It’s the season of change! We have officially welcomed Fall and completed our merger with Charles Schwab. My team appreciates your patience as we continue to make sure everything is in good order.

You are now able to log in and view your accounts through Schwab Alliance. If you have not already set up your credentials, I encourage you to do so. Visit schwaballiance.com, select New User, and then follow the prompts.

Investment Update

Since the last quarter, our stance on your investments has remained essentially the same: defensive.  After posting a strong rally in the first half, equity markets stalled in the summer and have fallen in September.  High valuations, bubbly technical factors, and questionable earnings prospects in a slowing economy hurt stocks. Higher interest rates and risk of rising inflation also provide headwinds.  Your investments are positioned in a large chunk of T-Bills (minimal credit and low interest rate risk), liquid alternatives (equity long/short, merger arb) with smaller amounts of commodities and equities (mainly US, small emerging market).

Not All Coupons Are Created Equal

A major change over the last year has been an increase in interest rates offered on different investments.  Our newsletter from a year ago highlighted emerging opportunities in select high coupon, low credit risk fixed income that we had not seen in previous years.  Since then, yields on corporate bonds, preferred stock, bank CDs, and annuities have also risen.

The question remains: does all that glitters equate to gold?  We have written an extensive guide that explains why all that glitters is not gold.

We would caution investors not to chase investments simply because they advertise a high yield.  Credit risk (“Will they actually pay you back?  Are they paying you a competitive rate relative to similar borrowers?”) and interest rate risk (“How will this investment look if markets raise/lower overall rates?” are key factors to consider.

Liquidity is another factor.  If you need your principal sooner, how long would it take for you to get it out?

Each investment has specific risks.  Bank deposits insure up to $250,000 in FDIC insurance per depositor.  But what if you have more money to invest?  CDs penalize you on interest earned for early withdrawal before maturity.

Annuities advertise the opportunity to lock in rates for a longer time.  Yet, they come with high costs and limited liquidity (surrender charges, minimum withdrawals) over many years.  What if you need your money sooner?

T-Bills have minimal credit and interest rate risk.  The main risk is if the Fed were to begin cutting interest rates; yields then might fall.

Preferred stocks offer high yields, but they face price risks depending on what both stock and bond markets do.  Additionally, if the issuing company faced bankruptcy risk, bondholders would get paid before preferred share investors.

The Myth of Compound Market Returns and the Reality of Why Timing Matters

When the stock market is doing well, you are likely to hear about “compound market returns.” This concept is often used to convince regular investors to put their money into Wall Street’s hands. But what exactly is it, and is it as great as it sounds?

The idea of compound market returns is based on the belief that the stock market always goes up, making it a good time to invest no matter when. You might have seen charts that suggest if you had invested 120 years ago, you would have earned a consistent 10% annual return (8% after inflation).

However, the problem with this rosy picture is that most people don’t have 123 years to invest. We need to focus on the time we actually have.

For most of us, retirement is not so far away. Many people I know say they have at most around 15 years. This is quite different from the 30 or 40 years often suggested by financial advisors.

Many people don’t start saving seriously for retirement until their mid-40s. By that time, they’d graduated, found a job, gotten married, had kids, and sent them off to college. So, they only have about 20 to 25 productive working years before retirement.

Another factor is Stock market valuations, which go through cycles of highs and lows.  When valuations were high in the past, the market didn’t perform well until those high valuations came back down.

The key point here is that when you start investing is critical to your financial future.

Now, let’s address the second myth: “Compound Market Returns.” Albert Einstein famously said, “Compound interest is the eighth wonder of the world.” But he was talking about interest, not stock market returns.

Popular sources have used this quote to encourage people to keep putting money into the stock market consistently, assuming an 8% annual return. They claim compounding will make your money grow.

However, there’s a big difference between actual returns from the stock market and an average or compound market return. Stock market returns are unpredictable and can vary widely from year to year.

In reality, compound market returns are a myth. Market downturns can have a severe impact on your investments, especially if they happen when you’re close to retirement. You might be able to recover lost money over time, but you can never recover lost time.

With current high valuations and interest rates, there’s a real risk of another market downturn. Investors need to be realistic about their future returns and the time it takes to reach their financial goals.

Beware of Smishing: A Sneaky Cyber Threat

Smishing, a blend of “SMS” and “phishing,” is a real cybersecurity risk. It can happen through text messages, WhatsApp, or other social media chats. Attackers send mass messages with a sense of urgency, aiming to trick recipients into clicking malicious links. Once lured in, victims may end up on fake websites where their personal information is stolen. Be aware of bogus messages posing as trusted banks or financial institutions

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 4Q23 appeared first on AWM.

We do our best, but a digital life can put us in harm’s way.

If cybercrime happens to you, it’s important to know what to do and act quickly.

At its best, cybercrime can wreak havoc in your life and cause a major inconvenience. However, at its worst, cybercrime can lead to financial ruin and even threaten your reputation and/or personal safety.

What can you do?

Step 1: Take a deep breath and get perspective.

Cybercrime is a serious conflict and should not be taken lightly. You are at war with cybercriminals, who are absolutely ruthless and move fast to take advantage of their victims.

However, if you act quickly, you can help limit the damage of hacking and get your life back.

The National Cybersecurity Alliance wrote an excellent, free guide on what to do if you become a victim of cybercrime. We strongly encourage you to read through their short 2-page pamphlet.  Here is a summary of their main points:

• Cybercrime comes in many forms.
• You should report cybercrime, but you need to report it to different agencies of law enforcement.
• Gather your evidence, both paper and electronic.
• Read through tips on specific types of cybercrime.
• Take preventative measures against all forms of malware.
• Read other websites about how to fight or file a complaint against cybercrime.

Step 2: Let your financial institutions know what happened.

Call your bank, financial advisor, insurance agent, or other providers to alert them of the situation.  They might be able to offer you additional advice.

Consider also contacting the credit agencies and putting a fraud alert and in some cases, a credit freeze on future applications for credit in your name.  Hackers might attempt to exploit your weakness. They will use your data to fraudulently make credit card applications in your name.

Step 3: Change your accounts with different, more robust passwords.

This might seem obvious, but it’s a crucial step nonetheless. Most of us just don’t do it.

Change the passwords on all of your financial accounts. It’s best to keep personal information out of your passwords, so try adding symbols, numbers, and blank spaces instead.

After the dust settles, be proactive and defend against future attacks.

You can put your life back together after a cyber-attack. However, you also need to think of the future.  Take additional defensive measures to make it’s much more difficult for a cybercriminal to hack you in the future.

The post 3 Things to Do If You Are a Victim of Cybercrime appeared first on AWM.

However, if you did receive a letter from LPL, we would like to share our thoughts on some disappointing news.

**As a reminder, we ended our partnership with LPL over a year ago to better focus on serving clients like you. Our decision to separate was partially to improve and secure our technology. 

Unfortunately, even though we had separated from LPL, they continued to retain information on certain clients for their own compliance. Consequently, clients’ records were at the mercy of LPL’s security efforts and their third-party providers. Regulations require financial institutions, like LPL, to maintain records on all former clients for several years.

Those records include personal information.

The letter dated as of November 17, 2018 states: one of LPL’s providers, Capital Forensics, suffered a security breach on November 1, 2018 by an unauthorized person who “gained access to a single Capital Forensics user’s account on a third-party file-sharing system.”  Upon investigation, LPL “determined that the files included some of your personal information, including your name, account number and Social Security Number.”

Upon several attempts to learn more about the breach, we were unable to get specific or detailed answers that gave us comfort. LPL will not share any specific information about individual clients, as we are no longer affiliated with them. They have encouraged us to have our clients call LPL directly for more information.

LPL provides further details in this article, along with a phone number for questions on free credit monitoring. They also offered our clients to use their third-party relation, AllClear Identity Repair, to monitor any account(s) that might have been impacted. We have no direct relationship with AllClear, nor have we done any due diligence on their company or services. Therefore, we don’t feel comfortable making any recommendations.

Our top priority is to protect your security and identity. We have written some advice in the last few months on how to prevent and deal with cybersecurity. You can read our recent October blog discussing some steps to consider if you become a victim of cybercrime.

The post Our Thoughts on the LPL Financial Data Breach – November 2018 appeared first on AWM.

You gave us a serious responsibility to take care of you. Part of that responsibility includes guarding the security of your accounts.

Since we became a registered investment advisor (RIA) firm in 2017, Ambassador Wealth has invested significant resources in reviewing and upgrading security measures to defend against outside intruders.

While there are no guarantees against hacking attacks, we will do all we can to make us a difficult target for cybercrime. Here are 3 key examples of how we defend against cyberattack.

We Care about the Security of Our IT Infrastructure

After conducting a comprehensive review in early 2018, we made some upgrades to our IT infrastructure. Examples include:

• Physical protection of our networks and servers
• Frequent data backup both on and off premises
• Putting our corporate website on a more secure https[2] domain

Additionally, we invested resources in doing a thorough vetting of our business partners. We sought to understand how well their security efforts measured up to industry standards.

We Ourselves Needed and Got Outside Help for Cybersecurity

As an RIA firm, we are one of the most highly regulated industries in America. While that imposes costs and extra work, there are some benefits as well.  One benefit is that it challenges us to think through key business issues deeply. One of those includes cybersecurity.

We recognized that we are not IT experts on our own. So, we brought in business partners who can use their expertise to help us.

One consultant monitors our networks 24/7. That includes things like backing up our data on and offsite, updating our hardware and software defenses against cyber attacks, and ongoing review of our current hardware and software needs.

Another consultant specializes specifically in cybersecurity for financial service companies. Their expertise has been instrumental in educating us on our role in cybersecurity.  We have instituted a continuing cybersecurity education program for our employees, which includes mock “phishing” Emails and other simulated attacks to review and upgrade our defenses. Also, we have instituted better procedures to deal with a variety of issues, including contingency planning.

We Enforce Firewalls around Your Money

Those of you who have worked with us for a while will be quite familiar with this defensive measure. While it has been around for a while, we still think it is worth mentioning.

Whenever someone wants money transferred from their account, you will receive a phone call from us. We do not simply comply with Email or voicemail instructions. We want to follow up with you personally to verify your identity and confirm your request.

In addition, do not be offended if we ask you a few personal questions to make sure it is really you. It is because we care about your security.

Another subtle but important point is that you cannot conduct any transactions on your My Wealth portal. It is simply a way for you to monitor balances in your accounts and to receive communication from us. That is important because it provides one less opportunity for intruders to try to gain access to your funds.

Schedule appointment

[1] https://www.techopedia.com/definition/24747/cybersecurity  accessed on September 27, 2018.
[2] https://en.wikipedia.org/wiki/HTTPS  accessed on September 27, 2018.

The post 3 Things We Are Doing to Defend Against Hackers appeared first on AWM.

The only 2 things guaranteed in life are death and taxes. Everything else is fair game—much of which can hurt us.

That being said, there are proactive measures we can take to decrease our chances and the impact of bad events happening to us or our loved ones.

Cybercrime (it’s like someone sneaking into your house and taking your personal information—but electronically) is one event that we all need to be on guard against.

To put it in perspective, the estimated loss from cybercrime ranges from $60 billion to $110 billion a year, according to the White House Council of Economic Advisers.[1] Globally, software provider McAfee estimates the global market for cybercrime to be a whopping $600 billion and growing.[2]

The nasty impact of cybercrime is more than just dollars and cents. It affects the lives of real people.  Consider the massive data breach of over 140 million personal records at credit scoring agency Equifax.[3] Target and the Department of Defense (DOD) made the news in the last few years for a similar problem.

Assuming each of these records represent a unique individual, nearly 1 out of 2 Americans alive today would be affected.

The reports are shocking. So, what can you do?

You Can Defend Yourself from Hackers and Cybercrime

While no one can guarantee you’ll never be hacked, there are some things you can do to make yourself a difficult target – and lower your chances of becoming a victim of cyber crimes.

1. Protect your identity.

   FINRA has a couple of helpful checklists on protecting your identity and your finances.[4]  Also, develop a proactive strategy to protect your passwords.[5] Even something simple like changing your passwords often or complicating it with numbers and symbols.

2. Safeguard your personal computer.

   Purchase and get regular updates for your antivirus and other security software, as well as installing a physical firewall for your home network.

3. Don’t surf on public networks (like Starbuck’s) unless you are willing to invest in a Virtual Private Network.
   

   Some hackers will sit in the restaurant near you and intercept your traffic (including usernames and passwords).  You put yourself at great risk if you access sensitive information in public, unsafe places.

4. Be careful of suspicious Emails from unfamiliar sources.
   

   (This is one form of “phishing”, a popular hacker tactic to force you to divulge your personal information to intruders.)

5. Be careful of Emails that demand your personal information or passwords.
   

   Even if they claim to be from a major vendor (such as Amazon, a bank or credit card company), verify and do not trust.  Do not give them your information.  If you really think it is legitimate, call the number for the company you know (on your credit card, not on the Email) to make sure the Email is not a forgery from a hacker.  (This is a more subtle form of “phishing”.  Don’t fall for it!)

6. Beware of fake requests from unfamiliar phone numbers or websites.
   

   Let them leave a voicemail.  Check out whether the phone number or website address is legitimate by typing the name and/or phone number on Google and look for reviews.  In many cases, you will find comments that indicate they are either scams or simply aggressive telemarketers.  There is no need to call them back. Neither should you download anything to “win a prize” or “get a free update”.
   

7. Beware of phone or electronic scams even from familiar sources. Especially beware if someone you do not know offers to “repair your computer” remotely.
   

   Unless you initiated the phone call and have complete confidence that you know the person on the other line is legitimate, do not by any means trust someone with your computer.  They might be infecting your computer to collect your personal information!

Schedule appointment

[1] “The Cost of Malicious Cyber Activity to the U.S. Economy”, The Council of Economic Advisers, February 2018 on https://www.whitehouse.gov/wp-content/uploads/2018/02/The-Cost-of-Malicious-Cyber-Activity-to-the-U.S.-Economy.pdf  accessed on September 27, 2018.
[2] Lynette Lau, “Cybercrime ‘pandemic’ may have cost the world $600 billion last year”, CNBC, February 22, 2018, on https://www.cnbc.com/2018/02/22/cybercrime-pandemic-may-have-cost-the-world-600-billion-last-year.html  accessed on September 27, 2018.
[3] “The Cost of Malicious Cyber Activity to the U.S. Economy”, The Council of Economic Advisers, February 2018, 14  on https://www.whitehouse.gov/wp-content/uploads/2018/02/The-Cost-of-Malicious-Cyber-Activity-to-the-U.S.-Economy.pdf  accessed on September 27, 2018.
[4] “Protect Your Identity”, FINRA on http://www.finra.org/investors/protect-your-identity  accessed on September 27, 2018.  “Safeguarding Your Financial Information: An Identity Theft Protection Checklist”, FINRA on http://www.finra.org/investors/safeguarding-your-financial-information-identity-theft-prevention-checklist  accessed on September 27, 2018.
[5] Bree Fowler, “Tips for Better Passwords”, Consumer Reports, June 27, 2018, on https://www.consumerreports.org/digital-security/tips-for-better-passwords/  accessed on September 27, 2018.

The post 7 Things You Should Do to Prevent Cybercrime from Hacking Your Life appeared first on AWM.