Financial Designations – The ABC and XYZ Of It

When is comes to letters and numbers the world of financial services is hard to beat. Beyond the gold standard, CFP, there’s the ChFC, PFS, LUTCF, CLU, CMA, CFA, CMFS, CIMA, CPA and well, I could keep going. Don’t forget the numbers- Series 66, 6, 7, 63, 65, and again- there are many more. In fact, I recently found a website that must have had at least 100 different designations. Why do I bring this up? Last month some advisors in Massachusetts were fined $250,000 for calling themselves “Retirement Income Planning Specialists.” Yes, they were “RIPS.” Seems the state of Massachusetts does not allow for people giving themselves bogus “senior designations.” And bogus it was. You’d think with all these designation options, some of which are literally only a small check and a few hours of online class time, they could have gone that way, but no, that was too much to ask.

I’ve heard people say they work with someone who specializes in financial planning for surgeons, or dentists, or C-level executives. Funny, I’ve yet to meet someone who specializes in financial planning for sanitation engineers, busboys or department store clerks. I wonder why? After five years of running a financial planning practice I’ve found the ideas of save more than you spend, manage emotions, understand the tax code and be informed really don’t change that much. Sure, some people can spend more, and the financial planning, tax, and investment portfolio complexities of a wealthier client ARE increased but the basics are always the same. So don’t be fooled by marketing ploys designed to impress on the surface, with nothing substantive behind them.

My advice is simple. When it comes to designations in the financial planning field, there’s two that matter, the CFP and the ChFC. While additional ones don’t hurt, I’d make sure they have at least one of those two.

To close, I’m reminded of a story an attorney once told me over lunch. His finance, a doctor, had hired a financial planner who supposedly specialized in the medical field. After a decade of high fees and disappointing service, she finally fired him. When I asked the attorney what the planner did differently, he snorted derisively and said, “nothing…. he just charged more for his make believe specialized knowledge.”

The Prior Month

Another stick save from the EU and IMF and Greece is still around to serve us gyros and great vacation destinations on the Mediterranean. We’re not surprised, but we’re also not totally convinced it’s over. Greeks are loathe to make additional cutbacks in spending and European banks don’t want to forgive any debt. We’re told the new solution will work. Unfortunately, it sounds remarkably like the old solution that didn’t work. Who cares, though- we can pretend like it will for awhile, right?

Stocks, as measured by the S&P 500, rose just under 2% in July on this Greek “solution.” Biotechs led the way with a new high mid-month even as oil plunged again to levels not seen since the spring. Expect to see gas prices fall fairly precipitously this fall. Outside of the Greece saga, thirty year mortgage rates again rose slightly to 3.98% and the unemployment rate remained steady at 5.3%. Treasury interest rates fell as the Federal Reserve released a very “poker-ish” statement at their July 29th meeting- not willing to give away if and when they will be raising interest rates. Second quarter GDP came in at a respectable 2.3%.

Party On GreeceWayne (Greece) and Garth (European bankers) are partying on! 

This Month

So should we party on? I wouldn’t be so quick to pop a top. Greece is already up to its old tricks delaying formalizing agreements with its creditors. This time the country is apparently trying to tell its creditors which hotels they can and cannot stay at (I jest not). Market breadth, or a measure of how many stocks are going up on a given day versus how many are going down, has been deteriorating for months. It seems Google, Netflix, Amazon and a few biotechs (like Gilead) are propping up the entire market, that can only last for so long. Momentum indicators like relative strength on the major indices have been losing steam all year. There are times when caution seems more warranted and this feels like one of them.

So what to look for in August? See if Greece really is “fixed.” The devil is in the details there. If you start seeing some large down days I’m not sure the market can pop right back up this time. Oil was lately around $45/barrel. The specter of some notable bankruptcies in this industry is growing by the day due to the continued low sale price and will not boost market confidence if it does happen.

FlossingIf only some floss and listerine could cure the market’s bad breadth.  Unfortunately, it takes more than that.

Credit Tip of the Month

So by what math is a credit score computed, anyway? I mean why is that number what it is? Well, the most important part is your payment history, which accounts for 35% of your score. Pay your debt (at least the minimum payment) on time and you’ll get high marks here. The second factor has to do with how much money you owe and how that compares to the amount of credit available to you. Typically, you want the ratio to be under 30%. This number contributes about 30% of your score. Another 15% is computed by looking at your credit history- the more history the better. An additional 10% is computed by looking at if you can manage different types of credit (i.e. a mortgage, car loan, student loans, revolving debt/credit cards), etc. And the final 10% examines whether you have applied for additional credit recently. Sound fair? Doesn’t really matter- it’s their game and you have to play it their way.

Like the drawing? It went down just like that, I swear! Okay, so I forgot to take pictures but suffice it to say a morning of hedge trimming and tree pruning resulted in a happy elderly Longmont woman. For those unfamiliar with our summer community service project, Yardbusters is a group of volunteers organized through Boulder County Care Connect that help the elderly and disabled of Boulder county take care of their yards. So join me next time on the morning of August 22nd, as we take care of some general yard maintenance like mowing, raking, weeding and/or trimming. Free lunch provided. Crayons too, if you request ahead. E-mail me if you’re interested in coming.
Special Event August 20th!

On Thursday, August 20th I will be speaking at the next Business Leaders Insight Lunch at Cantina Laredo. Topic of conversation will be Retirement Planning for Small Business Owners.

I will be discussing:

  • How to know when you’re ready to start a retirement plan
  • Sorting through available options and choosing the right one
  • Whether to include or exclude employees
  • Cost questions
  • Investment options and where to “house” your plan

If you’d like to attend, please sign up using this link. Cost is the purchase of lunch from the restaurant. Feel free to invite fellow business owners or friends as well!

Fun Fact

The average pencil will drawn a line 35 miles long.

Have a great August,
Steve Zakelj, CFP®

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