Here’s how I apply behavioral finance to help clients to think differently about their investing.
When adjusting for more realistic assumptions and considering the fact that the insurance company can change return caps and that inflation is both an unknown and deep risk, an FIA, along with most annuities, is not on the efficient frontier in either accumulation or decumulation phases.
As we enter the hurricane season, there are signs of three financial calamities merging to form the perfect storm. The nexus is in commercial real estate, but it extends to banking and the broader economy.
How have U.S. stocks performed this year? The answer is simple, but you’d never know that from looking at the three most often quoted indexes.
AI’s arrival will have an increasingly large impact on our lives. That includes investing and, especially, other aspects of financial planning.
One of the toughest dilemmas I wrestle with is whether to consider future tax liabilities from unrealized gains in the portfolio and taxes from withdrawing from traditional retirement accounts.
Here is some research on why our clients built a sizable portfolio while others had high income but little savings. I’ll address specifics on how to get savers to enjoy their money.
Over the past couple of decades, I’ve told clients many very important things. Most of them are timeless, which is why I find myself saying the same things repeatedly. Here are the top 10, and I’ve saved my most important for last.
Morningstar’s latest research showed higher safe spending rates across all asset allocations over all time horizons. I don’t agree with those results.
Rising interest rates was the dominant story in 2022. Did fixed income losses cripple insurance companies? Or has the insurance industry shifted the risk to your clients who purchased their products?
I built a 4.36% real (inflation-adjusted) systematic withdrawal portfolio using a 30-Year TIPS ladder.
Despite crippling stock and bond market performance in 2022, there are nuggets of good news for clients.
I wrote an article last month regarding the 10 things I got wrong about financial planning over my 20-year career. As it happens, I also got some things right and was happy when I was asked to write about them.
In the last two decades as an investment advisor, I’ve often been wrong – about markets, products and their providers, investors, the government, and the advisory business. Here are my top 10 items I’ve got wrong.
None of us can control markets, but it’s critical that our clients know how they have performed relative to appropriate benchmarks.
I’m going to review the research on safe-spending rates and then critique common methods of risk mitigation. I’ll offer the practical methods to reduce sequence-of-return risk that I suggest to my clients.
Advisors who use Dimensional funds are generally believed to more likely adhere to their investment strategies than their peers. A comparison of fund and investor returns calls this conventional wisdom into question.
I require clients to send me their most recent tax returns. Here are the insights I learn and how it provides a ton of value to clients.
Advisors make seven predictably irrational mistakes when it comes to bonds, depleting their clients’ wealth and standard of living.
Here is how I nudge clients (sometimes not so gently) to where they should be on their portfolio.
Advocates of active management – particularly those who favor smart-beta strategies – claim that cap-weighting suffers from the irreparable flaw of overweighting a handful of supposedly overvalued high-tech stocks. But that reasoning is flawed.
Data from Vanguard shows that advisors have increased allocations to passive, low-cost investment products. But they also increased allocations to commodities and timed markets poorly, particularly after the March 2020 crash.
I got my MBA at Kellogg nearly four decades ago and have been teaching investing for the last 20 years. Though not much has changed in the curriculum, over time I’ve realized that some things are downright wrong. Here are the big six.
Looking back at my personal financial planning practice, there are some things I’ve done right and some mistakes I’ve made along the way.
The Biden administration’s proposals won’t have much impact on the merely wealthy, but some changes will have huge consequences for the very wealthy.
Insurance is one of the areas I spend time working with clients to save them money and add value to the financial planning process. Here’s how I frame things to clients to give actionable advice.
I’ve spent more time explaining bonds to clients than stocks, mostly overcoming eight great misconceptions about fixed income.
With U.S. equity valuations very rich by historical standards, many – including Jeremy Grantham, Rob Arnott and Vanguard – are predicting emerging markets to excel. I’ll examine the case and give my thoughts on how to invest in emerging markets.
Post-pandemic financial planning will reward advisors who illustrate the relationship between money and happiness to their clients.
Clients are surprised when I request copies of their tax returns. But when they see the process I use to save them money – tax “alpha” – they often wish April 15 came more often.
Should your clients convert some of their traditional tax-deferred money (e.g. IRA or 401K) to an after-tax Roth account? There are some myths that are just plain wrong. Here are the seven situations to consider when advising on this issue.
I give these brilliant investment strategies a failing grade.
With the recent market rally, stocks are again near their all-time highs. But we face a perilous economy, coupled with the threat of a resurgence of the coronavirus. Here’s what I tell clients who are dead-certain that the stock market is due for a significant correction.
This century is barely 20% complete, yet investors have suffered through three extreme bear markets. Let’s look at which asset classes provided the much-sought diversification to offset losses in U.S. equities.
As an investment advisor, clients often ask my opinion about a private deal they’ve been offered. Here’s the general framework of how I assist the client in reviewing such investments.
Whether to purchase long-term care (LTC) insurance is one of the most difficult and consequential decisions a retiree will make. Because of the complexity of the products and the uncertainty of needing care, very few have attempted – as I did below – to provide an objective analysis.
Let’s walk through the first 20 years of the new millennium and the lessons for the next 20 years.
There is a tendency to think that owning a handful of stocks may be a bit riskier but have an equal likelihood of outperforming the market as a whole. This is wrong for two reasons.
Some clients are surprised at how I look at critical financial decisions. But when I reframe them from the conventional way of looking at those decisions, I can get clients to shift longstanding beliefs and make changes.
Though I’m trained to use these questionnaires, I don’t and here’s why – as well as a better way.
Why are we so bad at probabilities and worse at understanding consequences?
Investing is simple, but taxes aren’t. As a CPA, I make portfolios as tax-efficient as possible. I advise clients that the goal isn’t to pay the least amount of taxes, but to make the most money after taxes. With fee compression eroding advisor profitability, this is one key area you can differentiate your practice and add value for your clients.
Want to build a diversified, tax-efficient, and low-cost income fund for your clients? Here’s a surprising way to do that with a broad-based index fund like the S&P 500.
I take a lot of flak when I write about annuities. That criticism has come from the insurance industry, because I have been highly critical of products like fee-laden variable annuities with complex menus of riders. But recent discussions and a new analysis have led me to reconsider SPIAs as a source of longevity insurance at a reasonable cost.
I don’t enjoy receiving hate mail, but I do view it as a sign that my columns in the media are opening a dialogue, albeit at times insulting and hostile.
One of the biggest threats clients face in retirement is chasing higher investment income. I’ve seen people go back to work because they concentrated on income and lost their principal. Income is the wrong goal, particularly since much of so-called income is just a ruse allowed by regulators.
Nobody wants to compete in a commodity business, where the only path to survival is to be the low-cost provider. But many advisors are heading straight down that poisonous path – driven there by the robo industry that has commoditized investment management. Here’s how to ensure you are not a victim of commoditization.
The American educational system prepares our children to be successful in whatever field of work they choose. But that is not true of the popular “stock market game,” which has been hijacked by the brokerage industry to indoctrinate students into disastrous financial practices.
So-called “smart-beta” strategies hasn’t been all that smart lately – at least not for the last five years. This article will examine why, whether it was predictable and the likelihood it will work better going forward.
As a CFP and registered investment advisor, I’m bound by law to act as a fiduciary to my clients. Yet the CFP Board and SEC, overseers of the standards that guide fiduciary responsibility, aren’t always serving the investors they are intended to protect.