On Rules, Earnings, and Goals

On Rules

Hello and welcome to summer, and welcome to the Department of Labor's new rules. The summer, well we might just be wishing for a little bit of fall over here, it's kind of a scorcher, but the Department of Labor rules we're welcoming with open arms.

The implementation for the rules started on June 9 with a transition period for the rest of the year. Now you may be asking why the rules were brought about, what they are, and what all of this means to you and to us, so let's start with the why. The most basic reason for the new rules is simply a trend change in retirement savings. Originally we had, and still have, the ERISA rules that were enacted in 1974 to cover retirement plans and pensions from employers. These rules are much more stringent than the rules that were covering IRAs and other personal retirement accounts. The addition of the DOL rules comes about because the amount of retirement savings now sitting in personal IRAs and the like has grown exponentially and the need to protect those accounts as stringently as 401(k)s was evident.

The new rules bring over the added protections to all retirement accounts and hold any advisor who services those retirement accounts to fiduciary standards. Mandated fiduciary standards for advisors managing retirement accounts just means that the advisor has to hold the clients' best interests above their own when making investment choices or recommendations. The rules help prevent concealment of any conflicts of interest.

"But wait a minute, I thought advisors already put the clients' interests first." You say.

Well, that's true of Kozun Capital Management in all of our accounts, including non-retirement accounts. That is not true of all advisors by any means. The new rules will hold the most change for commission based advisors and companies who were only held to a suitability standard for their accounts. The products selected for clients could potentially have been selected because the commission for them was higher than with other products, not because the investment would best serve the client. Commission based advisors and companies will no longer be able to do this with any retirement accounts they hold for clients. There are exceptions, but for the most part there is a higher standard of protection for the public.

How will all of this affect us? The truth of the matter is it won't affect your accounts or relationship with us. We are fee based and we have always operated under the fiduciary standard for your retirement accounts and your non-retirement accounts.  Every investment choice or move we've made was made because it was the best one at the time to serve your interest and help you reach your goals.

That being said, the fiduciary standards will not affect commission based advisors on any non-retirement accounts that they manage. We would highly recommend speaking with family and close friends about the new rules to ensure that they know about them. They might not know, and they might not know that that their accounts might not be protected by the higher standards of the fiduciary rule.

On Earnings Reports

Typically, as we've spoken on before, the first year of a president's term is usually the worst in terms of market performance. There is no crystal ball to tell us how that will play out this go round, but even if that is true in terms of this cycle, we are continuing to see some very positive signs with the market this year. Specifically we are seeing some positive results with earnings in Q4 of 2016 and Q1 and Q2 of 2017.  Whether this continues or not anyone can say, but if it does it could lead to some growth opportunities in the market that we haven't seen in a while. Either way, it doesn't change our methods and we're continuing to examine the trends for buying opportunities.

On Goals & Milestones

Speaking of the fiduciary duty, part of that is being knowledgeable as to client goals. So, how are yours? Has anything in your life recently changed that might suggest a shift in focus or planning? Please give us a call or email and let us know, this information is vital to us in serving you.

With goals in mind, if you would like a retirement report or education savings report detailing where you are on the road to retirement or paying for your child's education with your investments and possible rates of return please email kozun@kozuncapitalmanagement.com to request this and a meeting or call to discuss it with you. It is important for us to make sure that we stay on the same page as you.

Market Commentary Disclosures:

The information contained herein is obtained from sources believed to be reliable but its accuracy and completeness is not guaranteed. Due to market volatility, any opinions expressed herein are subject to change without notice. Investors should be aware that there are risks inherent in all investments, such as fluctuation in investment principal.

The S&P is a market-cap weighted index composed of common stocks of 500 leading companies in leading industries of the U.S. economy.

The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

Indexes are unmanaged, do not incur management fees, costs and expenses cannot be invested directly. Past performance is no guarantee of future results. Returns do not include sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. Index returns include reinvestment of all dividends.

Sources: New York Times, CNBC, Thomson Reuters.

Neither NEXT Financial Group, Inc. nor its Representatives give tax or legal advice.