Merrill-Edge Drops Free Trades

Bad news on the investing front: one of the best deals going is coming to an end. Merrill-Edge is ending its 30 free per month transaction deal that was previously qualified by maintaining a deposit balance of $25,000 in Bank of America and Merrill-Lynch accounts. For many of our clients, the imposition of a $6.95 per trade fee will outweigh their returns on their small, learning accounts that we recommend.

Given that change, what other options exist? This chart lays out many of the options and our experience with Fidelity, Schwab, and Vanguard supports recommending to our clients that they contact one of those firms. For our purposes, we will be moving our corporate accounts to Vanguard as their in-house ETFs and funds meet our needs and fit with our philosophy. The fact that we can continue to trade for free in their products clinches the deal. That said, if we want something outside their offerings, their $7.00 per trade fee is a bit more and we’ll likely open additional accounts at either Fidelity or Schwab given their $4.95 per trade fee.  We like how Vanguard just seems honest and open with no $0.95 nonsense in their pricing.

We don’t have any experience with some of the other firms that offer free trades or trades assessed at very low per share rates. For small trades, of course, the small volume of shares will frequently produce transaction fees less than the flat rate $4.95 of Fidelity or Schwab. However, since we don’t advocate day trading as a strategy, given the low frequency of trades and the reputations of the two firms, we are comfortable with our recommendation.

Arizona Small Business Support

This post is the first in the small business category (tag).

While our income tax services for individuals and businesses are available regardless of the filer’s location (with some exceptions), our small business services are pretty much constrained to Arizona. That’s because state and local ordinances largely shape the cost of optimizing a comprehensive package of business support services. Based on the legal requirements, we’ve woven together partners and technologies that allow us to front to you, the microbusiness entrepreneur, the support you’ll need to get your good idea up and running. And, if you’ve been trying to do it all yourself, consider sluffing off some of the business process functions to us so you can dedicate more time to your passion. That’s not to say that we can’t help out-of-state firms (we actually have a presence in several states and even an overseas office), we can but probably not as comprehensively as in Arizona where we know the business climate and legal framework, especially human resources, quite well. Contact us if you think we can help aspects of your out-of-state business.

Our technology partner, CPA Network Solutions, provides everything related to software, computers, phone systems, and the internet, along with some other CPA firm-specific services we use in-house. Have you wanted access to world-class human resources software and advice? That’s available through CPA Network Solutions. The same with a professional, internet-based phone system. Paradise Hills Accounting provides our bookkeeping services (we use them too) including payroll and payroll tax filings (that stuff is really tricky!). Your books are always available online in one of several applications we use including the Quickbooks and Wave families. Those partners leave us free to do what we do best, organizing your tax life as the foundation of integrated financial planning (saving/investing, retirement planning, estate planning, risk management/insurance). Got the idea?

We are also ninjas in getting stuff done like business entity organization at rock bottom prices (you do most of the work, we point you in the right direction). Most legal documents, for example, are available from paralegal services — we use LawDepot, but there are many others. Having familiarity with stock-in-trade items like business filings with the Arizona Corporation Commission leaves us free from excessive legal fees. Bottom line, most divorce documents are just cut-and-paste versions of the last divorce the attorney sold; the divorce is only new to the former couple.

We’ll have a download available soon on how to start your own business in AZ so look for that. It will include how to interact with our partner web, so your business is up and running as soon as possible.

Spring Review


Spring Review

Summary: Spring is an excellent time to review the details of your existing financial plan components. Updates can avoid problems down the road as the specifics of our lives change over time.

Spring is in the Air

Before we get caught up in the hustle of the summer season, late spring is often a good time to “take a knee” (as we used to say in the military) and evaluate where we are. Here are some example questions you should ponder and then contact us for a link to our interview tool if you have questions or would like to discuss your situation. In general terms, you can also join our forums to review the threads there or post your own questions (and we’ll respond within a work-day).  So ask yourself:

  • Do I have the correct beneficiary elections (HSA, life insurance — don’t forget all those little policies at places like credit unions or membership organizations, IRAs, 401(k)/TSP/457(b)/403(b))?
  • Do I have property ownership the way I want it?
  • Do I have bank and other accounts correctly titled?
  • For items in my estate (none of the above are in your estate), is it time to revise my estate plan (will or trust)?
  • Are my investments optimized?
  • What to do with tax withholdings?

A close friend recently passed away. As I was helping his widow close out the estate, we found that he’d never updated the life insurance. The insurance company paid the policy out to his previous spouse, something I’m sure my friend wouldn’t have wanted, but he never got around to changing that beneficiary or lost track of that policy. It’s a lesson in keeping beneficiaries up to date and to not forget all those little policies that are out there, such as those issued by membership organizations and credit unions. We recommend keeping a spreadsheet with all this information. See our article on online security for related information on how to keep this type of personal information secure.

The same logic applies to so-called “real property.” Make sure that you have it titled properly in such a way that ownership passes directly to who you want. This is called, in some states, joint tenancy with right of survivorship, but consult with an expert in your state. Vehicles and anything else that has a written title to it can be treated this way and kept outside either an estate or a trust.

Bank accounts are frequently overlooked. Failure to have them properly titled can result in all the cash in your estate being locked up until a court can act. That makes it critical that at least an operating, or survival cash, account be shared with someone who can care for you if you become unable to care for yourself, or who can care for your loved ones who are unable to care for themselves.

If you have significant collections of art or other collectibles or real property that wasn’t titled as we’ve previously discussed in this article, does your will or trust, i.e., your estate plan, or provide, for the disposition of those things? If not, now is a great time to think through this and develop a plan and mechanisms, in conjunction with your trusted advisor, to address this.

You should be reviewing your investments regularly. This process, though, may give you new insights into your needs. If it does, you’ll need to get in touch with your investments advisor to discuss near-term, mid-term, and retirement needs.

If you received a tax refund, this is also a good time to go to the IRS Withholding Calculator and update your W-4. Your employer’s HR department will know what to do with the IRS Form W-4 that results.  If your take home pay will increase as a result of this, consider seriously opening up a savings account to receive the difference each month, so you never see it.  It is a great way to increase your savings.

Making this an annual ritual (we plan on updating and rerunning this article yearly), will keep the fundamentals of your “financial house” in order, and fits neatly with the urge to spring clean other aspects of life.


Update on the Fiduciary Rule

Summary: The Department of Labor’s April 7 Federal Register update on the Fiduciary Rule (which we covered in February) established June 9 as the Rule’s implementation date with a transition window until January 1, 2018. The Fiduciary Rule will allow investment advisers working with retirement account and plan owners and custodians to continue to receive compensation from product vendors so long as the adviser can demonstrate, “adherence to certain Impartial Conduct Standards: providing advice in retirement investors’ best interest; charging no more than reasonable compensation; and avoiding misleading statements . . . .” The DOL will use the intervening time to report back to the president on any issues it discovers regarding the costs and benefits of implementing this rule. Industry insiders and lobbyists are actively seeking to ensure the rule is never implemented. The intent of the rule is to protect retirement investors from predatory sales practices.

Why You Care About This Issue

Analysts report retirement investors losing billions in retirement account payoffs due to predatory sales practices. While the rule does not proscribe the conflict-of-interest-producing, compensation practices, it does create a very high bar to continuing them. Some industry insiders have indicated that the potential for lawsuits will increase so much as to eliminate the practices in general with a resulting decrease in offerings and services.

Compensation Created Appearance of Conflict of Interest

The core issue in the Department of Labor’s rule, which it began compiling and socializing during the Obama administration, is the exemption granted to “investment advice fiduciaries” that allows them to receive payments that would, in almost any other context, create a presumption of a conflict of interest. In the case of investment advisors, much of their compensation, except for the fee-only component of the industry, comes from the providers of the products they recommend to their retirement clients. In other words, these advisers function as salespersons for the product providers including insurance companies, brokerages that owned or had custody of equities (stocks for example) and debt instruments (such as bonds), and institutional arrangements such as hedge funds, real estate trusts, and the like. The entities write checks to the “advisers” based on their performance, with the retirement investors themselves generally ignorant of these arrangements.

Buyer Beware or Regulation?

Many contacts have expressed seeing little or no problem with the conflict of interest arrangement, with the “caveat emptor” ethos characterizing the main thread. A sharper version occasionally even resorts to the Darwinian or Ayn Rand framework. Rule advocates call for eliminating the conflicts of interest it indirectly addresses. They cite the combined effects of the severe informational and financial power imbalances (insider information), the wholesale transformation of retirement plans from defined benefit to contribution and the resulting reliance on 401(k) type plans and IRAs at the household level: The net impact limits most retirement investor’s ability to recover from poor decision-making.

Third Party Comp Allowed Within New Safe-Harbor

In this case, however, the rule has never sought to eliminate the conflicts of interest, instead establishing a small safe-harbor for receiving compensation from instrument sellers. The safe-harbor was created by providing exemptions to other rules prohibiting the conflict-of-interest-creating compensation. Rather than flatly prohibiting compensation structures that, “could be beneficial in the right circumstances (italics ours; see comment), the exemptions are designed to permit investment advice fiduciaries to receive commissions and other common forms of compensation.” Advisers will need to be able to demonstrate that even though they are taking what amounts to kickbacks and bribes in other industries, that they are still able to act in their clients’ best interests. They will also have to fully disclose the compensation they receive from the third parties to these transactions. This will be a change from the current standard in which a particular recommended investment is just expected to meet “ . . . the objectives and means of an investor.” No disclosure of compensation from the third parties is currently required nor is any generally provided. Advocates of the rule stress that this situation allows brokers to establish relationships that appear to be necessarily in the investor’s best interests while the adviser is actually functioning as a salesperson for the third party.

Delay for Reporting

The President’s memorandum mandating the delay requires the DOL to answer three questions before implementing the rule:

  • Whether the anticipated applicability of the Fiduciary Rule and prohibited transaction exemptions (PTEs) has harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
  • Whether the anticipated applicability of the Fiduciary Rule and PTEs has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and
  • Whether the Fiduciary Rule (and ongoing PTEs) is likely to cause an increase in litigation and an increase in the prices that investors and retirees must pay to gain access to retirement services.

The memorandum states that, “. . . the priority of the Administration ‘to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies,’ then the Department shall publish for notice and comment a proposed rule rescinding or revising the Fiduciary Rule, as appropriate and as consistent with law.”

Comments Period Results

Of the 378,000 comments provided to the DOL on the Rule delay up to April 7, 173,000 favored immediate implementation of the rule. Frequent reasons provided included that the DOL had already analyzed the reporting issues the Administration’s memorandum required and that the harm to investors should end as quickly as possible. For example, the DOL summarized this argument explaining that, “ . . . under the current regulatory structure, investors lose billions of dollars each year as a result of conflicts of interest, and [they] argued that delay would compound these losses.” Opponents challenged the legal authority of the DOL to extend the rule to IRAs and other authoritative challenges and contended that the variety and type of offerings presented to individual investors would decrease.

Comment: We observed, in the months leading up to last February’s delay of the original April 10, 2017, implementation date, a tectonic movement toward an industry-wide transition to a fee-only basis for retirement investment advisers, with several major brokerages eliminating access to traditionally-compensated advisors to all but the most “sophisticated” investors. Of course, this transition is likely to affect the breadth of offerings in the traditional and fee-only marketplaces. We argue that the disappearing products never belonged in the menu for run-of-the-mill retirement investors. Among those are products like high 12(b)1 and similar fee mutual funds and front loaded mutual funds. But, this change clearly conflicts with the Administration’s previously-mentioned goal of “empowering” Americans, in some cases, to impoverish themselves. Ultimately, then, this issue, like many, depends more on one’s underlying values than on the facts at hand. Where the DOL will eventually end up, given the sheer volume of the proponents’ efforts contrasted with the absolute financial clout of the rule’s opponents, is anyone’s guess. We come down in favor of protecting “the little guys” from powerful forces against which they can do little but rail against the gods, given that even the DOL experts presented the instruments likely most affected by the rule as ones that, “could be beneficial in the right circumstances.”  The finely tuned word choice describes investments that generally would be harmful to investors in most cases. The fact that industry insiders and lobbyists are actively seeking to ensure the DOL never implements the rule speaks volumes to the disruption in industry practices the rule threatens. It’s an issue we’ll continue to watch so you don’t have to.


Our Security: What You Need to Know and How to Maintain Your Own Privacy

McFarland-CPA Security

Like the Matrix, but without terrifying computer creatures taking over the world!

The U.S. Congress’s reversal of the Obama Administration’s FCC rule preventing your ISP from selling your internet usage data has dropped electronic security back onto the stage. Mention the adjective Russian now and hacking easily comes to mind. In this age of aggressive hacking, several clients have contacted us about our security measures. We’ll cross-post this text in our FAQs but wanted to get this the widest dissemination, so it’s starting on this blog. As all blog articles end up in our monthly newsletter, it will go out that way too.

As an office-free firm, our security is procedural and network centric. We keep our desktops locked when not in use (actually we disconnect). We store no information on premises and have no physical files. If we encounter paper documents, we scan them and return them immediately or shred them. Unlike in the case of traditional firms, we do not present a target for physical server theft with thieves then selling your information on the dark net.

We Use HTTPS and Cloud Security

Unlike the DNC (and some say the RNC was equally deficient), we have state of the art security. To start with, all of our applications force the use of the HTTPS protocol in line with Electronic Frontier Foundation best practices. Forced HTTPS use causes a uniform resource locator (URL) request sent by unsecured to be re-established in an encrypted session between your browser and our servers.

GoDaddy hosts our web-facing servers. They, in turn, have encrypted tunnels to our accounting data servers that are virtualized deep inside the Amazon cloud. We adopted this architecture to build in an additional layer of security for client’s sensitive financial information.

Unlike a local, storefront operation, or even more sophisticated global scope firms, we do not store any customer information on local computers. We use Chrome OS devices since they are the most secure off-the-shelf computers and tablets.  Then, we only use them as thin clients, granting us access to our web applications through our virtual private network (VPN) and encrypted browser sessions, and to Amazon’s cloud-hosted servers. We also have a few Ubuntu Linux machines online for specific processes that are not convenient on Chrome OS.

Connecting From Unsecured Locations

Some of our clients access our platform from places that are even more unsecured than just the general hacking climate (which is bad enough). Even their internet service providers (ISP) are highly suspect. In those cases, say, if you are expat living and working in Russia or China, we recommend you take additional measures. First, all of your internet traffic should be in a VPN that you run either from your device or your home router. We discuss Wi-Fi below. You should use a Chrome OS device (not to be confused with the browser of the same name) such as a Chromebook or a Chromebox. Neither Windows nor MAC OS can be trusted these days regardless of the measures you take to secure them (unless you use a thin client and reboot after every session).

Wi-Fi Security

There are a lot of myths out there about Wi-Fi security. But first, let’s just get this out there: Wi-Fi doesn’t stand for anything, especially not “wireless fidelity.” It was just a catchy name for the IEEE 802.11 standard.  The most important issue is to ensure you are using at least WPS2-PSK to secure your network. Your password should look like h&5U2v$(q7F4*. If it doesn’t, change it. Do not use the WPS option. Don’t turn off SSID broadcasting, DHCP, or bother locking down IP ranges or limiting access to specific MAC addresses. Those only keep out people who wouldn’t know how to penetrate your network anyway. Anyone who qualifies as a hacker will have the tools to defeat those measures faster than you can set them up and maintain them.

An added measure of security is to use a VPN originating at your device over the Wi-Fi. With this configuration, you will be secure even using open Wi-Fi systems such as at libraries, coffee shops, or airports. VPNs do slow down your internet experience a bit. However, you won’t notice unless you are trying to stream video or use internet video telephony like Google Hangouts (our preferred product) or Skype. In those cases, just turn off the device VPN but make sure to turn it back on when accessing your U.S. bank account from Moscow.

TOR and Other Onion Proxy Systems

Should I use a multi-hop proxy system like TOR for more security? That’s a question we’ve heard more than once. Keep in mind that the purpose of systems like TOR is to hide who you are from those with whom you are interacting or third parties trying to monitor your activities. In the case of banking or accessing our systems, do you really want to hide from us who you are? What you want to do is to ensure that no one in between you and us can read your traffic. That’s an encryption issue, not an identity issue. So, keep systems like TOR for when you are doing something that demands you hide your identity, not protecting content. Of course, you can do both, and if you are a sophisticated user and want to explore that possibility, there are many tutorials available for configuring these measures.

What Level Of Encryption

We use 128-bit encryption which is the same level used by the U.S. financial system. It is a good balance between speed (encrypting and decrypting incurs overhead costs on processors at each end) and security. If the industry increases to 256 bit or higher levels, we’ll be an early to middle term implementer. We won’t blaze the way, we’ll let others bear those costs, but we won’t hesitate either since security is one of our primary values.

Discussion and Advice

We’ll set up a thread on our forum for discussing these issues if you, dear reader, want to follow up on some point we made here.  For CPAs and other small businesses interested in advice, if you are considering any of these technologies, please feel free to contact us or our implementing partner, CPA Network Solutions (they have a link at the bottom of the page). If you contact them directly, we ask that you mention us as the referral source.

Tax Simplification

Once again, the politicians in Washington have chosen to attack the straw man of the tax code. They love to portray the IRS as somehow (they never state this but artfully imply it) creating the tax code. The truth is quite the opposite: Whenever a constituent darkens a member of Congress’s doorway asking for something in return for a campaign contribution, the result is frequently a new provision in the tax code if the contribution or contribution bundle was big enough. Every few years, we go through a purging of the code in the interest of “lowering your taxes” or “making it simpler” but the net result is just a reset in this interaction between Congress and constituents.

This year, part of simplification in legislation that would affect your taxes in 2018 is decreasing the number of tax rate brackets from seven to three. At the same time, various deductions would be eliminated such as the homeowner’s (a special interest group if there ever was one!) mortgage interest deduction and caps on charitable contributions (charities are another “special interest” — a term we’ve all been trained to hate — with powerful lobbies in Washington). The minimum rates commonly discussed would be an increase from 10% to 12% at the bottom.

Another aspect of the so-called simplification is the sought-after decrease in statuses from four to two: Head of Household and Widow/Widower would be eliminated. The following chart shows the current state of complexity.

 What this dialogue ignores is that the complexity of the tax code is in two areas that precede or follow the determination of this rather mechanical and simple process: What is the income amount to be taxed and what credits are available to lower the amount of tax once it has been calculated. The former we call determining adjusted gross income (or AGI) while the latter consists of subtracting various calculated amounts from what would otherwise have been the tax to be paid. In many cases, for those able to take advantage of the nuances of the tax code, they can lower their tax due to zero (especially corporations)!

If the only complexity in Title 26 of the United States Code (the formal name for the tax code) were just what politicians are trying to con us with, their proposal would be relevant. But, I’ll bet that most readers, once they know their AGI, can place themselves in the chart in less than 15 seconds. Are you married or single? Is your spouse dead or alive?  If you are single, do you have dependents? Then, how much is your AGI?  Voila!  Read to the left on the chart above, and that’s the rate by which to multiply your AGI.

As always with tax policy changes, there are winners and losers.  Early betting on potential losers is on single mothers who will lose the benefit of preferential treatment.  Congressional staffers though have been quick to point out that more generous child care deductions will more than offset the double whammy that some have identified — an increase in tax rates, remember the increase from 10% to 12% at the bottom, and the loss of the household deduction built into their status (income not taxable until  $13,250).  We’ll keep an eye on the childcare deduction as will Forbes and others.

If you work with us, however, your taxes will, in each succeeding year, be increasingly lowered by credits as much as your circumstances will allow — we seek to structure your financial life to gain access to credits or to shield income, legally, from taxation. And that’s not simple, nor is it going to be, at least not for long. Why? Well, that’s where we started. Remember that person darkening the Congress member’s doorway?


Groundbreaking: McFarland-CPA’s new Tax Organizer—Coming Soon!


Tax Organizer Coming Soon!

We are working feverishly on the Tax Organizer!

Like our attempt at a clickbait-style headline?

As part of McFarland-CPA’s ongoing commitment to delivering the best value, in the quickest way, at a cutting edge price, we are putting the finishing touches on our online tax organizer.  Most tax pros employ only one of the few options available for working with clients and price their services accordingly. We have striven to take the best aspects of each of these and synthesize them into a new way of doing business.

What are the options:

  • An in-office, face-to-face interview
  • An online file upload with follow up interactions via voice, email, or, rarely, online chat
  • Email a form (most common) and hope clients will fill it out prior to an appointment to drop off the resulting packet

Each of these alone has pros and cons and we’ll touch on the major points of each. For the first option, the most expensive one, this is like getting your hair done. It’s a custom job and takes up a lot of the pros time. You should expect to pay a lot for this approach if you are dealing with a trained professional. H&R Block and many other store-front franchise operations drop you in a cubicle to be interviewed by an entry-level staffer following a set script. That approach saves on costs but obviously you’ll lose the benefit of years of experience and training. Also, you should expect a lot of back and forth, which many people find frustrating, in order to develop a complete set of information for your return.

In the second option, the one followed by the early adventurers wandering out into the wilds of the internet, you could expect, and should still expect, a lot of back and forth. There was, and is, almost no way to make that work without the structure of the third option.

The tax organizer questionnaire is the solution to the unstructured problem of option two and is really the script for the entry level folks in some implementations of option one (remember H&R Block?). This option forces you to look through a sixteen page questionnaire (yep, we printed out the one the AICPA provides tax practitioners and it was 16 pages long) selecting what applies and what doesn’t. It’s a one-size-fits-all tool.

Our approach, which keeps costs to a minimum while providing a full CPA review of your situation, is a hybrid of all of these that allows us to start together on your adventure with tax-advantaged wealth accumulation and financial independence. We use an online tax organizer engineered to guide you through only the relevant parts of the organizer. In this way, we are similar to tax software. The information you provide through the organizer will be evaluated for reasonableness and probable completeness and then we’ll prepare the correct forms for you. Some items have multiple options and we have the experience to think through those and come up with the best solution for you. Software just doesn’t do that (unless you believe that Watson is actually evaluating your tax return using fuzzy logic).

We anticipate sending you the link to the online organizer later this week which will put us all in an excellent position in the countdown to April 17 (that’s the filing deadline for this year without an extension). If you want your return prepared and submitted later in the year, the organizer will provide you that option.

As always, we, the members of McFarland-CPA, want to express our gratitude for your patronage and can’t wait to get started on this journey with you! We think you will be much better off for having known us as the years go by and are thankful for the opportunity of serving your financial needs.

The Fiduciary Rule is Dead

The Fiduciary Rule is Dead?

Summary: The Fiduciary Rule, intended to eliminate predatory practices that have been costing retirement investors billions in lost returns, will not take effect on April 10 as previously scheduled.  Its implementation is delayed for 180 days and analysts assess that the Department of Labor will not implement it then, either.  A related executive order directs the Treasury Department to review regulations that inhibit Americans making, ” . . . independent financial decisions and informed choices.”

Fiduciary Rule Delayed 180 Days

The Administration directed the Department of Labor to cease work on implementing the Fiduciary Rule.  The rule would have taken effect April 10, 2017, but its future is now doubtful, given a 180 day delay to assess its impacts.  In a nutshell, licensed and registered financial advisers (financial product salespersons or FPS) engaging with either institutional or individual retirement plans would have been required to recommend investments that were in your best interests rather than applying the “roughly suitable” rule currently providing safe harbor in the industry.  This is a setback for retirement investors and increases the importance of being an informed investor before discussing any particular investments with your FPS.  The rule was not to have applied to investments in general, just to retirement plan investments. As a side note, McFarland-CPA does not recommend specific acquisitions of named products to its clients, instead providing an analytical framework from which to interact with those who do. We think education and information is the key to a satisfactory relationship with any salesperson.

FPS’s Interests Not Aligned With Yours

Up till now, FPSs could be compensated in many different ways and only a fee-only FPS could be assumed to really be in your court. Cases of “churning,” when a broker simply buys and sells in your retirement account in order to generate transaction fees, are not hard to find.  The sales of front-loaded funds and insurance-like investment products were other sources of FPSs’ revenue that did not necessarily align the FPSs’ interests, as the advisor, with yours, as their client. In another example, we have seen many clients who did not actually qualify as sophisticated investors (a term with pretty good common law definition) being taken advantage of by boiler room operations selling doubtful investments in shady limited liability corporations. The LLCs then go bankrupt with our clients losing everything. It is uncertain whether the final result will curtail these types of predatory practices but they clearly fall within the topic generally.

Fiduciary Duty Was Key Reason for Change

The previous administration had sought to force FPSs to be their retirement clients’ advocates rather than arms length adversaries as is now the case in some cases. Without fundamental changes to the industry, after the rule’s implementation, these sales professionals would have been open to slam-dunk lawsuits unless they could prove they actually were acting as fiduciaries. At least that was the scuttlebutt in the industry’s backchannels. The fiduciary duty is a bar that many would not have been able to meet and still remain in the industry.  Converting to a fee-only professional basis, as is common with attorneys, CPAs, and other professionals, would not have been possible for many given the saturation already existing in the market. There is a notable hesitance for consumers to leave indirectly-compensated brokers for fee-only professionals.  We’re ok with that, so long as it’s clear that the consumer understands the person on the other end of the phone has an agenda that isn’t necessarily aligned with your welfare. If your physician might be providing you with advice that wasn’t in your interest, how long would you retain her or him?

Assessment:  Maintained Vigilance and Consumer Education Will be Key

With the delay and possible cancellation of this rule, those most vulnerable to predatory practices will need the increased vigilant support of their confidants.  We will continue to emphasize this part of our information-only practice and look forward to a healthy discussion in the forums.  Advocates for the Obama administration rule contended that investor losses absent the rule reached $17 billion annually.

Investor Losses and the Fiduciary Rule

Obama Administration Policy Fact Sheet

DOL Fiduciary Rule as Proposed May Not Stop Investor Losses as Claimed


Blog Notes

We have arrived at the “go live” for McFarland-CPA’s interwebs presence during the 2017 tax season. Here you will find our regular blog posts but also access to our many web-community features (as we build them) including specialty pages and forums. The specialty pages are (or will be) curated knowledge areas where we cross-post blog posts but also more focused content in each of the financial planning domains (budgeting, investing, risk management/insurance, estate planning, and retirement planning).

We also have a page under construction explaining how to participate to gain discount points and also how to benefit from referrals.  More on that to follow.

The blog posts during a month comprise the content of the monthly newsletter so if that is your preferred way to receive our content, there is no need to subscribe to or monitor the blog.  You will still be able to participate in the forum discussions for each article/post following links in our newsletter.