Monday, January 29, 2007

A Contrarian View: Save Less and Still Retire With Enough - New York Times

A Contrarian View: Save Less and Still Retire With Enough - New York Times

This is quite an interesting and dangerous article that focuses on a few well respected economists who use data (falsely in my opinion) to try to convince you that you save too much. What? I'm sorry, but out in the real world people are not savings enough. I haven't had the time to get into the data, though from what I've read initially the findings are based upon logic that doesn't work for me.

The questions that needs to be answered are: is savings to much is a bad thing? What are the consequences of not savings enough?

So what if you die with more money than you needed - was it wasted savings? Perhaps, but doubtful.

I see these economists as good people, but wrong. The average person is in debt with little or no net worth except for their house, they may not be able to depend on social security or a pension and they've saved very little in their 401(k) - do you really think its responsible to tell these uber-consumers that its o.k. to stop saving and instead buy an HD Plasma TV instead?

This is the kind of stuff that ticks me off and sets people back.

Scott Dauenhauer, CFP, MSFP, AIF

Some pitfalls of searching for a financial planner | The San Diego Union-Tribune

Some pitfalls of searching for a financial planner | The San Diego Union-Tribune

This is the third in a three part series by Lynn O'Shaughnessy of the Union Tribune on how to find a financial planner.

I feel like I should send Lynn a check for this series.....she describes my business to a T. Fiduciay, Fee-Only, NAPFA, DFA, Accredited Investment Fiduciary........she mentions them all.

I am highly biased when I recommend you read this column and the other two, but I assure you I did not pay Lynn a dime, she figured this stuff out on her own. Needless to say I think she is a genius!!

Scott Dauenhauer, CFP, MSFP, AIF

Thursday, January 25, 2007

Scott Dauenhauer Awarded AIF Designation

Pittsburgh, December 2006 – Scott Dauenhauer, CFP®, MSFP has been awarded the ACCREDITED INVESTMENT FIDUCIARY® designation from the Center for Fiduciary Studies. The AIF designation signifies training in fiduciary responsibility and follows a two-and-a-half day course and examination.

Dauenhauer, a resident of Murrieta, CA is President of Meridian Wealth Management. Dauenhauer specializes in providing financial planning and portfolio management for families across the United States and in Southern California.

The Center for Fiduciary Studies is the first full-time training and research facility for fiduciaries. The Center, associated with the Center for Executive Education, Joseph M. Katz Graduate School of Business, University of Pittsburgh, teaches fiduciary standards of care and investment best practices designed for trustees and investment professionals. They also offer an ACCREDITED INVESTMENT FIDUCIARY ANALYST™ designation signifying the ability to perform fiduciary assessments. Programs are offered throughout the year at the University of Pittsburgh’s Center for Executive Education, Stetson University’s Celebration Campus in Orlando, Florida, University of Washington in Seattle, Rice University in Houston, and the Wharton Business School of the University of Pennsylvania’s West Campus in San Francisco. Courses are also available internationally in Canada, Singapore, New Zealand, and Australia. For more information on future events, training programs and fiduciary products, visit

When buying financial advice, ask about commissions, fees | The San Diego Union-Tribune

When buying financial advice, ask about commissions, fees The San Diego Union-Tribune

I Love Lynn!

Ok, so maybe I'm a little biased....after all she does say nice things about the way I do business. If I worked for Merrill Lynch I'd probably hate her (even though deep down I'd know she was right!).

In this second of three article series on how to choose a financial advisor Lynn O'Shaughnessy lays out the difference between Commission, Fee-Based, and Fee-Only Financial Planners.

She thinks fiduciary based Fee-Only advisors are the way to go........

Thanks Lynn!!

Scott Dauenhauer, CFP, MSFP, AIF

Tuesday, January 23, 2007

NASD Issues Investor Alert on Scam

NASD Issues Investor Alert on Scam

A client of mine was almost a victim, luckily he was paying attention.

07-11) 12:38 PDT WASHINGTON (AP) --
Securities regulators are warning people to be wary of a new investment scam that uses phony government agency Web sites.

The National Association of Securities Dealers, the brokerage industry's self-policing organization, issued an investor alert Tuesday regarding Web sites using in the address, resembling the .gov.xx address of official government sites outside the United States.
The scam, through e-mail and faxes, mainly targets people outside America with investment pitches meant to get them to send money in advance of services rendered, the NASD said. The unsolicited pitch for stocks or other investments typically ends by sending the consumer to a fake government regulator's Web site.

In addition, the phony Web sites may use cookies — data files that allow a site to track visitors electronically — to gather personal information, according to the alert.

In the United States, all federal agencies' Web sites have addresses ending with .gov.

The NASD said it is aware of at least three phony Web sites using the scheme:

_Central Registry Regulators, which claims that the agency "administers and enforces the federal securities laws in order to protect investors and to maintain fair, honest and efficient markets." (A mission statement similar to that of the actual U.S. Securities and Exchange Commission.)

_National Mergers and Acquisitions Board, which claims "to oversee, administer and enforce the federal securities laws relating to corporate mergers and acquisitions."

_Board of Commissioners of Mergers and Acquisitions, which claims the same.
On the Net:
The investor alert, "'Dash' Gov Sites Part of Ploy to Dash Off with Your Money," is available on the NASD's Web site at .

Scott Dauenhauer, CFP, MSFP, AIF

Monday, January 22, 2007

Financial advice better from fiduciary than broker > News > Business > Lynn O'Shaughnessy -- Financial advice better from fiduciary than broker

Lynn O'Shaughnessy hits another one out of the ballpark with this article on the difference between a broker and a fiduciary advisor. If you don't know the difference I beg you to read this article.

I am a fiduciary advisor, you can read more about what that means on my website at I am also an Accredited Investment Fiduciary.

The differences may seem small on the surface, but as you drill down deeper you'll find that the difference could mean a lot of money taken from or added to your bottom line.

The real bottom line is - why would you work with anyone who wasn't required to put your best interest first?

Scott Dauenhauer, CFP, MSFP, AIF

Friday, January 19, 2007

Indexing Works, But Don't Take My Word For It

As most of my readers and all of my clients know, I am a big believer in utilizing index funds to build portfolio's. I am not alone in this mindset, what follows is a small sample of quotes from other well known experts who appear to feel the same way:

"The fund industry's dirty little secret: most actively managed funds never do as well as their benchmark." Arthur Levitt, Chairman, SEC

"Most investors should simply invest in index funds."Robert Rubin, Secretary of the Treasury

"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees." Warren Buffet

"I love index funds." William Sharpe, Nobel Laureate

"With an index fund--the certainty of keeping up with the market is a very worthwhile trade-off for the possibility of beating it." Jack Brennan, Vanguard CEO

"Most investors would be better off in an index fund." Peter Lynch

"Only about one out of every four equity funds outperforms the stock market. That's why I'm a firm believer in the power of indexing." Charles Schwab

"Index funds are perhaps the most underrated stock funds in existence." Mutual Funds for Dummies

"The closest thing to a sure thing is that the Wilshire 5000 index will outperform actively-managed funds by l.5 to 2 percentage points a year over a sustained period." Jack Bogle

"Over the long-term the superiority of indexing is a mathematical certainty." Jason Zweig, senior writer for "Money"

"The media focuses on the temporarily winning active funds that score the more spectacular bull's eyes, not index funds that score every year and accumulate less flashy, but ultimately winning, scores." W. Scott Simon, author Indexing is for winners only

"We find that on average, active management reduces a portfolio's returns and increases its volatility compared with a static index." Vanguard Investment Counseling & Research Analysis

"They're just not going to do it (beat the market). It's just not going to happen." Daniel Kahneman, Nobel Laureate

"I was not always an obnoxious indexing zealot. Ten years of believing in and selling active management strategies in the brokerage industry made me this way." Rick Ferri,CFA, author, financial adviser

"Active portfolio management thus tends to generate lower returns and higher taxes." John Haslem, author, "Mutual Funds: Risk and Performance Analysis"

"Indexing virtually guarantees you superior performance.” Bill Bernstein, author, financial adviser

"Index funds save on management and marketing expenses, reduce transaction costs, defer capital gain, and control risk--and in the process beat the vast majority of actively managed mutual funds." Good & Hermansen, authors

"In every asset class where they are available. Index! Four of five funds will fail to meet or beat an appropriate index." Frank Armstrong, author, financial adviser

"Searching through a list of 234 domestic equity funds that have survived for 20 years, only 31 did better than the Vanguard 500 Index. That means the odds are really, really poor that any of us will do better than a low-cost broad index fund." Scott Burns, syndicated columnist

"Choosing actively managed funds is the triumph of hope over reason and experience." Larry Swedroe. author, financial adviser.

"It's just not true that you can't beat the market. Every year about one-third do it. Of course, each year it is a different group." Robert Stovall, investment manager

"Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind." Ron Ross, author and adviser.

"It is basically impossible to beat the market." Prof. Eugene Fama

"Indexing is a marvelous technique, I wasn't a true believer, I was just an ignoramus. Now I am a convert. Indexing is an extraordinarily sophisticated thing to do." Douglas Dial, former CREF portfolio manager.

"Simple buy-and-hold index investing is one of the best, most efficient ways to grow your money." Michael Lebouf, Ph.D., author

"The best plan for most of us, is to commit to buying some index funds and do nothing else." Charles Ellis, author

"With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me." Bill Miller, portfolio manager

"We should just forget about choosing fund managers and settle for index funds to mimic the market." Pat Regnier, former Morningstar analyst.

"The most efficient way to diversify a stock portfolio is with a low fee index fund." Paul Samuelson, Nobel Laurete

"We find that on average, active management reduces a portfolio's returns and increases its volatility compared with a static index implementation of the portfolio's asset allocation policy." Vanguard study

"Buy and hold. Diversify. Put your money in Index Funds." Justin Fox, Fortune senior writer

"I am somewhat skeptical about anyone's ability to consistently beat the market." Moshe Milevsky, author

"With a very simple and basic understanding of index funds, you can consistently beat 70% to 80% of all professionally managed index funds." Tweddell & Pierce, authors.

"Invest in a stock index mutual fund. What a brilliant, ingenious, common sense idea that I can't take credit for, but can religiously pass along to those of you who want to unclutter your financial lives and own a sophisticated portfolio." Bill Schultheis, author

"For most of us, trying to beat the market leads to disastrous results." Prof. Jeremy Siegel, author

"The surest way to make money in the stock market is not to work very hard at it. Don't try to outsmart the market; settle for matching it. Put most of your money in an index mutual fund." Gary Belsky, author

"My strongest commitment in the mutual fund arena is to index funds." Richard Young, editor

"I recommend that the long-term buy-and-hold portion of your equity portfolio be invested in equity mutual funds." Sheldon Jacobs, author

"The smartest thing people can do if they want money in the equities market is buy an index fund that is run for 30 basis points a year and forget about it." Elliot Spitzer, NY Governor

I'll add my own quote now:

"Indexing doesn't guarantee you better results, but it has the best probability of giving you the most return your money can buy. Choosing to utilize active managers is no different than choosing to sit down at the craps table in Vegas, you might walk away a winner, but odds are you'll lose"

If you've got some extra time on your hands (or are an insomniac and need something to put you to sleep) you can click here to read Standard and Poors latest Mutual Fund Scorecard report that shows what percentage of funds actually beat their benchmark.

Have a great weekend,

Scott Dauenhauer, CFP, MSFP, AIF

Tuesday, January 16, 2007



This is a link to William Bernstein's The Intelligent Asset Allocator, a great book. Most of the book is posted here and I encourage you to spend some time reading it, you will learn a ton and its all free!

Scott Dauenhauer, CFP, MSFP, AIF

Friday, January 12, 2007

How Wall Street 'Sweeps' the Cash -

How Wall Street 'Sweeps' the Cash -

This is a great article, unfortunately, if you don't subscribe to the Journal, I don't believe you'll be able to read it. I'll summarize, but if you want to read the whole story shoot me an e-mail and the journal allows me to e-mail the story from their webpage.

I've reported on this little scam before and it really irks me......what irks me even more is that now the custodian I am using is doing it. In fact, there is not a single major custodian not doing what I am about to tell you, it really is sick.

Idle Cash.......what to do with it? It used to be that your cash would automatically be swept into a money market account at your brokerage firm. Sometimes the brokerage account had a decent rate, sometimes it had a great rate. For the most part, most brokerage firms offered a competitive rate, though not the best rate (firms build in extra fees, thus you get a slightly lower rate than you would at a Vanguard).

Brokerage firms figured out a way to screw their customers even on money markets. How, you ask? Start a bank.

In short, the brokerage firm starts a bank and then offers a "new" money market account to you that is "bank-insured". Sounds great, right. It automatically becomes your new default money market account. The problem is that the rate is not competitive at all, in fact it usually earns about what a savings account earns at a bank (go figure). In some cases people have seen their rates fall from the 4-5% range down to less than 2%. The brokerage firm bank then uses your money to lend out to the banks borrowers at much higher rates.

They've gone from taking perhaps .50% of your money (the expense of the old money market fund) to taking taking about 3%, plus the interest they earn by lending YOUR money out. Does this sound like something that is in YOUR BEST INTEREST? It certainly isn't, but then again, brokerage firms are required to put your interest first, in fact they can't. A brokerage firm owes its first duty to their shareholders, not you.

My custodian, TD Ameritrade, now offers a bank sweep account, I don't like it. Although in their defense they don't require you to use it and I don't. I'll keep small amounts of money in their normal money market fund and large amounts I'll drop into the Vanguard Prime Money Market account. This little story demonstrates how little things can cost you a lot of money over time and why it pays to have a Fiduciary working on your behalf.

Scott Dauenhauer, CFP, MSFP, AIF
A Fiduciary

Swanson files suit against Allianz Life

Swanson files suit against Allianz Life

Allianz Life sells bad products to good people through either stupid or outright unethical insurance agents. They'll spend a ton of money defending themselves and probably settle with no admission of wrongdoing. They do a lot of wrong in my opinion, I've seen it firsthand.

Scott Dauenhauer, CFP, MSFP, AIF

Wednesday, January 10, 2007

An Index for Investing: Malkiel An Index for Investing

Burton Malkiel is a legend in the investment world. He is legendary on Wall Street because Wall Street hates him and a legend on Main Street because he is an honest straight shooter (the main reason Wall Street hates him).

Malkiel wrote the seminal best seller "A Random Walk Down Wall Street," a must read for anyone truly interested in investing. The above link takes you to an interview with Malkiel by US News and World Reports - it will only take you about 5 minutes to read, you won't regret.

Malkiel was one of the individuals responsible for helping me build my investment philosophy - along with Bernstein (William), Bogle, Swedroe, Bernstein (Peter), Swensen, and Ellis. One of these days I'll post a list of books that one should read in order to truly learn the art of investing.

Scott Dauenhauer, CFP, MSFP, AIF

Monday, January 08, 2007

The Real Reason You Are Sold Annuities

Increase your production by 200-500% in 12 months.

For years I've told you that annuities, for the most part are not good investments (with a few exceptions). I've told you that the people selling them are motivated by something other than YOUR best interest, this link will take you to an e-mail I recently recieved from an annuity marketing company who would like me to sell their annuities (note: I do not sell annuities, I am not licensed to sell annuities and I do not recieve any commissions, ever.).

This is further proof (as if we needed more) that the products you are being sold are sold to you much of the time in order to finance that nice car your advisor is driving (see the 2 year lease for the Bentley, BMW, or Infiniti) or perhaps its to finance a trip to Los Cabos or the Ritz. Whatever it is this marketing piece will hopefully provide further proof that most advisors selling annuities have other incentives than YOUR BEST INTEREST motivating them. Don't expect them to disclose this to you either, they won't.

Click the link above, its quite interesting.

Warm regards,

Scott Dauenhauer, CFP, MSFP, AIF

Tuesday, January 02, 2007

Why I Don't Believe In Optimizing To Find The Efficient Frontier

The picture above represents the efficient frontier(EF) by decade. The EF is basically a representation of the most optimal portfolio one can hold given a certain level of desired risk (as defined by standard deviation, note: not my definition) or conversly, the lowest level of risk for a desired return. Most planners will give you some spiel about how you need to "optimize" your portfolio, and they make it seem quite complicated.

The fact is that optimizing your portfolio is quite complicated......and impossible! To optimize a portfolio you must know something that nobody else knows - the future. Since none of us know the future - we cannot reliably find the optimal point on an efficient frontier. The frontier is constantly moving - as demonstrated by the above chart. Next time a planner tries to dazzle you with words like the efficient frontier or "optimization", just tell him or her "No Thanks!".

Scott Dauenhauer, CFP, MSFP Posted by Picasa

Putnam to be sold to Power Corp.

Report: Putnam to be sold to Power Corp. - Boston Business Journal:

I've considered Putnam a sub-par mutual fund company for many years, I was proven correct several years ago when they were involved in a few of the big Mutual Fund scandals. I don't believe the company has changed at all and regardless of who buys them (a power company?) the management has not changed. in my opinion, this is a bad fund company run by people who do not put shareholders first.

Scott Dauenhauer, CFP, MSFP