The definition of insanity
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[quote=iceco1d]Your 66 y/o guy can buy a SPIA for less than $130K that will give him 10K a year for the rest of his life. He’ll have $20K leftover to deal with inflation (which will probably involve him buying another SPIA at a certain point).
It’s not your fault that moron clients only saved $200K to live on for the rest of their lives. Both situations are manageable.
[/quote]
Damn, you are icecold. …
Lots of good people haven’t been able to save 200k, either because of employment problems (the blue collar sector has been pretty much wiped out), divorce for women who stayed home with kids, illness, etc.
This is one of the best threads I have ever read on this forum. I have never posted before but I just couldn’t resist any longer. I am new to the FA industry, however I have spent the last decade researching issues in political economy in academia. Regarding theories, MPT or otherwise, they should always be used as a guideline, not as hard and fast rules. MPT does seem to provide some loose guidelines when creating portfolio recommendations for a client but MPT doesn’t take consumer behavior into account. It assumes consumers/the market are rational and efficient. This is certainly not true since the entire stock market is a game of confidence in price.
I understand that FA's are primarily chasing after the commissions and fee's received from gaining new accounts, so the game rewards rainmakers and not money managers. But surely FA's can make more money from managing their clients dollars (assuming their book is a high AUM) since successful money management will be a big draw to new clients. This seems to be the implicit message that BG was driving at in the beginning of the thread. I think the FA's who want to drink the company kool-aid and sit on their intellectual butts spouting asset-allocation, dollar-cost averaging, and staying white-knuckled to a particular finance model like the MPT, EMH or whatever, while their clients pay the price, will not make it through a bear market/recession. The bottom line should always be, "Am I making my client money or at least staving off losses?" Who cares whether you do it through stocks, options, bonds, index annuities or mutual funds - "Am I making my client money?" Who knows, I could be wrong and out of business before the next year, but I believe I am correct. I leave folks with one question, and hopefully BG will weight in. How many of you use stock image coefficients for your book, as well as using behavioral models to get a quick look at the entire market?MLGone is 150% correct. That is good advice.
Odysseus - think seriously about what he said.ML and Sportsfreak… certainly no offense taken. I’m a few months in and doing well, though nothing to brag about yet. I’m over in NY with MSSB, it seems that the folks I’m around who do know their stuff never say a word and its always the complete muppets who give the free advice. (true in all walks of life really.) I was just wondering what the big guys do after they drag in the assets.
[quote=iceco1d]
The people that are "screwed" so close to retirement are a group I can't get my brain around.
Suppose you are in a plain vanilla asset allocation fund or target date fund over the past 5 years, and you are supposed to retire 1/1/10. Ok, you took a big hit during the sh*tstorm. But, if you are retiring soon, you SHOULD be putting away massive amounts of money for retirement. If you aren't, then that's YOUR PROBLEM. So you are maxing out your 401K, and probably adding to a Roth IRA. You're putting away $25K a year into your portfolio, that is now down 30%. Now that market has recovered, and you've stuffed a ton of money in at low values, to bolster your recover. You are now positive. Ok, so what if the economy DIDNT recover by now. Now, give me a little room to tweak my scenario here, and lets pretend this investor is in a 50/50 allocation, still plain vanilla, through the whole shat storm. He still shouldn't be down more than 25% (and that's a bit much, IMO). Keep in mind, this Joe Blow investor has been saving through the 80s, 90s, and 2000s. He's done well with this "moronic" strategy of asset allocation. So the market environment wasn't as favorable at the end as he would have liked, and now he has to retire with $750K instead of $1MM. What can we do for poor Joe? He must be f*cked because MPT failed. In the door comes Mr. Reality. Sorry Joe, life happens. You needed $45K a year from your portfolio to retire, and because MPT failed and the market went down, that would be an unsafe 6% withdrawal rate from your portfolio, and you can't retire. WRONG! Simple solution. Well Joe, you can still retire. Here is what we'll do. To get you to 45K, we are going to use $625K of your portfolio to buy a SPIA, and your 45K will be guaranteed for life. The other $125K, we are going to continue to invest, and use that for your COLA over the years. Gee Joe, and I bet you thought you were SOL! PS - FWIW, I don't recommend a withdrawal rate over 4% for a < 65 y/o, unless there is an obvious reason as to why it's OK (i.e. health, etc.). That would bolster my argument above even further (I used a 4.5% withdrawal rate, and assumed "Joe" was age 62). But I don't want to force my opinion on anyone else (wink wink). PS2 (haha) - This isn't how I run my practice, but it's one way you can make up for retirement shortfall in a bind. Heck, probably taking liquidity AWAY from baby boomers, is going to end up being a smart move...time will tell. Too bad it doesn't pay better to do so... [/quote] Ok, what to do after you've lost the client's money is one way to go. How about not losing it? Do you have plan for that?[quote=Ron 14]I will try to post a link, but Bank Investment Consultant has a decent article this week about MPT. It actually stated in the article that if you were to buy 20 yr Treasuries from 1969 - 2009 you would have beaten the S&P. There wasn’t much detail to the authors comment. Can that be true ? If so I need to change my thinking!
[/quote] Yes, it is true. There was a bull market in both equities and Treasuries. The return difference was slight, but Treasuries don't expeirence the same drawdowns as equities, nor do they see the same raging bull markets. But don't go so fast...the landscape ahead looks mighty different. Also keep in mind, that's if you invested in 1969 and held those Treasuries for 40 years. Who does that with ANY investment these days? If your client is 65-70, they might see 3% returns for the next 10 years in Treasuries. And take out the couple of implosions in equities, and equities would VASTLY outperform bonds. So the numbers ARE correct, but you have to put it all in perspective. If we were having this conversation in 1999, we would be laughing our arses off. Timing is EVERYTHING when it comes to measuring returns. And that's why equity investors have absolutely horrible real-life returns. They buy at the peak, and sell in the trough. If you are buy-and-hold, you can't be buy-and-sell when the sh!t hits the fan.Iceco1d just became my favorite on this entire thread.
The problem with starting out is that you are getting clients because someone else fck’d their portfolio up and you’re dealing with trying to turn Rosie O’Donnel into Megan Fox right before they need to double their $ and turn the spiggot on. Unless they are hooked up to a breathing machine on two packs a day they usually always will run out of $ well before they expected to die. It must have been easier back in the day for FA’s to plan for someone who retired at 65 and was dead by 70. Health care was non-existant then so there wasn’t $100k spent on keeping someone alive for the last 3 weeks of their life. Everyone nearing retirement that “needs” 12% a year for their fixed expenses has a problem but doesn’t want to give anything up that they “need” like a 3rd car for taking their grandkids to the park every first Sunday of the month. Fact of the matter if clients saved more it would be easier to help them plan accordingly because then they wouldn’t have to get 18% a year for the Monte Carlo to work out.
When I first started these were the people that I had the unfortunate luck to be getting in front of and with firm production req’s you took anyone with a pulse (big mistake, I admit it). If everything was rational in this industry things would make more sense and be easier to help people. Clients are irrational, brokers/advisors, analysts, markets, THE MEDIA makes me look up when I go outside sometimes to see if a unicorn is going to land on me from iceco1d’s client “the weekend hunter” shooting it out of the sky. There are 1001 ways to make and lose your shirt in the market. And they all worked at one point if you bought low and sold higher. Hell, if you bought AIG on the bounce it could be called a theory. What I do agree with is being conservative and giving up some of the upside for not getting Tommy Lee standing behind you while you’re grabbing your ankles in the bad times thinking you’re a $2 hooker he’s about to abuse. Clients never care how much you make them until you lose them a lot, and then you can expect an ACAT form being delivered even if you beat the market 7 out of 8 years. While I’d rather be Mr Aggressive and be the big swingin’ dck with returns, 90% of your client’s probably should be in front of Ron14’s Jr FA talking about money markets and CD rates because they don’t want swings in their money. They want the solid line moving upwards at all times but none of the pot holes along the way to grandma’s house. I agree with BG that Just because it’s boring doesn’t mean it doesn’t work.
And that this is probably the best thread I’ve come across. Good job BG throwing a bone in between 30 hungry dogs. It makes you think about how to be a better advisor and what YOU bring to the table even if none of us agree with anyone else.
[quote=BondGuy]
One of the perks of this business is the ability to live in a nice neighborhood. One of the downsides of living in a nice house surrounded by other nice houses is that the solicitations from financial advisors and consultants never ends. Many on this board who live in these types of places can relate.
This week i received not one but two solicitations from MSSB. One from their local in town office and another from an office located in Capital City about 10 miles away. First, the good news- Hats off to these advisors for their prospecting effort. At least that I respect. Next, the messege to us advisors - If you aren't contacting your clients rest assured someone else is. Finally, the bad news - Mailing number one comes from a three advisor group. The group consists of the typical two senior veeps and a junior FA. They have invited me and my guest to a dinner at one of the area's top restaurants. We will be entertained by Blackrock Investments. Opening for Blackrock that evening, Roosevelt Investments will do its act. The entertainment should be interesting. The invitation is entitled: A Consultative Approach to Investing It says and I quote: In today's complex world, investors need to develope a sound investment process that addresses asset allocation, developing an investment strategy, evaluating investment managers, and measuring performance. OK folks, what's wrong with that statement? If you answered, nothing listed in the invitation stopped investors from losing money throughout the past decade give yourself a gold star. Nothing in the invitation talks about protecting assets from decline. There's a reason for that. It doesn't work, it's failed strategy within a broken process. Yet "they" continue to push it. If it doesn't benefit the investor, who does it benefit? On to mailing number two: This one comes from an advisor without the Veep title, so I'm guessing rookie. The letter is four paragraphs long and totally fails by any standard to grab my attention. The letter focuses on retirement asks: How much should you save for retirement? What level of risk can you live with? How much do you need to live on? These are all good questions that we as profesionals ask as a standard course of business. The letter goes on: I believe that MSSB's comprehensive approach to retirement planning sets a new standard in the industry. We begin with your vision for retirement and try to estimate what that may cost to fund. (and here's the part i really love) We'll also look at risk factors-longevity,health care costs and others-that could threaten the lifestyle you envision. Then we'll develope a long-range investment plan that details where your income will come from in retirement. OK, I'll give trying to estimate retirement funding a pass. You either can estimate it or you can't. My question is this: When looking at the risk factors that could threaten my retirement lifestyle who proctects me from this Advisor and MSSB? Ya gotta love rookies. This kid obviously drank the Kool Aid because he believes that MSSB sets a new standard in retirement planning. Did i miss something here? Did MSSB protect it's clients in 2008? Did thier clients have a positive return in 2008? Are they back to even this year? How have MSSB clients done over the past decade? Were they immune to the tech bubble popping and decade opening 45% sell off? We all know the answers to those questions. The point: On main street people have gotten screwed by this process. Retirees and pre-retirees have little to show for the past decade of investing. Many have had their retirement plans scuttled. This firm, my firm , all our firms, did nothing to protect these people. Yet the beat goes on. The fees are racked up and the cash register rings. Whether you call it a Consultative Approach to Investing or Comprehensive Retirement Planning any program that puts investors money at risk without the safeguards in place to protect those assets is a failed process. A well stuffed mattress has outperformed most if not all of the cookie cutter fee based programs on Wall Street over the past decade. What do you call that when you continue to do the same thing and expect a different result? In this case, it should be called criminal.[/quote]
zzzzzzzzzzzzz..... zzzzzzzzzz..... How long did it take you to write that email??
[quote=hedge212]
[quote=BondGuy]
One of the perks of this business is the ability to live in a nice neighborhood. One of the downsides of living in a nice house surrounded by other nice houses is that the solicitations from financial advisors and consultants never ends. Many on this board who live in these types of places can relate.
This week i received not one but two solicitations from MSSB. One from their local in town office and another from an office located in Capital City about 10 miles away. First, the good news- Hats off to these advisors for their prospecting effort. At least that I respect. Next, the messege to us advisors - If you aren't contacting your clients rest assured someone else is. Finally, the bad news - Mailing number one comes from a three advisor group. The group consists of the typical two senior veeps and a junior FA. They have invited me and my guest to a dinner at one of the area's top restaurants. We will be entertained by Blackrock Investments. Opening for Blackrock that evening, Roosevelt Investments will do its act. The entertainment should be interesting. The invitation is entitled: A Consultative Approach to Investing It says and I quote: In today's complex world, investors need to develope a sound investment process that addresses asset allocation, developing an investment strategy, evaluating investment managers, and measuring performance. OK folks, what's wrong with that statement? If you answered, nothing listed in the invitation stopped investors from losing money throughout the past decade give yourself a gold star. Nothing in the invitation talks about protecting assets from decline. There's a reason for that. It doesn't work, it's failed strategy within a broken process. Yet "they" continue to push it. If it doesn't benefit the investor, who does it benefit? On to mailing number two: This one comes from an advisor without the Veep title, so I'm guessing rookie. The letter is four paragraphs long and totally fails by any standard to grab my attention. The letter focuses on retirement asks: How much should you save for retirement? What level of risk can you live with? How much do you need to live on? These are all good questions that we as profesionals ask as a standard course of business. The letter goes on: I believe that MSSB's comprehensive approach to retirement planning sets a new standard in the industry. We begin with your vision for retirement and try to estimate what that may cost to fund. (and here's the part i really love) We'll also look at risk factors-longevity,health care costs and others-that could threaten the lifestyle you envision. Then we'll develope a long-range investment plan that details where your income will come from in retirement. OK, I'll give trying to estimate retirement funding a pass. You either can estimate it or you can't. My question is this: When looking at the risk factors that could threaten my retirement lifestyle who proctects me from this Advisor and MSSB? Ya gotta love rookies. This kid obviously drank the Kool Aid because he believes that MSSB sets a new standard in retirement planning. Did i miss something here? Did MSSB protect it's clients in 2008? Did thier clients have a positive return in 2008? Are they back to even this year? How have MSSB clients done over the past decade? Were they immune to the tech bubble popping and decade opening 45% sell off? We all know the answers to those questions. The point: On main street people have gotten screwed by this process. Retirees and pre-retirees have little to show for the past decade of investing. Many have had their retirement plans scuttled. This firm, my firm , all our firms, did nothing to protect these people. Yet the beat goes on. The fees are racked up and the cash register rings. Whether you call it a Consultative Approach to Investing or Comprehensive Retirement Planning any program that puts investors money at risk without the safeguards in place to protect those assets is a failed process. A well stuffed mattress has outperformed most if not all of the cookie cutter fee based programs on Wall Street over the past decade. What do you call that when you continue to do the same thing and expect a different result? In this case, it should be called criminal.[/quote]
zzzzzzzzzzzzz..... zzzzzzzzzz..... How long did it take you to write that email??
[/quote]
Less time than it took you to read it!
Bondguy- has anyone of these Jehovah’s Witnesses shown up on your doorstep with an ICA pamphlet and Kool-Aid spots on their shirts?
[quote=Odysseus]This is one of the best threads I have ever read on this forum. I have never posted before but I just couldn't resist any longer. I am new to the FA industry, however I have spent the last decade researching issues in political economy in academia. Regarding theories, MPT or otherwise, they should always be used as a guideline, not as hard and fast rules. MPT does seem to provide some loose guidelines when creating portfolio recommendations for a client but MPT doesn't take consumer behavior into account. It assumes consumers/the market are rational and efficient. This is certainly not true since the entire stock market is a game of confidence in price.
I understand that FA's are primarily chasing after the commissions and fee's received from gaining new accounts, so the game rewards rainmakers and not money managers. But surely FA's can make more money from managing their clients dollars (assuming their book is a high AUM) since successful money management will be a big draw to new clients. This seems to be the implicit message that BG was driving at in the beginning of the thread. I think the FA's who want to drink the company kool-aid and sit on their intellectual butts spouting asset-allocation, dollar-cost averaging, and staying white-knuckled to a particular finance model like the MPT, EMH or whatever, while their clients pay the price, will not make it through a bear market/recession. The bottom line should always be, "Am I making my client money or at least staving off losses?" Who cares whether you do it through stocks, options, bonds, index annuities or mutual funds - "Am I making my client money?" Who knows, I could be wrong and out of business before the next year, but I believe I am correct. I leave folks with one question, and hopefully BG will weight in. How many of you use stock image coefficients for your book, as well as using behavioral models to get a quick look at the entire market?[/quote]
You are not correct. You will wash out of the business if you believe managing portfolios will winn you more biz.