Helping Out
John Yeigh | Oct 15, 2020
SOME FAMILY MEMBERS recently asked me to help them find a financial advisor. As luck would have it, soon after, Barron’s published a perfectly timed article, “America's Best RIA Firms,” which listed 100 highly ranked registered investment advisors (RIAs). Similar lists are available from CNBC and the Financial Times. It was time for me to get to work. Who wouldn’t want to recommend a “top” firm to his or her family? The Barron’s article provided four pieces of information for each firm: the number of clients, advisors and offices, as well as the number of states where those offices are located. This allowed me to calculate the client-to-advisor ratio, which ranged from five to 3,855 clients per advisor. My family neither required nor could afford the attention of 20% of an advisor’s time, but they also needed more support than an advisor who was handling thousands of clients. Some web research indicated that the typical number of clients per advisor is around 150. As few as 50 higher net worth clients is often sufficient for an advisor to generate a decent income. Assuming 2,000 working hours per year, an advisor with 150 clients can devote about one hour per month to each client, but that would include time handling paperwork, developing financial plans, following markets, and keeping up with tax and regulatory changes. In other words, the advisor might be able to chat with a client for 30 or 40 minutes per month. (In practice, advisors typically talk to clients less frequently, but for longer.) Several articles suggested that, if an advisor wants to maintain a good relationship with his or her clients, the maximum number of clients should be even less—perhaps just 100. That means an important first question to ask any potential new advisor is, how many clients are you currently…
Read more » Reluctant Spenders
John Yeigh | Dec 30, 2021
A 2021 SURVEY by the Employee Benefit Research Institute found that three-quarters of retirees said the value of their financial assets was the same or higher than when they first retired. This finding was consistent from the poorest respondents to those with the most wealth. The typical time in retirement for the respondents was seven to 10 years. One implication: Retirees may be underspending their accumulated wealth. EBRI examined five reasons for this possible underspending: Saving assets for unforeseen costs later in retirement Don’t feel spending down assets is necessary Want to leave as much as possible to heirs Feel better if account balances remain high Fear of running out of money The first two reasons—"saving for tomorrow” and “no current need to spend”—were reported by almost half of respondents. By contrast, a “fear of running out of money” was mentioned by only a fifth of those surveyed.
Read more » TINA Is Dead
John Yeigh | Nov 6, 2022
OVER THE PAST FEW weeks, my wife and I did something we hadn’t done in four years: We bought bonds. Specifically, we parked some money in one- to two-year Treasurys paying 4.3% to 4.6%—the highest rates in 15 years. Our portfolio now approaches 5% bonds, and we plan to buy more. We’re waiting to capture higher rates following the expected Federal Reserve rate increases. Bonds represent a seismic shift for us. In early 2020, I even wrote that the 60% stock-40% bond portfolio seemed dead, thanks to near-zero interest rates. But today, bonds are back, and it’s TINA (there is no alternative to stocks) that now appears dead. We recognize that our bonds are losing to inflation in the short term. Still, as retirees, we may be hurt less by inflation because many of our costs are either fixed or in decline, including housing, transportation and education. Also, inflation should eventually come down. In 2021, I also wrote about our use of covered calls on high-dividend stocks as a sort of bond proxy. In today’s bear market, this approach has held up well because the stocks involved haven’t been crushed like technology stocks. In fact, some of these “value” stocks remain near all-time highs, despite the market downturn. Our bond-proxy approach resulted in our portfolio regularly having a stock allocation of more than 90% through much of the 2021 TINA era. This year, we thought it prudent to reduce our stock exposure due to a mix of personal and market changes. We bought a second home in January. This required some stock sales, plus we now need to maintain a larger stash of operating and emergency cash. We have also ramped up our vacation spending after a two-year pandemic hiatus. On top of that, inflation provides another reason for a…
Read more » 1,000 Days at a Time
John Yeigh | Nov 9, 2022
THREE YEARS AGO, I wrote an article suggesting I had 7,000 days to go, at least according to the Social Security Administration’s life expectancy calculator. The 1,000 days since then represented a significant 14% share of my remaining actuarial life. The good news is, the Social Security calculator now estimates that my life expectancy is about 6,400 days. I’ve enjoyed 1,000 days of life but only used up 600 days of life expectancy. That’s like a 40% return on life over the past three years. Unfortunately, this math is doomed to the law of diminishing returns. Like fellow HumbleDollar scribe Dick Quinn, I’m counting down the days. So, what happened over those last 1,000 days? Lots. Our daughter got married, our son graduated from college and bought his first home, and we moved to be nearer to both children. We lost several close family members and the best hiking dog ever. I added a few creaks to my aging body and soul. Retired life is mostly good, and going as anticipated. We purposefully sampled several new-to-us life experiences, many of them pandemic-era additions to our bucket list. We went deep-sea fishing twice, tried fly fishing once, and took up wake-boarding and wake-foiling with varying success. We rented five different mountain cabins for a total of seven weeks, chartered a catamaran in remote islands, rented a lake camp for two weeks, and hiked in 10 more national parks. Per the modern senior mandate, we also sampled pickleball. These fresh adventures were all outdoors, often in isolation, usually inexpensive and always undertaken with family or close friends. All were enjoyable, though I learned that fly fishing is not my gig. The outside world has seemed stressful, what with COVID-19, the Ukraine war and far too much polarization. But except for COVID, such issues…
Read more » Nothing to Chance
John Yeigh | Jul 2, 2019
MY WIFE AND I TAKE some over-the-top precautions to protect our financial accounts. Why? After 40 years of working, our life’s savings boil down to digits stored on computers. No one anymore holds stock and bond certificates, stuffs money in mattresses or buries gold in the backyard. The integrity of those digits is all important. Here are our 11 strategies—which go way beyond the normal account and password protection recommendations: We only deal with major institutions. Several friends have their retirement funds invested through small, boutique wealth advisors. I know of one advisor who operates on his own out of his house. These small advisory firms likely provide great service. But to me, they seem ripe for mischief. Bernie Madoff is just one of many rogue investment advisors who have gone astray with Ponzi schemes or excessive commissions. We maintain 13 financial accounts split up among eight institutions—unlike many friends, who have consolidated all assets into one huge account. Just like portfolio diversification, we feel institutional diversification lowers risk, by reducing the fallout from a cyberattack or other issues with any single institution, while also marginally broadening our investment choices. We separate our investment accounts from our daily cash management and banking accounts. Except for occasional cash transfers from two investment accounts, these various accounts aren’t linked. The low interest rates of recent years minimize the penalty for maintaining larger bank cash balances. For our larger investment accounts, we utilize two-factor authentication, and also must painstakingly locate and input cumbersome passwords for each log in. We almost never save investment account passwords on any device. We don’t use any password manager or other lockable software, and we don’t maintain a spreadsheet with a list of passwords. We also feel “the cloud” isn’t our friend when it comes to protecting financial and…
Read more » Getting Roasted
John Yeigh | Nov 27, 2024
"YOU WILL ROTH!" “But Dad, I’m only 10.” “Evan, it is never too early to start saving. Besides, this gives you 70-plus years of compounding.” “Yes, Dad, but didn’t you tell me last week that I need a job and earned income to contribute to a Roth?” “We can arrange to get you a paycheck. I’ll get a friend or neighbor to hire you. What would you like to do?” “I like to play soccer.” “Evan, I meant what kind of job are you interested in? You know, engineers have among the best long-term employment prospects.” “Dad, stop! Shouldn’t I be thinking about today’s soccer game?” “The game is still an hour’s drive away, so we have lots more time to talk about starting your Roth account.” “You already told my two teammates and me all about Roth accounts when you drove us to last week’s game. Remember, you held me in that headlock to make sure I was listening.” “Okay, enough about Roths. Have you opened your health savings account yet?” My 24-year-old son performed the above soliloquy at our family’s Thanksgiving dinner last year. The performance included animated theatrics to imitate me driving, lecturing seriously, and holding him in a headlock. The family was in hysterics. Evan continued his tirade about my supposed transgression of providing too much parental guidance on financial issues. “You will become an engineer,” he declared. As he started to run low on material, my 29-year-old daughter, Megan, joined the fray. “And remember, it’s not just about Roths, but also asset allocation. You should be 100% in stocks when you’re young,” she said, using a deeper voice to imitate me, while wagging her finger in a parental-like scolding manner. “But Dad, I thought you always advised to first set aside six months of emergency…
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