Wealth manager or stock broker? There is a difference

Every so often we all hear stories about people who suddenly came into a lot of money and, in what amounts to little time, find themselves in bankruptcy court.

The older we get, we hear about those who retired thinking they would have enough income from investments that they would never have to worry about it, only to learn that wasn’t the case.

That’s where a wealth manager can be the most valuable ally for anybody who needs help handling money; keeping income safe and helping it grow is a job for a fiduciary who puts his clients’ peace of mind first, said Mike Mahoney, a registered investment advisor and owner of Cypress Asset Management in Peoria Heights.

“There is always a challenge of finding someone to help you with your money who is truly going to be working in your best interest. But it is really important. There a lot of tragic stories about people who get money and can’t handle it and don’t want to educate themselves to make the best decisions,” Mahoney said.

“I’m a fiduciary. It’s what I do. As a registered investment advisor, the duty owed to the client is much higher. By law, we are held to a high fiduciary responsibility and suitability responsibility. I am not saying stock brokers aren’t responsible, but there are a lot of problems in the entire industry. Get a second opinion; it matters,” he said.

“Look, if you were talking about your physical health you wouldn’t think twice about getting a second opinion. But many people go on blind trust.”

Mahoney has helped people his entire professional life. It’s what he enjoys, from his early career in the insurance industry to his current business as a registered investment advisor. Putting his clients first has molded his success.

He became a certified financial planner in 1992 because, he said, he became aware that many people neglect to plan for their retirement. “I know I can help them,” he said. “I want them to feel confident in me and in what we are doing, what they are doing.”

That is one reason Mahoney lined up Cypress Asset Management as an independent member of The BAM Alliance, a national organization of investors and advisors that has grown from 30 firms and $1.5 billion in investments in 2002, when Mahoney joined it, to 150 firms and $26 billion now. BAM is made up of independent, like-minded advisors who put the needs of the client first and advise them the way they would advise themselves. BAM calls that “eating our own cooking.”

Mahoney said he aligned himself with BAM because he wants his clients to have “a sense of well-being when it comes to managing their wealth.” That, he added, extends to helping clients with other pieces of their finances other than just investments. It includes tax planning, retirement funding, estate planning and even charitable giving.

He said he even has his own succession plan with BAM should something happen to him; again, to give his clients a sense of well-being.

“You know, when it comes to wealth management, investing is the easy part. But all investors need to know more about it. I mean, I’ve met bankers other finance people who don’t keep up with changes in the industry. We want to educate our clients so that they know what we are doing for them is truly for them. I want them to ask me questions. I want them to take ownership of their plan because if they don’t understand the plan, they abandon the plan,” Mahoney said.

The behavior of the investor is the biggest detractor when it comes to long-term investing, he added. “Some people don’t stick to the plan, which is written according to your willingness and ability to take risks. It’s their call, of course; it’s their money. But if I do a good enough job educating the clients, most know the plan and stick to it,” he said.

Mahoney said most people turn to stock brokerages that have well-known names and usually a lot of brokers. That’s fine, he said, but often lost is the personal touch a fiduciary is bound to give a client. “A broker is more sales drive. Some can be certified financial planners, but they aren’t held to the same standards. Their incentive structures are different,” he said.

Brokers usually are sales-driven and offer clients products that may or may not be in their best interest. Mahoney said he doesn’t offer products; rather, he offers education and opinions grounded in the science of investing.

Also, some big-name brokerages offer wealth management planning, but once a plan is in place that relationship is terminated. Mahoney doesn’t operate that way.

“Being a boutique firm, I get to know my clients well. We start with a discovery meeting, which helps us both determine the fit, and we go from there. We all bring baggage to the table. We all learn different values and biases, usually from experience. Most older investors have been zinged before and are much more cautious. There is a lot of anxiety and emotion when it comes to money. When you show them clarity, transparency and objectivity, it gives them peace of mind.

“When people discover you really are putting them first, the relationship blossoms.”

Mahoney has six keys to working with clients:

• Trust – acting as stewards to clients; favoring transparency and simplicity.
• Direction – building a personalized strategy for each client and keeping goals well in sight.
• Discipline – providing the glue to hold clients to their plans.
• Market returns – leveraging academic evidence to maximize returns.
• Costs – we are sensitive to costs and taxes and strive to minimize them.
• Time – we watch the markets so clients can pursue more fulfilling things.

The typical portfolio Mahoney handles is worth $1 million-plus. His clients range from business executives to physicians and attorneys and nearly all of them have been referred to his office. “It’s all about the referrals because those come from people you have helped,” he said.

Mahoney isn’t shy about having clients and potential clients read up on him and the differences between a registered investment advisor and a stock broker. He’ll even provide the reading material, including a book titled “Playing the Winner’s Game” by known financial writer Larry Swedroe, with the forward written by Mahoney himself.

The last paragraph of that forward says much about how Mahoney approaches his work and his clients: “It’s our investments in life, not our life in investments, that most accurately determine our wealth. You don’t have to be a millionaire to play the winner’s game, but you certainly have to have your priorities straight.”

Mahoney has written papers, as well, and has done case studies to illustrate how the science of investing can go with true wealth management to bring success to the client.

By the Numbers: Americans WIth Disabilities Act

OnJuly 26, 1990, PresidentGeorge H.W. Bush signed into law the Americans with Disabilities Act, which prohibits discrimination against people with disabilities in employment, transportation, public accommodations, commercial facilities, telecommunications, and state and local government services.

This Facts for Features provides a demographic snapshot of the U.S. population with a disability and examines various services available to them. The statistics come from various Census Bureau censuses and surveys, covering differing periods of time.

Population Distribution

56.7 million: The number of people inthe United Statesin 2010 with a disability, according to the Survey of Income and Program Participation. People with disabilities represented 19 percent of the civilian noninstitutionalized population. People with a disability have a physical or mental impairment that affects one or more major life activities, such as walking, bathing, dressing, eating, preparing meals, going outside the home or doing housework. A disability can occur at birth or at any point in a person's life.
Source: Americans With Disabilities: 2010

15.7 million: The number of people age 65 and older with at least one disability, according to data collected from the American Community Surveyfrom 2008 to 2012, which makes up 39 percent of the population in this age group. Of this group, two-thirds had difficulty in walking or climbing stairs. The second-most cited disability was difficulty with independent living, such as visiting a doctor's office or shopping.
Source:Older Americans With a Disability: 2008-2012 

19.9%: The percentage of the civilian noninstitutionalized population inWest Virginiain 2014 with a disability — the highest rate of any state in the nation.Utah, at 9.6 percent, had the lowest rate.
Source: 2014 American Community Survey, Table GCT1810

28.1%: The percentage of the civilian noninstitutionalized population inPike County, Ky., in 2014 with a disability — among the highest rate in the nation among counties with populations of 65,000 or more.Loudoun County, Va., at 5.5 percent, had among the lowest rates.
Source: 2014 American Community Survey, Table GCT1810

23.2%: The percentage of the civilian noninstitutionalized population in The Villages (CDP), Fla., in 2014 with a disability — among the highest rates in the nation among places with populations of 65,000 or more.San Ramon, Calif., at 4.3 percent, had among the lowest rates. A place is a city, town, village or borough, either legally incorporated or not.
Source: 2014 American Community Survey, Table GCT1810

Services for Those With Disabilities

2,833: The number of business establishments providing special needs transportation in 2012, up 20.7 percent from 2,347 in 2007. Such businesses may use specially equipped vehicles to provide passenger transportation. These businesses employed 61,605 people in 2012 and generated revenues of$3.5 billion. Employment was up 24.0 percent and revenues increased 27.7 percent since 2007.
Source: 2012 and 2007 Comparative Economic Census Geographic Area Series (NAICS485991)

14,060: The number of business establishments that provided pet care (except veterinary services) in 2012. These businesses generated revenues of$3.4 billion. Among these businesses are those that train assistance dogs.
Source: 2012 and 2007 Comparative Economic Census Geographic Area Series (NAICS812910)

25,964: The number of business establishments providing services for the elderly and people with disabilities in 2012. These businesses employed 901,359 workers and generated$34.1 billionin revenues. In 2007, there were 20,433 such establishments, employing 621,545 people and producing$25.3 billionin revenues. These establishments provide for the welfare of these individuals in such areas as day care, nonmedical home care or homemaker services, social activities, group support and companionship.
Source: 2012 and 2007 Comparative- Economic Census Geographic Area Series (NAICS624120)

7,832: The number of business establishments providing vocational rehabilitation services in 2012; these businesses employed 312,659 people and generated revenues of$12.4 billion. In 2007, there were 7,631 such establishments, employing 303,713 people and producing revenues of$11.5 billion. These businesses provide job counseling, job training and work experience to people with disabilities.
Source: 2012 and 2007 Comparative Economic Census Geographic Area Series (NAICS624310)

2,344: The number of business establishments providing translation and interpretation services in 2012; these businesses employed 24,926 people and generated revenues of$4.2 billion. In 2007, there were 1,975 such establishments, employing 14,546 people and producing revenues of$1.9 billion. Among these businesses are those that provide sign language services.
Source: 2012 and 2007 Comparative Economic Census Geographic Area Series (NAICS541930)

3,597: The number of business establishments providing home health equipment rental in 2012, down 4.4 percent from 3,762 in 2007. Such businesses rent home-type health and invalid equipment, such as wheelchairs, hospital beds, oxygen tanks, etc. These businesses employed 33,935 people in 2012 and generated revenues of$5.4 billion. Employment was up 2.8 percent while revenues decreased 7.8 percent since 2007.
Source: 2012 and 2007 Comparative Economic Census Geographic Area Series (NAICS532291)

Specific Disabilities (Updated)

Note: All estimates in this section come from the American Community Survey 2014 1-year data, measuring the civilian noninstitutionalized population. 

10.8 million: The number of people age 18 and older in 2014 who were deaf or had significant difficulty hearing. Among people age 65 and older, 6.7 million were deaf or had significant difficulty hearing.

6.8 million: The number of people age 18 and older in 2014 who had serious difficulty seeing even when wearing glasses. Among people age 65 and older, 3.0 million had serious difficulty seeing.

20.6 million: The number of people age 18 and older in 2014 who had serious difficulty walking or climbing stairs. Among people age 65 and older, 10.4 million had serious difficulty walking or climbing stairs.

12.8 million: The number of people age 18 and older in 2014 who had serious difficulty concentrating, remembering, or making decisions due to a physical, mental or emotional condition. Among people age 65 and older, 4.1 million had serious difficulty concentrating, remembering or making decisions.

14.1 million: The number of people age 18 and older in 2014 who had difficulty doing errands alone, such as visiting a doctor's office or shopping, due to a physical, mental or emotional condition. Among people age 65 and older, 6.8 million had difficulty doing errands alone.

7.4 million: The number of people age 18 and older in 2014 who had difficulty dressing or bathing. Among people age 65 and older, 3.8 million had difficulty dressing or bathing.

Older People With a Disability

Note: The source for the data in this section isOlder Americans With a Disability: 2008-2012, which contains data from the 2008 to 2012American Community Survey.

25.4%: The percentage who were age 85 and older with a disability among the population age 65 and older, according to the 2008-2012 American Community Survey.

More than One-Third
The proportion of people age 85 and older with a disability who lived alone, compared with one-fourth of those age 65 to 74, according to the 2008-2012 American Community Survey.

54.4%: The percentage of the older population who had not graduated from high school and had a disability, twice the rate of those with a bachelor's degree or higher (26.0 percent), according to the 2008-2012 American Community Survey.

12.6%: The percentage of older Americans living in a household with a disability living in poverty, compared with 7.2 percent of older household population without a disability, according to the 2008-2012 American Community Survey.

Earnings

$21,232: Median earnings in the past 12 months for people with a disability. This is 68 percent of the median earnings, $31,324, for those without a disability. (Both figures pertain to the civilian, noninstitutionalized population 16 years and older, with earnings in the past 12 months.)
Source: 2014 American Community Survey, Table B18140

Mobility

Note: The source for the data in this section is Desire to Move and Residential Mobility: 2010-2011, a report which uses data from theSurvey of Income and Program Participation.

12.5%: The percentage of householders with a disability who desired to move to another residence, higher than the corresponding figure of 8.2 percent for those without a disability. Those with mental disabilities were the most likely to desire to move (20.6 percent).

17.3%: The percentage of householders with a disability who desired to move to another residence and actually did so over a one-year period.

9.3%: The percentage of all householders with a disability who moved to another residence over a one-year period.

More auto recalls; more recall notices being ignored

Record numbers of automobile safety recalls, parts shortages, and inaction on the part of the owners of recalled vehicles have created a serious challenge for auto manufacturers and dealers. 

According to NHTSA data analyzed by J.D. Power through its SafetyIQ, there are more than 45 million vehicles that were the subject of safety recalls issued between 2013 and 2015 that are still un-remedied.

Over the past 20 years, more than 437 million vehicles have been affected by safety recall decisions in the United States. In 2015 alone more than 51 million vehicles were the subject of safety recalls, more than in any previous year.

By analyzing National Highway Traffic Safety Administration (NHTSA) and proprietary J.D. Power benchmarking data using its SafetyIQ platform, J.D. Power has identified that primary factors impacting completion rates for those recalls are vehicle age, vehicle type, overall population of recall, and type of recall.

"The steady surge in recalls, combined with NHTSA's stated goal of 100 percent recall completion rates, have made the number of un-remedied recalls still on the road a critical statistic for automakers and dealers," said Renee Stephens, vice president of U.S. automotive at J.D. Power. "By understanding the behavioral trends of vehicle owners, as well as recall completion rates among different vehicle and recall types, as an industry we can better tailor communications to improve those completion rates."

Following are the key findings in the J.D. Power SafetyIQ analysis (all data is based on recall decisions made from 2013-2015, as reported through six quarters of completion information):

• Un-Remedied Vehicles More Common in Older Models: The total recall completion rate for vehicles with model years between 2013 and 2017 is 73 percent. This compared with a completion rate of just 44 percent for vehicles manufactured between 2003 and 2007.
• Vehicle Type Plays a Big Role in Recall Completion: Among vehicle segments, large/work vans have the highest overall recall completion rate at 86 percent, followed closely by compact premium SUVs at 85 percent. This contrasts with the mid-premium sports car segment, which has a completion rate of just 31 percent, and with large SUVs, which have a completion rate of 33 percent.
• Larger Populations Present Bigger Completion Challenges: The completion rate for individual recalls affecting more than 1 million vehicles is 49 percent. This compares with a 67 percent completion rate for individual recalls affecting less than 10,000 vehicles. It is sometimes difficult to obtain parts to launch large campaigns. In addition, customers can more easily receive a targeted communication method, such as a phone call, with a smaller population of vehicles.
• Powertrain and Electrical System Recalls Most Likely to Get Fixed: Of the major safety components, the groups with the highest recall completion rates are powertrain (71 percent), electrical (62 percent) and hydraulic brakes (66 percent). Airbags and suspension issues have the lowest completion rates at 47 percent and 48 percent, respectively.

"By better understanding the specific factors driving recall compliance among vehicle owners, manufacturers and dealers can better tailor their communications and manage the recall process much more efficiently," said Stephens. "This is a critical level of intelligence for the industry, which we believe will ultimately help reduce the number of un-remedied vehicles still on the road."

For more information on J.D. Power SafetyIQ, please visit www.jdpower.com/safetyiq

 Record numbers of automobile safety recalls, parts shortages, and inaction on the part of the owners of recalled vehicles have created a serious challenge for auto manufacturers and dealers. According to NHTSA data analyzed by J.D. Power through its SafetyIQ, there are over 45 million vehicles that were the subject of safety recalls issued between 2013 and 2015 that are still un-remedied.

Over the past 20 years, more than 437 million vehicles have been affected by safety recall decisions in the U.S. In 2015 alone over 51 million vehicles were the subject of safety recalls, more than in any previous year. By analyzing National Highway Traffic Safety Administration (NHTSA) and proprietary J.D. Power benchmarking data using its SafetyIQ platform, J.D. Power has identified that primary factors impacting completion rates for those recalls are vehicle age, vehicle type, overall population of recall, and type of recall.

"The steady surge in recalls, combined with NHTSA's stated goal of 100% recall completion rates have made the number of un-remedied recalls still on the road a critical statistic for automakers and dealers," said Renee Stephens, vice president of U.S. automotive at J.D. Power. "By understanding the behavioral trends of vehicle owners, as well as recall completion rates among different vehicle and recall types, as an industry we can better tailor communications to improve those completion rates."

Following are the key findings in the J.D. Power SafetyIQ analysis (all data is based on recall decisions made from 2013-2015, as reported through 6 quarters of completion information):

• Un-Remedied Vehicles More Common in Older Models: The total recall completion rate for vehicles with model years between 2013 and 2017 is 73%. This compared with a completion rate of just 44% for vehicles manufactured between 2003 and 2007.
• Vehicle Type Plays a Big Role in Recall Completion: Among vehicle segments, large/work vans have the highest overall recall completion rate at 86%, followed closely by compact premium SUV's at 85%. This contrasts with the mid-premium sports car segment, which has a completion rate of just 31%, and with large SUV's which have a completion rate of 33%.
• Larger Populations Present Bigger Completion Challenges: The completion rate for individual recalls affecting more than 1 million vehicles is 49%. This compares with a 67% completion rate for individual recalls affecting less than 10,000 vehicles. It is sometimes difficult to obtain parts to launch large campaigns. In addition, customers can more easily receive a targeted communication method, such as a phone call, with a smaller population of vehicles.
• Powertrain and Electrical System Recalls Most Likely to Get Fixed: Of the major safety components,the groups with the highest recall completion rates are powertrain (71%), electrical (62%) and hydraulic brakes (66%). Airbags and suspension issues have the lowest completion rates at 47% and 48% respectively.

"By better understanding the specific factors driving recall compliance among vehicle owners, manufacturers and dealers can better tailor their communications and manage the recall process much more efficiently," said Stephens.  "This is a critical level of intelligence for the industry, which we believe will ultimately help reduce the number of un-remedied vehicles still on the road."

For more information on J.D. Power SafetyIQ, please visit www.jdpower.com/safetyiq

Consumers still frugal after last recession

Tightfisted. Frugal. Fiscally cautious. Call it what you want, but it's clear that the lingering effects of yesteryear's Great Recession still have U.S. consumers less likely to amass unnecessary debt, more likely to save, and more reluctant to spend compared to the past.

The result is the prospect of a more financially sound—but also less financially optimistic—consumer, according to market research firm Packaged Facts in the reportConsumer Banking and Borrowing: U.S. Market Trends.

The recession significantly reshaped how consumers approach debt—and it still does. Packaged Facts data indicate that 72 percent of consumers say that because of the recession, they are more conservative about taking on debt, a tendency that is relatively uniform across demographic segments surveyed in the report. This guiding attitude has likely helped shape consumers' generally more conservative use of revolving credit and mortgage debt, even while conservative loan standards crimp demand.'

"What we are seeing is that most consumers view their financial situation with uncertainty, a perception that likely affects how they plan for and execute financial decisions. It suggests a more risk-averse consumer who is less likely to take on high debt loads or make rash major financial decisions, one who remains more frugal than prior to the Great Recession," saidDavid Sprinkle, research director for Packaged Facts.

Packaged Facts also found that only 1 in 5 adults strongly agree that they are very good at managing money, and only 1 in 10 (10%) strongly agree that they are financially secure. Both beliefs indicate that there remains an important role for financial institutions capable of successfully marketing their ability to help consumers manage money and build financial security. In the report, Packaged Facts suggests that this type of marketing can start with everyday account and payment products, which has the doubled effect of reaching the widest swath of consumers and providing institutions with upselling candidates in the bargain.

Prior the recession, consumer debt loads had reached alarming levels and consumer savings rates were near historical lows—if not a recipe for disaster, then major ingredients for one, notes Sprinkle. As the recession set in, so did consumer pessimism and a far more difficult credit environment—and the savings rate rebounded.

Most economists have greeted the increase in the personal savings rate positively, with the view that anemic savings rates racked up prior to recession (during the consumer debt party) were unsustainable over time and suggested that consumers were spending beyond their means. We are now seeing an increase in the savings rate to historical levels, which long-term will help create more financially stable households throughout the country.

However, the immediate effect is that each dollar saved is not a dollar spent. In dollar terms, personal saving stood at$686 billionin 2015, putting the personal savings rate at 5.1 percent (per the U.S. Bureau of Economic Analysis). Therefore, every 1 percent change in the savings rate translates to a roughly$120 billiondeducted from consumer spending. This helps explain why consumer spending has not been the major factor driving post-recovery growth that it has been in decades past, and why consumer borrowing trends (student loans excepted) have remained relatively moderate.

Without more to cheer the consumer going forward (stronger wage growth and additional conversion of part-time to full-time employment would do), on top of lingering debt lessons learned from the recession, the consumer will likely continue to steer the same course. 

Consumer Banking and Borrowing: U.S. Market Trendsis designed to help market participants navigate and succeed in the financial services industry. The report provides trend-forward analysis of the consumer banking and borrowing market, focusing on commercial banks, credit unions, and savings institutions, with supplemental analysis of finance companies, as well as emerging banking alternatives..