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A Monthly Newsletter Source of Financial Sources • A Stock Picking Process So Simple, Even Your Dog Can Do It! • 401K Toolbox Managed Account Initiative With Lincoln Director SM Group • Convert Your IRA to a Roth IRA Now, Before the Cost of the Iraq War Makes It Go Away: Pay Conversion Taxes from Non-IRA Assets to Protect Tax-Deferred Investments for Future Generations. • Avoid Making Serious Mistakes With Your 401(k)s and IRA Transfers. • Scrutinize Your Insurance Company Group Annuity 401(k) Plan for Hidden Fees • Announcing HealthView -- Medical Advisory Services as part of Consumer Retirement Planning Provides Opportunity for Financial Institutions and Their Representatives to Provide More Accurate Retirement Planning for Clients • Holding Onto Stuff Gets in Our Way Emotionally, Physically and Financially. A Stock Picking Process So Simple, Even Your Dog Can Do It! Well, not really. But one successful fund manager suggests that investors could take a cue from the world of—would you believe it--dog shows to construct a more solid portfolio. Bob Markman, manager of the Markman Core Growth Fund advises that investors can build successful portfolios by focusing on big-picture competition concepts like ‘best of breed’ and ‘best of show.’ ‘Best of Breed’ stocks are companies that possess size, management skill, financial health, and product or service offerings that clearly set them apart from their competitors. They may not always perform well (short term, the market can be fickle) but as long term holdings they are likely to keep an investor ahead of the hoi polloi. Some best of breed examples are McDonalds in the fast foot arena, Tiffany in the specialty retail space and Proctor and Gamble in consumer products. Note that these are solid franchise names that are likely to still be solid franchise names years from now. Once you’ve picked five to ten best of breed stocks, the challenge is to then pick, from among your best of breed, one, maybe two, that you have the greatest confidence in. These are the best of show. These are the stocks you overweight in your portfolio. Notice the dynamic here: you start from strength and build on strength. Vegans can stop right here. But for the meat eaters among investors, Markman suggests a third category. These companies are the carnivores among plant eaters, the companies that make executives at even the best of breed companies break into cold sweats. They are “The Killer Competitors.” What makes a simply best of breed company a Killer Competitor? It’s the corporate ability to not just think outside the box, but to see around corners. It’s the skill to seemingly bend time itself, to act at a speed believed to be impossible. It’s the management courage to take—and make work—an imaginative leap that others fear could be career ending. It’s the possession of a Crayola box of 32 colors when the competition is stuck working with just eight. These are companies the define—and regularly redefine-their competitive space. Markman points to three very different stocks that fit this description: Apple, Toyota and Goldman Sachs. Robert Markman, Portfolio Manager, the Five Star Markman Core Growth Fund (MTRPX) -- a dynamic and responsive large cap growth, no-load mutual fund with a portfolio strategy developed to adapt to the changing investment environments. www.markman.com 952-920-4848. 401k Toolbox Managed Account Initiative With Lincoln DirectorSM Group Variable Annuity Reaches $500 Million Under Management. Lincoln Financial Group's DirectorSM relationship with 401k Toolbox managed accounts services has reached $500 million in managed 401(k) accounts. A total of 16,500 participants have selected 401k Toolbox's discretionary management service. All plan sponsor clients of Lincoln have access to 401k Toolbox, a service of PMFM, Inc, a Georgia-based independent third-party registered investment advisory firm, as an added-value service. 401k Toolbox, provides web-based investment advice as well as their "Manage-it-for-Me" option allowing individual retirement plan participants to contract with a discretionary manager. Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters in Philadelphia, the companies of Lincoln Financial Group had assets under management of $220 billion as of September 30, 2006. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life and disability insurance; 401(k) and 403(b) plans; savings plans; mutual funds; managed accounts; institutional investments; and comprehensive financial planning and advisory services. PMFM offers separate account management services, proprietary mutual funds, and is the advisor to 401k Toolbox, one of the leading 401(k) investment advisory services in the nation. As of 12/31/06, PMFM manages $870 million. The firm has increased its assets under management by nearly 25 percent in the last year. The management team at PMFM includes experienced investment advisors with offices in Watkinsville, Georgia who has worked with thousands of clients and offers their services to plan sponsors and through partnerships with 401(k) recordkeepers. Tim McCabe manages the marketing and distribution of 401k Toolbox. Convert Your IRA to a Roth IRA Now, Before the Cost of the Iraq War Makes This Option Go Away: Pay Conversion Taxes from Non-IRA Assets to Protect Tax-Deferred Investments for Future Generations. The tax bill signed by President George W Bush on May 17, 2006 still represents the greatest tax break ever penned for those with substantial income and IRA accounts. However the war budget recently released means that the government will again revisit this “gift” and it may go away. This once-in-a-lifetime opportunity has occurred that now makes converting your big IRA plan to a Roth IRA a strategy that must be considered. Experts believe that the value of conversions of IRAs to Roths are in the category of “best kept secrets” for high net worth investors. Do it now, they say, before the Government changes its mind and cuts off this “gift”.
It is unlikely that the Roth conversion opportunity will remain intact. The current budget deficit, war in Iraq, and extensive costs of homeland security will soon require this “loophole” be closed, because the government loses taxes with every conversion. In this example George Gardner, 79, has a Roth IRA valued at $4 million with a growth rate of 7%. Roth distributions are not required until death. George wants to leave the Roth to twin sons, Harry and Henry, both 40, so he splits his IRA into separate IRA’s for his sons over their lifetime based on the Uniform Lifetime Table. The Roth continues to grow to a value of $22 million over the son’s lifetimes, each son’s required distribution grows monthly, but the assets are never taxable to the sons. The total distributions during the lives of George, Henry and Harry equal $26,299,541. The growth of $18 million has been tax-free. George could also leave part of his $4 million to his just born great grandchild. If the IRA earned 8% over that great grandchild’s 80-year life expectancy, it would pay an astounding $122,514,435 income tax free. George could leave quite a legacy. Pearson Financial Services, Dennis, MA, is the author of "The Two Million Dollar Gift: Dynasty Trusts. Why Leave Your Assets Any Other Way", written for his clients, his clients' families, and his own family. He offers a fully integrated wealth management process, incorporating investment, retirement, financial and estate planning specialists under one roof, serving clients as their family's office, designing and implementing strategies to protect and distribute their wealth and highly appreciated property. Seth Pearson, CFP, 800-385-7925, seth.pearson@verizon.net. Avoid Making Serious Mistakes With Your 401(k)s and IRA Transfers. Every day thousands of people are changing jobs and retiring and every day serious mistakes are made in 401k and IRA transfers that can devastate a life time of hard-earned savings. The potential for error exists because no one is looking out for your account, you are supposed to be doing that. Or, the person who is supposed to watching for errors such as your HR Department at work, doesn't know some of the transfer rules. Either way a mistake could end up costing you thousands of dollars in unnecessary income taxes, penalties and lost tax deferred growth. Losing tax deferred growth is an unnecessary and damaging occurrence that happens when you take control of assets and do not make proper trustee to trustee transfers. You don't want to experience this forced distribution firsthand. Find a professional with the knowledge and experience to assist you in these transfers to ensure that they are handled properly from beginning to completion. If you or a loved one are facing a 401k transfer, IRA rollover or transfer due to death, you need help to avoid the traps of unintended taxes. You should also review your current IRAs to see if the custodian grants you the full flexibility allowed under federal law and to make sure your beneficiary designations are appropriate and reflect your wishes. You need to protect what may be your single most valuable retirement asset. Donald L. McCoy, J.D., CMFC -- 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. pfs@usinternet.com. Scrutinize Your Insurance Company Group Annuity 401(k) Plan for Hidden Fees Insurance company group annuities do not hold up under scrutiny when compared with mutual fund 401(k)s. There is no value added in a group annuity contract. It is simply a disguise for expenses the insurance company chooses to impose on its clients. In a group annuity employees do not own shares in specific funds, but instead they own “units” of a pool of funds. This effectively allows the insurance company to hide excessive fees. Here is data from a recent, real-life side-by-side comparison of an annuity-based 401(k) plan from a major insurance company provider and a more traditional 401(k) using Fidelity mutual funds that has been suggested by an independent advisor. The annuity plan has approximately $7 million in assets. Thanks to the higher fees involved with annuities, the plan was paying $28,000 in excess fund expenses. How? The group annuity contract was actually offering classes of funds that have a 50% to 100% higher cost than the true no load funds in the managed 401(k) using mutual funds. The insurance firms use this excess to pay sales commissions. These “soft” dollars that do not show up in the disclosure of fees because they are paid to record keepers in the form of “Revenue Sharing Agreements” or “Expense Reimbursements.” In addition, the separate account management fee for the group annuity was $70,000 and it was charging another $70,000 for an account service fee. The advisor selling the mutual fund managed account was charging per year approximately 0.7% of the assets under management. By working with a low-cost independent administrator (TPA) the total package of support and advice was substantially less than the annuity-based product without portfolio management. The bottom line here is startling: this year, the group annuity 401(k) plan would cost the employees nearly $120,000 more than the mutual fund managed account, and those excessive costs increase as the assets grow over the coming years. The costs, in most cases, are fully borne by the plan participants. Fiduciary liability matters as well. Although some plan sponsors do not worry about investment performance (although their employees certainly do) the bundling of services by the group annuity contract allows the insurance industry to layer on undisclosed expenses and these expenses reduce investment returns. Under ERISA, trustees of any plan have the responsibility of knowing the exact amount of expenses their participants are paying. The Mass Mutual contract made it nearly impossible for the plan sponsor to fulfill this responsibility. In contrast, the advisor selling the Managed 401(k) plan using traditional mutual funds is also willing to sign a contract serving as co-fiduciary, responsible with the plan sponsor for providing the most prudent investments and advice possible – something the insurance company representatives are not willing to do. Weber Asset Management offers the Weber Managed 401(k) Plan with a fully disclosed and easily understood and competitive fee structure. Weber designs plans to boost participation, thus allowing an increase in deferrals by the highly compensated employees. Weber signs onto its plans as co-fiduciary and provides active investment with an unsurpassed track record. Ken Weber, President, can be reached at ken@weberasset.com, or 800-438-3863. Announcing HealthView -- Medical Advisory Services as part of Consumer Retirement Planning Provides Opportunity for Financial Institutions and Their Representatives to Provide More Accurate Retirement Planning for Clients Health, wellness, and the cost of consumer health care are critical components in retiring well. The high cost of healthcare is one of the most significant factors impacting financial well being both before and after retirement. Until now, accurate figures around health care as Boomers age has been elusive. Now, HealthView offers medical advisory services that provide both financial advisors and their clients with a unique view of personal health -- including projected costs associated with an individual's very customized health profile. The result is a valuable, new dimension in retirement planning. The central offering of HealthView is the HealthView Report, an entirely new concept in personalized retirement planning providing a health risk analysis based on a financial representative's client's health, lifestyle and family history, and then the costs associated with those health care risk factors. The HealthView suite of tools includes a range of resources that serve as retention tools for the institution and its financial representatives while helping consumers make more informed decisions about their health care and related finances.
HealthView breaks new ground offering financial institutions and their representatives a new level of control over the accuracy of their planning for their clients' health and their financial futures. HealthView is part of WorldCare North America’s platform of services provided to consumers through financial institutions. Ron Mastrogiovanni is the president of WorldCare North America, a provider of medical advisory services including Web-delivered health assessmen programs that offer personalized health risk tools and analyses. The company also offers independent medical consultation services through some of the nation's leading research institutions, including Brigham and Women’s Hospital, Dana-Farber Cancer Care, Duke University Health System, Massachusetts General Hospital, and UCLA School of Medicine. WCNA's platform of services is provided to consumers through financial institutions, affinity programs and employers. To reach Ron Mastrogiovanni, call Joanna Flynn, WorldCare North America – 617-250-5167. Holding Onto Stuff Gets in Our Way Emotionally, Physically and Financially. Giving things away is really hard for most of us. We fear that we will regret our decisions. Possessions often are tangible reminders of our pasts. Just having them, we may feel, is a measure of the value of our lives. Even when painful to face old possessions, and you want to let go, the decision-making about how and when can stop you in your tracks. Keeping clutter and not letting go can wreak havoc within families and our pocketbook. We repeat buy when we can't find things. We spend hundreds of dollars a year on storage fees for items we simply cannot let go. We buy multiples of things that as we change, and life changes, become useless. When clutter mounts, so does financial bickering between couples. Lack of time or cooperation also makes it difficult. The logistics of giving stuff away can be overwhelming. Where do you start? How do you sort? Who will take what? Who will value your belongings the way you hope they will? How do you record the value of your non-cash donations for a meager tax return when an object's value seems so much more in our heart of hearts? Take into account the time and the emotions entailed, and it seems easier to just throw things away and be done with it, or do nothing until you absolutely have to because of a medical or financial crises, a move or after a death. Seeing the larger picture of what gives things value and why we hold onto our stuff, understanding what clutter is and is not, and building a regular routine for donations all make letting go easier. It's possible to make decisions you won't regret. Getting help makes the process more comfortable, and yes, even fun. And knowing how to work with charities can ease any after pangs. The cost of holding onto stuff costs our psyches a great deal of wear and tear. You can’t control the world at large, but there are ways to control your clutter. When you clear out the things you no longer love or use, you literally feel better and make room for what you want in your present life. Holding on has less to do with the value of the object itself than the fear that resources will not be available to meet your future needs. By making good decisions in the present (rather than worrying about a fabricated future), you automatically become better prepared for your future, a future that will unfold more favorably than you can imagine if you take better care of your present. It's okay to throw things out when they are beyond repair or usefulness, but it's important not to discard too soon. Yes, it is true that it is often cheaper to replace something than repair it. Yes, it is true that our current market makes things obsolete so that you will want or need to purchase the newer version. Yet, when we throw things away too soon, before the end of their actual usefulness, it's a premature burial. It's like burying something that is still alive. Too many Americans literally cannot afford what you can afford to toss. By donating your viable goods, you contribute to everyone's well-being -- yours, your family's, your community's, and the earth's. Give people a chance to use and even love your belongings while they are still "alive." In truth, we never get rid of anything. What we do, instead, is move our stuff farther away from us-to family, to friends, to strangers, and ultimately to the final container, the earth. Just like your closets, the earth is already rather full, and cannot fit much more. Many people have too much stuff, not because they are greedy or mentally ill, but because they haven't taken the time to adjust to the reality of their present life. Stuff just piles up. Moves, deaths, marriages, children, career changes, and new interests all require adjustment. Clearing our clutter is a way to adjust to the demands and desires of our present life. Just like our lives regularly change over the years, clearing clutter needs to be done regularly. By doing so, you get to have a more comfortable and productive life instead of spending time coping with all the stuff that's in your way. Laura Moore, ClutterClarity, Cambridge, Mass., provides on-site clutter-clearing services, coaching, and workshops, " It's Your Mess, But Not All Your Fault." laura@clutterclarity.com 508-349-1661. |