Why I Fired My Bank

Seems like a catchy title doesn’t it?  Well let’s see if you think I did the right thing by the time you get to the end of my story.

My personal bank is USAA Federal Savings Bank. This story is not about them.  I love USAA’s one and only San Antonio, Texas branch which I have never visited, but they always seem to be the top rated bank in the United States.  I know why.  Whenever I have a question, need, or problem, I just pick up the phone or email them and ….BINGO, I get a resolution.

Several years ago USAA started letting us drop our deposits off at the local UPS store.  Then they let us scan checks at home and deposit them over the internet.  Then came their iPhone app and I was in heaven.  Wish I could do this with my business account.

Now I run a small business and USAA doesn’t have business accounts.  I asked the owner of the local UPS store where I should open my new business account ten years ago.  He pointed me to the local bank just down the street.  Nice manager, friendly staff and good hours especially for drive in deposits.

Several years later our local bank got bought out by the regional bank from New York State.  Not much changed except the manager got promoted and the teller staff retired or moved on.  Things seemed to be working ok but going to the bank every day to make deposits became a chore for my assistant or my wife, but it was usually either done on the way home or during errand time at the beginning or ending of the work day.

A couple of years ago the big bank (P**) bought out the regional bank. You know where I’m going, don’t you?  More staff turnover. Everyone was a part timer or so it seemed. They all wished me a nice day, but when anything went wrong I had to find it, no one ever called to tell me there might be a problem.

Now banks make a lot of money on the deposit float.  I should know, I’ve worked for two of them. Our business has a nice five figure float where we don’t make a dime, but P** bank does.

Last year I noticed that the big bank was letting people make deposits with their iPhone but they had a limit.  We have five offices around the country and really enjoy making deposits on the iPhone since we travel for business. I found out the monthly limit was very low for our kind of business and for our average deposit. So I went in the see the branch manager - the new branch manager. I observed they had cut back the lobby hours and the drive in hours.  No early or late drive in business at all.   (Our local grocery story bank branch is open seven days a week!)

I explained to the new manager my needs. He listened, but it was obvious he had no power to amend the low limits even though our float was ten to fifteen times larger than any conceivable check we might deposit and then bounce.  We asked him to elevate the issue and have P** make an exception.  A week later the “business banker” called.  He listened to my story.   He said couldn’t change anything, but would call my first branch manager (from 10 years ago) who was now in some elevated position in the bank and address the issue with her.

A week or so later my voice mail message told me sorry, no change in their limits. Guess how I felt? Guess what I did?  Right, I went to Google “business banks that let their customers bank remotely and use their smartphones to make deposits”.

BINGO. EverBank is now our bank. The monthly limit for smartphone deposits is 2.5 times our normal amount of deposits. FedEx delivers the paperwork the next day.  New checks come in a week along with the debit card.  They call to see how we’re doing.  A month later they call again to check on us.

We are winding down our relationship (sic?) with P**.  Somehow the auto payment for the Amex bill didn’t get changed in time so we are overdrawn.  Does the big bank call, email, text us to let us know they’re charging us $25 for the overdraft and $7 a day for a beginning $141 negative balance? You can guess the answer. 

Today I paid the big bank $231 in cash and they said they would close the account in a few days.  Can’t even close an account on the same day!!  Well, goodbye big bank.  We admit we should have done this sooner, but it’s a pain to switch banks.

Sure do miss all the old employees from the local bank. In ten years, they were the only ones who seemed to really care about our business.

Conclusion: Every three years or so look around and comparison shop your vendors. There are companies out there that really want to listen to your needs and will do what it takes to exceed your expectations.

It's Never Too Late: But Get Going Now!

We are in the goal business. Helping people define, refine and achieve their financial goals.

What does it take to achieve and surpass financial goals?

1.     It takes willpower.  Remember the “protestant work ethic” of delayed gratification?  Starting early and staying with a plan is a key component to attaining financial success.

2.     It takes resources.  Income in excess of expenses is the primary means of developing resources to put towards goals like retirement, housing, education and travel.

3.     It takes knowledge of knowing where you’re going and if you’re on track to get there.  That’s called feedback.  You need a mechanism to keep you informed of your progress and to alert you to altering your actions to stay on track or ahead of schedule.

Now what are the most frequent obstacles we see that prevent goal achievement?

1.     Procrastination.  Lower priorities take over disposable income and not enough resources are directed to higher priority, but longer-term goals.  Parties, video games, you name it. In our society it’s easy to become diverted by slick marketing, peer pressure, and poor habits.

2.     Lack of resources.  Decisions that affect expenses whether they are day-to-day living expense decisions or long term debt decisions like student loans lead to an inability to save adequately for long term financial goals.

3.     No goals in the first place.  We call this the “seat of the pants” plan.  Without a roadmap any highway will take you there.  The majority of baby boomers might fit into this category.  For most of them it’s too late and they are going to work many more years and retire at a much lower standard of living than they otherwise might of because they never planned ahead.

So what can we take away from this discussion?

1.     It’s never too late to plan although the longer you wait the harder it is.

2.     It takes discipline and a denial of other counterproductive opportunities.

3.     It takes a feedback mechanism, including coaching in some cases, to stay on track and know when to hold ‘em and when to fold them (thanks to Kenny Rogers).

As this year comes to an end.  We want you to be thinking of goals and what you will be doing next year to achieve them.  Good Luck.

Scary time this year

We are now in October, with nine months of the year behind us.  That’s a scary thought even though Halloween isn’t here yet.  The good news first:

First quarter 2012 saw the US, Europe and Emerging Markets up big time: +13%/+11%/+14%.

Second quarter 2012 saw them down:  US -3%/ Europe -7%/ Emerg Mkts -9%

Third quarter 2012 was good:  US +6%/ Europe +9%/ Emerg Mkts +8%

Cumulative Year to Date:  US +16%/ Europe +16%/ Emerg Mkts +12%

Naturally, looking in the rear view mirror is the easy part and things are looking good.  But that’s only stock market investments. Bonds are at low historic rates. Since we believe the stock market is forward looking, we have no idea where it will end up on December 31^st.  The signals are mixed.  Staying fully invested is still our thought for right now.  However, that’s always been our thought.

We had a do-nothing congress this year so we remain in tax limbo until very late this year or early next year depending on how far the can is kicked down the road.

Capital Gains Fever

For many taxpayers it will make sense to harvest capital gains in 2012 to take advantage of current lower rates.  If we haven’t helped you before then you might not be familiar with this “harvest” term or technique of taking advantage of lower tax rates or losses to offset gains.  On the other hand, if you will be passing on assets and are in the 15% tax bracket or lower, then you might want to hold on for the stepped-up basis upon death.  We are sorry it’s so complicated, but we will point our finger at those 535 down in Washington, DC.

Medicare Surtax: 3.8%

Now we all have to understand where we will be on our 2013 tax return when it comes to Modified Adjusted Gross Income (MAGI) and Net Investment Income (NII).  For couples with over $250,000 in income filing jointly; married filing separately, $125,000; and all other taxpayers, $200,000; we will need to be open to strategies to reduce or eliminate the impact of this additional tax on certain income above these levels.

Other Tax Strategies for 2012

If we need to see more income this year we can explore converting some or all of an IRA to a Roth IRA.  The conversion will be taxed at today’s lower rates if we believe rates go up in 2013.  There also might be an opportunity to unwind this conversion up until fall of 2013.  We can also consider exercising non-qualified stock options if 2012 if we’re lucky enough to have some.

Don’t forget about Estate Taxes

The rules are set to lower the federal limits of individual exemption (and some states that are tied to the federal number) from the current $5,120,000 to $1,000,000 come January 1^st, 2013 unless the you-know-who’s do something. Fat chance. The President wants a $3,500,000 individual limit and the opposition party wants to eliminate the tax altogether. Who knows when and where we will end up.

OK. That was the bad news.

Good news, bad news, and now great news: Jennifer Ventola has joined MainStreet as our new Client Services Manager. You’ll be hearing a lot more from her if you’re an ongoing MainStreet client.

We sincerely thank you for using our services in the past. If you are an ongoing client we encourage you to get your statements and questionnaires to us in a timely manner now that they are starting to show up in your mailbox or email inbox.  Scary means we will be working harder for you than ever before.

All the best, Jim and Anna            info@adviceonly.net  goes to both of us

Hybrids help solve problems

I just spent two days locked up in a room  (sorta) in Tampa, Florida, (in the middle of winter!), talking about life, disability and long term care insurance.  Hey, don’t tune out just yet!

Every couple of years, some of us old dogs have to learn some new tricks. The world is changing pretty fast.

The operative word this year at our Low Load Insurance Academy was ”hybrid”, but not the car kind.  Both annuities and life insurance policies are sprouting wings that include coverage for long term care needs – and at a tax advantage in most cases.

If you've heard the pitch lately, you probably know that 70% of people age 65 today will need long term care services at some point in their lives.  Wow, the number has gone up.  I remembered when it was 60%.  We’re living longer and that is the result.  The second fact presented was that the national  average cost of nursing home care is up to $87,000 a year.  Another wow.  I was thinking maybe $80,000.

Now we financial planners love it when clients are predicted to “self fund” for long term care needs. That means they’ve saved or inherited enough money or property to see them through many years of high cost care. Remember that 70% figure?

Some people can self fund and hedge their savings by purchasing long term care insurance with a long elimination period or self fund and buy a short term policy to cover their needs until they can sell property that will provide a source of funding.

 

If people can’t self fund for all or most of their risk of needing long term care services, then you can buy insurance to cover that need, but guess what? Most people people we meet don’t buy LTCi (code for Long Term Care insurance).  Why?  “Because,” they tell me, “what if I don’t need it?”  The insurance industry has heard that excuse and come up with other options.

These days, both life insurance and annuities from several highly rated insurance companies offer long term care riders or supplements that turn them into a multi use product.  Being able to draw out assets from a life insurance death benefit or an annuity with no income tax implication is an attractive alternative.

 

So the next time you’re visiting with your financial planner ask about hybrids.  As usual, your mileage may vary.

Last Minute Tax Planning: Low Taxable Income

If your 2011 taxable income (line 43 IRS 1040) is going to be below $69,000 married or $34,500 single then you need to look at your taxable investment accounts and maybe sell and buy back (if prudent) to enable you to “recognize” long term gains this year. (This is not about short term, less than one year, gains.)

Why? No long term capital gains tax is due if your taxable income puts you in the 10 or 15 percent tax bracket. The law changed in 2008 and expires at the end of 2012 when long term gains tax rates go back to 20%.  This will increase your “basis” in the holding and allow for fewer taxes on future gains than if you just continued holding these securities (assets).  This does suppose they continue to go up in value.

At this time of year we advisers are looking to “harvest” long term gains and offsetting losses to increase the “basis” of holdings. This is good tax planning in most years.  It may not be that good this year, but for reasons not germane to this missive. Call or write to ask about this.

For the past couple of years and for the next year (2012), those taxpayers finding themselves in lower brackets should take advantage of this incentive to sell long term holdings that have increased in value.  If prudent, they can buy them back immediately without a waiting period which involves selling long term capital losses (wash-sale rule).

Your tax advisor or financial planner should always be consulted before implementing this kind of strategy. Why? Just selling for tax reasons, may not be the best strategic move for your portfolio. That’s why this discussion is for education and not actual advice. “Your mileage may vary” YMMV as they say in the text world.

A special thank you to Michael Kitces, author of the Kitces Report, www.kitces.com for reminding us planners to highlight this issue again this year.

Our Predictions for 2012

It’s that time of year again - prediction time.

What’s going to happen next year?  As usual, I don’t know.  How about you?  I just finished reading Forbes Magazine’s end of year Investment Issue and it didn’t help me come to any new conclusions. Rats.

Now for some breaking news. For the first time this year, I’ll be sending out a separate survey to those that frequently open my emails to see what you (they) say to some speculative questions I intend to offer for their response.  Of course, I’ll publish the results.

As we finish up this year going over many of our clients investment portfolios for the second or more frequent times, we have come to the conclusion, as we often do, that less is better -  less changes, less explanation, less understanding, and less acknowledgement that we can predict the future. Less is better. How unique?

So how are our clients, collectively doing?  Not bad.  Our clients are putting away more money since the two great dips of 2001-2 and 2008-early 2009.  They are also lamenting the continued softness of the stock and bond markets and the continued sinking of housing values. I feel the same emotions. 

By the way, our current favorite economic guru, Anirban Basu of the Sage Group, says that housing deleveraging will take a decade, until 2017.  (Sigh)

On the other hand, as a group our clients remain optimistic for the long run.  They are optimistic that we can do it – whatever “it” might be. (Mr. Minick, my 8^th grade English teacher, please forgive the dangling participle.)

This is the point that I should now report that our clients who retired during 2008-2010 have stated that they are doing “OK”.  That surpassed our expectations.  But the way, we can’t recall one client having told us it was mistake to retire when they did these past three years. (However, we acknowledge if they do regret it they may not have told us.)

It’s an election year coming up – surprise! You think 2011 was an up and down year?  You just wait.  The media loves a horse race and we will be having lots of them.  We have some international horse races going on too.  We predict the markets will over react in both directions. Don’t pay much attention.

What can a long term saver and investor do?  As I said in my first ever (August 2011) urgent email, “turn off the TV”.  You might recall this was the first time in 9 years I felt compelled to send out an “all hands on deck” email.

If you do want to ponder some thoughtful ideas and research on the subject of why we do what we do and why we make so many mistakes, I’d recommend Jason Zwieg’s “Your Money and Your Brain”, and Meir Statman’s “What Investors Really Want”.  Both of these books have to do with our behavior as investors.  

Many of you will recall, I’ve been recommending Charles Ellis’ “Winning the Loser’s Game” 5^th edition, for the past year or so. If you buy, borrow or beg one of these books and don’t think it’s of value after reading it, I’ll reimburse you whatever it cost. No time limit on this offer to regular readers of this blog.

So that brings me to my list of concepts I’d like you to consider exploring as we enter 2012:

·        The illusion of control

·        Confirmation

·        Hind sightedness

·        Patterns

·        Availability

You’ll find these concepts and more in the three books we’ve just recommended.

So for 2012, we suggest you follow Warren Buffet’s advice to just invest in index funds as much as you can.  I think John Bogle, founder of Vanguard, said that too.  If you must invest in a limited number of active funds in your work retirement plan, then try to find low cost and diversity.

My wish for this holiday season is for both you and me to have more family time and count our blessings each day. Thanksgiving was a good start. Keep it up. I predict it will improve our year 2012.

Time to introduce a little change, for the better

Helping people make informed financial decisions can be tough.  Now don’t fret, this isn’t a pity party kind of blog coming up.  These are just some thoughts on how to get people to act in their own best interest.  I think my doctor might have the same kind of thoughts sometimes, but not about me.

Being a financial advisor that only gives advice and doesn’t sell or manage stuff, has its advantages.  We don’t get a lot of phone calls or emails asking why we screwed up.  Now, both my partner Anna and I screw up plenty, but we try to catch each other’s mistakes before we foist them on the public.  However, when we do give advice whether in person, on the phone, on Skype or via email, we are never really sure what’s going to happen.  We usually find out later.

In our business model, we also don’t have to do quarterly reports or publish newsletters to explain what’s going right or wrong.  Who reads those?  I’m sure some folks do, but in past lives we hoped 5% took a look.  Only engineers, who found every addition error or typo, seemed willing to communicate about our offerings.

How late we hear from someone usually relates directly whether they are following our advice.  If we get phone or email soon after the delivery, then we know the client is doing something with our recommendations – thinking about them and, or trying to implement them and needs our assistance or further explanation.

It’s not unusual to see clients a year later and find that most of the work we recommended is yet to be completed. How were we to know? That’s where my doctor comes in.  He makes a follow on appointment right then when I’m sitting there.  Funny how the prescription runs out just about the time our next meeting is to take place.

OK, so Doctor of Financial Advice Ludwick is going to change his ways and book follow up appointments right away and also have the office staff follow up a week later to see how things are going. Yes nurse, I’m taking my pills and exercising.  I get the sense their interested in my welfare.  I can take a hint.

So after nine years of operating in a certain way, Doctors Ludwick and Sergunina will alter their practice and help their clients move forward in their financial lives. Yes it means more phone calls for us, but we expect to see more accomplishments because of our efforts.  Yes, it might mean we have to switch more appointments that need to be altered, but I think we can handle it.

So if you’re a client of ours, what do you think?  If you’re a colleague, what do you think? And if you’re a prospective client, what do you think?