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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters
Speaker 1: on Katherine Cowdery. The stock market is advancing, recovering some
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Speaker 1: thirty seconds with the yield of one point eight six.
Speaker 1: And that's a Bloomberg Business flash. You're listening to Taking
Speaker 1: Stock with Kathleen Hayes and Pin Box on Bloomberg Radio.
Speaker 1: New rules, new rules are governing the responsibility of the
Speaker 1: individuals that manage your money. Let's find out what these
Speaker 1: new rules mean to you. Noel go Farb is a
Speaker 1: financial advisor for National Financial Network. He is a c
Speaker 1: f A charter holder and is a certified professional when
Speaker 1: it comes to retirement income. No, thanks very much for
Speaker 1: coming into the studio. Much appreciate it. Thank you very
Speaker 1: much for having me. So tell us a little bit
Speaker 1: about these new fiduciary rules. This is coming from the
Speaker 1: Department of Labor. Correct, That is correct, the d o L.
Speaker 1: They put out a one thousand odd page ruling. It's
Speaker 1: very technical, actually, and many firms are reviewing that as
Speaker 1: we speak to kind of figure out exactly how that's
Speaker 1: going to affect UH advisors and investors. Because what happens
Speaker 1: is um there are there's a lot of money out there,
Speaker 1: a lot of money in qualified plans for one case,
Speaker 1: four or three bs and down the road, these these
Speaker 1: moneys will most likely be rolled into I RA s,
Speaker 1: and the d o L is who wants to have
Speaker 1: rules associated with that money to make sure that the
Speaker 1: clients are taken care of. Okay, Now, when they say
Speaker 1: clients are taking care of what is the current state?
Speaker 1: I mean, why do they need rules? What is wrong
Speaker 1: with the current situation? It's funny, it's according to the
Speaker 1: d o L. Funny to say that because I as
Speaker 1: a c F, a charter holder, and being that ethics
Speaker 1: is is up there as the top part of that
Speaker 1: whole program. I've always considered myself a fiduciary and always
Speaker 1: consider myself putting my client ahead of myself. And that's
Speaker 1: the way it should be. Uh in every aspect of life,
Speaker 1: I believe. But unfortunately there are there are sometimes bad people,
Speaker 1: and and I think these people need to uh there
Speaker 1: needs to be regulations to make sure that at least
Speaker 1: those people with money in I RA s are taken
Speaker 1: care of. And there are not certain products and high
Speaker 1: feed type products that may may they may be taking
Speaker 1: advantage of. Now, when you say high feed products, is
Speaker 1: that really the underlying issue? Here that products that would
Speaker 1: benefit the seller, let's say, with a commission, are sometimes recommended,
Speaker 1: and the Department of Labor wants you to be able
Speaker 1: to say legally that you're a fiduciary and that the
Speaker 1: product is either good for the client or the client
Speaker 1: should stay away. Right. Well, the ruling again, it's being
Speaker 1: looked at, so we don't exactly know everything yet. But
Speaker 1: the way I see it is that we want to
Speaker 1: make sure that the products are what's best for the client.
Speaker 1: And the great thing about what I do is is
Speaker 1: I help my clients understand all the risks that are
Speaker 1: associated with retirement and with getting to retirement that when
Speaker 1: they get there they have everything they need to be
Speaker 1: able to the income they require when they retire. Right,
Speaker 1: but can't can just just the point and then we'll
Speaker 1: go on. But it can the client now can ask
Speaker 1: anybody who is UH soliciting their business, are you a fiduciary? Correct?
Speaker 1: I mean it's a it's an specific term and it
Speaker 1: has legal implications. Sure, sure they can ask that. And
Speaker 1: myself being an advisor and and UH a fee based
Speaker 1: meaning I charge fee for the assets I manage. I
Speaker 1: am fiduciary, I'm held at at higher standard. I think
Speaker 1: in this instance, again it's being reviewed, so I don't
Speaker 1: know all the detail because it's a very large document.
Speaker 1: I didn't You didn't get through the thousand pages last night? Right? Well?
Speaker 1: I I fell asleep halfway through. All right, So given this,
Speaker 1: will you do you believe that there will be a
Speaker 1: change in the financial industry The smaller firms will be
Speaker 1: forced to consolidate in order to defer the cost of
Speaker 1: these new rules. Well, um, I think unfortunately what might happen, Um.
Speaker 1: All speculation of co us is that maybe the little
Speaker 1: investor might get hurt in the end because the costs
Speaker 1: involved might be too great to take care of those people,
Speaker 1: which is unfortunately because those are the people who need
Speaker 1: the most help. Let's turn our attention now to retirement.
Speaker 1: Particularly in a low yield environment. You must be getting
Speaker 1: a lot of calls or a lot of questions from
Speaker 1: people about how are they going to live when you
Speaker 1: know you've got, what is it the tenure today one
Speaker 1: point eight six percent. If you want to go out
Speaker 1: even longer than thirty years, you'll get two point seven
Speaker 1: one What kind of questions? What kind of issues are
Speaker 1: you dealing with? Well? The big issue is I see
Speaker 1: um now in going forward, is is there used to
Speaker 1: be U pensions. People used to receive pensions to find benefits,
Speaker 1: find benefit plans, and you know, once upon a time
Speaker 1: people lived happily ever after. And now what I find
Speaker 1: is that when I read when the east of my
Speaker 1: daughter doesn't like reading a books anymore. When I used
Speaker 1: to read her books, the fairy tales used to end
Speaker 1: in living happily ever after, And now that unfortunately, because
Speaker 1: of pensions really disappearing and the individual needing to take
Speaker 1: better care of their own retirement plan and throw in it.
Speaker 1: The biggest risk that we have right now is that
Speaker 1: we're all living longer. That's the longevity risk. So all
Speaker 1: of these risks are are pointing towards a more difficult environment,
Speaker 1: especially when is low interest rates. Uh. And what happens is,
Speaker 1: unfortunately is there are certain types of strategies that people
Speaker 1: can implement that can help them reduce the amount of
Speaker 1: risk they're taking and as well as reduced taxation. So
Speaker 1: as I always tell people, I can't control the market.
Speaker 1: I don't know where it's going to go. We know
Speaker 1: we have to have a diversified portfolio, but what we
Speaker 1: can control is the amount of risk we take and
Speaker 1: the amount of taxes that we may pay in retirement.
Speaker 1: And if we can do those correctly, then they can
Speaker 1: actually have a higher net after tax cash flow in
Speaker 1: retirement and not have to worry about interest rates. Does
Speaker 1: that involve what things like life insurance or annuities? I
Speaker 1: mean what kind of cash involves and involves all the above.
Speaker 1: Every everything depends on the case on the every that's
Speaker 1: that's the whole deal. Every situation is different, and we
Speaker 1: need to analyze each situation, look at how much how
Speaker 1: many assets they have, and determine the type of income
Speaker 1: that they require in retirement. Can you can you outline
Speaker 1: what are some of the big mistakes that people make
Speaker 1: when they when they looked at their financial planning for retirement. Well,
Speaker 1: the first mistake most people do is is they don't
Speaker 1: save enough. It's as simple as that. If people would
Speaker 1: just budget better and save more, they would have more
Speaker 1: in retirement. Now, the other big mistake people make is
Speaker 1: they take too much risk. I mean, we look at
Speaker 1: the uh, the interest rate environment. Of course it's forcing
Speaker 1: some people. I see this every day when I meet
Speaker 1: people and they say, well, I need a higher rate
Speaker 1: of return, where do I go? And they end up
Speaker 1: taking a lot of risks as people that are in
Speaker 1: their sixties and seventies, who are you know, invested too
Speaker 1: heavily in the stock markets because they need that that
Speaker 1: rate of return to generate that income that they require.
Speaker 1: Now I understand that in a previous life you manage
Speaker 1: money on an institutional level. For McCay and shields, what
Speaker 1: did you learn? What did you take away from the
Speaker 1: from that experience, how the market works that you're able
Speaker 1: to apply now on a retail side. Well, the one
Speaker 1: big thing that I've learned from that aspect from institutional
Speaker 1: side is, first of all, I I dealt with the
Speaker 1: international equity markets on the developed side, and that is
Speaker 1: really a very should be a very small part of
Speaker 1: everyone's UH financial strategy, if you will, So it's it's
Speaker 1: just a little piece. So what that has taught me
Speaker 1: was when I look at a person's entire balance sheet,
Speaker 1: we need to invest it properly and have a diversified portfolio,
Speaker 1: for sure, but we need to have other things in
Speaker 1: that strategy that are going to help benefit them down
Speaker 1: the road, both on a risk and tax perspective. I
Speaker 1: want to get your thoughts now on the current investment environment. Uh.
Speaker 1: If you take a look right now, uh, Dow Jones
Speaker 1: Industrial average year to day, you're up two and a
Speaker 1: half percent, SMP five, you've got a gain of maybe
Speaker 1: two percent. What do you see for stocks the rest
Speaker 1: of your what are the big issues? Oh? Well, the
Speaker 1: rest of the year. It's such a short term. I'm
Speaker 1: I'm a longer term person, all right, so, but but
Speaker 1: I mean the way I see it right now sitting
Speaker 1: here is, obviously we see all the data coming out.
Speaker 1: We see GDP numbers not so great half a percent. Yeah,
Speaker 1: we see earnings reports not so great for the most part,
Speaker 1: unless you're Amazon dot Com all right, EXCEP always exceptions.
Speaker 1: I buy I buy things from there. Uh. But the
Speaker 1: issue here is going forward. It might be that we're
Speaker 1: a little little ahead of ahead of ourselves, and a pullback,
Speaker 1: Um may you know, may happen, should happen. I mean,
Speaker 1: I market uncles straight up. And really we've had a
Speaker 1: decent market run for the last two years, and of
Speaker 1: course since the FED stopped intervening with with with que,
Speaker 1: the markets have been kind of flatished to down. So
Speaker 1: we'll see what happens. I I think longer term, we
Speaker 1: have a lot of issues, and maybe we'll get through
Speaker 1: the election year and we'll see what the new president
Speaker 1: brings to the table. What about bonds, Uh, you see
Speaker 1: people pounding the table saying buy treasuries or what what's
Speaker 1: the what's the outlook there? See if you go if
Speaker 1: you go back to the early eighties, it made sense
Speaker 1: to to buy bonds when rates were so high. I
Speaker 1: remember I had a paper out in the early eighties
Speaker 1: and I was putting my money in the bank at
Speaker 1: thirteen four c d s h. But unfortunately that that
Speaker 1: situation is just nostalgia. Man, that doesn't exist anymore. Right,
Speaker 1: So with the low, with rates where they are, I
Speaker 1: can't see how bonds can perform much more again traditional bonds.
Speaker 1: I mean, there might be some places to invest in
Speaker 1: in floating rate notes or or other inflation protectors or
Speaker 1: something if people want to obviously take less risk, and
Speaker 1: that's also, uh, just a piece of the overall strategy,
Speaker 1: and it's important to people to understand that. Thank you
Speaker 1: very much for spending time with us. So no Go
Speaker 1: Far Financial Advisor National Finance Shill Network on new fiduciary
Speaker 1: rules and planning for your retirement. You're listening to Taking Stock.
Speaker 1: I'm Pim Fox and this is Bloomberg Radio.