Tag Archives: financial advice

Will There Really Be a Doctor Shortage?

healthcare reformMy Comments: There is one already. An unintended consequence of ObamaCare ( the PPACA ) is that millions of people who have until now waited until the last minute and then went to an Emergency Care Center are now trying to get appointments with MDs who were already busy people. Not enough people are yet in the pipeline to provide medical care.

And it’s not just MDs. I’ve had several conversations with CPAs who are increasingly frustrated by their inability to find willing and qualifed accountants to come and work with them. Many are in their 60’s and looking to retire and get away from the grind but are unable to find successors.

I don’t know how all this is going to play out, since the demographics alone is going to create a greater and greater problem. All the baby boomers who became physicians 40 years ago are ready to do something else, just when the rest of us need more and more medical attention.

Dec 2, 2014 Arlen Meyers, MD, MBA

The conventional wisdom seems to be that we will be facing a doctor shortage due to the 10,000 boomers turning 65 each day, disparities in geographic distribution and inappropriate specialist/generalist ratios. Add that to the bottle neck in graduate medical education funding and the pundits would have you believe you’ll need to go the black market to find a doctor in the future.

Some have cast doubts, though. Here’s why:

1. There has not been enough pain spread around to all the players to motivate change. The expectation is there will be in the near future.

2. Patients are becoming more and more accepting of physician substitutes , extenders and advanced practice professionals

3. The care delivery channels and business models are changing requiring fewer doctors or less skilled professionals to execute them

4. Necessity will drive innovation, particularly with population health management tools applied to the 20% of Medicare recipients who account for 80% of the costs.

5. A shift from a sick care system to a health care system might lesson demand

6. Rethinking end of life care would reduce the demand for services.

7. The shift from hospital based care to community and home based care will drive the need for non-physician substitutes.

8. One- on- one care is migrating to team based care.

9. Surrogates and families are being given the technology tools to support aging at home initiatives.

10. The realization that doing what we are doing now and paying what we are paying will bankrupt the country and severely compromise our global competitiveness.

Healthcare manpower prognostications, to paraphrase Yogi, are notoriously unreliable particularly when they involve predicting the future. When it comes to doctor supply, don’t go all in or necessarily believe everything you click.

Arlen Meyers, MD, MBA is a Professor at the University of Colorado School of Medicine and President and CEO of the Society of Physician Entrepreneurs at http://www.sopenet.org and ceo@sopenet.net.

What Doctors and Families Have That Advisors Don’t

financial freedomMy Comments: As a financial advisor for the past 40 years, I’ve somehow overcome the perception that people with specialized knowledge can not always be trusted, especially with your money.

With so many threats coming at us from every direction these days, some of which are not realistic but promoted by the media as a way to deliver eyeballs, asking the right questions is one way to cut through the nonsense and arrive at meaningful information.

It’s not so much the answers that are critical, but the questions asked that are critical to our future satisfaction. Some of us are just better at asking those question than others.

Bob Stammers / November 20, 2014

Clients want advice from someone they know has no ulterior motives.

Imagine your doctor asked you to lose 10 pounds but you demurred. Maybe he’s telling all his patients in order to lower demand for Twinkies and the like so he can have more affordable access to junk food for himself.

That scenario is, of course, utterly absurd. Nobody would suspect a medical professional of short-changing a patient for such crass reasons, yet something along those lines does nag at the conscience of investors in their quest for financial advice.

They worry that the professionals proffering the advice are pushing products from which they themselves will profit but which may or may not be good for them, and even if beneficial, perhaps not optimal.

That is why, says Bob Stammers, the CFA Institute’s director of investor education, so many people looking for financial advice go to friends and family when they have important decisions to make.

Ironically, the friends and family members may have little knowledge about finance; the advantage they have is that they are not suspected of having any ulterior motives. In short, they are trusted.

“People really want that education and information at the point of decision making,” says Stammers in an interview with ThinkAdvisor.

“When they make decisions, they usually ask for advice,” he continues, “so an advisor can offer advice at time when people are willing to digest it.

But to do that, you have to build relationships of trust,” something the financial services industry is uniquely ill-equipped to do, says Stammers, who notes the industry remains in its familiar dead-last spot on an annual global survey of trust, well behind the automotive and pharmaceutical industries, and even taking a back seat to media and banking.

But this industry and societal problem can in some sense provide an “opportunity,” says Stammers, for individual advisors to build trust one investor at a time.

To further that ambition, the CFA Institute is actively promoting its Statement of Investor Rights, a campaign aimed at empowering consumers through awareness of what they should expect from the professionals serving them.

The 10-point list includes the right to objective advice (No. 2), to disclosure of existing or potential conflicts of interest (No. 5) and fee transparency (No. 8).

“If you work under an ethical code, there should be no problem providing all these rights,” says Stammers, who says these ethical expectations flow from the investment process inherent in his own CFA Institute’s charter.

So how does an advisor, whether or not he or she is one of the 120,000 CFA charter holders worldwide, break down the barriers to trust amidst a public that has duly noted the Madoff affair, the LIBOR scandal and the Wall Street firms that sold clients mortgaged-backed securities and then shorted them, making money on both sides of the trade?

“That stuff gets into people’s heads and they remember it,” comments Stammers, who advises advisors on a two-step trust-building process:
“First you build credibility, then you demonstrate integrity. You build credibility with past experience, with credentials like the CFA charter. As people do more and more due diligence, they’ll start looking for people who have these characteristics.”

“But then you articulate the ethical framework you work under,” he continues, specifying that by unambiguously explaining how you get paid and by clarifying the potential for conflicts of interest and how you seek to avoid them, you are demonstrating your integrity.

For advisors already convinced of their ethics or bored with the topic, Stammers offers a key insight as to why they should make ethics a primary daily focus, and why the medical profession is a relevant comparison to their own work.

It comes down to the role advisors believe there are providing in investor education.

“Investor education is a misnomer,” the CFA Institute’s director of investor education says. “It’s really about behavior change: How do you provide investors with the principles and best practices so that they can change their behavior to start doing correct things—by making better decisions and avoiding common mistakes that often plague investors.”

Investors will summon the courage to make these difficult changes when they can repose as much trust in their financial advisor as they have in their doctor.

And given the poor public image of the financial services industry today, the onus is on individual financial advisors to pave a path of trust that enables positive investor outcomes, Stammers argues.

The Wall Of Worry, Illustrated

My Comments: Readers of this blog post over the past six months have noted my concerns about a coming market crash and what it might do to your ‘nest egg’. Perhaps you remember my comments about a wall of worry, a phrase that gained traction in past years as the market climbed and climbed and climbed. The image here is a chart of the S&P500 since the major dip in 2009. You will have to decide if it’s real or whether it’s different this time.

James Osborne, Nov. 18, 2014

“The market climbs a wall of worry.” You’ve heard it hundreds of times. It sticks around because it’s true. And we know it is true, at some level. But it is always in the moments of true worry that we want to discount this (and all other) time-hardened wisdom.

Because we will forget, here’s what the Wall of Worry has looked like over the past five and a half years.

a) Unemployment is 9%. Corporate earnings fell 90% over the last 12 months. 10 major banks went bankrupt or sold at fire-sale prices in the last 9 months in the United States alone. The ultimate blue chip GE just announced it is cutting its dividend by 66%.
b) Unemployment is still going up! The US Dollar is absolutely tanking. There’s no way this dead cat bounce is legit.
c) Deficit spending is out of control! We are on a path to ruin.
d) Dodd-Frank will cripple the financial industry and permanently slow economic growth.
e) The US is going to hit the debt ceiling and default on its obligations. We will lose our position as the world’s reserve currency and life as we know it will be over.
f) The “Arab Spring” is destabilizing the Middle East and will lead to international war.
g) China’s “hard landing” will have a ripple effect on the global economy, which is not strong enough to take such a big blow.
h) Greece. Italy. Spain. Portugal. The Euro is a failed experiment. The “Grexit” will cripple already-weak European countries. A lack of stability will lead us all back into a global recession.
i) Too much “uncertainty” surrounding Obamacare is preventing US companies from reinvesting in their own growth.
j) More “uncertainty” surrounding US politics as we head into the 2012 elections. If Obama wins, the country’s economy will be in tatters.
k) North Korea is threatening the world with nuclear weapons. It’s not “safe” to be in the markets.
l) The Boston bombings claim the lives of 3 people and injure hundreds more.
m) Unable to produce a spending bill, the US Federal Government shuts down. Our country is clearly too dysfunctional to invest right now.
n) Russia invades Ukraine. We are on the brink of a possible global war. Only fools would be invested now.
o) Ebola outbreaks reach the US. A spread could decimate the global economy.

Let’s not forget that all along the last five years we’ve had hand-wringing over unemployment (which was over 9% two years after the recession ended), home prices, wage growth, Fed activity, lazy millennials, idiot politicians, global unrest, trade imbalances, peak oil (and now the horrors of falling oil prices), and my favorite, endless “uncertainty.”

So when the next bear market comes, when things get scary again and you try to tell yourself that it was “easier” back in the bull market, pull this back up. It’s never easy. There is always uncertainty. There is always a great reason to sit on the sidelines and wait for better economic conditions. Except that the better conditions never come, and in the process you miss the incredible power of long-term compounded returns.

Big Bank Problems: A Culture Ratio is More Important Than a Capital One

My Comments:house and pig The financial crisis in 2008-09 could have been much worse. The Federal Reserve intervened and limited the damage. After the fact, the regulators created a major remedy, one intended to “make sure” a similar crisis wouldn’t happen again. The idea was to impose new standards regarding the amount of capital, or reserves, on the books of the banks that were deemed “too large to fail”.

This author suggests it wasn’t enough. Which in turn suggests we’ll have another crisis down the road, only for different reasons. I can hardly wait.

Simon Samuels / November 24, 2014

The focus on making banks ‘safe’ by holding more capital is unrealistic, writes Simon Samuels

Tim Geithner said he realised Merrill Lynch’s risk culture was not in great shape when John Thain, then chief executive, did not know the name of his chief risk officer – who at the time was sitting next to him. The anecdote demonstrates a truth that is in danger of being lost in the regulatory clamour for banks to hold ever more capital: that the driver of bank failure is not insufficient capital but rather a bad “risk culture”.

Think of three pairs of superficially similar banks pre-crisis: Citigroup and JPMorgan Chase; Royal Bank of Scotland and Barclays; Belgian-Dutch lender Fortis and BNP Paribas. In each case, when crisis struck, the first needed a taxpayer rescue; the second did not. Yet here is the odd thing. Entering the crisis the capital strength of each pair was near identical. The overall risk culture, and not capital levels, explained their divergent fortunes.

Today regulators are focused on requiring all banks to hold much more capital as they attempt to make banks “safe”. In practice, however, making all banks “safe” is unrealistic. While RBS was suffering losses of £30bn in the crisis, BNP Paribas was making profits of €34bn. Would it have been right to have set BNP Paribas’ capital requirements in anticipation of RBS-sized losses?

Some say yes, including Robert Jenkins, a former member of the Bank of England’s Financial Policy Committee, who in 2012 put to the industry the idea of a “deal” whereby all new regulation would be suspended in return for a 20 per cent leverage ratio on banks, many times the Basel requirement. In practice, such a measure is a hammer to crack a nut. Much better, surely, would be to demand more capital only from those banks more likely to lose money: those with poor risk cultures.

But it is hard to measure risk culture. Some weaknesses are, in retrospect, obvious. Citigroup’s board included the chief executives of a galaxy of famous US companies who between them had hardly any banking experience. However, a good risk culture is more complicated than knowing who your risk officer is or having banking experts in the boardroom. Entering the crisis, the directors of RBS included a healthy compliment of extremely experienced bankers who – at the time – regulators, investors and analysts regarded as suitably qualified. Between them the five critical boardroom lieutenants of Fred Goodwin, chief executive, had almost 150 years of relevant banking industry experience. Yet, apparently, the culture was not one that encouraged challenge.

The UK’S 2009 Walker report on corporate governance recommended fostering such a culture in boardrooms as part of a strong risk culture. And it is more important than ever today, when the risks remain long after the loan has been repaid or the trade completed, as shown by the billions of dollars banks have paid so far for misconduct in the run-up to, during and after the crisis, including by those banks that did not need a taxpayer rescue to survive the economic meltdown.

But, while much has been done by regulators and policy makers, much more is needed. First, global regulators should disclose their own assessment of a bank’s risk culture. They may well penalise those deemed weak by confidentially requiring them to hold more capital. Disclosing such information – after an appropriate delay allowing the banks time to rectify the situation – will offer banks an incentive to address the problem and provide valuable information to investors.

Second, banks could vary the way they pay directors to reflect their different relationships with risk. By all means pay the chief executive, who will be focused on the bank’s growth, in deferred stock. But it is better, surely, to pay the chief financial and risk officers – both more focused on avoiding dangers – in similarly aligned debt instruments.

Third, banks should reveal their own record at measuring risk by disclosing how their losses each year compare to the level they expected, and providing an explanation for any difference. The International Accounting Standards Board’s IFRS 9 accounting standard takes steps in this direction but does not go nearly far enough.

Finally, banks could disclose the topics discussed and voting patterns at board meetings. Giving investors such an insight may reveal how good the board is at anticipating and managing risk, and how challenging or submissive the boardroom culture is.

Just because culture is harder to measure than capital does not mean it is less important. As Albert Einstein said: “Many of the things you can count don’t count. Many of the things you can’t count really count.”

The writer is a member of the Financial Stability Board’s enhanced disclosure task force. He writes in a personal capacity.

13 Reasons Why a QLAC Belongs in Your IRA

My Comments: Some people made good decisions along the way and now have significantly large IRA accounts. Some people I know have little need for the money to maintain their existing standard of living.

If this is you and would like to find a way to NOT take money every year and pay the IRS a sizeable chunk of your retirement nest egg, there is now a way to defer some of the taxes. You can’t avoid the truism about the inevitability of death and taxes, but you can delay it.

This article explains your new option. If you’d like to know more, send me an email or give me a call. I can help make it happen for you.

By Stan Haithcock / Nov 18, 2014

Qualified longevity annuity contracts (QLACs) were approved on July 1 of this year for use in Traditional IRAs, 401(k)s, and other approved retirement plans.

They’re also referred to as qualifying longevity annuity contracts. Regardless of what name you choose, let’s look at some reasons why you should consider including a QLAC in your IRA:

1. Potentially reduce taxes
The ruling allows you to use 25% of your individual retirement account, IRA, or $125,000, whichever is less, to fund a QLAC. That dollar amount is excluded from your required minimum distribution, RMD, calculations, which could potentially lower your taxes.

2. Lessen your RMDs
As an example, if you have a $500,000 Traditional IRA, you could fund a $125,000 QLAC under the current rules. Your RMDs (Required Minimum Distributions) would then be calculated on $375,000.

3. Plan for future income
QLACs allow you to defer as long as 15 years or to age 85, and guarantees a lifetime income stream regardless of how long you live.

4. Spousal and non-spousal benefits
Legacy benefits for both spouse and non-spouse beneficiaries guarantee that all the money will go to your family, not the annuity carrier.

5. Protect your principal
QLACs are longevity annuity structures, which are fixed annuities. Also referred to as deferred-income annuities (DIAs), the QLAC structure has no market attachments, and fully protects the principal.

6. Add a COLA
Depending on the carrier, you can attach a contractual COLA (cost-of-living adjustment) increase to the annual income or a CPI-U, Consumer Price Index for All Urban Consumers, type increase as well.

7. No annual fees
QLACs are fixed annuities, and have no annual fees. Commission to the agent are built into the product, and very low when compared with fully-loaded variable or indexed annuities.

8. Contractual guarantees only
QLACs are pure transfer of risk contractual guarantees, and agents cannot “juice” proposal numbers.

9. Laddering income
Because of the QLAC premium limitations, this strategy should be used as part of your overall income laddering strategies, and in combination with longevity annuities in non-IRA accounts.

10. No indexed or variables allowed
Variable and indexed annuities cannot be used as a QLAC, which is a positive for the consumer in my opinion. Only the longevity annuity structure is approved under the QLAC ruling.

11. Complements Social Security
QLACs work similarly to your Social Security payments by guaranteeing a lifetime income stream starting at a future date.

12. Indexed to inflation
The QLAC ruling allows the premium amount to be indexed to inflation. That specific amount is $10,000, and should increase by the amount every three to four years.

13. Only the big carriers play
Because of the reserve requirements to back up the contractual guarantees, only the large carrier names most people are familiar with will offer the QLAC version of the longevity annuity structure.

I have recently written an easy to read QLAC Owner’s Manual that clearly explains the law and what you need to know to make an informed decision. In my opinion, it’s worth your time to take a closer look.

Halt Jerusalem’s Unholy Descent Into Dark Ages

My Comments: Writing about politics and religion is outside my professional capacity to serve my clients, friends and family, not to mention those whom I hope to meet in the coming years. It’s much easier to try and ignore this stuff than to admit it has important implications. And then attempt to define just where we are mentally with respect to the issue at hand.

For many years I’ve been a fan of Israel. I’m not far removed from the horrors inflicted on Jews by the German state and the conflict we call World War II. However, I’m less of a fan than I used to be as Israel increasingly allows itself to be defined as just another tribe, whose people happen to live in a part of the world where tribal conflicts have raged for centuries.

For me it’s analogous to my refusal to be defined by any church or religious group. In historical terms the worst atrocities man has ever inflicted on his fellow man resulted from a belief that his God was “better than your God”, therefore “you must die”. For me that demeans the spirit behind all interpretations of God; that we are simply observers of the universe and subject to rules over which we have zero control.

I suspect I’ll not live to see this Jerusalem question resolved. But the following comments by someone with a significant history behind his name are worth a read. It has implications for what we are seeing here in this country today; the conflict between blacks and whites, and the growing discrepancy between the have’s and the have nots. We either accept the need to find remedies and struggle for solutions or it will sooner or later bite us in the ass. And it won’t be painless.

December 1, 2014 / Ghanem Nuseibeh / The Financial Times

The city has seen worse, but today’s problems could spark global conflict, says Ghanem Nuseibeh

Jerusalem, the city at the heart of all three Abrahamic faiths, is undergoing one of the most disturbing episodes in its long history. As the scion of its oldest Arab family, I find the developments of the past few weeks – the bloodshed, yes, but more fundamentally the wave of intolerance – deeply troubling, breaking longstanding pacts between the faiths to share the city and its religious treasures.

My family arrived in Jerusalem in the 7th century with the Arab Muslim army led by caliph Omar bin al-Khattab, companion of the Prophet Mohammed. At that time the city was ruled by the Roman empire, which for centuries had barred Jews from entering. The covenant of Omar – the truce between Omar and Sophronius, patriarch of Jerusalem – included a promise by the city’s new Muslim rulers to protect the Christian inhabitants. There was only one clause that the Christians insisted the Muslims not implement: the condition that Jews would not be allowed back into Jerusalem.

Instead, the Muslim conquest opened the city up to Jewish residents once more. One of my forefathers was a signatory to the covenant of Omar. I am proud to say the Muslim decision to allow Jews to resettle in Jerusalem was a moment of significance in the city’s history. Exclusion and discrimination gave way to tolerance and respect.

My family was entrusted with the custodianship and the key to the Church of the Holy Sepulchre, Christendom’s holiest site, more than 1,400 years ago. Since then, and to this day, we have performed this role – with the only interruption occurring during the crusades in the 11th century. The Christian and Muslim leaders of the day, Richard the Lionheart and Saladin, agreed to restore the Nuseibeh custodianship of the church to keep the peace between the Christian denominations after intra-Christian fighting and bloodshed, often within the holy building itself.

What we are seeing today is not the worst Jerusalem has seen. But it threatens to turn into a global conflict. When the city is caught up in religious strife, the suffering is reflected elsewhere in the region and beyond. Rhetoric and mutual intolerance is spreading, with every incident ratcheting up the sense of gloom and mistrust. A vicious cycle of incitement is creating an unholy race back towards the Dark Ages.

The murders in the past month at the Jerusalem synagogue were a most condemnable act of savagery. So too was the barbaric killing in July of the Arab youth, Mohammed Abu Khdeir – as well as the murders of the Jewish youths for which this was widely seen as revenge – and the dozens of deaths, including those of Arabs, that followed. For many, the city is becoming a place of exclusion, each group attempting to assert control at the expense of the other. This not only goes against our Abrahamic culture, the root of western civilisation, but also the notion of one God and the equal status of His children – Jews, Christians and Muslims.

The great kabbalist, Yehuda Ashlag, taught that the means for correcting the problems in the world are mercy, truth, righteousness and peace. None of these qualities are evident in today’s disputes over possession of Jerusalem’s holiest sites.

The way forward is lit by the heroes of the past. The willingness of Muslim leaders almost 1,400 years ago to allow Jews to live in Jerusalem was matched by Israel’s acceptance in 1967 of control by the Islamic Waqf – the Jordanian religious trust that administers the site – of the city’s al-Aqsa mosque. That spirit needs to be rekindled for our times.

Jerusalem desperately needs a new covenant for its inhabitants, and indeed for the world. Political and religious leaders must reflect the wisdom of the past and express a renewed commitment of respect for each other and for our respective places of worship. We dare not allow our fears and mistrusts to fester and lead to more senseless bloodshed.

The writer is a senior visiting fellow at King’s College London

Falling Gas Prices Fuel Holiday Cheer

My Comments: A good friend of mine who owns several gas stations says he loves it when the price of gasoline falls. The reason: it’s much easier for him to increase his margin of profit when the price is falling than when it’s going up. Everyone loves falling prices so there is less competition among retail outlets. When it’s rising, the game is won by those willing to accept a smaller profit per gallon.

I read this morning that prices in the South may go as low as $2 per gallon. It’s a reflection of our ability to produce more domestically via fracking and an economic slowdown across the planet leading to less demand for oil. Enjoy it while it lasts.

November 21, 2014 / Scott Minerd / Guggenheim Partners

Rising equities and falling prices at the pump will bring holiday cheer, but be aware of potential headwinds as we head into 2015.

Economic data from Japan this week was much worse than expected. Japanese GDP decreased by an annualized 1.6 percent in the third quarter, despite forecasts that it would rebound by 2.2 percent. In Germany, the economy only narrowly avoided falling into a technical recession in the third quarter, expanding at 0.1 percent, a figure that will do little to alleviate concerns surrounding the euro zone’s main growth engine. Economic weakness around the world is being directly translated into the price of oil.

The short-term trajectory of oil prices will depend on a number of factors, including the growth outlook for Europe and Asia, as well as the global supply/demand dynamic. Despite the recent decline in market prices, producers in the Middle East have not yet cut back on production. With fracking having fundamentally increased output in the United States, I suspect that oil is at least ten dollars a barrel away from any kind of price support.

While gas prices at the pump have been heading lower recently, U.S. equities have been moving in the opposite direction. In this regard, the domestic economy will likely benefit from both the wealth effect of rising equity prices, as well as the consumer spending power released by the decline in gasoline prices. Lower gasoline prices act like a tax cut, leaving more money for American consumers to spend on other goods, which is likely to provide the U.S. economy with a boost as we head toward the all-important holiday shopping season.

Despite the positive backdrop for the nation’s economy, the current rally in U.S. equities has still not been confirmed in the NYSE Cumulative Advance/Decline Line and investors would be well advised to monitor this closely. Historically, a persistent divergence between the Dow Jones Industrial Average and the Advance/Decline Line usually leads to a correction in equities. Whether or not the Advance/Decline Line can catch up with the increase in equity prices over the next few weeks will determine whether the current rally is sustainable.

Due to plummeting oil prices, the cost of gasoline in the United States is now at the lowest level since 2010. Gasoline consumption as a share of total spending should fall in the fourth quarter due to lower prices, freeing up income for spending in other areas. Even if gasoline prices remain unchanged for the rest of the year, we project real discretionary consumption should rise by the most since the beginning of 2011, helping to spur GDP growth.