Objective information about retirement, financial planning and investments


Cutting Investment Losses and Lovie Smith

English: LOVIE SMITH, of the Chicago Bears, in...

Lovie Smith is the Head Coach of the Chicago Bears.  A column in the Chicago Tribune this past weekend suggested that Smith might be on his way out at season’s end.  Smith makes a bit north of $5 million per year and his contract runs through the 2013 season.

Smith has had some success with the Bears, leading them to the Super Bowl after the 2006 season and to the NFC championship game after the 2010 season (where they lost to my Green Bay Packers).  Last year the Bears started 7-3 but faded and missed the playoffs.  This year they started 7-1 but currently stand at 8-5 with a key game against the Packers this weekend.  Looks like another potential meltdown for the underachievers.  In fact Smith has missed the post season 4 of the past 5 seasons.

The investment decision process

Investors are faced with the decision about where to best deploy their investment dollars on a regular basis.  Sometimes this decision involves taking a loss on an investment and moving on.  Maybe this involves a once high-flying mutual fund or perhaps a stock that looked promising.   When trying to guide a client through this decision process, the first and main question that I ask is “… would you buy this investment today?”  Often it’s tough for investors to admit that they made a choice that didn’t pan out.  However I would offer that the ability to take a loss when warranted and move on is a trait of successful investors.

The same process is also undertaken (or should be) by companies.  Has our investment in a new business line or in the acquisition of that competitor paid off for us?  More so what are the future prospects?  Is this still a good use of our capital and in the best interests of our shareholders?

In the case of the Bears, if they fire Smith they are assured of having to pay his salary for 2013 plus that of any assistant coaches who might be under contract if they are let go by a new coach.  The decision should be about whether Smith is the right person to lead the team into the future.  Pro Football is a business; the Bears are the 8th most valuable NFL franchise according to Forbes.  In spite of a lack of success on the field (their last two championships were in 1985 and 1963) they have a loyal fan base and play in the NFL’s second largest market.  Will a continued decline in the team’s performance hurt the value of business?  Some teams have seen immediate success from a new coach; take the San Francisco 49ers last year.  On the other hand there are no guarantees.

Love your family not your investments

I have encountered a number of folks who have a sentimental attachment to a particular investment. This might be due to having held it for a long-time or perhaps due to having inherited it from their parents.  This has no place in investing.  I’m not advocating trading for its own sake, or selling an investment on temporary weakness.  Rather you need to consistently review your holdings and your overall portfolio.  If changes are needed then make them.  In some cases this might involve taking a loss, admitting you made a poor investment decision, and deploying your money elsewhere.  This needs to be done within some sort of plan or framework such as an Investment Policy Statement.

In the case of the Bears, this transplanted Packer fan hopes the Bears not only keep him around for 2013, but that he is around for years to come.  I suspect many Bear fans are hoping the team eats his 2013 salary and makes a better coaching investment.

Please feel free to contact me for a review of your investment portfolio.

Photo credit:  Wikipedia


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Is Your Financial Advisor Like a Replacement Ref?


By now you’ve all seen the replay of the horrible call at the end of Monday night’s football game that gave the Seattle Seahawks a “victory” over my beloved Green Bay Packers.   In the interest of full disclosure I am a lifelong Packer fan.  This love affair with the Pack began towards the end of the 1966 season (I was nine) a season in which they won the first Super Bowl; Vince Lombardi was the coach; and Bart Starr and eight other players from this team would end up in the Pro Football Hall of Fame.  I’ve seen some great wins and some disappointing losses over the past 45 years.   Beyond the botched call on Monday, the whole tone of the games with these unqualified replacement refs is just hard to watch.

Update as of late September 26, 2012 the NFL announced that a tentative deal with the real refs had been reached and hopefully we will never see anything as shameful as this episode again.

Unqualified and incompetent referees in the NFL are discouraging, but an unqualified financial advisor can cause some real harm to you.

Is your advisor qualified?  The ref who signaled touchdown on that last play clearly was not.  He had never officiated a game above the junior college level before this NFL season.  Typically an NFL official must have at least five years experience at the college level.  As far as your financial advisor, ask yourself if she is qualified to advise you on your situation.  Does she take a holistic view of your financial situation or does she simply try to sell you more financial products?  Moreover does your advisor have the proper credentials such as the Certified Financial Planner (CFP®) designation?

Does your financial advisor collaborate with other professionals on your behalf?   One of the comments made by several of the experts on ESPN and other networks is that the head referee never called over the two officials who made the conflicting calls in the end zone to hear their explanations.  One of these experts is a former league referee and he indicated this should have occurred as a matter of course.  As a financial advisor I often tap the expertise of financial advisor colleagues and other professionals in areas like estate planning and insurance on behalf of my clients.  I consider myself a financial planning generalist, but I also know what I don’t know.  The key is doing the best job that I can for my clients.  Does your advisor take this approach?  If not why not?

Does your advisor place your interests first?  Clearly the NFL doesn’t really care about its fans or for that matter its players.  Why else would they put out such a cheapened product for the first three weeks of the season and put their players potentially at greater risk of injury?  It’s all about the money and the NFL is raking it in.  Likewise many financial advisors are all about the sale of financial and insurance products.  They are strictly out for the money; their client’s interests come second.  For many commissioned and fee-based advisors this is both the norm and perfectly legal as they are not held to a Fiduciary standard.  I’m biased, look for a fee-only advisor who holds him or herself out as a Fiduciary and who puts their client’s interests first.

Let’s hope the NFL settles their labor differences soon.  But more importantly, make sure that you have a first stringer as your financial advisor.

Please feel free to contact me with your investing and financial planning questions. 

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Photo credit:  Reuters

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