Tuesday, May 1, 2018

2.0 Myopia: Assets Management Compensation Astigmatism - Assets Manager in Personal Financial Planner Clothing


2.0 Myopia: Assets Management Compensation Astigmatism -
Assets Manager in Personal Financial Planner Clothing
 

Does a personal financial planner manage goals or manage assets?

 A personal finance ‘commentator’ recently wrote the following statements:
1.     'A recent ‘innovation’ suggested by some advisers and managers  is to benchmark results relative to the ‘investor’ (financial planning) goals in the first place, rather than the manager’s comparable benchmark.
The premise of this assumption of a recent ‘innovation’ is historically incorrect. Going back to the ‘60’s Connecticut General Life Insurance was doing ‘Living Planning’ which matched living objectives/goals to living resources and survivor objectives/goals to survivor resources – on a present value basis adjusted for assumed inflation rates
Secondly, have the asset managers in financial planner clothing (compensated by a percentage of assets under management)  become born again ‘managing goals as their priority’ having ‘seen the light’ without a near death experience?’ Asset under management percentages are facing three headwinds lowering and compressing their percentage for assets under management from ‘the standard of 1%’:

-         Lower competitive percentage on assets under management by full or partial ‘robo’ advisers (i.e. Betterment etc)
-         smarter clients saying ‘why am I paying the same percentage for incremental dollar investment
-         lower expected rates of return from markets in general as anticipated due to demographic changes requiring increased withdrawals from the markets.
And viola’ – born again goals under management planner benchmarking as 'value added’ from the former ‘sinning’ (as in ‘missing the mark’ pun intended) assets manager in personal financial planner clothing. One can only wonder if there is a baptizing ceremony for these ‘missing the mark’ sinners. (Note in Greek – sin means missing the mark. Benchmark?)
2.      Benchmarking to goals measures investor results.
          The petticoat of percentage of assets under management compensation of an asset manager in financial planning clothes betrays the primary mindset of being an investment manager (inherent proclivity to ‘more’ given assets under management compensation) rather than a planner (managing goals). Benchmarking to goals/key result areas includes not just asset accumulation (education, slow down, retirement etc) but also:

-  asset protection (capital depletion due to health, disability etc  
- income conservation (tax reduction as a strategy for asset accumulation),
-  asset conservation (income adequacy for heirs, asset disposition according to desires, estate liquidity and shrinkage.

Thus if per Maslow all one knows is a hammer (or is compensated by assets under management percentage) then everything  will look like a nail (be about assets under management) and the other goals will get short shifted or worse nailed.
Benchmarking in personal financial planning is relative to the CLIENT’SNOT THE INVESTOR’S – goals. The use of the phrase ‘investor’s goals’ is ‘a tell’ as they say in poker – of an asset manager in personal financial planner clothing rather than personal financial planner. (Furthermore, like pulling a thread on a sweater, the client’s –goals interweave. For example, even long term care capital depletion or disability insurability questions may impact the cash reserves and or volatility the client can take relative to asset accumulation goals)).
 The ‘asset under management’ commentator apologist uses confusion to leave room for plausible denial for comebacks. But the question remains – what is the alternative to holding the engaged personal financial planner accountable other than progress or lack of progress thereof to the interrelationship and accountability of personal financial planning goals – to be on target, accomplished, and or maintained?  Stipulating to clients changing goals, their priority, and life changing events – each of the goals as applicable should be stated on a present value basis with an assumed after tax after inflation rate of return – risk adjusted – with date of start and duration with a year by year tracking to see if ‘on track.’ And yes, monte carlo et al should be run for the probability of success and or failure taking into account on the asset accumulation goals – the sequence of return risk to minimize the flaw of averages.
Thus, due to asset under management astigmatism/myopia confused as ‘personal financial planning’ the commentator confuses asset management with personal financial planning – maybe just maybe to protect the asset under management compensation bias and confirmation bias?

Sunday, April 29, 2018

Myopia: Assets Management Compensation Astigmatism - Assets Manager in Personal Financial Planner Clothing


Myopia: Assets Management Compensation Astigmatism -
Assets Manager in Personal Financial Planner Clothing 

Does a personal financial planner manage goals or manage assets?
 A personal finance ‘commentator’ recently wrote the following statements:

1.     'A recent ‘innovation’ suggested by some advisers and managers  is to benchmark results relative to the ‘investor’ (financial planning) goals in the first place, rather than the manager’s comparable benchmark.

The premise of this assumption of a recent ‘innovation’ is historically incorrect. Going back to the ‘60’s Connecticut General Life Insurance was doing ‘Living Planning’ which matched living objectives/goals to living resources and survivor objectives/goals to survivor resources – on a present value basis adjusted for assume inflation rates
Secondly, are the asset managers in financial planner clothing compensated by a percentage of assets under management  born again ‘managing goals having ‘seen the light’ without a near death experience?’ Asset under management percentages are facing three headwinds of lower competitive percentages by full or partial robo managers, smarter clients saying ‘why am I paying the same percentage for incremental dollar investment, and lower expected rates of return from markets in general as anticipated thus facing compression of asset under management percentage they can charge. And viola’ – born again goals under management planner benchmarking - as 'value added.' One can only wonder if there is a baptizing ceremony.

2.      Benchmarking to goals measures investor results.

          The petticoat of an asset manager in financial planning clothes betrays the primary mindset of being an investment manager rather than a planner. Benchmarking to goals/key result areas includes not just asset accumulation (education, slow down, retirement etc) but also asset protection (capital depletion due to health, disability etc, income conservation (tax reduction as a strategy for asset accumulation), asset conservation (income adequacy for heirs, asset disposition according to desires, estate liquidity and shrinkage. Thus if all one knows (or is compensated by assets under management percentage) then everything will be about assets under management and the other goals will get short shifted or worse nailed.
Benchmarking in personal financial planning is relative to the client’s – NOT THE INVESTOR’S – goals. The use of the phrase ‘investor’s goals’ is ‘a tell’ as they say in poker – of an asset manager in personal financial planner clothing rather than personal financial planner. (Furthermore, like pulling a thread on a sweater, the client’s – again ‘client’s’ goals interweave. For example, even long term care capital depletion or disability insurability questions may impact the cash reserves and or volatility the client can take relative to asset accumulation goals)).
 The ‘asset under management’ commentator apologist uses confusion to leave room for plausible denial for comebacks. But the question remains – what is the alternative to holding the engaged personal financial planner accountable other than progress or lack of progress thereof to the interrelationship and accountability of personal financial planning goals – interrelated as they maybe – to be on target, accomplished, and or maintained?  Stipulating to client changing goals, their priority, and life changing events – each of the goal as applicable should be stated on a present value basis with an assumed after tax after inflation rate of return – risk adjusted – as a start with a year by year tracking to see if ‘on track.’ And yes, monte carlo et al should be run for the probability of success and failure taking into account on the asset accumulation goals – the sequence of return risk to minimize the flaw of averages.
Due to asset under management astigmatism/myopia confused as ‘personal financial planning’ the commentator confuses asset management with personal financial planning – maybe just maybe to protect asset under management compensation bias and confirmation bias?

Sunday, April 22, 2018

The Tightwaddery---ENOUGH--- More Continuum - Historic Revisionism & Omission

The Tightwaddery---ENOUGH--- More Continuum - Historic Revisionism

MONEY (tim) Magazine Cover : F.I.R.E, Vicki Robin,& Joe Dominquez

I knew Joe Domingez who started it all = not Vicki Robin  for what has now become FIRE
That said - Joe's 'enough' (he published in 1992 like I did) is explained I believe in the context of a continuum of enough

On one end is More on the other end is tightwaddery
 
Enough is in the middle with variations - Joe's was more toward fiscal restraint even tightwaddery --- at the time there was a Kiplinger's cover story of a guy shining his shoes with a banana peel to say money... There was even the Tightwad Gazette.

The enough I professed at the time was 'one man's floor was another man's ceiling'.

So there wasn't the political agenda in my approach to Enough as there was in the tightwad and Joe's at the time

Furthermore, the enough approach I wrote of took more of the emphasis on aligning personal financial resources with life goals and values as you would see from my book 1st edition which was the culmination of my writings on enough from 1977 on.

From enough being 'clientle realizable goal determination with orderly plans for achievement' (1977) evolving to aligning personal fnancial resources  to achieve life goals and mission (1990's) to today enough is 'healing financial anxiety, puttin' money in its place, to transcend - elevate- connect and align to one's significance/assignment - what one is meant to do, meant to be - enough to live for, enough to live on (c)

So there is this continuum to consider -- but both would agree '- why sacrifice what you need (for enough) for what you don't need (for more - by more-ons__)

Interesting the historical revisionism and omissions by Money Magazine

84% & The Death of Today’s: Accounting, Security Analysis & Asset Manager Compensation in Personal Financial Planning Clothing


84%  & The Death of Today’s: Accounting,
 Security Analysis & Asset Manager Compensation
 in Personal Financial Planning Clothing

According to investment group Ocean Tomo, 84% of the S&P 500’s market value is comprised of intangible assets.
 Patents, trade secrets and brand reputation are the lifeblood of many modern business.
Best’s Review, ‘Insuring Intangible Risks,’  p47, April 2018

(note: A.M. Best Company provides news, credit ratings and financial data products and services for the insurance industry since 1899)

Given the above:

·         What is the value & usefulness of corporate balance sheets prepared by accountants?
·         As for securities analysis – Johnny Carson being reincarnated as Carnac the Magnificent – would be more reliable in predictions (especially given security analysts rely heavily on the corporate income, balance sheets, and cash flow statements provided by Accountants in Wonderland (with or without Alice but certainly the Mad Hatter.)
·         How can personal financial planners, compensated as a percentage of assets under management like asset managers, play asset manager selecting stocks, bonds, mutual funds, etfs’ etc? What added value do these asset under management compensated personal financial planners provide?
·         How can actuaries – the same one’s responsible for long term care policy screw ups even after the travesty of crash value life insurance premiums blowing up and companies going under in the early 90’s – insure these risks – without a firm calculation of values?

As a recovering fee only personal financial planner who practiced the concept of Enough in contrast to the More of moreon planners, personal financial planning is about managing goals not managing assets. Planners – especially asset under management compensated asset managers in financial planning clothing – manage assets often to an orphan secondary status even to the detriment of other personal financial planning goals (recall Maslow: if all you know is a hammer, everything looks like a nail ---((or assets under management??))). Now given the Tomo Study unless disputed and the compression of asset under management percentages due to robo advisors, planners will have to – need to – go back to personal financial planning – managing goals.

PS: Isn't it interesting this study has not been exposed to date in The Wall Street Journal, and accounting journals - given the monumental impact on accounting, securities analysis, risk management. One can only wonder why - as inquiring minds want to know.

Sunday, March 25, 2018

Stock Market Media Personal Financial Pornography


Stock Market Financial Cable Media Pornography - the conflating of the nominal with the relative in the stock market averages

A 400 point 'nominal) move down on a Dow Jones of 25,000 is a 1.6% (relative) move. Yet to listen to CNN or CNBC (neither friendly to the Trump administration) 400 points is Armageddon

Now at 40 point (nominal) move down on a Dow Jones 1000 is 4% (relative & move) for example I don't recall getting the out sized over reaction i.e. an Erin Burnett 'boo-hoo leading' cadence of doom (on steroids with the excuse 'if it bleeds it leads' or 'we didn't have cable then.'

Yet a 400 point move up on a Dow Jones 25,000, if to be consistent, should have the same out sized reaction and cadence - but is then just a rebound- bounce back - correction of an over correction - dead cat bounce" etc given less time and frantic response. (A study of body language I believe would bear me out).

And yes by the same token - though with less frenzy - fox business on the upside elevates the positive  and downplays the downside but certainly with less vigor though with some cheer leading

Confusing (deliberately and purposefully) the nominal with relative is if anything 'soft' stock market pornography reporting with a political agenda

Saturday, January 13, 2018

MORE & Being ‘SPECIAL’



MORE & Being ‘SPECIAL

(you’re) 1 in a million
cliche

One in a million indicates special.
Yet even if true, being 1 in a million of 7 billion people in the world, one is merely 1 out of 7,000!
So much for ‘special.’

One singular sensation
Lyric from Chorus Line’s Singular Sensation

What motivates the pursuit of special (when certificates of participation – make everyone a winner - special)?

Money?
Sex?
Recognition? (which is envied and certainly fades)
Legacy? (really, tell me the name of your great, great, great grandfather).

By implication – even though no snowflake is alike (including the campus crybullies, coddled cupcakes and their pampered unaccountable scholar barrens professors) if one is not special (an American Idol?) – they are losers, worthless.
1 in 7000.

Special doesn’t promote humility – ok maybe false modesty to reinforce one’s ‘specialness.’

If one isn’t special – at best they are ordinary, regular, common, bourgeois and or in the Hillary Clinton dickionary – deplorable. At worse, if not special unique distinctive exceptional, extraordinary, one is worthless – not “one singular sensation
MORE seeks extra©

          The ‘special quest’ (with or without peyote) bolsters and fortifies the pursuit of MORE.
          If one is ‘right,’ one is ‘better.’ And if one is ‘better’ one gets MORE (sex, money, recognition, etc) And if one gets MORE he or she must be ‘worthy’ and ‘good.’
          Thus, A Special MORE-on (Big G stands for goodness – Cheerios™ or Special K from Kelloggs – ‘k- e- double l- o double - gg’ kelloggs’s best to you.)
          1 in 7000

Isn’t that special
Dana Carvey as The Church Lady

Despite a lack of confidence, and as one never accused of humility ('I was wrong once, and even then I was mistaken”), petitioning of Hashem (as a Celestial Major Domo) rather than acknowledging & ascribing to Hashem has been my habit. (That said, my standard poodle of excellence Goodie, ‘her Royal Highness,’ of blessed memory, made a point of taking me down a notch or 20 while my Moses, my standard poodle friend of the soul, had my clay feet on a pedestal – and yet reminded me daily Torah study time.)

It is said that Moses was the most humblest of men. Moses was chosen by Hashem to lead the Israelites out of Egypt (Egypt- mitzrareim – meaning narrow places, restrictions) per the following story:

 It seems a lamb wondered from the flock. Moses found the lamb drinking near water and carried the lamb back to the herd. Thus, if Moses could treat this lamb in this manner – with this humility – he could lead the Israelites out of Egypt (and endure the constant baa baa baa-ing, complaining and kvetching per The Book of Numbers/Kvetchings of our ancestral Hebrews!)

And yet, Moses (the most humblest of men) and his brother Aaron were denied entrance to the promise land for ascribing to themselves – being special (worse divine) – in bringing water out of the rock.

You didn’t build it (implying we – the government did)
Fairoah Obama & Poca-haunt-us

          No, Elizabeth & Balaam Barack, all is derivative (fabricated) originally from Hashem and fabricated from there. (From no-thing – something – then something from something).  And, though admittedly guilty I as well, we so called self made men (“persons” in PC) are those who worship their creator – are but the singer not the song writer, the fabricator even innovative but not the  inventor. All is derivative from Hashem. If that recognition was internalized,  there would be greater humility and less pursuit of being e-specially special realizing and remembering but 1 in 7000.

The journey isn’t conquering new lands but seeing with new eyes
Proust

Humility, acknowledgment – gratitude may lead to a modicum of joy (simcha) but being special (being well known for being well known) or e-specially worse - being special via stolen valor – is never ‘enough.’  Acknowledgment, gratitude & humility (not this writer’s forte) isn’t dependency, isn’t acceding to predetermination/preordination (at the expense of free will and self determination within limitations(1). The recognition of acknowledgment actually may yield a certain simcha (joy)(2) in contrast to the externally derived so called happiness.
Walking with God (and his emissary dog(s) if lucky) continuing to complete one’s incompletions & one’s assignment INside out in humility, gratitude and acknowledgment – that makes the extraordinary out of the ordinary and being ‘special’ - 1 of 7000 or 1 in a million doesn’t matter.


(1)    At 5’5 ½” (on a good morning) it is predetermined this writer would never plan center for the NBA’s Denver Nuggets (not even the Philadelphia 76ers when they went 12 and 70. So free will is limited. Furthermore, there is the limitation by Lamentations – all is preordained but you have free choice – another Jewish Koan (actually Cohen)
(2)    Simcha (joy) is INside out not ‘as’ dependent on OUTside as the illusion of happiness is. Happiness is a sensation – requiring higher and higher dosages to palliate – for happiness’ altered stae whereas Simcha is, at best, an ‘altar’ed state.

Thursday, November 30, 2017

Private Foundations Uses, Abuses & Reasons For

(What follows is a response to an editorial by economist Steve Moore lambasting the abuse of private foundations by the likes of Soros, Gates etc).... Note I propose reforms below as well.




Steve Moore is correct that Private Foundations can become abusive the play toy of the very very wealthy with tax benefits.  However, let us not confuse the parasites with the host.

The public charities' abuses and philandering gave rise to the increasing use of private foundations. The abuses and lack of results of the public charities in effect created the private foundation surge. Look at certain charitable public foundations which have become in time the exact opposite of what was intended by the founders - whether one agrees with the originators' politics or not proving Guirjieff's Law of Seven 'that which was intended, in time, becomes its exact opposite.'

If anything many - too many of these public charities and their executive directors are better known for 'giving good lunch' than accomplishing anything.

So to get rid of these 'give good lunch' executive directors, minimize abuse of the private foundation backlash to the ineffective public charities,  and minimize the probability of becoming the opposite of what was originally intended let alone the harboring of worthless heir force lucky sperm club progeny - how about the biblical Joseph solution?

The private foundation would have a a life of seven fatted years. At the end of seven years it's fate is emaciation. The private foundation  must dispense of all the remaining assets to other charities (but not to any other charity private or public directly or indirectly controlled by the dismantled foundation, heirs, relatives etc etc. This would be akin to rules that are negative toward interlocking directorates and brother sister corporations and subject to huge non deductible fines.)

Yes, in 7 years living or deceased - there can be abuse - but let us not defeat the better for the perfect. Besides even on the 7th day God rested so on the 7th year the private foundation can be put to rest.

Final note, it is also suggested - so a war chest is not accumulated by the giving good lunch executive director to bring to another foundation upon dissolution - 15% of capital minimum and all dividends, interest and realized capital gains be distributed annually.