Getting Financial Advice Vs. Being Sold Product from Lou the Butcher

Unfortunately for consumers, the financial advice profession is clear as mud. The large Wall Street firms aim to keep it this way with their deep pockets and lobbying efforts, because less transparency equates to greater profits.

Ultimately, consumers want advice but are often simply sold product. Watch the video below for a short and amusing analogy of the issue and to gain greater clarity.

- Kevin Kroskey, CFP, MBA

Diversification: Disciplinarian of Disciplinarians

Disciplined diversification works when you do and even when you don't want it to. Diversification in effect forces you to sell the thing that has been doing so well in your portfolio and to buy the thing that hasn't. While this makes rational sense, it is emotionally difficult to execute. Think back to the tail end of 2008--were you selling bonds and cash to buy stocks? Most likely you weren't unless your advisor or some sort of automatic trigger did it for you. Carl Richards of www.behaviorgap.com provided a good reminder of how diversification works in a recent NY Times blog post. The diversification he discusses here is more so related to equity asset-class diversification but also touches on the three basic building blocks--equities, bonds, and cash. He doesn't discuss alternative asset classes -- an asset class that doesn't fit neatly into the three basic categories -- being used to further diversification, but that's a detailed topic for another day. ...

Should We Go Back on the Gold Standard?

If you watched the Republican presidential debates, you might have noticed that a number of candidates yearn for a return to the gold standard—that is, that every dollar issued by the government would be backed by a comparable value in gold bars that were stashed away in a government vault. Sen. Ted Cruz of Texas argued that the dollar should have a fixed value in gold, and Sen. Rand Paul of Kentucky added that printing money without backing in the precious metal destroys the value of our currency. Mike Huckabee, former governor of Arkansas, thinks that if not gold, then the dollar could be pegged to a basket of commodities. All are mostly concerned that printing money will cause runaway inflation. But there may be several problems with this return to the fiscal system of the late 1800s and early 1900s. One is that inflation has barely budged even as the Federal Reserve Board was piling one QE stimulus on top of another, and the government was adding records amoun...

Behavioral & Psychological Aspects of the Retirement Decision

An important paper has recently released by the Social Security Administration called Behavioral and Psychological Aspects of the Retirement Decision . It delves into some of the non-financial reasons why people choose to retire when they do. Following are some highlights from the paper. Many future retirees do not understand the interplay between claiming age and Social Security benefits. Even when they understand the claiming rules, many people claim benefits when it is not economically advisable to do so, as m ore than half of retirees claim benefits at 62. Retirees tend to anchor on ages that have some retirement significance. Why do so many people claim to be "burnt out" at work when they turn 62? Why not 60 or 64 or 68? It's because 62 is the age of eligibility for Social Security benefits. But what if they were to anchor on age 70 instead? Might they push through the burnout, as they would if it occurred at 55 or 60 when retirement cle...

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