I recently sent out a press release on how consumers are caught in the crossfire between FINRA and the Financial Planning Coalition which consists of the CFP Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors.
FINRA is trying to gain control of registered investment advisers from a supervisory role. In addition, they are trying to portray themselves as consumer friendly and in favor of a fiduciary standard. The problem is . . . a fiduciary standard does not allow you to sell from inventory. In addition, it would be a huge stretch to say that buying an illiquid limited partnership that pays a FINRA registered representative an 8% sales commission is in a client's best interest. Neither would having sales quotas to keep your office stipend or qualify for a trip to Cancun be in a client's best interest. This is clearly in the best interest of the FINRA registered representative. Just because the FINRA registered representative is wearing an Registered Investment Adviser hat, makes no difference since the later transactions related to sales quotas and trips clearly fall outside what it means to be a fiduciary.
If FINRA was really in favor of consumers, then they would tell their members that there will no longer be any FINRA broker/dealers and all product commissions will be eliminated. FINRA should also recommend to all its members that they all should register as registered investment advisers. Of course, if they do not do this, then it is obvious that FINRA is putting their own interests and the interests of its members ahead of consumers. They cannot spin it any other way. However with their political clout, I am sure they will find a way.
In the end, if registered investment advisers do not fight this and fight this hard, then consumers will lose and registered investment advisers will lose.
Wednesday, May 6, 2009
Thursday, April 30, 2009
New Video on My Book
You can view a new video on the My Book page of my web site at www.firstcoastplanning.com. The video is only two minutes and 37 seconds long. I hope you like it!
Friday, April 17, 2009
What? You can BUY a house with a Reverse Mortgage?
Yes, it is true. You can buy a house with a Reverse Mortgage effective January 1st of this year. There are some qualifications.
You must be age 62 or you must be turning 62 within 6 months.
It must be your primary residence and you have to live in the home.
The loan needs to be from an FHA approved lender.
The example that I have in my book simplifies the explanation. Here it is again.
Assume the new home is for sale at $350,000. If you put approximately $123,000 down on the home, then you can take out a Reverse Mortgage for the difference. Instead of the buyer of the home using the money and spending it, the buyer immediately pays the seller the $227,000 Reverse Mortgage proceeds. The seller has received his full $350,000 via the $123,000 down payment plus the Reverse Mortgage proceeds of $227,000.
The buyer has a $350,000 home that they bought free and clear for all practical purposes for $123,000. It is true, that at the buyer's death, the Reverse Mortgage will be paid back. However, compare that to someone who thought their only option was to buy a house for $123,000. With the Reverse Mortgage Purchase Program, instead they can buy a much bigger house.
How to Use the Reverse Mortgage Purchase Plan in a Divorce Situation
Although I am not a fan of divorce, I do understand that it happens nevertheless. Now, I want you to think about how to use the Reverse Mortgage Purchase Plan in a divorce situation. Let us assume that a husband and wife have a $350,000 home with no mortgage and they are getting a divorce. They also have some investment assets of a few hundred thousand. Normally, the old way of handling this would be to sell the house and split the proceeds. Most often, the house may take a long time to sell and it may be sold at a value less than ideal.
Now there is a better option. The strategic planning that goes into this is as follows:
Take a regular Reverse Mortgage out on the existing home and split the proceeds 50/50. Assuming our same numbers above, this means that $227,000 would be split 50/50. The spouse moving out goes and buys a new home with their share of the proceeds. Then, the spouse moving out takes out a Reverse Mortgage on the new home. The end result is that one spouse stays in the home and has no mortgage payments and has $113,500 in cash, plus 50% of the investment assets! The spouse moving out buys a home for approximately the same value and has no mortgage payments, plus gets 50% of the investment assets, too! Both of them have $350,000 houses with no mortgage payments!
The old way was to sell the house and who knows how long that would take. This new way, the house does not have to be sold! It works beautifully for both parties. Tell your friends you heard it here first. By the way, this is the kind of information that you will find in my book.
You must be age 62 or you must be turning 62 within 6 months.
It must be your primary residence and you have to live in the home.
The loan needs to be from an FHA approved lender.
The example that I have in my book simplifies the explanation. Here it is again.
Assume the new home is for sale at $350,000. If you put approximately $123,000 down on the home, then you can take out a Reverse Mortgage for the difference. Instead of the buyer of the home using the money and spending it, the buyer immediately pays the seller the $227,000 Reverse Mortgage proceeds. The seller has received his full $350,000 via the $123,000 down payment plus the Reverse Mortgage proceeds of $227,000.
The buyer has a $350,000 home that they bought free and clear for all practical purposes for $123,000. It is true, that at the buyer's death, the Reverse Mortgage will be paid back. However, compare that to someone who thought their only option was to buy a house for $123,000. With the Reverse Mortgage Purchase Program, instead they can buy a much bigger house.
How to Use the Reverse Mortgage Purchase Plan in a Divorce Situation
Although I am not a fan of divorce, I do understand that it happens nevertheless. Now, I want you to think about how to use the Reverse Mortgage Purchase Plan in a divorce situation. Let us assume that a husband and wife have a $350,000 home with no mortgage and they are getting a divorce. They also have some investment assets of a few hundred thousand. Normally, the old way of handling this would be to sell the house and split the proceeds. Most often, the house may take a long time to sell and it may be sold at a value less than ideal.
Now there is a better option. The strategic planning that goes into this is as follows:
Take a regular Reverse Mortgage out on the existing home and split the proceeds 50/50. Assuming our same numbers above, this means that $227,000 would be split 50/50. The spouse moving out goes and buys a new home with their share of the proceeds. Then, the spouse moving out takes out a Reverse Mortgage on the new home. The end result is that one spouse stays in the home and has no mortgage payments and has $113,500 in cash, plus 50% of the investment assets! The spouse moving out buys a home for approximately the same value and has no mortgage payments, plus gets 50% of the investment assets, too! Both of them have $350,000 houses with no mortgage payments!
The old way was to sell the house and who knows how long that would take. This new way, the house does not have to be sold! It works beautifully for both parties. Tell your friends you heard it here first. By the way, this is the kind of information that you will find in my book.
Monday, April 13, 2009
Roth Conversion Thoughts for 2010
Beginning January 1, 2010, the adjusted gross income limitation of $100,000 will be lifted and this will allow anyone regardless of income to convert their IRA to a Roth IRA. There is a provision, a default provision that will allow the taxes to be spread out over the years 2011 and 2012. Sounds good doesn't it? Well not so fast.
The tax rates are going up in 2011. You may end up paying more taxes by taking the default choice of spreading it out over those two years. Instead, you may want to go ahead and pay the taxes in 2010 when the rates are still low.
You will have to tell your advisor or custodian that you want to pay the taxes in 2010, because the default option is to spread it out over 2011 and 2012. If you do not request this from your advisor or custodian, then you will automatically get the default option and more than likely end up paying more in taxes.
The tax rates are going up in 2011. You may end up paying more taxes by taking the default choice of spreading it out over those two years. Instead, you may want to go ahead and pay the taxes in 2010 when the rates are still low.
You will have to tell your advisor or custodian that you want to pay the taxes in 2010, because the default option is to spread it out over 2011 and 2012. If you do not request this from your advisor or custodian, then you will automatically get the default option and more than likely end up paying more in taxes.
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