Broker Village - Musings

Our style is very different from other firms. We are completely objective and unbiased. Yet, we have a definite point of view. That point of view is: "The math says X." It's up to you to put the proper perspective around the results. We're not big on caveats. If we can send a man to the moon, surely it's possible to determine which share class to buy, if a 529 makes sense, or if refinancing a mortgage is a good idea.

If math can provide the way to enlightenment, why do investors make so many "curious" decisions? For example, they often put capital gains-generating investments (e.g., growth stocks) in an IRA instead of a taxable account. They pay down a mortgage before paying down their credit cards. There are plenty of great on-line tools, books, courses, pundits, and theories to guide them.

Why do financial advisors make so many "curious" decisions? Many still fear fee-based business, yet fee business pays more than commission business over time. It also increases the value of their book. They fret over asset allocations, but permit some clients to put variable annuities in an IRA. There are plenty of great on-line tools, books, courses, pundits, and theories to guide them.

Why do executives make so many "curious" decisions? They create sales campaigns that don't address an advisor's bread and butter: the value of their business. They over-price managed accounts to the point that C-shares are cheaper and easier sell. There are plenty of great on-line tools, books, pundits, and theories to guide them.

These are the issues that Broker Village can address. If we can help your firm in these areas, give us a call.

· B- or C-shares are better than A's (when a load is paid) for many trades under $50,000

· Promoting the tax deductibility of 529 plan contributions may cause investors to buy the wrong 529

· More sales decisions should be made with an eye to the marginal impact on ROI

· Fund firms easily can affect a product's competitive profile through comparative modeling (but don't)

· Most on-line calculators are inaccurate, particularly share class calculators

Advisor Business Issues

· More advisors can move to fees by selling level-load variable annuities

· Working the back of a book leads to a huge increase in GDC and practice value

· Selling funds with low expenses actually pays the advisor and B/D more

· Sales assistants can pay for themselves many times over within a year

· Independent advisors sell their assets for far too little

· Wirehouse advisors could negotiate far better offers when they move

· Wirehouse branch managers could make much more compelling offers to recruits

· Going from a wirehouse to an independent firm is not nearly as lucrative as it appears

· Those 100% payouts are a lie; it's 100% of 80% of a smaller trade

Investor Issues

· Conventional wisdom about mortgages is wrong. You should refi for as little as 0.25% to 0.5%

· Do not pay down a mortgage early if you have credit card debt or a car payment

· The older you are, and the less you earn, the more valuable a refi is to you

· Investors should not use the same asset allocation in taxable and tax-favored accounts

· Married people benefit more than single folks from a refi

· More people should use 529 plans

· UGMAS still make a ton of sense because you can control fees and the investments

· Few people should fund an IRA before they fund a 529

· Nobody should fund a 529 before they max out their 401(k)'s match

· Set up irrevocable trusts and fund them with tax-managed funds and muni bonds

· Never pay a load for a very high quality muni bond fund

· Rebalancing a portfolio hurts performance, not helps it

· Monte Carlo modeling does not improve performance

· Most retail-oriented Monte Carlo models are grossly wrong or misleading