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Welcome to the Chapel Hill Financial Advisor Blog!

My name is Kent Fisher, CFA® and I work as a Financial Advisor at Old Peak Finance in Chapel Hill.  Please stop by in the future for my thoughts, ideas and general ramblings about all things finance.  I might throw in some local color as well.

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Nothing on this site should be taken as financial advice – it is only the opinions and ideas of one person.  Only for entertainment purposes some might say.

Please visit http://www.oldpeakfinance.com for greater details.

or send me an email:  kent.fisher@oldpeakfinance.com.

Fiduciary Rule – please come back!

Apologies for being away for so long.  Life is short and I have been caught up in a multitude of other tasks that have taken me away from the blog.

What has me writing today, is something I heard on Dave Ramsey’s radio program.  It hammers home why you want to be with an advisor who sticks to the Fiduciary Standard of care. (vs the Suitability Standard you will encounter at a broker/dealor.)

Dave Ramsey told a caller to put the minimum into a government sponsored Passive S&P500 fund (just to get the government match), then take whatever was left and try to beat the S&P500.  What?  This investor was not a market pro – a real beginner calling into a show to get good advice. Crazy as that is, it gets worse…..he tells the caller to visit his smartvestor listing of pre-approved brokers who will help you choose a fund to beat the S&P500!

Wow.  Just wow.  I think 90% of what he says is good advice, but when it comes down to recommending a poor solution for the investor – he is just like all the others.  Making $$ sure can compromise your ethics.  He knows beating the S&P500 is a daunting task and that tons of research has been done on the topic.  He chooses to ignore the evidence and recommends a solution that puts $$ in his pocket.  To heck with the outcome the caller will get – as long as it is “suitable” what he has done is legal.  He is aware a better solution exists, but will not recommend it.  Legal responsibility upheld, ethical responsibility………..

Unfortunately things will not get better for “Joe Average” anytime soon.  We have a roaring bull market, and a government bent on dismantling anything done over the past decade.  Bringing the Fiduciary Standard to greater swathes of the general population seems dead in the water.  Lets hope we do not lose what we have.  Come back Fiduciary, come back…….

 

Evolution of Retail Investment Management: Automatic for the people.

Time for some reflection. Here is my broad-stroke analysis of the retail investing landscape’s history.

1970s – Individual stock picks @ 4% commission per side from your broker. Ouch.

1980s – Individual mutual fund recommendations from your broker for a 5% load.

1990s – DIY fund/security selection from online trade stations. No more 5% to 8% hits.

2000s – Realizing you need asset allocation advice from an RIA @ 1%.

2010s – Fintech automates asset allocation advice, passive takes hold.

2020s – What is still missing? Lots. The important stuff.

So for the past 45 years, there has been a dramatic reduction in fees associated with many of the “clerical/administrative” pieces of your financial puzzle. Computerization has really provided a big boost to the average investor in doing simple repetitive tasks.

In fact, with Fintech (Internet based financial tools) we are starting to see some progress on strategic issues as opposed to just administrative issues.

So where do we go from here?

The issues that have large impacts on your financial well-being have not really been tackled yet. I’ve listed some of the most important pieces of your financial plan below. Unfortunately, the solutions demanded involve interactions with other humans. You will have to pay for quality coaching. The internet is not going to cut it. Luckily for me, people still have a place in investment management.

  • Comprehensive Wealth Management Services. (savings strategies, tax planning, estate planning, evidence-based investing. Spending Strategies.)
  • Coaching – Implementation Slippage Minimization (ISM – my term) – ensures you execute the plan you have put to paper.
  • Decumulation Strategies – Accumulation is easy. Just do it. Save until it hurts! Not so for spending. There is greater variability in retirement spending preferences than there is in retirement accumulation strategies. You will need a personalized plan.

 

Roy Williams teaches grit.

Roy Williams – hall of fame UNC basketball coach – plays the long game.  From the perspective of a financial planner, there is a lot we can learn from Roy.

I am not a basketball expert.  Just a Canadian/American that has fallen in love with the game over the last 18 years.  Easy to do when you live in Chapel Hill.

From my observations, Roy has an overarching game plan he deploys in each game; he wants to run fast and hard with each possession.  I used to think he had superior athletes, and he wanted to push the kids on both teams to the edge of their ability.  Naturally, this would favor UNC if they have the best athletes.  I am pretty sure this is part of the plan.  However, I have come to believe there is much more at work here.

Simply put, the opposition team is not used to the Tarheel pace.  At first they keep up quite well, but by late in the 2nd half the payoff appears.  “We like to get into their legs” is an expression I have heard quite a few Tarheel players make.  The idea is that the opposition is tired by the end of the game…… shots start to fall short, speed will be diminished, and the Tarheels will start to surge at just the right time.  Serendipity?  No, a game plan that has been in place since the first tip-off.

You do this game after game, and your players learn not to panic if they create a couple of turnovers early in the game that let an opponent get on top.  They know they are setting themselves up for long-run success.  If you spend 4 years learning and believing in this system, you develop grit.  Big time.

Academics are now trying to identify individuals that display grit, then chart their success later in life.  Make no mistake – grit is a key ingredient to life success just as it is in almost all sports.  Tarheels display grit game after game.  It is why many of us follow them with such passion.

What can an investor learn from all this grit talk?

#1, Play the long game.

#2, Display grit – do not get bothered by short-term disappointment.

It really is that simple.  Simple to strategize,  much harder to execute.  Play the long game, ignore short-term market fluctuations.  You may not look brilliant at a given moment, but you are setting yourself up to be a consistent winner – just like Roy and the Tarheels.

 

Market Volatility – much ado about nothing.

I’ve been contemplating about how the next financial “crisis” will unfold.  Specifically, how it will be different from our last “crisis”?

One new angle that has my attention is the speed of our news cycle.  It seems like we are voraciously consuming news these days in ever smaller bits and bites.  I like to watch big network evening news, and often do it via a DVR recording.  The result is that I am acutely aware of how the actual newscast is extremely front-loaded with smaller and smaller ad-infested stories filling the last 10 minutes.  I guess someone has done research on who is keen enough to remain dialed-in for the final 10 minutes, and has found an algorithm that maximizes add dollars and eyeballs.  I’d bet that many people have tuned out by the final 10 minutes.  Today’s population is so ADD that a 30 minute newscast is too much.

So how does the new news consumption pattern affect the financial markets?  Well for one, getting any airtime is tough given the constant stream of shenanigans going on in Washington.  What chance does a fact-based financial news story have in these times?  Not much I’d say.

The result is a series of small market “corrections” that seem to grab our attention for a short amount of time.  They do not stay in the spotlight long enough to induce bouts of panic selling like they used to.  So, if you are leery of being in the market post-2008, you hear a series of stories showing violent market drops.  This helps maintain your stance of staying out of the market.  If you are a ‘dip-buyer’, you see a series of 10% corrections that allow you to buy more at reasonable prices.  Again, it just reinforces your preconceived notions of how to invest/stay involved in the market.

What will cause these positions to change?  Big movements.

Big movements will get big airtime, and have big fundamental issues.  Until then, we will get blassé about all of these little corrections.  They will be much ado about nothing…….until they aren’t.

However, when the big one comes, you had better have your portfolio ready.  I think the speed and ferocity of the next crisis will hit us harder than the last.  It will probably last a shorter amount of time, but our hyped up cycle could be very tough on both your wallet and your tenacity.  Will you be able to stick to plan?

 

 

 

2018 – What is different this year?

As we start the year, I am reflecting a little on what is occupying my brain’s CPU.  What do I spend most of my time thinking about?  Naturally this is within the context of my profession, and not all the ramblings going through the mind of a middle-aged male.  (Gosh, it even hurts to write those words – middle aged male.  To quote the Talking Heads…….How did I get here?)

So, here it is, the things I noodle on while at work in January 2018…………….

LTC Insurance:  The Long-Term Care insurance business is going through huge changes.  The bottom line is that it is not as profitable as expected because people who planned and worried about their financial future also worried about taking their meds and watching their diets.  The result is much longer lives and higher payouts than expected.  Coupled with a tendency to stick with their policies, LTC purchasers are inflicting great pain on the insurance industry.  The result is that LTC insurance is now harder to get and way more expensive than before.  Unattractive to many today.  What will the impact be in 20 years?

Annuities and Retirement:  Normally I am not a fan of complex insurance products like annuities.  However, with interest rates persistently low, the mortality credit feature of simple annuities makes them more attractive.  Most complex annuities are still the devil, but you may need to dance with this guy/gal to bring some stability to your retirement plan.

Consumer Acceptance of FinTech:  One of the key questions in retirement is………am I still on plan/track?  Easy to ask, hard to answer in the real world.  Modern Internet Apps are a solution (I call them FinTech as a group), but how many retirees are going to want to track their spending online?  We now have the technology, but do we have the desire to use it?

Stock Market Blindness:  As the market propels upward, and is being supported by an administration that likes to spend like the proverbial sailor on weekend leave, what are the long-term effects?  I can’t help but think we are ignoring the big issues for one last hurrah.  It’s like the party has been winding down – and we all know a doozy of a hang-over is coming – but we just found a new 6-pack of beer.  We know it’s not going to help with the hang-over, but it’s cold and tastes good in the moment.  I fear young people are going to have a bigger bill to re-pay than we imagined just a few short years ago.

That pretty much sums up my thinking for the moment.  As I re-read this piece, I think it makes me appear more negative than I am.  I’m actually not that negative….let me explain…..

I do think 2016/2017 was a rough stretch for the country as a whole, but I think we learned a lot and actually have a better understanding of what really matters.  I do not project current trends moving forward.  I think we have experienced an inflection or turning point – we’ll be more united and kinder in the future.

Our current trajectory could be fun for a while.  I am an investor.  I earn more return on my Capital than I do on my Labor.  Go S&P500 Go!!  This will eventually show the value of good financial advice.  We’ll see who has their bathing suit on when the waters recede!

That did not take long……..See my post about Saving after the Tax Reform. Then read this.

The Senate GOP would “have to have Democratic involvement” in changing those programs, the Kentucky Republican told Axios on Thursday.

House Speaker Paul Ryan has signaled that House Republicans want to turn to what he calls “entitlement reform” next year after the GOP’s successful passage of a tax overhaul this week. Some Republicans have identified cutting spending as a way to address concerns about the roughly $1.4 trillion in tax cuts under the GOP plan.

 “We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said on a radio show earlier this month.”
-Jacob Pramuk, CNBC

Tax Bill Passed: Time to Save!

Get your piggy bank in order! It looks like we are going to have one of the largest overhauls of the tax system ever. I’d like to suggest that we take any gain that comes our way from the new tax code and save it. Pronto! I’m willing to bet we are going to need it in retirement.

I am all for cutting taxes, but this package comes with a 1.46 Trillion dollar cost that will eventually have to be re-paid. How will that happen?  You could raise taxes, but that is political suicide. Unlikely. Far more likely that we will see an effort to reduce Social Security and Medicare benefits. The cuts to taxes may not have been evenly distributed, but I bet the bill for our current overhaul will be evenly split.

So to prepare for retirement, you are going to need more savings than before. Time to take your tax savings and invest them. This may not happen for several years, but the economy will slow one day, we’ll all look at the massive government debt pile, and the talking heads on TV will start the chorus of fiscal responsibility.

Be smart. Get ready for your share of the cost. Start saving your windfall today!