What are you paying for?

A reflection:

I was very fortunate to be hired into the investment industry in 1981. Two gentlemen, Larry Zielinski and Ted Swedock, took a huge leap hiring a not very qualified candidate out of undergraduate business school to fill a role as an analyst in a small consulting group.  I was the first-non consultant or assistant to be hired.  The role’s responsibilities were vast, and the experience that I gained was immeasurable.

But, the most important knowledge that was shared with me was a comment that Larry made on the first day that I began working at Janney Montgomery Scott’s Investment Management Controls division.  Larry told me that anyone or any company can produce vast quantities of paper and/or fancy reports.  A consultant is only worth their salt if they have the ability to interpret the information that they are passing on and at the same time are willing to make recommendations based on their interpretation.

As I sit back today and reflect on my nearly 33 years in this business, I can’t help but remember how important those words were that Larry uttered to me in October 1981.  I’ve tried to follow his lead since day one.  Initially, I didn’t have a clue about how most things truly worked in the investment industry. Today, as we build KCS, we continue to live by Larry’s example.  We can produce all the fancy reports in the world, but they aren’t worth the paper they are printed on if we also don’t share with our clients and prospects our recommendations as to a course that they should follow.  We are Fiduciaries, and we take that responsibility seriously.

As you may know, every month we produce at least one article on an investment subject. We don’t pull any punches.  If you want to know how we feel on a subject, just go to our website and look under the heading “Publications.”  Everything that we’ve produced is there.  I don’t know how many other consultants/consulting firms are regularly producing articles, but they should at least be willing to take a stand on those subjects most important to their clients.

At KCS, we are concerned about retirement security for most Americans.  We do believe that the demise of the defined benefit plan will produce negative economic and social consequences for a large segment of our population.   We don’t think that the status quo approach to managing DB plans is working.  We believe that our clients and their beneficiaries need new thinking and approaches on a variety of retirement subjects.  We’ve articulated those.  Has your consultant? So, I ask again, are you getting what you are paying for?

Europe isn’t wittnessing a great recovery!

As readers of the KCS Blog know, we have been and remain negative on the Euro-zone for a variety of reasons, but specifically because the Euro is a failed model. Without the ability of the Euro-zone constituents to devalue their currency when needed, and they can’t because it isn’t a Fiat currency, these economies / countries will continue to stagger.

Here is some perspective brought to us by Mark Grant:

“Let us peer specifically at Europe. Real inflation in Europe, adjusted for
austerity taxes, has been running at -1.5% for the past five months according to
London’s Telegraph. They are experiencing a very real bout of Deflation. Prices
are down -5.6% in Italy, -4.7% in Spain, -4.0% in Portugal and even -2.0% in
Holland. According to Bloomberg the EU is missing its Inflation target by more
than 150 bps on the downside. Bank of America has opined that the current
stagflation could cause a rise in France’s official debt to GDP to 105%, 148% in
Italy and 118% in Spain. The ECB has said that it is discussing some type of
Quantitative Easing though what it might be has yet to be seen. Yields are down
across Europe but the economies are no better.”

As we’ve discussed, austerity hasn’t worked. Debt to GDP is rising in most Euro-zone countries, employment remains incredibly high, and growth and inflation are non-existent. Clearly this isn’t a great formula for success.

Only time will tell, but don’t be shocked if one or more constituents are no longer sharing the Euro in the next 2-3 years.

Retirement Confidence Slips Again, according to the IRI

The Insured Retirement Institute (IRI) today released a new report showing that Baby Boomers’ confidence in their retirement plans continues to decline, a trend dating back to 2011, when IRI first began tracking Boomers’ retirement expectations. During that time, the percentage of Boomers showing high levels of confidence in their financial preparations for retirement dropped from 44 percent to 35 percent. But while confidence continues to slip, IRI found slight improvements in several important measures, including the percentage of Boomers (51-67) with retirement savings, their total savings, as well as the number of Boomers with a retirement savings goal and a planned retirement age.

While Boomers’ current economic outlook has also soured, they are beginning to show optimism that their financial situation will improve, with 42 percent of Boomers expecting things to improve in five years, compared to 33 percent of Boomers who shared this view in 2013.

Other key findings from the report:

  • A quarter of Boomers postponed their plans to retire during the past year.
  • 28 percent of Boomers plan to retire at age 70 or later.
  • One in 10 Boomers prematurely withdrew savings from a retirement plan during the past year.
  • 80 percent of Boomers have retirement savings.
  • About one-half of Boomers with retirement savings have $250,000 or more saved for retirement.
  • 55 percent of Boomers have calculated a retirement savings goal, up from 50 percent in 2013.
  • Of those calculating a retirement savings goal, 76 percent are factoring in the cost of health care.
  • Three in four Boomers say tax deferral is an important feature of a retirement investment.
  • Nearly 40 percent of Boomers would be less likely to save for retirement if tax incentives for retirement savings, such as tax deferral, were reduced or eliminated.
  • Boomers planning for retirement with the help of a financial advisor are more than twice as likely to be highly confident in their retirement plans compared to those planning for retirement on their own. 

The IRI study is based on a survey of 800 Americans aged 51 to 67.