The Best TV We've Ever Seen

We're used to seeing financial related television delivered in a way that frankly, doesn't appeal to most viewers.  Terms like 'rate of return' or 'beta' or 'compounding' just don't excite.  That is, unless a hilarious comedian delivers them.  John Oliver (comedian, former Daily Show correspondent, and host of Last Night Weekly ) did something important.  He recorded some of the best television we've ever seen.

This must-watch, plain English (pun intended) explanation about the rigged state of the financial service industry hilariously outlines why you should care more about your money.  You.  The one reading this right now.  It's a little long but well worth the time to watch. (fair warning - this video contains crude language and concepts that are meant to be humorous but may be in appropriate or undesirable for some. )

Fiduciary Financial is a Fiduciary only firm that believes in low cost and conflict free investing.  I.e. We are exactly the type of Advisor that John Oliver is advocating that you use. If you would like to talk about your situation, contact us!  

P.S. If you are a retirement plan sponsor for your company or can affect positive change for your company's retirement plan, it is particularly important that you watch starting at 11:46 minute mark.  We would love to help your company eliminate excess costs from your retirement plan and make it a better experience for all of your employees. It's very simple, submit a brief request here: CONTACT US

JUST ANNOUNCED! Action Point Financial is a finalist for Veteran-Owned business of the year in West Michigan!

We're proud to announce that Action Point was recently nominated and is now a finalist for Veteran-Owned business of the year in West Michigan by the Grand Rapids Chamber of Commerce. 

The United States military is not the environment one joins to craft and develop the foundation of successful entrepreneurship. And yet, when I reflect on the growth Action Point has experienced over the last 3 years, it is evident that the principles and disciplines the military instills are very much a part of the firm being built today.

The core values of the United States Navy are Honor, Courage, and Commitment.

I don't know any successful business that has been built without a healthy dose of commitment and we remain as committed as ever to doing our part in making investors lives better. That continues to mean advocating for and delivering lower investing fees,  fiduciary management, and full blown financial planning for today's and tomorrow's investors.

Honor is something lacking throughout the financial services industry. I'm not saying there aren't good people but there are a lot of bad and even more troubling to us, lots of good people that have to follow honor lacking policies, procedures and practices. Honor is something we take seriously. We have to earn it each and every day and work hard at that.

Courage. That's an interesting one. Being a great investor takes courage. We haven't forgotten what it's like to be in the midst of a crash and believe courage is just as important in today's investing world as ever before (maybe more so).

We're proud to be a finalist for this award, whether we win it or not. What it represents is meaningful to us.

Ben VerWys - Co-Founder & Senior Financial Advisor / former U.S. Navy Military Police Officer

What is a Best Interest Contract Exemption and why would your financial advisor want you to sign one?

Bottom line:  A best interest contract exemption allows financial advisors that still make their money by selling products for commissions to be compliant with the new DOL fiduciary rule when working with your retirement accounts.  These retirement accounts were expanded to include individual retirement accounts (IRAs) but do not apply to other accounts like your brokerage account or college saving 529 accounts.  Many of the fiduciary requirements are still in place even if you sign the BIC, but you have to ask yourself if exempting your best interest is really what's best for you. 

In the past couple of days, you may have received an unexpected call from your financial advisor.  The conversation went pretty well, as usual.  He is always so nice and probably asked how your summer was going, or how that promotion at work was shaping up.  At some point, he undoubtedly worked in a comment on the Department of Labor’s (“DOL”) Fiduciary Rule, how D.C. is just adding more requirements for us all.  Unfortunately, that means you need to sign yet another form for the lawyers that he called the BIC.  Sounds harmless enough, but hopefully when you see that document come through your inbox, you get a little curious.

Sure it looks nice, but it’s still lipstick on a pig.  This time it’s your piggy-bank they are trying to cover up!

SOME RULES ARE WORTH HAVING (FOR YOU, NOT THEM)

Welcome to the third installment in our series on how the recent Department of Labor's “Fiduciary Rule” may be impacting our financial system and you the investor.  As a Registered Investment Advisor (RIA), we at Action Point Financial always have been and always will be fiduciaries, but this new rule is causing some substantial changes for broker-dealer firms. 

To quickly recap our previous discussions on the "fiduciary rule," we first talked about what a fiduciary investment advisor is and how to know if you’ve got one (spoiler: you probably don’t) The Day Has Finally Arrived! Fiduciary Rule is Here: An Open Letter to Consumers.  Later we discussed how costly (and how transparent) these advisory services should be (Arbiter of Reasonableness: What is Reasonable & Who Gets to Decide?.  If you haven’t read those, they’re both quick reads and worth your time to understand the rest of this article.  Go ahead and read them, now’s a good time.

If you are still working with a financial advisor at a broker-dealer firm, a word of caution to you, especially if they approach you with that little form called a BIC or Best Interest Contract Exemption (BICE).  While these individuals may call themselves "financial advisors" they are probably better represented by their former title, stock broker, meaning they earn money by selling you products that pay them with commissions, 12b-1 fees, fund loads, or profit sharing with proprietary products. 

A fiduciary financial advisor has the legal obligation of putting their clients’ needs first and taking the highest level of care when choosing investments.  This has not been the case with financial advisors working at broker-dealers.  For them to sell a product to you, they previously only needed to meet "suitability" standards based on age and financial situation, with no regard to fees or diversification.  Additionally, they are only able to provide general financial education to those seeking their services and not permitted to provide detailed advice to their clients, even though they call themselves financial advisors. 

WHAT IS THE BIC

Enter the Best Interest Contract Exemption (BICE) or even BIC for those trying to hide that signing it actually waives your rights.  The majority of Financial Advisors are still brokers or may be dually registered, but the new DOL "fiduciary rule" requires anyone working with a retirement account to be a fiduciary.   These accounts include your 401k or 403b, any of your IRAs, or other ERISA accounts that you might have. 

Getting paid a commission does not fit well in the fiduciary world since it always adds another conflict of interest for the advisor.   Once signed, the BICE allows the advisor to be able to continue to earn that nice commission when selling you funds for your retirement accounts.  In whose best interest is that?

WHAT IS NOT COVERED

The BICE still requires those advisors that charge commissions to maintain many of the fiduciary standards such as acting in the client’s best interest by being prudent and loyal while properly disclosing the fees they charge in a transparent manner.  However, these requirements only apply to your retirement accounts, and only when you have given them the ability to act with discretion.   This means if you call your broker asking for a specific product, they can sell you it, even if it should not be in your portfolio.  If you were to call your advisor requesting a particular product, or if this was for your brokerage (non-tax deferred accounts) they do not need to follow these rules.

WHY WOULD YOU SIGN IT?

The BIC drastically increases the liability for many broker-dealers to work with your retirement accounts, and many firms are choosing to send their smaller accounts packing.  Some are making the statement that this is hurting those clients because they are not getting financial advice, but was that kind of advice really worth getting?  Others are setting up automated, “robo-advisors” to automatically feed your through their computer system and still collect their check at the end of the day.    

Maybe we are a bit biased, but we believe that if you call yourself an advisor then you should be expected to provide open and trustworthy advice.  A cook should eat their own cooking, and we should be treating our client's money like it was our own.  We should make money when our client's make money, not by charging expensive commissions up front and then forgetting about them.  We believe in giving prudent advice and thankfully for us, have found that many consumers wanted this all along.

So, what should you do when looking at a BICE from your current financial advisor?  That answer is ultimately up to you, but if you're unsure and want a second opinion, we would love to gain an understanding of your needs and guide you in the right direction.

Arbiter of Reasonableness: What is Reasonable & Who Gets to Decide?

In our last post, we talked about the Department of Labor's newly launched Fiduciary Rule and what it means for you. We also raised another issue that isn’t getting much coverage: in a world where everyone is forced to charge on a fee-only based system, and those fees are required to be “reasonable,” who decides what is reasonable? 

It turns out, a fiduciary can act in your best interests, but still charge too much. Sometimes, WAY too much! In addition, we’re concerned that what financial services companies consider “reasonable” fees may start to increase as broker-dealers now following the fiduciary standard seek to recoup lost commissions revenue. Reasonable fees are generally deemed to be around the industry average of 1.00-1.25% of assets under management (“AUM”), depending on total investment amounts. (See the figure below for an illustration of this.)

Source: Advisory HQ 2017 Report on Advisory Fees and Costs

The problem with this assumption is two-fold.

First, this range is antiquated and has not adjusted for the current environment. As returns on money markets, bonds, and other fixed income based assets have come down over the years, Advisory fees have actually gone up according to leading research firm PriceMetrix.

The second problem is that “reasonableness” has historically been defined by, and interchangeable with industry-average. In other words, the financial services industry itself has been the arbiter of reasonableness. That’s right, the industry that is incentivized to make as much profit as possible is the same group that gets to determine what is reasonable. So while the fiduciary rule is a nice step in the right direction, it doesn’t go nearly far enough. Investors not paying attention are still likely to lose large amounts of money, just now in the form of annual fees instead of commissions.

Keep in mind this does not even include the expenses associated with investment funds in your accounts, or any transactional costs. If you think that’s too much – and you should – what are your options?

We believe that in the future, clients’ expectations should drive down the industry average AUM fee, and rightly so. There’s no surprise that what we advise you to seek is what we offer: transparent, low cost, fiduciary investment advice. First, look for a fee-only advisor that acts as a fiduciary at all times, with all of your money. Remember that the new rule only addresses retirement accounts right now. So when it comes to any non-retirement money, including college savings, inheritance, etc. most Advisors do not need to act in a Fiduciary capacity still. Second, look for an advisor that is dedicated to transparency, who will candidly discuss with you how she gets paid and how that impacts your investments. The more forthcoming an advisor is with you on these matters, the more likely she is to be truly operating in your best interests.

Finally, look for an Advisor with a lower cost structure. Many firms have no flexibility when it comes to their AUM rates – these may tend to be part of big banks or franchised by a larger corporate entity – but some firms do. Ask to see the Advisor’s fee schedule and ask whether there’s any flexibility in those rates. Our clients prior to arriving at Action Point almost always paid at least 1% with many between 1.20% - 1.30%. At Action Point, every client pays less than 1% for investment management. We pro-actively seek to set each client’s fee as low as possible. When compared to the “reasonable industry averages” we can typically offer fee reductions of up to 20-40%!

Of course, lower cost cannot be the *only* thing you consider. Investors can and should be looking at both reasonable cost and value in exchange for cost.

At Action Point, we believe the future is now. We are dedicated to a transparent, low cost fee structure that’s always well below industry average, regardless of your investment balance. We charge less because we can, and because it’s the right thing to do. We are all fiduciaries, all the time, which means we’re always working in your best interests and with no commissions on investments, ever. We want to help you enjoy your life and save responsibly for the future.  Contact us today to find out how.

The Day Has Finally Arrived! Fiduciary Rule is Here: An Open Letter to Consumers

The first phase of the Department of Labor’s “Fiduciary Rule” goes into effect today. This topic has been in the news a lot lately, so you probably have some idea that your financial advisor should be a fiduciary. The author of this Forbes article thinks that regardless of the rule’s legal future, consumers will hold their financial advisors to it, and I agree. You have been enlightened, and now I hope you will accept nothing less than your best interests as top priority. You already demand this level of care from your doctor and accountant so when your life savings are at stake, you should absolutely expect the same standard of care and ethical duty.

But what does it mean exactly, to be a fiduciary? And what does it mean for you if yours isn’t?

Essentially, a fiduciary is an financial advisor who is required by law to act in the best interests of the client. But there’s more to being a fiduciary than meets the eye. It’s not just a label you can slap on.  Only one kind of financial advisor – one who acts exclusively as a Registered Investment Advisor or “RIA” – is required to act as a fiduciary at all times. That little three letter word “all” is really important.

It is possible, and increasingly popular, for financial advisors to be dually registered, meaning sometimes they wear a fiduciary hat to provide investment advice while at other times not; getting commissions through an affiliated broker-dealer on other investments. So the question to be asking is not, “Are you a fiduciary?” but rather “Are you required to act as a fiduciary at all times?” 

These dually registered advisors are blurring the distinction between broker and advisor, which can be confusing to investors. Other key differences between these two approaches include the following:

The fiduciary standard goes beyond the traditional requirement that broker-dealers “reasonably believe” the recommended investments to be “suitable” for the client, based upon their needs, objectives and circumstances. The broker’s duty also remains to the broker-dealer by whom she is employed, not necessarily to the client. To make matters worse, many of these broker-dealers are publicly traded companies which means their duty remains to the shareholders. The fiduciary standard requires RIAs to maintain a “duty of loyalty and care” to their clients, which means the advisor is required to be on your side, regardless of whether it makes her, or her employer, more money.

The essential difference between the suitability and fiduciary models is their primary focus: a product vs. client orientation. The licensing requirements for these two professions back this up. A broker is trained and licensed primarily to be a salesperson and has a Series 7 license to sell a product. An RIA, however, maintains a Series 65 license to provide investment advice. 

I can hear you protesting as I type these words - “But my Financial Advisor is a great guy!” or “We’ve been with XYZ Brokerage forever… of course they’re looking out for us!” I am not saying your Financial Advisor isn’t a great guy, or that you haven’t had good service from your brokerage. But the bottom line is that under the fiduciary standard, an advisor working with an RIA would be prohibited from putting your money in an investment from which she would receive a higher fee because it would cost *you* more money. The great guy at your brokerage would not, as long as that was one of many investments deemed suitable for your situation. In fact, a broker might even be incentivized to invest you in his brokerage’s products because he earns a higher commission on them, regardless of whether they are the best choice for you.

Another byproduct of the sales or transactional orientation of most brokers is that once the sale is completed and they’ve received their commission, you may not hear much from them. We often hear people say they “feel like a number” or don’t hear from their financial advisor regularly which makes sense when you think about it - if they’ve already received their compensation and are not bound by a fiduciary duty to keep working in your best interests, why would they call more than they need to? Unless you’re an investor with a lot of assets, it is not cost effective for them to spend time on you. This is often true for many RIAs, as well, because they tend to be paid a fixed percentage of the invested amount. This is why many investment management firms have minimum account sizes that exclude less profitable clients.

Which brings us to another problem in the scope of advisor compensation: in a compensation structure where everyone is moving to fee-only, and those fees are required to be “reasonable,” who is the arbiter of reasonableness? If everyone is charging around the industry average of 1.00% - 1.25% of assets under management – and we may see that increase as advisors seek to make up for lost commissions – investors don’t have many better options. So even fiduciary RIAs and dually registered brokers can legally meet the definition of fiduciary, but still charge what we believe are excessive investment management fees. And in the end, you, the client still pay a steep price.

At Action Point, we do things differently. We are all fiduciaries, all the time. That means we serve your best interests above our own. That means a transparent, and much lower than industry average fee structure with no commissions on investments, ever. We believe that talk is cheap. So this is our way of adding real value (plus we can sleep at night which is an added bonus.)

We don’t believe in minimums either. We currently help investors that range in size from just getting started to tens of millions. If you’ve got a little to invest, we want to steer you in the right direction. If you’ve got a lot, we want to help you avoid expensive mistakes. We want to help you enjoy your life and save responsibly for the future.                                                                                                                 

INC. Magazine spotlights Action Point Financial

Action Point recently collaborated with INC. Magazine to co-write the nationally read article - Entrepreneurs Need to Get Serious About Their Investment (Advisor). Enjoy! (time to read: < 3 minutes) 

TV interview talking about the Fed's decision to raise interest rates. (Time to watch - 3:22)

(to view the 3:22 video, click the image or link below)

Yesterday Ben VerWys, Action Point CEO & Senior Financial Advisor stopped by the studio to chat with anchor Brian Sterling about the Federal Reserve's decision to raise the interest rate by a quarter percent.  The important takeaways of note are:

1) Borrower costs will rise.  Many of the major banks have already announced increases to their prime lending rates.

2) Investors need to take a hard look at their investment portfolios, including 401(k)s and IRAs to determine what the impact of the Fed's announcement may be.  As Ben mentions in the video, it is important to recognize that the impact of this isolated rate increase may be minimal today, however poorly positioned portfolios may be impacted for years to come as the Federal Reserve pursues their long term agenda. 

If you have questions about how the interest rate increase may affect you or whether your investments are well positioned going forward, please CONTACT US today.

Original video link: http://woodtv.com/2015/12/16/fed-hikes-rates-for-first-time-in-7-years/

Every Day is Veteran's Day

Each year, on November 11th, I attend a Veteran's Day assembly at my daughter's school that honors veterans of all generations. It's a point of pride for the kids to be connected with a relative or family friend that participates in the assembly so I make it a point each year to attend. And honestly, the feeling that I get when I can see that my daughter is truly proud of me is not something I want to miss.

Action Point is a veteran owned business and I've often thought that we have unique advantages and perspective because of this. It's interesting though because the hiring world seems to be very polarized when it comes to hiring veterans. I personally can credit much of my career success thus far to the opportunities that were opened up to me because of my military service. However for every one of me, I can find an article or research evidence that shows when push comes to shove, many companies do not look to ex-military members for high level expertise.

We are proud to be veteran owned and our desire would be that our clients and potential clients are more inclined to hire us because of this than less.  Being former military in no way undermines our ability to provide helpful financial planning techniques or hinders our ability to identify compelling investment opportunities.

Here's a quote for you to ponder:  

"Heroism in battle is first and foremost the acceptance of fear and the decision to act appropriately in spite of it."

At first read, that may seem like it's talking about former war heroes or veterans and it certainly is applicable in a military way.  However you may be surprised to learn that is a direct quote from financial educator Nick Murray, addressing the task at hand for my firm; to help people navigate to and achieve financial success. As CEO of Action Point, I became a Financial Advisor to help people like you become a hero to yourself and your family. Together, we can help each other be heroes, starting by getting laser focused on achieving your long-term financial success.  To have a conversation about, contact me via our Contact Us page.  And remember, veterans are veterans every day.

Lastly, for my military friends, check out The Veteran Mafia, a great perspective post from Patriot Boot Camp addressing why each of us veterans has a unique opportunity post service.

Warm regards,

Ben VerWys - Senior Financial Advisor

Action Point Co-Founder and Advisor admitted to prestigious national registry of Financial Advisors

When you hear us talk about truly putting our client's best interests first and advising clients the right way, we want you to know it's not just cheap talk.  Aside from believing in completely transparent relationships, aside from being anti-commissions, aside from dropping the licenses that allow us to charge commissions, one of Action Point's Founding Partners and Senior Financial Advisor, Ben VerWys has been admitted to the Paladin Registry.  According to Jack Waymire, Founder of The Paladin Registry and author of Who's Watching Your Money?, Paladin, is "the only online service that vets and rates the quality of financial planners and advisors. We ask the right questions so investors don't have to. And we know the critical differences between good answers (benefit investors) and bad ones (damage investors)."

Paladin uses an objective research process to determine who is profiled in the Registry. Advisors must be willing to practice full transparency. They cannot withhold information that may cause investors to reject them. Next, they must complete Paladin’s rigorous due diligence process that focuses on their expertise and ethics. And lastly, they must also score in the 90th percentile or higher when Paladin’s proprietary algorithm rates the quality of their credentials, ethics, business practices, and services.