Don’t Make the Same Mistake as Prince

maxresdefaultDon’t Make the Same Mistake as Prince

Before he died, Prince had an estimated estate of $300 million. In addition, he had a whole library of unpublished music and future royalties that has an unknown net worth. Most people who have an estate that large typically have a complex estate plan that minimizes taxes at death and details out how the estate is to be distributed. At the very least, people have a basic will.

Prince had nothing… estate plan and not even a simple will.

Now it is up to a judge to figure out and determine who gets what. I am sure that there will be people coming out of the woodworks to get their piece of the estate. It will probably be one big ugly fight.

You probably don’t have an estate problem as complex as Prince. However, everyone has an estate of some type and everyone needs a plan.   This is especially true if you have children. It goes way beyond the assets you might leave if something happened to you and your spouse. Most importantly, it is about the welfare of the kids.

Most parents think that getting a will in place will do the job. The problem is that a will doesn’t completely do the job in the worst case scenario and you always have to plan for the worst case scenario. What if something happened to both spouses leaving the kids without parents? Grant it, the probabilities are very low. However, since probabilities remain, you have to plan for it.

Think of a will as a wish list. You write in the will what you wish to happen for your family hoping that a probate judge agrees. After all, your will has to be approved by a probate judge. Also the probate process leaves your estate open to a challenge from an interested party that disagrees with your wishes.

If you take one additional step, you can eliminate these potential liabilities for your kids. Setting up a trust fixes that problem. AT the risk of making an attorney cringe, think of a will as a wish list and a trust as the final word.

When a trust comes into play, everything transfers to the trust. It becomes a private matter and avoids probate. You appoint ahead of time someone to administer the trust. You can go into detail what you want to happen in the event that the worst case scenario occurs. You can elect guardians. You can dictate how and when you want the money to be distributed and for what reason. Said another way, you can protect the kids from themselves by giving them access when they are more mature to handle it.

This is even a good step to take if you have adult children. I know of too many stories where adult kids would get into fights after the remaining parent has passed. With the trust, you can remove all questions as to where assets are to go.

The process is easy. It takes very little time to set up. A few appointments with an estate planning attorney will get the job done. For the sake of your family, this is one thing you don’t want to neglect to do.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

What We Can Learn From the Decline in Apple


Apple_gray_logoWhat We Can Learn From the Decline in Apple

On CNBC, where they consistently drink the Kool-Aid, one of their commentators in 2015 said, “Apple is probably one of the lowest risk stocks to own.”  I will bet he might want to take those words back.

Apple stock has had a rough ride. Over the past year it has dropped over 27%. One of the most popular stocks on the exchange that has been an investor favorite. At the same time, it has also been described as the “biggest wealth destroyer.”

Some 363 mutual funds owned the stock at the end of 2015. Then there are the investors who are chasing performance. If you are making money like Apple did, everyone wants to be involved. However, the great don’t stay great forever. What goes up can come down.

The good news is that there are investment lessons to gain from Apple.

As a company gets more profitable, expectations are hard to maintain

Profitability was one of Apple’s biggest problem. The more and more profitable Apple became Wall Street had higher and higher expectations for higher earnings. There comes a point where you get to big and expectations get out there way ahead making it impossible to keep Wall Street happy. Said another way, you have to sell a lot of Apple watches to make your earnings numbers. That hasn’t been happening. Unless they come out with some new technology soon, it could be a painful drop down to the stock price where expectations are realistic again.

Global economy means global risk

I have heard commentators blow off the influence of China’s economic decline in relation to the US. Unfortunately, that is not a wise move given that they are the second largest economy in the free world and we are all interconnected. Apple’s sales in China were down 26% in the latest report. That is the largest single regional decline for Apple. Plus, the Chinese government blocked Apple’s services such as iTunes and iBooks from its’ company. Here you have a double whammy. China’s economy is in free fall and their government controls what they want to control – and apparently that is Apple.

What Goes up Quickly Can Fall Hard – Always have an Exit Strategy

In 24 years of managing money, I have always found it interesting how investors can act as if a stock price can go up forever. There is always a peak. There are no sure bets. This is why it is important to have an exit strategy in place.

“When everyone thinks alike, everyone is likely to be wrong.”

Humphrey O’Neill had a famous saying. He said, “When everyone thinks alike, everyone is likely to be wrong.” When a stock or an idea/concept gets “crowded” it is usually a sign that the good times are about over. Everyone loved Apple Stock. Everyone liked Real Estate and Technology stocks in the early 2000’s and look what happened.

A 27% decline is hardly the end of the world. However, there are many things that are concerning about Apple even at this point. The key take away is what you can learn and apply to your investing.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Are You Getting the Financial Advice You Need?

Are You Getting the Financial Advice You Need?

  • 80% of people between the ages of 30 and 54 don’t think that they will have enough to retire.
  • 38% of people don’t save anything for retirement
  • 36% of people over the age of 65 depend completely on social security

These statistics are not very encouraging.

There is a big problem that I see when it comes to personal finance. There is a gap between what people are doing financially and straight-forward advice. We spend 12 years in the education system and for those fortunate enough 4 more years in college with no exposure to financial education. As a result, we are forced to figure out this whole money thing on our own.

To make things worse, we have a financial services business that is primarily more concerned with selling product than giving good advice. Of course, that is not every financial advisor. There are some great ones. At the same time, there are far too many that are more interested in product sales.

It is time to get on the right side of those statistics.

One of the main reasons that I felt called to and feel that I was given the opportunity to host the radio show was simply to educate and educate through the lens of stewardship.  To accomplish that, we are in the process of rolling out many resources to help as many people that want to be helped. I want to reverse those statistics! Once our new resource library is rolled out, you will find the 20-minute conversations with Bob on Fridays, customized spreadsheets for budgeting, planning, keeping track of expenses, educational videos about all things about money, submitting any questions to Ask Bob, our free risk survey with risk analysis, and more!

In the meantime, I want to make sure that you know about my financial advisement practice. There is something very different about my practice. Let me explain it this way. Everyone has a financial journey that they are traveling. Some are behind, some ahead, and some just starting. Most advisors who have been practicing as long as I, only focus on those who are ahead on that journey. As a result, most people don’t have access to experienced advise.

I have spent nearly 24 years developing a practice model where I can help people no matter where they are on that journey.

It might be as something simple as helping you through Ask Bob or you becoming a client. I can counsel on anything when it comes to money. So, if this speaks to you at all, let’s start a conversation. There is never any pressure to take action. If you need something as extensive as a fee based meeting and you can’t afford the fee right now, that is ok as well. A part of my practice is to minister others by giving my time and advice- helping them right where they are now.

Together we can fix the problem of financial advice. To get more information, call Judy to set up a time. She can be reached at either or 972-386-0384 ext 206. You are also welcome to email me personally at or text a question by first texting Prudent Money to 77978.

Annuities and the Secret Behind the Guaranteed 9% Return

financial growth concept. plant in coins over whiteAnnuities and the Secret behind the Guaranteed 9% Return

The annuity business is booming for the right and the wrong reasons. At the very basic level, annuities give risk averse investors something that they can’t get at a bank with a CD.  Fixed annuities pay much higher fixed guaranteed rates than CD’s. Investors that want the guarantees at least have better alternatives than the banks with their pitifully low interest rates.

Then there is probably the most popular annuity right which is the fixed indexed annuity. The pitch for this one is always the same. You get to participate when the market goes up. However, when the market loses money your principle is protected. Let’s face it – that is a pretty good marketing pitch. Who wouldn’t want their cake and eat it to?

I will have to hand it to the insurance industry. They finally created a decent guaranteed model with the fixed indexed model. It is definitely better than the equity indexed annuity model which benefited the insurance industry more than the insured. I guess all of the lawsuits finally woke the industry up!

The problem with the fixed indexed annuity is the annuity sales machine and its overly aggressive sales people. For example, you can’t turn the radio on AM on a Saturday morning and not hear a pitch for an easy way to make money. You take no risk and get a guaranteed 9% return. If that existed, I would stop managing money all together and just put my client’s money into these magical investment products. The problem with any of these irresponsible sales people who make these claims is that their 9% is not the same as your 9% return. Their 9% return is clocked in smoke and mirrors and fine print.

The 9% you are looking for is an investment return that you make year in and year out without any “gotchas” on the other end. Of course, that doesn’t exist.  Once again it is highly irresponsible and perhaps even unethical for any financial professional to even insinuate that to be the case. Yet it happens Saturday morning after Saturday morning on the radio.

Then there are the aggressive assumptions that are made on future return.  Fixed Indexed Annuities are based on a formula that creates the return.  Formulas have variables.  Advisors are notorious for selling annuities based on “non-guaranteed” aggressive assumptions.  Said another way, if I show you an illustration where the guaranteed annuity averages 8% a year due to me using the absolute best case scenario you are likely going to want to invest your money.  The problem is the best case scenario has a less than 10% likelihood of actually occurring.

Bottom Line – Annuities can be a good investment for the safe money, conservative investor.  There are two things you need to know.  First, understand that there are good annuity products and there are ones that benefit the advisor and the insurance company more than the client.  So, chose wisely! Second, make sure you are working with an advisor that is more interested in advising and guiding you to what is in your best interest versus “selling” you a product. If you are unsure about your annuity plan, you are always welcome to send me the information through Ask Bob and I can give you an opinion.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Puerto Rico is Why You Should Stay Away From Municipal Bonds

This is Not a Good Sign for the Stock Market

Puerto Rico is Why You Should Stay Away From Municipal Bonds

I have never understood why anyone would want to loan money to a city or state that is in heavy debt. When you invest into a municipal bond that is exactly what you are doing. We think that our federal government is poorly run. Investors don’t even stop to think how bad and corrupt it is at the state level.

Puerto Rico, who is knocking on the door of financial insolvency, is in debt by 72 billion dollars and quickly running out of money. They aren’t afforded the option of Chapter 9 bankruptcy. However, to make the problem go away, Congress is trying to change that and the individual investor will take the loss once that happens.

Yes, Congress has a fall guy when it comes to state debt. Think about how this has unfolded. First, interest rates are driven down so low that investors are going to markets such as the muni bond markets for higher interest bearing investments. They should be safe right?  After all it is the promise to pay by states that is important. So, in effect, the politicians left the states financial irresponsibility up to the individual investors to bail out. Now, they are voting to allow the individual investor to take the loss. That all works out real nice.

It is another bail-out. Not at the expense of the taxpayer but at the expense of the investor. If you go and look at what muni bonds are for sale, you will see the highest paying ones are for Puerto Rico and for the State of Illinois which is just as bad. So, Puerto Rico goes first. Then it will be ok for the State of Illinois to go next. Maybe California will be next. Let’s reward these states for the financial corruption and irresponsibility.

The irony is that it is our very own irresponsible politicians that are working to allow this to happen.

The problem is once the nuclear option of bankruptcy goes into effect, the investors have no legal options for protection. They are wronged by the very system that was supposed to honor their investment.

SO, Congress set up the individual investor for the fall. That is genius. After all, they didn’t want to have to pay for the problem.

Careful what you wish for politicians. This could have a huge ripple effect across the entire muni bond market driving up borrowing costs, driving down muni bond prices, and greatly effecting every state that needs to borrow money. Of course, that is just what they do. Politicians messing up markets.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Why Do Millennials Like Bernie Sanders?

26157430056_2b81ec9313_bWhy Do Millennials Like Bernie Sanders?

I am about to shoot a teaching video for on advice I would give the Millennial generation. I think that this generation is an important one. They have the opportunity to turn financial illiteracy around once and for all. The cycle has to stop. There is not much hope for my generation. However, for younger generations, there is hope. It starts with proactive steps to learn and get an education on how it all works. With that information, you can make better decisions and form more effective habits.

The interesting aspect of the millennial generation is that they are the best equipped to take this on. Survey after survey would show that they put priority on financial education. The surveys would show that the millennials out of all of the generations are the biggest savers. I told this to a friend and he commented that of course they save. They are all living at home with their parents. That comment like most is very misguided due to the misrepresentation of the millennials by the media. If I were back in my 20’s living with my parents and had an extra $1,000 a month believe me it would have been spent and not saved. It takes discipline to save and they are doing it.

There is however a troubling aspect of this generation in that they prefer socialism over capitalism. I thought a lot about this because it doesn’t support my thesis about this generation. Socialism doesn’t work.  I would challenge anyone to show where this is working. You could make the argument that capitalism doesn’t work either. Although neither have been effective. I think you have to look much higher for what is not working.  Cronyism and out of control politicians are the blame. They have ruined capitalism making socialism more desirable.

However, if you really think about it, the support for a socialist makes sense. First, they are drowning in student loan debt – a problem created by the politicians giving out debt like candy. If I were drowning in student loan debt and there was a candidate that was going to do something about it, I probably would prefer them as well.

Second, there is an appearance that capitalism has failed them. Employment out of college is not so hot. Most have to rent because they can’t participate in the America Dream of home ownership. The whole notion of capitalism hasn’t worked out for this generation.

Third, then there is the cost of healthcare – another problem created by the politicians. It is spiraling out of control.

Finally, just like that generation doesn’t know what a Dallas Cowboy super bowl looks like, they also have never experienced capitalism working.  They have only watched socialism get bigger and bigger.

It should be no surprise that Bernie Sanders appeals to the millennials and they prefer that over capitalism. Unfortunately, that just strengthens the shift to socialism and the death of capitalism.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

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