A university student interested in financial planning came to my office to discuss the industry. He asked, “What is the most important thing for me to do to prepare to be a financial advisor?” He listed the potential classes he might take, and internships that were available to him, trying to give me a bigger picture of his options.
 
I asked him to consider the other areas of his life where he might need to hire professionals, and what qualities would be important to him. He mentioned several items but ultimately it came down to his answer that he would hire someone who had shown by his own experience, expertise in the field in which he worked. I asked if he would hire a contractor who lived in a run-down home and he agreed that he definitely would not.
 
With this question I had set him up for part two. I asked him to tell me about his own investment account and personal financial plan. He laughed and reminded me that he was a starving student without a spare nickel to his name.  His answer was fair but I told him he could not expect to advise others on financial matters in which he had no personal experience. I encouraged him, no matter how small, to get started investing and learn by his own experience so that he could teach others.
 
I have often been frustrated with the financial planning industry. Although regulators are working on a uniform code of conduct, there are currently very weak standards that govern who can call themselves financial planners. I think this needs to change.
 
People often ask how to select an advisor. Obviously, education and certification are required pre-requisites (only 15% of financial planners are Certified Financial Planners®).  But I would like to recommend another step, a bold step. When a potential financial advisor is interviewing you and asking lots of financial questions, turn those questions around. I believe clients have a right to know that the advisor has his/her own house in order. Advisors need personal experience and success in the areas they will be advising you in. You would be surprised how many there are who call themselves financial advisors but have little or no personal investments. The thought is absurd and scary.
 
Some years ago at a seminar I surprised the audience by posting my own investment allocations on the screen. I wanted them to know that I had personal experience in the things I was teaching them. I would like to see the regulators add a requirement that all who advise others on their investments be willing to disclose, at least at some level, their own personal investing experience and allocations. If you are looking for an advisor, don’t be afraid to ask them some personal questions. This is your life’s savings and you have the right to know the person trusted to manage it has their own financial house in order.

Years ago I had a client for whom I created a financial plan designed to get them comfortably to the end of their lives. A few months after the husband passed away, we received a call that was out of the ordinary. This nice lady needed $25,000 to pay for some remodeling in her home. I discussed with her that the amount requested would impact the financial plan and potentially put her at risk, but she was insistent.
 
Over time, requests for funds continued to come and my yellow flags were turning red. A financial advisor has a legal obligation to be alert for signs of fraud so I sat down for a serious conversation with this lady. She admitted that after her husband’s death she was very lonely but a kind man, (30 years younger,) had suddenly appeared to help her and they had become romantically involved.
 
We talked about other potential motives her boyfriend might have, and I cautioned her that her account was drawing down dangerously fast, but she was in love and could not be convinced. We require all clients to authorize us to contact a third party in such situations so I decided to call the lady’s daughter. Her daughter got involved but was also unable to persuade her love-struck mother. Shortly thereafter the account was mysteriously transferred from my office. It is a sign of potential fraud when criminals act to separate the victim from the people who care about them.
 
As you can imagine, once the money was gone, the boyfriend disappeared. The mother was devastated not only financially but emotionally. She had lost the love of her life, or so she thought. This is one reason we advise against major decisions following the death of a spouse. Death notices are public and unfortunately criminals can use them as a list of potential victims who are in a vulnerable state.
 
We learned at our recent company national conference that romance scams are becoming increasingly common in our digital world. Criminals today don’t need to move in with their victims, they simply use the internet, and dating sites, to create loveable but fictitious people and lure the lonely into phony relationships. They are very convincing and usually search out their victims first to learn their hobbies and likes to help create an emotional connection.
 
A major protection against being scammed is to remember that no financial fraud can occur unless money moves. As soon as money in any form is involved – stop immediately and re-evaluate the situation. A criminal cannot defraud you unless he can convince you to move money or assets. And you can be sure that before the request for money, there will be a strong play on your emotions. Help protect yourself right now by agreeing in advance with a trusted friend to consult with each other in any situation where someone makes an unusual request for you to move money.
 

An extensive exit poll this week demonstrated the vast divide in American politics. On each issue the respondents came down heavily along party lines. One question that stood out to me was, “How do you feel about the state of the economy?” Over 85% of Republican respondents said it was “Great” while over 85% of Democrats selected “Terrible” as their answer.
 
I can understand ideological differences over healthcare, immigration and other social issues but as a numbers guy I have a difficult time with varying opinions about the economy. Unemployment is near record low levels, GDP is high, growth is strong and earnings continue to outperform expectations.  In just about every measurable field the numbers say that the economy has rarely, if ever, been better. So how can almost half of America consider it to be “Terrible?”
 
I suppose there are isolated situations but it’s hard to imagine any significant demographic that has not benefitted economically from the current growth cycle. Which leaves me to assume that unfortunately, politics has just become part of the human reality and we tend to see things through the blue or red lenses we wear.
 
Investors, however, don’t have the luxury of having their investment decisions clouded by colored glasses, at least if they want to survive and thrive. They must look at the numbers as they are, and attempt to predict where they are likely to go. Since I’ve already stated that the numbers continue to be positive, let me address how I feel the recent election might affect those numbers going forward. Let’s take off our colored glasses for a moment.
 
The 2018 tax cut greatly benefitted businesses and consumers and should continue to do so. Deregulation has been a strong positive factor for continued growth. A business-friendly attitude at the executive branch has spurred growth and development in many industries. Historically low inflation and interest rates have helped the economy and innovation continues to improve productivity. The big question is, will any of the above conditions change as a result of this election? The day-after market rally was Wall Street’s answer to that question. They were not cheering the democratic takeover of the house, nor the Republican gains in the Senate, but rather the financial peace that comes from assuming a divided congress will get very little done. From an investor point of view, a congress that can’t act, can’t hurt anyone.
 
I suspect that the next two years should see a continued pattern of growth as the mechanisms are already in place to allow that to happen. However, the areas of growth will shift slightly as the new political landscape makes some slight adjustments, so investors need to stay informed. Both sides won in this election and both sides lost. No one ever gets everything they want but I believe, as a financial advisor and a numbers guy, that investors just got two more years of economic growth, although perhaps just a little bit less than the past two.

Many who have come into my office have asked about a small green sweater that is framed and hanging on my wall. It seems a strange item for a financial planning firm, but the story behind it plays a significant role in my philosophy towards investing.
 
In 1921 my grandpa Jones opened a small knitting mill in Los Angeles.  From the beginning he decided to run his little company based on two very simple principles. First- Be fair and honest with customers and employees. Second - Only produce the highest quality clothing, made from 100% pure wool.
 
The early years were not easy. Among other things was stiff competition from several other mills in the area that had chosen to use “fillers” in their wool. By mixing foreign material in the wool, the competition could keep costs lower, yet under regulations at the time they could still claim to be pure wool. This concerned Grandpa but he pressed forward with a firm determination to follow his business plan. When people bought a “Jonesknit” sweater, he wanted them to know they could trust the product to be of the highest quality.
 
The years went by and Jonesknit, despite receiving numerous awards for the quality of its sweaters, continued to struggle in a competitive world where price often had the final say. Suddenly, in 1929 the Great Depression struck and the garment industry was particularly hard-hit.
 
Amazingly, while competitors were shutting down, the sales of Grandpa’s sweaters grew. Public schools, large organizations and even the U.S. Postal service began to buy almost exclusively from Jonesknit. Not only were there no layoffs, but new people were hired and Grandpa was able to continue giving his employees regular raises. He learned that when times get tough, people can’t afford to waste their money on junk. They look for quality. Grandpas focus on quality resulted in his family and employees being cared for in comfort while so many were suffering during the depression.
 
The small green cardigan Jonesknit sweater in my office was given to me by my grandpa when I was eight years old. I admit to being pretty disappointed at the time, having really wanted another toy airplane that Christmas. But I have since come to appreciate the valuable message knitted into that sweater. During those times when the investing world is struggling and I am searching for appropriate investments for my clients, I glance over at that sweater and remember the lessons learned from grandpa Jones. “Focus on quality,” I remind myself, as those companies who do so are most likely to survive and thrive. I call it my Green Sweater principle and it has served me well for many years.
 
As the investing markets enter this current season of heightened concern and increased volatility, you can be sure I will be paying particular attention to the lessons of that old green Jonesknit sweater hanging on my wall.

We were on the mountain this week and Jayden and his friend wanted to go for an ATV ride. It was late afternoon so I let them go on condition that they were back by dark. Later on, as the sky darkened I was wondering when the boys might get home and realized I had given them bad advice. By telling them to be home by dark, I hadn’t allowed any room for error. There are lots of ways to run into trouble on the mountain, from a serious accident to a less serious mechanical breakdown, or simply getting lost. Even the most experienced riders can get turned around in the forest. By giving them instructions to be home by dark, I didn’t leave any room to go looking for them in the event they failed to show up.  There is no cell service on the trails and once it gets dark, finding someone can be very difficult. Needless to say, we were glad to see them pull in just as the last light was disappearing.
 
Investors often come to me with an odd request. They tell me that since the markets are pretty good they want me to keep their investments overly aggressive but, to move them to safety if things change. It would be great if that were possible but the reality is, when the markets turn against you there isn’t always a lot of warning. Sometimes by the time the markets go dark, as it were, it’s too late to do anything about it. This is one of the reasons I emphasize taking a more balanced approach to investing. In a sense, it is like giving you room for error. A balanced portfolio, by design, may have some investments that are doing very well and others that may not be doing quite so well. Then the investments may switch places. The goal is to get a favorable rate of return overall, while not exposing yourself to more risk than is reasonable. It is a trade-off.
 
Since I didn’t give the boys any room for error, I realized that I had exposed them to too much risk. A simple flat tire could have become a major problem given the difficulty of finding help in the dark. By asking them to be home an hour before dark they would have had a little less time for fun, or perhaps a little less return as it relates to investing, but the price would have been worth the reduced risk. It has been my experience that trading off a little return in exchange for less risk can result in a more positive investing experience over time. As with four wheeling, a flat tire eventually will happen and when it does you will be glad you saved that extra hour of sunlight to help you find a solution.

On September 11th,  2012 an automated text message from the mayor of Santa Clara, Utah warned that the dam above my house was about to break. I raced home but before arriving received a call from my neighbor.  He was normally quite a jokester but there was no joking in his voice when he said that a wall of water had just crashed through my house. “You don’t want to see this.” he said. And he was right.
 
Water is an unpredictable thing. The flood had come barreling down the street, crossed a field, and crashed through our French doors filling our house with over three feet of mud. It was as if the flood had singled us out for destruction. As bad as it looked, we had no idea it would take 18 months and over $200,000 to repair our property. As Launa and I surveyed the terrible scene I said, “What are we going to do?” She responded, “Start shoveling.”
 
We learned from our own personal 9/11 that sometimes bad things just happen. Despite all your best efforts, you can’t always predict or prevent disaster. I have helped many people through personal financial disasters in their lives. Job losses, medical emergencies, divorce, criminal activity, national economic collapse and many other unexpected disasters can put a real squeeze on family finances. There are things that can be done to prepare, but there is never a guarantee that your preparation will be enough. Life doesn’t really offer many real guarantees. I have seen people do everything seemingly right and still find themselves looking at a flooded life wondering if they will ever recover.
 
The thing to remember about proper financial preparation is that it’s like living a healthy lifestyle. You may eat properly and exercise daily your whole life, and still wind up with a heart attack before age 60. That’s just the way life is. But those first 60 years would have been much more enjoyable for having lived so well. In similar fashion, being financially responsible is not just about hoping to retire comfortably in your old age, but about living better in your younger years. It’s about having more peace and less stress in your life today, even if all your efforts can’t guarantee what might happen tomorrow. Doing what’s right today brings its own reward right now, and will also make whatever comes tomorrow easier to handle.
 
I may be a little sentimental but I still have several shovels in my hangar covered with Santa Clara red mud. I keep them as a reminder that despite our best efforts, disasters can still happen. They also remind me that our preparation before the flood made the disaster much more bearable. We can’t stop the floods of life from coming, but we can live better until they do, and get through them easier if we are prepared. Financially speaking, doing what is right today is always a good idea.