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Tuesday’s need-to-know money news

May 19, 2015 By Liz Weston

money-vacation-saveToday’s top story: The mystery database that can sink your mortgage. Also in the news: The changes in store for your credit cards, cash flow killers, and cutting costs at the pump just in time for summer travel.

The Little-Known Database That Can Sink Your Mortgage
Getting to know CAIVRS.

4 Ways That Credit Cards Will Change by 2020
One card fits all?

How To Kill Your Cash Flow in 6 Easy Steps
You’ll want to avoid these.

How to Cut Your Costs at the Pump
Saving on summer driving.

Filed Under: Liz's Blog Tagged With: CAIVRS, cash flow, Credit Cards, gas prices, mortgages, tips

Monday’s need-to-know money news

May 18, 2015 By Liz Weston

cc-travelToday’s top story: How to protect your credit cards while traveling. Also in the news: New reverse mortgage rules, why you shouldn’t put off home repairs, and how Health Savings Accounts can benefit your taxes.

5 Ways to Keep Your Credit Cards Safe When You Travel
Don’t let credit card theft ruin your summer travel.

New Reverse Mortgage Rules Open Door To A More Secure Retirement
Find out what’s changed.

Around the House, It’s Better to Pay Now to Save Later
Putting off repairs can cost more down the line.

The Triple Tax Benefit of Health Savings Accounts
HSAs can help save you money during your retirement.

Filed Under: Liz's Blog Tagged With: Credit Cards, health savings account, home repairs, reverse mortgages, travel

Friday’s need-to-know money news

May 15, 2015 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: How to increase you credit card limit. Also in the news: The money mistakes empty nesters make, the terms every homebuyer should know, and the biggest threats to your retirement.

5 Ways to Get a Higher Credit Card Limit
What to do when you need more spending power.

3 Money Mistakes Empty Nesters Make
All that change can shake things up.

10 Terms Every Homebuyer Should Know
Brush up on your real estate vocabulary.

The 7 Biggest Threats to Your Retirement
What you need to avoid.

Filed Under: Liz's Blog Tagged With: Credit Cards, empty nesters, homebuyers, money mistakes, real estate, Retirement

How planners get paid–and how that can, should and will change

May 14, 2015 By Liz Weston

iStock_000014977164MediumThe best way to pay a financial planner is directly through fees you pay, rather than indirectly through commissions. That way, you don’t have to worry that the advice you’re getting is influenced by how much your advisor stands to gain by selling you certain investments.

But most fee-only planners have adopted the “assets under management” approach, where the fees you pay depend upon how much you invest with them. And people who think deep thoughts about the industry wonder if that’s the best way to go.

One of those deep-thought-thinkers, Bob Veres of the trade information resource Inside Information, moderated a panel exploring “alternative fee structures” yesterday at the annual conference of the National Association of Personal Financial Advisors, the biggest group of fee-only planners.

There are several problems with the AUM model. One is that the planner’s compensation is tied to the whims of the market—income goes up when the market’s up and down when the market’s down, something that’s beyond a planner’s control. While the complexity of planning tends to increase the more money someone has, planners can still wind up doing a lot for a client who isn’t charged much and “charging a lot and doing not a lot” for another, as one panelist put it.

Another issue is that the planner may be tempted to hoard assets, encouraging you to keep your money invested even if paying down your mortgage, buying rental real estate or investing in a start-up may actually be a better deal.

“AUM has too many conflicts of interest to be the long-term solution for the profession,” Veres declared. He qualified the statement saying it was only his opinion, but he’s got a pretty good track record of predicting financial planning trends.

For planners, the biggest hazard with AUM is that they are charging for what is essentially a commodity—investment management—and throwing in the real value, comprehensive financial planning, for free.

“We are the ones training clients to focus on investment management instead of financial planning” through the AUM model, said panelist and CFP Carolyn McClanahan, who charges a flat fee based on the complexity of a client’s situation. Other panelists based their fee on a client’s net worth or charged by the hour.

Investment management fees are about to get squashed, thanks to so-called “robo-advisors” that use computer algorithms to invest and rebalance portfolios. Start-ups such as Betterment and Wealthfront, as well as established players including Vanguard and Schwab, offer digital advice services for about 30 basis points, or .3 percent. That compares to the 1 percent or so charged by many investment managers (and fee-only planners). Yes, some people will still want a human to manage their portfolio, but in the future fewer and fewer will be willing to pay that premium for it, said McClanahan.

I still hear a lot of scoffing from planners who don’t think robo-advisors will affect their business. A conversation I had with a couple of women who aren’t planners, but who use them, will illustrate that many planners are more vulnerable than they think.

Both women acknowledged that their planners did a lot of work up front, setting up their portfolios and advising them on other aspects of financial life: insurance, taxes, estate planning and so on. But neither felt they were getting enough on-going service to justify their AUM fees, and both were thinking of jumping ship to a cheaper solution. After all, if all they were going to get was investment management, why pay three times more for it? That 30 basis point fee starts to look pretty good. Increasingly, those who charge more will face the burden of proving they’re worth it.

 

Filed Under: Liz's Blog Tagged With: assets under managment, fee-only planners, fees, financial planners, Financial Planning, financial planning fees, NAPFA

Thursday’s need-to-know money news

May 14, 2015 By Liz Weston

321562-data-breachesToday’s top story: Starbucks is the latest hacker’s delight. Also in the news: Getting control over your spending, advice that could ruin your retirement, and money fears that could sabotage your net worth.

Reports: Hackers Targeting Starbucks Mobile Users
How to protect your caffeine fix.

3 Tips for Getting Control Over Your Spending
Reining it in.

This Popular Financial Advice Could Ruin Your Retirement
Why dying broke is a bad idea.

6 Fear-Driven Money Moves That Sabotage Your Net Worth
Coping with financial anxiety.

5 Ways to Mitigate the Financial Downside of a Disability
Reducing money stress.

Filed Under: Liz's Blog Tagged With: budgets, data theft, disability, financial stress, spending tips

Wednesday’s need-to-know money news

May 13, 2015 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: The right way to close a credit card. Also in the news: Financial tools you no longer need, determining how much college tuition you can afford, and how baby boomers can survive retirement.

What’s the Right Way to Close a Credit Card?
How you say goodbye matters.

5 Financial Tools You No Longer Need
Some of these may surprise you.

How Much Tuition Can You Really Afford?
Time for a reality check.

How Boomers Can Avoid Going Bust in Retirement
There’s still time to get your act together.

Filed Under: Liz's Blog Tagged With: baby boomers, college tuition, Credit Cards, financial tools, Retirement

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