Monthly Archives: December 2016

Tips to Build Your Stock Picking Strategy

There are an infinite number of smart stock investing tips out there. An hour spent on the internet would find you thousands. However it does not take much to figure out that they can not all be the successes they claim to be.

Below is a rough set of tips or guidelines to help you figure out your own stock picking system.

Do not believe every stock tip you see

One great tip is not to go into Google, search for hot stock tips and buy a load of stocks that show up in the results. Such a strategy could be compared to gambling. Every such stock tip that you read about should be treated exactly as any other potential investment. In other words research it like you would any other company. Also do not be scared of missing the boat or being rushed into any investment. All of the best investments tend to appreciate in price over a long period of time. Do not be rushed into investing your money.

Never stop learning about the markets

Research is your friend. Ask friends about the companies they work for, read the papers, take some financial books out of the library, research on the internet. Familiarity breeds knowledge so the more you can read about the stocks you want to invest in, the more of an informed decision you can make.

Take your time before buying

Often if a stock suddenly becomes attractive, maybe due to some recent news released it does not always pay to buy straight away. Often the price will spike for a few days before falling back a little as some investors take some profits.

Do not be stubborn

If you have made a bad investment and lost money do no be afraid to sell the stock and take a loss. It is better to lose 10% than 50%. Always set a stop loss to minimise your risks and re-evaluate the stock if the limit is reached.

If you are unsure seek advice

If you are unsure then do not be afraid to seek advice prom a professional financial advisor or broker. Be aware that they will likely be seeking commission so take any advice with a pinch of salt, however do not always ignore it.

Avoid Financially Supporting Aging Parents

Unless you have spent considerable time with your parents and are aware of how they manage their finances and resources, it is likely you will end up contributing financially to their retirement and healthcare needs. This will significantly affect your retirement planning not to mention your time, family relationships and your career.

While children are generally supportive of caring for aging parents and many would not change anything about the time, effort and financial support provided, with proper planning this support does not have to be a personal or financial drain. Be prepared to open the discussion. This is difficult subject matter that many people put off or put aside to focus on other priorities like raising children and funding college. However not planning for long term care often results in crises and stress later in life. This type of planning is just not for our parents it is for us because accidents and health care issues occur throughout life.

Most of us feel psychologically young while our bodies chronologically age. It is this unexpected chronological aging that catches us off guard. We approach our fifties and our body parts begin to fail due to overuse, especially in those who have been very active like distance runners or those who ski. Or we are diagnosed with high blood pressure or diabetes and we may be destined to take medications the rest of our lives.

Our parents face the same chronological issues on an accelerated level. Hip and knee replacements are common as are the increased number of medications older adults often take. And how well your parents cared for themselves when they were younger will have a direct effect on their ability to age with or without significant health issues.

After age 65 a stay in a nursing home is common whether it be for short term rehabilitation or to recover from a medical emergency. Most older adults have excessively negative memories of nursing homes because their parents or older family members may have been placed in the “home”. The skilled facilities of today have come a long way in dispelling this old impression, however many people do not want to live the last years of their lives in a nursing home. All the better reason to make a long term care plan now.

We often see our parents as the authority, however depending on their level of education and experience in the world, we may be the actual authority. Children are often better educated than their parents and more familiar or at least aware of financial planning and insurance products. I was surprised when I learned after my mother’s death that she never knew how to balance a checkbook. She was just good at making sure there was always enough money in the account to pay the bills.

Here are five steps you can take to avoid financially supporting aging parents. If you are already at the point of crises, many of the discussion points still apply, however you may have to make other hard choices about finances because long term care insurance may no longer be an option due to health reasons.

1. Have a discussion with them about their finances. Many parents feel this to be an invasion of privacy but they might understand if you tell them that you are making your own long term plan and want to make sure that they are equally prepared for retirement.

2. Take them with you to a financial planner and while you are there share information and make your own plan to stress the importance of proper planning with your parents. Set an example.

3. Prepare budgets. Have a realistic discussion of available finances and the costs of long term care. Look at expected monthly retirement income versus available monies to pay for unplanned hospitalization or skilled nursing facility co-pays. If there will not be sufficient funds available for unexpected expenses, consider long term care insurance which pays for home care, assisted living and skilled facility care.

4. Discuss life insurance if this has not already been purchased. It could mean the difference between having a paid off mortgage or not, in addition to paying for funeral arrangements and paying off other bills.

5. Follow through with finalizing a plan. If you wait too long some options may no longer be available.

Understand Financial Literacy

Financial literacy is the knowledge necessary for managing your personal finances. This is indeed a necessity for financial health. It will create a perspective that will allow you to avoid financial pitfalls. Most importantly, this will help you come up with wise decisions involving your hard-earned money. Experts highly emphasized that if you understand financial literacy, you’ll be able to make excellent choices and come up with a very strong financial management habits.

Financial Facts

When children leave their homes for college, they will certainly face a lot of new responsibilities, experiences, and environments. In order to help your student in this transition, they must be aware of the financial facts of life. These include how to open the first checking account or perhaps how to make the first purchase using a credit card. They must be ready to enter the world of becoming independent. Most people today view managing money as a symbol of independence and maturity.

Make sure that they fully understand the fundamentals of personal finance as this will guarantee that they know how begin their financial future. As a parent, be aware that you are the most important source of financial education for your young ones. Though it is not easy to talk about money, discussing personal finance with your children will show that you see them as responsible young adults.

Great Tips For Interacting With Your Kids About Money

  • Approach the conversation with an optimistic attitude.
  • Since laughter can help, consider lightening the mood with a joke.
  • You must set a tone of openness, trust, and confidence.
  • Ask several questions, and be sure to listen to the answers carefully.
  • Do not make it look like a lecture but an equal exchange.
  • Do not bring up an old financial disagreement.
  • Ensure that your kids know that they can always turn to you in case they will need financial help, information, and advice.
  • A great way of teaching your children about the fundamentals of finance is to develop a budget for college.

How To Develop A College Budget

  1. List your regular monthly expenses.
  2. Know your total income – these may include part-time job, financial aid refunds, and allowance.
  3. Subtract your expenses from your income to determine if the budget is reasonable.
  4. When the expenses are more than your income, you must work together in order to reduce your expenses until the numbers agree.

Pick an Independent Financial Adviser

You may find this article useful in providing the key points to help you pick an experienced IFA in the UK.

With over 30 years experience as an independent financial adviser, I would suggest you consider the following key points in finding your perfect adviser.

  • Ideally your adviser should be located within s 20-mile radius so that he or she can be available at short notice, it may also mean, lower call out fees or charges.
  • However, if you have an adviser who is further away but is always available online over the phone or via email and you are happy with this arrangement, then fine.
  • It may not be ideal, picking an adviser who’s fresh out of college or university because they may well be friendly and keen but will lack the knowledge and experience than you will need. It is all very well passing a few exams but an adviser with a lifelong experience is by far a much better solution.

A good IFA will talk quite happily about the fees or how they get paid, advisers who are vague should be avoided, when an adviser talks freely about their fees then that gives you confidence and a reference point in deciding whether you will get value for money if you agree to instruct them for their services.

  • Remember that if an IFA charges you a 2% fee for advising you on a £50,000 investment and then charging 2% for £250,000 would in my opinion be unfair. After all the adviser is unlikely to be doing 5 times more work for their fees are they?
  • Most good advisers will have an up to date website with details about their experience but also importantly, verified client reviews that will demonstrate the skill and effectiveness of this particular adviser.
  • If no client reviews are available then you may be unable to form a fair opinion, perhaps you should continue to shop around or get a recommendation from your family or friends.
  • All adviser these days need to be registered not only with the UK financial regulators such as FCA but also various organizations, networks and institutions to help advisers gain additional ongoing knowledge, plus acquire a minimum number of CPD points/hours for their continuous professional development to remain compliant.
  • Usually the first meeting is free, if not then pass them by as most professional IFA’s will always offer you a free “no obligation meeting” in order for you to get to know them and to decide if you feel you can trust and be guided by this adviser and to build up a good working relationship that may last a lifetime.
  • Your adviser will need to be able to talk to you in a way that you can clearly understand, it is all well and good having an adviser that has passed the highest level of qualifications but if they talk to you in a jargon that leaves you clueless then that’s just a waste of your time and theirs!
  • Finally, it is always really helpful if like your adviser or at the very least, if you can get on with them, that they talk your language, listen to your needs and concerns and provide some effective ideas and solutions that are presented in a way you can fully understand.

During that first meeting, there should always be a few questions you will need to ask the adviser such as:

Are you fully authorized?
Are you independent or restricted?
What qualifications do you have?
What are your initial fees?
What are your ongoing annual fees?
How will I receive the advice?
What is my choice of ongoing services?
Can you provide client recommendations?

After all, when you are dealing your life’s savings, your retirement income or finances generally, you can’t afford to get it wrong.

Financial Adviser Spectrum

As an independent financial planner, I often find myself describing my business model and trying to articulate how it is different than many of the other financial advisers in the market. More than most industries, the business model of a financial adviser really matters to his or her customers, whether they know it or not. When a consumer goes to the grocery store, or even goes to buy a car, that individual rarely stops to think about how the person selling the groceries or cars is going to get paid. This is true even in real estate, although there are innovators in that industry that are trying to change the nature of real estate professionals’ compensation. To a consumer of financial advice, however, the way the supplier of that advice gets compensated is a critical criterion for consideration.

The spectrum of business models for financial advisers is very wide, but the models can be aggregated into three broad classes that are typical of how financial professionals view themselves.


There was a time when people rarely used the term “financial adviser”. It was much more typical to hear the term “stockbroker” or “insurance salesman”. A more legalistic term for a stockbroker is a registered representative.

This is a traditional means of dispensing advice. In reality, the role of the broker is to sell products, such as stocks, mutual funds and insurance policies. They receive commission for doing so, and are thus incentivized to sell products that pay the highest commissions or fees. Some of the compensation is obvious, such as the commission on a specific stock trade. Other compensation is less transparent, such as the percentage of mutual fund loads that are paid to the financial advisor. By law, such loads, which are really just sales charges, can amount to up to 8.5% of a mutual fund transaction, and can be charged when buying, selling, or both. Although it is rare to see a load as high as the law allows, they can still add up, and it is not always clear how much the investor is paying and to whom. Interestingly, even no-load funds can charge up to .25% per year for ongoing “service fees” that could go to a financial adviser.

Different products pay very different commissions, and a broker’s loyalty is therefore potentially torn between selling a product that is in the best interest of the client, and selling a product that provides the best compensation to the broker. Often, the client doesn’t know the difference.

Fee-only financial planners

Consumer advocates will almost invariably recommend using a fee-only financial planner/adviser. That’s not to say that all fee-only planners are competent and ethical, and all advisers that operate under different models act solely in their own best interest. However, by definition fee-only planners are paid only by their clients, and that means that they are free to provide objective advice.

Whereas stockbrokers are product salespersons who are registered representatives, financial planners are typically registered as investment advisors and offer advice on a broad range of topics that are critical to meeting the financial objectives of their customers.

Some planners charge based on the amount of Assets Under Management (AUM). A common compensation plan would be for customers to pay 1% of their total AUM annually. This approach has the advantage of aligning the interests of the client with those of the adviser, in the sense that when the portfolio increases in value, both parties benefit. However, this doesn’t work as well for investors who are in the retirement phase and withdrawing funds. It also doesn’t necessarily incentive the adviser to support a diversified portfolio of assets that could include such things as rental real estate. One of the other complaints about this business model is simply that it can be expensive relative to the value received. That, of course, is dependent on the level and breadth of services provided as well as on the actual percentage of assets that is charged.

Another model that is gaining traction in the marketplace is the hourly or flat fee paradigm. Under this method, an advisor charges either by the hour or by the project to deliver anything from a comprehensive financial plan to a couple of hours of consultation on a specific topic. Proponents consider this to be the model that most effectively minimizes the potential conflicts of interest between financial planners and their clients.

Fee-based financial planners

Fee-based planners are kind of a hybrid of brokers and fee-only advisers. They can be compensated through fees for providing advice as well as commissions for selling products. In some cases, such a planner might be paid for a financial plan that includes a range of recommendations and products, but he or she may only be paid commissions on, say, the insurance products.

Often, fee-based advisers offer a financial plan for a nominal fee – or even free – with recommendations that will lead to substantial commissions. Of course, the concern with that approach is that the plan will include actions that may or may not be good for the consumer, but will prove to be lucrative for the adviser.