Whatever our goals this year, may we always remember that each of us are the master of the change we wish to see: “If it is to be it is up to me.” Teach, lead and inspire!
See: Three New Years Resolutions that will end the world’s dependency on fossil fuels.
After a couple of decades of giving financial industry foxes near unfettered range to abuse the savings of trusting clients, enforcing a fiduciary standard on all who offer financial ‘advice’ is the only sane course in the long build back to financial stability. If you are one of the majority that are still taking your personal financial and investment advice from those not held to a fiduciary standard, it’s time to wake up and put the best interests of your family and financial health first.
Of course, increased financial security for savers means reduced profits for the financial industry, and so the foxes are fighting necessary changes every step of the way, with all their formidable political clout. They must not win. We, the people, our pensions and institutions, simply cannot afford the plundering of savings to continue. See DOL Fiduciary rule could take $2.4 billion bite out of financial services industry:
The DOL’s proposed conflict-of-interest rule “could drastically alter the profits and business models of investment product manufacturers like BlackRock and wealth management firms like Morgan Stanley that serve retirement accounts,” according to Stephen Ellis, director of financial service equity research at Morningstar Inc. “Current government and financial industry reports have a high-end annual cost of $1.1 billion,” but the low-end impact could be more than double that at $2.4 billion, Mr. Ellis wrote in a research note issued yesterday.
The $2.4 billion number is Morningstar’s low-end estimate of prohibited mutual fund front-end load commissions and mutual fund 12b-1 fees paid to full-service wealth management firms for commission-based IRAs. It is a revenue number, according to Morningstar.
Many words of wisdom in this clip from Howard Marks and reminding of some critical reasons why most people who try to ‘invest’ in capital markets, are left with losses and trauma each cycle. It doesn’t have to be that way, but you do need to approach investing and financial management in a completely different way than conventional ‘advice’ suggests. For those who are today strapped to the titanic for yet another sinking, it is still not too late to save your financial strength.
Howard Marks, Oaktree Capital’s co-founder and co-chairman, discusses market liquidity, risk-blindness at Central banks and opportunities that come for those who have the discipline to wait for value. Here is a direct video link.
Probably the biggest problem (of many) with conventional investment theory is that it assumes investors all have long time horizons and the ability and fortitude to ride out bear markets and deploy fresh cash when valuations are low. In reality, most don’t have any of this–especially once we are at or within a few years of retirement. And let’s face it, most don’t get the bulk of our savings amassed until we are late in our working career. So lower risk tolerance actually comes with having more savings to lose–yet this is the exact opposite of how the risk-selling industry sees its customers.
Since investment ‘advisors’ typically make little to no fees on any capital left in cash, most never recommend their clients hold anything more than 5 or 10% cash and so almost no clients are prepared and able to buy assets in a meaningful way in bear markets. Not only that, but once their savings have already lost a ton of value in falling markets, very few have the stability or strength to buy more when prices are finally attractive. To the contrary: most feel the need to run for the exits after they have lost.
A second big reason for misery is that most people are putting money they need for income and expenses within the next 5 years–into highly volatile, long-term asset bets. Performance of these bets is far from guaranteed, and yet most are set up on a needed income withdrawal plan far above actual yields. When valuations are high, the probability of capital losses over 5 and even 10 year time frames far outweighs the probability of gains, and yet most are foolishly betting away their peace and financial security as if it was all superfluous cash. Madness is mainstream in the investment business. Buyers beware.
