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Archive for November 2011

Do You Have A Disaster Plan?

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Few people do.

It’s one of those things we all say we’ll get around to doing, but it never seems to happen.

Free advice (does anyone EVER take advice when it’s free?).  Put it on your calendar, just like a doctor appointment, and schedule a couple of hours.

Next, here’s a list of things you should onto two CDs, courtesy of Money magazine.  Keep one at home and one in a safe-deposit box:

  • Driver’s licenses & passports
  • Social Security cards
  • Health insurance cards
  • Insurance policies
  • Mortgage and other loan papers
  • Property deeds
  • Car title and registrations
  • Marriage license
  • Wills and trusts
  • Last year’s tax return
  • Bank and brokerage account numbers

To Money‘s list, I would add an Excel spreadsheet of

  • All important web URLs, IDs, passwords, including security questions and answers
  • All important software access codes, passwords, etc.
  • All important contacts names, email addresses and phone numbers (doctors, attorneys, advisors, insurance agents, etc.)

My spreadsheet has three tabs:  Personal, business, and legal. 

Disaster recovery isn’t just about your house maybe burning down.  It’s also about helping your spouse and children if something happens to you.

What better gift at Christmas?  If the worst should ever happen, you and your family will find none better.

Jim

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Jim Lorenzen is a Certified Financial Planner® and an Accredited Investment Fiduciary® in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.   IFG provides investment and fiduciary consulting to retirement plan sponsors and selected individual investors. Plan sponsors can sign-up for Retirement Plan Insights here.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader.  The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Written by Jim Lorenzen, CFP®, AIF®

November 30, 2011 at 8:00 am

Want To Be A CFP®?

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Here are ten schools worth a look.

Believe it or not, I actually knew what a CERTIFIED FINANCIAL PLANNER® was back in 1984.   I had just sold my weeklies and was finishing my two-year transition into a career in speaking and management consulting… a career that involved a lot trips to LAX and baggage claims all over the U.S., Canada, and even the U.K. 

Even then, the thought of a consulting career with less travel – and particularly one with recognized credentials and barriers to entry – became quite attractive.   But, what attracted me most – and I suspect most others – was that this was a career where you actually make a difference in other peoples’ lives.   It was the chance to live a ‘life of significance’ beyond simply making a living.

Many individual investors were just beginning to learn what a CFP practitioner was back in those days; but, even today, many don’t know…. Or do they?

They must be figuring it out, because the number of schools meeting the demand for professional education is rising.  According to Financial Planning’s November 2011 issue, there are now 333 CFP board-registered programs in the U.S.  183 are certificate programs, 103 are undergraduate programs, 41 are master’s programs and 6 are Ph.D. programs!

Financial Planning’s list is not a ranking.  It’s just a list of 10 schools are appear to be stand-out schools based on feedback from some industry leaders.  Interestingly, The American College, which has been providing education to financial professionals for more than 80 years, was omitted.  So were some pretty well-known schools with strong academic standards, including Pepperdine University. 

Nevertheless, if you have a son, daughter, niece, or nephew who’s thinking about a career in financial planning, here are some schools they might want to consider.  Remember, though, there are many excellent highly-regarded programs at schools not on this list; it’s a just a ‘starter’ that may help.

The College for Financial Planning

Greenwood Village, CO, 2 Programs – Online certificate program; Online graduate program for MS degree in Personal Financial Planning

University of Georgia

Athens, GA, 5 Programs – Undergraduate degree program; Masters program; Doctoral program; Terry College of Business, 2 programs (online and classroom)

Boston University

Boston, MA, 2 Programs – Online and classroom certificate programs

Kansas State

Manhattan, KS, 4 Programs –  undergraduate, master’s, Ph.D., and graduate certificate

Kaplan

Online + classrooms in New York and San Francisci, 2 Programs – Self-paced and accelerated/virtual certificate programs

San Diego State University

San Diego, CA, 3 Programs – B.S. in Financial services with certificate in personal financial planning; M.S. in Business Administration with concentration in financial and tax planning; Executive financial planner advanced certificate

William Patterson University

Wayne, NJ, 2 Programs – Undergraduate B.S. in Business Administration/financial planning; Certificate program

Texas Tech University

Lubbock, TX, 11 Programs – From undergraduate to Ph.D., including minors and dual graduate degrees in financial planning and business or law.

Utah Valley University

Orem, Utah, 1 Program – Undergraduate major in personal financial planning

Virginia Tech

Blacksburg, VA, 2 Programs – Undergraduate B.S. in either finance or applied economic management

 

Happy hunting and Good luck!

Jim

 

 

 

 

Jim Lorenzen is a Certified Financial Planner® and an Accredited Investment Fiduciary® in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.   IFG provides investment and fiduciary consulting to retirement plan sponsors and selected individual investors. Plan sponsors can sign-up for Retirement Plan Insights here.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader.  The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Written by Jim Lorenzen, CFP®, AIF®

November 29, 2011 at 8:05 am

Happy Thanksgiving!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Someone asked me the other day what ‘retirement’ means to me.  I gave a quick three-word answer:  Freedom and Options.

As we now come up on Thanksgiving, I realize I must have been half-way to retirement the day I was born.

I was born an American.

That’s a condition many might take for granted; but, I never have.     When you consider how many hundreds of millions of people live under conditions  hard for us to imagine all around the globe, it’s easy to see why many who come here truly understand we are indeed that `Shining City on the Hill’. 

Just being born here means you won the lottery. live in a country few want to leave and so many want to enter.    I’m married to an immigrant who came to America over forty years ago with about half her family.  They’re an amazing family with the other half still in Mexico. 

Trust me:  You don’t what patriotism is until you see this country through the eyes of an imigrant.   We have a niece in Mexico married to a wonderful man.  Both of them have graduate degrees and have a nice home and a brand-new beautiful baby.  Both of them have successful careers and they recently bought a new Toyota… made in America especially for sale in Mexico.  The selling point?  There’s a hidden compartment in the trunk where you can hide a flashlight and a gun.  The trunk also opens from the inside.   When you have a family in Mexico, you think about those things. 

Here in America, we can park our car at the airport and come back two weeks later to find it.  Here in America everyone has opportunity, if they’re willing to try… and you’re always free to reinvent yourself.

During my days in publishing, I had an employee who grew up behind the Iron Curtain.  The government told her what her career would be.   One of my best friends is married to an immigrant who also grew up in Eastern Europe under Communism.  The stories told by people who’ve lived it first-hand should be told in every middle school classroom.

But, America almost didn’t get born at all.  In fact, few truly know the story everyone should know, and the man who almost single-handedly made it happen.  For too many, George Washington is a marble bust or a picture on money; but, the truth is better than anything Hollywood could invent.  He was our first action-hero and his exploits are documented even in the diaries of enemy soldiers.

America didn’t happen by accident.    And, when you think about it, Memorial Day, which honor those who’ve died for us; Veterans Day, which honors all those who’ve served in a foreign war; and Thanksgiving, which is about thanking God for all our blessings, all tie together.

Thanksgiving is a uniquely American holiday.

America is unique.  And, if you don’t believe it, just try to imagine what the map of the world would look like today if America had never existed.

One of my favorite books on how it all started is John Ferling’s Almost A Miracle.  I recommend it.   It would make great reading during this time we give thanks for all that we have and for all those who helped make it happen.

Written by Jim Lorenzen, CFP®, AIF®

November 22, 2011 at 8:00 am

Posted in Holidays

Tagged with ,

Individual Investors Gravitating To RIAs

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Just as many brokers (registered representatives of broker-dealers) have been moving from their brokerage houses to become independent registered investment advisors over recent years, it appears many individual investors seeking advice are learning who these people are and are following them.

According to TD Ameritrade’s latest RIA survey, trust and customer service are the most important reasons why clients opt to work with registered investment advisors (RIAs) instead of commissioned brokers.

TD Ameritrade’s quarterly query of 502 RIAs, appearing in this month’s issue of Financial Planning,  found that 29% of clients using RIAs said that the RIA’s  fiduciary responsibility to work in the best interest of clients was the No. 1 reason they got their business.    Placing second at 21% was more personalized service and a competitive fee structure, just ahead of dissatisfaction with their current or former full commission broker (19%).

Tom Bradley, president of TD Ameritrade Institutional, said in the report, “The survey results support what we believe is a long term trend of investors gravitating to the fiduciary model… Investors may increasingly seek the confidence that can come from working with independent RIAs who sit on the same side of the table and are required by law to put their clients’ interests first.”

According to the survey, 55% of new business coming to RIAs are coming from traditional full-commission firms.  Not much of a surprise, since that’s where most RIAs came from themselves, including yours truly.

It appears the trend is due to the fact that responsible practitioners want the same thing their seem to desire:  A high level of professionalism characterized by a `client-first’ fiduciary standard coupled with a non-conflicted environment.  

Frankly, it was the reason I began my journey to independence back in 1992; and, it’s gratifying to see that individual investors are finally catching on.

Test Your Financial Literacy!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Here’s some fun you can have with yourself… and maybe someone you know!

Here are two short financial financial literacy tests  from an industry self-regulatory organization… and another one from  The Council for Economic Educiation.

Take it yourself – then have a few of your friends take it.  See who really knows what they’re talking about!

Jim

Written by Jim Lorenzen, CFP®, AIF®

November 14, 2011 at 8:15 am

How To Hedge Your Portfolio

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Here’s a short little tip you might find helpful.

The other day I was talking with someone when the conversation finally turned to the familiar, ‘what do I do now’ question.

I told him what he intuitively already knew:  No one can predict the future and no one really knows.  Asset management isn’t about prognostication, contrary to what you see on the business talk shows; it’s about managing risk.  In fact, it’s about managing a list of risks which include market risk, inflation risk, legislative risk (taxes), interest rate risk, currency risk, etc.  It’s quite a list.

So, we don’t manage money, we manage risks – We just do it with money.

Today, we have uncertainty in the stock market – That’s a constant.  Markets have always been uncertain and they always will be.  No sense spending time gnashing our teeth over that one.   There’s also a lot of concern about inflation, interest rates, as well as the price of energy due to mid-east uncertainties that seem to have no end.

Let’s move on to how all that uncertainty can be managed.

One way is hedge your portfolio.   But how do you do it?  It isn’t as difficult as you might think.  Recognize that, in the investment world, there are only two things you can do with money:  You can use it to own or you can use it to loan.   Ownership happens on the equity (stock) side of your portfolio.  When you loan your money out, you’re in bonds.   You can hedge your bond allocation against inflation risk by using Treasury Inflation Protected Securities (TIPS).  You can hedge your equity (stock) allocation against a variety of risks by using real estate and commodities, which include food, energy, and hard assets like precious and strategic metals, etc.  All of these hedges can be purchased individually or through a variety of mutual funds, including index funds, and exchange-traded funds (ETFs).

How do you do it?

Take a simple hypothetical allocation of 40% stocks and 60% bonds.  If you wanted your portfolio to be 10% hedged, then you would use equity hedges for 4% of your stock allocation and you’d use TIPS for 6% of your bond allocation. 

A 20% hedge would look like this:  The 40% equity allocation would end-up as 8% in equity hedges and 32% stocks.  The 60% bond allocation would end-up as 12% in TIPS and 48% in bonds.

The real question:  What size hedge should you have?  Ah, that depends on your age, income, outlook, goals, risk assessment, etc.  Various hedging ratios will undoubtedly have an impact on portfolio volatility and performance.   In order to know IF you should be in a hedged portfolio – and the degree of hedging that would be prudent, you should meet with your advisor – many like myself often conduct online meetings with clients – review your plan, and have your advisor review your portfolio by conducting a portfolio stress-test and compare it to a hedged portfolio.  At that point you should be able to make a determination.

Jim

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Jim Lorenzen is a Certified Financial Planner® and an Accredited Investment Fiduciary® in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.   IFG provides investment and fiduciary consulting to retirement plan sponsors and selected individual investors. Plan sponsors can sign-up for Retirement Plan Insights here.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader.  The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Hyper Inflation May Be On The Way

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen, CFP®, AIF®

Every family probably has at least one `real world’ economist – the one that does the family purchasing.  Anyone who buys food, whether at the supermarket or at Walmart, knows that the packages have been getting smaller for some time; an example of  ‘stealth’ inflation – you can’t ‘see’ the price hikes.

Over the past year, we’ve all seen food and energy costs increase dramatically, even if a couple of short-term dips make us feel like it must be getting better; the way you feel when someone quit hitting you with a hammer for five minutes.

We’ve gone through the stock market bubble, the tech bubble, and the housing bubble.   We may be at the peak of the bond bubble. 

First, it’s important to understand how interest rates affect bond values.  Over recent years, interest rates have been headed south.  Anyone who may have purchased a long-term high-rate bond in the past has seen the value of that bond increase as rates headed down.  The reverse is true, as well:  When interest rates head up, the older lower-rate bonds are worth less to a potential buyer.  A seller has to drop the price before a purchaser will buy the bond.

Now, of course, rates appear to be at rock-bottom.  Many would argue that the Fed has run out of bullets and there’s nowhere else to go with monetary policy.  But, what would drive rates up?  A demand for capital, of course, which usually accompanies a recovery, would be one way.   But, recovery doesn’t appear to be on the immediate horizon.

Government spending is an issue, too.   Our federal debt has grown from $9 trillion to over $13.5 trillion in the last 36 months… a 50% increase in all the debt accumulated in our nation’s history [Source: http://www.treasurydirect.gov].   This debt will come due; and when it does, the government will likely be printing money to pay it, also likely devaluing the dollar, as well as dollar-denominated assets in the process.

There’s more:  The ‘stealth’ inflation, already in the pipeline, is very likely due to many companies continuing to pad cash positions as they’re still uncertain about the effects the new health care law, as they’re already dealing with Sarbanes-Oxley and Dodd-Frank, let alone whatever new tax legislation will come down the pike in coming months.   Add to that uncertainty over energy sources from the mid-east, U.S. trade policy, and an aging population, and it’s easy to see the potential problems.   The demand for capital to meet a myriad of obligations and issues won’t be hard to find.  And, it could be big.

Whether hyper-inflation hits in one month or five years is anyone’s guess, and there are economists in every camp on that scale; but many agree that hyper-inflation is on the way and some say it won’t come slowly. 

In fact, there appears to be a significant number who believe that it will hit the economy, along with a bond bubble-bust, surprisingly fast, reminiscent of the other bubble busts we’ve seen in the past, surprising a lot of people!

If that’s true – and I can be counted as one of the believers – investors should get prepared now for a big drop in bond values, which could happen surprisingly fast.    

The good news:  It’s manageable.   There are ways this phenomenon can be managed without destroying your existing financial plans; but, since I provide investment advice only to clients and not in posted blogs – a practice most advisors follow – I would suggest this as a topic you discuss with your advisor immediately.

What?  No advisor?  Gee, what can possibly be done about that?

I wonder.

Jim

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Jim Lorenzen is a Certified Financial Planner® and an Accredited Investment Fiduciary® in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.   IFG provides investment and fiduciary consulting to retirement plan sponsors and selected individual investors. Plan sponsors can sign-up for Retirement Plan Insights here.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader.  The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.