Monday, April 26, 2010

The Taking Control Plan

The Taking Control Plan is a six step process that focuses on eliminating debt, keeping discretionary spending under control, establishing savings accounts for specific goals, building your emergency funds, moving on to fully funding your retirement accounts, then finally taking excess income and adding it to your investment accounts.

The Taking Control Plan Money Flow:
  1. Fixed Expenses Account
  2. Under Control Account(s)
  3. Savings Accounts
  4. Investment Account(s) for Emergency Funds
  5. Fully Funded Retirement Account(s)
  6. Excess Income to Investment Accounts
For a graphical view of the The Taking Control Plan Money Flow, follow this link: TheThe Taking Control Plan Money Flow

For a PowerPoint Presentation on the The Taking Control Plan, follow this link: Taking Control Power Point Presentation

Most people have been trained differently when it comes to handling debt, building emergency funds, adding to investment accounts and retirement accounts. The old and very ineffective solutions for debt management have been things like refinancing one credit card to another with a lower rate, or perhaps taking out a home equity line of credit and moving the credit card debt over to the home equity line of credit. The worst in my opinion is trying to be on a budget. Budgets are boring and nobody wants to be on a budget. These old ineffective solutions are not very smart strategies.

Those of you that know me, understand that I am totally unemotional when it comes to coming up with the best plan to get out of debt. It does not make sense to contribute to retirement accounts when you have credit card debt at 19.95% interest for example. You would have to exceed 19.95% on your retirement accounts in order for this to make any kind of sense and you would have to do it consistently. This is not feasible, it is not realistic and it is simple not smart.

You really should think about The Taking Control Plan and how it makes so much sense in helping people get out of debt, achieve their short term savings goals and also systematically increase their retirement accounts and investment accounts. The Taking Control Money Flow is important to making this work. It all needs to be done in order. There is a method to my madness, if you will.

Instead of my trying to explain it all in this blog post, I would prefer if you follow the links above where it will make more sense.

If you are in FL, KY, IN or TX, then I can help you right away with The Taking Control Plan. The fee for this valuable service can be as low as $50 a month. This is a very reasonable fee to have total control over your financial life.

If you are in other states, then we need to discuss how I may still be able to assist you through de minimus exemptions or by obtaining additional licensing in advance. You can go to my website at and click on the Contact button where you can submit me a brief contact request.

Remember the ultimate goal: Get out of debt, achieve Savings Goals, build emergency funds, fully fund Retirement Accounts and add excess income back into your Investment Accounts. It all make tremendous sense and I think you will agree after you review the above links.

Thank you very much.

Monday, April 19, 2010

How FINRA Registered Representatives Steal Your Money

It is now gettting to the point where I can almost guess how a typical Wall Street firm invests their client's accounts. It is patently obvious that they invest client's money in a manner that always benefits the firm and the FINRA regulated registered representative. Never does it benefit the client, in my opinion.

A case in point. I just received an account transferred from a major Wall Street firm. In this account, there were 7 mutual funds. On the surface you might think this was properly diversified if you only go by the names of the funds. The asset classes involved were:

Large Growth
Large Value
Small Cap Growth
Small Cap Value
High Yield Bond
Core Bond
International Value
Health Care Sector

There are however, a couple of problems. FINRA says that if you invest in mutual funds, that you should invest all the proceeds within one mutual fund family in order to get the commission breakpoints for the client. The breakpoints means that the client can pay less in commissions if they invest in one mutual fund family.

In this case, we have 7 mutual funds and 6 different mutual fund families. The reason this was done is because the FINRA regulated registered representative wanted to earn the highest possible commission that they could. Therefore, the way they invested this partcular client's money, the FINRA regulated registered representative earned the full 5.75% in commission on each mutual fund. If this FINRA regulated registered representative, instead would have put them all with one family, then they would have earned significantly less commission.

This is so typical and something that I see so often it is criminal in my opinion.

The other problem that I have with this is that the Wall Street firms have commission production quotas for all of their FINRA regulated registered representatives. No doubt, this client was the victim of someone trying to meet their Wall Street firm's quota.

The problem with quotas and revenue production requirements are that they benefit the Wall Street firm first, the FINRA regulated registered representative second and supposedly the client last. In this case however, this account was very poorly diversified and heavily weighted to equities, so it was of no benefit to the client in my opinion.

As readers of my book know, if you have 80 -100% invested in equities, then you can be assured that you will have significant volatility and a portfolio primed to take a big fall. Even after the recent comeback of the equities market, this account was still down almost 30%. Thirty percent! Like I said, this kind of advice is criminal in my opinion.

While this client was with this Wall Street firm, there is no doubt that churning inside the account occurred. Churning is where one 5.75% mutual fund was sold and another one from a different mutual fund family was bought. The purpose of course was to generate more commissions for the Wall Street firm and the FINRA regulated registered representative.

Welcome to the world of SUITABILITY. According to FINRA, this is all perfectly acceptable and meets their definition of SUITABILITY. If you are doing business with a Wall Street firm and a FINRA registered representative, then you can bet your bottom dollar you will be low man on the totem pole.

There is a better way. Work with independent registered investment adviser firms whose investment adviser representatives are subject to a FIDUCIARY standard. A FIDUCIARY standard is where the investment adviser discloses all conflicts of interests in writing, in advance and does things in your best interest. Wall Street firms have the money, so they blanket the airwaves with touchy feelly ads trying to convince you that they will look out for you. Sadly, most of America falls for these ads and does business with these Wall Street firms at a significant cost to their financial future.

No dual registered representatives either. A Wall Street firm's FINRA regulated registered representative may tell you that he or she is also an investment adviser representative for a registered investment adviser. However, this is a trap. The indisputable fact is that it makes no difference whether a FINRA regulated registered representative is also an investment adviser representative for a registered investment adviser. The reason is that these people still have commission and revenue quotas. They still have to meet their quotas to keep their job. Once again, this means the Wall Street firm benefits first, the FINRA regulated registered representative and dually registered investment adviser representative benefits second and you, the poor client last. My point is the client does not benefit at all by working with these Wall Street firms.

You need to get out while the getting is good. Move to a totally independent registered investment adviser firm with no Wall Street firm affiliation. You will be glad that you did.

Thursday, April 15, 2010

Lost Ball in the High Weeds - Dodd's Financial Reform Legislation

It is very interesting to see how the media portrays Senator Chris Dodd's Financial Reform Legislation. Even, the media outlets in the financial services industry have no clue. Let me help the people who do not know how to read or who are too lazy to read the bill.

As I reported in a prior blog post, there are a confusing array of new bureaucratic organizations that will be created with this bill. Just what we need, more government bureaucracies.

See my March 16th, 2010 post entitled, "More Bureaucracies and More Studies"

These are the new government bureaucracies that are in the Dodd Bill.

Financial Stability Oversight Council
Office of Financial Research
Orderly Liquidation Authority Panel
Office of National Insurance
Investor Advisory Committee
Office of Investor Advocate
Bureau of Consumer Financial Protection
Consumer Advisory Board

I just have to wonder. Since Senator Dodd is retiring from the Senate, do you think he may have created an agency, advocacy, board, committee, council, panel, office or bureau that he may himself want to be a part of in his retirement? No. Say it ain't so. Would he?

Perhaps some of his cronies will be appointed to one of these agencies, advocacies, boards, committees, councils, panels, offices or bureaus. Do you notice when the government writes legislation and they are trying to create more bureaucracies, then find themselves in a predicament. They cannot name all of their groups Councils, or Committees. They have to come up with different names like panel, advocacy, office or bureau. How stupid do they think we are?

Take a look at the last four on the list. Now, you tell me...which one of these will have more authority and which one of these will really protect consumers? The Investor Advisory Committee or the Office of Investor Advocate? Perhaps, the Consumer Advisory Board will have the most authority, but wait, the Bureau of Consumer Financial Protection has the best name. After all, it has the word bureau in it which is where we derive the term bureaucracy.

Now, we have not even started our blog discussion on the budgets for each of these groups. I can just imagine the waste of federal money that will be lost in these agencies, advocacies, boards, committees, councils, panels, offices or bureaus. Another example, of your federal tax dollars at work people.

If you think the above list contains a lot of bureaucracies, then look at all of the studies that are to be done required in the Dodd bill.

1. GAO study and report on accredited investors
2. GAO study on self-regulatory organization for private funds
3. SEC Commission study and report on short selling
4. GAO study of non-admitted insurance market
5. Study on treatment of credit card banks, industrial loan companies, and certain other companies under the Bank Holding Company Act of 1956
6. Study and report on implementation related to Security-Based Swap Markets
7. Study and rulemaking regarding obligations of brokers, dealers, and investment advisers
8. Study regarding financial literacy among investors
9. Study regarding mutual fund advertising
10. GAO study and Federal agency review of required uses of nationally recognized statistical rating organization ratings.
11. SEC study on strengthening credit rating agency independence
12. GAO study on alternative business models
13. GAO study on the creation of an independent professional analyst organization
14. GAO study of increased disclosure of Municipal Securities to investors
15. GAO study on the Municipal Securities markets.
16. Study of funding for the Government Accounting Standards Board.
17. GAO study on proprietary trading
18. GAO study on the effectiveness and impact of various appraisal methods

People, this is how the government keeps the juggernaut going with endless studies that need endless amounts of funding. Ridiculous.

These people in Congress who write this garbage are "lost balls in the high weeds." We need to vote them ALL out of office this fall.

I believe in the American Voter. This fall, we will start the process to take back our country.

Stay tuned.