Saving for Retirement and Working Toward Financial Goals
Saving for retirement in today’s environment is not what it once was. Beginning with the onset of the COVID-19 virus in February 2020, the stock market, as measured by the S&P 500 index “plunged” nearly 34%. The quotation marks around the word “plunged” were added by yours truly because it has long been fashionable to employ hyperbole to emphasize or exaggerate a situation. This stock market forfeiture, however, was not an exaggeration. The plunge constituted actual loss, and anyone who withdrew their money out of the stock market at that instant would have suffered a financial loss equal to those negative losses.
When I worked as an investment advisor many years ago, we were told that such an event would constitute a “hypothetical” loss. However, unless the client was retiring and pulling investments out of the market at that point in time, it was not an actual loss for them. That sort of thinking is not very comforting. In fact, it borders on the cavalier and indifferent. It almost seems a bit like George Orwell’s concept of the term “doublethink”. We’re not talking about some hypothetical ride on an amusement park roller coaster. We’re were looking at a real LOSS!
For many, the money invested in the market represents the life savings, and the future hopes and dreams for a great many people. We’re talking about their survival and that of their loved ones. The drop in the stock market in 2000 to 2002, by the way, was reportedly, 46%. And during the period from the early part of 2007 to the early part of 2009, the market lost 59%. Safe retirement investments need a better way.
The reoccurring volatility in the stock market can be expected to continue. There is no reason to believe that instability will diminish. If investments are not doing well, you are probably already aware of it. Some people may appear to be unconcerned. But, if you are not comfortable with your capacity to save for retirement or to consistently work toward planned financial goals, we should talk.
The manner in which the financial services industry works is an open secret. It has been said that investment firms lie. Many are packed with pretenders and smooth-talking salespeople using deceptive advertising and marketing techniques designed to appeal to a client’s vulnerabilities instead of rational judgement. One of the primary complaints about financial advisors is that they don’t, or can’t, explain in detail the investment products they’re selling. The client should understand the fee structure, the historical performance, and most importantly, the ration for why that investment product is right for that client, among other things. Mostly, investment advisors seem to want to convince their clients that the client’s money was invested in a “properly balanced stock and mutual fund portfolio.” That’s hardly adequate.
The securities industry is very heavily regulated. While some people think that it should be regulated, others feel that government regulation, at both the state and federal levels, amount to an overly burdensome bureaucracy. I do not have an opinion regarding the securities industry except to say that it involves an immense amount of money, influence, and complexity. Anywhere those three factors coexist, there is also the significant potential for fortunes to be made and for self-dealing to occur.
I have been there, and I know what I’m talking about. I stayed just long enough to understand how it works. The problem of self-interest for securities investments is so widespread that an entire organization of attorneys, the Public Investors Advocate Bar Association has been formed to protect the investing public. My understanding is that they are very busy. You can their mission and purpose at https://piaba.org/.
It is my personal and professional opinion that no financial advisor or investment advisor should put his or her own needs before the needs of the client. This has been a high ethical standard for a very long time. The Certified Financial Planner Board of Standards, for example, supports a uniform fiduciary standard of conduct for all personalized investment advice. This fiduciary standard of conduct should put the interests of the client first, and should include both a duty of care and a duty of loyalty. That organization’s position is grounded in the real-world experience of more than 87,000 CFP® professionals and the revised Code of Ethics and Standards of Conduct, effective October 1, 2019. The Code and Standards contains a genuine fiduciary standard of conduct that is broadly applicable within a business neutral model-.
It is necessary to point out that I am not a financial planner, nor an investment advisor, and I do not render investment advice of any kind. But I will listen to any client’s concerns about his or her investment performance and recommend several qualified investment advisors whom I consider to be qualified and ethical. Those advisors should be able to assist any client or potential client who prefers to remain invested in the market.
But, as mentioned earlier, there has to be a better way. As it turns out, there is such a way – and a number of very interesting and potentially profitable options do exist. It is possible to build wealth for retirement – or for any other financial goal – in a way that is more efficient, less painful, less risky, and possibly tax-free. This can be done without the fear associated with investing in the stock market.