Letters to the editor

Health planning absent from wealth platforms

I have seen the study referenced in the article “HSA assets grew more than 62% last year, Celent study shows,” which appeared on InvestmentNews.com on June 29.

As health care becomes increasingly self-directed and high-deductible health plans become more prevalent, this trend is bound to continue. In addition, the use of health savings account assets to fund post-retirement benefits will also increase, as the number of employers that offer post-retirement health care continues to decrease.

Unfortunately, health care planning is conspicuously absent from wealth management platforms. Most individuals are in the dark as to what differentiates HSAs from flexible spending accounts and which to select if an employer offers both.

Further, planning for future health care for individuals and dependents is usually ignored until something “happens.” Then, it is too late.

I am a health care planning consultant, and having spent 26 years at Smith Barney Inc. of New York, I can tell you that this will be the great differentiator among wealth managers.

Ellen Breslow

Managing director

EAB HealthWorks

New York

Waiting for clarification on fiduciary rules

The article “Insurance-affiliated brokers face major changes under Obama plan,” which appeared in the June 29 issue, provides a misleading picture of the future for insurance-affiliated brokers.

The fact is, much remains unknown about the fate of the Obama administration’s financial services reform proposal as it relates to this important group. Insurance-affiliated brokers and others are waiting for clarification of how the proposed rules would work, and it remains to be seen exactly how, whether, or to what extent fiduciary rules would be applied to them.

To be sure, there is no solid reason for these brokers to assume that their business models will be upended.

There is good reason to believe that the administration will heed the good work of insurance-affiliated brokers in their capacity as investment advisers for their clients. The careful attention they pay to full disclosure and the investor’s individual needs and objectives is a point the industry is stressing now.

Frank Keating

President and chief executive

American Council of Life Insurers

Washington

Jobless data aren’t all they are cracked up to be

Jobless claims are one of the biggest news releases each month.

The stock market anticipates the announcement as soon as the month begins. Investors have to wait until the first Friday of each month to receive the news.

The press, politicians and so- called professionals spend too much time analyzing this number.

First, the monthly adjustments to the number make the economic release suspect. Second, it is a lagging indicator of the overall economy, and third, the stock market, while affected the day of the release, is less affected by the news one month or more after the release.

Each month, when the Department of Labor releases information about the unemployment rate, it releases the most recent results, along with revisions for the previous month. The Bureau of Labor Statistics revises numbers for the next two months, then finalizes the number the following March.

Additionally, the bureau continues to revise seasonally adjusted numbers for five years thereafter.

Consequently, the unemployment rate is a difficult number to nail down, because it is repeatedly revised for months after the initial release.

The figure is more misleading as an economic barometer.

Since 1948, when the Labor Department began tracking unemployment, the National Bureau of Economic Research, the independent body for monitoring and classifying recessions, has registered 11 recessions. During that time, there have been only two times that the unemployment rate has peaked during the month that the recession ended.

During the past 11 recessions, there were nine times when unemployment increased on average for seven months after the end of the recession. The range has been very broad, from one month after to more than 18 months after.

In fact, during the recessions in 1984 and 2001, the unemployment rate increased for 18 months after the recession. And in the three recessions since 1991, the unemployment rate increased for at least 16 months after the bottom.

And yet the press and politicians are harping on the unemployment rate going higher and the need for more stimuli.

The question of whether the stimulus package will increase jobs, or even if the upturn in the cycle will create jobs, is still open.

But, the real answer is, it is still too soon to know. The unemployment rate is a lagging indicator.

There is no analysis or validation as to what the numbers are really saying. It is better to leave the rate of unemployment well enough alone as a harbinger of economic activity.

As a measure of the economy and the impact to the stock market, the unemployment rate is generally a poor guide here as well.

During the 11 recessions since 1948, the stock market rose by 9.8% with a standard deviation of 11.8% as the unemployment rate continued to rise. The market rise is statistically insignificant during this time.

And yet everyone looks at the unemployment number as highly enlightening.

More attention should be placed on other factors that are more significant to the state of the economy and the stock market.

James B. Cornehlsen

Portfolio manager

Dunn Warren Investment Advisers

Greenwood Village, Colo.

Profiles in social media could be seen as advertising

I truly enjoyed your webcast “Using social media to market your practice,” which took place on July 14.

As the author of “Growing Within the Lines: The Investment Adviser’s Advertising and Marketing Compliance Guide” (National Underwriter Co., 2008), I am concerned about potential violations of the advertising rule that I have noticed in LinkedIn profiles.

Aside from the testimonial issue, which has been brought up by many observers, registered investment advisers may inadvertently be violating Rule 206(4)-1(a)(2) under the Investment Advisers Act of 1940, which restricts ads referring to specific recommendations made by an investment adviser that were or would have been profitable to any person.

In addition, advisers’ profiles may be construed as performance advertising, which must comply with the requirements of a no-action letter. Furthermore, any reference to an RIA’s performance must not be false or misleading in any way.

Therefore, I strongly recommend that advisers avoid any direct or indirect reference to their firm’s performance in LinkedIn profiles or when using other types of social media.

Les Abromovitz

Senior consultant

National Compliance Services Inc.

Delray Beach, Fla.

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