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Recent Articles by Robert Schmansky, CFP®

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Help! I'm Only Earning 1% on My Savings

Wednesday Nov 18, 2009

Low cash yields aren't as big of a problem as you might think.

Will Boomers Crash the Markets?

Thursday Oct 22, 2009

We all know we can’t time markets, but there has been a recent revival of a theory from financial experts that we are ever closer to a market crash we all should have seen coming. The Congressional Budget Office even issued a report addressing the alleged problem. According to the theory, we are just a few years away from ...

Where a Financial Adviser Can Add Value

Tuesday Oct 13, 2009

Character traits of the new paradigm financial adviser.

No, You Don’t Need a Variable Annuity for Retirement Guarantees

Thursday Aug 6, 2009

One of the products that has been stung in the retirement product race are variable annuities with benefits for retirement income. Here are reasons why you don’t need an annuity, and some ideas to create a safer portfolio.

Struggling Student Loan Holders Have New Repayment Option

Friday Jul 10, 2009

New Income-Based Repayment option for federal student loan holders will help those with overbearing payments.

Person-to-Person Lending as an Investment

Tuesday Jun 9, 2009

The rates on direct, person-to-person (P2P) lending are attractive; unfortunately the risk is not.

My Broker is Leaving: What Should I Do?

Monday Jun 1, 2009

Industry consolidation and frustrated brokers have left many families wondering if they should move their accounts to their broker’s new firm.

Recent Comments

Commented on: Person-to-Person Lending as an Investment
David R Hanson
FiLife Contributor
David R Hanson said
20 days ago

A really fine piece Robert. A couple of reactions: -I agree with you that p2p lending is an innovative concept. I do fear that your excellent indictment of proper.com's specific implementation will be read as reason to dismiss other more viable p2p models. -As of today, Prosper.com's performance as per the link you provided is notably worse than when you wrote the piece. As unemployment continues to rise and middle- and working-class citizens keep struggling, I expect this trend to continue. -At the same time, the "spread" between what banks pay savers and what they charge typical borrowers has never been greater. Small business loan and credit card rates keep soaring, when they're still available at all...yet the deposits used to help fund these loans costs banks less than one percent in interest. These provides a greater than usual opportunity for those who would act as intermediaries between borrowers and savers without needing such a massive spread to stay afloat. I'm thinking of models like the Grameen Foundation at http://www.grameenfoundation.org/ , or community based credit unions that focus on local "meat and potatoes" lending, complete with careful underwriting. If models like these received even a fraction of the government support currently given to the largest banks, they could do a great deal to revive the economy on a much more sustainable basis than would programs like cash for clunkers, homebuyers tax credits, and bailouts for megabanks. In any case, thanks for giving FiLife readers good reason to pause and think before giving their hard-earned money to flawed models like prosper.com's .

Commented on: Will Boomers Crash the Markets?
David R Hanson
FiLife Contributor
David R Hanson said
20 days ago

I personally found the separation into so many sections distracting, FWIW. Other than increasing pageviews and ad clickthroughs, I'm not sure what the rationale would be for cutting a piece of this length into seven sections. Substantively, I think the main drivers of investor behavior going forward (including boomers and other reitrees) will be factors other than savings and consumption patters. We're currently in a period of almost unprecedented uncertainty, unpredictability, and anxiety concerning market and investor behavior. Investors still recovering from the horrifying March 2009 market lows. The savings rates you mentioned are held artificially low via government intervention, making alternatives to equities less attractive. More generally, massive, ultimately unsustainable government intervention is altering market behavior in ways that no one can fully assess. I'm bearish on equities for reasons that stem beyond the scope of a comment on your piece. But FWIW, I agree that those focused specifically on baby boomer behavior are looking in the wrong place.

Commented on: Where a Financial Adviser Can Add Value
David R Hanson
FiLife Contributor
David R Hanson said
20 days ago

Excellent piece Robert. FPs that see the need to move from a "salesperson" to a "Value add" paradigm will not only see serve their clients much better, but will also grow their practices. I think the recent economic turbulence is accelerating these shifts.

Commented on: Will Boomers Crash the Markets?
Kevin
FiLifer
Kevin said
25 days ago

Boomers may create selling pressure but I'm far more concerned by how under-saved these people are for retirement. You can't sell off what you don't have. Folks who are well-saved for retirement won't do "crash selling" b/c they won't need to and will likely keep a longer-term, multi-generational view of their assets. More conservative mix, to be sure, than when they were 40 or 50 years old, but unlikely to be 100% in cash or something similar. Folks who aren't well saved for retirement will turn to the government for a handout...and that when the real trouble will hit. My $0.02.

Commented on: Will Boomers Crash the Markets?
Robert Schmansky, CFP®Napfa_small
Expert Partner
Robert Schmansky, CFP® said
28 days ago

I appreciate the comments Morris. We'll probably always deal with a choppy market around times like you mention, but in the end, as you note, investors don't always ignore value, and retirees simply aren't all of the mindset of some of the authors who wrote about this recently (an aside, the link with the Bob Powell article on the subject was published after I sent this in, so I did not consider those opinions, but it does offer greater insight into the two sides)... I suppose I was one-sided, but the articles I was referring to came from a few finance experts who simply accept the idea of a crash as a given. So my goal here was to share why it's not... whenever we're told to be 'sure' the market will react one way, it seldom does... I know FiLife appreciates the feedback. I kind of liked the layout, though they wanted to experiment, so probably recognize that not everyone will... perhaps not so many sections may work better?

Commented on: Will Boomers Crash the Markets?
Morris Armstrong
FiLife Contributor
Morris Armstrong said
29 days ago

Bob I think that your article was very good but destroyed by the way that it was edited. You aslo know that for every point that was countered by you that the propeonents could have bored us with more words. The point is that retirees are not selling en mass and converting to cash ( at least not as of now) and excepting a complete paralysis of the government ( wait until next election day}it is unlikely that will occur. Investors do not always ignore valuations and I dont think that retirees will spell the doom of the equity market,

Commented on: No, You Don’t Need a Variable Annuity for Retirement Guarantees
Robert Schmansky, CFP®Napfa_small
Expert Partner
Robert Schmansky, CFP® said
4 months ago

Morris, thanks for the comments. I'm not saying it's crooked, but I certainly don't think the funds are simply selected for being best in class. Take an example of an S&P 500 Index fund. You can find Vangaurd funds in some annuities, though not what I've seen being proposed to clients. It's obvious when you buy an "X" Company annuity and the expense ratio for the "X Funds" S&P 500 index fund is 70bps, before annuity expenses, that the M&E expenses aren't the only way companies are making a profit, there is also the higher costing funds.

Commented on: No, You Don’t Need a Variable Annuity for Retirement Guarantees
Doug Kinsey
FiLife Contributor
Doug Kinsey said
4 months ago

Great advice Robert! I agree with your comments, and what the public doesn't know is that many advisors who earn compensation for these products overlook simpler, more efficient alternatives, such as bonds, U.S. Treasuries, and just plain diversified portfolios. Guarantees normally are gimmicks in these products and really aren't necessary.

Commented on: No, You Don’t Need a Variable Annuity for Retirement Guarantees
Robert Schmansky, CFP®Napfa_small
Expert Partner
Robert Schmansky, CFP® said
4 months ago

Pasquale, Thank you for the kind comments and your contributions. Rob

Commented on: No, You Don’t Need a Variable Annuity for Retirement Guarantees
Pasquale J. Sacchetta, CFP®
FiLife Contributor
Pasquale J. Sacchetta, CFP® said
4 months ago

Robert, Very well written commentary on variable annuities. Your article is comprehensive and you present a solid argument on the pitfalls of relying on just one feature of a very complicated product. We all know that clients are told that variable annuities provide guarantees as well as tax deferral. They are also told they can switch between sub-accounts without the worry of triggering taxation. What they usually aren't told is that their advisor can replicate many, if not all, of the benefits of variable products without the restrictions and costs of the variable products.

Robert Schmansky, CFP®Napfa_small
Expert Partner

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