Brokers around the country had a very positive reaction to the new version of the SEC’s Best Interest Rule which was approved last week. One of the reasons why, other than the generally light-touch direction of the regulation, is that the new rule seems to suggest that a broker can always be confident in putting money into an IRA when considering a rollover. However, the SEC has just warned brokers against this quick conclusion, saying they cannot short-circuit their analysis.

FINSUM: The way the new rule was structured seemed almost too good to be true for advisors as it appeared to heavily favor rollovers into IRAs. More analysis of the rule will be forthcoming over the next week.

Published in Wealth Management
Tuesday, 29 January 2019 08:30

The Fed’s Risk to Retirement


Those nearing retirement are likely comforted that rates have risen and returns from fixed income are much higher than the near zero coupons of the 2008-2015 era. Pension funds are finding it easier to meet their return goals, and generally speaking, the environment for retirees is on much better footing. However, the risk of a return to zero interest rates in the next recession seems very high, according to independent research. The Fed tends to raise rates slowly and cut them quickly, so the threat of a return to zero rates seems very plausibe the next time the economy goes into reverse (maybe 2020?). Even the Fed staff itself acknowledges this likelihood.

FINSUM: The risk of a protracted return to zero interest rates is not inconsiderable and is likely one of those late night stress points for those nearing retirement (and their advisors!).

Published in Bonds: Treasuries
Friday, 28 September 2018 10:35

How the Bull Market Could Ruin Retirement

(New York)

That is quite a counterintuitive headline, but in an odd way, it could not be more true. Bloomberg has put out a piece, which echoes many advisors, that the current bull market could actually end up hurting many retirees. The reason why is that many have experienced hefty gains in the last decade and feel comfortable retiring. However, after such a sharp run higher, the market is likely to experience a steep correction. For retirees seeking to steadily withdraw money from their accounts, this could pose a major problem, as a drop in the market could cause such significant damage to portfolio value that even outperformance in subsequent years may not make up for it.

FINSUM: This is a valuable point that all retirees and their advisors need to bear in mind. Portfolio construction and planning definitely need to take this threat into account.

Published in Eq: Large Cap
Tuesday, 25 September 2018 08:38

The Best Long-term Dividend Stocks

(New York)

Many investors may be looking for the best possible combination of high dividend yield and stability. Many companies with very high yields are not stable, so there is often a tradeoff between the two. With that in mind, here are three dividend stocks whose payouts should be reliable for decades to come. The first is a smaller REIT called CareTrust (4.6% yield), which is focused on growing its real estate footprint to handle the US’ aging population. Nike (1%) is another option. The dividend yield is not high, but it is hard to think of a more reliable payer. Finally, there is Canadian space stock, Maxar, which is growing strongly and offers a great dividend yield (considering how small and young it is) of 3.3%.

FINSUM: This is a serious mix of options from three entirely different sectors. Definitely some interesting choices to look into.

Published in Eq: Large Cap
Wednesday, 12 September 2018 10:07

The Best Safe Dividend Stocks

(New York)

Safe dividend stocks are absolutely prized by America’s retirees. No group relies on dividends more than retirees, and most seek safe and reliable dividends with underlying businesses that can provide some price appreciation too. With that in mind, three stocks to look at are McDonalds, Corning, and Starbucks. All three companies have strong and growing businesses and seem committed to rewarding shareholders. They also have the formidable capital position to be able to invest in continuing robust growth even in changing times.

FINSUM: We don’t know much about Corning, but McDonalds seems like a good bet to us. The company has responded well to the shifts in consumer tastes and it has been innovative in adapting its menu and model to the new environment.

Published in Eq: Large Cap
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