By Kristin Grind – “J. David Lewis, the president and founder of financial adviser Resource Advisory Services in Knoxville, Tenn., recently sent in an application to open a checking account at Schwab Bank.
“While he says he will keep an account at Atlanta-based SunTrust Bank to avoid the hassle of changing his automatically deducted bills, he is happy to try out the higher-rate account.
“Internet banking has evolved to the point where I almost never need to go into a bank,” he says. “What are those things?”
Read the entire article via Should You Bank at Your Brokerage? – WSJ.com.
May 4th, 2012
Our Comment by J. David Lewis – Believe it or not, I am glad to see services like these. Many people need and deserve financial planning help. Far too many have told us they didn’t think they had enough to be our clients, when we have been able to help them in many ways. A minimum fee structure, instead of requiring a minimum portfolio, permits us to help several clients who now have growing resources. We will do all we can to help those who are serious about improving their resources, even to the point of helping them find one of these services.
By EMILY GLAZER
You dont need a high net worth or complicated investments to create a financial plan.
There are a crop of new resources that let you get financial-planning services on the cheap. For a flat or hourly fee, a certified financial planner can help you develop a savings plan, get your budget in order and pay down debt. Enlarge ImageClose Andy Rash
But keep in mind that you get what you pay for—so dont expect any of the bells and whistles of a full-service financial-planning or brokerage firm. Some financial planners dont offer any investment advice. And most of the consultations are done over the phone and via email. Whats more, some financial experts warn that this isnt a solution for every investor since the quality of financial advice can be limited. And you may want to do some due diligence on the financial planner you are considering.
See if these tools will be useful for you via How to Find Financial Planning Help – WSJ.com.
Contact J. David Lewis directly with dlewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 58522
April 1st, 2012
Our Comment by J. David Lewis – This article was published in 2011, just days after we completed summarizing client estate plans, with the information we maintain for them. I postponed sharing it until we are again in the season when we remind clients to ask themselves if there estate plans are still the way they want them. Everyone should think about things people around them will need if they are not able to take care of their own affairs.
By Saabira Chaudhuri
“Jean Parr is grateful that her mother obsessed about the subject. “I really didnt want to think about it,” says Ms. Parr, 54 years old, a manager at the American Chemical Society in Washington. But when her mom died in 2005, she knew exactly where to look for the will, the key to a safe-deposit box and documents indicating her mother had paid and arranged for her own funeral.
The financial consequences of failing to keep your documents in order can be significant. According to the National Association of Unclaimed Property Administrators, state treasurers currently hold $32.9 billion in unclaimed bank accounts and other assets.”
Read “The 25 Documents You Need Before You Die” via Designing Your Death Dossier – WSJ.com.
In 2011, most “Estate Planning Quarterly Reports” included our thoughts on communications which is an element in the WSJ.com article we encourage now. Many families have an ability to be more pragmatic than others about disposition of their “stuff.” We think it is important for whole families to have a well understood philosophy surrounding any asset that has the potential for becoming emotionally charged when it is part of an estate. Survivors often seem to honestly believe their interpretation of family history is more valid than other family member’s interpretations. Sometimes those contradictory beliefs are strong. We think families will benefit if the living owner can speak clearly about their wishes and consider reasonably accurate assessments for the effects of these assets on their family’s wellbeing. It is also important to listen carefully to potential heirs when they discuss their feelings about your family’s assets. We think open communication is more important, with regard to these matters, than “iron-clad” legal documents. Surprises and conflicting interpretations can cause family distress.
Contact J. David Lewis directly with Dlewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family.
March 15th, 2012
Our Comment by J. David Lewis - There is more to money than money®. And, there is more to investing than picking one (or a few) indexed mutual funds. There is still art and the need for judgment in putting together a good portfolio, no matter what instruments you use.
By Jason Zweig
“As a result, investors are equipped with the itchiest trigger fingers ever in one of the touchiest periods in history. To blame the rise in correlation solely on indexing, they argue, is shortsighted.
With active stock pickers still stinking up the joint, indexing remains the cheapest, most convenient and most reliable way to capture the returns of just about any market.
But if the only index fund you own is linked to the S&P 500, too much of your money may be riding on stocks that move in lock step. Think beyond the S&P 500 to baskets like the Russell 3000 index or “total stock market indexes” tracked by Dow Jones, MSCI, S&P or Wilshire, which hold a much broader selection of stocks.
Next, no matter how diversified you are, you probably arent as diversified as you think.”
Read the full column via The Intelligent Investor: Are Index Funds Messing Up the Markets? – WSJ.com.
Contact J. David Lewis directly with dlewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family.
February 24th, 2012
Our Comment by J. David Lewis - As Zweig often does, this column helps his readers put the current investments events into a much longer and more meaningful context than most people are able to see.
By Jason Zweig
They might not have had a choice. The investing mind comes with built-in machinery that sizes up the future based on a surprisingly short sample of the past. Neuroscientists say the human brain probably evolved this response in a simple environment in which the cues to basic payoffs like food and shelter changed slowly and rarely, making the latest signals most valuable—nothing like what todays investors face with electronic markets in a constant state of flux.
Experiments led by neuroscientist Paul Glimcher of New York University found that cells deep in the brain calculate a sort of moving average of past events, giving the greatest weight to the most recent outcomes.
When the latest rewards turn out to be better than the long-term pattern, these neurons fire unusually quickly, spreading a burst of dopamine—the neurotransmitter that triggers the pursuit of reward—throughout the brain. Thus, after a decade of mostly dismal stock returns, even a month or two of outperformance might prompt you into an impulsive
Read Jason Zweig’s column via The Intelligent Investor: This Is Your Brain on a Hot Streak – WSJ.com.
Contact J. David Lewis directly with dlewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 57739
February 12th, 2012
by J. David Lewis -
There is more to money than money®. Investment performance is only one of many factors that influence growing financial strength. Even during the best market conditions, the far more significant influences for improving wealth are investment contributions, withdrawal management and debt management. No investment return can produce meaningful progress without these disciplines. This has been particularly true since 2000. Yet, we know people who have surprisingly good financial growth through these years. In How Financial Advisers Get Clients to Take Action – WSJ.com, a Wall Street Journal article highlighted Resource Advisory Services’ unique methods for helping clients with this sort of thing. I wrote about tools you can use yourself to manage these factors in “A ‘One Task a Year’ New Year Resolution”. I will now discuss a couple of our investment performance observations that appear to be at play recently.
We describe our use of actively managed mutual funds on our website in Investment Philosophy. We believe carefully selecting these managers can produce returns that exceed the expenses within the mutual funds. They “fine tune” the asset allocations for us. Our rebalancing is generally less overt than it would be with indexed mutual funds. By this, we mean a large part of our rebalancing is accomplished by having mutual funds pay cash distributions instead of reinvesting. We can then make conscious reinvesting decisions. This year, Bryan Hankla and I have been discussing a subtle and interesting asset allocation phenomenon that has been developing for a good while.
The mutual fund data service, Morningstar, attempts to classify mutual funds according to many traits – probably too many to be useful. Two of the major divisions are the growth investment style versus the value investment style. In reality, each of these styles is defined by philosophies and methodologies of investment managers. Growth investing is about finding companies that have grown in the past, with a high probability they will continue that growth. Value investing is about finding companies that have underlying value greater than the current stock price reflects. One would be hard pressed to prove either method is better than the other over the long term. In the short term, one or the other often prevails. There are outstanding experts using each style. Very few are able to effectively shift from one style to the other. So, we like to keep a balance of mutual funds committed to each style.
Instead of attempting to quantify these abstract approaches, Morningstar attempts to consider some companies growth and some value using mathematical techniques. Then, they deduce the growth or value mutual fund management style by the preponderance of these styles in mutual funds. It is not at all uncommon to hear investment managers adamantly object to the style Morningstar has assigned it. We follow the “corporate personalities” of mutual funds we use enough to judge whether we believe these objections are well founded. They usually are.
For at least a year, we have noticed that Morningstar has been reclassifying a number of mutual funds from value to growth. Have these mutual fund managers changed their management disciplines? Have companies Morningstar once considered value companies become growth companies? Should we sell and buy mutual funds to restore our allocations between growth and value based only on Morningstar assignments?
I have not forgotten a couple of dinners with Chuck Royce, in the 1980s, when his mutual fund offering was much smaller than now. He talked about the importance of developing a style and methodology that you can believe strongly enough to stick with it through thick and thin. For him, it was small cap value. More than twenty years later, his firm seems to have never drifted from that approach, although it has been severely out of favor at times. Other managers we follow appear equally committed to their unique styles of management. If we believe one changes its philosophy, we are more skeptical than we are after a year or two of weak performance relative to the general market.
So, when we see that Morningstar has moved a mutual fund from one category to another, we pay more attention to whether the manager is still approaching its job the way we expect than the label given by Morningstar. To be sure, we pay attention to the Morningstar categories. We also pay attention to other sources of information about our choices. A dose of judgment is important. We want to know as much as we can about the mutual fund managers’ investment styles and let those professionals do the job our clients’ pay for in mutual fund fees. This is a reason Bryan has visited a few mutual fund companies in recent years, to see how committed they are to their styles.
There is another interesting asset allocation observation we have not heard discussed. It is the difference between performances for U.S stocks versus international stocks. At the end of October, the twelve-month return for the S&P 500 Index was +8.09%. The comparable return for Vanguard Total International Index Fund was -6.54%. This helped us understand how much impact our international mutual funds were having on total portfolio returns. By January 31, 2012, the disparity of 14.63 percentage-points had widened for a couple of months and then narrowed slightly to 13.20 percentage-points. It was 4.22% for the S&P versus -8.98% for international stocks as of January 31, 2012. How should we feel about our allocations to international stocks?
There is substantial market history that speaks for long term international investing. We continue to believe it is important to maintain appropriate international allocations. Since January 31, 2002, the S&P 500 Index return was 3.52%. This compares to 7.11% for the Vanguard Total International Index Fund – roughly double the S&P return. Other evidence clearly indicates one-year performance is a very poor predictor that a category, like international stocks, will continue the same trend through the next year’s performance. So, we continue to believe we should maintain international allocations essentially as we have in the past.
My years of experience with this sort of thing have convinced me that Chuck Royce was and is right on the matter of maintaining discipline. To the extent investment performance has influence on net worth, our tendency to use international, mid-cap and small-cap funds in larger percentages than the S&P has helped our clients’ net worth over the longer-term.
Contact J. David Lewis directly with DLewis@ResourceAdv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 57427
February 6th, 2012
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