Juicing and Other Bad Behaviors

scamScamming, identity theft and fraud are terms that are common vernacular within today’s technology driven communication methods. It seems that every day, you hear of new (and not so new) ways that scammers and con-artists are trying to dupe people out of their hard-earned dollars.  In an effort to keep our customers safe, here are a few scams that you should know about.

Juice Jacking

Smart phones are part of the way we do business today. They are a mini computer, a personal organizer, a bank teller and a multitude of other technology tools all rolled into one hand-sized device. Unfortunately, they are highly susceptible to hacking if you are not careful.

While smart phone brands can differ, they all have one thing in common – data can be delivered through the power cord. And Power-up stations can be a cause for concern given the ease with which information is shared.

The way the scam works is simple. A smart phone user plugs the phone’s USB charging cable into a power station. However, instead of powering up the user’s phone, the hacker uses this as an opportunity to access phone data or infect the phone with malicious code. In addition to giving the hacker access to your private information, the code that is embedded on your phone could also be transferred to your personal computer when it is used to power up or sync your device.

Phishing scams

While phishing scams are not new, they continue to impact millions each year. This scam is based on initial communication made via email or social media. The hacker sends a message in an attempt to get the victim to provide login info for online profiles and other login spaces. This could include your banking information, social media channels, work information, cloud based storage and any other site that contains personal information.

The criminals are very good at making the communication look official, duplicating the look of logos, web pages, Facebook sites and other online areas. They will ask you to click on a link that will lead to a very official looking page that could appear to be very legitimate. Once on this page, the unsuspecting victim is often asked to provide online credentials and other valuable information.

The rule here…never give your information to any unsolicited online source. A legitimate offer will also have a phone number you can call for additional information.

 Travel Scams

‘Tis the season for discount getaways! But if you are not careful, a seemingly good deal could lead to huge headaches. The scam goes something like this: The scammer sends the victim an email for an amazing deal on a dream vacation. The deal expires in a very short time frame causing a great sense of urgency.

The victim is generally duped into the intrigue of a “trip of a lifetime” and misses the fact that there are hidden costs associated after they pay the initial fees. Other scams never send the victim anywhere…they just take the money and run. Your lesson on this scam is to ask questions upfront before paying for anything!  If it seems fishy, it probably is.

 Antivirus software

Have you ever had an alert pop up on your computer screen for an anti-virus program that you don’t actually have on your computer?  Heed our warning, do not click on it! While it might just be an innocent pop-up window from an online browser, it could also be a form of malware that will infect your computer and could even block your operating system, requesting you pay to get the decryption key.  The best defense for this type of scam is to have a good anti-virus software program downloaded on your computer. And, if it looks suspicious, don’t click it.

Fake Check Scams

The fake check scam comes in many different forms. Some people offer to pay you for a service, while others offer an advance on a sweepstakes or other cash award. The thing that all of these cases have in common is that the scammer will request that you send money back to them.  They may send you a check and ask you to deposit the check and then wire them a certain amount of the money (for processing fees). These checks can look so real that they might even fool the bank teller. In general, you will be able to withdrawal at least a certain amount of the funds as soon as the check is cashed. It could take several weeks for the bank to discover that the check was fraudulent. By that time, the scammers are long gone and you are on the hook to cover the amount that was withdrawn from your account.

Remember, there is no reason why you should be asked to send money back for a prize you won or be asked to cash a check over the amount owed and offer a cash reimbursement. When in doubt, ask for cash or at the very least accept only checks from local banks.

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Should you Consider Preferred Stocks?

imagesIn the past, investment grade corporate bonds or government bonds were considered a solid investment vehicle, offering a safe 6-7% interest rate. However, in today’s uncertain economic climate, this is simply not the case. For instance, the investment of government bonds with a ten-year maturity might only provide a yield of 1.6% in today’s market. Factor in the after-inflation yield and you could be looking at negative returns. So what is an investor to do? Are there any solutions that can help today’s investor overcome these scarce returns?

One thing to think about is a bond substitute, such as an investment quality preferred stock. We consider this type of investment a crossbreed of sorts which lie somewhere between a bond and a stock. Investment grade preferred stocks are a type 1 investment for 612 companies, unlike common stocks, which are a type 2 investment.  In addition, the dividend qualifies for a 70% exclusion for income tax purposes. However, you just can’t jump in and buy these instruments eyeing higher yields without also understanding the risks.

You must know the details of the investment to understand what you are getting.  There are risks that the company may call (force you to sell) the preferred stock, stop payment of dividends if the company is experiencing financial trouble, and they may have a very long to unlimited maturity.   There are preferred stocks available in the market that mitigate these risks, but it takes a lot of effort to find them.  The advisor must resolve to do the due diligence to make sure they are appropriate for the portfolio and to be aware of the risks involved. This investment instrument is not for the advisor that does not monitor their investments or take the time to read the prospectuses and understand how exactly they work.

While preferred stocks can carry a higher risk than bonds, high-quality investment grade preferred stocks can be a suitable choice and are only slightly more volatile than bonds.  A diversified portfolio utilizing a measure of preferred stocks might just be the tool you need to add some stability to your investment mix and increase your portfolio returns.

Do you want to know more about using preferred stocks to generate income as a bond substitute? Contact the team at Financial Fiduciaries for more information.

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What You Need to Know About Retirement Savings

As Reported by John Oliver

While some of the 20 minute John Oliver sketch below is a bit tongue-in-cheek, we think it highlights the importance of working with a fiduciary. In his own words “The entire retirement industry is a potential minefield and you need to pay attention.”  Take some time to review this humorous, yet spot-on look at retirement planning. (Warning – Not suitable for younger viewers.)

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Worried About Brexit? Consider Meditation

meditationWith economic uncertainty looming all around, the world has never been more stressed out. Brexit has left questions and even fear in the minds of investors as they carefully consider their next financial move. With economists predicting that the worst is yet to come, many are asking us, “How do we deal with all the stress?”

As weird or unorthodox as it may sound, many companies are turning to Eastern philosophies to help their employees work through stress and become more centered. Companies like General Mills, Google and Green Mountain Coffee Roasters have adopted company yoga classes, meditation rooms and mindfulness training programs to help employees relieve stress and anxiety. Here are five ways meditation and relaxation practices can help you to feel less anxiety with regard to your financial outlook:

  1. Meditation provides a strong sense of calm and control that has staying power. It can reduce the sense of panic that often arises in times of market uncertainty and allows investors to look toward the future in a more clear-headed way.
  2. Relaxation techniques allow the executive functioning sections of the brain to operate more efficiently giving greater concentration and an ability to focus on solutions rather than fears.
  3. Meditation offers the ability to see the bigger picture without being clouded by future concerns, thereby forcing you to concentrate on the here and now.  This allows you to consider ideas that you may have previously dismissed.
  4. Without the distraction of stress, you are better able to focus without the added concerns of physiological symptoms and fears intruding upon your thoughts.
  5. Meditation can be effective in relieving the issues associated with depression.

Here’s another way to handle financial stress-hire Financial Fiduciaries to look after your financial interests.  Let us worry about the details and the vagaries of the investment world.  Here is our mission.

 Our Mission

Our mission is to zealously represent the interests of our clients in their financial transactions and dealings. Our clients have funds that require proper stewardship, but do not feel they have the time, interest or expertise to properly discharge these responsibilities on their own.  They hire us to perform these duties for them, and we make the decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options.

Sources:  http://bhwealth.com/how-meditation-and-mindfulness-can-help-alleviate-financial-stress/ http://www.oprah.com/money/5-Ways-to-Cope-with-Financial-Stress-and-Anxiety http://www.huffingtonpost.com/david-a-dedman/financial-mindfulness-the_b_5567377.html


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Inherited IRA’s No Longer Protected from Creditors

tax returnsOne of the benefits of having an IRA is that they are protected from creditor claims because they are retirement accounts. This is a good thing for people who are in professions that could have a liability concern. However, a recent ruling by the Supreme Court could cause a problem if the IRA’s you own are inherited.  The ruling states that inherited IRAs are not considered protected retirement funds—and are thus subject to creditors’ claims if the beneficiary files for bankruptcy.

This stems from the case of Clark v. Rameker, Heidi Heffron-Clark. In this case, the defendant argued that a $300,000 IRA she inherited from her mother in 2001 qualified as a protected retirement account.  With that in mind, the account should be exempt from the claims of creditors after she and her husband filed for bankruptcy in 2010. Under U.S. tax code regarding inherited IRAs, Heffron-Clark was required to withdraw a minimum amount of money from the account each year, even though she is not yet retirement age. Given this, the court decided the account was not a protected retirement fund because the beneficiary wasn’t using it as one.

What does this mean for you?

The Supreme Court’s decision means that if an estate is bankrupt, inherited IRAs will now be considered assets that can be utilized to satisfy creditors’ claims. With that in mind, if a retirement fund is inherited the money will no longer be protected if the beneficiary files for bankruptcy.                

How do you avoid this?

We suggest creating an estate plan to ensure that inherited IRAs are safe from creditors. In most cases, establishing a trust as the beneficiary of the IRA rather than the family member will give an IRA protection from creditors. For more information on how to properly handle this or to discuss how to create a trust to protect your assets from creditors, contact the professionals at Financial Fiduciaries.


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The Precedent to Brexit

am brit flagBefore there was “Brexit” there was another painful economic divorce, when the British citizens of the American colonies decided to “Amexit” the British Empire in the 1770s.  The Economist magazine took statistics from that era, including long-term government bond yields and stock prices, to see what the “Amexit” shock looked like from an economic standpoint in Britain.

It’s usually bad economic news when government bond yields rise dramatically.  It means that demand has gone down or investors are uncertain whether they’ll get paid back, and (in this case) the British government had to pay more to entice people to invest in the British empire during the time when its army was fighting to subdue the pesky rebels overseas.  Similarly, when stock prices go down, it usually means investor confidence is shaken—or, in the case of the accompanying graph, from the year 1770 through the year 1790—apparently shattered.

You can see some of the seminal events noted on the graph, including a downturn following the unrest associated with the Tea Act and the Boston Tea Party, and then a significant downturn in stocks (and upturn in bond rates) after the American rebels commenced what we on this side of the Atlantic call the Revolutionary War.

Perhaps the most interesting thing about the graph is the fact that normalcy was restored roughly the same time the U.S. finally got its government act together and created the Constitution.  Despite the fact that the British had lost a huge amount of territory and a very promising piece of their future economy, bond rates returned to normal, and the stock market settled down to a few points above where they had been when the whole American independence mess started.  In the end, from an investment standpoint, the “Amexit” proved to be a tempest in a teapot.




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Should you give your RIA Full Discretion?

From the desk of Charlie McCullough

Charlie McCulloughThe other day I was talking to a friend about retirement planning and the importance of working with a trusted financial advisor. I told them about my relationship with the team at Financial Fiduciaries and why I thought fee-only services were valuable. As the conversation commenced, we started talking about whether or not it was a good idea to give an RIA full-discretion to make investment decisions (discretionary investment management) or if an advice based arrangement would be a better idea (with the individual making the decisions based on the advice of a broker).  It was a fruitful discussion in which we came up with many pros and cons. Here are a few of the things we considered:

  • Tying their hands – A non-discretionary advisor has their hands tied when they see an opportunity that requires a quick decision. If they must first obtain client approval, the opportunity could pass them by or a difficult situation could worsen. Discretionary advisors are able to take action on their recommendations which could make a real impact on the performance of the investor’s portfolio over time.
  • Do you trust your Advisor? – An advisor who has discretionary rights must act within the fiduciary standard. This means that the client must have the utmost trust that the advisor will work within their best interest.  Additionally, in order for this type of arrangement to be effective, the advisor must have an intimate understanding of the client’s financial goals and their current financial situation.
  • Can you make a quick (educated) decision – In the end, if you do not give a trusted advisor discretionary interest in your accounts you need to take on the role yourself. How confident do you feel making quick and educated financial decisions? What would you do if the market took a turn for the worse? Do you have the free time and the market knowledge to give to educated oversight to your portfolio?
  • Who will profit from the decisions? – A fee-only advisor does not profit from the decisions they make on your behalf. Rather, they make their money by providing the best possible advice. If a broker does not want to take on the discretionary investment management role, perhaps they do not want to be responsible for their bad advice.

There is a lot to consider when giving your advisor discretionary responsibility of your accounts. In the end, the best advice I could give my friend was to seek a trusted professional and find out if they are a Fiduciary.  This is the best protection for your portfolio and your financial future.

Charlie and Lisa McCullough are fictitious characters who are utilized to illustrate situations in which people might find themselves.  Their family and friends are also fictitious.  While their stories are inspired by actual situations encountered by Financial Fiduciaries professionals working with clients and prospective clients, they are not intended to provide any specific investment advice.  Each situation is different and any general advice provided in the context of these articles may not be suitable for all individuals.  Always consult a professional for advice specific to your situation.
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