Month: September 2009
I came across several interesting financial tidbits this week in my reading – I figured I'd just informally share some of the information in a little different format than usual …
Learning Lessons From the Market.
It would seem that the volatility in the market would have created a prime opportunity to evaluate one's portfolio, reassess risk tolerance, and become more interested in knowing what is going on in your financial world. An ideal learning opportunity! An April, 2009 Charles Schwab survey suggests otherwise. Hopefully you have taken the chance the market has provided to become more engaged in your personal finances (Source – 8/31/09 issue of Barron's). What have you done in the past two years (since the beginning of the market decline?
From the Schwab survey…
– 39% of fund investors changed their portfolio allocation.
– 45% have tried to become more knowledgeable about their investments.
– 47% aren't personally involved in managing their funds.
– 36% don't know what mutual funds they own.
Marriage and Money.
The top causes of arguments among married couples? According to research by the Center for Marital and Family Studies at the University of Denver, money is the #1 cause of arguments (although it becomes less of an issue the longer you're married); children are #2.
For those married 1-8 years, money is the source of 43% of arguments.
For those married 9-25 years, money is the source of 38% of arguments.
For those married 26+ years, money is the source of 23% of arguments.
According to the Federal Trade Commission (FTC), nearly 80,000 complaints were received about third-party debt collection agencies in 2008 (more than any other industry). The most common gripes:
– Calling incessantly (35%)
– Demanding more than the amount owed (33%)
– Failing to send the required written notice (16%)
– Calling at work after being instructed not to (10%)
– Broadcasting the problem to neighbors & colleagues (9%)
The FTC is currently seeking reform to modernize the Federal Debt Collection Practices Act. The FDCPA was established in 1977! Consumer debt, the debt collection industry, and technology look nothing like it did 30 years ago. You can read the FTC report here.
Life Insurance Awareness.
September is life insurance awareness month in Missouri. Now is a great time to review your existing coverage/needs. Complete story available here.
The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for securities firms doing business in the U.S. It is not the regulatory function of FINRA, however, with which I would like to focus … they also happen to be huge advocates for investors and consumer protection. FINRA believes that investor education is the key to protection. They argue that by utilizing “the Internet, the media and public forums, we help investors build their financial knowledge and provide them with essential tools to better understand the markets and basic principles of saving and investing.” The FINRA Investor Education Foundation is the largest foundation in the U.S. focused on investor education.
WHAT FINRA DOES:
– Host educational forums offering unbiased investor resources/tools.
– Inform of potential scams & actions taken against dishonest brokers.
– Provide resources/tools to help investors evaluate products & professionals.
At some point in life, all of us will find ourselves in need of some type of support or assistance – physical, emotional, educational, financial, or otherwise. This support can come from many potential sources including (but not limited to) family, friends, work, church, or community. Historically, one of the greatest challenges has been finding those resources … no longer!
2-1-1 is a toll-free number that connects people with community resources. By dialing 211, you now have access to information on resources of all types from one central database. People are available to help 7 days a week, 24 hours a day. Calling the confidential hotline or viewing the websites (see below for each state site) will connect you with hundreds of services in your local community.
What types of community services/resources are available?
BASIC NEEDS – Food, Rent/Mortgage Assistance, Utility Assistance
PHYSICAL/MENTAL HEALTH – Health Care, Counseling, Alcohol/Drug Rehab
WORK INITIATIVES – Educational & Vocational Training, ESL, Job Training
CHILDREN, YOUTH & FAMILIES – After-School Programs, Tutoring, Mentoring
SUPPORT FOR SENIORS & DISABLED – Adult Day Care, Meals, Respite Care
This is just a small sampling of the support and assistance programs available. In addition to the free call, each state also has a useful website with a wealth of information and search tools to “find” resources. I've gone ahead and done the legwork and provided a link to each state program below for you… There is also a National Call Center.
211 STATE WEB RESOURCES.
ALABAMA, ALASKA, ARIZONA (unfunded and shut down earlier in the year),
ARKANSAS, CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE (NO CALL CENTER OR WEBSITE), FLORIDA, GEORGIA, HAWAII, IDAHO, ILLINOIS, INDIANA, IOWA, KANSAS, KENTUCKY, LOUISIANA, MAINE, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MISSISSIPPI, MISSOURI, MONTANA, NEBRASKA, NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, NORTH DAKOTA, OHIO, OKLAHOMA, OREGON, PENNSYLVANIA, PUERTO RICO, RHODE ISLAND, SOUTH CAROLINA, SOUTH DAKOTA, TENNESSEE, TEXAS, UTAH, VERMONT, VIRGINIA, WASHINGTON, WASHINGTON DC METRO AREA, WEST VIRGINIA, WISCONSIN, and WYOMING (NO CALL CENTER OR WEBSITE).
More and more employers are passing costs onto employees. Healthcare costs which historically have had roughly an 80%/20% employer-employee cost split has now shifted to closer to 70%/30%. A study by the Government Accountability Office suggests that investment fees (fees charged by companies managing mutual funds and other products for services related to operating the fund) are now almost exclusively borne by plan participants (you and me). The impact of fees (even minimal fees) over time is a concept that never ceases to amaze me. In the GAO study referenced above, a 1% per year additional fee (which may not sound like a lot) reduced the sample retirement account by nearly 17% after 20 years!
The GAO Study reviewed the topic of Private Pensions, specifically exploring the changes that are needed to provide 401(k) plan participants better information on investment fees:
THE BOTTOM LINE FINDINGS FROM THE STUDY.
– Fee information is not provided in a standardized manner;
– Results in challenging comparison of investment options and fees;
– Suggestion that investment fees become more transparent;
– That service providers disclose compensation (& potential conflicts).
SUGGESTIONS FOR INVESTORS.
Review the funds expense ratio (the funds operating fees). This is the most effective way to compare fees. It is common for consumers to not be concerned because they assume these issues don't apply to them. With 401(k)s, it is likely the opposite is the case – poor 401(k) plans are the norm – you should be concerned! Few investment options and expensive funds (i.e., index funds with expense ratios exceeding 1%) are all too common. Take action! Poor plans will remain the norm until people push for better plans. The Motley Fool provides a great resource to help arm you in your request for change. It shares the ammunition you'll need (Your Plan's Summary Annual Report, Summary Plan Description, and/or Fee Arrangement) as well as a sample letter that will provide the factual information needed (rather than merely an emotional argument) to get things rolling in the right direction. Good luck!