From Fern » Financial Issues

Growing Personal Financial Wealth- Mindfully

Fern — Wed, 21 Apr 2010 22:34:27 +0000

Thanks to Elephant Journal for publishing my piece on Money and Mindfulness:

Growing Personal Financial Wealth-Mindfully

Not too tight and not too loose

Fern — Mon, 15 Feb 2010 18:39:48 +0000

I have been busy writing my ebook- the 401K First Aid Kit:Stop Your Portfolio Bleeding and Get Back to Financial Health. I know- goofy name, but apparently when you are building a business online you need catchy titles. What started out as a “I want to help people understand their 401K” mission turned into a full time project with coaching calls, online sales page, marketing, blah, blah, blah. During that time everything else (except my workouts) got put on hold– my memoir, my coaching practice, this blog, the dog, my jewelry making hobby, my relationships, etc.
Now that the project is over, I realize that I am stressed and I feel the imbalance and strife that exists when there wasn’t any before. I realized that I didn’t have work/life balance in myself that I support and coach in my clients. What a wake up call! When I meditate on that and what went wrong, it’s easy to see where the wrong turn was made.
The project turned from a labor of love to a “how can I turn this into a money making machine”. Seduced by the mentorship of slick online marketing gurus, I lost who I am and what I provide into how I can package and sell my knowledge.
I know I am good at what I do and I know that people love my stuff. I need to step back and build my relationships with my tribe and continue to give them good free content packaged without the google adwords— and have the confidence in the abundance that is around me.
As Pema has taught me, -not too tight- I’ll have a sliver of the chocolate cake and not too loose- I’ll take the whole chocolate cake– but something in between. The Middle Way.

Financial Crisis-My Two Cents

Fern — Fri, 26 Sep 2008 22:26:11 +0000

I have been fielding clients concerns over the last two weeks so now it’s time for me to put in my two cents.
Most of you who have been following me for a long time, know that I have been bitching about the problems in the financial industry since day one. I have never been a big fan of government intervention in business affairs. Compliance is costly, onerous, and sometimes, plain unnecessary. But left to our own oversight, we fail miserably. Greed, dishonorable conduct, and unethical behavior is more the norm than ever before and so (as I gasp) it is time the government needs to step in and say, “What a minute! You have to stop this!”
How they intend to control this craziness, I have no idea. The disease has spread and unless the whole nation starts to “get it”, I fear that it will continue- just in a more covert way.
To highlight just a few injustices that I and my clients have experienced over the course of my more than 24 years in the industry:
*After extensive analysis of a real estate transaction, a client goes to sign documents at the escrow company and finds that the loan rate has changed by more than an eighth of a point higher than he was quoted and told he had to close that day or else lose the deal.”
This is a common bait and switch loan transction that was happening all the time.
*Client just bought a large life insurance policy from a broker that was backed by a AAA Excellent A.M. Best rated company. The life insurance company goes bankrupt as AM Best rates them AA Superior.
Life insurance ratings companies are useless
*Fannie Mae and Freddie Mac bondholders were rubber stamped high bond credit quality ratings that were all a sham to promote more sales and more commissions to large bond brokers”
Clients were told they had to use a certain title company to purchase real estate through their broker, But weren’t told that the broker made extra fees by using that title company.
I could go on and on but you get the picture.
And the highest insult to the American people:
The Financial Planning Association and the National Association of Personal Financial Advisors sue the Securities Exchange Commission to force all people who call themselves Financial Advisors to disclose how they are compensated—- and loses.
The CEO of Citigroup is forced out of the company because she wanted the Citigroup hedge fund that fraudulantly lost customer’s funds to repay every penny back to the customers.

Ameriprise is a real surprise!

Fern — Wed, 14 May 2008 22:08:21 +0000

“Financial Advisors forged customers signatures at least 96 times in order to articficially inflate sales volume. and to hide the fact that they hadn’t met commitments to deliver completed financial plans.” -WSJ4/10/08
Okay, you say, a few bad apples. So what?
The firm’s signature product is its low cost financial plan delivered to clients in a book form to sell them products.
What happened to Financial Advisors acting as a fiduciary? Oh yeah, I forgot. The SEC still has that rule in force that brokers are exempt from acting as a fiduciary (that is, putting their client’s interests first) because they really aren’t Advisors but Salespeople. That’s funny because they call themselves Financial Advisors.
Are you confused yet?
So if the American public.

Paper Beast

Fern — Sat, 18 Aug 2007 07:27:49 +0000

When I ran my business out of an office, I was meticulous about keeping good records and keeping them organized. As my business grew, that process became very demanding of my time. It was important since I was managing money for individuals on a non-discretionary basis and so I could be audited at any time— and I was ready (I am required to keep client records for 7 years). But I knew I had come to the tipping point when my assistant said that she couldn barely squeeze another file folder into our filing cabinets that lined almost every wall.
I knew I didn’t want to be like my friend, an immigration attorney who had a garage filled with client records that she was required to keep. I had other business colleagues that had gone paperless and they were sharing their strategy online. I figured now was the time to go “paperless” and I researched it and decided to do this in-house by buying a commercial scanner and a software program (PaperPort). I hired college interns to feed that scanner all day and into the night. We had lots of late night pizza meetings to decide how best to organize the electronic file folders. Joseph thought I was crazy to take this on when my plate was more than full with other activities but I wanted to keep our garage from turning into a self-storage unit. The process wasn’t that difficult once it was up and running and I had my eye on turning our home office into a paperless environment once I was done with the business. Can you tell that I hate clutter?
I was about 60% done when I had got into a car accident and ended up transfering the business to another competent Advisor who had similar services. That paperless trail was a blessing for Joseph to be able to access information and files and client databases so that he could sell my business for me. It also represented to the buyer that I had a solid business with good records.
Now I look around at my home office filled with books, and papers in boxes around me, and I am thinking of a paperless project to get rid of this clutter. Seems like this paper beast just follows me around.
Tips:
get all of your bank statements, and brokerage statements delivered electronically. Copy these and store on your own computer since they only keep the file for a few months. Before you do this, make sure you have good virus protection, your firewall in on, and you have spyware installed.
The IRS can audit you up to three years after you file or six years if income has been substantially understated or seven years if you have sold real estate.
Documents showing contributions to IRA accounts should be kept for many years untill all the money is withdrawn from that account.
Keep good documents on improvements to your home until the house is sold. It will help to increase your basis and lower your tax in the future.
Ask for brokerage account maintenance fees to be waived if you go paperless. They are saving substantial money so they should pass the savings on to you (not charge you as some do).
Many fund companies or brokerages will donate money to environmental organizations when you go paperless.
Going paperless doesn’t mean going blind. Check your statements. I check quarterly to make sure all is well and nothing is out of sorts.
Get a shredder and experience the joy of getting rid of old documents. Get the kids involved. They love to shred!
Don’t forget to back up everything! We use a free online service called Mozy. Some people use CDs, some DVDs, and some use tape backup.
Whatever medium you use, make sure you use it consistently.
Let’s all stop the paper beast from growing!
Coaching Question- What would it mean to you if all of your financial records were organized and available to you at the click of a mouse?

No Time, Training, or Temperament

Fern — Mon, 15 Jan 2007 14:03:25 +0000

I am now officially a gym rat. I work out twice a week with a personal trainer. It is my main form of exercise since I cannot play tennis, golf, mountain bike, hike, or any of the other things I used to do. I now walk and go to the gym. I did find a gym though that I really like- Axis. I knew I was in the right place when I walked in and saw trainers doing really unusual exercises and I saw machines that I had never seen before.
Right after or sometimes before my session, I walk on the treadmill. There are two televisions mounted high above the row of treadmills and stair steppers, and bikes—just like in the hospital. One television always has a financial station and the other some girly show like the View or Martha Stewart. I face the financial TV wondering what people see in that. Even when I was in the business I never watched that stuff but apparantly millions of Americans do. I don’t know why because most of the advice is biased and the ticker- what’s with that? Who looks at that and why? Even super short term traders know that by the time you are seeing that info on the west coast, the price is now different. So who cares?
I think about the referral I got years ago from a good client of mine. This woman had inherited a lot of money and decided to manage it herself. She got up every morning and turned on some financial TV show and traded on the news that day. She wanted me to do her tax return. She had a pile of papers showing her gains and a pile of papers showing her losses. She totaled each pile up and showed me the small gain she had, and how simple her return would be.
I told her I wish it were that simple. Each trade needs to be broken down to show the gains and losses. That would take hours and the return would cost her quite a bit. She agreed to let me do the return. After digging through the trades, many did not match and I found that she was trading stocks she didn’t even own. The end result was that she had over a $100,000 loss. It was devastating to her but she needed that awakening to realize that she was not capable managing her own money. Yet she couldn’t trust someone to manage it for her since no one could get the returns that she wanted without any of the risk– yeah right.
I used Schwab Institutional Services for my clients and I used to chuckle as I would go into the local branch to deposit a client check and see a row of elderly retired gentleman sitting in the lobby watching the ticker and talking. Very cute way of socializing—– losing your money in the market. Eventually Schwab got smart and redesigned their branches (as well as closed down many).
I was reading the speech former SEC Chair Arthur Levitt gave to NAPFA’s 2006 conference and was very inspired. Here is a quote:
“When I consider today the lack of knowledge among even the most sophisticated people in terms of investments, it really concerns me . A recent report showed that over 50 percent of Harvard’s faculty and staff invest their entire retirement savings in money market accounts. The Los Angeles Times studied what recent Nobel Laureates in Economics did with their money, and said that most of those titans of economics were really terrible investors. One had the bulk of his retirement in a money market account; one spends most of his time on chasing the latest hot investments, from tech stocks to oil stocks; and another spent the entire 1990s with his winnings fully invested in municipal bonds. The fact is that most people don’t have the knowledge, the background, or the termperament to manage their own money.
The so-called Merrill Lynch Rule that exempts brokers from the fiduciary requirements of the Investment Act of 1940 only confuses investors. While brokers will counter that that they are under NASD oversight, they are simply not regulated with the consumers’ interest in mind. They are not required to obtain best execution pricing for trades and are allowed to sell to a client more expensive investment vehicles that will generate greater commissions to the broker. There is absolutely no reason why a fiduciary responsibility imposed upon Investment Advisors should not apply to retail brokers with equal coverage. The notion that a retail broker is an order taker is absolute and total fiction.”
For a real Financial Advisor that adheres to a fiduciary standard, check out NAPFA http://www.napfa.org and/or the Garrett Planning Network http://www.garrettplanningnetwork.com/pages/splash/index.htm.

Rising Interest Rates

Fern — Sun, 21 May 2006 21:34:51 +0000

Interest rates are rising. So what are you doing about it? If you read the news, it sounds like a death knoll. And to people who are getting mortgages it may be. But to those who are saving money, it sounds like heaven. More interest on the money you save without any risk. So what are you waiting for? Get rid of those old CDs, and bank savings accounts, and get the highest rates that are available out there. Where? Why — on the internet. You are already saying- “But isn’t that risky?” No, it’s not and here is why. Internet banks have lower overhead so they can offer you more interest. Also, their money market accounts are FDIC insured, unlike all of the brokerage money market accounts. What kind of interest? Well, check this out at virtual bank, http://www.virtualbank.com/
Also check out Emigrant Bank, and ING Direct online.
Why am I telling you this? Because even though I am still a registered investment advisor, I am not practicing but my registration allows me to provide information and education. So there….. you are informed and educated. Now go out there and prosper.

Prosperity SIG Notes for you

Fern — Sat, 20 May 2006 08:12:00 +0000

Although I am on the road, I was able to give this teleclass to a Special Interest Group (SIG) of financial Coaches on May 16th. I am putting the notes here from my class for all of you to in benefit.
Notes from Fern Alix LaRocca CFP® EA
Disclaimer- although I am a Registered Investment Advisor at no time during this talk will I be giving out advice. All that I will be discussing is informational and educational.
By 2020, 30% of the entire population will be retired, and 67% of United States assets will be controlled by pre-retirees and retirees. I believe that there will be many financial coaching opportunities to help people transition as they age. As coaches, we believe in people having a strong personal foundation. We should also believe that they have a strong financial foundation because this will be having this base will help them attract and retain more wealth and abundance in their lives.
The 7 Steps to Your Own Financial Plan!
The first step is like pouring the foundation for a house
Preserve what you have and what you acquire through……
Does anyone know what that would be?
1) Risk Management-
What would happen if your spouse’s income were not there?
What could you do to replace lost income?
How would you pay off debts?
Life Insurance, Medical & Dental Insurance, Property and Casualty, Disability Insurance, Long term Care.
2) Cash Flow Analysis- Determine discretionary income
Identify sources of discretionary income. You can only invest from what you save.
If wanted to save for the future what is the one thing you could do today?
How much would you need in cash in case of an emergency?
(Like the car breaking down, roof leaks,)
Typically 3-6 months salary- depending upon debt
3) Investment Planning-
Are you comfortable with the risk you are taking in your portfolio?
Power of compound interest
What could you do to maintain a diversified portfolio?
Bonds, Stocks, Mutual funds, etc. Real estate, rentals, vacation homes, land.
Own vs loan.
4) Retirement Planning-IRA, Roth-IRA, SEP, 401K, 403B, 457 and 412 retirement plans. Do you have a retirement plan that you are comfortable with?
Are you contributing the maximum to a retirement plan at work?
5) Education Planning- 529 Plans, UTMA
6) Income Tax Forecasting- Use of tax deferral, tax deductions and tax –free vehicles.
Concepts of tax deferral versus tax-free and tax deductions.
7) Estate Planning- Wills, trusts, powers of attorney for health care and financial care.
At www.wholeheartedway.com you can contact me for my 8- 1 hour coaching sessions, I cover these 7 steps in detail so that you will end up with your own personal financial plan.
Also Sign up for my free newsletter – at www.wholeheartedway.com
Also keep checking my website for free resources that you can use in your own practice to help your clients build a good financial foundation.
Send me resources to share, too.
Building your Financial House-
Risk Management- Preserve what you have and what you acquire through the use of insurance.
Cash Reserves- Have enough for emergency savings so you can invest for the long term
Identify sources of discretionary income. You can only invest from what you save.
Loaner Dollars, or Fixed income investments- CDs, treasury notes and bills, smart notes, etc.
Owner Dollars, or Equity investments- Mutual funds, stocks, etc. Invest for the long term. Understand the costs of investing and keep your assets diversified. Read the prospectus and understand the risks involved.
Use retirement plans and education plans to defer tax and build wealth. Always defer and deduct as much as possible. If you are in a high tax bracket, also make use of tax- free investments such as municipal bonds.
Identify risks, potential returns, liquidity, tax implications, and costs involved in all transactions.
Here is what others thought about the course:
“Excellent! You would be a fool not to take this course!”
-Anthony Hayes-Real Estate Agent
“It’s very beneficial for someone exploring how to invest.”
-Chris Gatto-Public Relations Specialist
“Helps give you a logical sequence of how to secure your financial future.”
-Tony Ramirez- IT consultant
“Great way to check out your previous understanding!”
-Thomas Cheng- Engineer
Attendees of the class will get 20% off the published coaching rates at www.wholeheartedway.com
My one on one Coaching sessions are valued at:
1 hour -$80/hr
3 hours-$220
6 hours-$440
The 7 Steps to your own Financial Plan- 10 hours, valued at $800- is only $600 just for Prosperity SIG members that sign up before June 1st.
(A deposit of 50% of the fee is due upfront)
Contact information:
Email: fern@wholeheartedway.com
415-819-3065 Phone
Website: www.wholeheartedway.com www.afdadvisors.com
Blog: www.dharmaofmoney.com

Losing Their Edge

Fern — Wed, 03 May 2006 18:03:21 +0000

For years, business professionals at the many financial conferences that I went to prophesied the demise of the small independent financial advisor (like me- Yikes!). Merge, they said, or be forced out of business by the big giants like Merrill, and Morgan, etc. I defiantly turned the other cheek and kept my business small, successful, profitable, and what’s most important- I had time for a vacation. Not too many Merrill or AmEX people can say that.
After reading this, I finally feel vindicated. It’s not how big or small you are – it’s the content, stupid. High quality, high service, independent and ethically run firms will flourish in today’s environment. People now, in the face of Enron and World Com scandals, want someone that has few conflicts of interests and they are willing to write a check for that service instead of being sold a product for a commisssion.
Read it (wall st journal 042906) and understand the difference from a fee-only advisors who acts as a fidiciary and a stockbroker that sells a product. Don’t get me wrong, a lot of commission planners really are ethical and care about their clients, but it is hard for them to do their job when their boss is telling them to sell xyz today. You decide. Time for them to look at “right livelihood”.
Hey, did you notice how I still write like I am a practicing financial advisor? Hmmmm……talk about attachment!
Stockbrokers Loosen Up Their Ties
As Advisers Gain Ground,
Big Firms Change Strategies;
The ‘Suitability’ Standard
By JEFF D. OPDYKE and LINGLING WEI
April 29, 2006; Page B1
Wall Street’s giant brokerage firms — long the dominant force in the investing game — are starting to lose their edge.
Increasingly, individual investors are turning over their money to independent brokers and advisers amid worries that big firms don’t always have their best interests at heart. Over the past five years, independent advisers have nearly doubled their share of assets under management to 17%, according to discount brokerage firm Charles Schwab & Co.
Now Wall Street is fighting back. Some firms are making changes to minimize perceptions that their advice isn’t as trustworthy as some of their more independent rivals. Morgan Stanley, for example, recently started highlighting that clients can pay a fee to have an adviser build a financial plan — and then execute the plan at another brokerage firm. The goal is to ease concerns that the Morgan Stanley broker might encourage the purchase of some product that benefits the broker more than the investor.
Others have started granting their advisers greater leeway to recommend a broader range of products, including more options that aren’t part of the brokerage’s own investment tools.
And some are moving away from in-house investments entirely. Late last year, Citigroup Inc.’s Smith Barney sold its asset-management arm, which created its own in-house mutual funds, to, in part, eliminate the perception of self-interest when suggesting investments to clients.
Moves like these reflect a power shift under way as investors — wary of undisclosed conflicts of interest after various market-related scandals in recent years — insist that their financial professionals have no incentive to pitch particular products because of commissions or underlying fees.
For investors, the new options add complications to the process of picking the right person to help with high-stakes investing decisions.
Deciding whether to hire a full-service broker or an independent adviser — or someone in between — comes down to whether you want advice tied to an individual transaction or advice designed to map out your financial life, and whether you want that advice delivered by a brokerage firm or an independent shop. Each has its strengths and weaknesses.
Stockbrokers
First and foremost, brokers are salespeople. So, when acting in that role, their income depends on commissions from client trading. As such, a broker is best for investors who want someone to bounce specific stock and mutual-fund ideas off of or who want someone who will call with investment suggestions. With brokers, you usually have the choice of paying per transaction or paying an annual fee for all the services you use, as in a so-called wrap account.
You will pay for that hand-holding, though. Commissions can easily top $100, depending on the type and amount of stock you are buying and the size of your account, compared with the $5 to $20 you would pay at an online firm such as Scottrade Inc. or E*Trade Financial Corp. Some Wall Street firms require a $50,000 account to even get access to a broker; otherwise, you will be sent to a call center, where the level of individual attention is often greatly diminished.
Another important factor: Brokers aren’t “fiduciaries,” meaning they have no legal requirement to act in your best interest. Instead, they follow much looser “suitability” guidelines that, while backed by court decisions, aren’t legal obligations. If you want a fiduciary relationship, a traditional brokerage account isn’t for you. For investors who don’t feel they need a broker’s advice or helping hand making trades, discount and online firms are a better choice, since they also charge considerably lower commissions on trades.
Investors may increasingly come across independent brokers these days. They aren’t employees of a traditional Wall Street firm but instead act as independent contractors with firms such as Linsco/Private Ledger Corp., a major independent brokerage firm, or Raymond James Financial Inc. Ostensibly, independent brokers have fewer reasons to push one product over another, and they generally have a broader selection of investments to sell and no sales quotas for particular products (unlike some traditional Wall Street brokers).
All of that should mean the independent broker is conflict-free. Yet that isn’t necessarily true.
In December, for example, the National Association of Securities Dealers imposed a $2.4 million fine on Linsco/Private Ledger for inappropriately steering investors into costlier class-B-share and C-share mutual funds that generated higher commissions for the brokers. Bill Dwyer, Linsco’s managing director of national sales, says, “We addressed any concerns regulators had, paid all the fines and moved forward.”
Financial Advisers
There are essentially two types of advisers. Those who work independently, or outside of a brokerage firm, are known as registered investment advisers, or RIAs. Those inside a Wall Street firm are investment-adviser representatives, since the firm itself acts as an RIA, although they may have a different title. Both provide essentially the same service: big-picture financial planning and money management.
Advisers are the best choice for investors who want someone to help lasso their entire financial life — from investing, tax planning and charitable giving to family-business succession planning and more — and take responsibility for managing the investments. You will generally pay an annual fee of 1% to 2% of the assets under management.
RIAs typically charge a single fee for all the services they provide, which can be less expensive than paying for all the services and trading separately. By contrast, brokerage-firm advisers offer that arrangement as well but also allow clients to separate fee-based advice from transaction-based trade execution, if that better fits their needs.
Brokers are increasingly wading into financial-planning and advisory roles. Most no longer call themselves brokers but, instead, financial advisers or financial consultants. Indeed, “there is some good, meaningful planning going on inside” brokerage firms, says Dan Moisand, president of the Financial Planning Association, a trade group.
Yet the advice a broker can provide is limited because of Securities and Exchange Commission rules. Advice brokers offer in a brokerage account must be incidental to the job of trading securities for you. That means while brokers can talk about how a stock or mutual fund fits into your financial scheme, they can’t offer a comprehensive financial plan. (Brokers are permitted to provide a financial plan, so long as it is part of an advisory relationship.)
Financial Planners
Investors have still another option: If you are looking for someone to fashion a financial plan that you will execute yourself through a traditional or online brokerage firm, you don’t need an adviser or broker but, rather, a financial planner. Look for someone with these credentials, which indicate an adherence to certain ethical standards as well as a level of knowledge: certified financial planner (CFP), chartered financial consultant (ChFC) or a certified public accountant with a personal-finance-specialist designation (CPA with a PFS). Advisers often sport one or more of these credentials as well.
Planners can provide the same services as advisers. The only difference is that they generally leave the job of managing your money up to the client.
The cost of a financial plan is typically a one-time fee of a few thousand dollars, depending on the complexity of your needs. Local advisers and planners can be found through the Web sites of either the Financial Planning Association (fpanet.org1) or the National Association of Personal Financial Advisors (napfa.org2).

When to not speculate

Fern — Fri, 28 Apr 2006 23:00:51 +0000

“There are two times in a man’s life when he should not speculate in
stocks: when he can’t afford it, and when he can.” — Mark Twain
“October: This is one of the peculiarly dangerous months to
speculate in stocks. The others are July, January, September, April,
November, May, March, June, December, August, and February.” — Mark Twain
Rings true even today.