Am I Crazy Or What?

Thanks to all who gave me encouraging words on my goal of finishing my master's degree in financial analysis. (BTW, the first half of the capstone isn't quite done, but it's really, really close.) I'd like to explain to you why I'm doing this. I've been in college a long time, ultimately earning a Ph.D. in curriculum development in 1998. I've been a junior high English teacher, a university freshman composition instructor, and a corporate trainer. I entered the financial world in 2002, after a horrific experience when a broker lost much of my mother's IRA because she was not diversified out of technology during the dot.com bubble burst. I have worked since that time to increase my level of competency. Even though I was legal to "do business" after taking my Series 65 exam in 2003, I didn't believe I possessed the skill set necessary to really do the best job that I wanted to do. That's why I began by completing my CERTIFIED FINANCIAL PLANNER(TM) practitioner status, passing the 10-hour exam in March of 2005. However, I still felt uneasy with my skill set in portfolio management, so in August of 2007, I began working toward a master's in financial analysis. I will graduate this summer.
Now, I will admit that some of what I have learned I am not likely to use in my practice, but nearly everything I have learned has been in the media in one way or another. After the financial meltdown of 2007, complicated financial concepts and products have received national attention. At least I can explain what that means to my clients.
To me, this is what being a fiduciary means. I believe it is my duty to go the extra mile if it might help my clients. I'm extreme in this, I know, but I really believe it matters. I've given an additional four years of education toward it, after my Ph.D. I encourage you to work with a financial advisor who is willing to go the extra mile. I'm not the only one--I know several personally. It isn't a requirement to be legal in the field, but I believe it's the least we can do.
Be Prosperous!
Peggy

Apologies

I have been the world's worst blogger this week. As some of you may know, I am completing a Master's in Financial Analysis. I've finished my coursework, and now I'm working on the capstone. It takes a lot of time, and it's been a primary focus for me recently. I'm sorry--I'll try to provide you with something interesting next week!

Be Prosperous!
Peggy

Help Me Make This Better!

I'm one quarter finished with the 2010 blog, and I have been excited with the feedback I get from readers on Facebook, Twitter, and the blog, itself. However, I really want this blog to help you meet your financial goals and dreams for the "sort of" New Year! Please respond to any post you find helpful, and also let me know if I need to provide more information about a subject. Tell me if I left anything out, or if I didn't explain the background enough.

I have discovered that five blogs a week are more than I can keep manage! The goal for the rest of the year will be 2-3 per week. Should something propel me to national acclaim, maybe I can write more, and my staff can pick up the extra work!! Until that happens, two - three times a week keeps me busy.

Thanks for all your support, and I look forward to hearing from you!

Be prosperous!
Peggy

Financial Reform Limits

I was extremely disappointed that the financial reform bill dropped the mandatory fiduciary standard. Many leading minds, including Vanguard founder Jack Bogle, wanted the bill to include language that required all financial advisors (individuals who help clients with their portfolios) to act as a fiduciary. This means that they must always act in the client’s best interest. Investment Advisors, like my firm, already must hold this standard; however, the brokerage industry does not. This means that a stock broker does not have to uphold a fiduciary standard. Instead, he or she must maintain a “suitability” standard, which means that the investment choices must be suitable, but don’t have to be the “best” choice in the mind of the broker. I find this fact both amazing and appalling. I had no idea when I entered the industry that there were two standards!

Now, some brokers choose to act as fiduciaries, but it isn’t a mandate. And acting as a fiduciary doesn’t mean that I am not compensated for my work. If I went out of business, I believe it would not be in the best interest of my clients! But my fiduciary standard means that I am always trying to take care of my clients, keeping their expenses lower without sacrificing quality, and helping them maximize returns in their level of risk. Further, I try to provide financial planning, that ensures all areas of their financial lives have attention. Our industry needs fiduciary reform.

Be Prosperous!
Peggy

Life Insurance and Estate Tax

A good use of life insurance is to help lessen the impact of estate tax. This column begins with a disclaimer that the information I'm going to provide is an overview, and you absolutely MUST speak with an attorney for details and to see if this strategy would work for you.

First, the best estate planning possible should make use of as much estate tax credit for both the husband and the wife through the use of irrevocable trusts and maybe lifetime gifting. We'll talk more about these topics later. Once the estate has been lowered as much as possible, the owner of the estate sets up an irrevocable life insurance trust (ILIT). Then, the trust purchases life insurance itself, insuring the life of the estate owner. Since the trust is irrevocable, it isn't the property of the decedent (the person who dies), and as a result, the life insurance isn't included in the decedent's estate. Instead, the proceeds of the policy can be used to pay the remaining estate tax liability. Consult your attorney about the best ways to pay for the policy.

This is a complicated strategy, but sometimes, it's better than the decedent buying the policy himself. Why? Because in this situation, the life insurance is included in the decedent's estate, and as a result, the proceeds are also subject to additional estate tax. Remember that life insurance is usually exempt from income tax, but it isn't exempt from estate tax unless it's out of the estate. Further, the strategy often won't work well if an existing policy is placed in the trust. Usually, the trust needs to buy the policy, itself. Be careful with it, but an ILIT can often help pay estate tax liability in a cost-effective way.

Be Prosperous!
Peggy