Issue 3.10

I published the following article in August 2007 just two months before the financial markets came crashing down.  I reprint it here as a reminder that in 2010 these principles still apply: 

As a boy in a family of 11 kids I was proud to tell my friends we lived in a huge 2200 ft home.  My first car was an old Ford Pinto with pink carpet that the prior owner had thrown on the floor to cover some rust holes.  The upholstery was torn, the tires didn’t match and the paint was faded.  I spent as much time working on that Pinto as I spent driving it.  When I show my kids pictures of that car they laugh, but in 1974 my friends didn’t laugh.  They loved my Pinto.  It was the only car our group had and it usually got us where we wanted to go.  When I bought that car for $800 at the age of 16 I did something that may seem very strange today.  I wrote a check for it from my earnings at the car wash.

I have spent much of my career working with people from a generation that believed that if you couldn’t afford something you didn’t buy it.  Their homes, cars and vacations were in line with the resources at hand, always leaving enough aside for a rainy day.  They patched clothes when they wore out, replaced transmissions to get a few more years out of the family car, and saved empty mayonnaise bottles because “you never know when it might come in handy.”  Their lives may not have been filled with expensive toys but they had what they needed and in retirement had saved enough money to live comfortably and without fear of depending on others.

As I work with those of the next generation I have noticed a startling trend.  Despite relatively high incomes compared to their parents, the money is being used, not to provide for a rainy day but to increase their borrowing power at the bank.  Retirement accounts seem to be the last concern of a generation bent on having every toy, building massive homes, and seeing exotic locations.  Destined to live for today, I fear that many do not see that rainy days will always lie ahead.  History teaches us that if we do not plan for tomorrow, tomorrow will make different plans for us.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC

Issue 2.10

It is hard to believe it has been 10 years since all that worry about Y2K.  I used that expression the other day with a teenager and he didn’t even know what I was talking about, yet for those of us who remember, the world was coming to an end that day.  It seems humans love to look forward to the end of the world.  There is something in us that fears, yet secretly yearns for some great disaster.

As a teenager in the 70’s I remember seeing advertisements showing factories pumping out heavy smoke from their smoke stacks.  The warning was that all that smoke would block out the sun and bring on a new ice age.  Though it has been a chilly Christmas week in the desert, I don’t think the dire predictions of a new ice age have come to pass.  I find it somewhat ironic that we now see similar advertisements with smoke stacks but the warning today is that all that smoke is going to trap in the heat and cook us all to death.  I think I will go out on a limb and predict that the doom-sayers will yet be wrong again.

Of course if you are still worried about the earth melting let me put your mind at ease.  Another group of Eeyores, whose message is being played out in a currently popular movie, are telling us that the whole world will end in 2012 based on some Mayan calendar.  I have to wonder, if the Mayans were really so smart about predicting the future why couldn’t they foresee their own demise?  I am not sure they are the ones I want to put my trust in.

I ran into a good friend recently who thanked me for my weekly articles.  Then she added, “You are always the optimistic one aren’t you?”  I took that as a great compliment.  I realize there are many problems in the world.  I also believe that problems are merely temporary roadblocks that need solutions, not a bunch of whining about how we are all going to die.

The coming year will bring with it great challenges and wonderful opportunities.  My goal each week in these articles will be to steer my readers towards the good that lies ahead.  My hope is that you will find there is no good that comes from being an Eeyore. Happy New Year!

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through Linsco/Private Ledger member FINRA/SIPC

Issue 52.09

I have a friend who manages several billion dollars for one of the world’s largest money managers.  While most investors measure the daily movements in their accounts in hundred dollar bills, this man watches his accounts move enough each day to buy or sell several Las Vegas Strip hotels.  I asked him how he dealt with the stress of all that responsibility.  His answer was simple.  He said, “I don’t care where the price of a stock is going tomorrow or next month.  I only care where that company is going to be in five years.”

We often talk about having a compass to guide our life.  A compass gives direction by looking at a distant goal.  As our ship is tossed with the natural waves of the sea, the compass remains fixed on a non-moving point far beyond the horizon.  This man makes decisions every day that affect the life savings of thousands of people.  He makes those decisions by keeping his eye on the compass, while not being concerned about the waves.  His long-term view reduces stress in his job while providing a great benefit to his clients.

During the Christmas season I am often asked if I think we will have a “Santa Claus Rally.”  Of course next month it will be the “January effect,” then the “Spring bump,” and on it goes.  Traders who follow various almanacs are always happy to point out some trend tied to every day of the year.  The reality is, unless you plan on being a day trader, it doesn’t make any difference.  Like my friend who manages billions, where the stock market is going tomorrow has no bearing on whether or not you will be able to enjoy your retirement over the next several decades.

During the time of year when people are setting goals, take a look at your financial compass and make sure it is focused far off on a goal that is unmoved by the waves of the day.  Then you can truly enjoy the “Santa Claus Rally,” which is to rally around those things in life that really matter during this special time of year.  Merry Christmas.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through Linsco/Private Ledger member FINRA/SIPC

Issue 49.09

My Dad often quoted the classic poem, “As you ramble through life Brother, whatever be your goal, keep your eye upon the doughnut and not upon the hole.”  This seems such simple advice in a complex world.

I began tracking investment markets when the Dow Jones Industrial Average was in the 800’s.  I followed the market news closely everyday but the average investor paid little attention to the goings-on in the financial world.  There just wasn’t very good access to information.  Investing back then was a very different procedure requiring many phone calls and often days before the investor received notification of a trade.  The markets were volatile just as they are today, but few outside the industry appreciated just how much.

Technology has dramatically changed the investing process.  Today news is instant, trading takes seconds, and investors are bombarded with information.  This barrage of news has had the effect of causing far too many investors to lose sight of the doughnut.

In an airplane cockpit during the first and last 10 minutes of every flight, pilots institute a procedure known as the sterile cockpit.  During this time nothing is allowed to be discussed that isn’t directly related to flying the airplane.  Pilots are able to safely execute the very difficult task of landing an airplane because they focus all their attention on it.

Many investors today are tossed to and fro by the winds of distraction that blur their vision and cause them to lose focus.  A talk show hosts recommends buying gold and suddenly they have to have some.  The news reports a falling US dollar and they want to move their investments to Australia (true story).  A salesman scares them about the stock market and they quickly exchange a lifetime of successful investments for so-called “safe” money.  Soon they have forgotten why they invested in the first place.

If a pilot loses his focus while landing, the passengers will surely feel it.  If investors lose focus their accounts will feel it as well.  It is a difficult task in such a noisy world, filled with product salesmen who scream at you like infomercial hucksters, but for those who keep their goal in sight and remain focused many wonderful landings still await.  So turn off that smart phone news feed and go enjoy a nice doughnut.  There are still many delicious ones out there.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC

Issue 48.09

I was in Boston last month for some continuing education.  While there I took a few hours to walk a historic tour of the town.  It was sobering to be in such a special place were so many great patriots sacrificed so much for all of us.

As I toured the museum at the Bunker Hill monument I was touched by the courage of the early Americans.  Wearing their farm clothes and armed with hunting rifles they took on what was at the time the world’s most powerful military.  When the patriots ran out of ammunition they fought cannons and guns with rocks and sticks.  In the end, the massive British force was too much for them.  However, though they lost the battle their efforts would go a long ways in eventually winning the war.

The British army, severely handicapped and demoralized by their huge losses at Bunker Hill would never again view these renegade Americans the same.  The battle on this little hill made it clear to many British commanders that this was a war Britain was not going to win.  The significance of the loss at Bunker Hill was summed up later by an American officer Nathanael Greene who said ”I wish we could sell them another hill at the same price.”  And a steep price it was, for both sides.

We fight different battles today but the purpose is the same.  Like the patriots in Boston, Americans today just want the freedom to govern themselves and to reap the rewards, or the sorrows of their own actions.  Like the beautiful city of Boston today, I see a new American spirit rising from the ashes once again.  Our economy has been beaten, but it will not stay down.  Thieves and liars on Wall Street and in Washington have harmed us all, but we will nurse our wounds and move forward again.  We have made mistakes but will learn from them and be better off for the experience.

In the end, America will be what it has always been; a land of opportunity for those with the wisdom and the faith to see it.  I stand firm in my conviction that better days lie ahead of us and in the end, the financial preachers of gloom and doom will be wrong once again.  Like the British at Bunker Hill, they too will learn that Americans are not easily defeated.  And that is what I am thankful for today.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 47.09

A client called to ask me about an offer she received from an insurance salesman.  Her friend had taken her to an open house event and once there she had been told about an insurance product that promised to pay her a 20% upfront bonus.  In short, if she invested $100,000, the insurance company would add $20,000 to that value the very first day as a free bonus.  My clients’ friend was so excited to tell her about the smart insurance agent who had found her this free money. “How can they possibly be giving away money?” she asked me.

I title my weekly article “Common Sense Investing” for a reason.  Many financial decisions boil down to using that often elusive and not-so-common, common sense.  It amazes me how often common sense seems to get tossed out the window when big profits and easy money come into the equation.  I have found that my best response in these situations is to turn the question around something like this.  To my client I said “Pretend your married daughter called to tell you an insurance company had offered her $20,000 for free if she invested with them.  What would you tell her?”

My client paused, and then smiled, as she realized the answer to her own question.  Of course insurance companies don’t give away money; nor do grocery stores, banks, auto dealers or clothing stores.  Their marketing gimmicks may appear to “give” you money upfront, but as the saying goes, “What the advertising giveth, the fine print taketh away.”  Unfortunately, by the time the fine print kicks in it will be too late to change your mind.

I could spend months writing articles on how to not be taken advantage of by salesmen but I think the easiest solution is the one I just mentioned.  Anytime an opportunity is presented to you, pretend your child came to you with the same idea that they were thinking of doing themselves and consider what advice you would give them.  Human emotions often make it very difficult to make the right decisions for ourselves, but when faced with advising another whom we love, that good old common sense kicks right in and makes things much more clear.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC

Issue 46.09

In many ways financial planning resembles the practice of medicine.  As a Certified Financial Planner® I will take your temperature, look into your eyes, tap on your knees and ask you how you feel.  Then, based on past experience with similar patients, combined with current knowledge of financial matters, I provide a diagnosis and treatment.  As is the case with medicine, the solution has to be unique to the individual situation.  Imagine a doctor who prescribed penicillin to everyone he saw.  Despite the ailment, every patient walked away with a bottle of the same pills.  Though some patients may recover, the vast majority would be no better off and many much worse off for having seen him.  Such a doctor would soon be run out of business.

A person’s financial health is a complex matter.  As with medicine, lifestyle, family history, diet, work environment, past experience and future needs all have an effect on an individual’s overall health and play a part in the treatment.  

I mentioned last week that I was asked to provide financial advice at the AARP convention in Las Vegas.  The CFPs® who were invited were sent a long list of the many areas of financial planning that we were required to be current on in order to provide the best advice to the attendees.  As I reviewed the list it was a stark reminder of how complex this career can be, and how much time I had spent over my life in continual education preparing for it.

I love being a CFP®. I love the challenge of diagnosing a financial problem and prescribing a solution.  I love working with people to improve their financial health and the joy that comes as together we witness the progress.  I thoroughly enjoy the adjustments that we make along the way, and must make, as we respond to changing conditions in the world and in my client’s individual lives.  I am often asked when I plan on retiring.  First of all I still have an eight year old at home, but apart from that, how could I ever retire from doing that which has brought so much joy and fulfillment?  I suppose one day I may start slowing down, but for the foreseeable future at Wyson Financial, the Doctor is in.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC

Issue 45.09

In 1965 at the age of seven I began working for my Dad mopping the floors in his aircraft parts manufacturing plant.  It was hard work but the 50 cents an hour made it worthwhile.  On the way home we often stopped by Knott’s Berry Farm to ride on the old Model T cars.  It was one of the only rides in those days.  The cost was one hour’s pay but it was well worth it.  I often wished he would let the janitor mop the floors and just give me the money to ride the cars.

By age fourteen I had moved up to the milling machines and was earning $4.50 an hour – an astronomical wage at the time.  The job required cutting wing struts and small parts for the Lockheed L1011 wide body jet.  He trained me how to carefully and safely use the large machines to cut the parts to within the thousandths of an inch required by the specifications.  If the part was cut incorrectly you could not tell by looking at it, but it would show up in quality control and be rejected.  I learned that the smallest error in measurement could result in improper metal fatigue and premature failure of the part, which would be disastrous for the plane.

The lessons learned in that dirty factory have served me well as a Certified Financial Planner®.  I learned the value of taking time to do my work carefully and to exact specifications.  There is a general assumption that most investor accounts were decimated by the market crash.  Some days I wish it were legal for me to publish the results our clients saw at Wyson Financial.  I am sure people would be surprised at how well our financial aircraft flew through the turbulent storm.  I am so thankful to my Dad for teaching me such valuable lessons that I still use every day.

A good portfolio is not much different from a well-built aircraft.  Seemingly small errors can lead to weakness and failure in the future.  When I fly commercially today, I often look out at the wings of that plane and, thinking back on that fourteen year old kid, I am thankful my dad taught me to take the time to do it right.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial, 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial member FINRA/SIPC

Issue 44.09

Last week I made many new friends at the AARP convention in Las Vegas.  Over 30,000 attendees came to enjoy activities that were as diverse as the people in attendance.  There were classes on choosing the right doctor, or assisted living center.  Multiple vendors sold hearing aids, walkers and pill dispensers.  All these were expected of a convention for people over 50, but there was much more that I didn’t expect.

Classes on how to use Facebook® and Twitter® were standing room only.  A virtual reality motion ride was also a big hit.  If that wasn’t enough to get your heart pumping attendees lined up at the Las Vegas Motor Speedway for a chance to ride 165 MPH in a real racecar.  This convention was not your grandfather’s version of retirement.

As Baby-Boomers age, they are doing so with a determination that life does not end but is only beginning at 50, and then speeds up at 70.  In conjunction with Dr. Ken Dychtwald, well known author and founder of the company “Age Wave®,” I have been teaching courses at Dixie State College on this phenomenon and how it will impact investing over the next 30 years.  It is a fascinating time and the opportunities for investors are, in my opinion, as good as they have ever been.

My attendance at the convention was the result of an invitation from AARP.  Retirees are bombarded with constant “noise” about where to invest their dollars so AARP decided to offer some help.  An invitation was sent to Certified Financial Planners® across the country.  From the replies, a group of 45 CFPs® were chosen to staff the event.  An area was setup in the center of the convention hall where attendees could receive free, no-strings-attached financial advice.  In order to maintain the highest level of advice, AARP only invited those who held the CFP® designation.  The event was a huge with a non-stop line of attendees seeking advice.

I thoroughly enjoyed the entire event, and the optimism of those I met.  Though they were cautiously concerned, they refused to accept an attitude of gloom and doom.  Perhaps my experience could be summed up in the answer I received from a pair of sisters in their late 70’s when I asked why they were attending the convention.  Their faces both lit up with big smiles as one replied excitedly, “We’re living!”

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial member FINRA/SIPC

Issue 43.09

You have probably never heard of SEC Rule 151A but it will very likely affect you.  If this rule takes effect as scheduled in January 2010 most people over 55 are going to feel the pinch.  You better sit back and take a deep breath because this one is going to hurt.

Rule 151A refers to the sale of Fixed Indexed annuities, or FIAs (once known as EIAs).  FIAs work somewhat like a traditional fixed annuity in the sense that they have a minimal (emphasis on minimal) guaranteed rate of return if held for the life of the contract which is commonly 10 years or more.  They also have a feature that ties them to a stock market index, usually the S&P 500.  If the index goes up then the annuity has the potential to share in a portion of the gain (emphasis on potential and portion).  Even though the client must hold the annuity to maturity or suffer high surrender penalties, many clients are surprised to learn that the insurance company is permitted to make annual changes to how the contract credits earnings.

FIAs are sold mostly by insurance agents.  An agent represents an insurance company in the sale of their products for which the company pays them a commission.  They do not get paid by the client because under agency laws, they do not represent the client. 

The SEC determined that since FIAs earn returns based on the stock market, then the people who sell FIAs should be educated, trained and licensed to deal in securities.  Under Rule 151A a securities license will be required to sell FIAs.  Securities licensees are not agents of a company, but are required by law to act in the best interest of their clients.  They must be able to demonstrate the suitability of recommendations to compliance departments, regulators and auditors.  As you can imagine, the insurance industry has spent huge sums to overturn this Rule before January.

And now for the bad news.  If Rule 151A takes effect in January, free dinner seminars across the country will come to a screeching halt.  Securities’ licensees are generally not permitted to use this sales tactic, and without the large commissions FIAs generate, insurance salesmen could no longer afford to.  Retirees may be forced to say “Goodbye” to all those free dinners at the local buffet.  I told you it would be painful.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC