Since their founding, Schwab has been disrupting the industry by taking advantage of the semiconductor to reduce the cost of investing for everyone. This is a good thing. Independently, Schwab and Vanguard changed the industry more than any other two companies, and average investors are better for it.
No longer is it the norm for brokers to charge 1% (or more) of a transaction amount just to trade a stock. No longer is it standard for a mutual fund manager to charge in excess of 1% (or more) annually to attempt to beat the market, which they rarely do anyway.
Research and technology made things better, as did market competition.
Your stuff lies to you, and to me, and to everyone else.
We use our stuff to tell lies to others, and they believe them, because we typically don’t let people see our balance sheet or our cash flow.
Our houses tell lies, and so do our cars. Our clothes, our trips, even our Instagram accounts do too. We use them to tell the story of our own financial success, which we know gets translated into success in life (for some weird reason). Sometimes, the success is real, and sometimes it’s fake. But as long as it’s documented well for our neighbors and our family, it doesn’t really make a difference.
I’m in a position to get to peak behind the curtain a bit, and ascertain whether the perceived success has any underpinning in reality, or if it’s all a facade. I get to see the truth. I wish our stuff would tell the truth, too, so everyone could be more honest with themselves and others about their current financial status. It would probably help to provide some better perspective about how meaningless stuff can actually be.
Back at the 2008 Summer Olympic Games, Michael Phelps became known for more than just his historic gold medal accumulation: he also became known for his diet. During the training and the games, in order to keep up with the energy needed to perform at a world class level, he’d put down 12,000 calories a day.
Although he later admitted that the figure was somewhat exaggerated, the quantity of food he ate while training was still rather daunting:
Breakfast: Three fried-egg sandwiches with cheese, lettuce, tomatoes, fried onions and mayonnaise. Two cups of coffee. One five-egg omelette. One bowl of grain. Three slices of French toast topped. Three chocolate-chip pancakes.
Lunch: One pound of pasta. Two large ham and cheese sandwiches with mayonnaise on white bread, plus energy drinks.
Dinner: One pound of pasta, an entire pizza, and even more energy drinks.
Olympic level swimmers burn between 3,000 and 10,000 calories per day, so all that intake was put to good use.
Wouldn’t it be nice, though, to be able to eat whatever you want, not exercise, and still lose weight?
I’m not typically into New Year’s resolutions; I tend to think that if there are things we’d like to do differently, we shouldn’t wait until January to start. And anyway, 80% of resolutions fail by February, so really, what’s the point?
Just about everybody we meet with talks about travel being one of their most important financial goals; the ability to see and share a journey with loved ones is high on the priority list for most of our clients.
My kids are now 7 and 4 ½, and they’ve already been all over the U.S., and have traveled internationally to Europe and Africa. We’ve made travel a priority, and they’re starting to get old enough to appreciate it (although my daughter claimed her favorite part of our spring break trip to Italy was the “yummy Cheerios” [Froot Loops] at the airport hotel in Boston).
Every once in awhile, and sometimes more often than that, markets go nuts. Investors (over)react to some random news, in an attempt to predict an inherently unknowable future, and everyone pays.
We call the market gyrations “volatility,” especially when the market goes down. I’ve noticed that when the market goes up, we don’t call it anything; we just go on about our lives as if markets going up is normal and to be expected, like Mr. Market owes us something.
Since 2002, Crocs (CROX) has sold over 300 million pairs of some of the ugliest shoes on the planet. Their strategy, it seems, is to embrace the ugliness, and design what many consider to be the most comfortable shoe they’ve ever worn, fashion sense be damned.
This approach has led to a bit of an online backlash over the years, as this (one of my personal favorites) Facebook group shows. The group has existed since long before Facebook became the web’s number one destination for middle aged women to sell essential oils and other various multi-level marketing products, and they do nothing to shield Crocs and Croc-wearers from their disdain.
Last week marked the tenth anniversary of the collapse of Lehman Brothers, which, along with the forced sale of Merrill Lynch to Bank of America, and the federal takeover of Fannie Mae and Freddie Mac, triggered the Dow Jones Industrial Average to plunge almost 4.5% that day. Two weeks later, an even bigger 7% drop signaled the spread of the financial crisis, as Lehman’s $613 billion in debt reverberated throughout the financial market. Their bankruptcy remains the largest in history.
Shortly thereafter, Washington Mutual was seized by the FDIC, and their assets were sold to JP Morgan Chase, and Wachovia was acquired by Wells Fargo.
The traditional brick-and-mortar bank is a relic of days gone by, like cable TV and Myspace. If you’re still using one, it might be time to reconsider your life choices, at least as it relates to the location of your checking and savings accounts.
Most of the people I meet with have accounts at either Bank of America or Wells Fargo. In Charlotte, I suspect a significant majority of people bank at one of those two behemoths. I’m assuming most people who have accounts there maintain them out of convenience: They think it’s too difficult to make a change, or they don’t understand how significant the advantages are to banking elsewhere.
Last week, the New York Times ran a story about an advisor at JP Morgan who rang up over $128,000 in commissions in a year, on an account worth just over $1 million:
“After about six months, she learned that the account, worth roughly $1.3 million at the start of 2017, had been charged $128,000 in commissions that year — nearly 10 percent of its value, and about 10 times what many financial planners would charge to manage accounts that size (emphasis mine).” The client has Alzheimer’s, and her 58-year old daughter was assisting her with managing the account and her day-to-day finances. The money was invested with what she considered to be a reputable firm, and she thought she was dealing with a trustworthy advisor. It turns out he’s not actually an advisor; he’s a broker who took advantage of a woman who couldn’t look out for herself, and a daughter who was doing her best to make good decisions on her mom’s behalf.Continue reading “Advisors Behaving Badly: Three Ways to Avoid Getting Scammed”