Results Matter More Than Performance

Eng-webOn a recent due diligence trip to Los Angeles, Mike McCann and I had the opportunity to engage with the Capital Group, the investment manager for American Funds. I walked away from that visit with three strong impressions that I believe benefit our clients:

1. Unique corporate culture

2. Process + Consistency = Results

3. Results vs. Performance

The Capital Group was founded in 1931 and has distinguished itself as one of the few actively-managed mutual-fund companies that has consistently provided above-average results. Their unique corporate culture has enabled them to do things differently than many of their competitors. For example, they’ve been able to recruit and retain top talent. This is evidenced by the long average tenure of their investment professionals, which is more than twice that of the industry average (11.6 years vs. 5 years). An experienced investment team ensures there are professionals who have managed through many different market cycles, especially the difficult ones.

Another important aspect of the culture – borne out of this longevity – is the consistency of their process. The Capital Group emphasizes rigorous fundamental research, long-term decision-making, low fees and independent thinking, all of which have helped produce favorable long-term results for their clients. Such results, in turn, provide reassurance for current investors as well as future investors of their products.

The final distinction I realized during our time with Capital Group was the difference between performance and results. They made it clear that within their organization they do not focus on performance. Performance is something that may sound good in an advertisement. Yet, it is the results that are important, because the results are the money in the bank, the resources that clients can live on.

Knowing the investment professionals at American Funds view results in this way, and knowing they are not “chasing performance” to publish in their next brochure, gives me peace of mind.

This part of the Capital Group process enables me to feel comfortable and confident that we at Perspective Financial are investing our clients’ hard-earned money with a company that is also putting their clients’ interests before their own.

By |July 20th, 2015|Advisors, Company News, Investing|

Strategizing Social Security for Married Couples

Camargo-webImportant Update: As of November 2, 2015, this option has been eliminated by a new budget bill passed by Congress and signed into law by President Obama. It impacts social security for married couples.  Click here to read an article with the updates.

It is critical for married couples to plan together how and when they will file for Social Security. As a spouse, you are entitled to 50 percent of your working spouse’s monthly benefits. Being aware of filing options can help you choose the best strategy and may result in thousands more dollars in benefits.

File and Suspend

For one spouse to claim spousal benefits, the other must have filed for his or her own benefits. If one spouse has reached full retirement age (typically 66 to 67 years, depending on date of birth), there is an option to file and suspend – filing an application for retirement benefits, then immediately suspending the request. This enables the other spouse to file for spousal benefits, while allowing the first to defer personal benefits until age 70. Deferring allows your benefits to increase 8 percent a year, thus resulting in a larger overall benefit.

Restricted Application

A spouse can claim spousal benefits with a restricted application at full retirement age. This allows them to receive spousal benefits without triggering a simultaneous claim for their own Social Security benefits. By doing this, they allow their own benefit to grow for up to four years, at which point they can switch to their own greater benefit at age 70.

Start, Stop, Start

Starting benefits before full retirement age reduces your benefits. If you file when you turn 62 years of age (the earliest allowed), you can suspend your benefits once you reach full retirement age. You can than resume them at any time until 70 years of age. This strategy can enable your spouse or children to collect benefits on your record sooner, while giving your own benefits the opportunity to grow.

Before taking action, be sure to evaluate how each option will affect lifetime benefits. Your financial advisor can help you assess the options, as well as take into account factors such as retirement assets or long-term care needs.

By |July 6th, 2015|Advisors, Financial Planning, Retirement|

Book Review, The One Page Financial Plan

Eng-webThe idea of simplifying the financial planning process to one page is appealing to me, and I wanted to read about how another financial planner would propose to do just that.

Financial planning can sometimes never get started because of how complicated it may seem from the onset.  There are potentially many moving parts such as a budget, tax plan, estate plan, life insurance and investments to name a few. In The One Page Financial Plan, author Carl Richards distills this process down to one key question to simplify your financial plan.

Book Review, The One Page Financial Plan by Carl Richards.

The One Page Financial PlanRichards does a great job of talking about financial planning without a lot of industry jargon.  In addition, the book helps address many of the mind games we play with ourselves when it comes to our personal finances.  When we make excuses for not addressing important topics regarding our financial life, this book encourages you to move in the right direction with simple suggestions that can be easily implemented into your lifestyle.

This book is a quick read that I believe many can reap benefit from over a lifetime.


By |June 15th, 2015|Advisors, Books, Financial Planning|

Understanding Obstacles to Saving

Mailliard-webOnly about one-third of Americans are saving enough for retirement. So claims UCLA economist Shlomo Benartzi, author of Save More Tomorrow and host of TED Talk “Saving for Tomorrow, Tomorrow.”  Through his study of behavioral finance, a hybrid of economics and psychology, Benartzi seeks to understand why people are not saving, and from there, devise solutions.

Benartzi identifies three major behavioral obstacles to saving. Inertia is number one. It is easy to become overwhelmed with today’s to-do list. Something that requires special effort often gets put off to tomorrow.  About one-third of employees with access to 401(k) plans that require proactive sign-up and navigation of complex choices do not participate.  “Lack of action is a powerful default,” said the professor.

A second obstacle to saving is loss aversion.  We can be over-sensitive to relatively small losses. To illustrate, Benartzi asks his audience to imagine withdrawing $100 from an ATM and then losing a single $20 bill. Most of us would be very bothered by that, even though it is really a minor loss. Many would-be savers are wired to view savings as a loss, as it involves the loss of spending today.

Economists call the third obstacle to saving present bias or myopia.  With heavy focus on the immediate present, what is right in front of us, we anticipate our future choices will be better than they end up being.  We intend to do all the right things… tomorrow.  Benartzi illustrates:  We anticipate snacking on fruit this afternoon, but come snack time, we choose sweets. “Self control is not a problem in the future. It is only a problem now when the chocolate is next to us,” quipped Benartzi.

Understanding obstacles to saving will help you overcome them.

Benartzi advocates simple behavioral science tools and 401(k) plan redesign to help overcome these obstacles. Rather than requiring proactive opt-in, he recommends that plan participation be the default assumption for employees. Plans should have fewer, not more, investment choices. And, plans should include a mechanism for automatic, gradual future savings rate increases.

By |August 13th, 2014|Advisors, Financial Planning|