Savers lose out as advisers cash in

Savers lose out as advisers cash in

An “insidious relationship” between financial advisers, investment funds and stockbrokers is costing savers billions of pounds in lost income, it has been alleged.

By Jon Swaine and Holly Watt
Published: 7:20AM BST 03 Aug 2010

The close links between different parts of the industry, based on lucrative commission payments, are said to be preventing thousands of people from getting the best deal.

Investors may be unaware that advisers can receive thousands of pounds from their stake and recurring fees in return for referring them to a savings or pension fund.

Related Articles

• 
  

  American savers have smaller charges on personal pensions

• 
  

  Elderly could still face 'death tax' to pay for care

• 
  

  Kenneth Clarke to slash Legal Aid budget

• 
  

  Pensions: billions invested in worst-performing funds

• 
  

  50 per cent tax rate for higher earners in Budget 2009

• 
  

  Savers deserve reward for thrift, not rate cuts

Others do not know that stockbrokers receive valuable commissions for trading the stocks and shares their funds hold – and can “churn” the fund to make more.

Rosina Lizar, 86, from Manchester, was advised to put her savings of almost £10,000 into a Scottish Mutual Commercial Property Plan in December 2002.

The fund had an initial charge of 17.5 per cent, more than three times the current industry standard of five per cent. This saw £1,750 promptly docked from her stake.

Mrs Lizar was told that the fund, which was being recommended by other advisers at the time, had good prospects of making her large returns. Eight years on, her stake is worth little more than £1,000.

The financial advisers received four per cent commission, worth almost £400, for persuading her to join the fund. They were then entitled to a “trail commission” worth 0.5 per cent of Mrs Lizar’s stake – £50 initially – every year from then on.

Mrs Lizar’s daughter Geraldine Lawton, 60, said: “She had no knowledge of investment and trusted her adviser completely.”

Her new financial adviser, who did not wish to be named, said: “This was disastrous. Someone at that age should have been directed towards simple, low-risk investments protecting her capital. She doesn’t have much.”

Advisers insist they are not swayed by commission. A spokesman for the adviser’s firm said it had “robust systems in place” to ensure customers were given appropriate advice.

“The case has been investigated and at the conclusion of that investigation, a complaint was wholly rejected,” the spokesman said.

The FSA is planning to phase out new commission payments from 2012. But existing trail commissions – estimated to be worth more than £2 billion a year – will continue.

Experts fear advisers will find ways to circumvent new rules. Many advisers are already replacing trail commission with annual “financial health checks”, for which they charge extra fees.

Clive Waller, managing director of CWC Research, said: “There is always a danger for buyers using commission-based advisers. What if the best advice is not to do something? The only safe thing to do is to have upfront fees.”

Alan Miller of SCM, one of the City’s most successful fund managers, said: “There are insidious relationships across these different parts of the industry. Advisers will never recommend the cheapest funds because they don’t pay commission.”

There have also been calls for greater scrutiny of the relationships between fund managers and the stockbrokers they employ to trade the shares held by the fund.

Brokers make money by charging commission on the trades. Investors would hope that the broker chosen by their fund manager would be the one offering the best improvement on the price being quoted by a stock exchange.

However City insiders said this is not always the case. One trader said: “I know some people who only use one broker. Some just use their best mates, some are receiving nice presents. People are human." It is claimed that ski trips and junkets to the Cricket World Cup in the Caribbean and Monaco Grand Prix are regularly offered to clients by brokerage firms.

Other alleged relationships are developed more subtly. Donations on a website to charities nominated by Guillaume Rambourg, a former star fund manager at Gartmore now being investigated by the FSA. Brokers have denied this was an attempt to curry favour.

Mr Miller said: “Customers are saddled with the costs of ‘research’ from brokers, which is bundled into commission and can double trading costs. Why should people pay for what their manager should know already?”

Those in charge of deciding how to invest institutional and company pensions also mingle with executives keen to get control of their money.

Representatives from huge fund groups – including Goldman Sachs and Schroders – paid £1,670 each to meet managers of some of the biggest local authority pensions at last year’s local government pension fund symposium.

Officials controlling the £6.5 billion West Midlands Pension Fund, the £8 billion Greater Manchester Pension Fund and the £2 billion Nottingham County Council all attended this year’s event at the De Vere Dunston Hall in Norfolk. The hotel offered delegates a jacuzzi, steam room and 18-hole golf course on which productive deals could be struck.

A spokesman for Lipper, the respected US financial researchers, said investors in America were better protected in relation to the fees and commissions.

She asked “whether someone else ought to be acting on behalf of investors – a fiduciary responsibility. Such a role is undertaken by a mutual fund’s board of directors in the US, a majority of whom must be independent of the company managing the fund.”

http://www.telegraph.co.uk/finance/personalfinance/pensions/7923488/Savers-lose-out-as-advisers-cash-in.html

Basic assumption is, over time the domestic and world economy will go up

For Financial Planners, a Year of Tough Questions comments

By RON LIEBER
Published: October 16, 2009

If you think you’ve had a hard time reckoning with your own finances in the last 18 months, try putting yourself in the shoes of the financial planners who’ve been answering to scores of unhappy clients.

The planners, after all, were the ones who were supposed to help their clients avoid trouble in the first place. “I feel like I’m finally able to leave the witness protection program,” said Ross Levin, president of Accredited Investors in Edina, Minn. “There has been a loss of confidence in us and in the world, and a sense of betrayal. They did everything we told them to do, and it seemed like it didn’t work out.”

Though markets have improved, they are still far from where they once were, and that has made for some difficult discussions between financial professionals and their clients.

I wanted to find out more about those conversations. How much were clients pushing back, for example, and what were they saying? That was the main reason I moderated a discussion last Sunday at the Financial Planning Association annual meeting in Anaheim, Calif. (I received no compensation for my role there.)

While the planners were resolved and well rehearsed in front of hundreds of their peers, it was also clear that they had been severely tested in the last year. During the hourlong session, I quizzed five of them about the toughest questions their clients had asked. Here are those questions, along with the planners’ responses.

PREDICTING THE FUTURE So why didn’t most financial planners see all of this coming? Weren’t the signs obvious?

“This question actually presumes that there is something wrong with not having seen this coming,” said Elissa Buie of Yeske Buie, with offices in Vienna, Va., and San Francisco. “We live in a chaotic system, and chaotic systems are not predictable. But we know the range of possibilities, and this was always a possibility.”

Though most clients tend not to remember it years later, good financial planners will generally sit down at the beginning of a relationship, after clients have declared the sort of risk tolerance they think they have, and remind them how bad things can get in a truly outlying year. Well, 2008 into 2009 was one of those years.

Still, Ms. Buie said that even had she known the extent of the stock market carnage, it still might not have helped her clients’ performance much. “We wouldn’t have known when the turnaround was coming, so we wouldn’t have known when to change people’s portfolios.”

DIVIDING THE MONEY One of the most frightening parts of the recent market decline was that there was nowhere to hide. If you divide your assets among stocks, bonds, real estate, commodities and other investments, they are not supposed to all fall in tandem. So is the idea of asset allocation dead?

Tim Kochis, chief executive of Aspiriant, with offices in Los Angeles and San Francisco, rejects the premise of the question. “Asset allocation is not designed to protect against market movements in very short-term time horizons,” he said. “It’s designed to provide optimal performance results over very long periods of time, and there’s nothing to suggest that that expectation will not be fulfilled.”

For clients, it’s easy to blanch at something like this. Must they really wait decades to see whether their financial planner was right? Then again, getting set for retirement and not outliving your money is generally the primary goal for clients who pay for financial advice.

Older investors still had to wonder early this year whether their portfolios would ever recover. The last six months have given them some comfort, though, assuming they remained in the stock market. Mr. Kochis notes that one of the primary tenets of asset allocation is rebalancing every so often. People who did that and picked up, say, cheap stocks in emerging markets earlier this year are probably glad they did.

ESTABLISHING CONTROL Still, given what we’ve learned about the unpredictability of the markets, is there anything related to money that is within one’s control?

This is a question that people ask almost out of desperation, while throwing up their hands in despair and disgust. But there are plenty of ways to answer it. Harold Evensky of Evensky & Katz in Coral Gables, Fla., noted that the expense of investing was controllable, and clients can also often control what they pay in taxes and when.

Michael A. Branham of Cornerstone Wealth Advisors in Edina, Minn., the youngest financial planner on the panel, added an important point for midcareer professionals who are still employed. “They could control their savings rate,” he said. “They could choose how much more they wanted to add, so when we came out of this, they were able to really be ahead of the game.”


Ms. Buie said that after meeting with many clients in the last year, she found that the ones who felt best were the ones who had chosen to rein in their spending the most. “They probably felt more empowered than anyone else because they were doing something to make progress,” she said.

SNIFFING OUT THIEVES The economy was bad enough, but individuals who paid for financial advice also found themselves worrying about whether their adviser was the next Bernard L. Madoff. So how can people know for sure that they are not dealing with crooks?

The short answer is they can’t, and Ms. Buie noted that planners who had appeared at past conferences had themselves stolen client money later on. Still, Mr. Evensky noted that it could help to work with a financial adviser who kept client money with a third party like Charles Schwab or Fidelity.

That won’t protect clients against, say, forged money transfer forms. Ms. Buie said she believed that the brokerage industry needed to do a better job of creating clearer monthly statements that alerted people when money moved out of their account.

“It should say, at the top, this is how much money left your account this month,” she said. That way, people who didn’t move any money out themselves could notice any transfers more easily. She added that people who were sick, old or otherwise distracted should have trusted friends or family members reading the statements each month on their behalf.

CHANGING FOREVER When things are at their worst, the natural response is to lower expectations. As a result, many financial planners have heard some version of this question over the last year: Do I have to change my lifestyle from this point forward, forever?

For clients living close to the edge financially, or those who were older, this analysis was fairly intense, according to Mr. Kochis. “But our conclusion was not to do anything that is irreversible,” he said. Take the decision to retire, for instance. “You can’t simply snap your fingers and get your job back.”

Ms. Buie suggested focusing on what individuals really meant by lifestyle. “Even if you have a little less money, do you really have a little less life?” she said. Her firm’s mailing to clients on meaningful activities that didn’t require a lot of money got far and away the most response of anything it had ever sent out, she said. She and her husband, for instance, have saved money on travel through home exchanges.

These dark moments have provided a good opportunity to remind everyone of the fundamental assumptions that inform financial planning, whether you are working with a professional or not. “We made it very clear to clients that we have a basic, underlying belief that over time, the domestic and world economy will go up,” Mr. Evensky said.

So to those who insisted that stocks would never again be appropriate and were grasping for guaranteed returns, he simply said this to the ones who did not yet have enough cash to live on comfortably forever: “You can be certain if you put your money in C.D.’s and money markets, but you can also certainly be sure that you’ll never be able to accomplish your goals and maintain your lifestyle. There is risk no matter what you’re doing, and our judgment is that the safe thing to do is to stay invested.”

http://www.nytimes.com/2009/10/17/your-money/financial-planners/17money.html?em

The Intelligent Investor: The Investor and His Advisers

The Intelligent Investor: The Investor and His Advisers

December 19, 2008 @ 8:00 am - Written by Trent

This is the eleventh in a weekly series of articles providing a chapter-by-chapter in-depth “book club” reading of Benjamin Graham’s investing classic The Intelligent Investor.

Warren Buffett describes this book: “I read the first edition of this book early in 1950, when I was nineteen. I thought then that it was by far the best book about investing ever written. I still think it is.” I’m reading from the 2003 HarperBusiness Essentials paperback edition. This entry covers the tenth chapter, which is on pages 257 to 271, and the Jason Zweig commentary, on pages 272 to 279.

I found it very refreshing that in this chapter, Graham didn’t just focus on professional investment advisors when using the term “advisor.” Instead, under this umbrella, Graham included relatives, friends, local bankers, brokerage firms and other investment houses, financial service providers of all stripes, and professional finance advisors.

Why is this distinction important? We don’t just get our financial advice from “financial advisors.”

Take this blog (and countless others like it). We’re not financial advisors. I tend to think of myself as closer to the definition of “friend” than of financial advisor. I’m simply out here sharing my own reflections and experiences, letting people know where I succeed and where I fail.

Take the talking heads on CNBC. Those people may be financial advisors, but they’re speaking in a role where they’re not actually providing financial advice. They’re actually just being entertainers. Have you ever seen the disclaimer that precedes or follows any segment with Jim Cramer?

Yet there’s all this advice out there, and we do incorporate it into our knowledge, whether consciously and directly or not. The question is how can we know what knowledge is actually worthwhile and what isn’t? What advice is worth paying for and what isn’t? That’s really what Graham is seeking here.

Chapter 10 - The Investor and His Advisers
Even though this chapter is fairly long, Graham’s principles for how to deal with personal finance advisors - and personal finance advice - are pretty simple.

Be wary of all advice. You should never absolutely trust anyone with your money. Couple their recommendations with your own research and have an idea of what you want. Don’t just follow blindly with whatever an advisor says.

Avoid people who claim absurd returns. If returns seem to excessively beat the market, stay away. Almost always, it’s either a scam or it’s a person playing a very short term game that’s likely not to work next year. In either case, you don’t need their advice.

Stick with certified advisors or advisors from large, reputable houses. You’ll have to pay for both of these, of course, but the advice here is pretty good if you’re just seeking what a well-informed and cautious investor might be doing.

Truly defensive investors may not need advice at all. Defensive investors stick with high-grade bonds and common stocks of large, stable corporations and are likely to want to know exactly what they’re buying. In that case, you should be doing the research yourself - advisors might only be helpful in special situations (like a giant windfall, for example).

Make your advisors prove themselves to you. Just because someone has some impressive accomplishments in their past doesn’t mean that they’re guaranteed to be a great advisor. Be limiting in your trust until they show you repeatedly that they’re providing great advice for you.

Commentary on Chapter 10
Zweig puts more of a modern spin on Graham’s advice in the commentary. He seems to be even less inclined to recommend financial advisors than Graham is, arguing that one should only hit a financial advisor if you’ve tried things yourself and are experiencing waters that are far more turbulent than you’d like.

Zweig’s mantra? Research, research, research. Find out everything you can about your potential advisor before you even begin taking advice. Google them, find out about any complaints (using http://www.advisorinfo.sec.gov/), and ask around about them.

When you decide to give one a shot, don’t just dive into their advice. Zweig offers two long pages of questions you might want to ask a new advisor in order to get to know where they stand on things.

The biggest flag of a good advisor (from Zweig’s perspective) is interest in your specific situation. Are they asking about your budget? Your goals? Your frustrations? Your psychological makeup (asking about how you handle conflicts)? A good advisor will want to know all of these. If they’re not asking, they don’t care, and that’s dangerous.

http://www.thesimpledollar.com/2008/12/19/the-intelligent-investor-the-investor-and-his-advisers/

Where Do You Get Your Financial Advice?

Where Do You Get Your Financial Advice?
November 14, 2007 @ 10:00 am - Written by Trent

Some of my most faithful commenters have personal finance blogs of their own, and one of them, Mrs. Micah, asked a question that really got me thinking: where do you get your financial advice?

The more I thought about the question, the more I realized that the answer isn’t as obvious as it seems at first, so I’ll progress through my ideas about that question.

My first and most obvious answer is the personal finance resources that I read regularly, like personal finance books, blogs, magazines, and so on. Most of the raw personal finance information that I absorb comes from these sources.

But that’s the easy answer. Where do I really get my personal finance advice? To me, advice means more than just absorbing information from others - it also includes the situations where people provide direct comment on my own life and how I live it.

In that light, my biggest source for financial advice is my wife. She might not be the most informed individual about how to eke out an extra percentage from my investments, but she does know me - who I am, what our situation is, and where we’re going. Often, I’ll collect the data I need for various points of view and then present them to her, and together we talk through the situation and determine a plan. When I’m trying to make a decision about my financial situation, she is the first person that I turn to.

If that’s not enough, I turn to my parents. They generally offer lots of good arguments for staying the course in whatever I’m doing, simply because things have turned out all right so far since I began turning my financial ship around. Before then, I didn’t really talk to them at all about my finances, but I’ve come to find them to be excellent advisors when I’m troubled. I’m also coming around to talking to my mother- and father-in-law about things, but since my relationship with them is still relatively young, I sometimes don’t ask such strong questions of them.

After that, I listen to my readers. Quite often, if something is still troubling me, I’ll voice that concern in the form of a post here at The Simple Dollar and then take all of your comments to heart. Often, writing the post makes the answer clear; other times, I’ll rely on your comments for guidance. Often, you say what I’m already thinking; other times you rip my ideas to shreds. Either way, you aren’t afraid to pull punches and call me out when I’m getting overly confident or am looking down an inconsistent path.

If that’s still not enough, I turn to meditation and/or prayer. I take in all of the advice that I’ve heard and spend some time in deep meditation. The answer - the truly right answer - then comes from within. I won’t debate whether that’s a subconscious thing or a supernatural thing, but I find that such steps are often the key to me finding the right answer.

Those are my key sources for financial advice. I start with information (books, magazines, blogs), talk to those who love me, reformat that question as an article that addresses my readers, read the responses, then take all of that and meditate on it. In the last year, these sources have served me incredibly well.

http://www.thesimpledollar.com/2007/11/14/where-do-you-get-your-financial-advice/

Finding Affordable Financial Advice

Finding Affordable Financial Advice
by Laura Rowley
Posted on Friday, February 20, 2009, 12:00AM

While the world is chock-full of financial planners, they typically serve clients with $250,000 or more to invest. Sound, affordable advice can be tough to find for less-affluent wage earners. (And in the era of Bernie Madoff, whom can you trust?)

The economic crisis underscores the need to address finances in a holistic way -- debt, savings, investments, insurance, etc. -- and that may mean reaching out for guidance.

Here's a look at some of the efforts to fill the affordable advice void, designed for people who are either novices or have some financial literacy but want a coach to assist them in refining and reaching their goals.

Large Firms

Smith Barney's myFi, a division of Citigroup, recently launched a "Financial Wellness Program," in which clients pay $50 to $100 a month to develop a plan with an advisor. Counselors typically have seven years' experience and some level of financial certification. They act as fiduciaries, and don't get commissions for steering clients into Citi's products.

"We said, ‘Let's wipe away the past and [offer] the opportunity to pay for financial [advice] the way you'd pay for a utility,'" says Andy Sieg, managing director and head of myFi. "It has nothing to do with products and everything to do with advice. It's one price for ongoing coaching across all the issues of your financial life. Even someone on the verge of bankruptcy can call."

The coach walks clients through diagnostic tools to develop goals and an action plan. The client also has access to a series of planning modules over the course of a year, delivered by certified financial planners (CFPs) and other specialists. The coach is typically in touch with the client once a month, with an in-depth session occurring once a quarter. Coaches don't suggest specific products, but they will recommend resources, such as Bankrate.com or LendingTree.com, for mortgage rates.

Waiving Nuisance Fees

Participants don't need to have assets invested with Smith Barney, although clearly the firm is hoping to eventually attract those investments. If a client does bring assets to the table, myFi currently waives brokerage and account fees, as well as other transaction charges, for those with less than $100,000 in managed assets.

"It is extremely transparent in terms of what the customer is paying and what they get for what they pay," says Sieg. "What we heard from clients is they don't necessarily understand pricing in financial services, and clearly have a negative reaction when they feel there are nuisance fees."

Other large financial services firms, including Fidelity, Vanguard, and Charles Schwab, offer advice, but it's generally reserved to retirement or college savings advice. Fidelity, for example, offers free asset allocation advice at one of its 128 centers or on the phone, a spokesman says, adding that the advisors don't earn commission on the products they recommend. The advice is based on the firm's online tools (which some critics say are skewed toward over-saving for retirement).

For clients with less than $100,000 in investable assets, The Vanguard Group offers asset allocation and investment advice, as well as analyses of saving and spending in retirement, for a $1,000 fee. Clients fill out a detailed questionnaire online and then spend an hour on the phone with a fee-only consultant, who makes portfolio recommendations based on Vanguard's mutual funds (but doesn't earn commission on funds.) You can't get services like estate or insurance planning unless you have $500,000 or more of investable assets.

Seminars and Money Clubs

Another approach is to find like-minded peers to keep you on track -- in other words, a money club. "The group is a collective conscience that can increase your knowledge by sharing and increase the odds that you do your homework and follow through on actions," explains Diahann Lassus, president of the National Association of Personal Financial Advisors (NAPFA), a group of fee-only professionals.

Money clubs have been springing up nationwide, with many non-profit groups focused on women. Two veteran organizations are the San Diego-based Women's Institute for Financial Education (which has trademarked "money club") and New York-based Savvy Ladies, which had 5,000 women participate in clubs and educational programs last year.

Stacy Francis, a fee-only CFP in New York, founded Savvy Ladies in 2002, and she donates 20 percent of her firm's income to help run the non-profit. For an annual membership fee of $50 to $160, members get access to 18 to 24 workshops and seminars a year, as well as help finding or starting a club. They also get to have one-on-one monthly phone sessions with a CFP who works pro bono.

"Our goal was to create clubs across the nation, and we have some up and running -- but not as many as I had hoped," Francis says. "The challenge has been finding champions willing to do the work -- to find a space to meet and reach out to other members of the community who might want to participate."

If you're interested in starting a club, see these guidelines.

The USDA's Cooperative State Research, Education, and Extension Service brings together the teaching, research, and extension activities of 103 land-grant universities and the U.S. Department of Agriculture. CES is a public-funded, non-formal educational system that extends research-based information to nearly 3,150 county offices. (To find one near you, click here.) The Cooperative Extension Service also offers extension.org, which allows consumers to submit financial questions and receive answers from educators by email.

You can also access a personal finance course online for free through the OpenCourseWare Consortium. It's a group of about 250 universities internationally -- including 17 in the U.S. -- that offers course materials, lecture notes, tests, and more.

Crown Financial Ministries, which has roots in the mid-1970s, offers programs nationally and internationally; its curriculum is founded in evangelical Christian teaching. The Bible-based programs emphasize eliminating all debt and tithing 10 percent of one's income.

Financial guru Dave Ramsey, who also layers Christian messages in his teachings, has trained an army of instructors through his Financial Peace University. They offer a 13-week financial course for $99 around the country.

Financial author Lynn Khalfani-Cox is sponsoring her own Zero-Debt Tour at churches across the country. "The requests have come into us specifically from a lot of churches over the last two years," she says. "People are looking for help and for hope -- and in times of crisis, they do turn to faith."

Q and A

Finally, DIY investors seeking answers to more-narrow financial questions can find a fee-only planner who charges by the hour at garrettfinancialnetwork.com, or use a Web site such as myfinancialadvice.com, which answers questions for a fee. Additionally, NAPFA is touring the country with Your Money Bus, in which members offer free financial planning advice to consumers in various cities around the country, through June 3.

Lassus says no matter which educational avenue a novice chooses, the key is to reach out: "Just like the odds are much higher that you will actually reach an objective when you write it down, they are also much higher when you share your objectives with someone else."

http://finance.yahoo.com/expert/article/moneyhappy/143028

Also read: Personal Money http://www.invest.com.my/game/intro/

Simon Woodroffe, the founder of Yo! Sushi has most of his £1.6m pension in cash

Simon Woodroffe, the founder of Yo! Sushi has most of his £1.6m pension in cash
Simon Woodroffe OBE, 56, is the millionaire founder of Yo! Sushi. Having sold a majority stake in his business in 2003, he sold his remaining 22pc in March. He lives with his 18-year-old daughter, Charlotte, on a £1m houseboat in Chelsea.

By Mark Anstead
Last Updated: 9:38AM GMT 12 Dec 2008

Simon Woodroffe on fame and fortune. Photo: ANTHONY JONES
Where did you put the money from selling your remaining Yo! Sushi stake?
I split it between three deposit accounts. I've always banked with NatWest for my personal account (since I was 16); my business account has always been with Barclays and I have a deposit account with a firm of financial advisers called Sterling Assurance, which I set up when I wanted to transfer money out of stocks and shares.

Are you very active as a stock market investor?
When I sold a stake in Yo! Sushi in 2003 I wanted to invest around £1m and I looked around to find an adviser. I've got a good accountant but I didn't have anyone to invest wisely for me. Eventually I put it into mutual funds with Sterling Assurance but then, when everything started to dive this year, I realised that wasn't working. I now see my dream of an ideal adviser doesn't exist – you have to take responsibility for your own decisions.

In early September I decided to take my money out of funds and into a deposit account with Sterling. I was very late doing it and I lost about £200,000 on the value of my portfolio last year, but at least I got it out before the really big crash so I congratulated myself on not losing another 20pc. I think now the only way for me to make money in stocks is if I find out more about it. In the past I have always felt out of my depth.

Why are you going to try again?
Because I think it makes sense to spread my money across asset classes and the stock market must rise again. And, with interest rates coming down, the money I have on deposit won't keep pace with inflation. But, when I do it, I'll do it with enthusiasm, taking an interest and assuming responsibility.

I live to this motto – follow your fear to find your destiny. One of my fears is I don't understand the stock market properly, so I will face up to that and find out more about it. In my experience when you do that you find things are simpler than they appear.

Read more http://www.telegraph.co.uk/finance/personalfinance/fameandfortune/3722321/Simon-Woodroffe-the-founder-of-Yo-Sushi-has-most-of-his-1.6m-pension-in-cash.html

What Type of Financial Adviser do You Need?

What Type of Financial Adviser do You Need?
Part Two of Series
By Ken Little, About.com

See More About:
fee-only financial adviser
commission based financial adviser
Sponsored Links
Financial Planning Abroad
Migrate to Australia

Do you need the services of a professional financial adviser? Many people find that having a professional look at their total financial picture and bring it in focus is a valuable service.
As I discussed in part one of this two-part series, people often turn to financial advisers when they don’t have the time, energy or talent to manage a complex financial life.
If you think the services of a professional sound like something you could use, the next question becomes which type of adviser do you pick.
Generally, who can classify financial advisers two ways:
How they are compensated
Professional designations

How they are Compensated

There are three basic ways you compensate financial advisers for their work. Each of the three methods has some good points and some weaknesses. In the end, you should choose the adviser you feel will do the best job for you and worry less about the method of compensation. The compensation methods are:

Fee Only
The fee-only adviser develops a comprehensive plan that lays out how you can reach your financial goals. However, it leaves the actual execution of the plan to you. The adviser doesn’t sell any products or services other than the plan itself.
The strong points of fee-only financial advisers are:
Comprehensive plan – Fee-only advisers usually produce the most comprehensive plan since this is their sole product.
Objective recommendations – Since the fee-only advisers make no money off sales of any products, their recommendations are not driven by potential commissions.
Customer interaction – Fee-only advisers are more likely to spend time educating customers on various aspects of the plan since it will be up to the customer to execute the plan.
The weak points of fee-only financial advisers are:
Cost – Fee-only advisers charge more than other types of advisers since they do not take any other form of compensation.
Execution – Some customers find they are not much better off with a plan in their hand if they have to perform the execution also.
Updating – As things change, the plan needs updating, which may involve additional costs.

Fee and Commission or Percentage of Assets
The second method of compensation of financial advisers includes a fee and commissions. The fee, which is usually substantially less than what a fee-only adviser would charge covers the cost of building the plan and commissions cover the cost of execution.
A variation on this compensation plan involves an annual fee based on a percentage of assets in your accounts. The fee compensates the adviser for monitoring your investments and making recommendations.
The strong points of fee plus commission advisers are:
Plan development – The fee plus adviser develops a plan for the customer that lays out suggested strategies for reaching the customer’s goals.
Execution – Because the fee plus adviser receives compensation from executing the plan, the adviser is there to execute the plan.
Multiple products – The fee plus adviser often sells or has access to multiple products such as insurance in addition to investments, so much of they can do much of execution.
The weak points of fee plus commission adviser are:
Objectivity – There is always the question of how objective the advice will be when it results in a commission for the financial adviser.
House products – Fee plus advisers may push house products (certain mutual funds or life insurance products, for example), which may not be the best choice for your particular situation.
High-price products – There is a danger the fee-plus adviser will pick products for your plan that pay higher commissions over other equally good, but lower commissioned products.

Commission Only
The third method of compensation is commission only. The financial adviser receives their only compensation from products they sell you.
I think you can see the inherent problem with this arrangement – it is in the adviser best interest to sell you something. A person who works on a commission only basis is a salesperson.
However, this is not to say that you can’t work with someone on this basis. It will depend on the individual and your relationship.

Who is a Financial Adviser?
In many states there are no strict regulations regarding the terms “financial adviser” or “financial planner,” meaning anyone can print up business cards using those terms. However, several professional designations are protected.
The top designations you should look for are:
Certified Financial Planner (CFP) – This is the top of the line in terms of professional designations. Before an adviser can carry this designation, they must complete three years of work in financial planning, take a course of study and pass a comprehensive set of examinations. They must also meet certain ethical and educational standards.
Chartered Financial Consultants (ChFC) – Take courses of study on personal finance and pass exams.
Certified Public Accountant (CPA) – CPAs must pass exams on accounting and tax preparation to win the designation. However, you want CPA who has also been awarded the designation Personal Finance Specialist.
Other designations and some explanations of financial planning terms can be found at this site on financial credentials.

Conclusion
If you decide to use a professional financial adviser, the most important considerations are the person’s integrity and your relationship.
Method of compensation and other factors are secondary to establishing a level of trust that will allow you to work with the adviser in confidence.

http://stocks.about.com/od/findingabroker/a/Finadvis121404.htm

Do You Need a Financial Adviser?

Do You Need a Financial Adviser?
Part One of Series
By Ken Little, About.com

See More About:
financial advisor
allocate resources
estate planning
retirement planning
financial goals

Buy high and sell low. To borrow an old retail saying, “you can’t make a profit on volume” trading stocks that way.
Some investors find that they don’t have the time, energy or talent to research and identify stocks for their portfolio, much less manage their money effectively. Their needs go beyond the scope of a stock broker - they may need the services of a qualified financial adviser.
In this two-part series, I’ll look at what a financial adviser can do for you and discuss the different types of financial advisers and how they work with you. This article covers what benefits you can expect from a financial adviser.
A good financial adviser will work with you to develop a game plan that fits your financial circumstances and tailors a plan to accomplish your goals.
Some people find that they are more comfortable doing their “own thing” and don’t want to spend the money a good adviser may cost.
On the other hand, many people gladly turn over the details of developing a financial plan to an expert.
What Financial Advisers Do
Most financial advisers want to look at your whole financial picture – all your income and liabilities. They want a complete picture of where you are financially so they can draw a map from where you are to where you want to go. Here are some of the benefits of using a financial adviser:
The Big Picture – A financial adviser will develop a comprehensive profile of your financial status. This profile will identify areas of strengths and weakness.
An Unemotional Assessment – The financial adviser will give you an unemotional assessment of what needs to be done. Money is an emotional topic for many people, which often leads to bad decisions.
Allocate Resources – It is likely you have competing priorities, such as sending the kids to college while building a retirement fund. A financial adviser can help you allocate resources so both goals receive the appropriate share of dollars.
Minimize Taxes – Most investment decisions carry some type of short or long-term tax implication. Your adviser can help you shape your investments in a manner that keeps taxes to a minimum and more of your dollars invested.
Estate Planning – Careful planning will help ensure that your estate passes to loved ones in a manner that protects as much of its value as possible. In broad terms, your adviser will cover these areas. More specifically, your adviser will focus on these areas:
Retirement accounts such as 401(k)s, IRAs, and so on
Insurance including medical, life, disability, liability
Educational goals for how many children at what ages
Taxes both personal and business if self employed or own a business
Other financial goals such as second home, buy a business, retire early
The Plan
Depending of the type of financial adviser you use, you will get some form of financial plan that details the findings of the adviser and provides a blueprint to reach your goals.
The plan may include options to reach your goals that involve different levels of commitment on your part (read that dollars).
Conclusion
In the second part of this series, I’ll look at how different financial advisers execute their plans and how much their services cost.
Financial advisers come in variety of flavors, each with their strong points. The second part of this series examines how these financial advisers differ in execution and compensation.