It never ceases to amaze me how much trust people will put in their financial advisor. Sometimes, the trust is necessary, and a good thing. Sometimes however, a closer look at the motivations of your advisor are warranted, as your trust may be misplaced. This month I’d like to take a closer look look at the two “suitability standards” financial advisors work under, and tie it in to some legislation that is before Congress and the Department of Labor this fall.
First, the two standards- most financial advisors work under what’s know as the “suitability standard.” They are required to make recommendations to their clients that are suitable based on age, risk tolerance, time horizon, etc. It does NOT, however, have to put the client’s interests above the advisors.
Second, is the “fiduciary standard.” Here is where most advisors fear to tread. Under the fiduciary standard, an advisor must act, at all times, solely for the benefit of his/her client. It is a legal and ethical obligation. Take a look at this article and then ask yourself, which standard do you want your advisor to be working under?
Then ask yourself, if you have an advisor, which standard is he/she working under? Are you comfortable with that? And if you have an advisor, why wouldn’t they want to work under the fiduciary standard? After all, haven’t they told you again and again they are here to help you?
As a registered investment advisor, we work under the fiduciary standard. And we consciously chose to do so– indeed, we want the responsibility that it entails and want our clients to know we always have their best interests in mind– not our own.
The Prior Month
As suggested in last month’s newsletter stocks began to run into some trouble in August. While equity markets began their descent early in the month, it was the release of the July Federal Reserve meeting minutes August 21st and the ripening prospect of war with Syria that really seemed to get the sell-off going in earnest.
The Fed hinted at beginning their “tapering” of bond purchases as early as this month, a program the equity markets do not want to see end. And while war with Syria in itself is probably not too problematical for the market, it is the unknown consequences of what that war might bring that has the financial markets on edge. With those concerns in mind, the S&P fell 3.1% in August.
Statistically speaking, September has seen the worst returns of all twelve calendar months. Indeed, during the last 20 years, September has averaged a monthly loss of three quarters of one percent. And while statistics are nice, it’s the “set-up,” so to speak, that we are faced with this September that we need to be concerned about.
Later this month the Federal Reserve is expected to begin tapering its asset purchases, which figures to dampen animal spirits. And now the prospect of military conflict with Syria seems unavoidable.
Somebody call Debbie Downer, we are having trouble finding much of anything to get excited about right now. And with the decline having already started from the first week of August, squarely in the pi time symmetry zone, juxtaposed with an ominous “square out” on the wheel of time and price at S&P 1709, we remain concerned about an even deeper correction.
The McClellan Oscillator is a market breadth oscillator developed almost 45 years ago by Sherman and Marian McClellan. It tracks the rate of money entering or leaving the stock market. When you hear financial pundits say the market is “overbought” that means a lot of money has been flowing into the market. Conversely, an “oversold” pronouncement means money has been leaving the market.
Click here to see where the oscillator is as of the most recent close: McClellan Oscillator
Polar bears are so well-insulated from the cold that they spend most of their lives trying to cool down!
Calendar of Upcoming Events
September 11 – “Organizing Your Financial Life”
Is your financial life in need of some helpful tips? Do you want to invest, but aren’t sure how? Are you looking to make a budget for yourself, but have no idea where to start? Maybe you’re looking to buy your first home, but are nervous about qualifying for a mortgage. If these or any questions like this are on your mind, then join us for a very special Brain Food Lunch, Wednesday, September 11th at Carelli’s Italian Restaurant.
Have a great September,
“Investing your money the way you would if you knew what I knew”