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Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

Outlook and Commentary - 2012: The First Quarter

As an investor, are you encouraged by the markets’ recent rise? Is your willingness to take on riskier assets; i.e. stocks and high yielding bonds, increasing? Are you finally willing to get your money off the sidelines and “back into the market?” Are you wondering if I’ve gone off the deep end by even asking these questions?

I haven’t, and my point is this: Now, more than ever, is an excellent time to reinforce the value of a disciplined investment plan that avoids the cycle of human emotions. As our client, you know what we’ve been saying all along:

  • Forget about trying to forecast short term market moves.
  • Rely on our expertise in the science of capital markets to form a sensible investment plan aligned with your personal goals and the markets’ long-term risks and expected rewards.
  • We make and manage a well-structured portfolio to reflect yourplan.
  • And we help you stick with it.

So, enjoy the gravity defying quarters when they show up, but remember that in investing, as in life, the best path to success is a carefully constructed and executed plan.


The Quarter in Brief

In the first quarter of 2012 investors apparently remained optimistic despite lingering economic concerns; a rise in gas prices, relentless ambiguity in the real estate market, the recession in Europe and relatively uninspiring corporate earnings in the US. Here are a few of the more notable economic events of the 1stquarter:

  • Job growth in the U.S. continued to show marked improvement. The unemployment rate, which dipped to 8.3% in January, stayed at that level throughout the 1stquarter.
  • President Obama presented the 2013 budget to Congress. The proposal included a “Buffett Rule” that would set taxes at 30% for Americans making more that $1 million, taxing dividends as ordinary income and reintroducing limitations on itemized deductions. It also includes provisions to keep the estate exemption at $3.5 million but resetting the estate tax to 45%.
  • Eurozone finance ministers continued to work on arrangements for a second rescue package for Greece and two cash infusions from the European Central Bank helped provide much-needed liquidity for the EU’s commercial banks. These measures gave the global stock markets a reason to rally, despite the new-found consensus that much of Europe is now in a recession, or at least moving into one.
  • In Asia, the Chinese government lowered its target for GDP growth, projecting 7.5% in 2012 (versus 8.0% in 2011). Analysts expect that Beijing will quicken the pace of both monetary and fiscal policy measures to ensure that a “hard landing” is avoided.



Market Overview

The opening quarter of 2012 was the best 1stquarter for U.S. equities in nearly 14 years. Domestic stock indices advanced; 12.0% for the S&P 500 and +12.1% for the smaller company Russell 2000. Around the world, stock indexes recovered much of the declines from the previous years; developed markets rose 10.0% and Emerging Markets gained 13.6%. The Federal Reserve’s commitment to enduring ultra low interest rates helped to keep treasury yields low and bond prices steady.

Market Statistics





S&P 500 Index



Russell 2000 Index



US Aggregate Bond Index



MSCI EAFE Developed Markets



MSCI Emerging Markets







Our Focus

There is no one-size-fits-all investment portfolio for everyone, but there is the right one for you. Understanding the basic tenets of investment success, our focus has been, and will continue to be, your lifetime financial plan and your personal financial success. 

If your personal circumstances have changed, please call us to schedule a meeting. Or if you feel very anxious, or even overconfident, about your investment strategy in the face of the current volatility, please be sure to discuss your concerns with us. There is no need to be hesitant or embarrassed about it – after all, it is your money and it is better to act now than to react at the next downdraft.


On A Personal Note

Ah, spring. Being mindfully aware that life is short, I visited my NY-based family for the holidays and enjoyed the beauty of spring in an area with realwinters. In Westchester County, I saw forsythias, cherry blossoms and daffodils. In NYC on Easter Sunday, I found myself, serendipitously, in front of St. Patrick’s Cathedral in the middle of the “Easter Parade” (and learned that it’s not a real parade!). I hope that you were able to celebrate this time of renewal and rebirth in a way that was special to you. 

Stay Confident and Stay the Course,


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Soul-Searching on Wall Street

Soul-Searching on Wall Street
March 28, 2012

When the trappings of Wall Street tempt even our most venerable financial institutions to stray from their roots (as covered in my last blog posting),is there anything that you and I can do about it? At least as far as your personal investments are involved, I believe the answer is yes.

It starts with an understanding that is at once both basic and far-reaching. Perhaps Yale University’s Chief Investment Officer David Swensen encapsulated it well when reflecting on his own earlier career: “I had a great time on Wall Street, but it didn’t satisfy my soul.”[1]

This simple statement says a lot about how to go about achieving our own, soul-satisfying investment experiences. We -- you and I alike -- must bridge that disconnect between our money and what we’re actually trying to do with it.

The end goal isn’t (or at least shouldn’t be) merely to amass piles of money. It’s to form and adhere to a plan that offers you the best chance for achieving what you most want out of your life, while avoiding too many painful setbacks along the way. If you look at investing through this lens, it clarifies how we can view your wealth management in the same, best light:

Begin at the beginning: build a plan

I guide my clients’ investment activities first and foremost by a mutually formed plan that defines their unique financial goals and describes a sensible process for achieving them. Otherwise, what else can you rely on besides blind luck to find your way (and how reliable is that)?

Ensure that your goals drive the process

Our plan is in the form of a written Investment Policy Statement that the client and I both have signed, and that we revisit periodically, to ensure it continues to reflect their evolving circumstances. By sticking with this approach, you’re investing according to your own goals, rather than the whims of an ever-fickle market.

Find a fiduciary

As described in my last blog “What the World Needs Now,” about Goldman Sachs’ dirty laundry, a non-fiduciary relationship allows transactional-focused financial intermediaries such as brokers to engage in acts that conflict with your best interests … and yet are still perfectly legal. In contrast, our Registered Investment Advisor firm is legally obligated to form a fiduciary relationship with you, which means we can only act in your highest financial interests in managing your wealth.

Again, if someone is resolved to break the law, then a written agreement won’t stop them. But it’s beyond me why anyone would open themselves to the potential for being legallyripped off (in the form of unnecessarily higher costs or less-appropriate investments), when it’s is so readily prevented by ensuring your advisor is a fiduciary.

Talk the talk

A plan is a great start, but, ultimately, it’s only as good as your ability to stick with it. That’s why one of my key roles as a fiduciary advisor, is not only to help people form their plans, but also to serve as their constant ally in adherence along the way. The goal is to consistently encourage sensible investment activities and warn against the temptations to stray (such as panic-selling when the markets turn bearish, or chasing hot streaks when the market’s on a tear).

Walk the walk

Last but certainly not least, I’ve established my business and service offerings to complement rather than conflict with all of the above. Some of the characteristics to look for here include:

  • Transparent, fee-only arrangements.Greg Smith’s Goldman Sachs article illustrated all too clearly the conflicts of interest that can arise when your “advisor” is operating in an environment in which portions of his or her income are in the form of often undisclosed commissions and similar incentives coming from outside sources.
  • Arm’s length custody. We hold clients’ assets with a separate custodian, who sends regular, independent reports directly to them. That way, they can objectively substantiate our advisor activities on their behalf.
  • Passive management. Easily a topic for another blog, but the recommended investment solutions within your portfolio should be optimized to help you achieve your personal goals. Briefly, this translates to our using funds that are “passively” managed to capture available, long-term market risk factor premiums as effectively and efficiently as possible. A passive strategy helps you avoid the costs and inconsistencies found in attempting to outfox the market through “active” predictions. The market as a collective, highly informed entity is pretty tough (and expensive) to trick.

So, take heart. While we can’t necessarily account for the denizens of Wall Street, there’s a lot we can do to account for our own assets, without having to sell our souls to anyone.

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What the World Needs Now

What the World Needs Now
March 21, 2012

For anyone who is a movie buff, this blockbuster can be compared to the classic scenes in the likes of Tom Cruise’s Jerry Maguire and his career-killing “mission statement,” or Howard Beal’s (Peter Finch’s) Networkdeclaration: “I’m as mad as hell and I’m not going to take this anymore.” Except this time, it’s for real. When Goldman Sachs executive Greg Smith quit his job on March 14, he declared, “I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.”

But this was no internal memo in which he aired his grief. As most are now aware, he went public (verypublic) in his now-viralNew York Timesop-ed.

Time will tell whether Smith ends up honored as a game-changing hero, cast aside as a “whiner,” or largely forgotten, like that airline steward who departed his career via the emergency exit. Remember him? For the record, that was Steven Slater of JetBlue. If you Google him, you’ll find about 265,000 hits from August 2010 … and nothing more.

Like our windmill-tilting Slater, Greg Smith may not enjoy lasting personal fame, but we fervently hope that the message he delivered ends up spurring a permanent cultural shift within the financial industry. Just as JetBlue’s steward represented only the tip of an industry-wide iceberg, Smith’s condemnation of the cultural and leadership changes he saw take place during his decade at Goldman Sachs struck most of us who have been around Wall Street’s block once or twice as illustrative of a global epidemic versus a random head cold.

It really shouldn’t be that complicated. As Susan John of the National Association of Personal Financial Advisors (NAPFA) commented in InvestmentNews, “I think clients want to know that whoever is working with them has their interests at heart, and that there’s more loyalty to the client than to the firm.”

It seems to us that this sort of dedication to investors’ best interests should be a no-brainer — regardless of a firm’s business model, fee structure or service offerings. It seems equally clear that, at least among Wall Street’s behemoths and likely far more widespread than that, it’s all too frequently not. 

How do we make meaningful progress toward eliminating financial service environments in which, as Smith alleged, his former colleagues “push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals”?

Legislation can help. To a point. One need only look to examples such as Bernie Madoff to know that laws will only get us so far when someone is determined to break them. What’s required is an attack on all fronts. As individuals — financial professionals and investors alike — we must share a common passion for championing continued cultural, legal, procedural and educational improvements in all that we do with our investment activities.

To that end, here are some inspiring words to help keep the flame alive: “Let us start a revolution. … I am prepared to die for something. I am prepared to live for our cause. The cause is caring about each other. The secret to this job is personal relationships.”

Greg Smith? Guess again; it’s Jerry Maguire’s mission statement.

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Embracing Imperfection

New Year's resolutions often involve making promises to ourselves we can never keep. But instead of tilting at windmills, we can often generate better results by merely resolving to be less dumb in certain areas. And money is a good place to start…

Embracing Imperfection


New Year's resolutions often involve making promises to ourselves we can never keep. But instead of tilting at windmills, we can often generate better results by merely resolving to be less dumb in certain areas. And money is a good place to start.

One human tendency is to judge the effectiveness of our retirement savings strategies by looking at performances on one-, two-, or three-year horizons. We do this because we are wired to be more sensitive to short-term losses than to long-term gains.

This is why much of the financial services industry and media encourage a short-term focus for an audience with a long-term horizon. This is akin to looking through the wrong end of a telescope. The thing you should be focusing on looks even farther away.

The result of this short-term mindset is that investors end up following the herd and seeking safety when opportunities are plentiful and seeking risk when opportunities are few. The less dumb thing is to maintain a level of discipline amid the noise.

Another human tendency—and one allied to our built-in loss aversion—is to be suckers for the supposedly "free" or discounted offer. Like Homer Simpson, a zero price tag makes us fall for pitches selling us stuff that is neither necessary nor good for us.

In the world of investment, it's this tendency that makes people gravitate to strategies that headline high returns without mentioning the risk, or that conveniently bury fees, commissions, and other costs. Regret lies on the other side of those decisions.

A less dumb thing is to focus on return andrisk. They're related. Focusing exclusively on return can lead to rude awakenings when risk shows up. Focusing exclusively on risk can lead to disappointment when returns are delivered.

A third tendency among humans is to succumb to what behavioural scientists call "hindsight bias." Essentially, this is our habit of viewing events as more predictable than they really were. Call it the "I saw it coming" syndrome.

There is a fair bit of this around at the moment, with plenty of "experts" saying the sovereign risk crisis was completely predictable. This is strange, because as we saw in my previous column "Things Change,"the overwhelming consensus among institutional investors a year ago was that fixed income would underperform in 2011. The crisis may have been predictable, but the market reaction wasn't.

The consequence of hindsight bias for investors is they tend to be forever rewriting history and forever seeking to interpret performance based on what they know nowrather than what they knew a year or more before.

A less dumb thing is to accept there will always be a level of uncertainty. The future is unknowable. And all we can do as investors is to ensure the risks we take are related to an expected return, that we diversify around those risks as much as possible, and that we exercise a level of discipline amid the noise.

It's a way of embracing your imperfection, and it's a New Year's resolution you have a chance of sticking to.

Jim Parker

Vice President, Dimensional Fund Advisors

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New Year, New Life

Spend the holidays WITH yourself, not BY yourself…here are some tips for the newly divorced or separated:

Move your needs to the front burner.Especially if you have children, you may have spent years pushing your needs and dreams to the back burner. Now it's time to take some time for yourself. This doesn't mean becoming completely selfish, or shutting yourself away from others, but it doesmean taking the time to rediscover and follow your bliss. Do at least one thing that matters to you every day.
  1. Let go of the past.It's time to start the next chapter of your life -- and to do that, you need to shut the page on the last one.
  2. Gifts from the heart, not from the mall.You may think you really want that new 50-inch flat screen TV, but the joy of having that will wear off in short order. The most wonderful gifts are totally free: spending time with friends and family, and enjoying your favourite hobby/sport/leisure activity.Give the gift of quality time with you to your children, family, and friends. Give them your full attention, and don't forget to tell them how blessed you feel to have them in your life.
  3. Search for happiness within. If you're still waiting for others to make you happy, you need to cut that out right now! It only works for a very short time, and then you're left more miserable when it stops working (and it always does). If you’re not happy with who you are on the inside -- and if you're not comfortable spending time in your own company -- you won’t be happy in a long-term relationship with anyone else either. Create happiness and stability in your own life before looking to share your life with someone else.
  4. Take a tip from the kids.Dr. Wayne Dyer is the author of No More Holiday Blues: Uplifting Advice for Recapturing the True Spirit of Christmas, Hanukkah, and the New Year, an inspirational little book that offers positive suggestions in a quick-read format. Dr. Dyer says that, as adults, "we've come to believe that the holiday season is really only for children ... thus only children can enjoy the holidays; adults must suffer through them." He contrasts child-like attitudes ("I can't believe it's over already, it seems like it just started") to negative adult attitudes ("Thank God it's over. If it lasted one more day I'd have a nervous breakdown"). Ring any bells? This year, try to recapture some of the joy you experienced as a child during the holidays.
  5. Forgiveness will set you free.You need to find a way to forgive your ex -- and then forgive yourself -- for what went wrong in your marriage. That doesn't mean forgetting the lessons you learned, but it does mean letting go of the bitterness that's poisoning your life. Remember: hatred binds us as mercilessly to its object as does love. So forgive, and free yourself.
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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >