How does the President want to modify tax rates?
The wealthiest taxpayers could be hit hard if the tax hikes in President Obama's 2013federal budget proposal become law. The good news is that the tax changes outlined by the President in mid-February may be softened by eventual bipartisan compromise. As currently proposed, they would impact the wealthiest Americans on several fronts.
The Bush-era tax cuts could expire for the rich. As envisioned, the top tax rate would reset to 39.6% for individuals earning more than $200,000 a year and couples earning more than $250,000 a year. The EGTRRA/JGTRRA cuts would be extended for the vast majority of taxpayers.1
A new kind of AMT could emerge. President Obama would like to see a "Buffett rule", basically a simplified take on the Alternative Minimum Tax. This new rule (inspired by Warren Buffett's now-famous New York Times editorial) would impose a 30% income tax floor for anyone earning more than $1 million a year. Yet while President Obama has mentioned this idea in speeches, the proposed 2013 budget contains no details of it. The White House says that the President would prefer to get to the details after broader revisions to the tax code. Even then, a "Buffett rule" might be hard to implement in practice.1,2
Tax rates on capital gains & dividends would rise. Long-term capital gains would be taxed at 20% instead of 15%. Dividends amassed by businesses and taxpayers in the highest income tax bracket would be taxed as ordinary income, at 39.6%.1
Investment income could be reduced by a healthcare surtax. As a condition of the Health Care & Education Reconciliation Act of 2010, the highest-earning U.S. households would be hit with a new 3.8% Medicare tax on unearned income in 2013.1
This levy would only affect taxpayers who realize huge amounts of investment income; gains exceeding $250,000 for an individual or $500,000 for a married couple. (The Tax Foundation estimates it would affect 2% of U.S. households.) For these taxpayers, dividends would effectively be taxed at 43.4%. The tax would also apply to income derived from real estate investment.1
Deductions would be decreased. The President's 2013 budget would cap deductions of qualified expenses at 28% for those in the top two income brackets. Right now, these taxpayers can deduct 33% and 35% of qualified expenses. Non-profits, the real estate industry and state and local governments seem likely to disfavor the cap.1
Estate taxes would rise. In 2012, we have a 35% federal estate tax with a $5.12 million individual exemption. The proposed 2013 federal budget would put the estate tax at 45% with a $3.5 million individual exemption.1
Other tax proposals. The envisioned 2013 federal budget would also:
• Make the $2,500 American Opportunity Tax Credit permanent
• Make the R&E credit for businesses permanent
• Authorize gradual increases in estate and gift taxes and revise rules for taxing different forms of trusts
• Offer a tax credit to employers expanding payrolls in 2012 (of up to 10% of the increase in wages subject to payroll taxes)
• Carry the bonus depreciation extension (on new equipment) for businesses through 2012
• Hike taxes on global corporations headquartered in the U.S. across the next ten years through less lenient foreign tax credits and restrictions on opportunities to defer taxes on foreign profits
• Recoup costs from the 2008 Wall Street bailout through fees charged to financial institutions holding more than $50 billion in assets
• Cut assorted tax breaks for energy companies3
How much of this budget draft will make it through Congress? Good question. Much of what the President is proposing may not be realized, but with the federal government badly needing to reduce its deficit, many of these changes could end up taking effect. Taxpayers and their advisors will want to keep their eyes on Washington.
Citations.
1 - money.msn.com/tax-tips/post.aspx?post=4bb02697-fe82-4c9a-ad0f-a164f50ce7c8 [2/17/12]
2 - www.nytimes.com/2012/02/17/us/politics/white-house-sees-buffett-tax-rule-more-as-a-guide.html [2/17/12]
3 - www.kansascity.com/2012/02/13/3426281/obamas-proposed-tax-hikes-at-odds.html [2/13/12]
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.
Monday, February 27, 2012
Tuesday, February 21, 2012
LET THE TAX DEBATE BEGIN
Here's a great way the British government could balance its persistent budget deficit: http://www.youtube.com/watch?v=5OKo3hOp1SA&feature=related. But perhaps we should avoid this solution in the U.S.
Closer to home, just a week ago, the smart money in financial circles was betting on a year of tax gridlock, punctuated by a bruising battle over the extension of the payroll tax cut.
Then, suddenly, everything turned around. Tomorrow (Friday), a bipartisan House/Senate committee is expected to bless a new payroll tax cut extension that was negotiated without any of the bitter partisan posturing that everybody expected. The cut will reduce Social Security taxes from 6.2% of income to 4.2% for workers through December 31, and put up to $130 billion back into the pockets of lower- and middle-income workers.
The same bill extends unemployment benefits from 59 weeks to anywhere from 89 to 99 weeks, depending on the unemployment level in each state, and will require the recipients of unemployment insurance payments who have not finished high school to enroll in a GED program. States could also create voluntary training programs for those seeking jobless benefits.
In other provisions, doctors who treat Medicare patients would avoid seeing their payments cut. To partially offset the costs, federal workers would have to pay more into their pension plans, and $5 billion will be cut from the new health care law.
If you add the $100 billion that the measure will add to the deficit to the $1 trillion in government budget cuts that went into effect automatically, government expenditures will shrink by a net $900 billion this fiscal year.
Bigger picture, President Obama has released a new proposed budget which would, among other things, extend the Bush-era tax cuts for all but the top two brackets. The 33% and 35% marginal rates would go back to their pre-2001 levels of 36% and 39.6%. The budget proposal would also raise the long-term capital gains rate to 20% for single taxpayers with more than $200,000 a year in income, or married taxpayers filing jointly earning $250,000 per year. For these same upper-income taxpayers, the tax rate on qualified dividends would revert to ordinary income rates--up to a maximum of 39.6%. For everyone else, dividends would still be taxed at a 15% or 0% rate, depending on the tax bracket.
The bill would create a permanent solution to the vexing Alternative Minimum Tax, essentially replacing its complex formulae with the so-called Buffett Rule, requiring any household earning more than $1 million a year to pay at least 30% of income in federal taxes.
Also: instead of allowing the current estate, gift and generation-skipping transfer tax rates to expire and default back to a $1 million exemption and 55% tax rate at the end of the year, the budget proposal would take the estate tax system back 2009 rates. That would give each spouse a $3.5 million estate tax and generation-skipping tax exemption to work under, a $1 million gift tax extension for each spouse, and a maximum 45% estate tax rate for amounts above these levels.
In all, the tax proposals are expected increase government receipts by an estimated $1.5 trillion over the next ten years.
The budget proposal virtually ensures that Congress will take up the extremely messy, highly-partisan issue of taxes during this election year, which may actually be good news for taxpayers. Without Congressional action, estate tax and income tax rates were due to revert back, as of January 1, 2013, to rates not seen in more than a decade.
If you have a lot of spare time, you can read the full text of the budget proposal here:
http://www.whitehouse.gov/omb/budget/Overview, and if you're curious about historical tax rates every year going back to the very first income tax in 1913, you can find them here: http://www.taxfoundation.org/taxdata/show/151.html. What you'll find is that the only years when people earning over $1 million a year were able to pay less than a 30% federal tax rate were 1988-1989, 1925-1931, and 1913-1916.
Sources:
http://www.politico.com/news/stories/0212/72869.html
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Closer to home, just a week ago, the smart money in financial circles was betting on a year of tax gridlock, punctuated by a bruising battle over the extension of the payroll tax cut.
Then, suddenly, everything turned around. Tomorrow (Friday), a bipartisan House/Senate committee is expected to bless a new payroll tax cut extension that was negotiated without any of the bitter partisan posturing that everybody expected. The cut will reduce Social Security taxes from 6.2% of income to 4.2% for workers through December 31, and put up to $130 billion back into the pockets of lower- and middle-income workers.
The same bill extends unemployment benefits from 59 weeks to anywhere from 89 to 99 weeks, depending on the unemployment level in each state, and will require the recipients of unemployment insurance payments who have not finished high school to enroll in a GED program. States could also create voluntary training programs for those seeking jobless benefits.
In other provisions, doctors who treat Medicare patients would avoid seeing their payments cut. To partially offset the costs, federal workers would have to pay more into their pension plans, and $5 billion will be cut from the new health care law.
If you add the $100 billion that the measure will add to the deficit to the $1 trillion in government budget cuts that went into effect automatically, government expenditures will shrink by a net $900 billion this fiscal year.
Bigger picture, President Obama has released a new proposed budget which would, among other things, extend the Bush-era tax cuts for all but the top two brackets. The 33% and 35% marginal rates would go back to their pre-2001 levels of 36% and 39.6%. The budget proposal would also raise the long-term capital gains rate to 20% for single taxpayers with more than $200,000 a year in income, or married taxpayers filing jointly earning $250,000 per year. For these same upper-income taxpayers, the tax rate on qualified dividends would revert to ordinary income rates--up to a maximum of 39.6%. For everyone else, dividends would still be taxed at a 15% or 0% rate, depending on the tax bracket.
The bill would create a permanent solution to the vexing Alternative Minimum Tax, essentially replacing its complex formulae with the so-called Buffett Rule, requiring any household earning more than $1 million a year to pay at least 30% of income in federal taxes.
Also: instead of allowing the current estate, gift and generation-skipping transfer tax rates to expire and default back to a $1 million exemption and 55% tax rate at the end of the year, the budget proposal would take the estate tax system back 2009 rates. That would give each spouse a $3.5 million estate tax and generation-skipping tax exemption to work under, a $1 million gift tax extension for each spouse, and a maximum 45% estate tax rate for amounts above these levels.
In all, the tax proposals are expected increase government receipts by an estimated $1.5 trillion over the next ten years.
The budget proposal virtually ensures that Congress will take up the extremely messy, highly-partisan issue of taxes during this election year, which may actually be good news for taxpayers. Without Congressional action, estate tax and income tax rates were due to revert back, as of January 1, 2013, to rates not seen in more than a decade.
If you have a lot of spare time, you can read the full text of the budget proposal here:
http://www.whitehouse.gov/omb/budget/Overview, and if you're curious about historical tax rates every year going back to the very first income tax in 1913, you can find them here: http://www.taxfoundation.org/taxdata/show/151.html. What you'll find is that the only years when people earning over $1 million a year were able to pay less than a 30% federal tax rate were 1988-1989, 1925-1931, and 1913-1916.
Sources:
http://www.politico.com/news/stories/0212/72869.html
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Thursday, February 16, 2012
THE LANDMARK MORTGAGE SETTLEMENT
What kind of relief will it offer?
Big news, but will it make a big difference? On February 9, the Justice Department announced it had struck a settlement approaching $26 billion with the major U.S. mortgage servicers. This is the biggest multistate settlement of any kind since the Big Tobacco payout of 1998, with five big banks (Bank of America, JPMorgan Chase, Citigroup, Ally Financial and Wells Fargo) agreeing to make amends for robo-signing and other consumer abuses. Other lenders may join them in the deal.1,2
While this is all well and good, Housing and Urban Development Secretary Shaun Donovan conceded to the press on February 9 that the accord “doesn’t solve everything.” Indeed, with trillions of household wealth lost in the foreclosure crisis, even a settlement of this magnitude can seem relatively puny.3
Just 9% of homeowners will have mortgages modified. About $10 billion of the settlement will be used to rework home loans, but if your mortgage is owned by Fannie Mae or Freddie Mac, you’re out of luck; those loans aren’t included in the deal. Therefore, only about 1 million homeowners will get loan modifications out of the 11 million with underwater mortgages nationwide. These 1 million borrowers could see principal reductions of up to $20,000.1,2,3
What about cash payouts? About 750,000 borrowers who lost homes to foreclosure are in line for some monetary compensation: about $2,000 in cash each. To qualify, you must have lost your home sometime between January 1, 2008 and December 31, 2011. These payments will be sent out by state governments.2
Here’s a breakdown of how the settlement funds will be distributed:
• $10 billion for principal reductions on underwater mortgages
• $7 billion for “other forms of relief” (unspecified; could include short sales, neighborhood blight reduction efforts and principal forbearance)
• $4.25 billion to 49 states (all except Oklahoma, which reached its own settlement with the five big mortgage servicers)
• $3 billion toward refis of underwater mortgages
• $1 billion to the Federal Housing Administration
• $750 million in cash to the U.S. government2
On top of that $26 billion, Bank of America will pay out another $1 billion to settle a separate federal investigation into mortgage fraud at Countrywide Financial, which it bought in 2008.2
The settlement amount could approach $45 billion if other major mortgage servicers sign on to the agreement. That could presently happen.1
When do you find out if relief is coming your way? It will likely take you from 6-9 months to determine if you are eligible for any benefits from the settlement. The federal government says you will get a claims form if you are eligible to get some money as a result of all this. If you have any doubts that the claims form will reach you at your current address, you are directed to contact your state attorney general’s office.2
To learn more, you can visit NationalMortgageSettlement.com, a new website providing yet more details.1
Citations.
1 - abcnews.go.com/Business/feds-announce-25b-foreclosure-deal/story?id=15545458#.TzWEzOSX1c4 [2/9/12]
2 - www.thefiscaltimes.com/Articles/2012/02/10/What-the-$26-Billion-Bank-Deal-Means-to-You.aspx#page1 [2/10/12]
3 - www.kansascity.com/2012/02/10/3421011/finally-real-mortgage-relief-for.html [2/10/12]
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.
Big news, but will it make a big difference? On February 9, the Justice Department announced it had struck a settlement approaching $26 billion with the major U.S. mortgage servicers. This is the biggest multistate settlement of any kind since the Big Tobacco payout of 1998, with five big banks (Bank of America, JPMorgan Chase, Citigroup, Ally Financial and Wells Fargo) agreeing to make amends for robo-signing and other consumer abuses. Other lenders may join them in the deal.1,2
While this is all well and good, Housing and Urban Development Secretary Shaun Donovan conceded to the press on February 9 that the accord “doesn’t solve everything.” Indeed, with trillions of household wealth lost in the foreclosure crisis, even a settlement of this magnitude can seem relatively puny.3
Just 9% of homeowners will have mortgages modified. About $10 billion of the settlement will be used to rework home loans, but if your mortgage is owned by Fannie Mae or Freddie Mac, you’re out of luck; those loans aren’t included in the deal. Therefore, only about 1 million homeowners will get loan modifications out of the 11 million with underwater mortgages nationwide. These 1 million borrowers could see principal reductions of up to $20,000.1,2,3
What about cash payouts? About 750,000 borrowers who lost homes to foreclosure are in line for some monetary compensation: about $2,000 in cash each. To qualify, you must have lost your home sometime between January 1, 2008 and December 31, 2011. These payments will be sent out by state governments.2
Here’s a breakdown of how the settlement funds will be distributed:
• $10 billion for principal reductions on underwater mortgages
• $7 billion for “other forms of relief” (unspecified; could include short sales, neighborhood blight reduction efforts and principal forbearance)
• $4.25 billion to 49 states (all except Oklahoma, which reached its own settlement with the five big mortgage servicers)
• $3 billion toward refis of underwater mortgages
• $1 billion to the Federal Housing Administration
• $750 million in cash to the U.S. government2
On top of that $26 billion, Bank of America will pay out another $1 billion to settle a separate federal investigation into mortgage fraud at Countrywide Financial, which it bought in 2008.2
The settlement amount could approach $45 billion if other major mortgage servicers sign on to the agreement. That could presently happen.1
When do you find out if relief is coming your way? It will likely take you from 6-9 months to determine if you are eligible for any benefits from the settlement. The federal government says you will get a claims form if you are eligible to get some money as a result of all this. If you have any doubts that the claims form will reach you at your current address, you are directed to contact your state attorney general’s office.2
To learn more, you can visit NationalMortgageSettlement.com, a new website providing yet more details.1
Citations.
1 - abcnews.go.com/Business/feds-announce-25b-foreclosure-deal/story?id=15545458#.TzWEzOSX1c4 [2/9/12]
2 - www.thefiscaltimes.com/Articles/2012/02/10/What-the-$26-Billion-Bank-Deal-Means-to-You.aspx#page1 [2/10/12]
3 - www.kansascity.com/2012/02/10/3421011/finally-real-mortgage-relief-for.html [2/10/12]
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.
Wednesday, February 8, 2012
PACIFIC NORTHWEST ECONOMIC UP-DATE
Tammy recently attended a Financial Planning conference in Seattle and wanted to share with you some thoughts from a well known Pacific Northwest economist, Michael Parks.
Globally
Parks stated that globally the main apparent risks are Europe and China. The Eurozone with its high debt, low growth, giant public sectors, early retirement, and untaxed informal sectors is struggling. This is disconcerting since European banks are larger than US Banks. Banks and governments - too big to fail - are inter-dependent and both at risk. He was concerned about the 2 bank failures of Belgium Bank and MF Global. He said that Greece is just a side show, and that Italy, but also Spain and France, share the center ring. He also said that the European Union is very connected to emerging markets which can go from boom to bust. The problems in Europe pose three contagion risks for the US: Merchandise trade, Banking, and the Stock market.
China is the second largest economy and next to India and Brazil it has had good growth rates. However, Parks said that China's growth slowed to 8.8% in the 4th quarter of 2011. This was mainly due to slow exporting to rich economies such as ours. China's debt is accumulating quickly with its boom of investment into its own infrastructure, namely the real estate sector. Sound Familiar? Here is an interesting article about China's Ghost Towns. http://www.economywatch.com/economy-business-and-finance-news/Chinas-Ghost-Town-Overdevelopment-in-the-Real-Estate-Market/22-08.html
United States
We all know about the dysfunction in Washington, D.C., but Parks said that it is inhibiting the necessary structural reforms. He believes that our country needs to work on its infrastructure while interest rates are low. He says that monetary policy is constrained as interest rates are zero bound. Bernanke has limited options for stimulus. The forecast for US economic growth for 2012 is an improvement from 2011 according to data from the Bureau of Economic Analysis. As I write this, the Dow sees its highest close since 2008 because of positive jobs data.
Washington State
Parks said that the Boeing-IAM agreement is great news. The Labor peace plus a bulging order book should provide high levels of employment in this sector. He said the weakness of the dollar is good with our close proximity to Pacific Asia although the US and Canadian dollar are about par. Parks reminded us about the feeble recovery we have seen so far in housing which is the sector that usually leads the economy out of a recession.
All in all, Parks feels that even though there are some wildcards still being played out globally, the United States is seeing some recovery and making the tough climb up in the typical business cycle, albeit more slowly this time than in decades before. It all comes down to human behavior which is unpredictable and yet we all know how much our country loves to prosper. Parks believes we will continue to see a strive towards prosperity in our country, whether bad or good.
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial St., Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
Globally
Parks stated that globally the main apparent risks are Europe and China. The Eurozone with its high debt, low growth, giant public sectors, early retirement, and untaxed informal sectors is struggling. This is disconcerting since European banks are larger than US Banks. Banks and governments - too big to fail - are inter-dependent and both at risk. He was concerned about the 2 bank failures of Belgium Bank and MF Global. He said that Greece is just a side show, and that Italy, but also Spain and France, share the center ring. He also said that the European Union is very connected to emerging markets which can go from boom to bust. The problems in Europe pose three contagion risks for the US: Merchandise trade, Banking, and the Stock market.
China is the second largest economy and next to India and Brazil it has had good growth rates. However, Parks said that China's growth slowed to 8.8% in the 4th quarter of 2011. This was mainly due to slow exporting to rich economies such as ours. China's debt is accumulating quickly with its boom of investment into its own infrastructure, namely the real estate sector. Sound Familiar? Here is an interesting article about China's Ghost Towns. http://www.economywatch.com/economy-business-and-finance-news/Chinas-Ghost-Town-Overdevelopment-in-the-Real-Estate-Market/22-08.html
United States
We all know about the dysfunction in Washington, D.C., but Parks said that it is inhibiting the necessary structural reforms. He believes that our country needs to work on its infrastructure while interest rates are low. He says that monetary policy is constrained as interest rates are zero bound. Bernanke has limited options for stimulus. The forecast for US economic growth for 2012 is an improvement from 2011 according to data from the Bureau of Economic Analysis. As I write this, the Dow sees its highest close since 2008 because of positive jobs data.
Washington State
Parks said that the Boeing-IAM agreement is great news. The Labor peace plus a bulging order book should provide high levels of employment in this sector. He said the weakness of the dollar is good with our close proximity to Pacific Asia although the US and Canadian dollar are about par. Parks reminded us about the feeble recovery we have seen so far in housing which is the sector that usually leads the economy out of a recession.
All in all, Parks feels that even though there are some wildcards still being played out globally, the United States is seeing some recovery and making the tough climb up in the typical business cycle, albeit more slowly this time than in decades before. It all comes down to human behavior which is unpredictable and yet we all know how much our country loves to prosper. Parks believes we will continue to see a strive towards prosperity in our country, whether bad or good.
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial St., Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
Monday, February 6, 2012
ARE PEOPLE REALLY RETIRING LATER?
A noted economist disputes that generalization.
True or false? You may have heard this claim before (or something like it): “Many Americans are being forced to retire later because their savings and investments took a hit in the Great Recession.”
Recently, a big-name economist disputed that belief. In a commentary for Bloomberg, former White House budget director Peter Orszag wrote that some of the statistics don’t seem to back up this conventional wisdom, but perhaps it all depends on which statistics you cite.
A fact that can’t be ignored. In mid-January, a widely reprinted Washington Post article mentioned that since the start of the recession, the population of U.S. workers older than 55 has increased by 12% to 3.1million.1
Examining this Labor Department finding, the Post feature referenced longevity and the loss of traditional pension plans as contributing factors. It presented stories of older workers who didn’t think they could easily retire, and quoted respected commentators such as Alicia Munell, director of the Center for Retirement Research at Boston College, who remarked that “some of these people are just clinging by their fingernails to jobs.”1
But is there more to the story? It turns out that Americans were trending toward staying in the workforce longer even before the recession. In 1994, Orszag notes, 43% of Americans aged 60-64 were working; in 2006, it was 51%. Nearly half of 62-year-olds went and claimed Social Security benefits in 1994, but 12 years later, less than 40% of 62-year-olds followed suit.2
Orszag mentions another factor that may have kept older employees working during the recession: declining home equity. Put that alongside diminished IRA and 401(k) balances, and there was every reason to stay on the job these last few years.
However, just because older Americans wanted to keep working didn’t mean that they could.
In the 2011 edition of its respected Retirement Confidence Survey, the Employee Benefit Research Institute found that 45% of retirees ended their careers earlier than they wanted to, in many cases due to layoffs and health issues.3
The Post article noted that the jobless rate for workers older than 55 was just 3.2% in December 2007 when the downturn began. In December 2011, it was up to 6.2%.1
The percentage of employed Americans aged 60-64, which had steadily risen during the 1990s and early 2000s, has remained at roughly 51% for the past five years.2
That brings us to Orszag’s central point: “The bottom line is that people’s retirement decisions aren’t always entirely voluntary.”2
How about your retirement decision? Do you think you will retire when you want to retire? Are you prepared for retirement financially? A new year is a good time for a new look at the state of your finances and your retirement readiness. With astute planning, you might be able to retire sooner than you think.
Citations.
1 – www.usatoday.com/USCP/PNI/NEWS/2012-01-17-PNI0117biz-older-workersART_ST_U.htm [1/11/12]
2 – mobile.bloomberg.com/news/2012-01-18/look-at-jobs-before-leap-on-older-retirement-commentary-by-peter-orszag [1/18/12]
3 - www.ebri.org/pdf/briefspdf/EBRI_03-2011_No355_RCS-2011.pdf [3/15/11]
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.
True or false? You may have heard this claim before (or something like it): “Many Americans are being forced to retire later because their savings and investments took a hit in the Great Recession.”
Recently, a big-name economist disputed that belief. In a commentary for Bloomberg, former White House budget director Peter Orszag wrote that some of the statistics don’t seem to back up this conventional wisdom, but perhaps it all depends on which statistics you cite.
A fact that can’t be ignored. In mid-January, a widely reprinted Washington Post article mentioned that since the start of the recession, the population of U.S. workers older than 55 has increased by 12% to 3.1million.1
Examining this Labor Department finding, the Post feature referenced longevity and the loss of traditional pension plans as contributing factors. It presented stories of older workers who didn’t think they could easily retire, and quoted respected commentators such as Alicia Munell, director of the Center for Retirement Research at Boston College, who remarked that “some of these people are just clinging by their fingernails to jobs.”1
But is there more to the story? It turns out that Americans were trending toward staying in the workforce longer even before the recession. In 1994, Orszag notes, 43% of Americans aged 60-64 were working; in 2006, it was 51%. Nearly half of 62-year-olds went and claimed Social Security benefits in 1994, but 12 years later, less than 40% of 62-year-olds followed suit.2
Orszag mentions another factor that may have kept older employees working during the recession: declining home equity. Put that alongside diminished IRA and 401(k) balances, and there was every reason to stay on the job these last few years.
However, just because older Americans wanted to keep working didn’t mean that they could.
In the 2011 edition of its respected Retirement Confidence Survey, the Employee Benefit Research Institute found that 45% of retirees ended their careers earlier than they wanted to, in many cases due to layoffs and health issues.3
The Post article noted that the jobless rate for workers older than 55 was just 3.2% in December 2007 when the downturn began. In December 2011, it was up to 6.2%.1
The percentage of employed Americans aged 60-64, which had steadily risen during the 1990s and early 2000s, has remained at roughly 51% for the past five years.2
That brings us to Orszag’s central point: “The bottom line is that people’s retirement decisions aren’t always entirely voluntary.”2
How about your retirement decision? Do you think you will retire when you want to retire? Are you prepared for retirement financially? A new year is a good time for a new look at the state of your finances and your retirement readiness. With astute planning, you might be able to retire sooner than you think.
Citations.
1 – www.usatoday.com/USCP/PNI/NEWS/2012-01-17-PNI0117biz-older-workersART_ST_U.htm [1/11/12]
2 – mobile.bloomberg.com/news/2012-01-18/look-at-jobs-before-leap-on-older-retirement-commentary-by-peter-orszag [1/18/12]
3 - www.ebri.org/pdf/briefspdf/EBRI_03-2011_No355_RCS-2011.pdf [3/15/11]
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.
Wednesday, February 1, 2012
FIDUCIARY DELAYS
If we were to craft a commercial for the slippery concept of "fiduciary standards," perhaps we should look to these fine examples of refined marketing excellence: http://www.metacafe.com/watch/2221825/best_of_5_worst_local_tv_holiday_commercials_ever/.
Chances are you missed the announcement, buried on page C7 of the January 24, 2012 issue of the Wall Street Journal, but it caused a stir in the financial planning world. The Securities and Exchange Commission has put off implementing a key part of the Dodd-Frank Act: creating a fiduciary standard for all who give investment advice, whether they be brokers or SEC-registered registered investment advisors.
Anybody who saw Fabrice "Fabulous Fab" Tourre boast about his prowess selling complex toxic securities to his unsuspecting customers, or watched Goldman Sachs CEO Lloyd Blankfein testifying uncomfortably to Congress that his firm had no duty whatsoever to protect the interests of his customers in these transactions, quickly realized that Wall Street is not totally about creating vast wealth for the people who receive brokerage advice. This was further underscored when Smith Barney traders chortled in their internal e-mails that betting against some of the toxic mortgage pools they had sold their customers was "the best short ever."
Dodd-Frank was supposed to change all that, by asking the SEC to require that brokers who made investment recommendations be held to a fiduciary standard "at least as stringent" as the standard that investment advisors are held to. Under heavy lobbying pressure from Wall Street, the SEC has dragged its feet on this issue so effectively you might think it was wearing shoes made of cement. And for most investors, this stalled effort at reform has sailed totally under the radar.
What does it mean to act as a fiduciary? The fiduciary concept is actually pretty simple, and can be found in the very first written legal code, the Code of Hammurabi (roughly 1770 BC) and in Cicero's orations during the Roman Republic around 50 BC. In the ancient world, a trader would take his caravan (or sailing ship) to some distant land to trade Mesopotamian clay pots or bronze artifacts for furs, tin or copper. Since the trader would be gone for months or sometimes years, somebody had to make basic business and financial decisions on that person's behalf while he was on the road. And it was important that this person make decisions that were in the trader's interest, not his own. When somebody came to offer the merchant a great business opportunity, he wouldn't want somebody who would jump in and buy it for his own profit instead, or buy it and then sell it back to the merchant's account at a fat markup.
As Cicero put it:
“…in cases where we ourselves cannot be present, the vicarious faith of friends is substituted; and he who impairs that confidence, attacks the common bulwark of all men, and as far as another depends on him, disturbs the bonds of society.”
(Oration for Sextus Roscius of America; Cicero 106 – 43 BC)
So the basic idea of a fiduciary is a simple standard of behavior. You are watching out for and protecting the interests of someone who has given you their trust. You are making decisions and recommendations that will benefit that other person. You would, under this simple standard, have to avoid triumphantly selling at a markup the same securities that your colleagues are confidently betting will blow up and leave your customers with frightening losses--while generating outsized gains that will flow into the Wall Street bonus pool. With this in mind, it becomes a lot easier to see why Wall Street has lobbied so hard to stall being held to this standard.
You might start to hear the next round of arguments about this part of Dodd-Frank either prior to or after the general election. The Wall Street lobbyists and trade organization have argued that instead of being prohibited from acting on conflicts of interest and engaging in self-dealing, brokers should be allowed to "disclose" them to their customers. The lobbyists on the side of consumers and fiduciary advisors think it's possible that the SEC will bow to Wall Street's heavyhanded lobbying tactics, and create a new, watered-down version of the ancient fiduciary concept. By this time next year, it is possible that representatives of Merrill Lynch, Smith Barney or UBS will be able to behave like Fabulous Fab and still hold themselves out as fiduciaries, so long as their brokerage agreement says somewhere on page 14 that they might be working harder to generate profits for their brokerage employer than looking out for the interests of the person who receives their advice. Cicero and the Mesopotamian trader would have seen through this ruse in a heartbeat. Today's regulators are a lot easier to fool, and not always totally focused on protecting consumers. (Just ask Bernie Madoff.)
SEC-registered Registered Investment Advisors have been living under a fiduciary standard--the one referenced in Dodd-Frank--since 1940. It's true; you don't see RIA firms routinely handing out seven-figure bonuses to their brokers and sales agents. But many advisors who live under this business model make a good, honest living--and, most importantly, they don't have to squirm uncomfortably when somebody asks them to explain their recommendations.
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Chances are you missed the announcement, buried on page C7 of the January 24, 2012 issue of the Wall Street Journal, but it caused a stir in the financial planning world. The Securities and Exchange Commission has put off implementing a key part of the Dodd-Frank Act: creating a fiduciary standard for all who give investment advice, whether they be brokers or SEC-registered registered investment advisors.
Anybody who saw Fabrice "Fabulous Fab" Tourre boast about his prowess selling complex toxic securities to his unsuspecting customers, or watched Goldman Sachs CEO Lloyd Blankfein testifying uncomfortably to Congress that his firm had no duty whatsoever to protect the interests of his customers in these transactions, quickly realized that Wall Street is not totally about creating vast wealth for the people who receive brokerage advice. This was further underscored when Smith Barney traders chortled in their internal e-mails that betting against some of the toxic mortgage pools they had sold their customers was "the best short ever."
Dodd-Frank was supposed to change all that, by asking the SEC to require that brokers who made investment recommendations be held to a fiduciary standard "at least as stringent" as the standard that investment advisors are held to. Under heavy lobbying pressure from Wall Street, the SEC has dragged its feet on this issue so effectively you might think it was wearing shoes made of cement. And for most investors, this stalled effort at reform has sailed totally under the radar.
What does it mean to act as a fiduciary? The fiduciary concept is actually pretty simple, and can be found in the very first written legal code, the Code of Hammurabi (roughly 1770 BC) and in Cicero's orations during the Roman Republic around 50 BC. In the ancient world, a trader would take his caravan (or sailing ship) to some distant land to trade Mesopotamian clay pots or bronze artifacts for furs, tin or copper. Since the trader would be gone for months or sometimes years, somebody had to make basic business and financial decisions on that person's behalf while he was on the road. And it was important that this person make decisions that were in the trader's interest, not his own. When somebody came to offer the merchant a great business opportunity, he wouldn't want somebody who would jump in and buy it for his own profit instead, or buy it and then sell it back to the merchant's account at a fat markup.
As Cicero put it:
“…in cases where we ourselves cannot be present, the vicarious faith of friends is substituted; and he who impairs that confidence, attacks the common bulwark of all men, and as far as another depends on him, disturbs the bonds of society.”
(Oration for Sextus Roscius of America; Cicero 106 – 43 BC)
So the basic idea of a fiduciary is a simple standard of behavior. You are watching out for and protecting the interests of someone who has given you their trust. You are making decisions and recommendations that will benefit that other person. You would, under this simple standard, have to avoid triumphantly selling at a markup the same securities that your colleagues are confidently betting will blow up and leave your customers with frightening losses--while generating outsized gains that will flow into the Wall Street bonus pool. With this in mind, it becomes a lot easier to see why Wall Street has lobbied so hard to stall being held to this standard.
You might start to hear the next round of arguments about this part of Dodd-Frank either prior to or after the general election. The Wall Street lobbyists and trade organization have argued that instead of being prohibited from acting on conflicts of interest and engaging in self-dealing, brokers should be allowed to "disclose" them to their customers. The lobbyists on the side of consumers and fiduciary advisors think it's possible that the SEC will bow to Wall Street's heavyhanded lobbying tactics, and create a new, watered-down version of the ancient fiduciary concept. By this time next year, it is possible that representatives of Merrill Lynch, Smith Barney or UBS will be able to behave like Fabulous Fab and still hold themselves out as fiduciaries, so long as their brokerage agreement says somewhere on page 14 that they might be working harder to generate profits for their brokerage employer than looking out for the interests of the person who receives their advice. Cicero and the Mesopotamian trader would have seen through this ruse in a heartbeat. Today's regulators are a lot easier to fool, and not always totally focused on protecting consumers. (Just ask Bernie Madoff.)
SEC-registered Registered Investment Advisors have been living under a fiduciary standard--the one referenced in Dodd-Frank--since 1940. It's true; you don't see RIA firms routinely handing out seven-figure bonuses to their brokers and sales agents. But many advisors who live under this business model make a good, honest living--and, most importantly, they don't have to squirm uncomfortably when somebody asks them to explain their recommendations.
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
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