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A Monthly Newsletter Source of Financial Sources • The Dirty Little Secret of 401(k) Plan Fees • Financial Opportunity is Just Like Our Aging Bodies… If You Don’t Use It, You Lose It. • How to Improve Your Investment Results: Make More Mistakes! • Four Changes You Can Make to Improve Your 401(k) Retirement Planning When Your Receive The • Ten Financial Tips for Your Newlywed Children • Discuss Your Holiday Spending and Gift Budget As a Financial Teaching Point With Your Children • Turn Your Clutter into Cash: Reduce Holiday Spending Worries by Clearing Your Clutter • New Medical Consultation Service May Be Your Best Option to Receive Specialist Evaluation of Health The Dirty Little Secret of 401(k) Plan Fees When Eliot Spitzer, Attorney General of the State of New York, needed help investigating the fee abuses in the 401(k) industry, he turned to Ken Weber, president of Weber Asset Management. Weber had been fighting for an even playing field in the sale of 401(k) plans for some time. The plans sold by major insurance companies, he claims, are rife with hidden fees; brokers, for example, often say that fees are "waived." When Weber brought this to Spitzer's attention, he asked Weber for backup information. Within days, Spitzer's chief prosecutors met with Weber. For over a year the A.G.'s office had suspected something was amiss, but Weber was the first to clearly layout HOW the deception worked. The insurance industry maintains that all of its 401(k) group annuity fees are disclosed, but Weber says most such disclosures are so deeply buried in policies that figuring out the true costs of a 401(k) plan almost impossible. "Disclosure without comprehension," a New York state regulator says," is not disclosure." In addition, 401(k) plan contracts are usually delivered two or three months after the plan sponsor has signed a letter of agreement and the process of changing record keeper for the plan has begun. It is these contract documents that fully spell out the real costs, says the insurance company. Even then, the fees are hidden deep and the various fees are never shown in one place, but are split up in different sections of the contract. In some plans, it is shown that certain fees can be "up to 1.0%" but never details how the set of fees are calculated. And some fees are never disclosed. For example, some undisclosed fees are buried in so-called "no-load" funds. Funds may be labeled "no-load" when they carry no front-end or back-end sales charge, but typically, insurance companies use funds with higher-than-average expense ratios. The fund company then "rebates" all or part of the fee back to the insurance company in the form of "revenue sharing" or "expense reimbursements." In fact, as many as six different individuals associated with the insurance company and its sales force may receive a portion of these fees from the 401(k) plan fee structure. All of the difficulty in finding the true fees flies in the face of the Department of Labor (DOL) rule saying that an employer must, "Ensure that the fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided." To see entire statement go to: http://www.dol.gov/ebsa/publications/401k_employee.html. In truth, millions of employees are needlessly paying 1% to 2% more each year directly out of their retirement accounts to cover unnecessary costs. When they retire, that "small" yearly slice could easily reduce their final payout by hundreds of thousands of dollars. For information on low-cost 401(k) plans with all fees fully disclosed, contact Ken Weber, principal, Weber Asset Management, Inc., Lake Success, N.Y. The firm provides customized asset management plans for individuals and for 401(k) plans. He can be reached at 800-438-3863 or at ken@weberasset.com Financial Opportunity is Just Like Our Aging Body -- If You Don't Use It, You Lose It. Reality isn't fun when we realize that either we need to exercise more and eat right or our blood pressure or waistline will get out of control as we age. Arrgh. However, the same can be said for financial opportunities to defer taxes. If you don't use them, they often don' t stick around waiting for you to change your mind. Recently, an IRS ruling determined that private annuities could no longer be used, going forward, as a tax deferral strategy. As usual, when such a major financial vehicle is virtually cancelled, all the annuities in place as of the date of the ruling are grandfathered and the assets that are protected in these annuities will stay protected. The same issue impacts families who choose to use a dynasty trust as a tax deferral strategy for their children and grandchildren. Such a trust must be in place before you die. Your family could not implement it following your death. If you don't use it, you lose it. Another example is a conservation easement. If property is not appropriately re-titled to the conservation trust, the gifting family cannot take the value of the property out of their estate and thus will owe taxes on its value when the owners die. In this day and age, there are still two very effective tax deferral strategies left that must be considered by families of wealth -- the charitable remainder trust and the 1031 exchange. Both strategies effectively eliminate capital gains tax on the value of assets in an estate and smart families will investigate both to update and complete their estate planning Pearson Financial Services, Dennis, MA, is the author of "The 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. How To Improve Your Investment Results: Make More Mistakes! How’s this for a counterintuitive brain twister: the more mistakes you make, the better the results you are likely to achieve in your portfolio. According to Bob Markman, portfolio manager of the Markman Core Growth Fund (MTRPX) all investors—even the pros—make mistakes. Recognizing them soon, and having the emotional courage to take the loss and move on, can be the difference between success and failure over the long term. Markman believes the average investor has been trained to be too inactive. We all come to the table with an innate desire not to be wrong; add to this industry propaganda about the necessity of holding investments for the long term, and you get a return-toxic brew of poor investments held far too long in a portfolio. Increasing the activity in a portfolio—taking more small gains and more small losses—can help to improve investment results, says Markman. His Core Growth Fund has used this strategy to produce returns that have resulted in Five Star Ratings from Morningstar for the past three and five year periods, and has landed the Fund in the top 1% of the Lipper Large Cap Growth category for the past three and five year periods. Experienced investors know that success over the long term often comes merely from avoiding big, portfolio-destroying losses. Yet how often has a 10% loss slowly and inexorably slid to a 30-40% loss due to inaction and hope? And how often does an investor let a position with a small loss sit in a portfolio for years, negatively impacting returns, in hopes of seeing a revival? On a related note, many investors waste time and resources sitting for years on a 20% gain in a stock, hoping it will eventually materialize into the mythical ‘ten bagger’ that Peter Lynch often spoke of. Winston Churchill could have been talking about his investments when he said “I never worry about action, but only about inaction.” Markman maintains that with the greatly reduced cost of trading these days, investors should not fear increasing the activity in their portfolio. Take small gains; fix small mistakes. You won’t always be right, but achieving perfection is not the point—achieving the best batting average is. Woody Hayes, the legendary Ohio State football coach understood this. His famed ‘three yards and a cloud of dust’ grind-it-out offense proved that many small gains, with few big mistakes, would eventually win the game. Old Woody would never dream of quoting the ancient Chinese philosopher Lao Tzu who said that “Great acts are made up of small deeds,” but he would no doubt agree with Markman that “Great results are made up of small gains.” Robert Markman, Portfolio Manager, 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. Four Changes You Can Make to Improve Your 401(k) Retirement Planning When You Receive The Advice You Need The key to a 401(k) plan participant’s successful retirement is your willingness to take the advice offered, through your plan, to get you on track for retirement. This path to success in retirement saving can be one or several of four ways you can improve your retirement planning:
Knowing and processing all of these ways to improve retirement planning are enhanced with one-on-one counseling that is now available to participants when your employer’s prioritize helping you get on track for retirement and understanding why others are not on track. The major metrics most often looked at by 401(k) plan sponsors were participation rates (data that tells nothing about future financial preparedness of the employee), and investment choices that are often far too conservative to support a retirement. However, advice for 401(k) plan participants is now accepted as important to the success of a 401(k) plan. Making one-on-one meetings -- retirement counseling meetings -- available to all employees helps to ensure the plan sponsor that their employees are on track for retirement. Sign up for your session now. 401k Toolbox, a service of PMFM, Inc., Athens, GA., is the acknowledged leader in one-on-one advice programs. PMFM, Inc. manages $800 million as of September 30, 2006. The firm has increased its assets under management by nearly 40% in each of the last three years. The firm has worked with thousands of clients and now offers their services to plan sponsors through 401k Toolbox. Tim McCabe is national marketing director. Tim McCabe -- 800-222-7636. Tim.McCabe@pmfm.com Ten Financial Tips for Your Newlywed Children Parents know that a successful marriage requires many ingredients. Keeping financial stress to a minimum is one of them. Help your newlywed children get off to a strong financial start in their marriage with these ten tips: 1. Establish an Emergency Fund 2. Reduce Credit Card Debt 3. Put Savings on Automatic 4. Protect Income with Insurance 5. Diversify Investments Diversifying in this case means allocating money to different types of investments such as US and foreign stocks, small company and value stocks as well as bonds. Newlyweds with $100,000 or more may be better off building their own portfolio using a variety of index funds from Vanguard or I-shares. Investors with smaller amounts may prefer an “asset allocation” fund that owns many different investments in one mutual fund. These are offered by Vanguard, Fidelity, T Rowe Price, Charles Schwab and many other financial institutions. 6. Encourage Moderate Spending 7. Stress Communication 8. Develop an Estate Plan 9. Purchase a Home 10. Spoil the Grandkids Kevin Dorwin, CFP®, MBA is a Portfolio Manager with Bingham, Osborn & Scarborough LLC (BOS), a San Francisco and Menlo Park, California-based registered investment advisor with approximately $1.5 billion in assets under management. BOS has provided investment management and comprehensive financial planning for individuals and endowments since 1985. All revenues are fee only. BOS has eight principals plus eighteen team members working on behalf of their clients, including seven credentialed portfolio managers with direct client contact and eleven operations, administration, finance, compliance, and systems staff with responsibilities related to client accounts. Kevin.Dorwin@bosinvest.com. 415-781-8535. Discuss Your Holiday Spending and Gift Budget As a Financial Teaching Point With Your Children The holidays can be a fantasy wonderland for kids and a financial nightmare for parents. The kids enjoy their expensive gifts for a few weeks or a month (or have more fun with the boxes) and parents end up starting the New Year with massive credit card debt. But holiday giving can be meaningful and even instructive without costing an arm and a leg, regardless of which winter holiday you prefer to celebrate. Our family celebrates Christmas and around the time our three children were in the later elementary school grades and had broken the code that Santa was Mom and Dad, we’d started to be pretty good about sticking to a spending plan for holiday gifts. When we asked for the kids’ gift wish lists, we told them what the gift budget per kid was. Far from taking the magic out of the gifts, it excited them. As a financial planner, I knew that our spending paled by comparison to some families with comparable incomes, but the kids were quite pleased with the prospects. If one of them had a big item that would use a majority of the budget, we might have a chat with them about what the priorities were on the list. Without asking, “Do you want this one big ticket item and several pretty small items?” the answer to that question became clear pretty quickly. Unbeknownst to the kids we also had a small stocking stuffer budget for each child, so they each received a few smaller gifts that we thought they’d enjoy, even though they weren’t on their lists. Around the same time we gave them each a gift budget for us, for their siblings, and for extended family. The gifts reflected thoughtfulness for the recipient. And each of the kids have been known to take some of their personal spending money to augment their holiday giving budget. The kids are now in 8th, 9th, and 10th grades and they still look forward to their winter holiday gift list. Every once in a while, one them will ask during the summer or fall what the holiday budget might be and if we’d consider putting a specific item under the tree for them. If we answer that the item seemed like something that could end up on the short list for our shopping, they will often forgo an immediate purchase, but will do research on good deals, features, and upgrades. In addition to keeping the holidays bright financially for Mom and Dad, the kids are learning to prioritize their financial wants and defer getting big ticket items. So whether you have a Chanukah menorah, Kwanzaa bush, or a Christmas tree, holidays can be filled with joy and giving without maxing out credit cards. Linda Leitz, CFP, Pinnacle Financial Concepts, Inc., Colorado Springs, Colorado, is author of The Ultimate Parenting Map to Money Smart Kids,” as a book or as a CD. She specializes in helping families and individuals meet their long- term financial goals. She also helps those in the midst of divorce resolve financial issues through her company Divorce Solutions, Inc. She can be reached at 719-260-9800 or Linda@brightleitz.com. Turn Your Clutter Into Cash: Reduce Holiday Spending Worries By Clearing Your Clutter Steadily work through your clutter to reduce your holiday cash flow worries. Start clearing fifteen minutes a day or four hours a week and you will have more cash in your pocket, comfort in your home, and pleasure during the holiday season. Promise. There are many benefits to clearing your clutter: more room, more clarity, more comfort, and even more money. Hundreds, even thousands of dollars appear when you find cash and coins, gift certificates and gift cards, sell or return items, prevent duplicate spending, donate items for the tax credit, or , give good stuff away or sell it, turning the clutter into holiday cash. One woman working with her clutter-clearing coach recently found $1200 worth of valuable items when she cleared clutter from her spare room to make space and comfort for a guest. Another redeemed pocket change coins worth $617. Another woman found thousands of dollars worth of yarn in nine separate containers. She didn't know she had so much, and had just kept on buying. She is now practicing prosperity with clutter clarity. Instead of buying more yarn this winter, she's clearing clutter, creating comfort, saving money, and knitting her holiday gifts, a true act of love. By turning clutter clearing into a treasure hunt you reduce holiday money worries. Instead of going to the mall and fighting the crowds, go into your closets and find the treasures. Re-gifting is totally OK.. Do not be held hostage by holding onto something you do not want. It takes up valuable space, which costs you in many important ways. When you discover a “nice” item you currently do not love or use, give it away to someone who will. “Nice” means the item is in good shape or of sentimental or monetary value.. Re-gifting is a win-win situation. There are many ways to create holiday cash flow by transforming your clutter into someone else's treasure now. 1. You can get cash or store credit for holiday gifts by returning items you have never used. If it is too late to return, give that nice item away as a gift to someone who will appreciate it, or donate it and write it off. 2. Expired gift cards and gift certificates are not always a loss. Make the effort to call companies to ask, negotiate (plea) a new deal. You may be surprised how you can turn expired gift cards into holiday gifts. 3. Cash in those coins at the local grocery store, pour the coins into the machine, dash to the check-out line, and put bills in your pocket. 4. Selling items on Craig's List clears clutter and creates cash. Craig's list is organized locally, eliminating any shipping issues that may occur with EBay or at the post office. Consignment stores are excellent options. Your winter clearing of unwanted stuff when you are house bound makes spring-cleaning a snap. You can find exactly what other people will love, certainly need. Putter through your clutter and surprise yourself at how little cash you will need to layout for your holiday shopping list. It’s your mess, but not all your fault. Your unwanted stuff may be exactly what other people will love, certainly need. Putter through your clutter and surprise yourself at how little cash you will need to layout for your Holiday shopping list. Laura Moore, ClutterClarity, Cambridge, Mass., provides on-site clutter clearing and educational workshops to help people clear their homes of clutter for greater comfort and control. Her workshops “It’s your mess but not all your fault” are currently being presented in the Boston area. .laura@clutterclarity.com 508-349-1661. New Medical Consultation Service May Be Your Best Option for Specialist Evaluation of Health Issues Given Lack of Primary Care Physicians. It was a major headline in a recent Boston Globe, "Hospital doctors shut doors to new patients." The newspaper reported that many doctors blamed a national shortage of primary care doctors for the limited access consumers are facing when shopping for the best doctors. According to the Globe, the best doctors, located at the prestigious Boston hospitals, are not taking new patients any longer, a situation dubbed a "huge crisis in primary care." A new medical consultation service may be the best option for getting a specialist opinion for a consumer facing a medical challenge. The medical consultation service circumvents the difficulty of reaching the "best in class" doctors at teaching hospitals because in many cases, those physicians will accept cases to review when they would not accept the patient themselves. It is far different to ask a "best in class" doctor to review a complete workup and file of a patient as it is packaged by the medical consultation service, than it is to actually see the patient, order the labs, read the lab reports, and actually meet with the patient. The diagnosis and treatment recommendations are returned to the patient and patient's physician of choice within four business days. So if the patient is receiving care at a community hospital, health center, or suburban or rural doctor's practice, and wants a specialist consultation, chances are that triggering the medical consultation benefit, part of their Health Saving Account (HSA), their employee benefit package, or other financial services products, will work best. While not an in-person appointment, it does offer the patient confidence that the most highly regarded physicians in the country are looking at the file and offering treatment suggestions. To reach Ron Mastrogiovanni, call Joanna Flynn, WorldCare North America, Cambridge, Mass., 617-250-5167 or e-mail jflynn@worldcarena.com |