Noal Goldfarb Doesn't See Much Upside Left to Bonds (Audio)

weakness overseas. After the report, traders lowered their expectations for higher interest rates in June. Crude oil is falling for a second day as a rock sax sports approach to record high in April. We checked the markets every fifteen minutes throughout the trading day. Down Industrial Average is up one d twenty nine points shortly before the closing bell. That's a gain of three quarters of a percentis trading

at seventeen thousand, nine hundred three. SMP five funded up seventeen points, seven eighths of a percent to two thousand eighty two. The NAZDAC is of forty five points, a gain of one percent, trading at forty twenty. West Texas Intermediate crude oil down a dollar a bear two spockled up a dollar ninety announce at ten your treasury down thirty seconds with the yield of one point eight six.

And that's a Bloomberg Business flash. You're listening to Taking Stock with Kathleen Hayes and Pin Box on Bloomberg Radio. New rules, new rules are governing the responsibility of the individuals that manage your money. Let's find out what these new rules mean to you. Noel go Farb is a financial advisor for National Financial Network. He is a c f A charter holder and is a certified professional when it comes to retirement income. No, thanks very much for

coming into the studio. Much appreciate it. Thank you very much for having me. So tell us a little bit about these new fiduciary rules. This is coming from the Department of Labor. Correct, That is correct, the d o L. They put out a one thousand odd page ruling. It's very technical, actually, and many firms are reviewing that as we speak to kind of figure out exactly how that's

going to affect UH advisors and investors. Because what happens is um there are there's a lot of money out there, a lot of money in qualified plans for one case, four or three bs and down the road, these these moneys will most likely be rolled into I RA s, and the d o L is who wants to have rules associated with that money to make sure that the clients are taken care of. Okay, Now, when they say clients are taking care of what is the current state? I mean, why do they need rules? What is wrong

with the current situation? It's funny, it's according to the d o L. Funny to say that because I as a c F, a charter holder, and being that ethics is is up there as the top part of that whole program. I've always considered myself a fiduciary and always consider myself putting my client ahead of myself. And that's the way it should be. Uh in every aspect of life,

I believe. But unfortunately there are there are sometimes bad people, and and I think these people need to uh there needs to be regulations to make sure that at least those people with money in I RA s are taken care of. And there are not certain products and high feed type products that may may they may be taking advantage of. Now, when you say high feed products, is

that really the underlying issue? Here that products that would benefit the seller, let's say, with a commission, are sometimes recommended, and the Department of Labor wants you to be able to say legally that you're a fiduciary and that the product is either good for the client or the client should stay away. Right. Well, the ruling again, it's being

looked at, so we don't exactly know everything yet. But the way I see it is that we want to make sure that the products are what's best for the client. And the great thing about what I do is is I help my clients understand all the risks that are associated with retirement and with getting to retirement that when they get there they have everything they need to be able to the income they require when they retire. Right, but can't can just just the point and then we'll

go on. But it can the client now can ask anybody who is UH soliciting their business, are you a fiduciary? Correct? I mean it's a it's an specific term and it has legal implications. Sure, sure they can ask that. And myself being an advisor and and UH a fee based meaning I charge fee for the assets I manage. I am fiduciary, I'm held at at higher standard. I think in this instance, again it's being reviewed, so I don't know all the detail because it's a very large document.

I didn't You didn't get through the thousand pages last night? Right? Well? I I fell asleep halfway through. All right, So given this, will you do you believe that there will be a change in the financial industry The smaller firms will be forced to consolidate in order to defer the cost of these new rules. Well, um, I think unfortunately what might happen, Um.

All speculation of co us is that maybe the little investor might get hurt in the end because the costs involved might be too great to take care of those people, which is unfortunately because those are the people who need the most help. Let's turn our attention now to retirement. Particularly in a low yield environment. You must be getting a lot of calls or a lot of questions from people about how are they going to live when you know you've got, what is it the tenure today one

point eight six percent. If you want to go out even longer than thirty years, you'll get two point seven one What kind of questions? What kind of issues are you dealing with? Well? The big issue is I see um now in going forward, is is there used to be U pensions. People used to receive pensions to find benefits, find benefit plans, and you know, once upon a time people lived happily ever after. And now what I find is that when I read when the east of my

daughter doesn't like reading a books anymore. When I used to read her books, the fairy tales used to end in living happily ever after, And now that unfortunately, because of pensions really disappearing and the individual needing to take better care of their own retirement plan and throw in it. The biggest risk that we have right now is that we're all living longer. That's the longevity risk. So all of these risks are are pointing towards a more difficult environment,

especially when is low interest rates. Uh. And what happens is, unfortunately is there are certain types of strategies that people can implement that can help them reduce the amount of risk they're taking and as well as reduced taxation. So as I always tell people, I can't control the market. I don't know where it's going to go. We know we have to have a diversified portfolio, but what we can control is the amount of risk we take and the amount of taxes that we may pay in retirement.

And if we can do those correctly, then they can actually have a higher net after tax cash flow in retirement and not have to worry about interest rates. Does that involve what things like life insurance or annuities? I mean what kind of cash involves and involves all the above. Every everything depends on the case on the every that's

that's the whole deal. Every situation is different, and we need to analyze each situation, look at how much how many assets they have, and determine the type of income that they require in retirement. Can you can you outline what are some of the big mistakes that people make when they when they looked at their financial planning for retirement. Well, the first mistake most people do is is they don't

save enough. It's as simple as that. If people would just budget better and save more, they would have more in retirement. Now, the other big mistake people make is they take too much risk. I mean, we look at the uh, the interest rate environment. Of course it's forcing some people. I see this every day when I meet people and they say, well, I need a higher rate

of return, where do I go? And they end up taking a lot of risks as people that are in their sixties and seventies, who are you know, invested too heavily in the stock markets because they need that that rate of return to generate that income that they require. Now I understand that in a previous life you manage money on an institutional level. For McCay and shields, what did you learn? What did you take away from the from that experience, how the market works that you're able

to apply now on a retail side. Well, the one big thing that I've learned from that aspect from institutional side is, first of all, I I dealt with the international equity markets on the developed side, and that is really a very should be a very small part of everyone's UH financial strategy, if you will, So it's it's

just a little piece. So what that has taught me was when I look at a person's entire balance sheet, we need to invest it properly and have a diversified portfolio, for sure, but we need to have other things in that strategy that are going to help benefit them down the road, both on a risk and tax perspective. I

want to get your thoughts now on the current investment environment. Uh. If you take a look right now, uh, Dow Jones Industrial average year to day, you're up two and a half percent, SMP five, you've got a gain of maybe two percent. What do you see for stocks the rest of your what are the big issues? Oh? Well, the

rest of the year. It's such a short term. I'm I'm a longer term person, all right, so, but but I mean the way I see it right now sitting here is, obviously we see all the data coming out. We see GDP numbers not so great half a percent. Yeah, we see earnings reports not so great for the most part, unless you're Amazon dot Com all right, EXCEP always exceptions. I buy I buy things from there. Uh. But the

issue here is going forward. It might be that we're a little little ahead of ahead of ourselves, and a pullback, Um may you know, may happen, should happen. I mean, I market uncles straight up. And really we've had a decent market run for the last two years, and of course since the FED stopped intervening with with with que, the markets have been kind of flatished to down. So

we'll see what happens. I I think longer term, we have a lot of issues, and maybe we'll get through the election year and we'll see what the new president brings to the table. What about bonds, Uh, you see people pounding the table saying buy treasuries or what what's the what's the outlook there? See if you go if you go back to the early eighties, it made sense

to to buy bonds when rates were so high. I remember I had a paper out in the early eighties and I was putting my money in the bank at thirteen four c d s h. But unfortunately that that situation is just nostalgia. Man, that doesn't exist anymore. Right, So with the low, with rates where they are, I can't see how bonds can perform much more again traditional bonds.

I mean, there might be some places to invest in in floating rate notes or or other inflation protectors or something if people want to obviously take less risk, and that's also, uh, just a piece of the overall strategy, and it's important to people to understand that. Thank you very much for spending time with us. So no Go Far Financial Advisor National Finance Shill Network on new fiduciary rules and planning for your retirement. You're listening to Taking Stock.

I'm Pim Fox and this is Bloomberg Radio.