As another Summer comes to a conclusion, all you will hear from TV pundits and news articles is the next recession is impending. It seems a recession is always just around the corner! The Nostradamus of recession predictions is the Inverted Yield Curve which was achieved last week and just in time for Back to School shopping. The yield curve inverts when the 2-year U.S. Treasury bond yield is greater than the 10-year U.S. Treasury bond yield. While many factors do indicate a recession is looming (US-China trade relations, political uncertainty, lack of stimulus from 2018 tax cuts, etc.), several indicate the fear is overblown. The job market remains strong, reduced interest rates by the Federal Reserve and strong corporate balance sheets. The good news is this fear is a constant in the market whether it’s August 2019, August 2017 or August 2008. To achieve sizeable investment returns requires a degree of risk. So, sit back, relax, enjoy the last week or two of Summer and practice the following (whether a recession is looming or not):

  1. Proper Emergency Fund – 3 months minimum but 12-24 months is not out of the question for some. Understanding how you will react during a recession is not an enjoyable exercise and better to prepare for the worst especially if worried about ongoing employment.
  2. Access to Credit – much easier to obtain a Home Equity Line of Credit (HELOC) when employed and home values are high. Not only does it provide liquidity but allows you to reduce the amount of emergency funds needed.
  3. Continued Employment – if work is steady and not worried about staff reduction or cutback in hours then riding out a market downturn is less impactful especially if more than 5 years till retirement.
  4. Reduce Expenses – no time like the present to understand what the household needs each month to run properly. If cuts need to be made, have a list ready of the first expenses to go (e.g. cable bill, travel, and eating out).
  5. Investments – never stop dollar cost averaging into retirement accounts and other investments. That is the key to long-term success and a much less stressful path. If investment risk is correct in an up market it should not change in a down market unless you want to be aggressive and reallocate into more equities especially in retirement is more than 10 years away.

The average recession lasts 1.5 years and 3 out of 4 economists are predicting another one by 2021 so make sure to follow the above advice sooner than later. It’s always best to pack the life jackets before leaving the shore!

Recently, both the CFP® Board and the Securities and Exchange Commission have set higher standards of care & transparency when dealing with clients.  While both are welcome developments, they are still catching up to our pledge to uphold a fiduciary duty to our clients since Lighthouse Financial Advisors was founded in 1999! A fiduciary duty is the legal obligation of one party to act in the best interest of another. Brokers fear being asked if they have a fiduciary duty.


As noted in our May 2, 2018 blog, the CFP® Board is strengthening its code of ethics to require advisors to act as fiduciaries at all times when working with clients.  The policy was set to go into effect Oct 1, 2019, but enforcement is delayed to June 30,2020.  This is to allow time for increased enforcement capabilities and to allow CFP® certificants and employers at firms that do not require a fiduciary standard to catch up to the new rules.


Meanwhile, the SEC adopted Regulation Best Interest: The Broker-Dealer Standard of Conduct, which requires that broker-dealers act in the “best interest” of their “retail customers.” While any progress is welcome to see on a Federal level, under the new SEC reforms, brokers still do not have to operate under a fiduciary standard.


While we are overseen by the SEC, we are also CFP®’s and members of the Alliance of Comprehensive Planners. From day one we have held ourselves to the higher Fee-Only Fiduciary Standard, and could not agree more with how even the SEC Commissioner Robert Jackson put it, consumers “should seek out true fiduciary advice from financial professionals who have chosen to hold themselves to higher standards” than those set by the SEC. We couldn’t agree more!


THE OFFICIAL CFP® FIDUCIARY DUTY STANDARD – At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary, and therefore, act in the best interests of the Client. The following duties must be fulfilled:

  1. Duty of Loyalty. A CFP® professional must:
    • Place the interests of the Client above the interests of the CFP® professional and the CFP® Professional’s Firm;
    • Avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict; and
    • Act without regard to the financial or other interests of the CFP® professional, the CFP® Professional’s Firm, or any individual or entity other than the Client, which means that a CFP® professional acting under a Conflict of Interest continues to have a duty to act in the best interests of the Client and place the Client’s interests above the CFP® professional’s.
  2. Duty of Care. A CFP® professional must act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s goals, risk tolerance, objectives, and financial and personal circumstances.
  3. Duty to Follow Client Instructions. A CFP® professional must comply with all objectives, policies, restrictions, and other terms of the Engagement and all reasonable and lawful directions of the Client.