You decide you need a financial advisor to help you invest your retirement assets. You want a competent, ethical professional who has specialized financial knowledge. […]
In my previous post, Fixing ERISA to Protect Against High Plan Fees, I discussed the failure of many 401(k)/404(c) plans to comply with ERISA’s fiduciary requirement to […]
Why do multi-millionaire executives, who run big Wall Street companies, continue to rip-off investors? I think I know the answer to this one. You can […]
The World Series of Poker just concluded in Las Vegas. The winner of the $8.4 million first place prize was Ryan Riess a 23 year old professional player from Michigan. There were 6,352 entrants who paid $10,000 each to participate in the world’s biggest poker game.
Poker is a fitting metaphor for people who invest their retirement assets in the world’s biggest casino – Wall Street. No one can predict the next card and no one can predict the future performance of the stock market. Poker and investing retirement assets are a combination of skill and luck. And, both are forms of playing the odds. What are the odds you can beat your opponent’s hand? What are the odds the stock market will go up in the next 30 days?
Why is this a retirement issue? Wall Street invests trillions of dollars of retirement assets in 401(k) plans, IRAs, and personal accounts. Its companies are extraordinarily adept at convincing investors to give them control of their retirement futures. You win if you retire when you want to, live the way you want during retirement, and have financial security late in life. You lose if you have to defer your retirement date, reduce your standard of living during retirement, and run out of money late in life.
The Skilled Professional
For years I have told investors if you are going to play in Wall Street’s poker game you want a professional playing for you. It is no accident that a professional won the World Series of Poker. And, I believe Ryan Riess was the seventh winner in a row who was in his 20’s. It takes skill and stamina to stay in the game.
A professional represents more skill and less luck when he plays. He has spent years memorizing the odds and playing millions of hands of poker to hone his skills. And, he probably had coaches to accelerate his learning curve. […]
From Wall Street’s point of view, the ideal assets are the ones it can retain the longest and the ones that produce the largest amounts of new fees and commissions.
Investors may spend 30 years accumulating assets for their retirement years. Then they may spend 30 years in retirement. If a Wall Street advisor created a relationship with this type of investor on day one he could generate fees and commissions for the next 60 years.
In year one, the investor opens an account with an initial contribution of money – let’s say $5,000. And, the investor contributes that amount for the next 30 years. Simple math, with no compounding, says the investor will have $150,000 at the end of the 30-year period. […]
A high percentage of investors have been conditioned to believe investment performance is determined by their willingness to invest a significant percentage of their retirement assets in the stock market. Consequently, they are exposed to substantial risks when they are in their latter years of accumulating assets for retirement or in their early retirement years with 20 or 30-year investment horizons.
According to an Investor Watchdog (www.InvestorWatchdog.com) survey 64.2% of investors are becoming very concerned about their ability to recover from stock market crashes. Their immediate concern is a crash between now and their retirement dates or within a few years after they retire. They have figured out how the math of falling and rising markets works against them. Bill and Ann Smith, our hypothetical investors, illustrate the problem.