The Equifax Hack Shows Only You Can Protect Your Identity

What happens when one of the three primary entities designed to safeguard our financial identity to the outside world gets hacked?  

We don’t know yet, but it’s quite possible that the answers will be illuminated in retrospect because Equifax waited more than a month to announce the breach.

What can you do at this time to ensure that you are shielded from the worst possible outcomes of this–or the inevitable next–mass identity theft?

Click on the graphic above to watch Tim Maurer on PBS’ Nightly Business Report discussing Equifax hack

First, specifically regarding the Equifax situation, you may consider taking two steps they have recommended (all while keeping in mind that this is coming from the entity that let the identity of as many as 143 million Americans slip through their fingers):

1) You can go directly to the dedicated Equifax website to determine if you were likely hacked, like I did. Hit the “Potential Impact” tab and then the “Check Potential Impact” button:

You’ll be asked to put in your last name and the last six digits of your Social Security number.  Then, you’ll get the verdict on whether or not they think your information may have been hacked. When I completed this process for the four members of my household, three of them were (apparently) spared while I got the undesirable response that my “personal information may have been impacted by this incident.” Awesome.  

Many, however, have found this online device lacks reliability. In at least once instance, the name of a colleague’s dog and a fabricated Social Security number returned positive results. [Insert contemplative, curious emoji.]

2) Regardless of whether your information was hacked, Equifax then gives you the opportunity to sign up for their TrustedID Premier credit monitoring system–free for a year to all Americans. There initially was some controversy over whether agreeing to receive the freebie would result in waiving your right to be part of a prospective class action lawsuit against Equifax in the future. They’ve since clarified that it will not.

But signing up for their credit monitoring service also seems convoluted, or perhaps my enrollment message appears clearer to you:

If your journey to secure your identity continues beyond what the leaky Equifax has to offer–and it probably should–please consider these additional steps:

3) Monitor your credit. You can pay someone to do this, but I’ve yet to be convinced that it’s worth it, especially because you can get most of the promised benefits for free.  

You can obtain a free copy of your credit report from all three credit reporting agencies at annualcreditreport.com. Order all three at once for the most comprehensive review or spread them out throughout the course of the year. But to be fair, reading a credit report can be like drinking from a firehose.

Therefore, you may consider a growing number of free online resources, like CreditKarma.com or Mint.com, that aggregate credit information in a more understandable and practical form.  Personally, I’ve used CreditKarma for years and found it to be very helpful as part of the following simple process:

  • Regularly glance at the homepage, which displays my current credit score from two of the three credit bureaus. Only if there’s been any significant movement in this score will I then…
  • Review any of the warnings that might explain the volatility in my score. If so, I might…
  • Review reports in full and take any necessary action.

This process has more than once served to alert me to activity that required follow-up.  

4) You may consider taking the additional step of “freezing” your credit. It’s a process that looks different in each state, and I’d only recommended it if you don’t intend to use your credit in the near future. Otherwise, you’ll have to “thaw” your freeze to give prospective creditors the necessary access to your info.  

One step, however, that I can’t see any downside to taking is freezing any existing credit reporting for your minor children. (Um, why do they even have credit reports, major credit bureaus?) If you decide to go this route, Clark Howard’s credit freezing guide is helpful.

5) Only use credit cards–not debit cards–for purchases. Despite Dave Ramsey’s objections, this way, it won’t be YOUR money that is stolen if you’re hacked. It’ll be the credit card company’s job to reclaim their funds.  

This is advice that I’ve received first-hand from Frank Abagnale, the fraudster turned FBI consultant made famous by Leonardo DiCaprio in the movie Catch Me If You Can.  

We can trust him now. I’m pretty sure.

6) Lastly, change your passwords to online financial accounts. If you were one of the 143 million people affected by the Equifax hack, you may wonder if hackers could gain immediate access to your bank and securities accounts. But you still hold some very important cards that they can’t see–namely, your password and any PIN numbers attached to online financial accounts.  

Do you really want to go “off the grid”?

It’s probably a good time to update and strengthen those.

But here’s the scariest news that has been highlighted by this new mass hack:  

Unfortunately, we now live in a world where it’s not a question of if, but when, we will deal with having all or part of our identity stolen.

Sure, you could try to go “off the grid,” like Psycho Sam, the bush-man. But for most of us, the benefits to be derived by the online economy simply outweigh the risks. That means personal credit monitoring is a habit we must build into our lives.

Solving for the Qualitative Deficit in Financial Planning

“The whole financial planning process is wrong,” says George Kinder, widely recognized as one of the chief educators and influencers in the financial planning profession.

But what exactly does he mean, and how does he justify this bold statement?

First, let’s separate the work of financial planning into two different elements–let’s call the first quantitative analysis and the second qualitative analysis.

Quantitative analysis is the more tangible, numerical and objective. It’s where planners tell clients what they need to do and, perhaps, how to do it. For example:

  • “Your asset allocation should be 65% in stocks and 35% in bonds.”
  • “You need $1.5 million of 20-year term life insurance.”
  • “Have your will updated and consider utilizing a pooled family trust.”

The qualitative work of financial planning is the intangible, non-numerical pursuit of uncovering a client’s more subjective values and goals, and, hopefully, attaching recommendations like those above to the client’s motivational core–their why.

If quantitative work is of the mind, qualitative is of the heart.

Qualitative planning often has been dubbed “financial life planning”–or simply “life planning.” It is defined in Michael Kay’s book, The Business of Life, as the process of:

Take More Risk In Life And Less In Investing

“I just really wish I’d taken more risk in my investment portfolio,” said no one–ever–on their deathbed.

That may seem like an odd observation, unless you consider the fact that I had the privilege of spending a couple days recently with life planning luminary George Kinder. Among other benefits, I was able to reacquaint myself with his famous three questions, elegantly designed to progressively point us toward the stuff of life that is the most important–to us.

The final question invites us to explore what benchmark life experiences we would leave unaccomplished if we only had one day left on this Earth. And as you may suspect, even in a room filled with financial planners, achieving a more aggressive portfolio posture was, perhaps, the farthest from anyone’s mind.

Meanwhile, most of the items that people did list represented experiences (not things) that, individually, were outside of their to-date unarticulated–but now evident–comfort zones.

Participants almost universally wished they’d have taken more risks in life–personally, educationally, relationally, experientially, professionally and vocationally.  

Similarly, those most meaningful experiences they had enjoyed thus far in life were the ones that pushed the boundaries of their comfort zones, expanding their personal risk tolerance.

But what about financial risk tolerance?

Top 5 Books To Put The ‘Personal’ Into Your Finances This New Year

Originally in ForbesBecause personal finance is more personal than it is finance, just about every step we take in our personal development aids us in financial planning, and vice versa.

top-5It is in better understanding ourselves that even the most confounding financial decisions are made simple. Therefore, it’s entirely possible for a seemingly non-financial book to have a meaningful impact on your financial life, while the reverse is also true.

Consider, then, this list of my choices for the top five (mostly) recent books that can improve your life, work and financial serenity in 2017:

5) The Whole 30: The Official 30-Day Guide To Total Health And Food Freedom is not your typical diet book. I don’t do those. But I am fascinated by various “life hacks,” small behavioral changes we can make in our diet, exercise and sleep patterns that make life more livable.

American Pension Crisis: How We Got Here

Originally in ForbesMy adopted home of Charleston might have been ranked the “Best City in the World,” but the state of South Carolina is earning a less distinguished label as a harbinger of the country’s worst pension crises. And yes, that’s crises—plural—because U.S. state and local government pensions have “unfunded liabilities” estimated at more than $5 trillion and funding ratios of just 39%.

What does that mean, exactly?

When a company or government pledges to pay its long-term employees a portion of their salary in retirement—a pension—the entity estimates how much it (and its employees) will need to set aside in order to make those payments in the future. An underfunded pension is one that simply doesn’t have sufficient funds to make its promised future payments.

Corporate pensions in the United States are in trouble, with the top 25 underfunded plans in the S&P 500 alone accounting for more than $225 billion in underfunding at the end of 2015. But states and municipalities are in even worse shape. This week, the Charleston-based Post and Courier estimated that South Carolina’s shortfall alone was at $24.1 billion, more than triple the state’s annual budget!

How did we get here?

There are two glaring reasons: poor investment decisions and greedy assumptions.

Why I’m Hoping The Trump Administration Doesn’t Kill The DOL Fiduciary Rule

Originally in ForbesAdvisors to President-elect Donald Trump have been vocal about rescinding the Department of Labor’s new fiduciary rule, introduced earlier this year to protect retirement savers from advice that isn’t fully in their best interests. The rule has already been under fire from the securities industry, and lack of presidential support could spell its ultimate demise.

As someone who has worked on both the fiduciary and non-fiduciary sides of the industry, I think revoking the rule is a bad, even dangerous, move. My rationale for such a position starts with my experience, early in my career, at one of the nation’s largest insurance companies.

“Look, you can set up your business any way you see fit after you’re successful. But right now? With a young family? You need to put yourself and your family first, and that means selling A-share mutual funds,” said my sales manager.

In other words, you must put your interests ahead of your clients’.

Fiduciaries are required to put their clients' interests ahead of their own.

Fiduciaries are required to put their clients’ interests ahead of their own.

As a brand new financial advisor, I was having a heart-to-heart with my supervisor after laying out my plan for creating a fee-based business within the agency, which would have meant recurring revenue for the firm but apparently in much smaller increments than were preferable.

“A-share mutual funds” are a variety with some of the largest up-front commissions—for both the salesperson and the company they represent. Variable annuities were even better, generating more of a “front-end load.” Whole life insurance was the pinnacle of up-front commissions.

In the newbie bullpen, we were encouraged to sell in various and sundry ways. The general agent in charge of the Baltimore metro area—the self-proclaimed “big dog”—was, indeed, a large man. A former starting lineman for a recognizable college football team, I’m quite sure that he routinely watched the classic Alec Baldwin “motivational speech” from Glengarry Glen Ross (turn the speakers down if you’re at work or children are nearby).


I recently discussed this topic on the Nightly Business Report (at the 9:05 mark)


My favorite anecdote from that time, though, was my general agent’s big fish story: “When you get a big fish on the hook, I want you to set a noon lunch meeting at the Oregon Grille.” (The Oregon Grille is an excellent restaurant north of Baltimore in pastoral horse country, where most of us had never dined.) “Go to the restaurant 30 minutes early and introduce yourself to the maître d’. Let him know that you’ll be returning shortly to the restaurant with a guest, and that you’d like to be referred to by name.”

Don’t Let Wall Street Fool You Into Taking Too Much Risk

Originally in ForbesCompetition for your dollars creates an inertia that always seems to lead Wall Street down the path of unhelpfully increasing the risk in your portfolio. The recent Wall Street Journal headline, “Bond Funds Turn Up Risk,” illustrates an especially alarming trend. Specifically, of increasing the risk in the part of your portfolio that should be reducing overall risk—bonds.

Bonds are supposed to be boring. The primary role they serve in our portfolios is not necessarily to make money, but to dampen the volatility that is an inevitable byproduct of the real moneymakers—stocks.

Is Your Attitude Toward Work Killing Your Retirement Dreams?

Originally in ForbesDo you have a generally positive or negative impression of the word “retirement”?

I ask because it dovetails nicely with a series of questions (inspired by Rick Kahler) that I use to begin most speaking engagements. These questions are designed to incite self-awareness, offering us clues about how our life experiences have shaped the (often unarticulated but powerful) beliefs that unavoidably influence the decisions we make with and for money.

Work or retire as a concept of a difficult decision time for working or retirement as a cross roads and road sign with arrows showing a fork in the road representing the concept of direction when facing a challenging life choice.

Regardless of an audience’s homogeneity, their responses are consistently inconsistent. I have, however, seen some generational persistency on the topic of retirement. For example, on average, baby boomers have a generally positive view of retirement—no doubt shaped in part by the incessant financial services commercials that promise a utopian post-career existence with beaches, sailboats, golf and an unlimited supply of vintage Pinot Noir.

On the other hand, the finance and accounting students that I had the privilege of teaching at Towson University—almost all members of the Millennial generation—had a generally negative view of the notion of retirement. This is for two prominent reasons:

  1. They pictured hot, humid, early buffet dinners in rural Florida.
  2. They don’t think that the American dream of retirement is available to them.

The Relative Irrelevance of Market Highs

Originally in ForbesThis week we’ve heard a lot about the U.S. stock market achieving new highs. So what? Should this record transcendence inspire confidence or fear, action or inaction?

Market High Wire

You’ll find sufficient supporters for both the pessimistic and the optimistic view, with a far greater number of pleas to act on these views. But I invite you to consider the relative irrelevance of market highs for the following simple reason:

Any investment with a positive expected rate of return should regularly revisit and recreate its all-time high as a matter of course. Otherwise, it wouldn’t have a positive expected rate of return!

How Money Destroys Relationships

Originally in ForbesMoney destroys relationships because people can’t compete with money. Money, after all, doesn’t disappoint you, or express disappointment with you.

It’s not that money is inherently bad or evil, but it’s not inherently good or righteous either. Money is simply a neutral tool that can be used well or poorly. It only has the value—the personality and the relational standing—that we give it.

One of the few criticisms I have of the movement to explore the psychology of money is its use of the phrase “your relationship with money.” Unintentionally, this gives money entirely too much credit by implying personhood. Indeed, if you have a “relationship” with money, you’re likely elevating it unnecessarily, and maybe even subconsciously devaluing those in your life who actually have a heartbeat.

How did we get here, to the point where we’ve personified—and in some cases deified—the “almighty” dollar?