On April 6, 2016 the Department of Labor (DOL) finalized a ruling addressing conflicts of interest they felt were evident in financial advisers’ retirement advice. This rule is more commonly known as the “DOL Fiduciary Rule”. We recognize the rule was finalized a few months ago, but we keep running into people who don’t quite understand the rule and its impact. So, in this month’s blog we are going to examine what the DOL rule truly means, and our opinion on the perceived impact to the financial industry.
At a moment’s notice we can jump on the internet, an app, or turn on the TV and see how the U.S. markets are performing. Is the S&P 500 up today? How is the Dow doing? These and other indices have become synonymous with the “U.S. markets”. However, what is rarely understood is the composition, selection criteria, removal criteria, and the individuals managing these indices. So, we decided to shed some light on the construction of the “U.S. markets”.
LBW would like to thank Laura Skilton Verhoff at Stafford Rosenbaum, LLP for collaborating with us on this piece. Her insight was invaluable.
On April 21st, 2016 the music world was stunned—Prince Rodgers Nelson (Prince) passed away at his home in Chanhassen, Minnesota. Prince, an American singer, songwriter, multi-instrumentalist, record producer and actor, was known as a musical innovator. He challenged the industry throughout the years with his extravagant dress and style of music. His innovative style and impact on the music industry allowed him to amass a sizeable fortune. At LBW we respect and appreciate what Prince had accomplished in the musical world; however, what truly amazes us is that Prince did not have an estate plan.
How LBW See’s It
Every quarter it seems we start our commentary with a new “OMG” (yes, LBW used “OMG” as an acronym for “OH MY GOSH”) event and Q2 of 2016 did not disappoint. Headlines were flooded with the BREXIT (a hype word for the United Kingdom exiting the European Union) event to our very own reality TV show, that is the United States (“U.S.”) presidential race. All joking aside, it seems that the U.S. as well as the world has become even more unpredictable, from slow anemic growth across the world to central banks’ monetary policies that seem to be changing every other month. This erratic environment has assisted in the creation of volatility we have seen in the markets year-to-date. Combine the impulsive nature of the world today with the U.S.’ almost seven-plus-year bull market, your result: “The tides have raised all ships, now the storm is causing choppy waters”.
As most of you already know, as of yesterday the United Kingdom (“UK”) voted on whether to stay in the European Union or to exit (hence the media hype word BREXIT). Many pundits believed that due to the “status quo bias” that Britons would vote to remain in the European Union (“EU”), and the markets seemed to price this decision in as of yesterday. However, waking up this morning the world was “shocked” that Britons had decided to leave the EU, which sent global markets awry. The next rational question is: why?
When you hear the words “We would like to have you as a member of our team.”, it is beyond exciting, you landed the job. However, reality sets in when Human Resources provides you with a benefits package. You are inundated with information and jargon you may have never heard of. To make this process less daunting, for this month’s blog we decided to focus on a potential piece of the package: medical coverage and specifically the savings accounts that may be offered relating to that medical package.
As we all know the investment industry is filled with jargon and multiple types of accounts such as a Roth IRA, Traditional IRA, Rollover IRA, Inherited IRA, SIMPLE IRA, SEP IRA, and many more. As stated in the name of the blog post, we will focus on one type, the Roth IRA. At LBW, a frequently asked question is: “Should I contribute to a Traditional or Roth IRA?”. More often than not, people are not as familiar with Roth IRAs as they are with Traditional IRAs. So, we are going to break down the Roth IRA into four sections: History of the Roth IRA, Advantages of a Roth IRA, Roth IRA vs. Traditional IRA, and Why and What the Government Wants to Change.
How LBW See’s It
The first quarter of 2016 did not disappoint. The S&P 500 hit a quarter low on February 11, 2016 equating to an approximate decline of -10%, falling to what pundits call a correction. How did the S&P 500 finish the quarter? Up approximately 1%. In short, we experienced more than a 10% swing during LBW’s first full quarter - what a ride. The swing was caused by the usual suspects: the continuing commodity rout, the strengthening U. S. dollar, the unpredictable Federal Reserve’s (“Fed”) interest rate moves, and continuing fears of a global slowdown. Was this volatility valid, or in other words, was the market overvalued on a valuation basis?
Let it be known, we had to look up how to review a movie. Remember, we are not professional spellers (if you recall the last LBW INSI”G”HTS) nor professional movie critics, although we try our best!
“In 2008, Wall Street guru Michael Burry realizes that a number of subprime home loans are in danger of defaulting. Burry bets against the housing market by throwing more than $1 billion of his investors' money into credit default swaps. His actions attract the attention of banker Jared Vennett (Ryan Gosling), hedge-fund specialist Mark Baum (Steve Carell) and other greedy opportunists. Together, these men make a fortune by taking full advantage of the impending economic collapse in America."
Working in the financial services industry requires significant trust. Unfortunately, too often that trust is, at least initially, one-sided where the client places their trust in the advisor. In the wake of the 2008-09 financial crisis’ recovery, and recent misappropriations such as Bernie Madoff’s Ponzi scheme, it is understandable for clients to find it difficult to trust their finance professionals. That trust needs to be established over time, but it must begin as a two-way street and on an appropriate foundation.