bills. Meanwhile, in the U.S., natural gas has become so abundant and the price so low that a company in Texas was burning the stuff off as a waste product.”

Special Commentary: The Jobs Report

Wed, 07 Dec 2011 14:06:19 -0500

The U.S. Labor Department reported on Friday that the U.S. economy added 120,000 jobs in November, roughly in line with expectations. The economy has now produced 100,000 or more jobs five months in a row – the first time that has happened since April 2006. But to make sense of jobs data, it’s important to understand the differences between the two main data sets, both of which can be “noisy” and subject to some pretty substantial revisions and adjustment factors. The number of jobs created or lost is revealed by the nonfarm payroll report, which is a survey of employers.

The European Sovereign Debt Crisis - Market Commentary from First Allied Asset Management

Thu, 01 Dec 2011 13:46:51 -0500

Blowout Black Friday retail sales sent stocks higher on Monday by nearly 3 percent on light volume, reversing a seven-day stock losing streak. Bond markets in Italy and Spain were the key negative culprits as yields on both countries’ debt breached the dangerous 7 percent level – crippling funding costs that previously pushed both Ireland and Greece into seeking bailout packages. The markets clearly sense that the size of Europe’s revised rescue fund is still inadequate to address the region’s dual sovereign debt and banking crises. Contagion has now reached the core of Europe. Optimistic policy statements out of Europe have been able to consistently generate rallies for 18 months, but I sense that this time we really are at the end game and painful specifics will finally be required.

Between the lines: Market Commentary from Craig Columbus

Wed, 16 Nov 2011 15:14:27 -0500

Below is this week's market commentary from Craig Columbus, our chief economist. This week's selected articles mostly pertain to Europe as that has dominated US trading/markets over the past few weeks.

Where Is the ECB Printing Press?
In my opinion, John Mauldin has done some of the best writing on the European debt crisis because he focuses on the deep, underlying structural issues rather than on the pronouncements of Europe’s leaders. Take, for example, the fact that few have reported that the “voluntary” haircut on Greek bonds only applies to private reditors: “Greece has been told that they can write off 50 percent of their debt held by private entities, but not that owed to the IMF, ECB, or other public entities. This means something more like a 20-30 percent haircut on total debt. Sean Egan suggests that eventually Greece will write off closer to 90 percent.”

Retirement 2.0

Tue, 15 Nov 2011 16:35:45 -0500

The latest trend in retirement is, well, not retiring at all. Retirement itself is no longer the goal. The goal seems to be adapting to a lower key phase of life and making sure each individual or family is prepared to deal with the personal and financial issues which apply to them. Despite the dozens of articles I’ve read which aim to teach advisors about what the ‘new retirement’ looks like, the more telling sign for me is listening to what my clients are saying. Frankly, they don’t even like saying the word retirement because it makes them feel old, unable, disconnected, etc.

Advisors & Social Media

Wed, 10 Aug 2011 17:20:49 -0500

At this point most people in sales and relationship-oriented businesses realize that social media IS the future when it comes to improving brand image and marketing products and services. If not already as important as print and e-mail advertising, your social media profiles are quickly gaining traction. Plus, I feel they’re a much stickier medium for communicating since most people engage their social media outlets daily. Unfortunately for us in the financial advising community, social media within our industry is a grey area and has remained so for years. Advisors are genuinely getting fed up at this point and it seems financial regulators are gradually starting to cave in.

Couples & Money: Reconciling Differences

Tue, 21 Jun 2011 13:27:21 -0500

There was a good piece in this month’s edition of Financial Advisor magazine written by Roy Diliberto about couples and how they deal with money. It’s no secret that an inability to discuss and understand attitudes about money causes many relationships to ultimately fall apart. The reason has nothing to do with the inherent property of money which is simply an object which helps us obtain things and acts as an exchange agent for goods and services. The more important focus is on one’s personal relationship with money, often dating back to their childhoods. Think about yourself for a minute—how was money introduced to you as a child and how have those attitudes and feelings shaped your relationship with money today? The classic example would be depression era parents who watched much of their savings disappear in the 1930’s. That sort of experience lasts a lifetime and more than likely impacts the way future generations are raised. If you grew up watching your Dad stash cash under the mattress and perhaps make you feel guilty about spending, you may pass some of those qualities down to your kids. However, if you grew up in a financially comfortable surrounding you may have been taught not to focus or discuss money, rather to focus on personal enrichment and building strong relationships with your peers. Perhaps money then becomes more of an afterthought for you and not on the forefront of your mind. Neither attitude is right or wrong: just different. The problems arise when these childhood experiences aren’t properly disclosed or discussed with those who matter.

How Many Financial Advisors does one Need?

Wed, 01 Jun 2011 11:09:43 -0500

Have you ever pondered how many financial professionals you need? I ask because I know that about 1/3rd of my clients work with me and at least one other advisor. Naturally I feel a little competitive and want to know that I’m the ‘lead’ advisor or primary advisory in terms of giving investment advice and financial planning recommendations. More importantly, I want to make sure my clients aren’t doing themselves a disservice by having multiple advisors who don’t communicate with each other. This has me wondering how necessary it is to have multiple advisors. If you do, in what ways are you adding value, and are you perhaps decreasing the likelihood of reaching your longer-term financial goals?

Advice for my Bond Market Investors

Thu, 12 May 2011 15:15:04 -0500

Bond investors have reason to be frustrated. As it is, they are willing to accept a lower total return than stock market investors by choosing safety and security over risk and return. The Fed has basically punished fixed income investors by keeping interest rates extremely low for a long time. The result is that you can’t simply pull a list of AAA government bonds, go out a few years, and expect a 5% yield to maturity. No sir, not anymore. What you can expect is something closer to 2%, or perhaps less. The more safety you require (think: treasury bonds) the less yield you can expect. I’m finding a great deal of difficulty building a bond portfolio these days which satisfies my bond investors in terms of risk, duration, and yield. The problem is that when I finally create a portfolio with a yield averaging 4%, I find my client is either taking on too much risk, or going out so far that they are locking in rates which they are soon to regret. So what are bond investors to do?

The Wealth Transfer: Getting Younger Clients

Fri, 15 Apr 2011 15:58:41 -0500

I've given some thought lately to lowering the average age of my clients. It’s an issue most financial advisors deal with when they look through their book of business and realize that most of their largest accounts are people in their 60’s, 70’s and older. In my experience, the reason for that is two-fold: first, older people really do have more money. It’s a combination of demographics (there are currently tons of baby boomers out there controlling trillions of dollars in assets) and the fact that people both come into more money at later ages and, concurrently, become more interested in the management of their assets as they near the distribution phase. The other reason why advisors have a hard time attracting young, wealthy clients is that younger people simply don't focus as much on saving and investing as older folks. Regardless of all the statistics about the time value of money and how much of an advantage a young person would be at later on if they saved more now, it’s simply not how the world works. I have plenty of clients who are in their 20's and 30's, earning well over $100,000 per year who save very little each year, despite my ranting. Granted I work and live in New York City where earning $100,000 makes you, well, poor. The handful of young clients who do max out their 401k and save beyond that will clearly be less stressed later on when life becomes more expensive (think: college tuition) and saving becomes more difficult.