Did you ever hear the phrase “It’s not my money” or “Don’t worry, it’s tax deductible”? Sometimes folks find it easy to become complacent over trivial matters. Sometimes we let the leaky faucet go a couple weeks before we get out the wrench or call the plumber. Sometimes we let the dirty dishes pile up in the sink either hoping someone else will do the dishes or we will get to it sooner or later.
My point is, if you are complacent about your retirement savings, perhaps you have your money in a variable annuity or mutual funds, what happens when the market corrects? The standard answer is “I don’t worry about it”, or, “It will come back up”. Those are acceptable answers for folks that are still working and have many years until they will become reliant on their life-long savings.
But what if you receive income, on a monthly basis, for your rent or mortgage, utilities, car loans, and other living expenses like healthcare, prescriptions, and food. Then what? Are you going to call the mortgage company and say “Ummm, my mutual fund accounts are down this month 20 percent, please accept 20 percent less”? Better yet — the pharmacist, will they lower the costs of your prescriptions because you were not keeping tabs on your brokerage or IRA accounts? I don’t think so.
I had the good fortune of serving on a panel at a conference in Boston several years back. The CEO of Fidelity, the Chief Investment Officer of John Hancock, and I, answered questions from a group of new financial advisors.
One person asked how they protect their clients from unexpected downturns in the market. The Fidelity CEO answered, they manage risk according to standards set by their internal measures and widely accepted practices and they have very low fees on their offerings. The gentleman followed up with clarification, “so let me get this straight, you do not protect your clients against market downturns, their principal will decline just like the rest of the market”. The CEO replied, yes, and tried to make a joke. But the room fell silent.
The panelist from John Hancock was a behind-the-scenes guy, an extremely brilliant number cruncher. He held the rigorous CFA™ designation. A certified financial analyst is the guy that manages the trades for pensions, mutual funds, and insurance companies. Imagine round glasses, messy hair, and a green visor. Just kidding. He stated very clearly, they actually can’t react, because that would adversely affect the markets. He continued, they have so much money invested for their clients that if they do anything outside of what the mutual funds state in their prospectus, they can be liable for market manipulation.
Then the gentleman from the audience looked at me and said I have been very quiet, what do I think. I stood up and grabbed the microphone and looked out over the room of 300 to 350 folks, paused, and then stated we are in very different businesses. These gentlemen are responsible for billions of dollars of investors’ assets. They are so big that any comment they make must be pre-approved by their legal departments, so the information will not put their companies in jeopardy.
I am a fiduciary, and I always have been, even before I knew what the word meant. My team and I commit to my clients that WE WILL DO NO HARM. We will move mountains to assure our clients don’t suffer the same fate as folks that follow the popular path. My fine colleagues, on the panel today, provide platforms of choice, nothing more. My job is to help our clients navigate the choice and provide information, so our clients can select the most appropriate platforms for their needs.
The room got quiet again. I could hear the gears turning.
Then, for the next 20 minutes, my colleagues were silent, all the questions were directed toward how can the average investor and the advisors in the room create solutions to the top concern of pre- and post-retirees today, protecting retirement income. I joked and said, come to Scottsdale, we have a workshop on that very subject.