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Questions to ask your financial advisor
A "Fee On
ly" Financial Advisor implies an advisor who is paid for giving advice (usually as a percentage of the assets he manages for a client) who isn't incentivized to recommend specific products or trading strategies.
As a result, you might think a fee only financial advisor wouldn't receive commissions or sales charges on products s/he is recommending. However, you'd be wrong.
A study from 2013 showed that up to 11% of advisors working at big brokerage firms described themselves on the Certified Financial Planner website as "fee only" when they also could accept commissions.
And
just last month, six firms were subject to disciplinary action by the CFP Standards Board for allegedly claiming to be "fee only" when they also received commissions.
So who can you trust?
When considering a new relationship with a wealth manager, always ask the following questions. (New Market Wealth's answers are in parenthesis.)
1. Are you always a Fiduciary, and will you state that in writing? (Yes)
2. Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services? (No)
3. Do you charge commissions on trades, or receive mark-ups on bond purchases? (No)
4. Do you participate in any sales contests or award programs creating incentives to favor particular vendors? (No)
5. Will you itemize all your fees and expenses in writing? (Yes)
6. Do you earn fees by advising private funds or other investments that you may recommend to clients? (No)
7. Do you earn fees for referring clients to specialists like estate attorneys or insurance agents? (No)
8. How do you report investment performance? (After all expenses)
9. Who manages your money? (Our professionals invest in the same assets we recommend to clients.)
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US Equities were mixed last week with the large cap stocks outperforming their smaller cap counterparts. On Thursday evening, Apple, the largest firm by market capitalization, reported results that generally exceeded analysts' expectations, providing a boost to the tech-heavy Nasdaq on Friday. Markets also reacted to a number of political developments last week including: Special Prosecutor Robert Mueller's announcement of the first indictments and a conviction in his investigation into Russian election interference, the GOP's draft tax reform bill, and President Trump's nomination of Jerome Powell to become the next chairman of the Federal Reserve.
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> The Fed:
Last Thursday, President Trump announced Jerome Powell as his choice to replace the current Fed Chair, Janet Yellen. Though the Powell nomination was widely reported and anticipated for weeks, markets reacted positively to the announcement.
> Yield Compression:
If confirmed by the Senate, new Fed Chair Powell is facing a compression in yields not seen since 2007. The central bank has hiked its benchmark interest rate four times under Yellen and has taken the first steps in unwinding the $4.5 trillion balance sheet built up during the efforts to spur growth through bond purchases.
This is significant for several reasons. First, a narrower yield curve implies slower growth ahead. Second, it limits the ability for leveraged firms, such as investment banks, to profit from borrowing short-term money and lending it out for longer periods of time. And third, it encourages companies and individuals to borrow more money and for much longer periods of time.
> US Employment: Last Friday's employment situation report was viewed favorably by the markets. Although
only 261,000 jobs were added in October (economists anticipated 308,000), payroll growth bounced higher and the unemployment rate shrunk to a 17 year low of 4.1%. Given the report, another rate hike in December is all but guaranteed.
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Correlation Between the Fed Chair and Interest Rates? With President Trump's nomination of Jerome Powell as the new Fed Chair, there may be a new reason to believe interest rates will rise: his stature.
Paul Volker, the 6'7" former central banker and inflation slayer, oversaw the surge of the Fed's benchmark funds rate from an average 11.2% in 1979 all the way to 20% by mid-1981. Whereas, during 5'3" Janet Yellen's tenure, rates have barely moved beyond 1%.
Will the 5'11" Powell rekindle price levels?
Note: we don't actually believe the height of the Fed Chair determines rates, but it has been an interesting coincidence!
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New Market Wealth Management offers modern investment solutions backed by extensive research and experience serving the needs of wealthy families. Through our strategic partnership with
Cliffwater LLC
, we have access to institutional-quality research, investment due diligence and asset allocation tools. We believe this level of experience and unique access to in-depth, sophisticated research are essential for success in today's complex world markets.
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