Death Cometh for the Greenback

October 30th, 2009

by Joseph E. Stiglitz
10.27.2009
From the November/December issue of The National Interest.

THE DOLLAR is in trouble. That’s clear, and it’s been true for a while.

The cornerstone of the global economic system has long been the greenback. In the aftermath of the Vietnam War and the oil shocks that brought on inflation, the value of the dollar relative to other currencies could not be maintained, so countries moved away from pegging their currencies to America’s. But still, the almighty dollar was used by countries all over the world for their reserves. The reserves provided backing for the currency and the country. They were a bank account that could be drawn upon in times of need. If oil prices shot up, a crop failed or lenders demanded their money back, there was a stockpile of money that could be used.

There was a longtime confidence in the dollar, even more when then–Chairman of the Federal Reserve Paul Volcker brought down inflation in the early ’80s. The dollar was a good “store of value.” And the fact that others were willing to hold American dollars was a big advantage to the United States—it could borrow cheaply abroad.

To assure the dollar’s standing, by the ’90s, America officially had a strong-dollar policy. Speeches by then–Secretary of the Treasury Robert Rubin affirmed our determination to maintain the value of the dollar. And for much of the period, the dollar was indeed “strong.” But it had little to do with the speeches, though I sometimes suspect not only that the secretary of the treasury but also the financial markets thought so.

For the past eight years, the dollar has increasingly become less revered. Its value has been volatile. As the rest of the world saw the United States struggling with a failing war and soaring budget deficits, many who had large dollar holdings began to reduce those reserves (or increase them less than they otherwise would have). All this put downward pressure on the dollar. And thus began the first signs of a vicious circle. The strength of the dollar is becoming riskier and riskier. The growing U.S. deficit and the ballooning of the Federal Reserve’s balance sheets leave many worried that in their wake will come inflation, undermining the long-term attractiveness of the U.S. currency.

In this article, I try to explain why the dollar is in trouble, but ask—should we care? What are the consequences? I will suggest that, for the most part, and for most Americans, it is probably a good thing. But the adjustment to a lower value of the dollar will not necessarily come easily. One of the consequences—already under way—is the fraying of the dollar-reserve system. I argue that a move to a global reserve system would be good for the United States, and good for the world.

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2010 Roth IRA Conversions

October 16th, 2009

Most of us dread the thought of the ever-changing tax laws. This time around you may be lucky enough to benefit from the already established changes. Beginning in 2010, new tax rules offer the unique opportunity for previously excluded, higher-income individuals to establish a Roth IRA. Here is what the changes mean to you:
What are the current rules?
Taxpayers with a MAGI (modified adjusted gross income) of $100,000 or less in the year of con-version are eligible to process a Roth IRA conversion. Taxpayers who are married but file a sepa-rate tax return are not eligible for Roth IRA conversions. When determining eligibility the amount of conversion is not included in the $100,000 MAGI limit. The conversion, however, will be taxed as ordinary income.
How will the rules change after January 1, 2010?
Beginning in 2010 the current MAGI limit and filing status restrictions will be removed.
Who will be eligible to convert a traditional IRA to a Roth IRA?
As of January 1, 2010 anyone with a traditional IRA will be eligible to convert their IRA into a Roth IRA. The normal 10% tax penalty for traditional IRA distributions prior to the account owner at-taining age 59 ½ will not be assessed for a Roth IRA conversion.
Will I be taxed on the conversion?
The entire Roth IRA conversion amount will be considered taxable income. The IRS will allow you to spread the tax payments over two years—2011 and 2012. You may also choose to withhold for income taxes at the time of conversion. Please work closely with your CPA or tax professional to determine the best tax strategy for your situation.
How is a Roth IRA different from a traditional IRA?
A traditional IRA is characterized by deductible contributions that grow tax deferred until distribu-tion. When distributions are made from a traditional IRA they are considered ordinary income. Contributions to a Roth IRA are not deductible. Roth IRA contributions grow tax free because they are not taxed within the Roth IRA or at the time of distribution (as long as the minimum hold-ing period, usually five years from time of contribution, and other requirements, such as age, are met). Distributions from Roth IRA earnings that have not satisfied the IRS requirements are sub-ject to income tax and in certain situations an additional 10% tax penalty may apply.
What are the disadvantages and benefits of the Roth conversion?
While there are a lot of benefits to convert to a Roth IRA, there are a few disadvantages you should consider before making a decision. First, if you are under 59 ½ you must use cash (outside of your IRA) to pay for your income tax liability. If you do not have the cash available the withholding (if taken from an IRA) may be subject to an additional 10% tax penalty. Next, if you believe your effective tax rate will decrease between the present and when you will begin distrib-uting your IRA you may want to reconsider – in this situation the traditional IRA may be more beneficial.
In contrast, there are various benefits available if you decide to do a Roth conversion. Obviously, tax free withdrawals are one of the main attractions to Roth IRAs. Conversions also offer signifi-cant tax advantages with estate planning. Converting all or a portion of your traditional IRA to a Roth IRA will reduce your taxable estate without a reduction in the tax-free earnings and distribu-tions that can be transferred to your beneficiaries. Last, there is no required minimum distribu-tion for Roth IRAs allowing you to leave your money invested for as long as you want.
Who should convert to a Roth IRA?
Since there is no easy formula or rule of thumb individual analysis is required. Many factors must be considered including age, health, net worth, retirement goals, tax planning, estate and income taxes. It is important to discuss your options and determine the amount, if any, would be most beneficial to convert to a Roth IRA.
How do I get started?
If you are interested in the possibility of a Roth IRA conversion in 2010 please call your Financial Advisor in December 2009 or January 2010 to get the process started.

Charles C. Zhang, CFP®, ChFC, MBA, MSFS
Zhang Financial
Portage, MI

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Turn Your Website Into a Marketing Tool

October 6th, 2009

Today there will be millions of searches on the Internet, many of them will be for financial planning services. If you’re located in an average sized city, 100 to 500 of them will be initiated in your community looking professionals offering financial planning services. If you’re like many professionals you’ve spent a lot of money having a website built but you’ve yet to see any business come back from it.

Go to your Google Search Bar and type in your profession or specialty and your community (Financial Advisor Boston MA). Now find your website listing, if you don’t find it on the first two pages STOP, everyone else does.

The process of getting your website to the top of Search is known as Search Engine Optimization (SEO). SEO is the most cost effective way to market your website to your target audience. BestofUS Internet Marketing only works with professionals to assist them in turning their website into an Efficient Marketing Tool.
Contact us for more information

Welcome to BestofUS Internet Marketing
Welcome to BestofUS Internet Marketing headquartered in Birmingham, AL. We only work with professionals (doctors, dentists, lawyers, financial advisors, real-estate agents, accountants, chiropractors, veterinarians, physical therapists) and require that you to be one of the best of your profession in your community. You’ll need to qualify for listing on www.BestofUS.com.

If that’s the case we’ll work with you or a member of your staff to make the changes required to move your website the top of Search. Then will implement proven strategies that will increase your site traffic and turn that traffic into prospects.

Be sure to check our SEO Blog where you’ll get many of your SEO questions answered.

Marketing Your Business Through the Internet
You can spend thousands on paid advertising or you can spend a fraction and target your marketing to your desired clientele using your website.

We’re going to ask you to write a monthly newsletter and then we’re going to help you build an opt-in mailing list of current client and prospects that you’ll automatically deliver your message to every month. Each month through your website you’ll add to that e-mail list thus building you list of prospects. We’ll help you turn your website into the marketing tool that automatically does all the things that you’ve know for years that you should be doing but have never found the time to implement and maintain.

Once your website is working for you, we’ll introduce you and your staff to Social Marketing using Facebook, LinkedIn, and Twitter. We’ll get you into the habit of producing Press Releases, writing a Blog, and publishing articled all designed to elevate your importance on the Internet, in your Community and in your Profession.
Contact me if you’d like to turn your website into a marketing tool.

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When ‘I’ll scratch your back if you scratch mine’ Bites You in the Rear

August 7th, 2009

Recently, Defined Contribution retirement plans have been in the news for a handful of reasons. In July the Department of Labor and SEC held a hearing addressing the lackluster and often misleading performance of Target Date investments. Another DOL hot topic is whether plan participants are paying unreasonable or excessive fees in their retirement accounts. Recent litigation has also publicized a rising number of conflicts of interest amongst plan fiduciaries.

In the course of our retirement plan practice, it isn’t uncommon when meeting with new plan sponsors that we identify fiduciaries who are potentially breaching their obligations to their participants. At our initial meeting, the trustee will tell us about his or her plan and identify strengths and weaknesses they would like to address. Despite that, a common statement is, “We are not currently interested in making changes to the plan because we have a relationship with our vendor [or broker].” When asked to explain a little further, common responses often begin with “We do legal work for the company” or “They’re a big client of ours so we don’t want to jeopardize that relationship.” The conversation always ends in their statement of, “You know what I mean?”

In the south, cases like these are often referred to as “the good ol’ boy network.” It is typically perfectly acceptable in most business relationships to do business with your best clients, but when a retirement plan is involved, things get a little dicey. Under ERISA provision 406(a), transactions between a plan and a party of interest can be seen as a prohibited transaction violation.

ERISA 406(a) prohibits plan fiduciaries from doing business or entering in to certain transactions with “parties of interest,” typically plan attorneys, accountants, investment consultants, or plan vendors. According to ERISA 404(a), “a fiduciary shall discharge his duties with respect to the plan solely in the interest of the participants and beneficiaries. Unfortunately, recent court cases have dictated that even if the transaction brings no harm to the plan and the plan participants, it can still be seen as a violation or conflict of interest and can carry severe consequences for all fiduciaries involved.

But what’s the big deal? ERISA’s standards for fiduciaries are extremely tough. In the case of Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan, the courts refer to those standards as “the highest known to law.” At the very least, the appearance of a potential conflict creates the question of whether a fiduciary is acting in the best interest of the participants. The biggest concern is whether actions by the fiduciary are negligent and are adversely impacting the plan. For instance, could the conflict of interest mean participants are paying unreasonable compensation to the vendor or investment advisor? Are there better investment options amongst other plan vendors? Do the participants have access to adequate educational tools and resources?

We’ve highlighted only one example of a potential conflict of interest. Many other examples exist. But what can fiduciaries do to avoid a prohibited transaction? We recommend that you demonstrate Procedural Prudence in all decisions you make:

1. Research and understand your fiduciary responsibilities,
2. Take Action – Do what is required to keep the plan in compliance, and
3. Document all decisions and compliance-related activities.

If you have questions about this subject or want to learn more about how to comply with ERISA guidelines, visit our website at www.retirementplanpros.com.

1950 Stonegate Drive
Suite 275
Birmingham, AL 35242
Office: (205) 970-9088
Toll-Free: (866) 695-5162
Fax: (205) 969-8017
Info@gandlwealth.com
http://www.gandlwealth.com

Trent Grinkmeyer, Valerie Leonard and Kimberley Fulcher are Registered Representatives and Investment Adviser Representatives with/and offer securities and advisory services through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. If you wish to opt out of receiving future e-mails, please respond to this e-mail with “Opt Out” in the subject field. This material is intended for informational purposes only and should not be construed as legal advice and is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent.

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Three Issues 401(k) Trustees Often Overlook

July 30th, 2009

Over the past twenty-four months the debate has heated over whether the 401(k) plan is still a viable investment vehicle for America’s retirement savings. Obviously, recent stock market conditions have created additional concerns as to whether plan sponsors are doing their job. Since we are on the front lines every day, we’ve compiled a list of three things we often see plan trustees overlook.

Investment Policy Statement (IPS) – The Department of Labor does not require a written IPS. However, case law has dictated that a lack of an Investment Policy Statement can show evidence of a violation of the Prudent Man Rule. Additionally, your IPS should outline clear standards for choosing investments, how investments are monitored, watch list investments and replacement triggers.

Quantitative and Qualitative Investment Process – As part of your ongoing investment monitoring process, ERISA guidelines suggest the need for a quantitative and qualitative process when evaluating investments and managers. Often times, plan sponsors rely on tools that account only for risk adjusted returns. Remember, the Department of Labor judges fiduciaries on the processes they follow, not the results that are achieved (performance).

Broad Array of Investment Selection – Often times we encounter plan sponsors who feel they’re meeting this requirement because of the number of investments they offer their participants. However, you must ask yourself, “Can my participants truly build a diversified portfolio?” To answer this question, you must understand the research behind asset allocation models. If your plan offers less than 13 choices (excluding target date or asset allocation investments), your employees are likely missing out on some very important opportunities.

If you don’t know whether you’re adequately addressing these areas, visit us at www.retirementplanpros.com to learn more about how we can help you fill gaps in your existing retirement plan.

About Grinkmeyer and Leonard Wealth Management
Grinkmeyer and Leonard Wealth Management is an industry leader in helping to provide focused, full-service defined contribution consulting services to employers looking for efficient, effective strategies for their retirement plans. We seek to help numerous employers just like you to maximize plan efficiency, minimize fiduciary risk, increase participation and diversification, boost investment possibilities, and improve the overall plan experience. Grinkmeyer and Leonard Wealth Management is a proud member of Retirement Plan Advisory Group, one of the largest independent consulting networks in the U.S. Learn more at www.retirementplanpros.com.

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Watch Those Beneficiary Designations

July 17th, 2009

We all want to live a long and productive life, with our retirement account landing at zero as we take our final breath. But of course it rarely works out that way. So when was the last time you reviewed and updated the beneficiary designations of your 401(k), 403(b), or IRA?

Did you know that how you designate a beneficiary–or your failure to do so–can dramatically affect the taxes owed and whether or not the account might keep growing after you’re gone?

Over the years, you’ve been able to defer income taxes through account contributions and (hopefully) through growth of the investments. But at age 70 ½ or your death if earlier, Uncle Sam wants his pound of flesh…at least annually.

If you’re married and have named your spouse as beneficiary, there’s considerable flexibility. Your spouse can remain as beneficiary and follow the distribution rules or can treat the retirement account as his or her own.

If you’ve named a beneficiary who is not your spouse, then that person(s) will have the opportunity to stretch the annual required minimum distributions (RMDs) over their own life expectancy. Depending on the beneficiary’s tax bracket and the size of the distributions, it may result in lower overall taxes spread over many years–plus the potential for continued tax-deferred account growth.

Note that the IRS differentiates between “beneficiary” and “designated beneficiary.” An entity such as a charity or your estate can never be a designated beneficiary. Charities and estates have no life expectancy over which to stretch the required distributions. While ABC Charity can be named a “beneficiary,” you must have a pulse to be considered a “designated beneficiary” and be eligible for the stretch option.

Unless there’s a compelling reason to control account distributions from beyond the grave (spendthrift children or second marriage situations, for example), you generally will want to avoid naming a trust as beneficiary of your retirement account. There is no particular tax benefit to be gained by it and it simply creates an additional layer in the distribution process. Be sure to consult a qualified attorney if you are considering this option.

Failure to designate a beneficiary doesn’t necessarily mean that your family won’t eventually benefit from your retirement account. But it does mean the account must be distributed over a much shorter period, likely resulting in a bigger tax bite and curtailing any potential ongoing growth.

So be sure to review and update your beneficiary designations periodically–especially if you’ve had a change in marital status or previously designated beneficiaries have gone before you.

© 2009 Larry McClanahan

Larry McClanahan, MBA, CASL®, CFP® is an independent, fee-based advisor in the Portland, Oregon area, providing retirement income planning and wealth management to retirees and those approaching retirement. He can be reached at http://www.larrymcclanahan.com Advisory services and securities through KMS Financial Services, member FINRA/SIPC.

It’s important to find a financial advisor who is knowledgable in the field of estate planning to assist you in such matters.
You can find a listing of the best financial advisors in your community at www.BestofUS.com

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Can We Convert Our Traditional IRAs Into Roth IRAs, Despite Our High Incomes?

July 7th, 2009

Q: Based on our household income we are unable to make Roth IRA contributions. Can we convert our Traditional IRAs into Roth IRAs?

The Problem – Income Limits on IRA Contributions and Conversions

If you are provided an employer sponsored retirement plan, have income over $109,000 and file jointly, you cannot deduct Traditional IRA (Trad IRA) contributions. This leaves you with two choices:

1) a nondeductible Trad IRA that will defer taxes until required minimum distributions (RMDs) are required or
2) a Roth IRA that will completely avoid taxes.

While the Roth version of the IRA is clearly the better choice, you are disqualified from contributing to a Roth IRA if your joint income exceeds $176,000. This leaves you with only one option, a nondeductible Traditional IRA. To make matters worse, you cannot even convert a Trad IRA to a Roth IRA if your household income exceeds $100,000.

The Solution – Convert in 2010

Starting in the year 2010, the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) allows you to convert your Traditional IRA to Roth IRA regardless of income. If you convert in 2010, you’ll be able to spread the tax impact over 2011 and 2012.

No Free Lunch

Like all Traditional IRA withdrawals, a conversion is a taxable event. However, once you convert to the Roth version of the IRA all capital gains, dividends, and interest are tax free while in the Roth version of the IRA and upon withdrawal. Based on the massive federal deficit, there is a high probability that income tax rates will rise over the next three years. By converting in 2010, you lock in your income tax rate, without concern of what rates may jump to in 2013.

Often Overlooked

The Roth IRA is an often overlooked estate planning tool. While not as powerful as a 529 savings plan, where assets are excluded from your estate, the Roth IRA has its own strong merits.

Many people are disqualified from Medicaid due to their modest income. Many times it is the additional income recognized from RMDs from Traditional IRAs that disqualifies applicants from Medicaid assistance. Unlike a Trad IRA, the Roth version of the IRA has no RMDs. Without the additional income you may qualify for Medicaid assistance.

Action Steps

If you are disqualified from a deductible Traditional IRA or a Roth IRA, contribute to a nondeductible Traditional IRA now. In a matter of months you will be able to convert it to a Roth IRA and enjoy a Medicaid planning vehicle and tax free savings vehicle all rolled into one.

Skloff Financial Group
By Aaron Skloff, AIF, CFA, MBA

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA) is CEO of Skloff Financial Group, a Registered Investment Advisory firm based in Berkeley Heights, NJ. He can be contacted at http://www.skloff.com or 908-464-3060.

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Four Steps To Choosing a Financial Advisor

April 28th, 2009

The Financial Services Industry, which originally was only available to the very wealthy, has grown over the decades to be the provider of investment information to roughly 40% of American families.

Most financial advisors are affiliated with large investment firms that funnel the firm’s collective knowledge, information, expertise and products to their cadre of advisor to pass on to individual and institutional investors. In theory this gave those investors associated with large firms the potential for returns that could not be achieve on their own or with an association with smaller or independent advisors.

Thus the Financial Advisor that advised you and me was actually taking the firms “expert knowledge”, adapting it to our situation and advising us where we should be investing our savings to achieve our financial goals

So what happened over the past decade? Most of us lost a sizable amount of our savings in the 2001 Tech Bubble only to loose more of our savings in the Sub Prime Bubble.

If you’re like 80% of the people in the world you don’t have as much in your investment accounts as you did one year ago. Whether you should change Financial Advisors or not, now is a good time to asses the performance of your current advisor and decide if it is time to make a change.

Step One: Decide what you want from your advisor. Here are some suggestions:
• Help me preserve the capital I have been able to accumulate and grow it at a conservative rate of return.
• Help me to live within my means and set an investment strategy based on my needs and goals.
• Help me protect my family form the loss of my earning power or my death.
• Help me and my family achieve our financial goals prior to retirement.
• Help me accumulate enough to enjoy a comfortable retirement.
• Help me assess my need for long term care insurance.
• Help me establish and estate plan.

Step Two: Once you know what you want from your advisor you’ll need to find a qualified provider. As in all professions the first qualification you need to look for is education. Your potential advisors will have a Series 66 or a Series 7 securities license as well as an insurance license and a variable products license. A Series 66 allows them to sell mutual funds and a Series 7 allows then to sell stocks, bonds, options as well as mutual funds. A Series 7 is a more in-depth course of study then the Series 66, so I’d eliminate anyone who doesn’t have a Series 7 securities license.

Seventy percent of the people representing themselves as Financial Advisors do not continue their education beyond their licenses and their required annual continuing education credits. It’s the other 30% of the advisors that you are looking for. These are the people with initials behind their names representing professional designations. At the top of this designation pecking order is the CFP (Chartered Financial Advisor) designation. A CFP is comparable to a master’s degree in financial planning; it takes three years of study and at least three years of practical experience. To find a CFP in your community go to: CFP.net/Search. Other designations like the ChFC (Chartered Financial Consultant) and CLU (Chartered Life Underwriter) are focused on specific segments of the financial advisory field. These designations are comparable to Board Certifications in the medical fields, and I personally would not put my finances in the hands of anyone who doesn’t take their profession seriously enough to seek all the education that is available. This search can leave you with a list of three to three hundred depending on the size of your community. I suggest that you check BestofUS.com a website that lists the best of ten professions across the United States. This should help you bring your list down to a manageable number of qualified advisors.

Step Three: Now you need to look into their past. Go to the NASD (National Association of Securities Dealers) website and look up your short list of qualified advisors. Finra.org/Investors/ToolsCalculators/BrokerCheck/intex.htm. Here you’ll be able find out your potential advisors work history, license history and if they have had any legal or disciplinary action brought against them.

We’ve gone through some pretty tough financial times over the past ten years and a lot of good advisors have been sued, so use this information as a means of asking your potential advisors questions. “Can you tell me what these issues are about?”

Now Google your short list and see what you find; you’ll be surprised what you’ll learn.

Step Four: At this point, you need to sit down with those left on your short list. Here is a list of questions that you should ask.
• What is your approach to financial planning? If they don’t address the “Help me” points above their not a Financial Advisor. If they start talking about Managed Accounts, Sector Investing, Momentum, Technical verse Fundamentals, or Option Strategies your talking to and Investment Advisor.
• What was your book of business worth on March 1, 2008 and what is your book of business worth today? Can I see supporting reports? Their going to ask to see your finances, it’s fair for you to ask to see theirs and if it’s down more then 25% you’re in the wrong place.
• How are you paid? There are only three possible answers here; commissions, asset base compensation, or fees. Most will be a combination of the three possibilities; the one that you want to watch out for is commissions. Commissions can create a conflict of interest. Asset based compensation means as your assets grow their compensation grows or as your assets go down so does their compensation. I liked that it results in a common objective. Fees will involve special work like a financial plan or a research project relative to your specific situation, and that’s fair.
• How often will we meet to review my situation? This needs to be at least twice a year.
• Tell me about yourself. How long have your been in the business? Do your have any professional designations? Have you had any legal or disciplinary action taken against you? What is your employment and education background? Have you written any books or articles that I can read? You know all the answers, just sit back and judge.

If you’ll follow this process you’ll find the Best Financial Planner for you. You may end up with the person that you’ve been using, but you now know they are qualified to provide you with the service that you need from your new Financial Advisor.

Use these four steps to choosing a financial advisor just as you would in choosing a doctor; do your homework and then take responsibility for your decision. As is managing your health you have to take an active role in the management of your finances; stay involved and understand everything.

A good starting point for finding a financial advisors who have been recognized as one of the Best in the Unites States can be found at BestofUS.com This website lists the best of class in ten professions, doctors, lawyers, dentists, financial advisors, chiropractors, physical therapists, accountants, mortgage brokers, real estate agents and veterinarians.

Best of the United States LLC searches for the best educated, most peer recognized, and most industry recognized authorities in each of the professions. Listed professionals cannot pay to be included on the BestofUS listing. BestofUS.com is the most complete listing of the best professionals on the Internet.

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Do You Need a Financial Advisor or an Investment Advisor

April 27th, 2009

We the investors of the world have provided the funds that corporate America has needed to finance their growth over the past two hundred years in exchange for the right to share in that growth and profits previously only afforded owners. The investor/ management relationship has worked out so well that a whole industry evolved to fulfill the growing number of investors needs for information and advise to assist investors in making sound investment decisions. The Financial Services Industry, which originally was only available to the very wealthy, has grown over the decades to be the provider of investment information to roughly 40% of American families.

Most financial advisors are affiliated with large investment firms that funnel the firm’s collective knowledge, information and expertise to their cadre of advisor to pass on to individual and institutional investors. In theory this gave those investors associated with large firms potential for returns that could not be achieved on their own or with an association with smaller or independent advisor.

Thus the Financial Advisor that advised you and me was actually taking the firms “expert knowledge”, adapting it to our sanitation and advising us where we should be investing our savings to achieve our financial goals. We were told that since 1900 if you stayed invested in a well diversified portfolio you would never have less then when you started in any ten year period.

So what happened over the past decade? Most of us lost a sizable part of our savings in the 2001 Tech Bubble only to loose more of our savings in the Sub Prime Bubble. The $100,000 that we had in January 2001 shrank to $60,000 by October 2003 then grew to $80,000 in July 2007 and is now worth $40,000 today. We’re eight years closer to retirement and wondering how we’re going to survive if we ever do get to retire.

Do we just plan on working for the rest of our life? Do we work until we can’t then go in Medicaid and welfare become a drain on the United States economy? Do we take what we’ve got left and develop a strategy and lifestyle that will allow us to live out a comfortable life without being a burden on or children and our country?

I personally think the last option is the best option, but it is going to take an adjustment in our attitudes and lifestyle. One of the adjustments has to be in how we look at the investment markets and out financial advisors. Whether you should change Financial Advisors or not, now is the time to asses the performance of your current advisor and decide if it is time to make a change. I am speaking of a Financial Advisor not an Investment Advisor, there are less then 5% of the world’s population that should be seeking the services of an Investment Advisor. The investment markets are not a place for most of us to turn to make money; they are a place for us to preserve the capital that we have left and grow that capital at reasonable rates of return.

The first step in choosing your new Financial Advisor is for you to decide what you want from your advisor after your attitude adjustment. Here are some of my suggestions:
• Help me preserve the capital I have left and grow it at a conservative rate of return.
• Help me to live within my means and set an investment strategy based on my needs and goals.
• Help me protect my family form the loss of my earning ability or my death.
• Help me and my family achieve our financial goals prior to retirement.
• Help me accumulate enough to enjoy a comfortable retirement.
• Help me assess my need for long term care insurance.
• Help me establish and estate plan.

Once you know what you want from your advisor you’ll need to find a qualified provider. As in all professions the first qualification you need to look for is education. Your potential advisors will have a Series 66 or a Series 7 securities license as well as an insurance license and a variable products license. A Series 66 allows them to sell mutual funds and a Series 7 allows then to sell stocks, bonds, options as well as mutual funds. A Series 7 is a more in-depth course of study then the Series 66, so I’d eliminate anyone who doesn’t have a Series 7 securities license.

Seventy percent of the people representing themselves as Financial Advisors stop their education beyond their licenses and their required annual continuing education. It’s the other 30% of the advisors that you are looking for. These are the people with initials behind their names representing professional designations. At the top of this designation pecking order is the CFP (Chartered Financial Advisor) designation. A CFP is comparable to a master’s degree in financial planning; it takes three years of study and at least three years of practical experience. To find a CFP in your community go to: cfp.net/search. Other designations like the ChFC (Chartered Financial Consultant) and CLU (Chartered Life Underwriter) are focused on specific segments of the financial advisory field. These designations are comparable to Board Certifications in the medical fields, and I personally would not put my finances in the hands of anyone who doesn’t take their profession seriously enough to seek all the education that is available. This search can leave you with a list of three to three hundred depending on the size of your community. I suggest that you check BestofUS.com a website that lists the best of ten professions across the United States. This should help you bring your list down to a manageable number of qualified advisors.

Next go to the NASD (National Association of Securities Dealers) website and look up your short list of qualified advisors. (finra.org/Investors/ToolsCalculators/BrokerCheck/index.htm) Here you’ll be able find out your potential advisors work history, license history and if they have had any legal or disciplinary action brought against them. We’ve gone through some pretty tough financial times over the past ten years and a lot of good advisors have been sued, so use this information as a means of asking your potential advisors some tough questions. “Can you tell me what these issues are about?” Now Google your short list and see what you find; you’ll be surprised what you’ll learn.

At this point, you need to sit down with those left on your short list. Here is a list of questions that you should ask.
• What is your approach to financial planning? If they don’t address the “Help me” points above their not a Financial Advisor. If they start talking about Managed Accounts, Sector Investing, Momentum, Technical verse Fundamentals, or Option Strategies your talking to and Investment Advisor.

• What was your book of business worth on March 1, 2008 and what is your book of business worth today? Can I see supporting reports? Their going to ask to see your finances, it’s fair for you to ask to see theirs and if it’s down more then 25% you’re in the wrong place.

• How are you paid? There are only three possible answers here; commissions, asset base compensation, or fees. Most will be a combination of the three possibilities; the one that you want to watch out for is commissions. Commissions can create a conflict of interest. Asset based compensation means as your assets grow their compensation grows or as your assets go down so does their compensation. I liked that it results in a common objective. Fees will involve special work like a financial plan or a research project relative to your specific situation, and that’s fair.

• How often will we meet to review my situation? This needs to be at least twice a year.

• Tell me about yourself. How long have your been in the business? Do your have any professional designations? Have you had any legal or disciplinary action taken against you? What is your employment and education background? Have you written any books or articles that I can read? You know all the answers, just sit back and judge.

If you’ll follow this process you’ll find the Best Financial Planner for you. You may end up with the person that you’ve been using, but you now know they are qualified to provide you with the service that you need from your new Financial Advisor.

Choosing your Best Financial Advisor can be as important as choosing your Best Physician, so do your homework and then take responsibility for your decision. As is managing your health you have to take an active role in the management of your finances; stay involved and understand everything.

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