As of tomorrow, putting a client’s needs first becomes law

Despite a bitterly contested battle by brokers, banks and insurance companies to kill it, the on-again, off-again Department of Labor Fiduciary rule becomes effective June 9, 2017. Investors should cheer the news. That’s right; it is no longer just a slogan that slick marketers use to woo unsuspecting retail investors into their fee-based, commission-based, fee-sharing web of duplicity and immoral behavior. Since I am already a fiduciary, I tried over the years to advise readers on what is in their best interests since their advisers certainly were not. The new law changes all that. If your advisor, broker, wealth manager, banker, et al provides you retirement advice for a fee, they are required to act in the best interest of their client. This rule covers all tax-deferred investment accounts. Ordinary taxable investment accounts are excluded from the rule. “But hasn’t my broker been acting in my best interest all along?” you might ask. The simple answer is no. Previously, the law states that as long as he or she puts you in a suitable investment they were within the letter of the law. Suitable does not mean the lowest cost or best performing fund, stock or any other financial security. It just means they can’t put a 92-year-old grannie into a two-cent biotech stock that she knows nothing about. A number of brokers, annuity shops and others have already abandoned ship sending out letters to their customers that they will no longer be managing their IRAs, 401(k) s and other tax-deferred accounts. These notifications have distressed many elderly clients, for example, who have established long and trusting relationships with...

Markets are still on a roll

Additional gains propelled stocks higher this week with all three averages closing at record highs once again. Despite the fact that more and more experts are warning of a possible fall in the averages, investors continue to pile into stocks. Should you?   The short answer is no, wait for that decline, unless you have no exposure to the stock market. That would be hard for me to believe if you have been reading my column regularly. My readers also know that the threat of a pullback hangs over the market all the time since we can expect as many as 2-3 declines in the stock market every year. The economy, however, is still growing enough, and interest rates are still low enough, to justify the present level of stock prices. Friday’s nonfarm payroll data was just another example of the underlying support that is propelling stocks skyward. The country’s official unemployment rate has dropped to 4.3%. That is a historically low number and most economists would say we are at full employment now. That’s not quite accurate, however, if you look at the “underemployment rate.” That is the number of workers who are presently working part-time, but would prefer full-time work. If you add that category of workers with those who have a full-time job, you have an overall unemployment rate of 8.4%. That is quite a bit higher than the official rate but is still down from 8.6% in April and the lowest reading of the combined employment data since June of 2007. Anecdotal evidence from several CEOs around the country over the past few weeks seems...

Elder care in an age of confusion

Many Americans confess that they are confused when faced with the myriad of Medicare choices available to them. Others are simply not planning, nor saving enough to meet the challenge of health care costs in old age. In response, a whole new industry has sprung up nationwide. It’s called Life Care Planning, an off-shoot and a natural progression for those practicing Elder Law. What, you may ask, is Elder Law and why has it become so important? Attorneys that practice elder law are essentially advocates for the elderly and their loved ones. They routinely handle a range of legal issues that usually accompany an older or disabled person. Many of these topics have been covered in this column: Medicare/Medicaid planning, Social Security, retirement, long-term care insurance, rising health care costs and more. These lawyers can also help with wills, trusts, special needs, probate proceedings, durable powers of attorney, pet trusts and other estate planning matters. These too have been topics of many of my columns. Life Care Planning takes this concept a step further. In most cases, when someone becomes disabled or reaches a certain age there is a level of care that is required. Life care planners first identify the level of care an individual needs, locates the appropriate care givers, and then figures out and coordinates the necessary private and public resources necessary to help pay for it. But it doesn’t end there. Once we reach a certain age (or our infirmities escalate) someone needs to both monitor and try to predict the next level of care required and most of the time those responsibilities rest on...

Markets climb higher

In the absence of any earth-shaking news, stocks tend to follow the recent trend. That trend, since the election has been up, so… The question to ask: when we can logically expect that trend to change? As readers may recall, my target for the S&P 500 Index is somewhere between 2,443 and 2,475, which I expect we will hit before the end of the second quarter. This week, we broke 2,400, regaining everything that was lost in last Wednesday’s 2% downdraft. Now, that 2,400 price level should act as a support for the bulls. “Are you still bullish?” asked one of my clients yesterday. “That depends upon your time frame,” I answered. In the short-term I am, if you consider that between now and say, the end of June, the markets could tack on another 2.5% or so. That’s not a bad return for 30-some days, and it is far better than the yield on the ten-year, U.S. Treasury Note (2. 24%). However, I recognize that the odds against further gains in the medium-term (this summer) are climbing. For example, the S&P 500 has not had a 3% drop since the August-November, 2016 time period, nor has it had a 5% decline since June, 2016. Given that we have had 16 corrections of 5% or more since the 2009 bottom, we are overdue for some kind of larger pullback. But in the meantime, the technology sector has been the stand-out winner so far this year. The FANG stocks (Facebook, Apple, Netflix and Google) have clearly been responsible for that leadership, representing about half the gains. Since a fair amount...

Are you ready for a 20% correction?

As the stock market makes new highs, investors tend to get greedy. They also begin to believe that what has happened in the recent past will continue to happen in the future. Actually, history shows the exact opposite. It is time to give the potential downside some thought. Hope burns brightly in the equity markets right now. Many on Wall Street believe that the Republican-dominated Congress, led by Donald Trump, “The working man’s president,” will usher in a golden era of strong economic growth and robust financial markets. The problem is that politics and investments make for strange bedfellows. At some point, I expect that the two will part ways and when they do, look out below. Now, with that in mind, have you given any thought to what you are going to do when the inevitable correction does occur? When your $1 million tax-deferred portfolio loses $120,000 in less than a month, will you panic and sell or will you hang in there or buy more? This is the time to plan your strategy—not when the markets are down eight days in a row and pundits are predicting the end of the world. Many indicators I watch are predicting that somewhere up ahead, investors should expect a substantial pullback. Stock market volatility, a sure contrary indicator of market strength, has been declining for the past 15 months. The Volatility Index is at historical lows right now. Then there is the law of physics. What goes up must come down. We are in our eighth year of a bull market. Memories of the 2008-2009 financial crises have faded. It...