Monthly Archives: September 2011
Retirement Accounts Will Usually Screw You Unless You Read This Article First
Oh yeah, this guy definitely doesn't know what he's talking about.
Full disclosure: I used to work in management consulting for the financial sector, so I may be a bit biased against the people who work in this field. But based on the events of the past 5 years, I’d say my dislike of this industry and the blowhards who work in it is not all that misplaced.
Your Retirement Account Means Nothing to Big Brokerage Firms
I’ve been having some issues with the “Financial Advisor” who provides retirement account services for my company. I won’t name the specific firm, but let’s just say any of the advisors who come out of the big, outdated, slow behemoths like Fidelity, Prudential, Edward Jones, etc., are all pretty much the same. When I started with my current firm almost two years ago, I went to see the advisor to pick out my retirement funds (the only options were mutual funds or bonds, not securities) and designate my contribution amount. Since I’ve never been good with saving, I’ve always been good about contributing to a retirement account since it doesn’t change my pay amount by much and it reduces taxable income. That’s fine. I tried to get into a friendly conversation with her to explain my background and decent knowledge of investing, but she wasn’t too interested and she offered zero advice on choosing funds. Obviously, she can’t say “Choose this fund and you’re money”, but she could have explained key factors to look at, why historical performance doesn’t really matter, what websites are useful for reviewing funds and other general information. But she didn’t. About six months ago, I tried to call her to do a friendly “check in” of how my account was performing. It took a couple back and forth calls with her assistant until she called me, and I know it sounds like I’m just ranting here, but she sounded pissed to have to be talking to me, a lowly retirement account holder. This was the gist of the conversation:
Advisor: “What is your question about your account?”
Me: “I wanted to look over the funds I’ve chosen and how they’ve performed and see if you think I should consider better performing funds.”
Advisor: “There’s no need to come in for that. You can check Morningstar.com and get any information you need. At your account value (about $3K at the time), there’s no need to look at it all. Until you’re at about 100K in account value, there’s normally no review we do of your investments.”
Me: (dumbfounded silence). OK then, well thanks for the advice.
Advisor: Absolutely! Yes, like I said, until you’re at about $100,000, we don’t really review your account as far as strategy.
She got off the phone as fast as she could. I admit, I should have been more assertive, but this woman throws me off every time I talk to her. When am I EVER going to have $100,000 in my retirement account for this company based on my salary? I’m not saying I’m not going to get there, but it’s not going to happen at shitty Edward Jones (ah, it slipped, but I promise the rest aren’t any better) with their lack of investment advising and their ridiculous idea that you need ONE HUNDRED THOUSAND DOLLARS before you can even start considering your investment strategy. I hate to break the news, but the person who has $100,000 was very actively managing his or her money and making investment decisions all the time to get there. If they got there simply by sitting in the same funds for years and years, then they were making much higher contributions than the average worker. If you’re maxing out your contribution at $15k a year, then yes, you probably will get to $100K in 5-8 years. But I still don’t think they would get there without research and reviewing their account. Because mutual funds do not outperform the market year after year, they have up years and down years. Yes, there are some strong funds, but you can’t go off reading a prospectus or two and expect to win big. I think the least the advisor can do is sit with you and be honest about all of these things, instead of showing you their chart about exponential growth if you start investing at 21 instead of 31. That’s a marketing gimmick. I’ve been contributing to retirement accounts since 2005, and they’re all losing money on a cost basis, because I haven’t made intelligent, well-researched decisions on funds. I just haven’t committed the time to it, although I am going to now. So even though my account is measly, her lack of respect epitomizes what’s really going on.
Wait! My battle with my so-called financial advisor isn’t over yet. I am invested in 4 funds, which are all Franklin Templeton funds, and they were all doing well until about May 2011, and as I believe we are in a market correction, I am not too concerned that they are slightly down from where I bought them. I believe they are good funds and will allow what’s been invested so far to sit there. But I had a revelation as to how exactly the brokerage firm invests my money. I make a bi-weekly contribution to my retirement account, which my firm sends over to them, and they automatically make purchases as soon as they receive the money. This means there is ZERO consideration of share price of the fund, even though they could set “buy” prices that I determine to be a fair buying price for the fund. But what happens in retirement accounts is that you choose a group of funds to invest in and you designate a percentage to each fund. Then the firm can basically go about buying shares willy-nilly, even if the price has climbed significantly since you first chose (making it more expensive to you), or dropped significantly (which may also be adverse, considering that means the fund is now performing poorly). Both of these may be opportunities, but I think it doesn’t make sense to simply buy shares every time a contribution is made, as shares fluctuate and there are good opportunities within those 2 week periods. So I called again with the instruction that until further notice, I want all of my contributions to sit in cash, until I can figure out what is the best next move. My advisor sounded annoyed as usual.
Advisor: You want your contributions to sit in cash?
Me: Yes, because you don’t consider share price when you buy the fund, right?
Advisor: (raised voice and pitch) Absolutely not! We do not look at share price for retirement accounts. They are automatic purchases.
Me: Right, so that’s my point. I don’t want that. So,
Advisor: (cuts me off) Well, I don’t know if you’ve ever invested in the market before–
Me: (cut her off) Yes, I have invested in the market. I’ve been investing since 2005 and no mutual fund I have chosen has outperformed or even performed the market on a long-term basis. I have actually lost money. So just making purchases on an outdated strategy from 2 years ago is not making me money.
I think I did get a word in this time around, but she still was so incredibly condescending that it left a lingering bad taste with me. Anytime someone says “Absolutely not” in response to a question, it’s frustrating. It’s the deputy, it’s the final word, the gavel slamming down, and it’s cringe-worthy. I was being polite but asking honest questions, and this advisor is crazy abrasive and always reminding me that this is nothing but a retirement account, as if she’s so busy handling Taylor Lautner’s investments (I live in LA), that she can’t be bothered to consider my more-annoying-than-scraping-gum-off-the-bottom-of-her shoe retirement account. Well, my apologies. But at least now I know what’s going on in my account and what to consider for future investments.
To Recap:
Advice for Taking Control of Your Retirement Account
- Investment advisors that are your company’s official advisor are usually worthless. I keep hoping to meet a great one, but I haven’t yet. They will not provide you guidance or advice, and they consider you worthless because your account doesn’t generate a ton of fees for them or have at least $100k starting out.
- Mutual funds are only a decent investment. Past returns are no indication of future performance, and there are fees to consider for the mutual fund as well.
- Don’t let people in the financial industry act superior to you. Whether it’s the banker or the financial advisor, the majority are as clueless as the rest of us. Oh, you don’t know if I’ve invested in the market before, Ms. Crabby Advisor? Just set them straight. Politely, of course, but be assertive. There is nothing wrong with saying, “I am doing my research to learn more about investing and retirement strategy and if you can offer specific advice, I would appreciate it.” They also have no real interest in your account performance because they do not benefit any more when you do well. Life is too short to consider people to be the authority just because they say they are. Your mahogany and leather executive accessories don’t help you manage my money any better.
- Investing research is more tedious than other types of research. Don’t try to find the magic guide or secret. Start with the basics: The Alchemy of Finance by George Soros, The Intelligent Investor by Benjamin Graham and Seeking Alpha. And there’s a ton more reading you’ll need to do if you are serious about understanding the market (I know I don’t, I’m just getting started).
What do you think? Have you done well in your retirement accounts? How often do you track your progress? I’d love to hear from you!
Pardon the Interruption, from BLACKONOMIC$
Note: Thank you to Mr. Jim Clingman from Blackonomics.com for allowing me to repost his article here! It was well-written and addressed to the black community in America, and everyone can relate to the powerful distractions that clamor to devour our time and our minds. Check out his website if you want more where that came from!
Considering the fact that Black people are so entrenched in the distractions of this world, I think it’s appropriate that I beg your pardon, Black America, in order to get a few important points across. Although for 16 years now I have sounded the economic alarm via this newspaper column, four books, and numerous speaking engagements, it is shameful that we have failed to act upon the messages of our ancestors and contemporaries. There is still a need to “capture” our attention when it comes to economic empowerment. Seems we have to be tricked, embarrassed, and beat-up before we start running for true freedom. So can you spare a few moments to read this missive, Black America? I beg your pardon for the interruption.
Pardon the interruption of your sports conversations, brothers and sisters, but you are in big trouble. The players, coaches, and team owners have their millions and are very secure; your team is not even in the game.
Pardon the interruption to your anger or euphoria, and your inconsequential rhetoric on Libya; Black folks in this country are unemployed in some areas as high as 50%. You are still being discriminated against when it comes to access to business, contracts, capital, and justice.
Pardon the interruption of your obsession with Will and Jada splitting up, Kanye and Jay Z’s new album, and Tiger’s golf game, multi-millionaires every one of them. You are trying to pay your rent, hold on to your homes, and feed your families.
Pardon the interruption to your wondering who will win the dancing and singing contests on television. You are doing the unemployment line-dance (“Now walk it out, y’all”) and singing “Stormy Monday” Blues in response to your current economic condition.
Pardon the interruption to your unceasing and loyal dedication to making everyone else in this country wealthy by buying their stuff and boycotting your own. Even with nearly $1 trillion in annual aggregate income, the wealth of Black people is 20 times less than that of whites.
Pardon the interruption to your fascination with other folks’ hair. Paying hundreds of dollars for someone else’s hair, as if God didn’t know what He was doing when He gave you yours, is only exceeded on the ridiculous scale by the dollars it takes for you to “get it done.”
Pardon the interruption to your penchant to have the best of everything, even at the highest prices. You are so silly to brag about how much you pay for things, while others brag about how little they pay for the same items. You love to go to bars and order whatever Champagne or Vodka some rapper might be drinking – even at hundreds of dollars per bottle. Only top-shelf for Black folks, despite the fact that you don’t make or distribute most of the products you purchase. Veblen’s “Conspicuous Consumption” concept ain’t got nothin’ on you.
Pardon the interruption to your shooting and robbing one another. It’s not enough for you to be under assault by outsiders, you feel compelled to take out your frustrations on yourselves rather than work together for your own benefit. Young people running rampant, wielding guns and having no trepidation at firing them at one another, at the police, or anyone they come across, speaks volumes about the overall condition of your families, your leadership, and your collective internal integrity.
Pardon the interruption of your meaningless conversations about Republicans and Democrats, Liberals and Conservatives, MSNBC and Fox News, and your preference of one talking-head over the other. They have their six and seven-figure salaries and can “talk” about your problems all day long. What do you have, and where will all the talk get you?
Pardon this interruption to your complacency, your apathy, your fear, your doubt, your perceived helplessness, hopelessness, and powerlessness. Pardon this interruption to your stream of consciousness, your psyche, and your apparent overwhelming desire to shut out reality. Pardon this interruption to your indifference and unresponsiveness to the life and death issues you face. Pardon this interruption to your proclivity toward the temporal, trivial, and the trifling things of this world. Pardon this interruption of your inclination to allow the silly and symbolic to take precedence over the serious and substantive. Pardon this interruption of your desire to continue majoring in the minors and getting caught-up in practices that matter little in the larger scheme of things.
Yes, pardon the interruption, Black America, but I just had to shake you once again; I just had to try to awaken you once again. I love you too much to let you stay in your comatose state, a state of inactivity and numbness. I care too much about our children’s future to sit back and not speak out about our condition and not get involved in initiatives to improve our situation. I respect our elders and ancestors too much to ignore their sacrifices for our economic freedom, some having died “on their way to freedom.” Are you on your way?
So, once again, for the umpteenth time, pardon my interruption of whatever you are hiding from or running from or afraid of. I hope you will forgive my intrusion into your fantasy world. But most of all, I hope you will move beyond the mundane and heed this call for appropriate action to economically empower yourself and our people.
-James Clingman, author of Blackonomics: The Way to Psychological and Economic Freedom for African Americans
If Rich People Were as Stupid as Nancy Botwin, We’d All Be Selling Them $500 Dime Bags
Weeds isn’t what it used to be, but at least Nancy’s still hot and Doug’s still Doug.
Sigh. I used to love Weeds. Great show. Excellent dystopian suburban humor. But then it got ridiculous. Ventured into fantastical and the absurd. And STILL no one killed Nancy.
Which brings me to the second to last episode of the seventh season, “Qualitative Spatial Reasoning”. That title alone brings me to the point of this post. I can’t stand the snooty, faux-intellectualism of the last few seasons of Weeds, as if Jenji Kohan can take any sort of topical issue, run 5 minutes of research on it, douse it in her dark humor and thus totally capture it. Uh, no. These writers have definitely not seen the inside of a hedge fund. Yes, those guys are fratty and elitist, but they are not mentally challenged. They had to be very sharp and very tireless to get to where they are and if they were running a Ponzi scheme they’d never say a word about it aloud with the likes of Nancy in the room. But what was even more irritating (Yes, I’m drinking some Haterade) was Nancy receiving funding from this hedge fund (More confused writing. Is it a hedge fund or a private equity firm or a venture capital firm? Oh you didn’t know there was a difference Jenji? You thought you could just interchange them and sound smart and relevant and well-read?) based on the fact that she was selling dime bags of weed to wealthy customers for $500 each by marketing them as a luxury product from Provence in a fancy box with a bow on it. Nice try, Nancy/Jenji. But no one is going to buy dime bags for $500, ever. If it was that easy to market products to the affluent customer, we would all be selling cheap stuff marketed as high-end stuff and making a killing. The affluent customer doesn’t just buy it because it’s expensive. What happened, you overheard a conversation somewhere and you decided it’s high time someone ridiculed overly conspicuous consumerism? Do you know the arena where cheap crap is marketed as a high-end product and makes awesome profits? Yes, it’s celebrity-licensed or designed merchandise!
This K-Dash by Kardashian dress was selling on QVC for $109. Marked down to $75, it’s STILL ugly.
This animal-print garbage bag was mass-produced somewhere in China to be passed off as a high-end designer item that is worthy of a $109 price tag. Sadly, the only people who are gullible enough to buy it are those unfortunate “aspirational” consumers, who would like to buy luxury goods, but can only afford the celebrity-knockoff versions of them. It honestly makes me sad when people buy celebrity brands. They are usually terrible (although Jessica Simpson has quite legitimized her empire) and don’t last longer than a few seasons. I bought a pair of Paris Hilton heels once because they were basic and only $25. Then my dog chewed them. I figured it was my lesson to never buy celebrity brands again.
What were we talking about? Oh yeah, Weeds. The show’s gotten lazy and it makes everything look so easy (Ponzi scheme! Venture funding! Arms dealing!). The wealthy customer is not so easy to trick. Yes, they like to brag about how much they paid for something, but if they were bragging about a $500 dime bag, they would get laughed out of whatever swanky event they were at. As Doug Wilson put it, “These are well respected members of high society; they do coke.”
Debt Pitfalls: Not Understanding Subtle Marketing
I like understanding how the effective marketer works. It’s good to know how these snakes work, because if you know their tricks you are less likely to fall for them. Things like “2 for $4″ deals when it doesn’t say “Must Buy 2″, means that you could just buy one item for $2, but they have implied you should buy 2 and now you are more likely to. There are tons of other examples (Macy’s revolves its entire marketing strategy around being a “promotional” store and they always have either a sale, coupon or other special deal that entices customers into the store. Really, how many 1-Day Sales can you have?), but I liked this article’s focus on the tricks of the grocery store, especially Mr. I’m-So-Hot-Right-Now Whole Foods. I think the fact that Dole has determined what color banana more people will buy is indicative of the fact that we are all spending way too much time on all the wrong things. Check it out.
