Thoughts from Atlanta

I am blogging from Atlanta while attending the NAPFA (National Assn Personal Financial Advisors) Core Competency Conference.  This morning we had an excellent speaker from the Atlanta Federal Reserve named Michael Hammill.  I will share with you some of the key ideas that I gleaned from his presentation:

• We are in a period of moderate economic growth (about 2.5%) since the first quarter of 2010.  While this is not a great number, at least we are moving in the right direction
• Consumer confidence is fairly pessimistic which translates to weak consumer spending.  Since consumer spending is 70% of GDP growth, you can see how this translates to the slow growth numbers cited above.  Wages drive consumer spending and when you consider the number of people unemployed or underemployed, it makes perfectly good sense that people are not spending because they cannot spend. And the savings rate is up sharply. When we went into this recesssion, the savings rate was negative.  It is now hovering around 7%.  As a financial planner who preaches a 10% savings rate for people, this makes me very happy.  Although the paradox is that we need people to spend in order to grow our economy. 
• Unemployment is around 9%.  However when you factor in the number of people who are underemployed (working part time instead of full time) and the folks who are so discouraged that they have actively stopped looking for work, this number should be doubled.  So, the TRUE unemployment rate is more like 18%.  Ouch!  We are adding about 100,000 jobs a month but when you consider that we were shedding more than 800,000 jobs a month during the recession (depression?), it will take us 5 more years to get back to pre-recession job growth.
• Business inventory levels are growing --a good thing!
• Housing market is very poor.  It was propped up with the generous tax credits but those have all expired.  The forecast is that housing market will remain very weak for the next four years.  It will take until 2012 to work thru the short sales and foreclosures clogging the market.  And until 2014 before housing prices start to rise. Bad news for people trying to sell their home.  Hardest hit areas are Florida, Calif, Nevada and Phoenix--the sunshine states where the biggest bubbles were.  No surprise there. 
• Inflation not expected to be an issue for several years--good news
• Financial markets adjusting to a new normal--stricter credit --weak loan demand.  Loan defaults (except for real estate) have peaked and are now declining. 
• Europe is working through their debt issues and not as much effect on US markets as expected. 

Well,  now you have the good, the bad and the ugly.  My bottom line take is that we are in for a long and slow recovery but we will recover. I am committed to helping you navigate the road ahead.  One of my colleagues said that he feels like Moses--leading his clients to the promised land of prosperity and recognizing that it may take the next 5 years to get there.  Great analogy.  Let me be your Moses!

New Financial Reform Bill: Progress Or Not?

If you have turned on the news, you probably have heard and re-heard reports on two events: the horrendous BP oil spill and the, newly passed, Financial Reform Bill. While I wish I had insight on how to fix the oil spill, I do have a few thoughts about the Reform Bill that was passed Thursday, July 15th.

So, what is in this Reform Bill?

Jill Schlesinger, author of "The Financial Decoder," and contributor to CBS' Moneywatch.com, wrote an article on June 25th, using with layman's terms, what the bill can and cannot do. She states, "the bill probably won't prevent the next crisis," but it will help consumers in some ways.

For example, there will be a new Consumer Financial Protection Bureau, which will help consumers by moderating the credit card and house mortgage industries. According to the Senate, the new Bureau will "finally [be] a watchdog to oversee financial products, giving Americans confidence that there is a system in place that works for them – not just big banks on Wall Street."  

Schlesinger says in another article about the new Bureau, "The new rules will prohibit mortgage brokers from steering customers into more expensive loans for a commission and will ban no-documentation or "liar" loans. It will also make credit card statements more readable and transparent, allowing consumers to more easily compare products."

She also notes where the new Bureau will not protect consumers in all things, namely auto dealer supervision and addressing the fiduciary standard: "Although the new consumer rules are a step forward, there are some noticeable omissions. During negotiations, two important consumer measures were left out: the oversight of auto dealers and the fiduciary standard. I'm particularly upset about the later, which would have made it law for financial professionals to put their customers' interests first."

I agree with Schlesinger about these omissions, namely about the fiduciary standard. We work very hard at Stewart Financial Services to address our client's needs first. There are many planners and institutions out there who base their financial advice simply on what funds would give them the biggest commission, or return... regardless if it's a good fit for their client's financial goals or dreams.

The SEC has been delegated to take care of an umbrella fiduciary standard for all financial advisors. We hope to see progress on this front, hopefully, within 6 months from now.

If you have a question about what the fiduciary standard is, please click on the orange button below. Stewart Financial Services is proud to follow all these guidelines for our clients' financial well being.

FocusonFiduciary.com

Also, if you have further questions about the Financial Bill Reform, you can click here to view Senate.gov's complete copy of the bill, or, as always, feel free to ask me. I feel the Consumer Financial Protection Bureau is a good step in the right direction... let's just keep making these steps! 

The Really Important Things in Life

Yesterday my daughter and I attended a wedding in our old neighborhood.  We moved away from that home and our dear neighbors next door some 24 years ago.  The sweet daughter of that family was the beautiful bride yesterday.  Even though many years and "much life" has passed in those 24 years, we felt like we were with family all day and we were so honored to be part of their special day.  We even got to tour the backyard of the house that we lived in for 12 years.  The house where my daughter lived for the first 4 years of her life.  Lots of good memories made in our home and the home next door.  And the time and distance between us was like it never happened.  We felt loved and part of their circle. 

So...why is my personal finance blog  reminiscing about the good old days?  Shouldn't I be talking about investments, rate of returns etc....? Because yesterday helped me reflect on what is truly important in life.  For me, it's spending time with my family and dear friends, gazing at the amazing milky way in Borrego Springs with my husband, walking my dog at the beach, brushing my kitty (she is deliriously happy when I brush her), getting lost in a book for hours, going to Padres baseball games, planning our upcoming missions trip to Haiti, shopping for a bridal dress with my niece and family, cooking and planning healthy dinners. I could go on and on. 

For my clients, I strive to help them figure out "how much is enough".  So that they can spend their time on the things that are really important in their lives.  Oh...and working with my clients... is one of the truly important and fulfilling things in my life.