WEALTH of KNOWLEDGE: Numbers don't lie: The real economic picture

Dawn P. in Seacrest Beach:  Are things really improving in the economy and the stock market?

Arbor Wealth:  Good question, Dawn.  The Federal Government releases a plethora of periodic information on manufacturing, employment and housing, but oftentimes it’s like sifting through Seagrove sand to ascertain its true meaning. Jobs created last summer in tourist-based restaurants and recently created part-time holiday positions will lower national unemployment figures. But wages are not rising. And many folks have stopped looking for work altogether and are not counted in the current national 8.5 percent unemployment statistics.

Walton County unemployment numbers are some of the lowest in the state. Our local builders seem much more active. But selling a property is still a difficult proposition, and while sales are on the upswing, prices continue to decline.  Housing remains at the heart of our national economic recovery movement. Many local storefronts remain empty; many businesses are closing.  Our deleveraging process still has several years to run its course.

One of the anecdotal, but time-tested ways that economists gauge economic prosperity is talking to hair stylists.  If customers are visiting their 30A salon on a 6-week interval, the economy is percolating.  If customers are cutting back to coming every 8 weeks, it means that the local economy is slumping. 

We think that the economy will experience very moderate growth in 2012. It is an election year, though, and few would be surprised to see an infusion of government dollars into the economy before November to keep the engine humming. The real election year issue could ultimately be gas prices. If relations with Iran heat up, or if Iran closes the Straight of Hormuz, and oil supplies decrease, we could experience $5 or $6 a gallon gas costs this summer.  This could throw the economy, and the election, into turmoil, and impact tourism locally.

Larry P. in Sandestin:  I am ready to establish a relationship with an investment advisor.  What should I ask the advisor?

Arbor Wealth:  Here are some questions to ask any advisor you interview, Larry:

1. Are you fee-only?  If the advisor says he is fee-based, he can still sell you products and accept commissions, which may create a conflict of interest.  It pays to work with a fee-only advisor.

2. What is your average account size?  Look for an advisor who frequently services clients with your level of investable assets.

3. Are you a fiduciary?  Advisors who are fiduciaries are held to the highest standard of client care.  Broker-dealers and wirehouse advisors are not fiduciaries.

4. Are you a relationship manager, an asset manager or both?  A surprising number of advisors do not manage assets themselves in-house. You may prefer an advisor who actually invests and rebalances your investments for you personally.

5. Are you a discretionary asset manager? A discretionary asset manager will counsel with you, evaluate your risk tolerance profile, then simply go to work on your behalf. You’ll get confirmations of trades, but the advisor will not call in advance to discuss the purchases.  A non-discretionary manager will call you first and seek your approval before buying or selling securities.

6. Do you subscribe to a buy and hold philosophy?  How often do you rebalance the portfolios of your clients?  For a person or couple near retirement, “buy and hold” may not work, as they may not have the investment time span necessary to wait for their investments to bounce back after a downturn.

7. Do you have any regulatory disclosures?  You can go to www.finra.org, click on the box for “Investor” and then select “FINRA BrokerCheck” to see an advisor’s regulatory record.

Margaret R. McDowell, ChFC, AIF, is the founder of Arbor Wealth Management, LLC, a fee-only registered investment advisory firm that specializes in portfolio management for high net-worth clients. Contact 850-608-6121 or visit www.arborwealth.net for more information.