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/

Become your own financial planner

Become your own financial planner

By Lisa Mary Thomson

There are always some people who live for the day's pleasures. Amit Gujral, a senior MNC executive, too belonged to this group. No doubt, the 30-year old made investments but more often than not, he spent his generous salary and perks on doing just what he and his family always dreamed of — the honeymoon to Hawaii, a summer holiday in a villa in Tuscany, an antique crib for his firstborn…the list was endless.

Up until the day when Gujral went for his health check-up, only to be told that there was a large growth in his kidney. Further tests revealed that the growth was malignant. Sleepless nights followed, not because Gujral was afraid of death, but more so because he hadn't made any provisions for his family.

Human Life Value



If you're a young person and think that financial planning must be undertaken only when you are older, with a family and have greater liabilities in life, you're sadly mistaken. On the contrary, the earlier you start planning, the better.

While it may be great to have a financial planner to help you out, there is no stopping you from trying to do this yourself. To help you become your own financial planner, SundayET begins with the basic premise of how to calculate your Human Life Value (HLV), based on which you can plan your further investments.

According to Kunj Bansal, senior vice-president (portfolio management services) at Kotak Securities, "Human Life Value (HLV) is nothing but the money that you are going to make over the rest of your life. It is the present value of all that you are likely to earn in the future."

The Defining Number

Over a period of time, however, the process of calculating this has been modified to include the element of expenditure. So, in addition to your salary, it also takes into account the amount you are likely to spend in the remaining years of your life.

Further elements have also been factored in such as already existing savings and bank deposits while other aspects like the house you are living in and the gold that you possess will be discounted.

Finding your HLV

Arriving at this figure can be as complicated or simple as you would like it to be, depending on all the elements that you include in the process of drawing your conclusions.

However, for practical purposes, here’s a very simple way of arriving at this figure.

Keep adding

Start off with a basic figure such as your annual income. Use this to calculate your remaining earning capacity. For instance if you are 30 and are most likely to work till the age of 60, then you would need to work out how much you are likely to earn over the next 30 years of your life.

Add your current savings to this. Savings in this case, would mean what is available to you in the form of liquid cash and fixed-deposits. "Once you have done this, formulate the present value of all the future earnings and you will then arrive at what is called the Gross HLV," says Mohit Thadani, head advisory, wealth management, Motilal Oswal Financial Services.

Begin Subtracting

From the gross HLV, you need to deduct the expenses that you are likely to face on a daily basis such as those required to meet household expenses. You also need to factor in the taxes you are meant to pay if you haven’t already deducted it while calculating your income.

Also deduct current financial assets from the gross figure. Keep a calculator near you because more subtraction follows. "Next, you will need to deduct all the one-time planned expenditures that you are likely to come across in your lifetime," explains Bansal. For this, you will need to know the approximate amount that you are likely to spend on buying your dream house.

If you have kids, you should have an idea of whether you want to set your kid to study abroad or within the country and determine the kinds of costs that will be involved. And then comes the large, but often, unavoidable expenditure that is involved in your child’s marriage. And then, the expenses that could suddenly arise in the case of an emergency.

Net HLV

After all these deductions, the figure that you finally arrive at will be your net HLV or your expected HLV. Based on this figure, you need to plan your investment pattern.

According to Thadani "It is imperative for an individual to work out his/her own economic value, so as to create replacement for his/her earnings in case of his/her demise – either through insurance coverage or through utilising his/her current wealth or combination of both."

While things may vary according to your risk appetite, the key remains in investing in instruments- be it debt, equity, gold or real estate- which match the time frame that you have in mind and provide you with the adequate returns.

Other adjustments

While the method mentioned above is the most basic, there are a few more points that could come in handy. You would need to make adjustments to the basic calculations to include the possibility of salary rises or even job cuts in the present situation. Some people also include the life expectancy of the spouse while arriving at HLV.

Bansal adds "Individuals also need to prepare themselves for a low-interest regime. As the economy develops, individuals should not expect the high rates of interest that they were used to getting in the past."

http://economictimes.indiatimes.com/quickiearticleshow/4130742.cms

Help for Mounting Losses

Help for Mounting 401(k) Losses

by Walter Updegrave
Thursday, November 27, 2008

Question: I'm retired and my 401(k) has lost approximately 35% over the past year. My financial adviser tells me to stay the course, but the losses keep mounting. What should I do? -Dale Marcos, Lafayette, Indiana

Answer: For starters, you should demand a better answer from your financial adviser. Just telling someone to "stay the course" isn't an adequate answer any time an investor expresses doubt or confusion about an investing or planning strategy, and it's certainly not an acceptable reply given the virtually unprecedented turmoil and uncertainty we're experiencing today.

More from CNNMoney.com: • How to Bet on Emerging Markets • 4 Lessons From the Financial Crisis • Whatever You Do, Don't Buy Sears

You can't blame your adviser for not foreseeing the severity of this downturn before it occurred. Nobody's crystal ball is that clear. But an adviser, or at least a good one, is supposed to help you create an investing strategy and retirement plan that can see you through a variety of economic and market scenarios.

Your adviser can't immunize you against losses altogether. That would be unrealistic if you also want your retirement savings to grow and support you for the rest of your life. But the plan should balance upside potential with some measure of downside protection that makes sense given your age, risk tolerance and your financial resources.

Most important, your adviser should be willing to get together with you in times like these to go over the plan, see if it's working as expected and discuss whether or not it needs to be revised.
On the face of it, a 35% decline over the past 12 months seems a bit much for someone who's retired. Given that stocks are down about 40% over that period and the broad bond market is flat to slightly up, that suggests a stock allocation somewhere between 80% and 90%. That strikes me as pretty risky for a retiree. But without more information about your overall finances - like whether the decline you cite includes withdrawals, what other investments you own and how heavily you'll be relying on your 401(k) for living expenses - I can't say for sure whether your 401(k) is invested too aggressively.

Ask for More Transparency

Whatever the particulars of your situation, this much is clear: You are upset about the performance of your account and you aren't getting enough feedback from your adviser to know whether the path he wants you to stay on is the right one.

Here's what I recommend. Go back to your adviser and explain that you need to know what course it is exactly that you are on and why you should stick to it. I'd ask to see how my portfolio is divvied up between stocks and bonds (as well as among different types of stocks and bonds) and I'd want an explanation of why that allocation makes sense given today's conditions.

I'd also want to see some sort of analysis that shows how much income I can reasonably expect throughout retirement from my investments, Social Security and pensions, if any, and how that income compares to my projected living expenses.

Move On

If your adviser can't or won't do this, you have two choices. You can take this kind of comprehensive look at your retirement finances on your own by revving up an online tool like Fidelity's Retirement Income Planner or T. Rowe Price's Retirement Income Calculator.
Or you can switch to an adviser who is willing to do this type of assessment for you. If you do move on to another adviser, be careful. There are lots of people with impressive-sounding credentials who really operate more as a salesman than financial adviser, looking to take advantage of fearful investors in uncertain times like these. To find a reputable adviser, search the Financial Planning Association Web site or the Garrett Planning Network.

Who knows, maybe your adviser has already revisited the advice he or she gave to you and other clients and crunched the numbers again. Perhaps that's why your adviser can so confidently tell you to stay the course. But if I were as worried as you seem to be, I'd want more convincing (and maybe a look at some alternatives) before I went along.

E-mail Updegrave at wupdegrave@moneymail.com.
Copyrighted, CNNMoney. All Rights Reserved.

http://finance.yahoo.com/focus-retirement/article/106216/Help-for-Mounting-401(k)-Losses;_ylt=ApmNvqTpXRlKoIp6cJnk1T67YWsA?mod=retirement-401k