WEBVTT - Noal Goldfarb Doesn't See Much Upside Left to Bonds (Audio) 0:00:02.279 --> 0:00:05.640 Global business news twenty four hours a day. If Bloomberg 0:00:05.720 --> 0:00:08.800 dot Com the radio plus Globo lapt and on your radio. 0:00:09.080 --> 0:00:13.280 This is a Bloomberg Business Flash from Bloomberg World Headquarters 0:00:13.280 --> 0:00:16.360 on Katherine Cowdery. The stock market is advancing, recovering some 0:00:16.640 --> 0:00:19.840 of last week's deep declines. A private survey shows US 0:00:19.880 --> 0:00:23.520 manufacturing expanded in April for the second straight month, suggesting 0:00:23.520 --> 0:00:26.560 that factories are adapting to a strong dollar and economic 0:00:26.600 --> 0:00:30.400 weakness overseas. After the report, traders lowered their expectations for 0:00:30.480 --> 0:00:33.479 higher interest rates in June. Crude oil is falling for 0:00:33.520 --> 0:00:35.440 a second day as a rock sax sports approach to 0:00:35.560 --> 0:00:38.560 record high in April. We checked the markets every fifteen 0:00:38.560 --> 0:00:41.519 minutes throughout the trading day. Down Industrial Average is up 0:00:41.560 --> 0:00:44.200 one d twenty nine points shortly before the closing bell. 0:00:44.280 --> 0:00:46.320 That's a gain of three quarters of a percentis trading 0:00:46.320 --> 0:00:49.680 at seventeen thousand, nine hundred three. SMP five funded up 0:00:49.680 --> 0:00:52.120 seventeen points, seven eighths of a percent to two thousand 0:00:52.200 --> 0:00:54.960 eighty two. The NAZDAC is of forty five points, a 0:00:55.000 --> 0:00:58.080 gain of one percent, trading at forty twenty. West Texas 0:00:58.120 --> 0:01:03.320 Intermediate crude oil down a dollar a bear two spockled 0:01:03.400 --> 0:01:07.080 up a dollar ninety announce at ten your treasury down 0:01:07.319 --> 0:01:09.360 thirty seconds with the yield of one point eight six. 0:01:10.200 --> 0:01:15.959 And that's a Bloomberg Business flash. You're listening to Taking 0:01:16.000 --> 0:01:19.400 Stock with Kathleen Hayes and Pin Box on Bloomberg Radio. 0:01:19.959 --> 0:01:24.080 New rules, new rules are governing the responsibility of the 0:01:24.160 --> 0:01:27.600 individuals that manage your money. Let's find out what these 0:01:27.680 --> 0:01:30.640 new rules mean to you. Noel go Farb is a 0:01:30.680 --> 0:01:34.800 financial advisor for National Financial Network. He is a c 0:01:35.000 --> 0:01:38.320 f A charter holder and is a certified professional when 0:01:38.319 --> 0:01:41.200 it comes to retirement income. No, thanks very much for 0:01:41.280 --> 0:01:43.240 coming into the studio. Much appreciate it. Thank you very 0:01:43.280 --> 0:01:44.920 much for having me. So tell us a little bit 0:01:44.959 --> 0:01:47.800 about these new fiduciary rules. This is coming from the 0:01:47.920 --> 0:01:51.560 Department of Labor. Correct, That is correct, the d o L. 0:01:52.240 --> 0:01:56.160 They put out a one thousand odd page ruling. It's 0:01:56.240 --> 0:01:59.520 very technical, actually, and many firms are reviewing that as 0:01:59.600 --> 0:02:02.400 we speak to kind of figure out exactly how that's 0:02:02.400 --> 0:02:07.320 going to affect UH advisors and investors. Because what happens 0:02:07.440 --> 0:02:09.600 is um there are there's a lot of money out there, 0:02:09.680 --> 0:02:12.520 a lot of money in qualified plans for one case, 0:02:12.560 --> 0:02:15.240 four or three bs and down the road, these these 0:02:15.320 --> 0:02:19.280 moneys will most likely be rolled into I RA s, 0:02:19.440 --> 0:02:22.079 and the d o L is who wants to have 0:02:22.280 --> 0:02:25.720 rules associated with that money to make sure that the 0:02:25.840 --> 0:02:28.079 clients are taken care of. Okay, Now, when they say 0:02:28.200 --> 0:02:31.920 clients are taking care of what is the current state? 0:02:31.960 --> 0:02:34.119 I mean, why do they need rules? What is wrong 0:02:34.160 --> 0:02:36.280 with the current situation? It's funny, it's according to the 0:02:36.360 --> 0:02:38.320 d o L. Funny to say that because I as 0:02:38.320 --> 0:02:40.639 a c F, a charter holder, and being that ethics 0:02:40.760 --> 0:02:43.280 is is up there as the top part of that 0:02:43.440 --> 0:02:47.720 whole program. I've always considered myself a fiduciary and always 0:02:47.760 --> 0:02:51.040 consider myself putting my client ahead of myself. And that's 0:02:51.080 --> 0:02:54.280 the way it should be. Uh in every aspect of life, 0:02:54.320 --> 0:02:58.680 I believe. But unfortunately there are there are sometimes bad people, 0:02:58.880 --> 0:03:02.360 and and I think these people need to uh there 0:03:02.440 --> 0:03:05.440 needs to be regulations to make sure that at least 0:03:05.600 --> 0:03:08.480 those people with money in I RA s are taken 0:03:08.520 --> 0:03:11.000 care of. And there are not certain products and high 0:03:11.040 --> 0:03:13.600 feed type products that may may they may be taking 0:03:13.639 --> 0:03:16.120 advantage of. Now, when you say high feed products, is 0:03:16.440 --> 0:03:20.480 that really the underlying issue? Here that products that would 0:03:20.560 --> 0:03:25.839 benefit the seller, let's say, with a commission, are sometimes recommended, 0:03:25.919 --> 0:03:29.040 and the Department of Labor wants you to be able 0:03:29.120 --> 0:03:32.600 to say legally that you're a fiduciary and that the 0:03:32.639 --> 0:03:34.920 product is either good for the client or the client 0:03:35.000 --> 0:03:39.080 should stay away. Right. Well, the ruling again, it's being 0:03:39.120 --> 0:03:41.240 looked at, so we don't exactly know everything yet. But 0:03:41.680 --> 0:03:43.560 the way I see it is that we want to 0:03:43.600 --> 0:03:46.520 make sure that the products are what's best for the client. 0:03:46.760 --> 0:03:49.040 And the great thing about what I do is is 0:03:49.120 --> 0:03:51.400 I help my clients understand all the risks that are 0:03:51.440 --> 0:03:55.440 associated with retirement and with getting to retirement that when 0:03:55.480 --> 0:03:58.760 they get there they have everything they need to be 0:03:58.880 --> 0:04:02.160 able to the income they require when they retire. Right, 0:04:02.200 --> 0:04:04.440 but can't can just just the point and then we'll 0:04:04.440 --> 0:04:08.160 go on. But it can the client now can ask 0:04:08.600 --> 0:04:14.320 anybody who is UH soliciting their business, are you a fiduciary? Correct? 0:04:14.360 --> 0:04:16.480 I mean it's a it's an specific term and it 0:04:16.560 --> 0:04:19.480 has legal implications. Sure, sure they can ask that. And 0:04:20.360 --> 0:04:24.080 myself being an advisor and and UH a fee based 0:04:24.120 --> 0:04:28.080 meaning I charge fee for the assets I manage. I 0:04:28.160 --> 0:04:31.080 am fiduciary, I'm held at at higher standard. I think 0:04:31.120 --> 0:04:33.400 in this instance, again it's being reviewed, so I don't 0:04:33.440 --> 0:04:35.360 know all the detail because it's a very large document. 0:04:35.440 --> 0:04:38.160 I didn't You didn't get through the thousand pages last night? Right? Well? 0:04:38.200 --> 0:04:42.960 I I fell asleep halfway through. All right, So given this, 0:04:43.640 --> 0:04:45.200 will you do you believe that there will be a 0:04:45.320 --> 0:04:48.520 change in the financial industry The smaller firms will be 0:04:48.680 --> 0:04:53.320 forced to consolidate in order to defer the cost of 0:04:53.400 --> 0:04:58.280 these new rules. Well, um, I think unfortunately what might happen, Um. 0:04:58.960 --> 0:05:01.320 All speculation of co us is that maybe the little 0:05:01.600 --> 0:05:04.760 investor might get hurt in the end because the costs 0:05:04.839 --> 0:05:08.120 involved might be too great to take care of those people, 0:05:08.160 --> 0:05:10.120 which is unfortunately because those are the people who need 0:05:10.160 --> 0:05:14.120 the most help. Let's turn our attention now to retirement. 0:05:14.240 --> 0:05:18.320 Particularly in a low yield environment. You must be getting 0:05:18.320 --> 0:05:21.120 a lot of calls or a lot of questions from 0:05:21.240 --> 0:05:24.640 people about how are they going to live when you 0:05:24.760 --> 0:05:28.200 know you've got, what is it the tenure today one 0:05:28.279 --> 0:05:30.640 point eight six percent. If you want to go out 0:05:30.680 --> 0:05:33.279 even longer than thirty years, you'll get two point seven 0:05:33.640 --> 0:05:36.240 one What kind of questions? What kind of issues are 0:05:36.279 --> 0:05:39.320 you dealing with? Well? The big issue is I see 0:05:39.800 --> 0:05:42.240 um now in going forward, is is there used to 0:05:42.320 --> 0:05:45.919 be U pensions. People used to receive pensions to find benefits, 0:05:45.960 --> 0:05:48.160 find benefit plans, and you know, once upon a time 0:05:48.960 --> 0:05:51.679 people lived happily ever after. And now what I find 0:05:51.800 --> 0:05:54.000 is that when I read when the east of my 0:05:54.080 --> 0:05:55.920 daughter doesn't like reading a books anymore. When I used 0:05:55.960 --> 0:05:58.040 to read her books, the fairy tales used to end 0:05:58.080 --> 0:06:01.799 in living happily ever after, And now that unfortunately, because 0:06:02.040 --> 0:06:06.719 of pensions really disappearing and the individual needing to take 0:06:06.800 --> 0:06:10.680 better care of their own retirement plan and throw in it. 0:06:10.920 --> 0:06:13.280 The biggest risk that we have right now is that 0:06:13.400 --> 0:06:16.680 we're all living longer. That's the longevity risk. So all 0:06:16.720 --> 0:06:21.920 of these risks are are pointing towards a more difficult environment, 0:06:22.080 --> 0:06:25.680 especially when is low interest rates. Uh. And what happens is, 0:06:25.760 --> 0:06:30.400 unfortunately is there are certain types of strategies that people 0:06:30.560 --> 0:06:34.400 can implement that can help them reduce the amount of 0:06:34.480 --> 0:06:38.000 risk they're taking and as well as reduced taxation. So 0:06:38.400 --> 0:06:40.919 as I always tell people, I can't control the market. 0:06:41.000 --> 0:06:42.320 I don't know where it's going to go. We know 0:06:42.440 --> 0:06:44.760 we have to have a diversified portfolio, but what we 0:06:44.839 --> 0:06:47.680 can control is the amount of risk we take and 0:06:47.760 --> 0:06:50.680 the amount of taxes that we may pay in retirement. 0:06:50.880 --> 0:06:53.600 And if we can do those correctly, then they can 0:06:53.640 --> 0:06:57.240 actually have a higher net after tax cash flow in 0:06:57.360 --> 0:07:00.280 retirement and not have to worry about interest rates. Does 0:07:00.320 --> 0:07:03.600 that involve what things like life insurance or annuities? I 0:07:03.640 --> 0:07:06.679 mean what kind of cash involves and involves all the above. 0:07:07.000 --> 0:07:09.840 Every everything depends on the case on the every that's 0:07:10.000 --> 0:07:12.600 that's the whole deal. Every situation is different, and we 0:07:12.720 --> 0:07:16.200 need to analyze each situation, look at how much how 0:07:16.240 --> 0:07:19.400 many assets they have, and determine the type of income 0:07:19.480 --> 0:07:22.360 that they require in retirement. Can you can you outline 0:07:22.400 --> 0:07:24.480 what are some of the big mistakes that people make 0:07:24.520 --> 0:07:28.520 when they when they looked at their financial planning for retirement. Well, 0:07:28.560 --> 0:07:31.440 the first mistake most people do is is they don't 0:07:31.440 --> 0:07:34.240 save enough. It's as simple as that. If people would 0:07:34.320 --> 0:07:38.280 just budget better and save more, they would have more 0:07:38.760 --> 0:07:41.280 in retirement. Now, the other big mistake people make is 0:07:41.280 --> 0:07:42.920 they take too much risk. I mean, we look at 0:07:42.960 --> 0:07:45.920 the uh, the interest rate environment. Of course it's forcing 0:07:46.080 --> 0:07:48.280 some people. I see this every day when I meet 0:07:48.320 --> 0:07:50.000 people and they say, well, I need a higher rate 0:07:50.040 --> 0:07:52.480 of return, where do I go? And they end up 0:07:52.520 --> 0:07:54.320 taking a lot of risks as people that are in 0:07:54.360 --> 0:07:57.080 their sixties and seventies, who are you know, invested too 0:07:57.120 --> 0:07:59.840 heavily in the stock markets because they need that that 0:08:00.080 --> 0:08:03.480 rate of return to generate that income that they require. 0:08:04.440 --> 0:08:09.440 Now I understand that in a previous life you manage 0:08:09.480 --> 0:08:13.520 money on an institutional level. For McCay and shields, what 0:08:13.720 --> 0:08:16.480 did you learn? What did you take away from the 0:08:16.960 --> 0:08:19.680 from that experience, how the market works that you're able 0:08:19.720 --> 0:08:23.520 to apply now on a retail side. Well, the one 0:08:23.760 --> 0:08:27.080 big thing that I've learned from that aspect from institutional 0:08:27.160 --> 0:08:29.160 side is, first of all, I I dealt with the 0:08:29.280 --> 0:08:32.400 international equity markets on the developed side, and that is 0:08:32.559 --> 0:08:35.480 really a very should be a very small part of 0:08:35.679 --> 0:08:39.400 everyone's UH financial strategy, if you will, So it's it's 0:08:39.440 --> 0:08:41.319 just a little piece. So what that has taught me 0:08:41.679 --> 0:08:44.040 was when I look at a person's entire balance sheet, 0:08:44.840 --> 0:08:47.560 we need to invest it properly and have a diversified portfolio, 0:08:47.640 --> 0:08:49.520 for sure, but we need to have other things in 0:08:49.559 --> 0:08:51.719 that strategy that are going to help benefit them down 0:08:51.760 --> 0:08:54.719 the road, both on a risk and tax perspective. I 0:08:54.760 --> 0:08:58.440 want to get your thoughts now on the current investment environment. Uh. 0:08:58.600 --> 0:09:00.920 If you take a look right now, uh, Dow Jones 0:09:00.920 --> 0:09:02.920 Industrial average year to day, you're up two and a 0:09:03.000 --> 0:09:06.040 half percent, SMP five, you've got a gain of maybe 0:09:06.120 --> 0:09:09.040 two percent. What do you see for stocks the rest 0:09:09.040 --> 0:09:11.360 of your what are the big issues? Oh? Well, the 0:09:11.440 --> 0:09:13.120 rest of the year. It's such a short term. I'm 0:09:13.160 --> 0:09:16.400 I'm a longer term person, all right, so, but but 0:09:16.600 --> 0:09:18.240 I mean the way I see it right now sitting 0:09:18.320 --> 0:09:20.320 here is, obviously we see all the data coming out. 0:09:20.360 --> 0:09:23.319 We see GDP numbers not so great half a percent. Yeah, 0:09:23.400 --> 0:09:26.760 we see earnings reports not so great for the most part, 0:09:27.600 --> 0:09:30.960 unless you're Amazon dot Com all right, EXCEP always exceptions. 0:09:31.000 --> 0:09:33.839 I buy I buy things from there. Uh. But the 0:09:33.960 --> 0:09:37.480 issue here is going forward. It might be that we're 0:09:37.480 --> 0:09:41.760 a little little ahead of ahead of ourselves, and a pullback, 0:09:42.040 --> 0:09:44.600 Um may you know, may happen, should happen. I mean, 0:09:44.679 --> 0:09:47.360 I market uncles straight up. And really we've had a 0:09:47.480 --> 0:09:49.920 decent market run for the last two years, and of 0:09:50.000 --> 0:09:54.360 course since the FED stopped intervening with with with que, 0:09:55.000 --> 0:09:57.480 the markets have been kind of flatished to down. So 0:09:58.880 --> 0:10:01.000 we'll see what happens. I I think longer term, we 0:10:01.120 --> 0:10:03.319 have a lot of issues, and maybe we'll get through 0:10:03.320 --> 0:10:06.240 the election year and we'll see what the new president 0:10:06.320 --> 0:10:09.360 brings to the table. What about bonds, Uh, you see 0:10:09.400 --> 0:10:12.959 people pounding the table saying buy treasuries or what what's 0:10:13.000 --> 0:10:15.200 the what's the outlook there? See if you go if 0:10:15.240 --> 0:10:17.560 you go back to the early eighties, it made sense 0:10:17.679 --> 0:10:19.839 to to buy bonds when rates were so high. I 0:10:19.880 --> 0:10:21.880 remember I had a paper out in the early eighties 0:10:21.920 --> 0:10:24.240 and I was putting my money in the bank at 0:10:24.280 --> 0:10:28.160 thirteen four c d s h. But unfortunately that that 0:10:28.520 --> 0:10:31.800 situation is just nostalgia. Man, that doesn't exist anymore. Right, 0:10:31.840 --> 0:10:33.640 So with the low, with rates where they are, I 0:10:33.960 --> 0:10:39.760 can't see how bonds can perform much more again traditional bonds. 0:10:39.840 --> 0:10:42.160 I mean, there might be some places to invest in 0:10:42.360 --> 0:10:46.000 in floating rate notes or or other inflation protectors or 0:10:46.120 --> 0:10:48.760 something if people want to obviously take less risk, and 0:10:48.800 --> 0:10:52.080 that's also, uh, just a piece of the overall strategy, 0:10:52.160 --> 0:10:54.679 and it's important to people to understand that. Thank you 0:10:54.800 --> 0:10:56.480 very much for spending time with us. So no Go 0:10:56.679 --> 0:11:02.000 Far Financial Advisor National Finance Shill Network on new fiduciary 0:11:02.120 --> 0:11:06.200 rules and planning for your retirement. You're listening to Taking Stock. 0:11:06.679 --> 0:11:09.160 I'm Pim Fox and this is Bloomberg Radio.