Category Archives: Finance

Certified Financial Planner

Many people wonder why anyone would pay money to a financial advisor when so much free financial advice is available in books, internet etc. The prime reasons are accuracy, accountability and customization.

Why Free Financial Advice could be dangerous

Of course, countless financial information is available on the internet and other sources. But, the problem lies on accuracy. It is nearly impossible to determine what is accurate and appropriate to your individual requirements and objectives. It is obvious that what is right for your friend may not be right for you. If you make financial decisions based on free financial advice that is inappropriate to your requirements and objectives, it could be a detrimental to your financial well being.

The main problem with free financial advice is that they know nothing about your individual financial situation, goals etc. They are unaware of your risk tolerance or time horizon. They offer one size fits all financial advice. Another big danger is that these free financial advices are without recourse. If such free advices cause you to lose money, you have no recourse. It is always more expensive than expert advice.

What is a Certified Financial Planner and Why You Need a Financial Planner

The prime advantage of hiring a certified planner is that they see your financial situations as a whole. He will study each and every aspect of your financial life. With a sound knowledge of your risk appetite, your outstanding liabilities, your needs and requirements, he will come up with financial recommendations that will take care of each aspect in total. Thus, a certified financial planner makes your financial life better.

A certified financial planner is a financial advisor who meets the requirements established by the CFB Board of Standards. Certified planners are trained to develop comprehensive financial plans. They access your financial situation, troubleshoot problem areas and recommend appropriate options. They assist you with a wide variety of financial decision making. A certified financial planner should be expertise in various investment strategies, insurance, retirement accounts, taxes etc.

What to Look for When Choosing a Certified Financial Planner

It is important to choose a certified financial planner as you will be working very closely with your financial planner. Ensure to know what services will be delivered, what their responsibilities will be.

When choosing a CFP, ensure to look at the advisor’s experience, qualification and their area of expertise.

There are various types of financial planners. The three general compensation categories that a CFP will fall into: Commission based, fee based and fee only. Each offer different service ad is compensated differently. Understanding how and how much a planner should be paid is another important factor to look for.

It is good to talk with your friends and relatives to see what their experiences are. Do intense research and make sure to check with the various regulatory boards to see if there has been a complaint lodged against the planner.

Find a Financial Planner

A planner is him who plans, for himself or for the others. This signifies a financial planner as one who creates plans for your existing finances for making it (you as well) see better days in the future.

Speaking of it, find a financial planner to reach the financial goals that you’ve set for the retirement years or for purchasing a new home or maybe for the college education of your children or for starting a business after retirement. It is, however, a bit tricky to find a financial planner who shall comply with your every need; this reinforces the fact that you must ensure an open relation and clarify every speck of doubt before handing over the contract. So:

  • Put on the paper your every financial goal.
  • Determine where you want to be in a few years (five, ten or fifteen).
  • Set goals regarding your retirement years.
  • If you are inclined towards doing charity, mention that as well in your list.

Now, you are all set to find a financial planner.Check with friends for referrals

There are of course people that you know and you trust and there should be someone with similar financial goals and strategies. That way, you may approach the financial planner this person is consulting; else, ask as many people as you can for a referral. The local bank or a local brokerage firm can be a good source as well.

Search the Internet for “Financial Planners”

The sanest thing that one can do regarding the search is to find a financial planner online. Almost all reliable financial planners have floated a website under their respective names by now; it makes gathering information on them a hell lot easier. Besides, choosing one according to the specialization shall impose less labor.

Contact the National Association of Financial Planners for a referral

The National Association of Financial Planners is a body that comprises all trained, qualified and reliable financial planners. That way, you do not need to worry about atrocious fee structures and neither do you have to worry about getting cheated.

Look up “Financial Planner” in yellow pages

If you want to reap the benefits of hiring a qualified, professional financial planner, then there’s no point in wasting time elsewhere. You can easily find an experienced financial planner through Respond.com – one of the most reliable and trustworthy online yellow pages.

Most Important Personal Finance Advice

There are many advices out there on how to deal with and succeed in your personal finance. Just like your goals in physical fitness and other areas of your life, you have to have goals in order to succeed in your personal finance. What does it mean to succeed in your personal finance? Success in personal finance means different things for different people.

If you make a lot of money but have a lot of debt, then you will still struggle with your personal finance because you are not making the most out of the money you have. You will be like a bath tub full of water coming in but most of the water is going down the drain. The end result is that you do not have enough water to take a bath.

If you do not make a lot of money (compared to the meridian family income which varies from city to city) which for the sake of argument is less than $50,000 a year but you do not have a lot of debt or other expenditures. You will notice that you do not struggle financially because your income is suffice. Over a period of time, your accumulation of income will enable you to succeed financially.

After listening to many experts and even practicing many of their advices, there is one advice that allowed and enabled people to succeed in their personal finances. Here is that advice:

THE BORROWER IS SLAVE TO THE LENDER.

What does that mean? It means that if you owe money then you are always enslaved to the company or person you owe that money to. You will never get ahead financially if you owe more than you make. Your net worth is your asset minus your liabilities. In order to have more of a net worth, then you will need to have more accumulated financial assets than financial liabilities.

Most people will argue what can be called a financial asset. With the down turn in real estate, many of the properties have become a liability when they were once an asset. But, most people including those experts would agree that credit cards and loans (especially car loans) are a liability.

We have to eliminate those liabilities such as credit cards and car loans in order to not be financially enslaved.

Money is definitely not the most important thing in life. But, it is important enough that we have to pay attention to our liabilities by eliminating those liabilities in order to succeed in our personal finances.

Using Your Debit Card and Personal Finance Advice

What is a debit card?

A debit card is one form of plastic money that is linked to your bank account and is as good as cash. You can use it in merchant establishments and pay up or use it in an ATM to withdraw cash.

What are the ten words on using debit cards and personal finance advice?

  1. A debit card is an excellent means to replace your cash. It eases you off the burden of carrying cash and at the same time provides you with the convenience of cash.
  2. Unlike cash you can keep track of the payments made through your debit card. This will help in keeping track of your personal finances as you may not remember where you spent that $18 last week if they go from cash but you will have an entry in the bank if you spend it through the debit card.
  3. You must handle the PIN number and identification details carefully. Most people are in the habit of storing their pins in their mobiles. While it is good to store the pin in a place that you can later retrieve from easily it should not be too easily viewable to others. What you can do is instead of storing your PIN as just the four or five digit number you can make it look like a phone number with the last digits the same as your PIN.
  4. Debit cards and personal finance advice are good instruments for people who are in the habit of overspending on their credit cards. You can have the convenience of plastic money and at the same time cut yourself off that unwanted credit limit by developing a habit of using your debit instead of your credit card at all places.
  5. If your debit card however is stolen it is relatively easier to be used than a credit card. This is because you can block your credit and stop payment in the case of a credit card but as soon as the debit card is used the money in your account is gone and therefore the first thing that you should do if the debit card is stolen is to call up your bank and inform them and stop the card transactions immediately without doing anything else.
  6. Here’s good debit cards and personal finance advice – Don’t give out your personal financial information about the debit or credit card over the phone or on the internet. In one incident an individual who was booking airline tickets was giving out his personal financial information over the phone and while the airline company did not cheat him he was overheard and since only numbers are required for online banking even without physically having the card the guy who overheard him still misused his card.
  7. With phishing attacks and viruses and Trojans becoming more and more sophisticated one can never be too careful while giving out their personal finance information over the internet. The key is to make sure that there are a few websites only which you use to purchase online and you make yourself familiar with them so that if there is any attempt of creating a mirror website and tricking you off your details you can spot something fishy and report to the authorities immediately.
  8. Debit cards act as a good mechanism for parents whose children are going out to college and are going to live separately. While on one hand it gives the parents the comfort to know that their children can get access to cash whenever needed at the other hand it also gives them a track of where the money is going and how frequently are the withdrawals being made.
  9. Another key thing to note is that while there is no fee for using debit cards normally if you are using debit cards and personal finance advice of one bank in the ATM of another bank there may be some fee attached to it. This is generally high as banks figure you will only do so when faced with no other option. So you should indeed do it when having no other option and keep at the back of your mind that its always better to not spend another couple of dollars when there is an option of saving it.
  10. And the last one which we all know but no one really does is its best to keep changing your identification number frequently as even if it leaks once the numbers can’t be used after a certain time period.

Stock Investment Tips

If you look at the history of stock market carefully, you will notice that there have been a lot of unpredictable twists and turns that puzzled the investors and brokers who thought themselves to be the masters of stock trade. Though there is no particular style of functioning of the share market, there are some popular proven tips that must be followed so as to be a successful stock trader. Let us here discuss few important things you must be aware of, in order to trade and invest successfully in the stock market.

1. Always apply the formula of buying stocks at low rate and selling them when their price rises. This simple strategy will give you assured returns on investment. Remember that your ability to follow this formula will determine your success or failure in the stock market.

2. Just follow what the stock market is going through. Keep in mind that the market is always right and price is the only reality. In other words, if you accept what the market indicates, you will be successful and vice versa.

3. Don’t look for reasons of the current position of the market. You will end up nowhere. It is just wastage of time that you are looking for the reasons for the change in the market. Never assume that the stock market is rational. Just bother about the direction and duration of the market move. Follow the current market trend. This is because the trend is the basis of all profit.

4. Don’t blindly follow the traditional technical and fundamental analysis, as they are not the only means to consistently make money in the markets. Make alterations in the trading strategy by following the current market trend. If you catch the trend changes correctly, you are surely going to get good returns on your investment.

5. Let your profits run and cut your losses as quickly as possible in order to strengthen your scope for success in the stock market.

6. Hire an experienced and efficient broker, as he will guide you in trading successfully for a long time with constant good returns. A stock broker is capable of making you understand the market strategies clearly, thus allowing you to make your own trading decisions by analyzing the facts rationally.

7. It is advised to the beginners to keep a close watch on the market and understand it thoroughly before making any transaction. You must be completely aware of the ups and downs of the market. Understand the basics clearly and then make a move.

8. Diversify your investments. That is, don’t invest all your capital investments in just one stock. Select stocks and bonds from different sectors and invest in them. This will lower down the risk factor.

9. Don’t ever be over confident while trading. Keep in mind that values van fluctuate any moment, no matter how steady they are at present.

10. Another helpful stock investment tip is to look at stock charts to study the graphical trends of the stocks in which you are interested. This will keep you updated about the market moves.

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.

Brokers

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.