Protecting Yourself from the Equifax Hack

In the past few weeks I’ve fielded numerous questions from clients about the Equifax hack asking what to do about it. The best advice I can give you is to regularly monitor your bank and credit card accounts or pay for a service to do this for you. Best is to do it yourself! Your awareness of your own account activity and prompt action if/when anything is amiss is the best protection. Finding an old error or fraudulent transaction can be difficult to prove and fix. Quickly bringing an issue to the attention of your bank or credit card company will usually result in a speedy resolution in your favor.


What happened? From about mid-May to July 30, hackers ransacked vast troves of information at Equifax, one of the three big credit reporting companies. The breach, as you probably have read, potentially exposed about 143 million Americans’ personal information, including names, addresses, dates of birth and Social Security numbers. The hack stunned many people who became increasingly aware of their own vulnerability to the largely invisible financial system that we have come to depend on.


Since Equifax disclosed the breach, the company has lost over $4billion in market value. Subsequent investigations have begun to expose the company’s negligence. The bug exploited by hackers was “known and could have been fixed and patched, says Ted Schlein, a general partner at venture-capital firm Kleiner, Perkins. Meanwhile, three Equifax officials, including the company’s finance chief, sold a total of about $1.8 million in stock August 1 and 2, according to securities filings, selling their stock before the public announcement and drop in price. Equifax has said they didn’t know the about the breach at the time of the stock sales. This is unlikely, as the well-known cyber-investigations firm Mandiant was brought in officially on August 2.


Regardless of the company’s negligence, people want to know how to protect themselves from this and other potential cyber-vulnerabilities.


Awareness and monitoring of your bank and credit card accounts is key.

  1. Check your Credit Report – Here is a link to a free credit report. You can run this report annually and review (for free!) it to see if there is any activity you do not recognize. This could include opening a new account, applying for any type of credit, late payments or any other activity that does not look familiar. There are other services such as, but they do charge a monthly fee.
  2. Report any Suspicious Activity – If you see anything suspicious, contact the credit card or bank’s fraud department immediately. You are not responsible for charges made on a fraudulent card, or fraudulent activity on your card, but you must report the issue in a timely manner.
  3. Recovering – If you have been the victim of any type of fraudulent activity or identity theft, you can follow the steps outlined by the Federal Trade Commission in this useful Guide.
  4. Tax Season – It’s still too early to know if and how the data are exposed in the breach could be misused, but one concern is that identity thieves can use stolen Social Security numbers to file fraudulent tax returns and receive refunds. When people file their taxes, the IRS tells them their return has already been filed. One way to prevent this from happening is to file early. For more information, the IRS has published a Guide on tax fraud.
  5. Freezing Your Credit – If you want to be more proactive, you can Freeze Your Credit temporarily and Set Up a Fraud Alert. When you freeze your credit, you set up a PIN on your credit accounts. Any use of your credit will require providing the PIN – information that the hackers will not have access to. A fraud alert can also be set so that credit card companies are required to verify your identity before opening any account. To set up the Freeze and the Alert, contact each of the credit bureaus using these phone numbers:

Equifax – 1-800-349-9960

Experian – 1-888-397-3742

TransUnion – 1-888-909-8872

  1. Equifax’s Identity Protection Program – I don’t recommend using Equifax’s Trusted ID program since this is the database that just got hacked. Providing them with additional information just isn’t a good idea. Furthermore, enrolling in this program may prevent you from participating in a class-action lawsuit.
  2. Monitor Your Accounts – While it is a convenience to have automated bill payment and other bank account management services, you must look at your bank and credit card accounts on a regular basis, review your transactions, and immediately report anything that is not familiar to you.
  3. Help Others – These processes are fairly simple and many require just a few short phone calls or online activities. But many people are just not good at doing these things. You may want to help some of your friends or family members to set up a couple of routine monitoring activities.

If you would like to know more about credit card fraud, you can download this Consumer Action Question and Answer Guide. [Create link to website, post document under Resources]

These days, it is important to be vigilant about your financial accounts. Taking some routine actions a few minutes a month is the best way to protect your ongoing financial security.


Insurance Resources by Guest Blogger, Tony Steuer

Tony Steuer, our guest blogger shares some great insurance articles and updates for your planning needs. Tony is an Insurance Literacy Advocate, Founder of The Insurance Literacy Institute, Creator of The Insurance Bill of Rights and Author of The Questions and Answers on Insurance Book Series. His website is

Resources for Long-Term Care Insurance

Thanks to Lisa Fu for the opportunity to be a resource for her article “3 Things to Know About Long Term Care Insurance” on Lisa takes a look at the basics of long term care insurance and the age at which a person should consider purchasing a long term care insurance policy. Long Term Care insurance is an important part of a financial plan as it is estimated that 70% of Americans will have a health issue that requires some type of Long Term Care services – home care, facility care, adult day care and so on. These are services that are not covered by Medicare. The average daily cost can be hundreds of dollars depending on your location and the type of service. To find out the cost in your area, visit the Genworth cost of care survey.

The complete article “3 Things to Know About Long-Term Care Insurance” can be read by clicking on the article name. A few highlights below:

Once in retirement, the average American is expected to spend as much as $250,000 on medical expenses.

Like any insurance, the trade-off with long-term care insurance is the leverage provided. If you can’t afford the premium and it doesn’t provide good leverage, investing in long-term care insurance might be unwise.

Steuer advises those who expect a need to purchase a long-term care policy after the age of 40. But purchasing long-term care insurance in your 40s also could save you hundreds of dollars in premium costs, compared to doing so in your 50s.
Depending on the health issue, you may not be able to meet the requirements to file a claim. To use the benefit, you have to be unable to perform two of six activities, such as bathing or feeding yourself. Your health may not be poor enough to use it as a result. “It is likely that a claim won’t be made until someone reaches their 70s.

You may not be able to afford it right now. If you have student loans and other expenses that have placed you in debt, paying for a long-term care insurance premium simply may not be possible. Steuer advises those who expect a need to purchase a long-term care policy after the age of 40 and if you have assets between $1 million and $5 million. “Someone who either has less than $1 million or more than $5 million should not consider it,”he says.

Long-term care insurance as an industry is going through some transitions. Prior to purchasing a policy, you should read my take on this: Can Long-Term Care Insurance Survive? The answer is a definitive yes and this article will provide you the knowledge to make a wise choice on this important coverage especially if “You Are in Denial About Long-Term Care Insurance“. And insurance regulators have formed a Long-Term Care Insurer Solvency Team. Insurance companies must remain solvent and profitable to be able to pay claims, unfortunately this was not the case for Penn Treaty policyholders (who can go here to get answers to their liquidation questions). It’s important to note that life insurance, health insurance, disability insurance and long term care insurance policy holders do have protection through the National Organization of Life and Health Guaranty Associations.

Key Person Insurance Coverage

Key Person Life and Key Person Disability Insurance is used to provide cash inflow when a key person is disabled or passes away. Thanks to Kristin Colella of RSL Media for the opportunity to be a resource for her article on on “Does Your Business Need Key Person Coverage”. Kristin takes a look at the impact to a business of a key person becoming disabled or dying and how insurance can be used to protect against that loss financially. When a key person is suddenly removed from company operations for an unspecified period of time or permanently, it will have an impact on the company financially.

The complete article “Does Your Business Need Key Person Coverage” can be read by clicking on the article name. Article excerpts including my comments follow below:

Keep in mind that not just any employee can be considered a key person. “The insurance company is going to want to know how that person is essential to the business, and will ask for financials and a job description to prove it,” says chartered life underwriter Tony Steuer, founder of the website The Insurance Literacy Institute. You will also need the key employee’s consent to take out the coverage.

In some cases, a business owner or partner can be insured as a key person. “Oftentimes, owners are the key people because a lot of the business is dependent on them or their connections,” Steuer says.


Sharing Economy Concerns:

Thanks to Ingrid Case for the opportunity to be a resource for her article on on “3 Tips for Seniors Looking to Make Extra Income”. Ingrid takes a look at how Seniors can earn money in retirement through the sharing economy (think: driving for Uber or Lyft, hosting guests through Airbnb or offering services through TaskRabbit”. As Ingrid points out, these are great ways to make extra money while setting your own hours, there are other considerations some of which I covered in “Thoughts on the sharing economy“. Article excepts including my comments follow below:

You may need to augment your insurance coverage if you are, say, using your car in a ridesharing service. “If you’re a senior, you do not have time to replace the nest egg that an uninsured accident could destroy,” says Tony Steuer, an insurance industry consultant in Alameda, Calif.
There are other insurance considerations for example, if you are driving for Uber or Lyft, your personal auto insurance will not provide any coverage during the time you are in your car waiting for a passenger. Coverage through Uber or Lyft starts when you have a passenger. If you are renting out your home, your homeowner’s coverage may not provide coverage. It’s important to read and understand the terms of your policy and to seek out supplemental coverage as needed.

Othello Powell, GEICO director of commercial lines points out that “Rideshare drivers take ‘huge risk’ with personal auto coverage“, most personal auto policies were never designed to protect you or your vehicle for commercial purposes. A typical personal auto policy contains coverage gaps and limitations for ridesharing and package delivery. If an accident does happen with drivers’ personal auto policies, they have to provide their insurance carriers with specific details, including the phase of the ride they were in. For example: Was the app on or off? Was the vehicle carrying any passengers or packages? Depending on the answers, drivers may not have the coverage they thought they had.

If you are working in the sharing economy, be sure you’ve read your homeowner’s insurance, auto insurance or related policy to determine what’s covered and what’s not covered. If your “work” is not covered, then you should strongly consider obtaining insurance to fill that gap.

Consumer Insurance Rights:

There continues to be more resources and protections for insurance consumers, depending on the state you live in and the type of insurance coverage. The Michigan Department of Insurance recently posted: Know Your Rights When Working With Insurance Companies. You can help increase awareness of the need for insurance and advocate for these rights by participating in The Insurance Bill of Rights Movement and signing The Insurance Bill of Rights petition (please share the petition). This is your opportunity to make a positive change as a consumer and as a member of the insurance industry.

The Department of Labor fiduciary rule has been delayed for an additional 60 days (link includes a countdown clock). The National of Association of Insurance Commissioners is moving forward to address this uncertainty by reviewing their annuity suitability guidelines. Annuities have been a prime area of sales abuses ranging from having high fees to contracts with surrender charges that exceed the contract holders’ life expectancy to those that can not be surrendered. If the annuity companies and those who sell annuity products were to concentrate on the positives of annuities – providing a guaranteed stream of income while minimizing fees, it would benefit consumers and more Americans would use this as part of their retirement distribution plan.

Health Care/Health Insurance Update:

Some of you may be fatigued by the ongoing health care/health insurance discussion, however, this appears to be the issue that just won’t die, despite Paul Ryan declaring that “Obamacare is the law of the land“.

Trump continues to poke at it, which creates uncertainty for insurance companies (Obamacare’s insurer’s struggle for stability amid Trump’s threats), in turn creating uncertainty for insurance consumers.

Insurance regulators also are concerned. Trump has stated that he is not sure if his administration would fund what are known as cost-sharing reduction payments, which reduce deductibles and co-payments for lower-income people.

Trump’s administration did announce some minor fixes last Thursday (a good start, just nowhere close to enough according to health insurers). However, despite uncertainty, insurers gear up for Obamacare 2018.

South Carolina is suing the federal government over the collapse of their health insurance exchange.

The IRS stated that the Earned Income Tax Credit has helped in that subsidies paid to an insurance company rather than directly to the taxpayer cut down on tax fraud.

For a thorough look at the issues, take the time to read “A Health Care Roadmap” and it includes an overview of the issues and includes areas that can be improved and ways to increase cost efficiency, make the plan financially do-able – please take the time to read it and share it. Yes, this is fixable, Alaska just did it.

Visit Tony’s website for more relevant articles on insurance:

Review of 2016 US and Global Markets

In 2016, the US market reached new highs and stocks in a majority of developed and emerging market countries delivered positive returns. The year began with anxiety over China’s stock market and economy, falling oil prices, a potential US recession, and negative interest rates in Japan. US equity markets were in steep decline and had the worst start of any year on record. The markets began improving in mid-February through midyear. Investors also faced uncertainty from the Brexit vote in June and the US election in November.

Many investors may not have expected global stocks and bonds to deliver positive returns in such a tumultuous year. This turnaround story highlights the importance of diversifying across asset groups and regional markets, as well as staying disciplined despite uncertainty. Although not all asset classes had positive returns, a globally diversified, cap-weighted portfolio logged attractive returns in 2016.

Consider that global markets are incredible information-processing machines that incorporate news and expectations into prices. Investors are well served by staying the course with an asset allocation that reflects their needs, risk preferences, and objectives. This can help investors weather uncertainty in all of its forms. The following quote by Eugene Fama describes this view.

“If three or five years of returns are going to change your mind [on an investment], you shouldn’t have been there to begin with.” ― Eugene Fama

The chart above highlights some of the year’s prominent headlines in context of broad US market performance, measured by the Russell 3000 Index. These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.

The chart below offers a snapshot of non-US stock market performance (developed and emerging markets), measured by the MSCI All Country World ex USA Index (in USD, net dividends). The headlines should not be viewed as determinants of the market’s direction but as examples of events that may have tested investor discipline during the year.

World Economy

2016 Market Perspective

Equity Market Highlights

After a rocky start, the US stock market had a strong year. The S&P 500 Index logged an 11.96% total return and small cap stocks, as measured by the Russell 2000 Index, returned 21.31%.

Overall, performance among non-US markets was also positive: The MSCI World ex USA Index, which reflects non-US developed markets, logged a 2.75% return and the MSCI Emerging Markets Index an 11.19% return.1

Global Diversification Impact
Overall, US equities outperformed equities in the developed ex US markets and emerging markets. As a result, a market cap-weighted global equity portfolio would have underperformed a US equity portfolio. Investors generally benefited from emphasizing value stocks around the world, as well as US small cap stocks.

Returns at the country level were dispersed. In developed markets, returns ranged from –24.87% in Israel to +24.56% in Canada. In emerging markets, returns ranged from –12.13% in Greece to +66.24% in Brazil.

Strong performance in the US placed it as the 17th best performing country out of the 46 countries in the MSCI All Country World Index (ACWI), which represents both developed and emerging markets. Although the S&P 500 Index had a positive return in 2016, the year was not in the top half of the index’s historical annual returns.

Brazil offers a noteworthy example of market prices at work and the difficulty of trying to forecast and time markets. Despite a severe recession, Brazil was the top performing emerging market country in 2016. Brazil’s GDP was projected to shrink 3.4% in 2016, according to the OECD in November, yet its equity market logged strong performance. The lesson is that prices incorporate a rich set of information, including expectations about the future. One must beat the aggregate wisdom of market participants in order to identify mispricing. The evidence suggests that this is a very difficult task to do consistently.

In 2016, equity market volatility, as measured by the CBOE Volatility Index (VIX)2, was below average. There were, however, several spikes—as you might expect—as new information was incorporated into prices. The high was reached in early February, and spikes occurred following the Brexit vote in June and again in November preceding the US election.

Premium Performance
In 2016, the small cap and value premiums3 were mostly positive across US, developed ex US, and emerging markets, while the profitability premium varied by market segment4. Though 2016 marked a generally positive year, investors may still be wary following several years of underperformance for value and small cap stocks. Taking a longer-term perspective, the premiums remain persistent over decades and around the globe despite recent years’ headwinds. The small cap and value premiums are well-grounded in financial economics and verified using market data spanning decades, but pursuing those premiums requires a consistent, long-term approach.

US Market
In the US market, small cap stocks outperformed large cap stocks and value stocks outperformed growth stocks. High profitability stocks outperformed low profitability stocks in most market segments5. Over 2016, the US small cap premium marked the seventh highest annual return difference since 1979 when measured by the Russell 2000 Index minus Russell 1000 Index. Most of the performance for small caps came in the last two months of the year, after the US election on November 8. This illustrates the difficulty of trying to time premiums and the benefit of maintaining consistent exposure. Through October, US small cap stocks had outpaced large company stocks for the year by only 0.35%. By year-end, the small cap premium had increased to 9.25%, as shown below.

US value stocks outperformed growth stocks by 11.01% following an extended period of underperformance. Over the five-year rolling period, the value premium, as measured by the Russell 3000 Value Index minus Russell 3000 Growth Index, moved from negative in 2015 to positive in 2016.

Developed ex US Markets
In developed ex US markets, small cap stocks outperformed large cap stocks and value stocks outperformed growth stocks. Over both the five- and 10-year rolling periods, the small cap premium, measured as the MSCI World ex USA Small Cap Index minus the MSCI World ex USA Index, continued to be positive. The five- and 10-year rolling periods for the small cap premium have been positive for the better part of the past decade.

Value stocks outperformed growth stocks by 9.26%, as measured by the MSCI World ex USA Value Index minus the MSCI World ex USA Growth Index. Similarly to US small caps, most of the outperformance occurred in the fourth quarter, reinforcing the importance of consistency in pursuing premiums. Despite a positive year, the value premium remains negative over the five- and 10-year rolling periods.

Emerging Markets
In emerging markets, small cap stocks underperformed large cap stocks and value stocks outperformed growth stocks. Despite the underperformance of small cap stocks, small cap value stocks fared better than small cap growth stocks and performed similarly to large cap value stocks. Investors who emphasized small cap value stocks over small cap growth stocks benefited.

Fixed Income
Both US and non-US fixed income markets posted positive returns. The Bloomberg Barclays US Aggregate Bond Index gained 2.65%. The Bloomberg Barclays Global Aggregate Bond Index (hedged to USD) gained 3.95%.

Yield curves6 were generally upwardly sloped in many developed markets, indicating positive expected term premiums. Indeed, realized term premiums were positive in the US and globally as longer-term maturities outperformed their shorter-term counterparts.

Corporate bonds were the best performing sector, returning 6.11% in the US and 6.22% globally, as reflected in the Bloomberg Barclays Global Aggregate Bond Index (hedged to USD). Credit premiums were also positive in the US and globally as lower quality investment grade corporates outperformed their higher quality investment grade counterparts.

While interest rates increased in the US, they generally decreased globally. Major markets such as Japan, Germany, and the United Kingdom all experienced decreases in interest rates. In fact, yields on Japanese and German government bonds with maturities as long as eight years finished the year in negative territory.

In the US, interest rates increased the most on the short end of the yield curve and were relatively unchanged on the long end. The yield on the 3-month US Treasury bill increased 0.35% to end the year at 0.51%. The yield on the 2-year US Treasury note increased 0.14% to 1.20%. The yield on the 10-year US Treasury note closed at a record low of 1.37% in July yet increased 0.18% for the year to end at 2.45%. The yield on the 30-year US Treasury bond increased 0.05% to end the year at 3.06%.

The British pound, euro, and Australian dollar declined relative to the US dollar, while the Canadian dollar and Japanese yen appreciated relative to the US dollar. The impact of regional currency differences on returns in the developed equity markets was minor in most cases. US investors in both developed and emerging markets generally benefited from exposure to certain currencies.

“There’s no information in past returns of three to five years. That’s just noise. It really takes very long periods of time, and it takes a lot of stick-to-it-iveness. You have to really decide what your strategy is based on — long periods of returns—and then stick to it.” ― Eugene Fama

1. All non-US returns are in USD, net dividends.
2. The VIX is a measure of implied volatility using S&P 500 option prices. Source: Bloomberg.
3. The small cap premium is the return difference between small capitalization stocks and large capitalization stocks. The value premium is the return difference between stocks with low relative prices (value) and stocks with high relative prices (growth).
4. Profitability is measured as a company’s operating income before depreciation and amortization minus interest expense scaled by book equity. The profitability premium is the return difference between stocks of companies with high profitability over those with low profitability.
5. Profitability performance is measured as the top half of stocks based on profitability minus the bottom half in the Russell 3000 Index.
6. A yield curve is a graph that plots the interest rates at a specific point in time of bonds with similar credit quality but different maturity dates.

Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Dow Jones data provided by Dow Jones Indices. MSCI data © MSCI 2017, all rights reserved. S&P data provided by Standard & Poor’s Index Services Group. The BofA Merrill Lynch Indices are used with permission; © 2017 Merrill Lynch, Pierce, Fenner & Smith Inc.; all rights reserved. Bloomberg Barclays data provided by Bloomberg. Indices are not available for direct investment; their performance does not reflect the expenses associated with the management of an actual portfolio.

Past performance is no guarantee of future results. This information is provided for educational purposes only and should not be considered investment advice or a solicitation to buy or sell securities.

Investing risks include loss of principal and fluctuating value. Small cap securities are subject to greater volatility than those in other asset categories. International investing involves special risks such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks. Sector-specific investments can also increase these risks.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, liquidity, prepayments, and other factors. REIT risks include changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and creditworthiness of the issuer.

Eugene Fama is a member of the Board of Directors for and provides consulting services to Dimensional Fund Advisors LP.

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

SFAA Conference Overview of Financial Regulations Presentation

On November 9, 2016, Ann Terranova, CFP ®, owner of Union Financial Partners presented An Overview of Financial Advice Regulations at the Sports Financial Advisors Association Annual Conference in Scottsdale, Arizona.

Ann Terranova told her audience that the financial services industry is a conglomeration of confusing companies and advisors often with hidden costs and conflicting profit motives that leads to general public confusion. It is very difficult for people in general and Professional Athletes, specifically to choose a financial advisor who will work in their best interest.

The reason for this is that despite a foundation of regulations that were established after the market collapse and Great Depression in the ‘30’s many Advisors still walk a fine line working on a Commission basis with investments to recommend and varying levels of compensation that result from making those recommendations. Commissions compensation naturally pits the advisors’ interests against those of their clients. A commission broker/advisor cannot work in a fiduciary capacity. A fee-only Registered Investment Advisor (RIA) or a bank Trust Officer both work in a clear, fiduciary capacity and people hiring an Investment Advisor will do well to understand the true difference between an Advisor and a Broker.

With the economic catastrophe of the Great Depression came the advent of Financial Regulations which are still relevant today.

  • Glass-Steagall Act of 1933 – separated commercial and investment banking
  • Securities Exchange Act of 1933 – established the SEC
  • Maloney Act of 1938 – made way for the establishment of the NASD/FINRA
  • Investment Advisors Act of 1940 – governs fee-only Investment Advisors
  • FDIC Insurance 1933 – to protect bank deposits

With the economic catastrophe of the Great Recession of 2008-2009 brought about by the real estate and derivatives market bubble, we see the advent of a new wave of Financial Regulations including Increased authority for FINRA as Super Regulator, Basel III Banking Accords, Bank Too Big To Fail Stress Testing, The Financial Stability Board, Sarbanes Oxley, and the Department of Labor (DOL) Fiduciary Rule.

Throughout history we see the political will for regulation and reform coming from periods of catastrophe and crisis, only to be relaxed or reversed in periods of non-crisis.

The relationship between the customer and the advisor at a broker-dealer firm depends on the role the advisor is playing at the time. The advisor may be wearing several different hats and is registered in several different capacities – as a Registered Investment Advisor, or RIA they are regulated by the Investment Advisors Act of 1940 when they manage an investment account on a fee basis. In this role, regardless of the other business they do or other business that their employer conducts, the advisor is held to a fiduciary standard.

A “Fiduciary” has the power and duty to act for another, under circumstances that require the utmost good faith, trust and honesty. Generally considered to be the highest standards of conduct under the law, fiduciary duties require one to act and serve solely on behalf of another party, in that other party’s best interest. Think about it as the person you name as Executor under your will; that is a fiduciary role. That person is charged with carrying out your wishes as if you were able to carry them out for yourself when you can’t because you’re dead. For a fiduciary advisor with an array of investment choices to recommend and varying levels of compensation that result from making those recommendations it can often mean walking a fine line.

When an advisor is acting as a broker, selling investment products and earning a commission, the advisor is acting as agent. In this capacity the advisor is regulated under the NASD (now FINRA) and is held to the ethical standards commonly referred to as Suitability, Duty to Disclose and Know thy Customer.

A Registered Investment Advisory Firm is regulated directly under the SEC and governed by the Investment Advisors Act of 1940.

An RIA operates on a fee basis and doesn’t sell any investment products for commission. An RIA firm can be a company that only provides investment advice but an RIA can also operate as a broker with what is known as dual registration.

The relationship of the customer to an RIA Advisor is clearly a fiduciary relationship.

According to the Department of Labor, conflicts of interest in investment advice cause Americans to lose approximately $17 billion per year.

The rule was enacted to ensure that advisors follow a fiduciary standard – that is to provide advice that is in the best interest of the client rather than for the benefit of the advisor and his or her own compensation. The primary focus of the new rule is conflicts of interest that pit advisors’ interests against those of investors.

A fiduciary must provide impartial advice that is in their clients’ best interest and cannot accept any compensation creating conflicts of interest such as a commission. To ensure that retirement investors are given advice that is in their best interest while also allowing advisors to continue to receive “conflicted” types of compensation including commissions the DOL carved out a Best Interest Contract Exemption. As long as financial institutions and their advisors meet the stringent requirements of the BIC Exemption, they can continue to earn commissions.

Ann Terranova founded Union Financial Partners almost 20 years ago and has been helping people achieve their financial objectives sometimes through multiple generations of a family. She is a thought leader in the industry and has developed a specialty working with Professional Athletes and Celebrities. She published a report about the NFL Players Retirement Plan which can be downloaded.

Download the Report

She has also published a report about Disability Planning for Athletes Expecting to Receive Concussion Class Action Settlement Payments.

Download the Concussion Report

She develops and implements long-range financial models for athletes, focusing on lifetime financial strategies and second career planning.

In dealing with financial advisors, it is important for anyone to know who you are dealing with and where they stand in the patchwork of business practices and financial regulations. Anyone looking to hire an Investment Advisor will do well to understand the true difference between an Advisor and a Broker. A fee-only Registered Investment Advisor (RIA) or a bank Trust Officer both work in a clear, fiduciary capacity and are duty-bound to put their clients’ interests first.


How Receiving Class Action Settlement Money Can Hurt You


Receiving Class Action Settlement Money Can Threaten Your Needs-Based Benefits

If you are receiving any type of needs-based government assistance including SSI, Medi-Caid (California Medi-Cal), Welfare, Food Stamps, Section 8 Housing, In-Home Support Services, Utility Payment Assistance and subsidized health insurance (Obamacare), your benefits could be reduced or eliminated when you receive money from the NFL Concussion Settlement.
It is difficult to qualify for needs-based benefits. Now that you’ve qualified or can qualify, you don’t want your benefits reduced or eliminated when you receive payments from the NFL Concussion Settlement. You want to continue your needs-based programs and have your settlement money, too. How to do that without any offset requires putting some planning techniques into place.

Without planning, once you receive Settlement money, you will have to report those funds to our needs-based programs. At that time, you will likely no longer “need” and will no longer qualify for government assistance.

For example, Medi-Caid (Medi-Cal) currently only allows a single person to have only exempt assets plus $2,000 and a couple to have exempt assets plus $119,220. Exempt assets include the home, personal belongings, one car, IRA and other qualified retirement accounts. SSI claimants who exceed the $2,000 asset limit ($3,000 if married) are ineligible for benefits. In fact, claimants who are over the asset limit will not even have their disability claim fully evaluated –they will get a “technical denial” of benefits. At best, your Settlement money will cause your benefits to be reduced. At worst, your benefits could be cut off entirely –until you use up your Settlement money and can then begin the laborious process of re-qualifying for needs-based programs.

Numerous planning techniques can help you avoid the loss of your needs-based benefits when you receive the NFL Concussion Settlement.

NFL Concussion Settlement Report

Can Volatility Predict Returns?

When investing in stocks, understanding the volatility of their returns can be an important ingredient to help investors maintain a disciplined approach. People invest their capital hoping to earn a rate of return above that of just holding cash, and there is ample evidence that capital markets have rewarded disciplined investors. For example, the exhibit below illustrates what investing $1 in 1926 into various asset classes would have translated to through the end of 2015. Nevertheless, returns can be negative for days, months, and even years. After such episodes, investors are frequently exposed to stories exclaiming what may cause the next financial crisis.

1. Eugene Fama and Kenneth French, “Q&A: Timing Volatility,” Fama/French Forum, December 19, 2008,

1. Monthly Growth of Wealth ($1), 1926–2015

Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. See Index Definitions in the Appendix for more information. US Small Cap Index is the CRSP 6−10 Index; US Large Cap Index is the S&P 500 Index; Long-Term Government Bonds Index is 20-year US government bonds; Treasury Bills are One-Month US Treasury bills; Inflation is the Consumer Price Index. CRSP data provided by the Center for Research in Security Prices, University of Chicago. Bonds, T-bills, and inflation data provided by Morningstar.

When volatility spikes, remaining disciplined can be even more challenging as pundits are quick to link volatility to any number of impending “crises” and to predict that short-term returns will be poor. See my blogpost on Coping with Market Volatility. Based on these predications, their advice for investors is often “sell now” to avoid these poor returns. But as Professor Eugene Fama points out, “The onset of high volatility should be associated with price declines that increase expected returns going forward (to compensate investors for the higher volatility).”1 That is, volatility often increases after a price decline, which may increase expected returns. So these pundits may be reflecting on what has already occurred, not what will occur. Do recent stock market volatility levels have statistically reliable information about future stock returns? We can examine historical data to see if there have been statistically reliable differences in average returns or equity premiums between more volatile and less volatile markets, if a strategy that attempts to avoid equities in times of high volatility adds value over a market portfolio, and if there is any relation between current volatility and subsequent returns.

A simple way to see if stock market volatility and returns are related is to look at average returns across different market environments. In Exhibit 2, we take monthly returns for the US equity market (represented by the Fama/French US Total Market Index) and break them up based on the previous month’s standard deviation (computed using daily stock market returns). Average returns in months when the previous month had higher volatility (75th percentile or above) were slightly higher than when the previous month had lower volatility (25th percentile or below). This conforms with the intuition presented by Fama.

2. US Equity Market, January 1927–April 2016

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French.

But, because stock returns have been noisy, these differences in average returns have not been reliably different from zero. In other words, at a glance there does not seem to be an economically meaningful difference in average equity returns based on the volatility of the prior month.

Exhibit 2 demonstrates that average stock market returns appear similar across various levels of market volatility. Is the equity premium (the return over US Treasury bills, or “T-bills”) also similar across different levels of volatility?

Exhibit 3 shows the average monthly returns for the US equity market and T-bills from January 1927 through April 2016. The full sample is further broken out into average returns for months following a “high volatility” month (75th percentile or above) and the remaining months.

3. Average Monthly Returns, January 1927–April 2016

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French. US Treasury Bills data provided by Morningstar.

We see that the average monthly equity premium has been higher after high volatility months. Nevertheless, the difference with all other months is not reliably different from zero—meaning we cannot reliably say that the premium is higher or lower after months with high volatility.2 These results suggest it is unlikely we can learn anything about this month’s equity premium based on last month’s volatility.

What if we had a trading strategy that attempted to avoid investing in equities when volatility was high? How would such a strategy perform relative to the market? Exhibit 4 shows returns and standard deviations for the US equity market,
T-bills, and a hypothetical trading strategy that bails out of equities and invests in T-bills when the previous month’s volatility was high—a strategy that “flies to safety.” If the previous month’s volatility was high (75th percentile or above), the strategy invests in T-bills. If the previous month’s volatility was not high, the strategy invests in US equities.

Over the period from January 1927 through April 2016, the volatility of the “fly to safety” strategy, as measured by its standard deviation, was lower than the volatility of the US equity market (12.21% vs. 18.66% annualized). This makes sense because the fly to safety strategy is invested in
T-bills one quarter of the time, so we would expect it to have a lower volatility. However, this lower volatility came with lower returns, as the fly to safety strategy had an annualized return of 8.22%, compared to 9.75% for US equities. A strategy investing 75% in the market and 25% in T-bills would have performed similarly to the fly to safety strategy, as illustrated in the last column of Exhibit 4.

4. Performance, January 1927–April 2016

The Hypothetical “Fly to Safety” Strategy invests in T-bills if the previous month’s volatility was high (75th percentile or above). If the previous month’s volatility was not high, the strategy invests in US equities. Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French. US Treasury Bills data provided by Morningstar.

2. The t-statistic for the difference in equity premium between months after high volatility and non-high volatility is 0.70. Normally, a t-statistic of at least 2 is necessary to reliably say that the result is different from zero.

Consistent with the analysis presented thus far, Exhibit 5 shows the randomness of the relation between recent volatility and future returns. The relation between them looks “flat.” That is, recent volatility does not indicate if future returns will be “high” and does not indicate if future returns will be “low.” This is confirmed through regression analysis, which further indicates there has been no reliable relation between recent volatility and future returns.

What can we take away from this analysis? Put simply, we can expect volatility when investing in stocks. There is considerable academic evidence that an investment strategy attempting to forecast short-term price movements is unlikely to be successful. Forecasting short-term stock market performance based on current volatility is no different. We believe that developing an asset allocation to match up with your desired risk tolerance and investment objectives, and staying disciplined and rebalancing in all market environments, remains an effective way to pursue your long-term investment goals.

5. US Equity Market Volatility This Month vs. Return Next Month

US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French.

Index Definitions

All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.Past performance is no guarantee of future results. There is no guarantee an investing strategy will be successful.

Fama/French US Total Market Index: Value-weight return of all CRSP firms incorporated in the US and listed on the NYSE, AMEX, or NASDAQ that have a CRSP share code of 10 or 11 at the beginning of month t, good shares and price data at the beginning of t, and good return data for t.

Brexit impact on US Investors

Brexit: What It Means for You

Brexit impact on US InvestorsLast Thursday, June 23, British voters voted in favor of “Brexit” — British exit from the European Union. I would like to share with you Union Financial Partner’s perspective on this decision.

In the short term U.S. markets have joined the global reaction to the surprise British outcome. Stocks have declined sharply and bond prices are higher, reducing interest rates. But the U.K. vote makes little difference for many U.S. companies and investors– so don’t overreact. Vanguard founder, Jack Bogle says “I think whatever your view of the world is, you have to invest,” says Bogle. “The alternative is – I mean, the only way to guarantee you will have nothing at retirement is to invest nothing along the way.”

While it’s natural to be concerned when stocks drop, sticking to the plan is the key in moments like these. Staying invested in a diversified-long-term portfolio will help you achieve your long term financial goals, despite these short-term changes. World stock market statistics have proven resiliency over and over again to provide capital for businesses and returns for investors regardless of shifting political and social alliances. Trying to forecast economic events, and then moving in and out of markets based on those forecasts, has proven to be a fool’s game. The only thing more foolish would be to sell after markets tank, which is an all too human response.

Leading up to and since the vote, Dimensional Fund Advisors (DFA) has worked with their counter-parties, including custodians, brokers, and dealers, to assure operational integrity throughout any disruptions resulting from the UK’s leaving the EU. We urge caution in allowing market movements to impact long-term asset allocation. Long-term investors recognize that risks and uncertainty are ever present in markets.

While I am unconcerned about the economic and market implications of the Brexit vote, I am disturbed by reports of racism following the vote and the cultural protectionism that seems to underlie the movement. Money is only a part of the foundation of our current and future well-being and we need to work for the peaceful cultural integration of people, families and communities so that we can enjoy our financial prosperity.

Union Financial Partners has 30 years of experience managing portfolios, including during periods of uncertainty and heightened volatility. We monitor market events—including their impact on trading and trade settlement—very closely and consider the implications of new information as it comes to light. We are paying close attention to market mechanisms and they appear to be functioning well. Our investment philosophy and process have withstood many trying times and we remain committed.

If you have specific concerns about your portfolio, please call me (415.563.3000) or email me [email protected] to discuss.

From One Woman to Another: How to Handle that Financial Adviser Conversation

I’ve heard this story from so many women around the world. You go to the financial adviser meeting with your husband and he – the financial adviser – spends all his time talking with your husband and not you. You know that it’s important for you and your husband to make financial decisions together and you do. You are an integral part of these decisions, sometimes even taking responsibility for most of them. And yet you feel left out of this process.

How can you be more effective in meetings with the financial adviser?

How can you obtain the important information that you and your husband need to make better financial decisions for you as a couple and as a family?

The most often cited cause of conflict in marriages is money. You need to get this right.

I will help you get at the essential information that you need to manage your financial life effectively…and harmoniously.

These questions are organized into easy, hard and hard-ball. Even asking the easy ones gets you into the game as an active participant in the process. The harder questions are more confrontational, but essentially necessary if you are going to make sure your own financial needs are going to be met.

Some of these questions are geared towards interviewing a new adviser, however, they can certainly be asked when a relationship is already established. If you think the question may have been addressed, already,you can simply say ‘can you remind me again….” If you are looking to establish a relationship with an adviser you will want to interview several people to make sure they’re the right match for you and exhibit key traits of a good adviser.

You can also do some research on your own before the meeting. This will make you more aware of the people and the company you are dealing with and will make you more confident. Review the company’s website. Google the Partners’ names and find out as much as you can about them. Look at their profiles on LinkedIn. Jot down any questions that come up for you as you perform this review and add them to your list of questions for the next meeting.

Easy Questions

  1. What are your qualifications?
  2. Do you have many clients like me?
  3. How will you help me reach my financial goals?
  4. What happens to our relationship with the firm if something happens to you?
  5. What types of clients do you typically work with? Are we typical clients for you?
  6. Are you the only adviser that we will be working with?
  7. What services do you provide?
  8. How are you compensated?

Hard Questions

  1. Are you held to a fiduciary standard?
  2. Are you held to any specific Code of Ethics?
  3. Do you provide comprehensive financial planning or just investment management?
  4. What experience do you have? Tell me more about your professional background.
  5. What is your approach to financial planning?
  6. What is your approach to investment management?
  7. How much are we paying for your services?
  8. Can we have a copy of your Form ADV Part II?

Hard Ball Questions

  1. If you accept commissions, will you itemize the amount of compensation you earn from products that you recommend to us?
  2. Do you accept referral fees?
  3. Would you sign a fiduciary oath committing you to put our financial interests first?
  4. Have you ever been disciplined by the SEC or FINRA?
  5. What is your investment management track record?
  6. Is there anyone else who stands to gain from the advice that you are giving us?
  7. Have you ever been publicly disciplined for any unlawful or unethical actions in your career?

It is very important that you identify which services the financial adviser provides and think about what services you really need. If you need comprehensive financial planning and your financial adviser provides only investment advice, you may have uncovered a source of frustration. Use these questions to insinuate yourself into the conversation when you and your husband meet with your financial adviser. As you do, you will gain confidence and effectiveness as a financial decision-maker for yourself, your marriage and your family.

NFL Retirement Report

NFL Retirement Report

NFL Retirement ReportThe average NFL career is 3.5 years long with total earnings of $6.7 million. It is important to make the most of it!

The NFL Retirement Report from Union Financial Partners provides a comprehensive and concise overview of the NFL Player Retirement Plan. A detailed description of the four individual plans explains what you need to know in terms of contributions and distributions, tax aspects of the plan, investment performance and expenses, and planning opportunities. The NFL Retirement Report concludes with six sensible strategies that can be applied to help you create a lifetime of financial success for you and your family.

NFL Retirement Report

Ann Terranova Financial Advisor

The U. S. Government Bailout – A Retrospective

By: Ann Terranova, CFP®

Now that the bailout seems to be relegated to a place in history and the world faces a host of new challenges, I thought it would be good to look back and remember what happened and the work that still needs to be done. In this sense, I mean on a Legislative basis but also what we need to do personally to ‘keep our own solvency when all the world is losing theirs.’

The Government Bailout of 2008-2009, specifically the Troubled Asset Relief Program (TARP), officially ended December 2014 when the Treasury sold its last remaining stake in Ally Financial (formerly GMAC). According to the Bailout Tracker ( a total of $618.1b was expended through the various Bailout programs and $643.4 b was returned, for a profit of $65.3b. Of the money received, $390b was a return of principal and $293.4b was earnings (dividends, interest and profit) on the funds loaned or invested.

During the crash I did in-depth research on the bailout on behalf of my clients, wrote extensively and spoke publicly. I listened repeatedly to my clients’ concern that the government is handing out money. I set out to find it. I scoured GAO Reports, Treasury Reports, Financial Stability Board Reports, Stress Tests, Basel III, and any and all documents I could get my hands on. In every case I found money loaned and money invested, always with interest, with dividends, with equity. It is difficult for me to listen to public debate where the Government is chastised both for losing money and for making money on the bailout. Public debate about the debt ceiling and budget deficits often lacks an understanding of the bailout and subsequent stimulus programs. The bailout itself did not increase the U. S. debt picture. Subsequent stimulus programs aimed at getting the economy out of recession did have a large impact on the public debt. Should the Government take action to revive the economy when faced with a recession or depression?

Investing money has to be seen in a different light from spending money. Bailout transactions were carried on the U. S. Government Balance Sheet both at a liability (decrease in cash funded by issuing Treasury Securities – loan payable) and a corresponding asset (an investment or loan receivable). What we see below is the TARP money on the U. S. Balance Sheet as an Asset.

  • In 2009 TARP assets are 239.7 and 23.5.
  • In 2010 TARP assets are 144.7 and 20.8.
  • In 2011 you can see 80.1 and 10.9.

The money to fund the TARP Program is part of the increase in Federal Debt Securities as a Liability, but only a small part. Federal Debt Securities increased from 5,836.2 in 2008 to 10,174.1 in 2011. Here is where you can see the U.S. Government ‘printing money’ to fund programs.

A summary of the Assets and Liabilities of the U. S. Government Balance Sheet from 2008 – 2014 shows that both assets and liabilities have increased over the years.

The bailout program itself was generally matched between assets and liabilities on the U. S. Government Balance Sheet. The Government’s economic stimulus program involved injection of cash into the economy by way of issuance of Federal Treasury Securities. CNN Money charts the entire bailout and economic stimulus program at $3trillion as of November 19, 2009. The stimulus programs generally involved the expenditure of cash without exchange of corresponding assets. The U. S. Federal Reserve, in addition, was purchasing Treasury Securities from banks as part of the Quantitative Easing Program, indirectly increasing the overall level of outstanding Treasury Securities.

Government programs, including those for stimulating the economy have cost the Government money, financed by debt. This is supposed to come back when the economy recovers and revenues increase, allowing the Government to reduce debt levels. How this is going to happen of course remains a mystery and the subject of much public debate.

The failure of the Government, in my opinion, was not in carrying out the bailout program. It was and still is the failure of Congress to enact laws effectively regulating the newly combined Banking and Brokerage industry.

  • The passage of the Gramm-Leach-Bliley Act, so called ‘The Financial Privacy Modernization Act,’ in 1999 (Bush Administration) ended the separation of banking and brokerage industries that had been established in 1933 by Glass-Steagall.
  • The Commodity Futures Modernization Act introduced by Phil Gramm and passed in 2000 (Clinton Administration) entirely deregulated the financial derivatives market and allowed unprecedented leverage against assets of dubious value ultimately backed by our bank deposits.
  • Since the Crash and Great Recession of 2008 – 2009 Congress has been ineffective in reinstating any significant regulations that would provide economic safety for the economy and for the public.

What can people do to keep our solvency when all the world is losing theirs? As I have been saying since 2008, if we are disgusted by ‘Too Big to Fail’ banks and the inability of Congress to regulate them, we have to vote with our feet and move our money into banks that are really just banks. If these institutions are too big to fail, it is partly because we all have given them our money and put it on deposit for them to use despite our glaring knowledge that they are not serving us. We have to stop. There are many local, regional banks that can serve our needs. Use them. Our vote as consumers will have a greater impact than our ability to effect regulatory legislation.

What do I do as a professional in the finance industry to maintain solvency?

  • I look for personal financial strategies that support the decentralization of the financial system.
  • I support local or regional banking relationships.
  • I am monitoring the development of blockchain technology that has the potential to transform our financial system and provide a system of accounting with so much transparency and integrity that third party institutions are no longer necessary for settling all personal and business transactions.
  • I look for investments that are direct, eliminating as many layers of institutions as possible between you and your money.
  • I look for investment strategies that are broadly representative of the whole economy, not just the biggest multinational companies.

We have to maintain our own healthy balance sheets and spending habits. Having a solid financial foundation with reasonable amounts of leverage (home mortgage for example) is what allows us to weather the financial storms that can erupt around us. We have to make sure to diversify our investments with appropriate levels of risk. We need cash in the bank for emergencies, we need bonds and we need equities for long-term growth.

We need to have a plan. The financial plan gives us guidance about our present and our future. We use investment, tax, asset location, business and cost-saving strategies to improve the future purchasing power of our hard-earned money and our valuable savings. The plan gives us a perspective to stay on track when dramatic events are unfolding around us. From that solid foundation of strength, let’s participate more fully and take control over the creation of our own financial futures.