Posts filed under 'Newsletters'
by J. David Lewis
Even in the days when our newsletters were paper, I promised myself I would not clutter readers’ lives unless I felt I had something significant to say. Some colleagues say we should buy content to contact people on-time every month. I don’t go along with the philosophy that writing takes too much time. Material written by others cannot really reflect Resource Advisory Services’ philosophy. Sometimes, I recommend something written by others, as I did in our last two newsletters – two months and four months ago. They can be found on the Resource Advisory Services Blog. The next may be in a few days or it could be awhile.
In a staff meeting last week, I was encouraged to describe my experience applying for Medicare. We hear a lot about concerns as people approach this process and little from people who have done it. I will get to that in a moment. The same day, I received the National Association of Personal Financial Advisors’ e-Newsletter with links to three excellent resources for finding financial advisors:
“The SEC just released a new resource entitled Investor Bulletin: Top Tips for Selecting a Financial Professional. The really exciting part is that they reference NAPFA’s Pursuit of a Financial Advisor Field Guide on the page of Additional Resources. You will note we are the only non-regulatory body mentioned.” The other link is CNN/Money’s “Ask How Your Financial Advisor is Paid” video. These links are worth sharing among people you know.
Now, for Medicare – Around June, a flood of Medicare supplement insurance offers began appearing in my mail. The vocabulary was foreign and the volume could puzzle anyone. They all implied that the decision on the plan is monumental. No wonder people feel overwhelmed with this stuff. I had heard that some prescribed drugs could lead to one company over the others but had little guidance otherwise.
Eventually, I decided to browse the Social Security website to educate myself a bit. Maybe I could learn how to read this stuff. That first visit didn’t give much useful information, except that I could apply for Medicare online. When I attempted it, I found I should wait until three months before my 65th birthday month – August for me. So, I turned to the insurance question.
I have probably had BlueCross BlueShield health insurance more than 85% of the time since I was first aware of health insurances – including my parents’ plan. So, I am inclined to stay with a company that has served me well. On the BlueCross website there were two Medicare plans that appealed to me. One cost nothing. The other appeared to be about $50 per month. Since I know the full cost of my employer provided coverage this was amazing. Yet, these estimates were without my prescription information.
There is a much more expensive BlueCross Medicare plan. Since I am satisfied I can handle the maximum out-of-pocket expenses for either of the less expensive plans, why pay someone to take this risk? Insure for the losses that would be devastating, not convenience. Sure, it will be inconvenient if events lead to spending the maximum out-of-pocket amount. I don’t know whether that will happen. If I elect to pay the higher premiums, those premiums are a certain expense.
I mentally set the whole thing aside, until the offers in my mail were more than normal one day and I was eligible to apply for Medicare. The link is www.Medicare.gov. On the opening page, two yellow rectangle buttons can get you started. “Apply for Medicare” should take less than thirty minutes. I don’t remember searching for information I couldn’t remember. Apparently most people can complete the whole application by following those steps. In my case, the last page said; “Your benefit application was received on … We cannot complete processing of your claim until we have received and verified all documents.”
They needed my birth certificate. The Social Security Administration was missing information from it. The young man helping me told me the information would have been collected if I had interacted with Social Security for almost anything in the past. He was very professional, almost caring. The wait to see him was reasonable, in a room that could handle many more than were there that day. I can remember Dad talking about my brand new Social Security card and signing it. I don’t remember ever going to a Social Security office. I still have the same cards, but they sent me a new one. It doesn’t look much different. The Medicare card should arrive soon, after which I can apply for Medicare supplement insurance. I was there about thirty minutes. It could have been much longer if that waiting room was full.
The young man also told me there is a tool for comparing supplement plans on www.Medicare.gov. This is the other yellow button on the opening page. Following it is easier than comparing plans on the BlueCross website. The tool needs basic information I could remember, plus data from my prescriptions. I breezed through it faster than the Medicare application. At the end, there was a list of the insurance companies and policies, with very clear information about total annual cost estimates, including out-of-pocket and premiums. For me, three vendors were obviously better than the rest. BlueCross was there with the two plans I found earlier. Premiums were slightly higher. I can sign up on that page as soon as I get that coveted Medicare Card.
I hope this will help calm those who approach the application. If nothing else, it should help you, or someone around you, toss all that useless mail.
Added as of October 13, 2012:
A client responded to my Medicare application story – “David, Welcome to the over 65 age group. Medicare can be a very confusing subject for a lot of people – what plan to take and which way to turn. If I had what AARP wastes on paper I could smoke those big cigars and drink the best wines.” So, I am adding a few words.
I came home one evening to find that someone had actually come to my house to “help” me decide on a plan. They left a brochure and business card. There had been a similar offer by phone. I wonder how much commission there is in selling these plans.
My Medicare card arrived and I apply for a supplement online. The application was straightforward. On this visit, I discovered my Medicare monthly premium will be more than the $99 I expected earlier. Income from work gets me one of those “tax breaks for the rich.” The supplement is still $50.
Amazingly, mailed brochures seemed to stop very soon. A curious one was from the company I chose online – for their more expensive choice. I first though it was paperwork to be completed, which may have inadvertently “upgraded” my application. The next day a letter from the correct plan and a three-page form arrived, to verify I would not be covered by other health insurance. There was also a 1 ½ inch stack of six booklets – postage over $5. The package tells me more current information may be available online.
I also received several pages of questionnaire from Social Security Administration, to determine whether I qualify for Medicare premium assistance. This is an adventure. I can’t wait to see what happens next.
Contact J. David Lewis directly with DLewis@ResourceAdv.com. 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. 61112
October 3rd, 2012
by J. David Lewis
May 11, 2012 – At the end of an excellent NAPFA National Conference in Chicago, I was with six good friends headed for O’Hare by train. The gathering was impromptu. We were engaged in fun conversation. Without a leader, and different ideas about the best train station, there was confusion along the way. At the station, cash was exchanged for exact change, with more confusion. Someone saw this opportunity to get my wallet. One of my friends later wrote:
“I’m wondering if the guy who told you to go to a different lane at the train station was the culprit, because I thought that was odd as I went to that same gate and got through. (Was he even officially an employee?) I think he distracted you and that may have been when it happened. I don’t recall anyone else around us then except that guy who told you to go to another turnstile. And he would have been watching our moves as we were getting our tickets. The rest of the time, I was generally behind you.”
On the train, I sent a text home to report progress. Within 5 minutes of that my credit cards were buying $97 and $25 train passes. A few other purchases were less than $2, with $40 cash back. Standing up at O’Hare, I realized my wallet was missing. I didn’t have a photo ID for airport security.
Tips: Avoid distracting situations. Men should keep their wallet in a front pocket. I was not following either. Women should keep purses closed or carry valuables elsewhere.
My friends went into a flurry of help. There was talk of finding a hotel. Someone suggested getting my passport faxed to me. I can’t remember all the suggestions. I stepped away to call my office for help canceling cards. Bank of America had already called the office and home about possible fraud in Chicago and was told I was there. I was able to list other issuers to call. Some seemed helpful; others indicated I should be the one who called. I now believe they all blocked the cards at that time.
Tips: Although all the cards had been used by the time we notified the issuers, this is probably the most important first action. Find help to make calls. They can Google for phone numbers.
Now, airport security was the next issue. I wanted to be in the gate area before the calls I should make myself. I decided to find a TSA agent for my options without an ID. She sent me to the airline for a boarding pass; reassuring I could get it.
Tip: Concentrate on finding someone who is likely to have viable options, instead of trying to generate solutions through brainstorming.
My friends started handing me cash, for which I am extremely thankful. (More than two weeks later, I still don’t have a debit card). They must have given me about $100, based on what I remember spending. The first $25 went for a baggage fee. Airline sympathy didn’t apply. I have to buy these friends a great dinner the next time we are together. I have no idea the amounts from each.
With a boarding pass and no ID, I was in the security line with two friends. The others had done all they could. I motioned for a TSA gentleman. He told me to stay in line. That desk agent had me step aside with another agent. Then, another appeared. These two used a cell phone to relay eight to ten questions and answers about my past. I was amazed what some database knows about me and how fast they got to it. No one could have faked their way through that. The friends in line with me were pushed along. Their faces looked concerned: as though they were abandoning me.
Tips: Friends are great. Friends with resources are wonderful. Having a few around with cash in their pockets is a big help. You can get on a plane without a photo ID. You just don’t want to try it unless you are who you say you are and have no reasonable alternatives.
Questioning finished, one agent signed the paper I had filled out. A supervisor-looking agent was summoned to sign for me to proceed. My carryon X-ray and body scan were normal. Did you ever notice how people smile in the body scan machine? What was the fuss? People seem to enjoy holding their arms up for those things!
I spent almost the entire 45 minutes before boarding with a sandwich and Bank of America on the phone. Christie was on the phone with others through the time I was flying. My phone power was almost gone. I spent most of the weekend dealing with the mess – also many hours the next week. Interestingly, the first question from virtually all these people was “Have you filed a police report?” I spent at least an hour, unsuccessfully trying to contact the appropriate department with Chicago Police. Still haven’t gotten it done, but most of the fraudulent charges have been refunded.
Tips: Learn to be patient. Make the calls. Fill out the forms. Consider how many cards you really need to carry with you. If replacement cards do not arrive as expected, call back. At least two issuers failed to place the orders. I only have credit cards now and want my debit cards – May 29, 2012.
Tip: A Tennessee Drivers License can be replaced online for a fee of $8.00. Replacing Lost Licenses – TN.gov
Contact J. David Lewis directly with DLewis@ResourceAdv.com. He founded Resource Advisory Services in 1985. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. 58950
May 29th, 2012
We feel very fortunate Mary Davis has joined us to assume Kyries role. With East Tennessee roots, her 1986 entry into financial services was with brokerage firm operation departments, leading to a Charles Schwab & Company retail client service position in Birmingham, Alabama. Yes, for some reason she is an Alabama fan. Those brokerage firm positions required significant testing for several securities licenses. More recently, Mary was Chief Compliance Officer at Sovereign Wealth Management in Memphis. This means she was their liaison with the Securities and Exchange Commission for regulatory matters. To prepare for these responsibilities, Mary earned the IACCPsm designation, awarded by National Regulatory Services.
Now, Mary’s position is Client Services/Administrative Assistant with us at Resource Advisory Services. Much of her work at Sovereign was astonishingly similar to Kyrie’s at Resource Advisory Services. In a nutshell it involves three complex software and electronic communication systems, plus extensive direct communications with other financial institutions. These functions make our personally written Quarterly Reports feasible. When you are in contact with Mary, take a few minutes to get acquainted. Her father was an Air Force dentist, which had Mary living in Alaska for many years. She has also lived in a number of other interesting places.
Read more via Mary K. Davis Has Joined Resource Advisory Services.
January 13th, 2012
by J. David Lewis
The time around each New Year has become very special for me. Of course, the news media fills its commentary with events of the last twelve months. We take a longer view; to consider events in each client relationship since we began our journeys together. I must say the letters we write with this season’s Quarterly Reports are among the most personally rewarding for me. Several of our clients have been with us more than twenty years. Even the much shorter relationships have personal stories. They all provide many memories I savor. There is more to money than money®. Life as an adventure is exciting. A new year is starting, with more in store for all of these relationships.
We use graphs, with annual columns to represent each client’s history of Total Assets – not just investment accounts. While increasing investments is important for future security, we also think it is important to have appropriate increases in those things that make life better now. Adjacent columns represent Total Liabilities. The distances between the tops of these columns graphically display net worth progress, which is the most comprehensive measure of financial strength. At a glance this measure of success – or lack thereof – is clear. These reports are not about how well we managed investments. They are about how well our clients managed their financial strength with our help.
The text of these reports compares each client’s financial strength now to several recognized events. These histories are important tools. If you cannot compare your current total assets and debts to your past, I encourage you to document them now, so you can make this comparison at the end of 2012 and at least once a year thereafter. I am finished with mine for 2011. The “Once a Year Task” doesn’t take that long and the information is amazingly useful.
Even if progress is less than you intuitively believe, you can actually feel more secure. Facts, even disappointing facts, help guide confidence in managing resources. In our experience, the exercise of measuring results regularly reveals that most people are in better shape than they imagined. Whether you are doing better than you believe or worse, knowing facts is better than not knowing.
Let’s say your change in net worth is positive. Was that because you have more assets than a year ago or did you reduced debts? We like to see net worth increased by both these components.
What assets increased or decreased? Do you have more investments, a nicer home or a new car? We have seen several situations where people displayed great distress over publicized market events, when their net worth was relatively stable. Investments were just not that big a factor relative to other issues for them.
The significance of maintaining these annual Net Worth Statements takes on more meaning with just three years of history. At the end of 2008, markets had been particularly brutal for several months. At the time, knowing how much that bear market effected net worth could make the events of the time more bearable. Not all the components of net worth are affected by the ups and downs of stocks.
Since December 31, 2008, investment returns for those who “weathered that storm” should be a contributor to net worth growth. The S&P 500 Index return from December 31, 2008 to 2011 was 14.11% per year. For many people, personal debts have also been reduced significantly in these years. With records of your historical net worth, you could expect to see encouraging improvement. Your view can be more comprehensive than just the last twelve months.
Five years ago, markets were approaching their highest level ever. The peak was reached in the third calendar quarter of 2007. Except for rare circumstances, investment performance has probably not contributed a great deal of personal net worth growth, with a five-year S&P 500 Index return of -0.25%. However, for those who continued systematic contributions to 401(k)s and other investments, alongside debt reductions, net worth growth should be respectable.
Ten years ago, December 31, 2001, it was about 3 ½ months after 9/11 and about 15 months before markets reached that low point in the spring of 2003. In 2001, we did not know when the bottom would come. It was painful, after two years of decline from the robust 1990’s. Now, the ten-year S&P 500 Index return is 2.92%, which has increased through 2011. This ten-year return is very low relative to the vast majority of ten-year S&P returns. Yet, we know that many people have managed to increase net worth through these years. Consider how knowing your progress might help you face the future now.
There is more to money than money®. Investment performance is only one of many factors that influence growing financial strength. Investment contributions, withdrawal management and debt management are the keys to building and maintaining resources, whether the markets are performing well or poorly. Returns cannot come close to these factors – particularly since the year 2000. Knowing the reasons for your unique results is important. So, now is the time to start building your documented history. The knowledge will make a difference in your enjoyment of life. Start this New Year with at least 2011 data in hand. This is a core service we provide clients and will be glad to help you.
Contact J. David Lewis directly with email@example.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. 56975
January 4th, 2012
By J. David Lewis
There is little doubt virtually everyone who gets this email is well aware of recent turbulent markets. At the end of June 2011 the S&P 500 Index returns were 30.69% for twelve months, 2.94% for five years and 2.72% for ten years. Stock market values dropped sharply around the beginning of August and have been volatile since. When I started drafting this text, markets had been sharply down for several days. As I draft and edit, they have rallied. The bulls and bears are still in their struggle. These alternating good and bad days have been the nature of things for about sixty days. For September 30, S&P returns were 1.14% for twelve months, -1.18% for five years and 2.82% for ten years. It is not surprising a lot of people feel something must be done on the worst days of the down periods. There is more to money than money®. And, there is more to this situation than just making a few trades.
During the recent quarter I had a conversation with another investment advisor, in which my friend asked about our portfolio adjustments in light of the markets. This is not an unusual question. I see several broadcasted emails a week from reporters wanting the same kind of commentary. When I told my friend we believe in building portfolios we are satisfied to hold through tough times, he concurred that our philosophy is correct in terms of investment management. The disturbing part of the conversation was his explanation for their recent portfolio changes.
My friend was concerned about calls from distressed clients. He felt compelled to show them account activity to maintain their relationships. In effect he said, “I don’t know whether what I am doing will improve investment returns or not – probably not.” I felt he was noticeably uneasy that he was making changes solely to soothe clients. When I described the conversation in our office, we all felt gratitude for our client relationships. We do not feel the pressures that seem to prompt many advisors’ departure from their belief that well diversified portfolios should not be disturbed based on recent market events. Unfortunately, I think many advisors do a lot of things to appease clients’ moods instead of well informed investment reasoning.
We think it is important to help clients consider their securities portfolio in the context of all their resources. It is not unusual to see someone very concerned about stock market events when all the stocks they own are a relatively small portion of their total assets. For some fortunate people, pension and social security income cover a large percentage of their day-to-day cash needs. Therefore, the cost of their lifestyle does not require much from their portfolio, and probably never will. Yet, they feel considerable emotional stress from market volatility, without considering whether the portfolio is already prudent for their situation. Possibly you can feel at least some relief by just putting your exposure to stocks into perspective relative to the rest of your resources. Try to understand the true significance of market volatility to your personal situation.
With this line of thinking as our context, we consider ways to create portfolios we are comfortable holding during tough market conditions. Periods of volatile markets are virtually a certainty in the future. They are also generally some of the worst times to change investment allocations. Facing the fact that there will be tough markets helps develop better portfolios.
Regularly, we merge all a client’s accounts into one portfolio listing, where mutual fund names and categories are together in a logical order. This yields a rough impression of the client’s exposure to stocks in general and various types of mutual funds. At this level of review, we consider diversification and portfolio behavior characteristics we can reasonably expect. Other times we create more sophisticated reports to understand allocations from different perspectives. Because mutual funds that appear to hold U.S. stocks almost always have bonds and non-U.S. stocks, it is important to see allocations to specific types of instruments without regard to the mutual funds that hold them. Often this deeper research reveals different allocations among instruments than the mutual fund names imply.
With this array of tools, we can analyze how a portfolio would have behaved through the ups and downs of the past ten years, which has an unusually rich assortment of ups and downs. This sense of portfolio resilience can go a long way toward revealing how damaging market events might really be. We know there will be tough markets that will affect our clients’ securities portfolios. The issue is to develop a sense for how much they will be affected. We believe strongly that the perspective and judgment these rigors bring is far more significant than the latest news stories. In our view, changing portfolios to imply we are reacting to recent events and news seems deceptive.
I hope this summary of our philosophy helps you understand how significant this, or any, turbulent market is for your total resources – not just your 401(k) and other investments. It is likely you are personally less vulnerable than you may feel. Of course, we will welcome the opportunity to give our professional opinion of your specific financial strength.
Contact J. David Lewis directly with firstname.lastname@example.org 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. 55585
October 6th, 2011
Markets with Bulls and Bears Pondering an S&P Downgrade
by J. David Lewis
It is time again to write about my thoughts on current events. When I started these newsletters, I promised myself I would not write them unless I felt I had something significant to say. For a few months I have not felt my comments warranted space in mailboxes. There was too much noise for a coherent opinion.
The line was, if a debt ceiling deal was not reached, our credit rating would fall, interest rates would rise and markets would react badly. On July 28, a journalist asked for my thoughts with two primary questions (“Knoxville Advisers Tell Investors to Hold Fast” by Josh Flory). What am I telling clients to help understand what it all means? And, what should they do about it? Frankly, despite all the noise in the media, we have not had that many clients asking these questions. When the article appeared, the two other advisors it quoted seemed to have many such calls. Our office discussed the contrast.
The article did a good job conveying advice to maintain portfolios developed in more rational times. I had told Flory we know there will be market crises. I have seen many in very personal ways. We do all we can to build portfolios we are willing to live with through whatever happens and commit to helping clients maintain strength. We publish this in Our Investment Philosophy and Disclosure – Form ADV Page 8 on our website with these words:
“Resource Advisory Services has an extraordinary commitment to holding portfolios through whatever market conditions prevail at any given time. There have been at least six market crises since the formation of Resource Advisory Services. It has been steadfast through all of those. It has weathered days when people were convinced stocks had to be sold, and then watched as markets recovered in ways that were far more dramatic than could be imagined on the worst days. When Resource Advisory Services felt pressures to “move into tech stocks,” in the late 1990s, it resisted very strongly. Resource Advisory Services does not restructure portfolios quickly under pressure.”
We avoid saying “if there is a market downturn” by using “when.” We do not want any false hope anyone might avoid frightening times. Appropriate asset allocation can affect portfolio volatility. Low risk allocation does not seem to help clients feel comfortable when there is disturbing noise. The owner of our most conservative portfolio was once very concerned about a relatively minor market event. We need to help anyone we can understand that shocking times are a part of life.
Near the end of my interview, to illustrate the effect of noise, I said a lot of people are talking about a debt downgrade increasing interest rates. For several years I have believed interest rates are almost certain to rise from current levels, without regard to the debt ceiling deal. They are far below my perception of normal. I remember economic volatility when studying finance during the 1960s. In 1980 I was a student again with the turbulent economic events of the 1970s and my banking experience as my background. Interest rates were much higher then. More reasonable interest rates are higher than now. Current rates are too low to sustain. This idea made it into Flory’s article.
The debt deal was reached. The next morning I read an S&P report about July’s exceptional corporate earnings, followed by news that General Motors profits increased 92%. Then the stock market collapsed. Interest rates went lower for now. The week ended with unbelievably good employment information. I remembered telling Flory that a bad deal on the debt is probably worse than no deal. The markets expressed their immediate reaction to the deal and seemed to ignore the good news.
Now, S&P has downgraded our country’s debt. On Sunday morning (August 7) I heard two political parties say the other had made the debt deal bad and S&P was not giving us justice. It is like fighting siblings when parents try to stop them.
S&P is only one of many organizations making judgments about our debt. China’s expressed their doubts clearly. I doubt China considered the S&P view. China did independent research, much as quality portfolio managers do independent research.
There are many bulls and bears in the markets for our bonds. S&P may influence some. The most important buyers and sellers want proof we can unwind our emergency and social excesses. It will not help to blame political parties or the bulls and bears. We have to actually do something. The markets, like good parents, are not much interested in excuses, whining or other noise.
Last September (2010), at Mount Rushmore, I heard a park ranger talk about the immense problems those presidents faced. He quoted Jefferson on a government that gives its people the ability to change the government as situations change, even to the point of replacing the form of government if needed. It is probably not time to talk about replacing this government. It is time to do all we can to insure that the leaders we pick will actually work on the issues that make our country stronger.
We are the people. We have the votes. We elected the politicians we have and should accept our personal responsibility in this. Prove to the bulls and bears of the world that we will now vote for those who can solve problems. Given the problems those presidents faced and solved, the current problems can be solved if the people have a coherent vision and really want the fundamental problems solved. In the meantime, I expect Resource Advisory Services to stand by the portfolios we have.
Click here for the original “Markets with Bulls and Bears.”
Contact J. David Lewis directly with email@example.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. 54564
August 7th, 2011