After yet another violent market swoon and snapback, it is entirely possible investors are resting their hopes on a flawed belief.

The first quarter of 2016 displayed a range of emotion that could shake even the most rational of investors.

The first six weeks of 2016 saw stocks rapidly decline, at one point down around 10% to 15%. While the depth of the decline could reasonably be described as normal, the speed was certainly sudden. On the flipside, the market’s recovery over the second half of the quarter has been equally quick.

Today, in fact, most stock market indexes now hover around the zero line year-to-date. No gain and only the fading memory of pain.

It was quite a ride that no doubt favored investors who were either blind or deaf or internet-free, as it has since the recovery began in 2009. Contemplation and preparation has not been rewarded.

To begin the year, investors began anticipating the negative effects of the Fed’s move off of zero interest rates. That concern, coupled with the fact that the economy is still showing only subdued growth and corporate profits have been in decline, investors were quick to cry wolf.

As soon as their cries rang out, central bankers in Europe, Japan and China all responded with more easy money. In fact, describing it as easy money may be an understatement with a large portion of all government debt across the globe now trading at negative yields. Yes, unbelievably, negative interest rates require the investor to pay the borrower for the privilege to lend!

Following suit, our own central bank has consistently backed down the expectations for rate hikes this year and next.

It’s almost ironic that the Fed started to raise rates in December, citing a healthy enough economy to start “normalizing policy”, as they say. Now, growth has stalled out once again, as it’s done repeatedly.

Regardless, my observation is investors don’t care as much about economic growth or even profit growth as they do about the underlying support of central bankers.

The quick market bounce in mid-February almost perfectly coincided with a doubling down of promises of lower rates for longer and more asset purchases around the globe.

Investors reaction to promises of easy money reminds me of the long held belief that objects of different weight – a bowling ball and a feather – fall at different rates.

For thousands of years, this flawed belief was seen as an universal truth by the academic elite. That is, until Isaac Newton showed what other non-academics knew long before, all objects are affected by gravity just the same.

Are investors simply buying into a similarly flawed and long-held belief that central bankers and low rates will always be there to rescue them? We shall see, but I’m placing my bet on gravity.

The recent best-selling book, The Life-Changing Magic of Tidying Up, argues that life’s better when you eliminate your clutter. I believe the exact same principle applies to your financial life.

As you look at your pile of shoes, tools or warily peer into your messy closets, it’s no surprise your things get lost so easily. Too often, partially due to a distaste for all things related to money, people similarly neglect their finances.

If this describes you, your benign neglect may lead to costly and avoidable mistakes.

Over the years, I’ve noted two common habits that lead to financial disorder.

First, many people have too many investment accounts. It results in a cornucopia of accounts and the situation is overwhelming.

This type of shotgun approach – to just open accounts all over town and never look back – creates a situation that is often unmanageable for a normal person. And, as a general rule, what is unmanageable most often remains unmanaged. In the world of investments, I can assure you, that’s not a good thing.

People living in this disorganized state also have little idea about their overall investment allocation and the level of risk they are taking with their money. With their piles of unopened envelopes and email notices growing, they often don’t know their mix of stocks, bonds or cash. There are simply too many accounts and it literally stops them from moving forward with a strategic investment plan.

Second, failing to periodically clean out your financial closet can result in costly estate and tax planning mistakes.

For example, neglect can lead people to fail to update their beneficiary designations as their life situation changes, such as a divorce, death or having a new child. The benefits of good tax planning concerning your heirs can be large and to inadvertently throw them away is unfortunate, to say the least.

Another example is for those who have successfully completed basic estate planning moves – through the creation of trusts or other methods. Having to keep track of too many moving parts naturally lead to a failure to execute on the plan. When you don’t actually fund your trusts or properly designate your payable-on-death directives for your various accounts, all the planning in the world is wasted effort and can lead to avoidable expenses for your loved ones.

A good financial adviser will work to better organize your financial life. Helping you tidy up your affairs is one of their core functions to help you gain confidence with your overall financial strategy and plans. An uncluttered home – and an uncluttered financial life – invariably leads to an uncluttered mind. It might even feel, dare I say, life-changing.

Occasionally, I experience disappointments as an investment adviser. It comes with the territory as I get to see behind the curtain of the financial services industry. It saddens me to report, when it happens, it’s often not a pretty sight.

An individual recently came to me for advice about his IRA account. After years working with an adviser, his gut told him he needed another set of eyes to take a look. His hunch was right. In a nutshell, the investment expenses he was paying were outrageously high.

The primary lesson is, you should periodically conduct your own review. It’s not difficult to do. The savings you might find can add up to a substantial sum over time.

Casting the curtain aside, here’s what I saw.

First, this individual’s adviser charged him 1% of his account value per year for services that largely focused on investment management. He described to me a relationship that was very light on personalized financial planning. For that 1% fee, which isn’t uncommon, the delivered services shouldn’t be light on this front.

But, as they say, there’s more.

Next, his adviser chose to outsource his duties to another investment advisory firm. Outsourcing is also not uncommon in my industry, especially for advisers who either don’t have the professional skill or the inclination to actually manage their clients’ assets themselves.

However, as a prudent consumer, you should be very aware of the possible double-layer of expense an outsourcing decision creates. In this individual’s case, his adviser’s outsourcing added yet another cost of 1.25% per year.

Unfortunately, as bad as this might be, you guessed it, there’s more.

 Third, the outsourced investment adviser outsourced his work too. As part of their service, they chose to invest the money in various mutual funds that, together, added at least 0.75% per year in additional costs.

With the curtain fully drawn back, this individual incurred total expenses of roughly 3% per year. Expenses like these create a hurdle so high, few investors can ever get ahead. And, these expense layered cakes are not rare enough, especially for smaller investors who can afford them the least.

 Think about the math for a moment. With interest rates so low today and with the economy now entering its eighth year of recovery, future investment returns – after expenses like these – may indeed have a hard time staying in positive territory.

Learning how to analyze your investment costs is a skill worth developing.  

Just finished reading the letter portion of Warren Buffett’s annual report to shareholders. It’s always a good read.

My general impression is that Buffett is increasingly describing the wide-ranging operations of Berkshire in terms and structure that highlight the conglomerate his empire has truly become. The specifics of the many underlying, smaller businesses that Berkshire controls and the investments Berkshire makes in marketable securities, are largely gone from his commentary. This was once the bread and butter for professional investor readers. This is natural and reflects the sprawling nature of the business today. Still, his letter does lose a little bit of its “nerdiness” as a result.

It was noticeable to me that he used only one page – just a short list – to describe Berkshire’s investment activities and he made no detailed mention of bonds (a big part of Berkshires’s portfolio as a large insurer), the state of the economy or the current state of central bank policies that have produced unprecedented effects in financial markets today. His comments about the market and their transactions along the way were very sparse and no real mention was made of his investment lieutenants’ (Combs and Weschler) decision making or returns in 2015. Given the focus that many shareholders place on Buffett’s investment acumen, I found this somewhat odd. Especially so, given that he is 85 years old.

Overall, the businesses that Berkshire controls have certainly produced a very diversified set of income streams. The overall value of the company, from a book value relative to its current market value perspective shows that Berkshire’s common stock is reasonably priced at around 1.2x book value. In fact, this is the valuation level that Buffett has stated will prompt him to use Berkshire’s resources to buy back its own shares. This has not occurred often in his 60 year history.

My opinion on Berkshires’s lower book value multiple is that it better reflects the reality that a management transition will occur sooner rather than later. Given its complex conglomerate structure – again, one highlighted by this year’s letter – Buffett’s successors will have a challenge during a transition.

In the high heat of this election cycle, Social Security reform will likely slide closer to the front burner. If not, it should.

As an investment adviser who disproportionately works with near- or currently- retired people, I see firsthand the important role Social Security plays in their overall financial picture.

For a large proportion of retirees, Social Security represents the majority of their retirement income. For this reason alone, digging into our presidential candidates’ Social Security reform proposals is a high priority.

Bernie Sanders appears to provide the most detailed Social Security reform proposals on record. Naturally, he focuses on increasing the program’s funding to help shore up its long-run financial sustainability.

Sanders primarily proposes raising the cap on wages subject to payroll taxes earmarked for Social Security. Under his plan, today’s maximum threshold of around $120,000 per year in earnings subject to this tax would remain. His new proposal is to restart collecting the payroll tax once a worker’s earnings exceed a new threshold of $250,000.

Importantly, in exchange for these additional contributions, affected taxpayers would receive no additional benefits and the money raised would be used to support the benefits of those with a lower history of earnings.

Hillary Clinton’s proposals center on her opposition to retirement age hikes, privatization plans or payroll tax increases for the middle class. Clinton has expressed openness to Sanders’ idea of raising the cap on earnings subject to Social Security payroll taxes, but provides no specific plans.

Donald Trump’s main idea for Social Security is to produce faster economic growth. However, I am not aware of an analysis of how economic growth affects the long-run financial position of Social Security. Beyond the economic growth argument, Trump has also suggested that wealthy people voluntarily return their benefit checks and that he’d reduce “waste, fraud and abuse.”

Marco Rubio and Ted Cruz both support increasing the retirement age and lowering the inflation rate for benefit payments. Both also support the idea of younger workers developing private accounts within the system.

While Cruz’ plan for privatization appears similar to Bush’s previously failed attempt, Rubio’s private account proposal appears to be designed as a supplementary source of retirement savings, rather than a replacement for Social Security.

Social Security is the ultimate political hot potato, no doubt. Understanding the candidates’ reform proposals – with details that allow for deeper analysis and thoughtful debate – is a basic right of voters. The goal of any reform, as I see it, is to reach a collective view on how we’ll maintain Social Security as a pillar of financial support to the millions of retirees who need it. Benign neglect won’t get the job done.

Jason P. Tank, CFA of Front Street Wealth Management will hold a free educational workshop on “Navigating Social Security’s New Rules” on March 9th at 6:30pm in the McGuire Room at the Traverse Area District Library. Call (231) 714-6459 with questions, visit frontstreet.com/workshop to learn more.