DOL PROPOSAL TO EXPAND FIDUCIARY DEFINITION

As a financial advisor living and serving clients in the Cass County and surrounding community, I have concerns about President Obama’s recent statements regarding my business and how I support my clients. I believe his remarks highlighted some basic misperceptions about the very critical services that I provide to the individuals and families I serve. The President has also recently expressed support for a Department of Labor (DOL) regulation that could significantly change the relationship I have with my clients and potentially make it more difficult for all Americans to save for retirement. Today, retirement investors can choose the types of investment professionals and services they want, as well as the manner in which they prefer to pay for these services. But, if the DOL moves forward with its fiduciary proposal and fails to implement it correctly, it could raise the cost of the products and services needed by 401(k) plan participants and IRA owners and restrict access to individual guidance and financial education, while also limiting the choices between fee-based and commission-based services. When it comes to managing financial challenges for our clients, we are with them every step of the way. From developing a savings plan to financing their children’s education, from planning for retirement to purchasing a home, our objective is to guide clients and help them reach their goals. Some clients start with very little, having accounts of less than $5,000. It is our mission to help them grow their savings and achieve financial independence and retirement security. As part of my commitment to my clients, I also provide them with information, explain their options, and help them make educated decisions. I believe that the DOL’s new definition of fiduciary could inadvertently reduce the access of low and middle-income individuals to investment assistance. I believe a compromise on the fiduciary issue can be found—one that adopts a best interest standard but allows advisors to continue to serve investors under a brokerage model, thereby maintaining investor choice and access to financial education. I support greater regulatory harmonization—including a harmonized fiduciary standard—so long as access to all models of financial advice is preserved. I’m proud that my clients come to me for support and entrust me with their lifelong savings, and I want to ensure than no new rule would prevent me from providing my clients with these important services.

David J. Workman, AIF®
LPL Registered Principal

Dave’s Blog 3.6.15

March is a great month. It has the 4 B’s for those of us in Indiana: Basketball (March Madness), Birds (returning), Buds (flowers/trees just starting to bloom), and Beaches (for those making a trek down to Florida for Spring Break). It is a great time of year. On the investment side of the world, I would like to discuss three things:

  1. IRA contributions: If you have not filed your taxes, please check with your tax preparer if you are eligible for a traditional or Roth IRA. When I discuss with clients about investing, I always mention (after having liquidity and reducing debt) being efficient in investing. The most efficient aspect of investing is the reduction or elimination of taxes. Be sure you are taking full advantage of any allowable IRA contribution.
  2. A stock market “Correction:” When a market goes upwards for an extended period, often defined as more than 20%, it is referred to as a “Bull” market. When a market declines by more than 20%, it is referred to as a “Bear” market. Usually in-between these two types of markets, we have what are called “Corrections.” Corrections are generally defined as a decline of between 10-20%, not as severe as a “Bear” market. In my opinion, “Corrections” are natural, normal, and necessary parts of a stock market “cycle.” If you look back over the last 70 years, we’ve had approximately 140 “Corrections;” that works out on average to about 2 per year. Since the “valley” of the 2008/2009 “Bear” Market, we have had very few (depending on who does the calculations) 1 or 2, while the U.S. equity market as defined by the S and P is up approximately 200%. In my opinion, we are due for not only a “Correction,” but multiple “Corrections.” I am not a timer and nothing I have ever read leads me to believe there is any empiric evidence that says under certain conditions you should reallocate your clients to a “cash” position, wait for the “Correction,” and then move them back in. Sounds good in theory, but I just haven’t seen it proven. I believe the most important part of moving through downward cycles is to make sure your portfolio is properly allocated to be consistent with your financial objectives. I encourage you to call my office to set up an appointment if you have not recently reviewed these objectives.
  3. Politicians, taxes, and the 529 College Savings Plan: Recently at the State of the Union, President Obama spoke of his idea to tax the earnings on 529 college savings plans saying these plans were for the wealthy. These plans are for people trying to save for secondary education. My purpose in this discussion is two-fold. One, your vote matters. Unless we elect politicians that will have the discipline to spend less, anything such as 529 college savings plans, Roth account, and the exemption on federal estate taxes can all be changed and the money redistributed to other programs. I believe that amount of interest we are paying on our national debt is either close to or surpassed the amount we are spending on our military. Be vigilant when it comes time to vote and be sure to discuss the importance of knowing the candidates within your circle of family and friends. Second, if you have not yet learned about the 529 college savings plan and you have a child or grandchild that you would like to save money for college, please call my office for an appointment to discuss. I believe the Indiana 529 is one of, if not the best, 529 plan (each state has its own 529 plan) in the nation for Hoosier residents.

March is a great month. My hope would be for Purdue, Indiana, Butler, and Notre Dame, to all be in the Final Four, with Indiana State, Ball State, Evansville, and IUPUI making the Elite 8. Very unlikely but, heh, hope at this time of year springs eternal for all true basketball fans for their teams.

March 2-8 – National Consumer Protection Week – Encourage consumers to take full advantage of their consumer rights and make better-informed decisions in the marketplace. www.ncpw.gov

March 10-17 – Global Money Week – Focus on saving money, changing economic systems, and building a financial future for youth. www.globalmoneyweek.org

Watch for details about Women & Investing Seminar.

Please let me know if you have any questions or we can be of help.  Thank you to all of my clients for your trust and business.

Blog regards,

David J. Workman, AIF®
LPL Registered Principal

Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program.  Withdrawals used for qualified expenses are federally tax-free.  Tax treatment at the state level may vary.  Please consult with your tax advisor before investing.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.  The S&P 500 is an unmanaged index which cannot be invested into directly.  Past performance is no guarantee of future results.