In Response To President Trump’s Latest Executive Orders

 

executive-order

In Response To President Trump’s Latest Executive Orders: 

Today, President Trump signed two executive orders that will significantly impact the current state of financial regulation in our country. Due to the financial crisis that took place between 2008 and 2010, massive regulations contained within the Dodd-Frank Act were imposed on the financial system. These regulations were designed to help protect the public from potential abuse by financial institutions. While we believe some measures of the regulations were well intended, we believe there have been some unintended negative consequences.  The financial industry was already a heavily regulated industry prior to Dodd-Frank.  

The second executive order President Trump signed is in response to the Department of Labor’s Fiduciary rule, that was scheduled to be effective in April of 2017.  The rule states that retirement advisors must act in the best interest of their clients. This is an enhancement to the  suitability rule currently in place.  Under suitability, advisors are obligated to recommend investments that are suitable, or appropriate for clients, based on the client’s income, investment knowledge and risk tolerance.Under the Fiduciary rules, financial professionals are legally obligated to put their client’s best interest’s first rather than simply finding “suitable” investments.The Fiduciary rule would have resulted in many advisors no longer being able to receive commissions on the sale of retirement products as such commissions would have been deemed to be a conflict of interest.   

At Wisdom Investments, we believe in fiduciary responsibilities and many of you already know we act in a Fiduciary capacity for our clients. This executive order will delay the fiduciary rule until the current administration has the opportunity to review and amend the rule. Clearly these two executive orders send the signal that the Trump administration feels the current regulatory state is unnecessarily burdensome.  These moves by President Trump are another indication that he intends to follow through on his campaign promises. While loosening regulations will ultimately help benefit business, the executive orders will face backlash from the Democrats arguing the decrease in regulation will negatively affect middle class investors.   

In summary, the status quo for investors remains the same. At Wisdom, we believe the Fiduciary standard will eventually be passed and we are supporters of the standard. We currently do business under that standard because we believe the fiduciary standard is beneficial for clients. The fiduciary proposal did have many ambiguous provisions and we are hopeful the postponement and review will provide clarity.   

In the meantime, if you know someone who is upset about the postponement or just know someone who is interested in working with a firm that always puts their clients’ interests first, in a fiduciary manner, have them call us or send us their name and we will contact them.  We place great value in the confidence you show in us and will do our very best to earn that continued confidence.   

Bill Kmiecik & Jose Cuevas 
Wisdom Investments
www.wisdominvestments.com
847-290-0753

Professionally Managed Mutual Funds or Index Funds? What if that’s not the question?

The Christian Financial Planner

barronsCONVENTIONAL INVESTING & INDEX INVESTING VS. EVIDENCE BASED INVESTING
Should you utilize actively managed funds (conventional investing) or use index funds (passive strategy)? This has been a debate for quite some time. For decades, conventional investing is all we knew. Indexes on the other hand weren’t supposed to be the investment. Indexes were designed to be the measurement for conventional investing. After the indexes were created, it was discovered that most of the professionally managed funds couldn’t beat the index. What we’ve learned through years of history and study is that only about 15% of the actively managed mutual funds available have beaten the indexes. So, as an investor if you knew you had an 85% chance of making less money than your designated index, what would you choose? Yes, 15% of those mutual funds did beat the index. The problem is you had no idea before hand what mutual fund was…

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Professionally Managed Mutual Funds or Index Funds? What if that’s not the question?

barrons

CONVENTIONAL INVESTING & INDEX INVESTING VS. EVIDENCE BASED INVESTING
Should you utilize actively managed funds (conventional investing) or use index funds (passive strategy)? This has been a debate for quite some time. For decades, conventional investing is all we knew. Indexes on the other hand weren’t supposed to be the investment. Indexes were designed to be the measurement for conventional investing. After the indexes were created, it was discovered that most of the professionally managed funds couldn’t beat the index. What we’ve learned through years of history and study is that only about 15% of the actively managed mutual funds available have beaten the indexes. So, as an investor if you knew you had an 85% chance of making less money than your designated index, what would you choose? Yes, 15% of those mutual funds did beat the index. The problem is you had no idea before hand what mutual fund was going to beat the index and how much risk they were going to take to do that.

From this explanation, you might say “Great. Thanks. I’ll go buy that index fund now”. And, you might be ok if you did that on your own. Chances are you would be better off if you bought the index fund and held onto it than if you had invested conventionally. However index funds have their own set of problems. These are problems you don’t hear advertised due to the massive amount of inflows into index funds right now. Plus, you have billionaire investor extraordinaire Warren Buffet telling you to buy index funds. A downside of utilizing index funds are the Hidden Costs. One of the hidden costs of owning an index fund is something called “Reconstitution day”. An index fund must follow an index or else it’s not an index. If a stock is no longer part of an index, what happens? The stock is moved out of the index. What happens when a stock is performing well and has increased in size? It moves into the index. The problem is this all happens on the same day. Everyone knows it’s coming. So, what happens? The stocks being sold decrease further in value and the stocks added to the index increase in value. By the time this happens, you have lost money on both ends.

There’s a third approach. This third approach was designed by noble prize winners from the University of Chicago and is implemented through Dimensional Fund Advisors. Unfortunately, the average investor can’t walk into Dimensional funds and use this approach. But, we will gladly help you incorporate this strategy! We believe this third approach is a better option. Actually, it’s been proven to be a better investment. Rather than trying to predict what’s going to happen in the market, we embrace the market pricing. We say, “You know, most of those guys on Wall Street are pretty smart and they have way more information than we do”. So deciding that most of the analysts have it right, we move to consider expected return. We know that not all stocks are going to have the same return. The same is true in the real estate market. The value of a Beverly Hills  home is going to grow faster than homes in Cleveland. Even though you know the Beverly Hills home is going to appreciate faster, you might still want that Cleveland home because it’s also going to appreciate. We may not want to own every home in Cleveland, but we know we want some of them. Translate this to stocks and you have an idea of why we think certain stocks should and shouldn’t be in our portfolio. As fund managers at DFA pick these stocks they start to discern, “is the stock too expensive?”, “is it right for the portfolio?”, “can we get the stock cheaper tomorrow”?  Then by eliminating stocks that are too expensive or have appreciated too much, a basket of stocks is created for clients to invest. In addition, it’s been proven over time that value stocks outperform growth stocks with less risk. Knowing this, portfolios are created with a tilt towards Value. A quick note: 82% of Dimensional Funds have beaten their index.

This is just one of the many reasons you should choose to work with our firm. We’d love to introduce you to evidence-based investing. Email me today to learn more about how this approach can help you with your goals.

Best,

Jose Cuevas
Vice President
Wisdom Investments
jose@wisdominvestments.com
847-290-0753

 

 

Investment advice or sales pitch? New rule will make it clear

THIS POST WAS WRITTEN BY GAIL MARKSJARVIS OF THE CHICAGO TRIBUNE
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Investment advice or sales pitch? New rule will make it clear

Gail MarksJarvis

On Money

 

Should you trust the adviser who’s telling you what to do with your money?

Unfortunately, many should not. The sad story is that if you are like most Americans, you are easy prey for the money advice business that’s involved with over $14 trillion of Americans’ retirement savings.

Typically, people seek out professional advice about their money because they don’t have a clue about how to proceed. But investing properly is a mystery, the fine print that goes with products like annuities is overwhelming, and finding the right person to help can be just as perplexing.

Too often, Americans end up in the arms of advisers who aren’t really there to protect and help them. They are salesmen or saleswomen, not true advisers who put clients’ needs first. These brokers aren’t rewarded by their employers for steering you into top-quality investments or insurance at the lowest price. They are hired to sell, just like the guy on the car lot. And that means many will sell what’s most lucrative to them and the firms that keep them on the job — not necessarily what’s best for you.

These so-called “advisers” may have titles like “financial consultant.” They may devote time to little league, community organizations or religious institutions. They may have clients who are rich or famous. But what they often won’t tell you — unless you probe for it — is that they aren’t paid to give you the best advice. And amid the naivete of some clients, their sales behavior can be like taking candy from babies. Americans are wasting about $17 billion a year on unnecessary fees in connection with investment advice that isn’t aimed at their best interests, according to the government.

Faced with the prospect that millions of Americans will run out of money in retirement and become a burden on government, the U.S. government took action last year to try to take some confusion out of the advice business. The Department of Labor is imposing what’s known as the “fiduciary rule” to improve the chances that when an adviser gives money advice it’s actually untainted advice — best for you, and not a disguised sales pitch. Numerous investment and insurance firms, plus business organizations ranging from the U.S. Chamber of Commerce to the Insured Retirement Institute and the Securities Industry and Financial Markets Association, sued to stop the new rule.

Those fighting the fiduciary standard claim that tightening rules around advice will lead firms to stop helping clients, especially people with little money in individual retirement accounts and workplace plans such as 401(k)s. The stakes are huge for the industry: There is about $25 trillion in U.S. retirement assets, including about $14.4 trillion in IRAs and plans such as 401(k)s, that would be subject to the fiduciary standard.

The industry’s fight continues, with U.S. Chamber President and CEO Tom Donohue noting in a recent blog post, “we are urging immediate action to undo the Department of Labor’s Fiduciary Rule.” With the Obama administration leaving office, and new Republican leadership promising less government regulation, the fight against the fiduciary rule goes into a new phase.

Fearing an overturn of the fiduciary standard, the Consumer Federation of America in the last days of the Obama administration circulated a report that takes aim at investment business lobbying efforts.

Barbara Roper and Micah Hauptman of the federation examined the websites of over a dozen brokerage firms and found that they emphasize “advice” and help “planning” for retirement. Yet the report said the lobbyists for those same firms have been fighting the fiduciary rule by claiming that they don’t promise advice and that clients know the consultant sitting across the desk from them is only a salesperson.

“Their marketing is grossly deceptive and securities and insurance regulators have an obligation to step in and bring a halt to the misrepresentation,” the report said.

As it now stands, when April arrives the new fiduciary rule will start being phased in with investment professionals having to live under tougher controls if they want to give advice on IRAs and 401(k)-type plans.

Under the fiduciary rule, brokers will have to make it clear that they are salespeople. People who give advice will have to declare themselves “fiduciaries” on paper.

But don’t take comfort in these new protections yet. First, know they aren’t in place now. So if you want to determine if you can trust an adviser now, you must ask if he or she is a fiduciary and examine their two government-required forms: ADV Forms I and II. Certain credentials — such as a certified financial planner or registered investment adviser designation — will help you spot fiduciaries. But also check out the person on BrokerCheck (www.brokercheck.finra.org) to see if your adviser or the firm has been in trouble with regulators. On the ADV form, also examine whether the person gets commissions — a business arrangement that could mean the adviser collects a fee based on what he or she sells you.

To see if your adviser has been picking solid or weak mutual funds for you, type in the name of your fund at http://www.finance.yahoo.com. Then go to “performance” for that fund and scroll to “trailing returns benchmark.” See one year, five year and 10-year performance. You want a fund that consistently has had a return at least as strong as the “category” return for more than a year.

If your adviser is picking stocks for you, ask the adviser to show you how your stock portfolio has performed compared with a benchmark like the Standard & Poor’s 500 index for large company stocks or the Russell 2000 index for smaller companies.

gmarksjarvis@chicagotribune.com

Twitter @gailmarksjarvis

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What exactly does financial planning entail?

financial-plan

 

wisdom-logo

For many, the idea of financial planning is simply investing.  While investing is a large part of financial planning, it is just one of the many services we provide to help our clients.  Financial planning can best be described as an all encompassing approach to managing your finances.  While many advisors call themselves financial planners, many are not.  This is one of the reasons why some people believe financial planning is only about investing.

For us, we take a comprehensive approach to financial planning. That means we look at your investments, debt, taxes, insurance, wills, trusts, & physical assets to determine your likelihood to attain your goals and to determine what your future cash flows could look like. We serve our clients as their life advisor, with a belief that financial planning is an ongoing process in which we help and coach clients to reach their personal financial objectives, including, financial independence, estate preservation, and a legacy of wealth, significance, and values.

The financial planning process itself involves multiple steps. First we gather all of the pertinent information to see your entire financial picture. We then draft a financial plan.  Our financial plan will tell us how your investments should be allocated and what types of investments are best for you. The plan will also address your current insurance needs. Do you need long term care? Do you have enough life insurance? Next, we’ll address your estate planning needs and help you find an attorney you can work with whom you’ll trust. We then look at your taxes to ensure you are not paying Uncle Sam more money than is necessary. During this time, we’ll also address any other goals you might have in mind.

The next step is ongoing portfolio management. We work with well known companies like Fidelity, VanGuard & Dimensional funds to help you manage your assets. Constructing your portfolio is just the first part of the process. We must continuously analyze your portfolio to ensure you are positioned appropriately for current market conditions as well as ensure you are invested according to your current risk tolerance.  Portfolio rebalancing is crucial to ensuring your investment allocation is appropriate.

From there we’ll meet with you periodically to review your investment performance and monitor your financial plan. As humans, we typically have at least 2 life events per year that could affect our financial plan.  Think about your last year.  Did you start a new job? Get promoted? Experience family loss? Have a baby? Buy a home? Get Married? Get Divorced?  Have a family member get sick? Send a kid to college? These are all examples of life events that would arouse a need for change with your financial plan.  Once we’ve met to determine what changes have happened in the last year, we update your plan to outline the necessary changes to stay on course.

A little bit about Wisdom Investments: We have a FIDUCIARY responsibility to act in the best interests of our clients. What matters most to us during the financial planning process is that we focus on what matters most to you. We help you align your desires with your goals to accomplish your financial objectives and stay true to your values. You can expect our highest level of commitment to this approach as when it comes to your money there is nothing more important than your goals and your values.

Do you know someone who needs our services? Please email us!

We provide financial planning & investment management advice for a fee.  We use the most technologically advanced financial planning software available.  We use Fidelity as your custodian to hold your assets. Wisdom Investments is a privately owned, independent financial planning company. We are not a broker. We are not compensated by third party companies to provide Investment advice. We have been serving Arlington Heights and the Northwest suburbs since 1999. We have a reputation built on helping successful individuals achieve their financial planning goals. In addition to providing Comprehensive Financial Planning advice, we provide a full range of services including, but not limited to, Retirement Planning, Investment Planning, College Planning, Estate Planning, Insurance Planning, and Tax Planning. Our Founder and President, Bill Kmiecik leads the organization with more than 30 years of financial services experience. Mr. Kmiecik is a resident of Arlington Heights and belongs to several organizations, some of which include, The American Institute of Certified Public Accountants, The Illinois CPA Society, The Arlington Heights Historical Society, The Arlington Heights Chamber of Commerce (member of Financial Review Committee), Rotary Club of Arlington Heights (Past President).

We would love the opportunity to show you how we are different than most financial companies. In this business, trust is important.  Trust is not automatically given. Trust is earned.  Come see why clients have been working with Wisdom Investments since 1999.

Blessings,

Jose Cuevas
847-290-0753

josecuevas_2016-8

Jose Cuevas                    VP Financial Planning Wisdom Investments

 

 

 

 

I have a retirement plan at work……

work-until-you-drop

Today I want to share part of a story of an interaction I had while interviewing a prospective client.  During the interview process is when I get a general understanding of what a client’s financial situation looks like.  Last week I met with someone who’s been trying to do all the right things.  This person has saved.  They have been frugal. Other than their home, they don’t have any debt.  But, what I found out was the entire time this person was saving into the company retirement plan, the money invested was invested far too conservatively for the desired risk tolerance level.  When I asked the client, “why was the money invested so conservatively?”.  The answer was, “The investment company never told me I was invested improperly”.

asset-allocation

Why am I sharing this? Because this is not the first time I’ve heard this exact same answer.  At some companies, you receive virtually no help when you set up your retirement plan.  You receive an enrollment form with some investment choices and you close your eyes and point your finger.  Some companies actually have representatives help set up your account and make choices for you.  This was the scenario mentioned above.  Now what’s happened is the client thinks a representative is going to help with managing the account and the rep never does anything after the initial setup. The allocation stayed exactly the same throughout the client’s career!  That’s a problem.

My hope from writing this post today is that you will pull up your 401k, 403B, 457 or IRA and check your allocation versus your risk tolerance level. My hope is that you will reach out to a financial advisor and say “I’d like to know if I’m invested properly?”.  Many investors tend to set their accounts up and let it ride while hardly ever making changes to the account. Other investors pull up the 401k account daily and make changes off every word that comes out of Jim Cramer’s mouth! You need a better plan.

jim-cramer

Part of the reason I went into business as an Independent, Fiduciary, Fee type financial advisor was to help ensure people like my Mom and Mother In Law would have a place to turn they could trust.  Yes. Having a financial advisor costs money. But, I can assure you that for most of the population, not having one will cost you much much more. As investors, you now have more choices than ever when managing your assets.  This is inherently good as you have more information to make sound decisions. This can also be a bit paralyzing because you don’t know what information is right for you or what account or investment or even what kind of advisor is right for you! That’s why you need to interview prospective advisors. You have to research the kind of person you want to help you plan for your future.

Going back to the above referenced client, this person is now in a position of trying to play catch up to meet the retirement goal.  How unfortunate is it to feel like that when you thought you were doing all of the right things throughout the years?   Just because we have 401k plans at work doesn’t mean we are planning for retirement.  It just means we’ve started something for retirement. As you think about retirement, you should be thinking about things like: “I want to have a home near my kids and a winter home” how much do I need to save today to make that happen? What kind of return should I expect on my money? How does this goal affect my goal of paying for my kid’s education? Paint a picture for yourself of what retirement looks like.  Think about the entire big picture.  For me, I anticipate working for non-profits. So I don’t expect to be fully retired. But, I’d like to have a home in the woods for the summers and a home in Florida off the ocean for winter.  I’d like to take one year and travel via RV throughout the United States to visit every state with my wife.  I plan to travel internationally and I plan to take my kids and their kids with me!

plan

My point is to do these things, I need a plan.  I can’t wing it.  I need to know the amount of money I need today to make this happen.  With money, the longer we wait to develop a plan, the more money we lose due to compounding growth.  If you knew you needed to save $500 per month to attain your goals and you are currently saving $400, you would probably start making different decisions so you could attain your goals in the future.

Find an advisor. Set a plan. Stick to it. And, revise it as necessary. Don’t just rely on your company retirement plan to get you where you need to be.

Thanks for reading.

If you are looking for a financial advisor, please contact me at 847-290-0753 or send me an email to jose@wisdominvestments.com

Many Blessings,

Jose Cuevas

 

4th Quarter & Year End Review, Wow What a Year!

The Christian Financial Planner

We hope you enjoy the 4th Quarter and Year End Review.  There were a plethora of events we experienced last year including Brexit, the worst two week stretch to start a year, Negative Interest Rate bonds in Japan, natural gas lows & Donald Trump. Even with all of the turmoil we felt domestically, you will see the United States was still the place to be with your money last year. Enjoy the piece “The Power of The Markets” which illustrates the power of the markets via the price of a pencil!

Click below to download the report!

qmr_q4_2016_landscape

To learn more about how we help our clients “Make Smart Decisions With Their Money”, Give us a call at 847-290-0753 or visit our website www.wisdominvestments.com.

Many Blessings,

Jose Cuevas
Vice President
Wisdom Investments

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