Happy Monday, money friends! As we progress into October this week, let’s look big picture: Investing. We welcome acclaimed CBS News business analyst, host of the Jill on Money podcast, and author of the book “The Dumb Things Smart People do with Their Money” Jill Schlesinger to the basement to give us a Q4 kick in the pants and discuss beyond-basics investing. You do not want to miss today’s show! Plus, we’ll explore what’s up with restaurants pushing gift cards in today’s headlines as well as a change at LPL Financial that impacts how advisors can operate, and what that means to you: the client. Plus, we’ll tackle Doug’s ancient trivia and throw out the Haven Lifeline to Jeff. Read on for all the wholesome financial goodness…
LPL cuts Morningstar reporting tool at more than two dozen offices
The broker-dealer had concerns about oversight of client accounts while using the application.
“LPL Financial on Monday morning confirmed it had halted access to a reporting tool that is part of Morningstar Office — a suite of portfolio management tools for investment professionals — at 25 offices due to concerns about client supervision and surveillance.
“With 17,000 reps and advisers, LPL told advisers of the change near the start of the month. The announcement became public on Friday when an industry attorney, Max Schatzow, wrote a blog that said LPL was cutting advisers’ ability to use Morningstar products in general, a clear overstatement of the change.
“He later updated the blog to correct the scope of the decision.
“LPL had issue with its ability to conduct surveillance of accounts using the specific Morningstar product. The firm is not cutting ties with Morningstar’s broad array of products and applications and is working with the mutual fund tracker to determine if there is a solution to address the current concerns.”
Morningstar is a popular tool in the financial industry, which allows for portfolio analysis, recommendations, and fund analyzer. Morningstar Office is a separate product from the standard Morningstar tool that is available for free to anyone. It is an industry-specific tool, which LPL had issue with because it failed to allow for conducting account surveillance. “Account Surveillance” in this case refers to the firm’s ability to make sure that advisors are performance tracking correctly and ethically, and not manipulate the numbers. The policy change allows LPL’s compliance department to accurately and properly monitor its advisors.
Both Joe and OG were pleased to read this news, as the move can only benefit the individual investor. Increased oversight, in this case, is a good thing.
Starbucks, monetary superpower
“I recently spent some time on Twitter discussing the monetary wonders of Starbucks. In this post I’ll bring a bunch of tweets together into a single blog post.
“I don’t go to Starbucks very often, so I only recently learnt that the company has succeeded in getting many of its customers to stop using cash and debit/credit cards to buy coffee. Instead, they are using Starbucks’s own payments option:
“Starbucks has around $1.6 billion in stored value card liabilities outstanding. This represents the sum of all physical gift cards held in customer’s wallets as well as the digital value of electronic balances held in the Starbucks Mobile App.* It amounts to ~6% of all of the company’s liabilities.”
Joe and OG are both gushing with admiration. Not only is the client guaranteeing sales up front before any actual product is delivered, they are essentially giving Starbucks an interest-free loan which The Bux can use for any purpose right now, not later. Plus, OG points out, there are some people out there who forget they have a balance on their Starbucks app/card.
It’s a brilliant business move – normalizing the use of the Starbucks phone app – which essentially holds the money captive until it is later redeemed.
Our Chat with Jill Schlesinger
Jill has forgotten more about investing than most of us will ever know. She started the Jill on Money radio show almost 10 years ago, and persevered over the years recently reaching the 500th episode published. She has helped countless callers and listeners – doling out unbiased, straightforward advice that is based on sound financial principles.
After having saved money and freed yourself from credit card and other consumer debt, many diligent savers know that there’s a better path to building wealth beyond just savings accounts, and that’s where Jill comes in – to educate us savvy money nerds about investing.
“If you can (add, subtract, and multiply), then you can figure out how to invest,” Jill says, responding to a frequently-used excuse about why people don’t invest: “It’s too complicated.”
Being diligent and constantly investing in a low-cost way for the long-term should be a pillar on which one plans their financial future. “Fees can really eat away,” she says, and advocates for frequently investing in low-cost, passive investments – be it index funds or other low-fee holdings.
Jill downplays the actual investment selection as the way to achieve your financial goals: “The most important way for you to achieve your goals is actually to save money. The investing part is actually pretty easy. The hard part is saving.”
Joe agrees that, while fees are important, the media focuses too heavily on this one aspect of investing. He says that he has seen many people reach their goals, despite using funds that charge way too much in fees. That’s not to say that controlling investment fees is not important, but that in the grand scheme of things, saving and investing an adequate percentage of your income is a much more important piece to the overall picture. The hard part, according to Schlesinger is actually doing something – putting money away.
When thinking about time frames, Jill urges investors to think long-term. The name of the game is beating the rate of inflation, not just accumulating a big pile of money. When you’re ready to pull the money out and spend it, you want more money to be there for you than what you put in. Going beyond just the stock asset class, Jill encourages us to think about all of the asset classes and how they fit into your situation – cash, fixed income (bonds), equities (stocks), real estate, and commodities. “The combination that you choose is the combination that is based on when you need your money and your risk tolerance,” Jill states. For example, she says that for the investor who has a huge amount of money, he/she can eschew stocks and stick to safer asset classes. That’s a choice for this person. “There is no rule of thumb.” Ultimately, investing and personal finance is all personal.
Jill advocates for a cautious approach when it comes to a short time horizon of three years or less. Nothing is guaranteed, and being smart can make the difference between reaching a goal or not.
Jill adds that she has been pleasantly surprised about how consistent people have been in the time of crisis. The incredible rebound in stocks serves as a reminder that a true and disciplined approach to finances is an effective strategy. Reach out for help if you find yourself considering doing something drastic.
What Chinese philosopher, the same guy who came up with the idea of the Golden Rule, was born on this date in 551 B.C.?
Of course, Confucius is the answer to today’s trivia!
Jordan calls in asking about downsizing to a one-car family since he will be working from home for the foreseeable future. Does it make sense to only have one car?
OG says it’s okay to get rid of it, but think about what happens when you return to work or need an additional car. In the meantime, it’s nice to have the extra cash, plus reduced expenses of no maintenance, insurance, or gas. Just be mindful of where that will leave you when the time comes that he needs another vehicle.
Joe agrees – be mindful of where either option leaves you. What happens if you get rid of it? What happens if you keep it? At the very least, if he decides to keep it, Joe suggests calling the insurance and downgrading the insurance to the barebones legally-required minimum insurance.
Leave a Reply