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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! • Discretionary Management Adds Value for Plan Sponsors, Participants and Brokers. • To Build a Profitable, Sustainable Practice, Advisors Need Access to the Qualified Plan Market. • As Market Capitulates due to War Fears, What Do You Do? • Consistent Strategy of Producing Profits for Clients in Bad Markets Separates Michigan-Based RIA from the Field. • It’s the Costs, Stupid! • Want
to Know About A Company's Retirement Plan? • Medicaid Cuts Will Make Long Term Care Planning for Elders Even More Difficult. • All Investors Should Have an Investment "Plan B". • The
Rules for Beneficiaries are Cause for Concern for Unmarried Partners. Discretionary Management Adds Value for Plan Sponsors, Participants and Brokers. The most important addition to a 401(k) plans since their inception 25 years ago has been the advent of discretionary management choices for participants. This gives participants the ability to choose a professional money manager to handle their 401(k) assets – something that participants have been clamoring for ever since the plans were first made available. “Almost no one wants to be their own investment manager,” says Tim Chapman, co-founder of 401k Toolbox, a service of PMFM, Inc., that provides individual participants with two choices, the information needed to manage their own portfolios, and the option of signing a contract with PMFM, Inc., making them the manager of record for investing assets inside a company’s 401(k) plan. Plan sponsors have wanted to solve their employees’ needs for direction in how to invest their 401(k) assets, but in the past ERISA law prevented either the employer or the investment provider (mutual fund or insurance company whose products are used in the plan) from telling employees what to do because of perceived conflicts of interest. Now, however, a neutral, third-party organization such as 401k Toolbox, can step in and manage employees’ retirement assets. Often, plan sponsors will look to a benefits consulting firm to evaluate the discretionary managers for them, for an additional layer of due diligence as to the quality of the third-party investment services being offered to their employees. For brokers selling plans, the advent of third-party discretionary managers is a huge differentiation in the marketplace. Plan sponsors immediately see the value, and participants breathe a huge sigh of relief. For the broker, it has become a huge productivity tool. Enrollment meetings are no longer presentations to a largely resistant, bored audience who really wanted someone else to do their investing. More notably, the perception of the employee retirement plan as an excellent benefit enhances the employees’ satisfaction with their employer. PMFM,
Inc. Principals are Tim Chapman and Don Beasley, experience investment
advisors with offices just outside Athens, Georgia. Jud Doherty,
CFA, manages the marketing and distribution of 401k Toolbox.
PMFM provides money management services for its own clients,
for the assets held by plan participants in their 401(k) plans,
as well as for the clients of other asset managers. The firm
has a lengthy history of good risk-adjusted performance, and
has preserved the value of client accounts over the difficult
last three years. To Build a Profitable, Sustainable Practice, Advisors Need Access to the Qualified Plan Market. Qualified assets are the last, best strategy to build profitable, sustainable practice. Jim Drury, President, BenefitStreet, San Ramon, California, says that advisors should be asking themselves and others "Is there a practical solution for working in the qualified plan segment of the market?" The reasons are obvious: * An advisor
can increase their assets under management by two times the industry
average if they begin to exploit three simple opportunities: (i)
Company retirement plans; (ii) IRA rollovers from the executives
and employees of those plans; (iii) and the related planning opportunities
that rollovers bring to an advisor. * An advisor with the goal of converting ten plans a month and
120 plans a year, would have the discretionary income to expand
their firm and increase market share within a specific geographic
area. The advisor would have the resources required to hire junior
advisors creating "super advisor branch
offices". * By prioritizing the process of closing accounts via a group approach, the
advisor increases asset growth two times faster than the one-at-a-time traditional
strategy for approaching high net worth investors . * Qualified assets under management or long-term money management, establishes
a guaranteed asset succession because that money holds its value in the sale
of a business or its transition from one advisor to another. Junior advisors
can help create a positive succession plan for the principals of the firm. Low adoption of technology by advisors is the most obvious reason why advisors do not have more assets under management, and certainly why they don't have more clients. BenefitStreet's
Omnibus 401(k) Technology™ is fundamentally different offering
a streamlined, retirement plan administration process, including
prospecting, high volume conversion, and enrollment, as well
as performance and tax reporting. The BenefitStreet technology
makes communication seamless and easy between all essential partners
for all types and sizes of plans. To reach Jim Drury, contact As Market Capitulates due to War Fears, What Do You Do? Pay the right price for stocks in your portfolio regardless of overall market activity and regardless of the NOISE. The stock market is not about today, nor about tomorrow; it is about the next three to five years as we come out of this current economic cycle. The overall market (as measured by the S&P or broader index) sell off creates opportunity for stock pickers who can identify good stocks (good companies) at competitive and historically low valuations. Unfortunately, there is a tremendous amount of NOISE in the media - terrorism, corporate crooks, faulty accounting, the pending war with Iraq and nuclear threats in Korea. All of this NOISE distracts investors from doing what they should be doing and that is to put their money to work by investing in great companies, with real earnings which are trading at compelling valuations. The market sell
off shows how myopic most investors are. Rather than fearing a
deteriorating market, investors should believe that all markets
cycle and asset classes rotate through time. The asset class that
had the greatest return over one to three years ,typically does
poorly as it becomes overvalued and money leaves the sector. Once
the asset class is beaten down and ignored long enough it eventually
becomes cheap or cheaper than the other asset classes that become
overbought, such as bonds and real estate. Patrick J. Horan, CFP™, ChFC, is the founder and managing partner of Horan & Associates Financial Advisors, Ltd., providing asset management and financial planning for executives and closely-held business owners through management of wealth accumulation and wealth preservation with minimal tax consequences. Worth Magazine recognized Horan & Associates in 2001 as one of the “Top 250 Financial Advisers in America” for the third consecutive year. He can be reached at 800-592-7534 or path@horan-associates.com, http://www.horan-associates.com. Consistent Strategy of Producing Profits for Clients in Bad Markets Separates Michigan-Based RIA from the Field. A proven, Michigan-based Registered Investment Advisor, (RIA) Schultz Investment Advisors, Inc. (SIA) has produced yet another year of outstanding results for his clients by not deviating from his proprietary strategy of evaluating and investing in closed-end mutual funds for his clients. Scott Schultz, President of SIA, states he is the "tortoise" and
not the "hare" when it comes to his philosophy. He further states
that it is only through the calamitous market environment of the past several
years that have proven him correct--and he will not change one thing in what
he does for his clients. Schultz is a USPTA Certified Tennis Professional and USTA Chair Certified Tennis Official, and harkens his investment "game" akin to a "baseliner" in tennis parlance. He is not a flashy "serve and volley" type of player. Schultz doesn't claim any greatness in either endeavor--investing or tennis--however, facts belie the denials. SIA does not short securities or utilize margin for his clients. He does study closed-end funds diligently and believes that closed-end funds are actually the best deal going in the marketplace. SIA's proprietary indicators have earned "USA TODAY'S" #1 money manager in America over the past three years in their December 13 issue utilizing "Morningstar Inc.", data obtained from its "Principia for Separately Managed Accounts" data base. How has SIA thrived in a terrible market? By executing their fundamental strategy with consistency. SIA evaluates the current market price of a particular closed-end fund, measures whether or not it is priced "fairly" given its historical parameters, and makes its decisions based on this data. SIA's
Asset Allocation Portfolio's have not collectively suffered a
down year over the past four years--including 2002! And in fact,
SIA also had another category with a positive return, and one
down just (.54%). These categories compose over two-thirds of
SIA's asset base. It’s the Costs, Stupid! For those of you who’ve missed the latest round of discussion on mutual fund returns, heads up! In recent weeks, John Bogle, patron saint of the retail investor and the Ralph Nader of the mutual fund machine, has spoken far and wide about what investors can do to optimize returns in the current market. These speeches sum to a single mantra—cut costs now! The math behind the mantra goes something like this: Over the 5-year period ended 12/31/01, the average U.S. diversified stock mutual fund returned 9% and the investor pocketed, on average, 5.0% for his or her trouble. Where’s the sinkhole between the average return on mutual funds over the period and the return earned by an investor?? Costs—namely, mutual fund management fees, marketing fees, transaction and trading fees, and, of course, the tax costs borne by investors in mutual funds with high turnover rates. Enough costs to devour on average 4.0% of every dollar you invest, knocking the 9.0% average after-tax return on mutual funds down to 5.0%. Throw in a 3.0% inflation factor and the average investor eked out a real return of 2.0%! So, amid the drumbeat of war, the soaring euro, the specter of more corporate shenanigans, a continuing wave of layoffs, and other factors over which investors have little control, take hold of that which you can control and focus on maximizing the after-tax, after-fee return on your portfolio. Paula Chauncey, CFA, Managing Partner of être llc, 617-716-0257,headquartered in Boston, MA, works with individuals, and their closely held businesses, to develop and execute wealth-building strategies. pchauncey@etrellc.com. Want to Know
About A Company's Retirement Plan? The Web site http://www.freeErisa.com makes available valuable public documents, Form 5500s, that corporations must file annually with the federal government. • If you are thinking about comparing companies' benefit packages, this Web site is the place to start. These collected public filings allow you to figure out what kinds of benefits are offered, not the details of each program, but the broad, overall structure of the benefits available at that corporation, such as whether they have health, disability, defined benefit defined contribution retirement plans, or an employee stock ownership plan. If you are thinking about a new employer, check out your prospective benefit plans before you apply. • As part of the Form 5500, you can check any company's Schedule H, Part II, Item 2 for larger plans to see total assets under management, how many dollars employees are contributing annually as a group, whether the assets have increased or decreased from the previous year, and the investment income those contributions are earning. For smaller plans, go to Schedule I, Item 2. • FreeErisa also lists plans that are being terminated for a wide variety of reasons. FreeErisa maintains two data bases of terminating pension plans. One is for defined benefit plans only, (Source: the Pension Benefit Guaranty Corp.), and the other includes all types of plans (Source: IRS). This information alerts the financial professional about a window of opportunity to contact rollover recipients in order to assist in investing those assets. Judy Diamond -- judy@freeerisa.com or call 202-728-0111. FreeERISA.com is read by more than 140,000 financial professionals monthly including Securities Brokers/Investment Managers, Financial Planners, HR/Employee Benefit Managers, Insurance Brokers, Accountants, Third Party Administrators, and others allied to the retirement industry. The Web site gets 1,650,000 page views per month from professionals using the featured research tools and data.
Medicaid Cuts Will Make Long Term Care Planning for Elders Even More Difficult Medicaid cuts mean fewer Medicaid beds available for the nation's elderly, says Marilee Driscoll, Long Term Care Learning Institute and author of "The Complete Idiot's Guide To Long Term Care. "Recent news reports show that forty-nine states have made or plan to make Medicaid cuts in fiscal year 2003, while 32 states have made or are planning a second round of cuts to the program, the main payer for long-term care," she says. That's the finding of a new study from the Kaiser Commission on Medicaid and the Uninsured. It also found that 37 states are reducing or freezing payments to providers, while 25 are reducing benefits. This marks the third consecutive year of nationwide budget problems for the states. The report, titled “Medicaid Spending Growth: A 50 State Update for FY 2003,” is available online at: http://www.kff.org/content/2003/20030113. Not only is Medicaid being cut, but other programs that have allowed seniors to stay in their own homes are being cut back as well. “The cuts tell us that we will all have a more difficult time finding care for our elders and Medicaid cuts will speed the demise of more nursing homes that cannot keep the doors open on the dollars paid by Medicaid,” says Driscoll. Planning ahead
for elder long term care requires understanding the following: Marilee Driscoll is author of the only long term care planning book to cover all the ways to pay for long-term care, "The Complete Idiot's Guide to Long Term Care Planning" available in bookstores and on Amazon.com now. The book has received enthusiastic and numerous “must reads” from its reviewers. Driscoll 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. 508-830-9975 or toll free at 866-MARILEE (866-627-4533), or md@LongTermCareLearning.com All Investors Should Have an Investment "Plan B". Both professional advisers and investors need a written "Plan B" for what they intend to do to protect their assets if 2003 is a fourth year of a down market. Despite all the hype emanating from Wall Street today, no one really knows whether 2003 will be an up year. A "Plan B" is a strategy you will turn to if all does not go well with the markets, and is best developed with a knowledgeable professional who has insight into portfolio protection strategies. Depending on risk tolerance, size of portfolio, age, and time to retirement, every Plan B will be different. Hypothetically, a single, 59 year old women would benefit from the following options: 1. Should the U.S. currency continue to drop, including some government
bonds in currencies outside the U.S., such as bonds from Switzerland
or Sweden, would protect assets. This is the most critical year an investor will face. Your strategy will determine your results for years into the future. It is no time to walk alone. Henry I. Montgomery, CFP -- Planners Financial Services, Inc., 952-835-9000. Minneapolis, Minnesota. Registered investment adviser and subsidiary company Montgomery Investment Management, specialize in the management of no-load mutual fund portfolios for individuals and retirement plans designed to protect capital by reducing risk. pfshim@usinternet.com www.plannersfinancialservices.com. Rules for Beneficiaries are Cause for Concern for Unmarried Partners Many corporations have anti-discriminatory polices that prohibit discrimination for job benefits on the basis of marital status. Yet the terms and conditions under which they actually provide benefits requires careful attention to the details. Example: Verizon's anti-discriminatory policy, published in its
Code of Conduct promises they will not discriminate in providing
employee benefits regarding marital status, yet the pre-retirement
death benefit for unmarried employees is forfeited if the employee
does not fill out and return the beneficiary form. Deb Neiman, Neiman & Associates, Inc, Watertown, Mass. 617-744-1816 is a co-founder of PridePlanners Association which will hold their second national conference on June 13/14 in Provincetown, Mass. deb@neimanonline.com
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