Trust Is The Currency of The Personal Financial Planner; AUM (Assets under Mgmt Compensation) Devalues Trust

Trust Is The Currency of  The Personal Financial Planner;

AUM (Assets under Mgmt Compensation) Devalues Trust

Maslow famously stated, ‘if all you know is a hammer, everything looks like a nail’ and the client gets nailed (Schwartz) in personal financial planning compensation.

Behavior is a function of its consequences

Tenet of Behavior Modification

In the practice of personal financial planning, the compensation method of assets under management compensation (AUM) inherently relegates the other the other elements of personal financial planning  to second class citizen status even orphans as personal financial planning just becomes just a gateway asset gathering. Constructively, the asset manager is masquerading as a personal financial planner.

Asset protection (home, auto, blanket liability, income replacement due to disability long term care insurance), asset conservation aka estate planning (income replacement for spouse, asset disposition (giving to whom you want, what you want when you want), liquidity, estate conservation) get a wink and a nod. That said income conservation (taxes) – is a focus as the less taxes the ‘more’ assets for the asset under management compensated ‘personal’ financial planner to be remunerated from.

Furthermore, at is implicitly, assets under management, is a contraindication to personal financial planning – as it inherently seeks more – taking more risk – in the name of getting more relatively – often at the expense of making the goals with the lesser risk. Too often more, better, now becomes less, worse, later – and the goals are not met or deferred – as the result of a more-on orientation per compensation method and, therefore, managing assets instead managing goals.

Rather than being on the same side of the table as the client (mutuality of interest – the basis of trust for the client) – the trust currency is devalued by AUM compensation (regardless of the pitch ‘when you win, we win.” In AUM personal financial planning, the client is further conditioned to focus on external comparison (i.e. Dow Jones, S&P etc while maybe a wink and a nod to goals. As a result in down markets, in particular, clients forget comprehensive planning – let alone do we still have ‘enough’ relative to each goal – and concentrate on how their portfolios are doing relative to ‘the market.’ Note: complaining is not unusual.

External comparison becomes the natural perspective & filter of AUM compensation – rather than goals being the basis of comparison. Thus the planner inherently – consciously or subconsciously – focuses on managing assets rather than managing goals.

Side Bar: Trust Me

How do you say ‘f**k you’ in Yiddish?.....

Trust Me

(Trust Me: is also a ‘60’s date movie theatre game with a high school date beginning with arm around the shoulder moving towards …. while at each movement asking permission via the question ‘trust me?”)

          Assets under management compensated planners will counter: if you lose – we lose (lower fees). That is a point of comparative more or less as the scorecard becoming the focus rather than on track, not on track (to meeting the goal(s)) and or goal preserved or not. Further’more,’ getting more at the expense of higher unneeded risk – jeopardizes the goal for the upside of planner AUM compensation which may not have been necessary. Consciously or unconsciously, AUM can be contrary to: the essence of trust: mutuality of interest, being on the same side of the table, and objectivity – the currency of trust – the very essence of the concept of fiduciary. This does not mean an AUM compensated planner cannot be trusted & objective – but rather the AUM compensation method is not inherently congruent to trust and objectivity.

There is no compensation method without conflicts or bias – apologists would say. Granted – if anything:

·         hourly compensation can lead to clients’ not calling for fear the meter is always running – and to the detriment after the fact to their goals.

·         Transaction (commission or fee & commission so called planning) is often just a delivery system for sales.

·         A flat fee or bracket fee compensation method gives client’s the assurance – that the planner, whether in cash or securities or whatever gets the same compensation, and therefore not motivated to take more risk or to do more transactions than necessary – but it too is assurance of a planner not having bias.

One could argue the bracketed fee (between x and y – if fee – based to hours - goes over hours allotted, the planner received no additional compensation. However, if the hours expended are less than allotted, the planner benefits. One could argue that is in the planners best interest to under utilize his or her hours. But, if the bracketed fee is such that the client knows – the bracket would be reexamined next year – that minimizes but does not the problem in either over and under utilization.

To compare the inherent conflicts of flat fee, bracketed fee with AUM  to is analogous to going 60 in a 55 mile an hour zone (flat fee, bracketed fee) with the potential of going 120 mph (AUM or transaction based compensation) There is no equivalency. As Thomas Sowell once said, there are no solutions only tradeoffs.

Regardless, the days are coming to an end for AUM personal financial planning compensation due to compression of percentages charged by competition even robo advisors. Now on the horizon is even subscription personal financial planning.

A True Story

          Years ago (in the late ‘80s), a commission based planner asked my advice as to how to transition to fee only planning. And in particular, what to say to this commission based clients.

          I gave him to alternatives:

          1) – tell the clients 12 months from now – you will be fully compensated on a fee only basis – but they had a choice to continue paying by commissions or going to fee only now but in 12 months regardless you will be fee only charging a quarterly fee OR

          2) – tell them you are sorry that you have been shtupping them all these years– and do not wish to do that any long. So you are immediately going to fee only personal financial planning compensation hoping they will understand get on board. Offer a jar of Vaseline™ concurrent as an ‘I’m sorry’ – literally and metaphorically.  

********

So, the challenge and choice for AUM compensation personal financial planners’ is whether they immediately lead the charge (and change of compensation charging from AUM) or be charged (with client retention loss) in effect becoming a rotary phone in the smartphone era.

Personal Financial Pornography in The Cable Media II

Personal Financial Pornography in The Cable Media II

From:james schwartz (manofdog01@yahoo.com)

To:cavuto@foxnews.com

Date:Thursday, September 5, 2019, 8:35 AM MDT

Chaleria/Haleria – Yiddish "wreck," in the phrase "nervous choleria." A person who behaves wildly or badly.

On August 14th, during the day, the Dow Jones was as much as 800 points 3% closing down 800 points to 25,479.

The financial cable media (CNBC, Bloomberg & even Fox Business to a lesser extent) - was in a chorus - dread, horror, the world is coming to an end. If the Dow Jones was 1000 and the market was down 30 - would the financial cable media be in a lockstep ready to slit its collective wrists?

And yet today the Dow Jones on 9/5/2019 is up over 400 points to 26650 or up 1171 points since the market was 25,479 down 800 points.

Where is the champagne and hallelujahs in the cable financial media's reporting when the market is up 1171 points (oh, that's right the media, in particular, The New York Times, Washington Post are talking up recession, recession, recession for their political agenda)?

When there is a market decline - it is typically faster than the market recovering and going up and past the decline.

The stupidity of the cable financial media - is breathtaking - personal financial pornography.

Where is the scorecard - and accountability on the more, more more MOREonic pornographic financial media - crying less, less, less - the world is coming to an end - being wrong, wrong, wrong. Where is the termination of these either idiots or agenda driven per their political persuasion so called journalists?

There probable response: if it bleeds it leads blaming all but themselves.

The Personal Financial Media Pornographers – Chalerias.

Risk Tolerance Horse Manure

Risk Tolerance Horse Manure

From:james schwartz (manofdog01@yahoo.com)

To:intelligentinvestor@wsj.com

Date:Saturday, September 7, 2019, 2:07 PM MDT

The only risk tolerance of use is within the context of the personal financial goal and the goal relative to the accomplishment of other goals.

When I was in practice as a fee only personal financial planner, a geologist who was the key to then the largest discover in the lower 48 -- had 95% + of his assets tied up in royalties.

Now as much of the resources were converted from royalties via cash flow - actually he required about 2.5% after tax and inflation - when the market was in the teens - but why risk (sacrifice )what you need for what you don't need. Thus, outside of his oil stream (now protected by trusts etc), having large blanket liability policies etc etc, and the estate planning of gifts and private annuities etc etc ---diversified with less volatility was the answer - as he became independent of his independent business

And this was a wildcatter - and they in business were big risk takers

So risk tolerance is within the context of the goals ---- and most of so called risk tolerance is an add on to avoid or minimize the asset under management % compression - by being the client's understanding best friend.

The real risk - not making the goal - context and the goal is everything

But most planners manage assets instead of managing personal financial goals - and better yet harmonizing and aligning the financial resources to financial goals and life values.

Stock Market Averages Reporting: Personal Financial Pornography

Stock Market Averages Reporting: Personal Financial Pornography

Bull markets end with a whimper – not a bang

Old stock market cliche

          The mainstream print & broadcast media, CNN, MSNBC, CNBC blare headlines and screeches again when the Dow Jones Average was down 600+ points and at one point 800+ points during the day.

          The world was coming to an end – and at least a precursor (to fit their anti-trump narrative of Paul Revering ‘a recession is coming a recession is coming).

          Now 600 or even 800 points on a Dow Jones of 26,000 is 2.3% or 3% respectively. But 600 points – 800 points screams ‘Katy bar the door hold on to your 401k for dear life.’

          To put things in perspective – if the Dow Jones Avg was split to reflect a Dow 1000 – a 2.3% and a 3% drop would indicate a point loss of 23 or 30 points.

          Do you think a 23 point or 30 point nominal loss would get screaming print headlines let alone high pitched concern with graphics on cable & the broadcast media? Yet, 23 and 30 point loss would be the same relative loss as 600 and 800 points on a Dow Jones 26,000?

And the same Financial Pornographic Media calls Professional Wrestling Fake?

ENOUGH(sm) – Jewish Personal Financial Planning vs Personal Financial Planners Life Planning Definitions

Definition: ENOUGH(sm) – Jewish Personal Financial Planning‘healing personal financial anxiety, puttin’ money in its place, to elevate, align & connect to one’s signification/assignment, what one is meant to do, meant to be – enough to live for; enough to live on

(1)    ENOUGH(sm) – Jewish Personal Financial Planning connects’ one’s means with meaning – beginning first with meaning  and secondly determining the ‘means’ requirements (not the other way around) or better yet

(2)    ENOUGH(sm) – Jewish Personal Financial Planning harmonizing meaning and means.

The above is in contrast to those in so called personal financial life planning who start their definition with aligning means to meaning as this approach has the cup (the means) more important than the coffee (meaning) though the alliteration sounds good.

Meaning first - means second.

Really?

When there is a why (meaning) - the how(means) becomes easier.

When the how (means) is first rather than just a constraint (i.e. within limits) --- the why (meaning) is often just a rationalization 

Alignment/aligning is a 'with' - whereas harmonizing is AND with the priority first on meaning and second on means versus the reverse.

The Personal Financial Anxiety Exam/Checkup© for Healing Personal Financial Anxiety

The Personal Financial Anxiety Exam/Checkup©

for Healing Personal Financial Anxiety

1. (In an audience) how many DON’T suffer from anxiety over finance, money?
2. (In an audience) how many find money/finances causes them financial anxiety?
3. What does money represent to you?
4. On a scale of 1 to 10 (ten being best, one being worst) relative to what money represents to you, as Dr. Phil would ask, how’s that doing/happening for you?
5. How much is enough to you? How do you know the amount? How did you calculate this?
6. If you had sufficient (enough) money to get what money represents to you and nothing else, would that: a) reduce your financial anxiety and such that the rating changes to what 1 to 10; b) from 1 to 10 how content would you be? (If below 7, is the financial anxiety merely symptomatic of a larger concern: something is missing – unfilled, lacking?)

The More Opioid Part I & II

 The MORE Opioid (I) of Happiness

Fun – amusement, entertainment, pleasure

Happiness – cheerfulness, glee, delight

Equanimity – calmness, composure, poise, level-headedness

Content – satisfied, pleased, sufficient (enough)

Flow – where challenge (stimulation) engages competency such that when looking up all of a sudden 3-4 hours has passed what seemed like 10 minutes.

Who is rich?

One who is satisfied (content?) with his portion (lot)

Ethics of the Fathers 4:1

          Happiness is a sensation- a state-  externally derived & relative typically requires higher and higher dosaging & or ((MORE)) dosages to maintain the sensation for of altered state (not to be confused an ‘altar-ed’ state). And the pursuit of ‘Happily Ever After’ (‘hopeium’ – a mental opiod)is a sisyphian illusion that has made Disney billions and monetized organized religion’s pitch of ‘after life insurance’ in annual dues, pledges, contributions, and willed pecuniary bequests while disappointing millions & getting Peggy Lee a Gold Grammy for Is That All There Is.

Happiness corresponds to an economy, to calculations, to weighings. It needs varieties as much as contrasts (external comparisons- jds). Satisfaction (enough –jds) is as fatal to it as impediments.

Perpetual Euphoria, Pascal Bruckner, p37

The promise of happiness is confused & conflated with contentment. Contentment is function of equanimity & ‘wanting what one has & is’ unlike happiness, the sensation of which is at best fleeting and never enough. Happiness also is confussed with fun. Whereas happiness is a state – fun is a circumstance usually tied to an event -  which has a higher component of self indulgence, absorption and yes the self idolatry of ‘its coming to me, it’s to me, I deserve it, and or cause I say so from on high’ (a derivative of Peggy Noonanitis.) While fun and happiness intersect at the need for higher dosaging and dosages for their ‘hit,’ equanimity rises above the good and the bad. Akin to a high wire walker, equanimity  navigates life using the a long pole swaying as needed left and right as walking straight across otherwise yields a fall. Equanimity accepts the Thomas Sowell thought ‘there are no solutions only tradeoffs.’ Happiness wants T’HE solution and fun wants it with ‘a little song, a little dance, a little seltzer down the pants’ (per Chuckles The Clown’s slogan in The Mary Tyler Moore Show).

          Though equanimity yields composure and possibly allows a certain contentment, it is not a contrary to seeking ‘flow.’ Equanimity gives context – flourish to flow – so it doesn’t overflow.

          The foil (Snidely Whiplash) to equanimity is the implied worthiness of oneself of the acculturated (and genetic?) requirement of MORE. (2) MORE may be disguised as enough (defined as ‘just a little MORE’) but this enough is an Enough imposter.

          Just a little MORE is never Enough let alone being Enough. Not Enough means one has Less and therefore reinforces the quest & imperative of MORE for happiness, for fun, for ‘enoughness’ – requiring increased and ever increasing dosages.

          The MORE Opioid.

Happiness Opioid Epidemic

1.- Opioids are substances that act on opioid receptors to produce morphine-like effects. Medically they are primarily used for pain relief, including anesthesia. (Note: Opiods are not to be confused with Ron Howard who played Oppie on The Andy Griffith Show – Mayberry RFD.)         

2.-This MORE is not be confused with developing one’s chalek (portion) endowed by Hashem. This MORE is externally comparative (more, better, now – compared to – which has a way of becoming less, worse, later – sacrificing what one needs for what one doesn’t need. One is reminded of the Zusia story in terms of comparison:

When the day comes that I must account for my life, I will not be asked, “Why weren’t you Moses?” I was not equipped to be Moses. But I dread the question, “Why weren’t you Zusia?

—Reb Zusia of Anipoli

 The MORE Opioid Parasites II:

Coveting, Seizure & Never Enough

A cheap Kia has more appurtenances and luxuries

than did a top-of-the line Mercedes twenty years ago

Professor Victor Davis Hanson, The Case for Trump, p220

          In rationalizing & justifying their policies of theft, seizure & confiscation, a foundational strategy of the Democrat Socialist Left is class & economic envy & its derivative tactics:

·         the call for redistribution (the MORE opioid) as well as

·         being victims of economic ‘inequality’ (besides which ‘you didn’t build it’)

The Democrat Collectivist Left points to there the statistic that there has not been a real raise of average hourly earnings of production and nonsupervisory employees per the Bureau of Labor Statistics of $23.26 since 1972 (in 2019 dollars).

Really?

Actually using the more accurate Personal Consumption Expenditure (PCE) index from the Commerce department rather than the conventional CPI-W (consumer price index) to adjust compensation results in real hourly compensation levels shows the compensation levels are 27.7% higher (in real terms) today than they were in 1972.

          The statement from the leftist liberal progressive Democrats of stagnation is wrong and one could say deliberately deceptive – not only in terms of real increase but also in the quality of what the same compensation per hour adjusted for 2019 dollars now buys. (Thus compensation is understated and overall inflation overstated)(4).

Gramm & Early in The Myth of Stagflation rhetorically ask: do these numbers (from the Bureau of Labor statistics) describe the life one has lived over the past 45 years when (in comparison with 1972):

·         American homes today are much more spacious and modern. The proportion of homes today that have two or more rooms per person is up 33.5%.

·         The share of homes with two or more bathrooms has more than doubled;

·         central air-conditioning is more than three times as common;

·         and the share of homes that have dishwashers is up by more than two-thirds.

·         Most homes in 1972 had televisions, but only about half were color sets. Today they are all color and most are flat screens in high definition, attached to cable or satellites.

·         The average home in 1972 had at least one phone, but none had cellphones or internet access.

·         Kitchens today are stocked with a far wider array of foods, including out-of-season fruits brought from half a world away and a vast variety of prepared foods.

·         Compared with 1972, this abundance costs an ever smaller portion of families’ budgets, freeing up some $3,200 on average to spend on other things.

·         Cars last 81.3% longer and are 72.7% safer, and many have GPS navigation and premium sound systems.

·         No standard model lacks air-conditioning or power steering.

·         The share of the population with college degrees is almost three times as high.

·         Americans live 7.4 years longer and their median age is almost 10 years older, yet the proportion of people reporting poor health is 20.3% lower.

·         Real median household net worth is up 172.2%.” (1)

The aforementioned brings up to “the MORE Opioid” Parasitic Pushers Dealer tactics of The Democrats

(Animal Farm) where all are equal and some more equal than others

Napoleon (The Pig) in Orwell’s Animal Farm

          The deliberately misleading compensation statistics employed by  the Democrat Animal Farm Napoleononic Korachs (2) (Pocohauntus, Sanders, Comrade AOC, reBUTTogieg, and Amy ‘(I) don’t think there are “legitimate reasons” to investigate the people who opened the (Mueller) investigation’ Klobuchar), are in addition to the following to inflame, engender, & elect:

·         calls for redistribution (theft)

·         anger at income inequality and therefore rationalizations for theft

·         lies (actually have a great respect for the truth and therefore use it sparsely like Mayor BUTTigieg stating the tax cut helps overwhelming the rich omitting:

(1)    the 1% pay 37% of the taxes

(2)    top 10% pay 69.47% of the federal taxes

(3)    to play the income class envy card omit:

·         the bottom 50% paid 3.7% of federal taxes (thus the top 1% pay 1000% more than the bottom 50% )

·         the bottom 90% pay 30.5%

·         the top 50% paid 97% of total of individual taxes

(4)    tax revenues are estimated up 3.3% (from 2018 3.33 trillion to 3.44 trillion in 2019)after the Trump tax cut – it is spending that is up as high as 9.7% (4.1 trillion to 4.5 trillion) for same period proving the Trump tax cut didn’t cut revenue. (3)

·         electing the parasitic mooching Korachian politicians ‘who appeal to the baser instinct of envy & the MORE opioid ‘we you being taken advantage of’ (f**ked) to justify – whether true or not.

Also if MORE Opioids (“MORE-fiend) are not forthcoming, then the Democrat Pushers play The MORE Opioids Cold Turkey Withdrawal Tactic: equality of misery – aka ‘if I can’t have it MORE, you can’t have what you have’ or worse, ‘if I can’t have MORE seize, confiscate it from you, you can’t have it either.’

And the Philistines (Comrade AOC, Pocohauntus, Sanders et al?) stopped up all the wells which his father’s servants had dug in the days of his father Abraham, filling them with earth

Genesis 26:15

          Thus the Democrat MORE Opioid MORE-ality Withdrawal Class Envy refrain – with apologies to the Bee Gees ‘if we can’t have it (& yours), neither will you.’

         

          Forget ‘I want my MTV!’ ‘I want my MORE opioids’ and if not, we’ll plug your wells till they is no MORE

Plugging the wells of economic freedom, & meritocracy.

Tums™ for the Tummy & MORE-on Opioids for Envy

(1)    Note an aside: statistical deception relative to ‘quality’ considerations is not just restricted to quality of compensation but occurs almost normatively relative to the quality of earnings reported by public companies. As one Fortune 500 Chairman once related to me when he asked his then Big 8 Accounting firm ‘what is my earnings for this quarter? The reply was, ‘what do you want it to be?’ In security analysis, there is a concept of ‘quality of earnings.’ Earnings are not earnings are not earnings with all the games that can be played by management and its colluding ‘independent’ accountants – to numerous to mention. And the above ‘quality of earnings’ games is compounded by the ‘creative accounting’ of what is called EBITDA and adjusted EBITDA (earnings before interest taxes depreciation and amortization.

(2)     Korach – is the story of ‘good (masquerading) reasons’ (invoking 14kt phony egalitarianism) so Korach could displace Moses (the real reason) as the leader of the Jews. PS 14kt phony Korach got swallowed by the earth alive – along with his acolyte followers

(3)    Yet Mayor reBUTTogieg blamed the deficit on the Trump tax cuts going to the wealthiest when revenues increased!. Note it  was Congress increasing spending and the deficit – but this failed South Bend Mayor (all resume, no achievement for South Bend, many failures) engages in creative accounting – to play the income class envy card

(4)    Inflation is not inflation is not inflation. Long Term Care and so called ‘higher education’ inflation runs 300-400% over the overall inflation rate. Furthermore, inflation’s impact is a function of income level and place in life cycle.