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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! • Use Your Pay Raise to Increase Your 401(k) Contribution. • Interest-Only Adjustable Rate Mortgages Gain Popularity. • Your Debt Level is Key to Retirement Timing. • Parents Need to Know the "Dire Results" Scenario if They Delay the Often Emotional Discussions of Family Finances With Adult Children. • Where Are Your Investment Dollars Going? • Healthy Seniors Should Hire a Private Geriatric Care Manager (GCM) to Help Sort Options for Long Term Elder Care. INVESTMENTS AND WEALTH MANAGEMENT • Tactical Asset Allocation Using ETFs Makes Institutional Strategy Available in a Retail Mutual Fund. • Bank Brokerage Services for Mass Affluent Offer Significant Opportunity for "Super" Brokers. • "Pensions 101: A Financial Professional's First Guide to Retirement Plans" Builds a Foundation of Pension Knowledge for Advisors Ready to Mine This Asset Base. • Fulfilling Investment Objectives in Mutual Fund Managed Accounts.. • Need a top speaker? Richard Feigenbaum, Speaker, Author, Focuses on 529 Plans, Stretch IRAs and Estate Planning. • Media: Sign Up for Free Subscription to In-Depth, Financial Education Resources.
Use Your Pay Raise to Increase Your 401(k) Contribution. Check out the 401(k) calculator at www.paycheckcity.com to easily and accurately figure out the benefit of using your pay raise this year to make a larger employee contribution to your company's 401(k) plan. The difference can mean thousands of dollars at retirement time. Use John as an example. He and Mary have three children and live in Massachusetts (the calculator is accurate for all 50 states). John earns $42,000 a year and just received a 3% pay raise, increasing his salary to $43,260. John, who is paid semi-monthly, has a 401(k) plan total of $32,000 in savings. His company has a dollar-for-dollar 401(k) match, up to 5% of gross pay. By increasing his 401(k) contribution from 3% or $54.08 twice a month of his new salary to 5% or $90.13 twice a month of his new salary, the improvement in the retirement bottom line is significant. At 3% of $43,260 over 20 years (assumes a 3% annual salary increase) at 6% investment return, John and Mary will have a retirement nest egg of $227,340.02. At 5% of $43,260 over 20 years (assumes a 3% annual salary increase) at 6% investment return, John and Mary will have a retirement nest egg of $310,432,68 for a difference of nearly $75,000 more to retire on. Most employees don't understand the power of increasing their 401(k) contribution up to the employer match that is available to them. The 401(k) calculator available when you register under advance calculators at www.paycheckcity.com allows you to experiment with all kinds of "what if" scenarios regarding your retirement security. With no employer match, even at 5% contribution to his 401(k) plan, John’s retirement nest egg would reach only $206,532.75, more than $100,000 less than his nest egg would be if he had an employer with a 5% employee match in the 401(k) plan. PaycheckCity.com offers unequalled employee self-service tools for paycheck management. The FREE PERSONAL FINANCE CALCULATORS at this site are used by individuals and organizations of every size to quickly and accurately answer paycheck-related questions and to compute paychecks under a variety of circumstances. Over a million page views take place each month on the PaycheckCity.com site and visitors stay an average of 10 minutes each. It is the most visited site for payroll-related support on the Internet. ontact Jon Bohnert, jon@paycheckcity.com, 480-596-1500 x. 103.
Interest-Only Adjustable Rate Mortgages Gain Popularity. Most people tend to think of a traditional 15 or 30 year mortgage as being the best and most conservative option (if not the only option) available on the mortgage marketplace today. However, as the interest rates on fixed rate mortgages have leveled off in recent months, many home owners are searching for ways to increase cash flow without going the traditional route. Interest-only ARMs allow many homeowners to dramatically increase cash flow and to afford homes that would otherwise be unaffordable. Typically, these loans last for 30 years, and allow homeowners to make interest-only mortgage payments for the first 5 to 15 years of the loan, after which time the payments will consist of principal and interest. The loans come in many versions. The interest rates can change monthly, or you can lock in the rate for 3, 5, 7, 10 or 30 years at a time. The interest rates range from about 3.25% on the monthly ARMs to about 6.5% on the 30-year fixed versions. If you start out with a $200,000 mortgage at 3.25%, the minimum interest only monthly payment would be $542. When compared to a traditional 30-year loan at 6% with monthly payments of $1,199, the cash flow savings run $657/month. You can choose to take the $657 a month and apply it toward paying down principal on the mortgage, paying down other higher-rate debts (car loans, credit cards), or for investment or other purposes. Another benefit of these loans is that they are not subject to the higher “jumbo” rates; the rate would be 3.25% whether the loan amount is $200,000 or $1mm. Clients in the following situations could benefit from interest only mortgages: divorce, self -employed/fluctuating income, recent college graduates with heavy student loan debt, real estate investors, move-up home buyers looking to buy more expensive homes. In most cases, the home appreciation on a more expensive home will result in the homeowner building the same equity, if not more, when compared with a less expensive home and a traditional 30-year loan. Gibran Nicholas, President and founder of Nicholas & Co. Mortgage Planning Solutions, a mortgage lender and broker in Ann Arbor, MI can be reached at 734-531-0180 or at gibran@nicholascity.com. The firm specializes in working with certified financial planners (CFPs), CPAs and attorneys, as well as builders with high-end clients.
Your Debt
Level is Key to Retirement Timing A home mortgage for an existing home or a new mortgage for a second home create a line item that requires significant income to pay during retirement. Other forms of debt can have a significant impact on income needs during retirement as well and should be discussed, such as: credit card debt, car or boat loans, time shares, and installment Loans. The use of refinancing may lower the cost of the mortgage for the existing home or the new home, and refinancing may also allow "cash out" of the mortgage to pay off some additional debt. In some cases, a mortgage payment may be useful for tax purposes during retirement. In general, however, reducing debt and keeping it down makes it possible to be more comfortable during retirement. Low or no debt loads allow the retirees to require less income to meet their monthly bills and travel expenses. The bottom line for the retiree is that debt must be dealt with before an accurate assessment of the time frame for retirement can be made. Donald W. Nicholson, Donald W. Nicholson & Associates, Ltd., Wilmington, Delaware, is a fee-based financial planning firm serving the retirement and wealth management needs of professionals and business owners for almost 30 years. His son, Donald W. Nicholson, Jr., is a full partner in the business. Contact them at 302-529-1500. E-mail dwnicholson@unitedplanners.com -- http://www.nicholson-associates.com.
Parents Need to Know the "Dire Results" Scenario if They Delay the Often Emotional Discussions of Family Finances With Adult Children. It is very hard for many aging parents to come to grips with making a decision that their grown children do not, or will not, like. Whether it is liquidating second home property that the children love, but cannot afford to maintain, or whether it is how to divide an estate if one child has serious health or drug problems and the other does not, parents are often in the position of making someone unhappy and as they age they really don't want to do that. Children are a full step away from the financial reality facing their aging parents and generally tend to have less information than their parents about the financial ramifications of estate planning that is delayed or not done at all. Most advisors will agree that getting clients to implement their advice is the hardest thing for them to get done. They can create an effective, professional plan that takes into account all of the financial issues of the estate, and still run into the emotional baggage that causes delay, even though the parents know they must act before one or both of them die. "We communicate with our clients regularly, reminding them that action must be taken to fulfill the intentions of the estate plan. Sometimes that works, sometimes that does not work. Sadly, we can end up with a file of good intentions at times, because the implementation was impossible for the family to face," says Henry Montgomery, Montgomery Investment Management, Edina, MN. The key, says Montgomery, is making it really clear what will happen if the estate is not protected and the plan is not implemented. "We don't like to emphasize dire results in our conversations, but sometimes it is the only way to break the emotional logjam," he says. 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.
Where are your investment dollars going?? Market timing and after-hours trading are two sure paths to eroding investors' returns. Picking up the marketing tab on firms' efforts to capture more investor assets is yet another. Within the context of the account management fees you pay to your mutual fund or brokerage firm, you may be paying for things you would never consider buying for yourself, let alone a perfect stranger. Consider the following: I received an invitation recently, because my name had been selected and income-qualified via zip code by a direct mailing shop, to dine at one of Boston's finest restaurants. This invitation, courtesy of a large national brokerage firm, sported a dinner menu that began with Osetra Caviar, proceeded to Terrine of Fois Gras, moved on to Steak au Poivre, etc., etc. You get the general picture. The meal is to be accompanied by an erudite and unique (read: singularly correct) view of where interest rates and the overall market are headed. Sound good so far? At the bottom of the glossy invitation, rendered in fine italic script, lay a brief disclaimer informing the invitee that while the firm extending this gracious invitation does not have account minimums, it does require that anyone accepting the invitation, due to the sophisticated nature of the evening's discussion, possess minimum assets to invest of $1,000,000. Who exactly is paying for this evening? The answer, of course, is you and me - including those of us with the desired "minimum" assets to invest and those of us without. How? Through the sales charges and 12b-1 fees we pay on mutual funds, through the commissions we pay on portfolio trades, through the management fees we pay to those who advise the mutual funds or other investment alternatives in which our money is invested, through the processing fees that hit our accounts, and through the bundled account management fee we pay to our brokerage firms. Caveat Emptor: Check out your brokerage firm's record on the marketing front and find out exactly where your investment dollars are going. Paula Chauncey, CFA, Managing Partner, être llc, 617-716-0257 works with individuals, and their closely held businesses, to develop and execute wealth-building strategies. pchauncey@etrellc.com.
Healthy Seniors Should Hire a Private Geriatric Care Manager (GCM) to Help Sort Options for Long Term Elder Care. Many seniors delay making long-term care decisions, either because they are in denial or simply don't know how to sort the many options available. As a result, it is their children who most often end up evaluating long term care facilities at a time of crisis. An excellent idea to remove the confusion and to get past denial is to hire an expert to help with the sorting process. That professional is a geriatric care manager (GCM) -- a specialist in helping families make sense out of the myriad of options for elder care. GCMs are "the wedding planners of long-term care choices" - helping individuals and families eliminate the steep learning curve in picking residential and care options. They know who to call, where the facilities are located, their cost, and the variety of services available at that facility. GCMs can be in private practice, or they may be associated with a facility or home care association. Example: Recently, John and Joan, after many years of talk and no action, said they had decided to move into assisted living. Their eldest daughter asked them to to consider selecting their facilities from one geographically convenient to her. They had no special ties to their current home area, nearly two hours from their daughter. The daughter, a full-time professional, did not have the time to do the research necessary to provide her parents with a full portfolio of options. The daughter was also concerned that her research might not uncover every available option. Instead, the family now plans to hire a geriatric care manager. Who pays for the GCM? Just as a furniture store may have complimentary interior designers on staff, often facilities or associations have "free" GCMs who, of course, usually steer you to their company's options. A better option for most is to pay out-of-pocket for impartial advice. Many LTC insurance policies offer to pay for GCM help - though some may not let you hire an independent practitioner, and require you use one they recommend. Some EAP programs offer free or discounted GCMs - to help employees and their families. Ask at your place of employment. The GCM working with John and Joan will be given specific instructions to find, list and prioritize the facilities that meet their needs and that is located within a thirty-minute drive of the daughter. Both parents are currently in good health, so the instructions to the GCM will focus on arrangements that provide amenable living arrangements for active seniors. But a key concern is finding a facility that also could provide assisted living and nursing home services as they are necessary, without requiring a major move. Dealing with the issue of elder care by utilizing the assistance of a professional planner makes sense to John, Joan and their daughter. Now, an appropriate decision can be made with all parties having the best available information. Marilee Driscoll, President, Long Term Care Learning Institute, (508) 641-9393, Plymouth, Mass., www.ltc123.com, author of "The Complete Idiot's Guide to Long Term Care Planning," is the nation's leading consumer authority on strategies to pay for long term care. She is President of the Long Term Care Learning Institute.
INVESTMENTS AND WEALTH MANAGEMENT Tactical Asset Allocation Using ETFs Makes Institutional Strategy Available in a Retail Mutual Fund. A mutual fund of funds launched by PMFM, Inc., in summer of 2003 was the first to use an actively managed portfolio of exchange traded funds (ETFs) as investments. The Fund has attracted $180 million in the last six months. The ETFs offer the portfolio managers of the PMFM ETF Portfolio Trust (ETFGX) flexibility and diversification with no mutual fund trading issues, because ETFs are structured to be traded intra-day. The manager's at PMFM, Inc. are active managers offering tactical asset allocation as they seek to keep their portfolios overweighted in asset classes that are doing well, and under-weighted in asset classes that are out of favor. In certain market conditions (like 2000-2002) that could mean avoiding equities entirely. Good tactical managers use clearly defined rules to determine the portfolio's allocation at any given time. Many tactical asset allocators also use mutual funds to implement their portfolios. The mutual fund industry is making rules changes regarding frequent, very short term trades and investigating the expenses such trades cause for longer term shareholders. It is now predictable that the mutual fund industry will create more trading restrictions, increase redemption fees and mandatory holding periods. These changes will make it very difficult for those managers who use tactical asset allocation to use traditional mutual funds to manage their clients money. A tactical asset allocation strategy for PMFM ETF Portfolio Trust with the objective of long term growth does not reach for the highest return by staying in the market at all times. Instead, the fund managers prioritize missing the most significant downturns by taking client assets out of the market when there is little likelihood of investment success based on their multiple indicators. This strategy allows PMFM ETF Portfolio Trust to offer returns comparable to equity strategies with a correlation similar to fixed income strategies. The expected low correlation of this fund to a core equity portfolio is likely to be lower than small cap and international asset classes. As a result of the low correlation, the fund is a good complement to a diversified portfolio. The tactical management of ETF's brings an institutional strategy to the retail mutual fund market. PMFM, Inc. principals are Tim Chapman and Don Beasley, with offices just outside Athens, Georgia. Jud Doherty, CFA, manages the marketing and distribution of 401k Toolbox, a service that provides discretionary management as part of its advice product. PMFM provides money management services for its own clients, for the asset held by plan participants in their 401(k) plans, as well as for the clients of other asset managers. The firm has always offered a tactical asset allocation strategy and has a lengthy history of good risk-adjusted performance, preserving the value of client accounts over the difficult last four years. Tim Chapman, 800-222-7636, timchapman@pmfm.com, www.401ktoolbox.com
Bank Brokerage Services for Mass Affluent Offer Significant Opportunity for "Super" Brokers. Many brokers
with successful books of business have scoffed at bank brokerage
opportunities in the past. However, that has changed as banks become
a force to be reckoned with in the brokerage landscape. In effect, banks now have investment divisions that function as wirehouses, offering bank brokers access to very competitive product lines and all the leading edge technology previously available to them only at the national firms. Most importantly, access to the excellent referral network within a bank works because bankers receive incentive compensation based on the amount of business they are able to refer to the bank's brokers. To make the bank brokerage strategy work, they are actively recruiting "super" brokers -- those highly professional, experienced, top producing financial professionals who have come from the top two quintiles in production at the national firms, who have one-third of their book in fee-based assets, and very importantly, have the presence to deal with high net worth clients. The "super" broker becomes the investment quarterback and relationship manager for the bank's high-net-worth clients or family office, providing access to trust services, sophisticated credit and lending services, risk management, real estate appraisal and management, and estate planning. To recruit the new "super" brokers, bank brokerages are offering significant signing bonuses to those willing to move from a wirehouse. Transition packages from banks are individually negotiated and based on the quality of the broker being recruited. The brokers' trailing 12-months production, total assets under management, percentage of book that is fee-based, clean compliance record, and the length of service at their current firm versus their number of years in the industry, are all factors considered in the determination of the transition package offer. Bank brokerages have found their true niche in servicing the mass affluent -- clients with assets between $500,000 and $5 million. These customers have built solid trust relationships with their banks and continue to focus on the banks, not the wirehouses, for the full range of their financial needs. Mindy Diamond is President of Diamond Consultants, Chester, New Jersey, a search firm specializing in recruiting wirehouse and regional firm brokers with trailing 12-month’s production between $200,000 and $5 million. Her firm assists these financial consultants in evaluating opportunities in the industry and introduces them to other wirehouses, regional firms, banks, or independent broker-dealers. Mindy can be reached at 908-879-1002, or mdiamond@diamondrecruiter.com.
"Pensions 101: A Financial Professional's First Guide to Retirement Plans" Builds a Foundation of Pension Knowledge for Advisors Ready to Mine This Asset Base. A new book "Pensions 101: A Financial Professional's First Guide to Retirement Plans" fills a void that exists between consumer books on retirement planning and highly technical books that cite all of the IRS and pension regulations without really instructing someone new to the field. Written by Rich White and technically reviewed by Rajean Boster, CPC, CEBS, the book uses a "case study" format that follows a typical American household making decisions about their retirement planning needs. Through a case study character who serves as the family's financial advisor, “Pensions 101” models effective client communication that can be practiced and perfected by professionals on the job. In addition, to direct your learning, the Guide includes specific learning objectives for each chapter and some brief application exercises to test the reader's progress, making it possible in eight to ten hours for the reader to greatly enhance their basic knowledge. The book covers the following areas: • Personal retirement plans and the concepts of "pension portability." Whether you work in management, sales, administration, or technical areas, Pensions 101 will give you a foundation upon which to build a career in today's financial services industry. Go to http://www.judydiamond.com for further information or call: 800 231 0669!
Fulfilling Investment Objectives in Mutual Fund Managed Accounts. Financial advisors want and need confidence that the investment choices they make for clients meet the risk profile established for that client. Confidence in the mutual fund selection process of the managed account provider is essential. The key is an investment team with the experience and flexibility to weight factors differently in order to establish criteria that is most relevant for choosing funds in any specific investment category. To be included in the initial universe, good portfolio managers at your managed account provider should first screen for the following: 1. No-load funds with no redemption or transaction charges, 2.
Three-year track record Funds that meet this initial screening are ranked and scored on the following: Then, additional criteria are reviewed for each fund versus its
peer group as follows: Well run mutual fund managed accounts release advisors and their investor clients from the concern and challenge of decision making so both parties may invest with confidence that their investment objectives have been honored by the portfolio. To reach Tim Clift, V.P. for Investments,
FundQuest, Boston, call Joanna Flynn at 617-526-7307. FundQuest
is the leading provider of customized Web-based managed account
platforms for financial institutions interested in moving their
representatives from commission-based to fee-based product sales.
Need a top speaker? Richard Feigenbaum, Speaker, Author, Focuses on 529 Plans, Stretch IRAs and Estate Planning. Program chairpersons for conferences next fall should look at Richard Feigenbaum as a possible speaker. He co- authored “The 529 College Savings Plan” and is a J.D. and practicing estate planning attorney and a much sought after speaker before groups of financial professionals. In addition he is available to author articles or to serve as a source for trade publications on the following topics: 1.529 College Savings Plans – How to grow your financial advisory business using the good news of 529 Plans as a way to “open the door”. From basics to sophisticated planning with 529 College Savings Plans, including gift giving strategies, workplace 529’s, state and federal tax issues, converting custodial accounts, estate planning opportunities, and much more. 2.Workplace 529 College Savings Plans – How to implement a workplace 529 without creating a nightmare for the advisor or the employer. Discussion includes state tax issues, tips on how to select a vendor, fees and expenses, technology issues, payroll issues and fiduciary liability for the employer. 3.Basics of Estate Planning – How to approach advising a client on estate planning, from soup to nuts, including the most recent tax law changes affecting estate taxes and estate planning. Discussion includes tools and techniques, as well as how to use the estate plan as a way to market your services to other professionals and clients. 4.Stretch IRA Planning – How to use IRA’s as a multi-generational estate planning tool. Discussion includes beneficiary designations, charitable planning, annuities as an investment of an IRA, creditor issues and insurance planning. 5.Asset Ownership and Beneficiary Planning – How to structure asset ownership and beneficiary designations to coordinate the estate plan with assets and beneficiary designations. Beneficiary designations and asset ownership are the most overlooked and are potentially the most dangerous mistake made by financial advisors. Mr. Feigenbaum has addressed these topics and others for the following companies: Massachusetts Financial Services (MFS), Alliance Bernstein, Wachovia Securities, Merrill Lynch, American Express Financial Advisors, HD Vest, Advest, MetLife, Automated Data Processing (ADP), Boston Estate Planning Council, as well as the Northeastern University School of Financial Planning. Richard A. Feigenbaum, J.D., 529 Consultant, Wellesley, Mass., co-author of "The 529 College Savings Plan", Second Edition, is a highly expert speaker and writer on the subject of funding for college and the nuances of the myriad 529 plans. An estate planning attorney, Feigenbaum offers a third-party resource for institutions and their registered investment advisors who need broad-based information to make the right 529 recommendations to clients. He can be reached raf@529consulting.com or 781-263-0090.
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