The BOND or Fixed Income Allocation:

Take your investment account statement and look at that pie chart representing your current allocations, the portion allocated to BONDS/Fixed Income specifically. This allocation is allegedly the SAFE portion of the allocation, and although my firm uses bonds too, I hesitate calling them safe....

Prior to the 2008-09 economic crisis, bonds yielded (yield & safety are what bonds are all about) approximately 2% annually. Going into 2009 bond fund values went down about 16%, and since have yielded approximately 1.7% annually. The standard fee Advisors charge is 1.5% annually, although several trade publications are encouraging Financial Advisors, that due to the shortage of experienced Financial Advisors, fees could be going up to 2.0+% in the near future. Now if the BOND allocation portion of your total portfolio is yielding 1.7%, and the Advisor is charging 1.5%, you're only making .25% per YEAR on this portion! Is this really safe in the true context of the word "SAFE"? Remember that allocation also got hit 16% during the downturn. And yes, the bonds recovered quickly, but so did the equity market.

I also use a bond allocation, but in a strong market most of the allocation is in equities, and when the market hits highs, I take a block of the equity position and put into bonds, thus locking in that portions gains. If the market goes higher, I add more to the bond allocation. And when the market takes a 10% downturn, I take half of that bond allocation and buy back into equities. If the market goes down further, I will take more of the bond allocation into equities. This strategy turbo charges the account performance as the market comes back up, and lessens the account losses during downturns.

Keep in mind, no one can predict the TIMING of when the highs and lows will occur. When certain indicators start to flag, TRULY experienced analysts NOT salespeople, will implement changes based upon this information. If you're driving and a Deer jumps out in front of you, don't you try to avoid it if possible?

When I meet with prospective clients I see the poor performance of their accounts. In every instance I see accounts that were placed in an allocation at the start, maybe a feeble attempt at 'rebalancing' occurred, but for the most part, any management of the assets was tasked to mutual funds.



Steve J. Casull, CEO

One of the biggest hurdles in owning an investment firm is separating your firm from the sleaziness associated with Wall Street and the investment industry. We have all seen the many instances that fuel this attitude. Those of us that pride ourselves in having a truly honorable firm have to fight this reputation daily. We can expound how honest and different we are, but this only adds to the skepticism.

Wisdom and common sense is key to conveying integrity.

When Financial/Investment Advisors change firms they usually have to go to the new firms training class. Most of this class pertains to SALES. Many sales tactics are presented. One in particular is “Dont sell against yourself”. If a prospective client walks into your office wanting a certain investment vehicle or strategy, dont risk the sale by suggesting something else. Sell the client what they want. This may be legal, but it doesnt make it right. Large sales production requirements for Financial Advisors can induce those Advisors to abide by this advice. We’ve all heard the addage, “The customer is always right”...well, not always. The truly good Financial Advisor isn’t afraid to lose the sale by giving the best advice. Sometimes advising that single Mother renting the seedy apartment to buy a home with the inheritance she just got, is the BEST advice, But as I was told, that advice doesnt help with my sales quota. Thus, another resignation.

I’ve been advised by various industry consultants wanting my business to have minimum account size requirements for new clients. Do smaller accounts really take that much time to manage? NO. For those of us that actually manage the accounts, rather than hand out mutual fund and annuity brochures, most of our analysis is valid for all account sizes, smaller accounts just have less to allocate in the model. And how do you know this small client won’t come into money in the future? Hey, if you’re a good Financial Advisor that gives more than just investments, maybe your input can help your client make a lot of money. And at the risk of sounding crazy to my former bosses, what about the good feeling it gives to just help people? I love that feeling.

Another example of stupid advice from the alleged experts is, “Discounting fees conveys you’re not confident in your services”. After over 20 years, I’m plenty confident in the services my firm provides, and my fees are half of the standard 1.5% per year. I met with an affluent person a few months ago that told me they don’t mind paying higher fees for excellent service. It was like they wanted to pay high fees in order to ‘feel’ like they were getting the best performance. This is the same psychology Large Wall Street firms use when they lease expensive offices with lavish entry ways and furnishings. Clients of these firms should realize that, not only are they paying for the opulence, but high fees are NOT an indicator of better performance or safety, and neither is expensive office space. Ironically, it shows how financially inept these firms are. How many of them were involved in the 2008 Financial crisis, and had to be bailed out? Stupidity

The average Investment Firm client changes Financial Advisors 3-4 times, costing them thousands of dollars before finding a good one for their situation. Take the time to interview as many as it takes from the start. Money saved is better than ANY investment return!

Steve J. Casull, CEO & Founder

What would Captain Kirk of the Star Ship Enterprise have to say about algorithm managed asset allocation investment accounts, otherwise known as “ROBO Advisors, or ROBO’s?" If you watched much Star Trek, you would know that human emotion played a big part in how Kirk saved the day in many episodes. Human emotions also play a key role in the various markets. Let’s take a look at the facts.

ROBO advisors are non-human Internet Financial Advisors that utilize a computer algorithm to manage the assets held inside of client investment accounts for alleged low fees. The prospective client goes to the website of the ROBO Advisor and before opening an account, each client is required to fill out a brief,  benign questionnaire, most have 10 questions. The questions are designed to allegedly convey the client’s financial experience, goals, expectations, and risk tolerance. This useless questionnaire is basically an attempt by these ROBO Advisors to cover their butts in conforming to Regulation 2090 that mandates a Financial Advisor must know their clients financial situation, goals, etc. Can a computer "know" a person?

Being an independent Financial Advisor, one would expect me to have a gripe against the ROBO firms, And I sure do. It's not that I consider them to be competition, ANd I'm not the stereotypica middle aged guy that resists change. In my opinion, ROBO firms are selling a product to a clientele that is ignorant as to how the markets work, with the expectation of low fees and "comparable" performance. ROBO Advisory fees are as high as .75% assessed on the account balance per year. Our Fees are the same.

As I said before, the ROBO advisors are mathematical algorithm computers programmed to place the buy and sell orders of the holdings inside of the accounts based on the risk tolerance score of that aforementioned questionnaire. Let’s say that the market today showed signs that Europe’s market was going downward. The computer would make an adjustment, likely reducing the European holding inside of that account. But how much of the European holding should the computer sell? All of it? WAIT! What if the numbers change tomorrow, and the European market actually rebounds with strength because a new treaty with a tyrannical country has been forged? This revelation is an emotional one. A computer wouldn't know that this is a good thing by itself, computers don't understand what is good or bad, instead the program would wait for the new market prices, and make further adjustment, thus "reacting" to that which has already happened. If the European holding has all been sold, that part of the account will suffer greatly by not taking advantage of the rise to come that the GOOD "EMOTION" NEWS would likely cause. So basically the account gets hit twice. This scenario has revealed the two major gripes I have with ROBO advisors, Emotion irrelevence, and reactive, NOT proactive, management. As conveyed in many episodes of Star Trek, human emotion usually won out over computer logic. All market analysts know that the market runs on emotional ques. "Consumer confidence" is one of the most widely used indexes in determining market strength. "Confidence" is an emotion. Would a computer know to make adjustments to expect a huge market downturn if terrorists flew a jet into a building? No. The computer is only looking at the current prices to make decisions. The computer would only make adjustments AFTER the market dropped, and in this scenario, the market would drop considerably in a very short time. Isn’t that, “locking the barn door after the horses run out”?

"Target Date Funds" should be mentioned here, as well. There is a trend by many Financial Advisors to utilize investment products called "Target Date Funds". These are funds that are managed by computer algorithms, and have the same mechanics found in ROBO Advisor management. Naturally, I have the same reservations about them too. They are "marekting" them to inexperienced investors and Advisors that just want to "set it, and forget it". 

Do you want your investment/retirement accounts "SET and FORGOTTEN"?



Steve J. Casull, CEO & Founder

Whether it be a Goose that lays Golden Eggs, Golden magical harps, or Black Beard the Pirate's Treasure, Gold has been a popular symbol in mythology throughout time, But is this reason enough for such a high value being placed on it? There is a lot of jewelry around the world made out of Gold, but at $1200 an ounce, all of the jewelry in the world would only make up a fraction of that price. So what determines most of the value? Psychology…emotion. 

Gold is the safety favorite of about 90% of the Investment Advisors I interact with. They all devote a chunk of the typical allocation of client investment/retirement accounts to Gold as alleged safety. These people are well-known, well-educated advisors. We’ve all read the articles, and seen the television commercials telling of Gold hitting $10,000 or even $20,000 an ounce! It has been warned for years by well-known advisors!

Lets say Gold reached $20,000 an ounce. What would have to happen in our economy to warrant this price? Total collapse. I’m going to risk an out lash from Gold enthusiasts here, but frankly, I am sick of hearing only 'one side of the “equation” on Gold. Gold can never be valued at $20,000 an ounce based on the value of today's dollar, unless of course, the United States went back to the GOLD STANDARD, or some technological advancement used Gold for some miraculous device like Time Travel. I don't see any likelihood of a Gold breakthrough technology though.  If Gold went from the present $1200 an ounce to $20,000 an ounce, the economic forces causing that dramatic rise would have already taken their toll on the economy and more importantly society. Frankly, there would be no economy left. People would be bartering bullets, grain, and farm produce etc. The Mad Max movies would be a close facsimile. Facts are facts, people. Time travel yourself to a dark future where society and the economy has shattered to the point that made Gold rise to $20,000 an ounce in value. In this dark age wouldn't a breeding pair of Cows, Sheep, or Goats still be worth more than an ounce of Gold?

So why don't the experts tell us to invest in a herd of goats rather than Gold?

Steve Casull, CEO Casull Financial Advisory

Description: A very REAL World conveyance focusing on true retirement planning for real people living in the real world. I caution that some of the concepts outlined go against current standards in the Financial Advising and the Investment Advising industry…I dare anyone to debate the facts, however.

I think we all need to wake up as Investment/Financial Advisors and stop parroting what we have been brainwashed into believing, and, therefore, saying to clients.

Typically, Most Financial Advisors have all left one firm to join another--most of us more than once.  Each time we were required to sit through a week or two of various ‘alleged’ training workshops.  Hopefully, we now realize these training seminars were merely sales coaching events; ways for the employing firm to cover their butts against potential lawsuits by having the proper allotment of compliance and ethics related presenters speak to us, as if a 15 minute speech on ethical behavior was going to change any unethical people in that room. A shark is a shark no matter how much training.

Take, for instance; "Risk Tolerance Questionnaires", doesn't every client answer the same questions the same way? Clients want to earn the most money with the least risk, young or older. How many advisors actually do the math for the clients after the Questions are answered?  Let's say the client answers the typical question of "How would you feel about losing 10% of your account value in a typical market downturn?”, with ”I can’t lose 10%”.  By this time the appointment has already taken about 45 minutes, and the ‘salesman’ knows not to overburden the sales event. Does the advisor then go through the math of how the account would have to be allocated in order to guard against a 10% downturn? No, they sidestep the issue with an attitude of “I gave the information; the client can do the math.”  

The REALITY is that in order to guard against a 10% downturn, the account would have to be 100% in cash, or bank CDs, but CD rates haven't come close to meeting inflation for over 20 years now. Not even 100% into bonds would guard against a 10% drop, as we all saw after 2008 when the bond market was hit, and hit big, then take into account the miserable returns bond funds returned years before the event, and after and you can see my point. Also, would the “Sales Manager” of any firm allow any of their 'sales rep advisors'  put people into cash only allocations that don’t pay commissions? They may allow it, but the Advisor wouldn’t be there long not making the firm commissions.

One of the biggest fallacies which needs to stop is skewing client allocations to a 80-90% position in Fixed Income/Bonds/Bond Funds as they near retirement, especially at these rates. It‘s not good for the client. Most of the salespeople posing as Financial Advisors out there adopt this allocation protocol, and they are encouraged to do so by the firms that employ them. The theory behind this protocol is that the closer you get to retirement, the less time you would have to rebuild your retirement after a market fall. Let’s take each reason that makes this incorrect one at a time. First, the day you retire you probably didn't intend to withdraw the whole amount. You should only be withdrawing the amount you need monthly. Any analyst will confirm that the market fully rebounded shortly after the 2008 fall. Second, the typical advisor charges about 1.5% per year in management fees. Bonds have been yielding about 1.60% for many years, which means the funds that contain these bonds yield the same, so you do the math. The 1.6% yield is bad enough, but the actual gain as you can see is barely a dribble after the 1.5% annual advisor fee is removed. Third, are bonds the safe portion of the allocation they are touted as being? No. Look at ANY bond fund chart, load or no-load in the timeframe of 2006 to present. Notice that HUGE dip after 2008? Now calculate the miserable returns the holders of those bonds/bond funds received prior to, and after that downturn, then ask yourself if they are really TRULY safe. Facts are facts, if the Equity markets plummet 20%, they will bounce back, and if they don’t, having money in bank CDs won’t be worth a dime either. I’ve always wondered why the other side of the ‘equation of doom’ is never outlined. I always hear that “clients are afraid to lose all their money in the market”.  Now for the TRUTH, if the markets go to ZERO, then the economy is dead, period, and even your money in FDIC guaranteed bank CD’s is worthless, except for kindling. Our economy is dependent on the stock markets, and stock markets have to rebound after falls, or else no one will invest. Would you invest your money into something that doesn’t go up?  

I have a client now that is a good example. Her name is Valeri. She recently lost her husband and had about $300K to invest. She found an advisor at a big firm and they put her into the typical high fee account. After a few quarters she noticed that the only person making any money was the “alleged advisor”, her words.  She was referred to me by her late husband’s attorney. He called me and asked to look over her account statements. Sure enough, $100K was put into a high commission annuity, and the other $200K was put into a BOND Mutual Fund. The fees were 1.5% annually. It doesn't matter what fund it was in, for my point. The Advisor's fees were 1.5% per year, and the fund was only yielding 1.67%! She was making a whopping .14%, or $280 a year with only 10 more years until her retirement. I see this kind of malfeasance all the time as I review prospective client accounts.

Let's get real, If the market is showing validation for an 80% equities 20% Fixed income/Bond allocation when a client is 30 years old, then the same should hold true for the 65 year old as well. If the equity market takes a 10%-20% hit, you take 70%-90% out of the bond allocation and put it into the equity allocation, Thus turbo-charging the returns during the rise back up. When the market regains the loss %, you reevaluate the model and allocate accordingly. Buy low, sell high.

Now for the 'myth of Gold', Gold is safety favorite of most advisors--well-known, well-educated advisors. We’ve all seen the commercials telling of Gold hitting $10,000 or even $20,000 an ounce warned for years by Peter Schiff! I’m going to risk an outlash from Gold enthusiasts, but I doubt that Gold will ever hit $20,000 an ounce. I dare say that if Gold went from the present $1200 an ounce to $10,000 an ounce within a shorter span than typical market trend increases, the economic forces causing that dramatic rise would have already taken their toll on the economy. Or better said, there would be no economy left, other than the barter of bullets, grain, and farm produce.

The reason I am bringing up such things is to inform, and, therefore, enable the true discussion and realization. The United States would never let the Stock market collapse to nothing, and If it were unable to prevent it, money would not be worth anything, anywhere, anyway. The point being that you can’t avert the market’s end, or protect against permanent severe losses by investing a large part of your limited assets into non-producing allocation models, for extended periods of time. Time value of money is an essential element in investing. It basically means that money sitting, not making a return, is a waste.

Do you plan on going to your account and withdrawing all of your money the day you retire? No, of course not. So, if we have established that a total economic meltdown can’t be averted, and that bond’s or CD’s aren’t the safe haven we’ve been led to believe, and the returns of those alleged safety hedges are actually in the negative when calculating the necessary current inflation element, then we can formulate the following statement: When the market goes down, it will always go back up, or it will be worthless anyways. Realizing this, the best course during a market downturn is to move money from the limited growing allocations and into the allocation that has gone down.



Steve Casull

CEO & Founder

Casull Financial Advisory, LLC

According to an article written by Emily Flitter, Reuters, at least 3 times in the past two years, Ameriprise Financial Inc. asked issuers of private real estate investment funds to change the structure of their deals so it could sell more of the securities to their vast client lists, according to interviews with multiple sources with direct knowledge of Ameriprise's practices and a review of testimoney in an arbitration hearing involving Ameriprise. Private placements generate higher commissions than most other products, securities brokers/financial advisers at firms like Ameriprise sell. Private placements are not liquid, meaning they are not traded in the open stock market which make it nearly impossible to get out of the investment should it become desirous, especially if the investment's value is falling. We used to call this scenario, "Catching a falling piano".  According to several experts, myself included, The company to whom the investment is being made in, should base their offering size (money gained from the offering) on the money they need, NOT on how much money the investment firm selling the offering to their clients wants to make.



Steve J. Casull, CEO & Founder

Have you reached into a pocket of clothing you hadn't worn in a long time and found "that $20" you forgot all about? What a rush! Or maybe you had a Grandfather that opened various savings accounts, but didn't list them any where, and didn't leave a will. Do you happen to know what happens to that money? Does the bank or brokerage firm get to keep it after a certain amount of time? NO! That money gets domiciled in a State account where the State gets to keep the interest it earns, but holds the money to either be claimed by the original owner, or their heirs. All that you need to claim the money is identification, and a couple of easy forms.

Valeri's Husband died a few years ago. He was a Pharmacist with a few stores. Each month those stores would receive payments and reimbursements from various insurance companies. Well as it turns out, her husband's death didn't close the spigot of payments being sent to the now defunct enterprise. They just found their way to the State's unclaimed property division. So far the total is in the THOUSANDS of dollars!

I have included a link to the State Unclaimed Property website where anyone can just type in their name and see if they have unclaimed property. Guess what? I had $3.78 held from interest at a credit union account that I closed after college.

From June 2013 to July 2014 over $15MILLION were paid out. And there are many more millions held in that account!



https://mine.utah.gov/UP_Start.asp





Steve J. Casull, CEO & Founder

My Mom is a smart gal, former Registered Nurse, and a “Tiger Mom” (have you read the GREAT book?) My Father was a genius. He could build and fix anything, and I’m resisting the temptation to elaborate on his various patents and inventions. The money your Father makes is irrelevant, but building respect in your kids is imperative. I do not care how much money you have; I feel it is imperative for Fathers to teach their kids the” basics of fixing”. It’s amazing how many men I meet in the upper income levels that hire out work that can easily be done by them. Now true, some of these people may say their time is worth more than the dollar savings, but showing your kids how to change a switch,  fix a hole in dry wall, paint a room, not only saves you money, but it is a valid way to interact with your kids. Thus, allowing them to carry on the same traditions to YOUR grandkids, in a ‘story’ that starts out, “when I was your age, my Father, your Grand Father, showed me how to fix stuff too”. Most of my neighbors hire landscapers, probably so they can have time to go to the gym. Doing your own yardwork not only; saves you money, burns calories, and gives a sense of fulfillment, but it also provides several “basic fixing” topics to your kids.

Although I feel it is a secondary reward, what does one do with the money saved when doing these fixes themselves? No money changes hands, so no money goes into the JUG. Wrong. The JUG gets 25% of all savings from do it yourself activities. The reality is that some may not want to fix a sprinkler, even though it is one of the easiest home fixes. Call a sprinkler repair person. Get a quote. Then go to Home Depot or Lowes and learn how easy it is to fix . You’re the BOSS. Either pay someone else to ‘earn respect from your kids’, or DO IT YOURSELF and then take 25% of what you were quoted and put it in the JUG. Once a month deposit the money into either an IRA, or maybe a NON-IRA.  Establish tradition that will be told in other stories to your grandkids…

Steve J. Casull, CEO & Founder

In my long career, I have only sold 3 annuities. That means that with all the clients I’ve met with, in my opinion only 3 warranted the capabilities that an annuity provides. They are tools, and like all tools, they have a set utility. For example, I can 'hammer' a screw into a piece of wood, but it defeats the whole utility of the screw's design. Annuities afford BIG commissions. I was constantly told to sell more annuities by various managers.

There was a study by Richard Toolson who is an Accounting Professor at Washington State University that researched the issue of breakeven points for variable annuities versus investing the same funds in a low turnover stock index mutual fund inside an IRA. Now, assuming both earn the same pretax returns, according to his calculations, an individual in a 36% tax bracket will never come out ahead by investing in a variable annuity due to the prolonged drag of excessive fees and tax issues.

NOW, If you know you are going to live a long life then MAYBE an annuity is a good fit. But if you have those psychic abilities, maybe you'd still do A LOT better putting your money in an IRA.

Steve J. Casull, CEO & Founder

I was lucky to have Ellwyn Olsen and Don Larkin as managers in the first firm I worked for. When Don recruited me, he said it was because of my background in Utah Economic Development activities. Helping clients build their wealth is the ‘MICRO’ version of Economic Development. He told me that, “If your client accounts grow, they will gladly refer people to you”… A true statement to this day. My first celebrity client was a referral from a happy client.

Ellwyn Olsen was a veteran in Utah’s investment circle too. He was a good manager in a time when managers really managed and firms grew due to their abilities to make their clients a better return than the competition. I do not see that now. I remember going into Ellwyn's office one day fresh out of training telling him that I needed to get some plaques on my wall like ‘so and so’.  “So and So” had plaques from various mutual fund and insurance companies. Some said things like “Top Producer”, “Gold Level”, “Platinum Level”, “Million Dollar Circle”, and then there was the picture of “So and So” with Governor Norm Bangerter! WOW! I told Ellwyn, “how can I get clients when “So and So” was such a great stock broker (that’s what we were called at the time)”? Ellwyn looked at me and said, “I wouldn’t let ‘SO and SO’ within 100 feet of my dog’s account.  He told me, and now I’m telling you; “plaques on a wall are trophies of sales, not of client account growth.  You don’t work for mutual fund companies. You work for your clients…and Piper (Piper Jaffray)”. He went on, “ So and So has been selling those funds on his wall for years.  Those plaques give ‘so and so’ a sense of importance so he will keep on selling them, AND as for the picture, so and so paid to attend a fund raiser to get a picture of him shaking hands with the Governor”.  Hmmmm

Various advisors advertise statements like “Baron’s Top Advisor”, “Paradigm’s Top Advisor”, “Member of the MDRT” (MDRT stands for Million Dollar Round Table). What do these accolades really mean?  What does it mean to you? Don’t you as the prospective client assume it relates to the performance of the accounts under their management? What if I told you it was based on how much that advisor sells, or how many clients they have, or how much money their clients have them manage? How does this pertain to what your account will do under their guidance? Does it matter “a hill of beans” to you if your ‘so and so’ sells a lot of the ‘such and such’ mutual fund or annuity? It's kind'a like a race car driver getting a trophy for using the most oil in a year.

Steve J. Casull, CEO & Founder