Monthly Archives - July 2016

When your relationship starts to get serious, have the money talk

by Jay Handy, CEO of Walnut Capital Management and SignalPoint Asset Management

It’s complex enough for one person to figure out how to manage their money (and where!). When you decide to commit yourself to a long-term relationship or marriage, the complexity doubles and things get interesting.

It’s been fascinating to watch over the 30 years as I’ve counseled couples on their life goals, financial stresses, hopes, dreams, layoffs, educational accounts, vacation, and first and last homes.

No matter how long a couple has been together, their original “familial DNA” will bubble up. Everyone is brought up with a different relationship to money, and those patterns stick.

Some people’s history is best described as: “Well, we never had any money, but gosh, it was always talked about. How much everything cost, what we would do if we could, and so on.”

And others might say: “We always had enough for anything we wanted, but we never spoke of money.”

From my vantage point, it is almost a therapy session to then get two well-meaning people together on the same financial page to manage a life together, including possibly raising children. Each comes to the table with a deeply seeded feeling on finances, a topic that is one of the top three causes for divorce. (For many reasons, such as when one person’s spending grows out of control and causes anxiety and tension in the relationship.)

I say therapy, because like all relationship issues, it comes down to communication and honesty. There can be some real resentment, grown over time and deeply buried, which only emerges, and sometimes in an ugly way, when challenged.

It is a lot easier to move through the inevitable rough spots in life if both people have a better sense of where the other is coming from. I tell people that having the money conversation is the first investment to make in one another in order to really start out as a united front. It will pay great dividends in the future.

CNBC put together a helpful list of topics to talk through that can help you get started, which you can read here.

Automatic Advisory

The Valley of Death

Valley of Death for the Average Investor and the Financial Services Industry.

category- Automated investment platform
by Jay Handy, CEO of Walnut Capital Management and SignalPoint Asset Management

To financial advisers, it’s no secret that the financial services industry has been retooled and refabricated ever since the deregulation of commissions on May 1, 1975. (Read more about the deregulation here.)

On that day, the industry become bifurcated with a young upstart named Charles Schwab who was the first to offer discounted trades without any frills. The playing field suddenly was separated to into two camps:

  • High service + High cost
  • Low service + Low cost

This event sparked industry innovation and served as an introduction of Wall Street to Mr. and Ms. Common Person. For people who did not have enough money to make their finances worth a financial advisor’s time, they now could get in the game.

This is terrific, but all too often this sort of setup turns a whole new market into unsuspecting targets when the market’s party is about over.

It’s usually the new investor who is the last person sitting at the table when check arrives after a long evening of eating and drinking. This is not to say all DIY investors are left with the bill every time, but all too often the wealthier people are home and long asleep when the lights start to dim and the waiter is looking to leave — if you’d just pay the bill already.

Up to this point, it would be common for institutional money managers and brokers to demand a minimum of $250,000. Recently, a number of retail brokers have raised this minimum to $500,000.

This sort of division leaves a lot of people dependent on themselves, various guidance on the web, friends at work and general gut reactions to make pivotal decisions.

This place between having enough money for some real attention and being left to your own devices is what I call “The Valley of Death.”

If you can make out of there by gathering enough assets you can grasp some help and access to professional knowledge, intellectual property and know-how. Otherwise, you can be left figuratively staring at a waiter while searching for your credit card or literally wondering what just happened to your 401k, house savings or child’s education account as happened to many people in 2000 and 2008.

Thanks to technology, there has been another bifurcation within the Low cost/Low service segment. Technology now provides the scalability to deliver a sound and accurate portfolio at a nominal fee.

The technology route is called “automatic advisory” or “robo advisory.” The magic of this option is it allows for frequent rebalancing (ask your broker to do that with your $5,000 account!), uses Exchange Traded Funds ETFs (a cost-conscious  move), and if you care to, allows you to set automatic monthly contributions to help keep you on track.

These elements seem small, but when employed can have a large impact on your long-term results. While the investment world initially started out as the Haves and the Have Not’s, you now can get much of these benefits without having an extra $250,000 laying around or paying the full bill.