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Don't miss this month's timely story ideas, direct dial phone numbers, and E-mail addresses of these accessible experts! • Do
You Really Want To Be A General Creditor To The Corporation For
Which You Work? • Service Counts at the Beginning of a Broker/Plan Sponsor Relationship. • Financial
Planning Flourishes in Malaysia. Do You Really Want To Be A General Creditor To The Corporation For Which You Work? Non qualified compensation plans need a second look in view of what can happen to a Fortune 100 company. There is cavalier attitude among senior executives of blue chip companies who firmly believe that their corporation would never become another Xerox, Polaroid, Digital, United Airline or Enron. A senior executive can defer salary and bonus income into a non-qualfied compensation plan set up by the corporation. For example, executives can take $100,000 of bonus, and defer receipt of it. Under normal circumstances, the executive can then receive that money over a ten-year period, typically after retirement, when they are presumably in a lower tax bracket. The increased value of the dollars deferred would then be subject to Federal and sometimes state taxes. However, such a strategy could throw the executive into a group of general creditors of a corporation becoming insolvent. The alternative, despite corporate loyalties, is to take the bonus and pay taxes on it the year it is received. The best deferred compensation plan, with all its bells and whistles, risks your own long term security on the future management of your blue chip employer, over which you may have little or no control. Philip
J. Toffel, Jr., Esq., WestonFinancial 617-571-4255 Company Stock Price Down? Plan Ahead So You Can Wait Out Dips In Company Stock Price. If your retirement date is coming up in the next few years and most of your retirement assets are in your Company's stock, you need to plan ahead. Diversification is the best solution, but if you company makes this difficult then you need to do some alternate thinking -- NOW. At a minimum, you should determine what your cash needs will be
over the next five years. Ideal sources of cash flow for this purpose include things you know with certainty will put a check in your mail box. For example, dividends on company stock (the price of the stock goes up and down but most dividends are predictable), interest income, pensions, social security income, and some annuities. Cash flow may also include maturing fixed income investments like bonds or CD's. These are investments with a known future value (maturity date) even if they will fluctuate in value until maturity. No matter what happens between now and maturity, you can count on having 100% of your dollars available in the future, no matter what the emotional markets may be doing at the time. Equity in your home, rental property or other assets that can be borrowed can also be an important financial planning tool. Not only can this be an inexpensive source of cash resulting in an efficient solution to the company stock problem, it can also help reduce your income tax expense since loan proceeds are not taxable and the interest expense may be deductible. Michael
T. Hengehold, CPA, MST, PFS, Hengehold Capital Mgmt.877-598-5120 Don't be Dazzled by Offers of Double Digit Yields in the Bond Market. In a flight to safety, don't get burned by what appears to be a safe or government guaranteed bond. Many investors got used to the high returns seen in the last decade, but have been bruised by the more recent down markets. In turning to bonds for safety, occasional offers of bonds and bond funds paying 10-12% have been very tempting to some. But often, there's a great deal of risk behind these investments, and sometimes this risk is hidden. There are a variety of ways to make risky bond/debt investments into what initially sound like safe investments. For example, one company is marketing a "debt offering based on home security loans" paying about 12%. In fact, this company is bundling loans people have taken to install residential home security systems, and selling this as a collateralized debt offering. If this company is willing to pay 12% to those who buy this debt, the interest rates on the original loans have to be higher (in order for the seller to make a profit). So the original debt being sold in his offering must have been issued at credit card rates that most would consider very risky. The level of risk behind this seemingly safe investment is almost certainly quite high. As another example, a well known mutual fund company has a closed end Government Income Fund which invests 65% in U.S. Government debt and up to 35% in issues of "stable" governments. Sounds safe, right? But this fund has investments in the Russian and Argentine governments, an expense ratio of 2.54%, and a portfolio turnover of 538% Check out how any investment works and make certain you clearly understand what you are hoping will boost your retirement income. Jane
King, Fairfield Financial Advisors, Wellesley, Mass. 781-431-1119
or 1-800-486-4845 is a small fee-only advisory and investment
management firm that provides sound, well-reasoned counsel
to individuals, families and business owners. She consults
on estate and retirement planning and has more than $75 million
in assets under management. She has been named to the Worth
Magazine list of the top financial advisors in the country
every year since it began. jking@fairfieldfinadvisors.com. Consumers SHOULD Worry About Inflation When it Comes to Their Long Term Care Insurance Policies. Nearly 60% of all long term care insurance policies are sold without a rider that protects the policy holder from inflation. This short-sighted cost saving can really hurt just when you need it. There you are, 15 to 20 years into retirement and you discover that the pay out has not kept pace with inflation and is inadequate to cover the cost of your long term care. Avoid this dilemma with the purchase of an inflation protection rider. This rider increases your daily benefit automatically with no medical questions, usually by about 5% and these increases continue even while you are receiving benefits. The cost of this protection varies between carriers, and though this is an expensive benefit, it is critical for those who need their policy to keep pace with escalating costs of long term care. Marilee Driscoll is under contract to write the first mass-market long term care planning book to be published by a major brand: "The Complete Idiot's Guide to Long Term Care Planning" will be published this fall by Alpha Books, a division of Macmillan USA. She is President of the Long Term Care Learning Institute, Plymouth, Mass., speaks to national audiences (both consumer and financial services) on retirement planning and long term care. She also provides technical long term care training to financial advisors & accountants. She is the author of "Seminar Secrets: How to market to baby boomers & their parents," and speaks to financial professionals on marketing through seminars. mdriscoll@marileedriscoll.com 508-830-9975 or toll free at 866-627-4533
Consider the following statistics: More than 46% of Americans with assets greater than $500,000 are women. Women control close to 50% of the country's total personal assets. Women now earn over $1 trillion annually. What do we do with all this money? How do we invest it and for what-a car, a yacht, the life of our dreams? Baby boomers, many if them women, stand to inherit more than $10 billion in wealth over the next decade as the largest asset transfer in history takes place. How do we get ready? We prepare by getting smart, getting informed, and by being thoughtful and strategic in selecting those who would advise us-by seeking financial advisors who will demystify the disciplines of finance and investing, and equip us with the knowledge, confidence and tools we may use to our optimum advantage. Therein lies the path to assuming the helm of our wealth. Paula
Chauncey, CFA, Managing Partner of Redwood Group LLC, 617-818-5514, Better Financial Disclosure Required to Boost Consumer and Investor Confidence in the Stock Market. What you read
in an annual report may not be what you get in this post-bull market Nancy
Coutu is Principal, Money Managers Advisory, 630-990-7174
Service Counts at the Beginning of a Broker/Plan Sponsor Relationship. Brokers, financial advisors and third party administrators focusing on providing the highest service levels for their plan sponsor clients and prospects have a new sales tool to assist in creating a custom lineup of funds for their clients. Manulife U.S. Group Pensions now offers its brokers the i:evaluatorSM, a web-based investment option evaluation tool that produces an objective, customized evaluation report of funds available from Manulife USA or Manulife New York against their appropriate index. The i:evaluatorSM then ranks the fund against funds tracked by Morningstar according to criteria selected by the client. It can also be used by existing clients to evaluate additional funds they are considering offering to their employees. The broker can continue to easily tweak the hypothetical portfolio choices until the plan sponsor is comfortable that the investment choices meet the needs of the firms' officers and employees. Check
out the i:evaluatorSM, at http://www.my401ksales.com or
call Financial
Planning Flourishes in Malaysia. Under the leadership of Jeffrey Chiew, RFC of Kuala Lumpur, a Malaysia RFC board has been created, chaired by Phang Kar Yew, CA, CPA, CFP, RFC. Chiew is the Asia chair for the International Association of Registered Financial Consultants, and he will be forming similar bodies in other Asian nations. The IARFC is a rapidly growing professional association that places great stress on continuing education. The President, Edwin P. Morrow, CLU, ChFC, CFP, RFC recently presented three days of intensive workshops in Kuala Lumpur, following his presentations to the Worldwide Financial Planning Forum held at the Putra World Trade Center in Kuala Lumpur. The IARFC's central office is located in Middletown, Ohio, and the Association is now reaching out to over 120 academic institutions that have a qualifying educational curriculum in financial planning. The Association estimates that in 2002 over 4,000 students will complete qualifying programs, "We feel that it is essential that course completers immediately commence a lifelong pursuit of professional education and develop the practices and procedures to effectively serve the public." For more information on IARFC contact Robyn Howard, Executive Director, 800-532-9060 or e-mail at director@iarfc.org Ask Good Questions When You Interview a Financial Advisor. Going it alone is not the best option for most of us when dealing with our financial issues. Get referrals from national organizations of planners such as the Financial Planning Association (www.FPAnet.org) and make at least three appointments. Most will not charge for an introductory appointment, but don't expect free advice either. As the following questions for background information: o What is your educational background? o What credentials have you earned? oWhat is your business background? oWith what kind of clients do you normally work? How long have you been practicing financial planning? oHow do you prepare a plan? oHow often do you send out client reports? oHow often do you meet with clients? o How are you compensated? (key question) o Do you personally research the products you recommend? o Do you review taxes as part of your service? oWho will be handling my affairs, you or a subordinate? Take time to consider your information and your gut instincts. No one cares about your money like you do! Dee
Lee, CFP, Harvard (Mass.) Financial Educators 978-456-3778 The Globalization of the Economy Requires Worldwide Business Education. Teaching young people the importance of market-driven economies and the role of business in a global economy is the focus of Junior Achievement International (JAI). This organization has been doing something about both financial ignorance and grinding poverty for 13 years by teaching business, economic, financial and entrepreneurial education to more than two million elementary, high school and college students every year in 112 member nations. The programs also teach the relationship between businesses, environmental issues, social issues, and the importance of ethical business practices. The advent of the Internet has facilitated the transfer of business education as well as the communications between the headquarters organization in Atlanta, Georgia, USA, and the business executives of the member nation boards of directors. Each member nation's board creates a partnership between business and education to implement JAI economic education programs -- programs that provide youth around the world with hope and opportunity. David Loose, Senior Vice President, Development and Operations, Junior Achievement International can be reached at David@jaintl.org,719-540-2254, JAI is a world-wide youth organization reaching 112 nations around the world, Albania to Zimbabwe, including the USA with 156 branch offices. Its programs reach close to 6 million young people, K-12, and university curriculums. Since 1919, 50 million young people around the world in all 24 time zones have benefited from JAI Programs. The Minnesota Financial Planning Association Creates Scholarship Fund to Honor Henry & Andrew Montgomery's Career-Long Service to the Financial Planning Industry. The Financial Planning Association of Minnesota has established the Montgomery Scholarship Fund in honor of Henry and Andrew Montgomery. Henry Montgomery helped found the International Association of Financial Planners (IAFP) as well as the Institute of Certified Financial Planners (ICFP). In January 2000, these two organizations (IAFP and ICFP), dedicated to serving the financial needs of individuals, families, and businesses, combined to form one unified group--the Financial Planning Association. The FPA now recognizes the contributions of both Henry and his son, Andrew Montgomery, through a scholarship fund that serves to remind practitioners and students of the leadership and service provided to the financial planning profession by Andrew and Henry Montgomery. Henry, a Certified Financial Planner, is Chairman and Incorporator of Planners Financial Services, Inc. (PFS), a 30-year old NASD firm. He is also a principal of Montgomery Investment Management, a fee-only division of PFS which is a 27-year-old Registered Investment Adviser Firm. His son, Andrew, was President of PFS and active in the Twin Cities ICFP Chapter until his untimely death in February 1999. Henry was twice president and long-time board member of the Twin Cities Financial Planners Association. He served for 6 years on the board of the IAFP and was president of ICFP; he has been known as the Father of Continuing Education. Elected "Certified Financial Planner of the Year" by the ICFP, he was also the recipient of the P. Kemp Fain award for contributions to the financial planning profession. He has served as chair and vice chair on numerous NASD, SEC and Real Estate syndication committees and continues to serve on national committees today. Scholarships
will be awarded to students pursuing their CFP designation who
are admitted to a program administered by an accredited university
or college registered with the CFP Board. For details, call FPA
of Minnesota at 612-789-4799 or send an email to office@fpamn.org.
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