The industry is so out of touch with trends in this area. Fees and expenses are going down industry-wide. Clients who never asked us about this before are now doing so, wondering why most of the wire houses, banks, and insurance companies want a delay. As with most things in this world, it's all about money. Consumers should demand the financial people they work with accept and adhere to a strong fiduciary standard. They should ask for written proof, either the firm's ADV form, their Code of Ethics, or something else that is evidence of fiduciary status. Another question should involve commissions, and whether any of their income is based on commission from the sale of products. Consumers should ask to see documentation similar to above that confirms what they are told. If they are unable or unwilling to provide this, consumers should walk away immediately. There is a firm in Central Ohio that puts virtually everyone into annuities. I would love to be a fly on the wall when a potential clients asks those questions. Keep in mind that many companies are really two firms: one that provides the planning/advice, and one that sells the products. So, theoretically the planning/advice firm could say they are fiduciaries by not mentioning the other company that rakes in commissions from annuities and other commission products. Consumers need to be aware of this. I would be glad to discuss this in more detail with folks who may have questions. Again, it's all about the money.

All good ideas, Ted. The one about legal documents, however, is especially good. I cannot tell you how many people think if they have a will, they are all set. THEY ARE NOT! Yes, a will is important. But perhaps even more so are Powers of Attorney that designate who will act on your behalf for healthcare and financial decisions. These are critical, especially for single people, since spouses typically serve as POA for each other. And folks should make sure the financial POA includes language the specifically includes "all retirement accounts". Most custodians like Fidelity and Schwab will not honor financial POAs that do not have this language. The other important legal item is to be sure your beneficiary designations are current. Many times we find folks who have remarried with life insurance and/or financial account beneficiaries still naming their ex-spouse, or young people just married with their parents still named as beneficiaries.
People, please take time to get these two items done, and be sure they reflect how you wish your assets to be handled in the event of your incapacity or death. This really is important.

Old_Joe: Nice to see an article written by Kathleen Pender, an excellent financial writer, who's articles I have linked for many years both here at MFO and FundAlarm.
Regards,
Ted

For a moment there I thought you were talking about student debt which, as a parent, I haven't forgotten about.
On the corporate side of the debt boat:
Nothing wrong with borrowing to restructure old debt, but financial engineering seems to take center stage when company debt gets mentioned.
Borrowing money to buy back shares of company stock, which increases the share price of the remaining stock, which meets quarterly/yearly bonus goals (our stock went up....we must be doing something right), which in turn provides huge cash bonuses for CEOs with borrowed money... (remember borrowed money). Now this seems completely wrong and slightly criminal.

FYI: Companies have been on a borrowing binge, but you wouldn't always know the full scale of their liabilities by looking at the balance sheet. This makes it hard for investors to compare businesses that fund their activities in different ways. Happily though, that's about to change.
How come? The answer is buried in the notes to financial statements (you know, the ones you don't bother reading). It's here that companies have parked about $3 trillion in operating lease obligations, according to Bloomberg data. For non-financial companies, those obligations equate to more than one quarter of their long-term (on-balance sheet) debt.
Regards,
Ted
https://www.bloomberg.com/gadfly/articles/2017-03-20/say-hello-to-3-trillion-in-forgotten-debt

Hi Guys,
Most financial wizards recommend that some portion of our portfolios should be invested in foreign markets. The obvious question is which markets? There is no obvious answer and it is likely that the answer morphs over time anyway.
I have always liked the checkerboard presentation of returns data over time as a nice statistics summary. If patterns exist, they always escape my interpretations. Here is a Link that presents returns for various countries in that checkerboard format:
https://novelinvestor.com/international-st
Here is a Link to a more recent 2017 detailed report on international market performance as compiled by Credit Suisse:
https://publications.credit-suisse.com/tasks/render/file/?fileID=B8FDD84D-A4CD-D983-12840F52F61BA0B4
Enjoy. I hope you find these references useful when making your investment decisions.
Best Regards

What's your advice when it comes to selecting mutual funds that are managed using sub-advisor?
A recent article from FA (Financial Advisor) mentions,

...many institutions and financial advisors favor sub-advised funds because they can hire the best managers and not rely on in-house staff. Currently 13% of mutual funds are managed by outside advisors. And assets in sub-advised funds have increase 25% to $755 billion since 2004. By contrast, assets of all mutual funds are up about 15%, or $453 billion, over the same period.
-(The) largest players in the sub-advisory marketplace include Wellington Asset Management, Alliance Bernstein, PIMCO and Prime Cap. But there are a number of smaller shops with strong track records.
-There often is turnover with investment company sub-advisors.
- The Masters' Mutual Funds group of four funds has outperformed the category average every year from 2002 through July 2006. Each fund has several highly regarded sub-advisors from other mutual fund shops. The Masters' Select Equity Fund, a large-cap blend fund, invests in the best picks of stellar managers, such as Bill Miller of Legg Mason, Chris Davis of Davis Select Advisors and Mason Hawkins of Southeastern Asset Management. The fund has outperformed the S&P 500 over the five years ending in July 2006.

Article:
fa-mag.com/news/sub-advisors-are-in-the-house-1503.html

Mentioned almost 2 weeks ago here at MFO by @Puddnhead with this link:

U.S. subprime auto lenders are losing money
on car loans at the highest rate since the aftermath of the 2008
financial crisis as more borrowers fall behind on payments,
according to S&P Global Ratings.
Losses for the loans, annualized, were 9.1 percent in
January from 8.5 percent in December and 7.9 percent a year ago,
S&P data released on Thursday show, based on car loans bundled
into bonds. The rate is the worst since January 2010 and is
largely driven by worsening recoveries after borrowers default,
S&P said.
Those losses are rising in part because when lenders
repossess cars from defaulted borrowers and sell them, they are
getting back less money. A flood of used cars has hit the market
after manufacturers offered generous lease terms. Recoveries on
subprime loans fell to 34.8 percent in January, the worst since
early 2010, S&P data show.

Link:
acrossthecurve.com/?p=28283

@msf okay so then you agree with what I'm saying. Schwab is not doing any wrong and there is no conflict of interest. With M* there is.
Besides M* used to rail against funds-of-funds charging an overlay of fees. How does it now become okay when M* is doing it and how much is M* charging for this "service".
The real problem is M* has a monopoly on fund ratings. Unless some big financial industry guns come out and seek alternatives, it can do whatever it wants.

https://www.sec.gov/Archives/edgar/data/1023391/000089706917000173/cg891.htm
497 1 cg891.htm
Filed pursuant to Rule 497(k)
Filed pursuant to Rule 497(e)
1933 Act File No. 333-12745
1940 Act File No. 811-07831
FMI Funds, Inc.
FMI International Fund
Investor Class FMIJX / Institutional Class FMIYX
March 17, 2017
Supplement to the Prospectus and Summary Prospectus
dated January 31, 2017
FMI International Fund (the “Fund”) to be Closed to New Investors
Effective April 30, 2017, the Fund will be closed to new investors. Except as indicated below, after April 30, 2017, only investors of the Fund on April 30, 2017, whether owning shares of record or through a processing intermediary, are eligible to purchase shares of the Fund. Exceptions include:
§ Participants in an employee retirement plan for which the Fund is an eligible investment alternative and whose records are maintained by a processing intermediary having an agreement with the Fund in effect on April 30, 2017.
§ Clients of a financial adviser or planner who had client assets invested in the Fund on April 30, 2017.
§ Employees, officers and directors of the Fund or Fiduciary Management, Inc., the investment adviser to the Fund (referred to as the “Adviser”), and members of their immediate families (namely, spouses, siblings, parents, children and grandchildren).
§ Firms having an existing business relationship with the Adviser, whose investment the officers of the Fund determine, in their sole discretion, would not adversely affect the Adviser’s ability to manage the Fund effectively.
§ An investment in the Fund that officers of the Fund determine, in their sole discretion, would not adversely affect the Adviser’s ability to manage the Fund effectively.
The Fund reserves the right, at any time, to re-open or modify the extent to which the future sales of shares are limited.
In connection with the closing of the Fund, the discussion on “Exchanging Shares” on page 33 of the Prospectus is deleted and replaced in its entirety with the following:
EXCHANGING SHARES
Shares of a Fund may be exchanged for shares of any other Fund or for the First American Retail Prime Obligations Fund, subject to minimum purchase requirements:
·FMI Large Cap Fund
·FMI Common Stock Fund
·FMI International Fund (must be an existing shareholder of the FMI International Fund, as the Fund is closed to new investors)
·First American Retail Prime Obligations Fund
at the relative net asset values. An affiliate of USBFS advises the First American Retail Prime Obligations Fund. This is a money market mutual fund offered to respond to changes in your goals or market conditions. Neither USBFS nor First American Retail Prime Obligations Fund is affiliated with the Funds nor the Adviser. You may have a taxable gain or loss as a result of an exchange because the Internal Revenue Code treats an exchange as a sale of shares. The registration of both the account from which the exchange is being made and the account to which the exchange is being made must be identical. Exchanges may be authorized by telephone unless the option was declined on the account application.
How to Exchange Shares
1.Read this Prospectus (and the current prospectus for the fund for which shares are to be exchanged) carefully. (Please note that the FMI International Fund is currently closed to new investors, subject to certain limited exceptions as set forth above.)
2. Determine the number of shares you want to exchange keeping in mind that exchanges to open a new account are subject to a $1,000 minimum ($2,500 with regard to the FMI International Fund and the First American Retail Prime Obligations Fund) for Investor Class shares and a $100,000 minimum for Institutional Class shares.
3.Write to FMI Funds, Inc., c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
Once a telephone transaction has been placed, it cannot be canceled or modified.
Call the transfer agent at 1-800-811-5311 to obtain the necessary exchange authorization forms and the First American Retail Prime Obligations Fund Prospectus. This exchange privilege does not constitute an offering or recommendation on the part of the FMI Funds or the Adviser of an investment in any of the foregoing mutual funds.
********
The date of this Supplement is March 17, 2017.
Please retain this Supplement for future reference.

"nature has been altered by the existence of that oil consumption and the ideology behind it"
I'm not certain that there is any "ideology" working here, other than the age-old tactic of making lots of money while either taking "more than your fair share of" or actually degrading a common community resource. In previous posts related to this concept I've mentioned grossly oversized trucks wreaking destruction upon the common highway infrastructure as an example of this sort of thing. This tactic has a venerable history, dating back at least to the 19th century displacement of small local agricultural interests by the conversion of the village "commons" to private ownership.
This is simply more of the same, with the interesting twist that in the energy-use area we are talking about wreaking impairment, if not a degree of destruction, on the entire planet. Personally, I consider anyone who does not accept the general premises of the scientific "97%" to be either a well-paid charlatan or a fool.
The problem with the data, to the extent that there is one, is the proper allocation of the degree of responsibility for the climate change to man-made intervention. This of course directly impacts the degree of financial responsibility attributable to any one specific industry. If my job involved protection of the profit structure of one of those industries, I would be very interested in hard data that was reasonably specific about my share of the cause, and therefore my fair share of the amelioration costs. I am not optimistic that this issue is going to be resolved any time soon, or even in sufficient time to prevent a universally catastrophic change in planetary conditions.

Let's be clear regarding scientists' funding for research. Does anyone here honestly believe the oil industry, one of the wealthiest industries on earth, doesn't have the financial resources to back their own research that far exceeds any university endowments or piddly grants scientists routinely apply for to fund their research? If there was solid evidence against anthropogenic climate change, legitimate scientists would have long ago found the financial resources to fund the research to prove it. There would not be this massive consensus in the scientific community from different corners of the globe regarding climate change. The fact is, the opposite is the case. The oil industry did its own research regarding anthropogenic climate change and has long known that it is real for decades and has been doing everything it can to cover up this fact ever since:
https://scientificamerican.com/article/tobacco-and-oil-industries-used-same-researchers-to-sway-public1/

I'm not doing anything special; when things I want to own come into my buy range I will buy ... and I'm not investing in or avoiding any specific sector per se just b/c of "rising rates."
The article was okay but I detected a whiff of "OMG DO SOMETHING" to the readers. I'm sure CNBC will be full of talking heads this week about how to invest for rising rates, sectors to avoid, etc, etc, etc too. Sorry guys, I own stuff in sectors you recommend avoiding, and you know what? I'm totally ok with that.
The only sector I refuse to own directly are banks and financial companies -- with the possible exception of maybe Lazard, Blackstone, or TRP. Why? I dont' trust them and they treat shareholders as a source of free money.

@dryflower Yes, I do impugn their motives. If you click on many members of that list, you can find their relationships to the organizations and industries of which I speak. But even in the case of scientists without industry conflicts of interests, let's put it in more human terms:
Suppose you went to 100 heart doctors and 97 of them said if you don't stop eating Big Macs and exercise more, you're going to have a heart attack. The remaining 3, said they aren't so sure Big Macs are the problem. Two of those remaining three you find out have a financial relationship of some sort with McDonald's and will receive some sort of bonus or paid speaking gig if you continue to eat Big Macs. The third just disagrees with the science. Would you take no preventive measures whatsoever based on that diagnosis? Would you continue to eat as many Big Macs as you normally do and do no exercise, or maybe cut back at least a little on the burgers? Because right now 97% of climate scientists say if we don't curtail our use of fossil fuels, the earth will have a heart attack.

@Lewis You may be an excellent writer of financial news, but apparently you didn't hear the latest news about climate change. The Trump administration has proven once and for all that global warming does not exist.

FYI: (Click On Article Title At Top Of Google Search)
Morningstar Inc. has filed with the Securities and Exchange Commission to launch nine mutual funds for use in its managed portfolios that are specifically for financial advisers.
Regards,
Ted
https://www.google.com/#q=Morningstar+Inc.+has+filed+with+the+Securities+and+Exchange+Commission+to+launch+nine+mutual+funds+f&*

FYI: In part 2 of our exclusive interview with Wall Street’s number one economist Ed Hyman, and top global investor Matthew McLennan we look at the dramatic financial changes occurring around the world and what they mean for business and investors.
Regards,
Ted

FYI: Wall Street pros say bull markets don’t die of old age. But after eight years of rising stock prices, being on the lookout for signs of a market peak makes good financial sense.
Regards,
Ted
http://www.usatoday.com/story/money/markets/2017/03/07/bear-market-warning-flags/98695888/

Hi Guys,
Hooray for Larry Swedroe! In this current article Swedroe identifies Monte Carlo simulators as an important tool when making a retirement decision. He joins many financial advisors who also exploit this useful tool when making that life changing decision. I too have recommended application of Monte Carlo simulators since the early 1990s.
Swedroe emphasizes that a projected failure rate from these Monte Carlo estimates is not sufficient as a standalone output. He argues that the time of potential portfolio exhaustion failure during the retirement lifecycle is also critical. I completely agree.
The code that I frequently recommend, from Portfolio Visualizer, does provide that information in a graphic format. Once again, here is a Link to that excellent website tool:
https://www.portfoliovisualizer.com/monte-carlo-simulation
When I first became interested in the retirement riddle, Monte Carlo calculators were not readily available. So I built my own copy. I too recognized that the time of failure was a critical output. So on my version of a Monte Carlo code I included a user option to reduce withdrawal rate percentage by a user input if the portfolio suffered negative returns for 3 consecutive years.
An input of a 10% withdrawal rate reduction after 3 down markets lowered the portfolio failure rate substantially. These Monte Carlo studies encouraged my early retirement. Other approaches to protect against a portfolio failure exist.
I encourage you guys to visit the Portfolio Visualizer website and to consider using their Monte Carlo code. It's a terrific tool; give it a try.
Best Wishes.

The NY Times article cited is really depressing reading for current or former teachers. I may have made this point in another thread, but my view, as a retired faculty member and union officer and the spouse of a retired public school teacher, is that the NEA and its state affiliates have failed to properly represent the interests of teachers, especially with respect to retirement. I have observed a paternalism that expresses itself in opaque arrangements with third parties, probably negotiated in expensive restaurants in full knowledge that most teachers won't notice the commissions and high ERs on the products sold. @bee is obviously very knowledgeable about what is available in CT (my home state) and I wish others were as well informed. I was ignorant about my retirement plan when I started work and I doubt I was alone. I wonder if a course in financial literacy in HS might help.