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LPL Runs Afoul of Regulators Unusually Often

  • March 28, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement, Seeking Prudent Advice

A New York Times article published last Friday tells the story of the 4th largest brokerage firm in America and its frequent run-ins with regulators.

Here are some key excerpts:

LPL Financial, has 13,300 brokers, 6,500 offices, 4.3 million customers — and a growing list of problems with regulators.

State and federal authorities have censured the company and its brokers with unusual frequency.

LPL brokers have been penalized for selling complex investments to unsophisticated investors, for speculative trading in customer accounts, and, in a few cases, for outright stealing from clients.

“LPL is on our radar screen more than any other firm,” said Lynne Egan, who oversees securities regulation in Montana.

Since the financial crisis hit in 2008, prominent firms like Merrill, which long catered to individual investors, have lost brokers and customers. Many investors have turned instead to independent brokerage firms like LPL. Unlike employees of the industry giants, LPL brokers are essentially contractors. They get LPL e-mail addresses and come under LPL compliance but pay for office space and staff.

LPL’s most serious case in Montana was resolved in 2009, when Donald Chouinard, an LPL broker in Kalispell, was sentenced to 10 years in prison for operating a Ponzi scheme. LPL paid Mr. Chouinard’s clients $1.3 million, and Ms. Egan’s office a $150,000 fine.

William F. Galvin, the Massachusetts secretary of the commonwealth, came to a $2.5 million settlement with LPL in February for selling the same product to investors in his state. Mr. Galvin said LPL had failed to properly examine who the products were being sold to, and had pushed the investments without mentioning that they provided big commissions to LPL and its brokers.

“What we really saw was a complete lack of supervision,” Mr. Galvin said.

 


Money Lessons From “Downton Abbey”

  • March 14, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Seeking Prudent Advice

We’re big fans of “Downton Abbey”, the television show that follows an aristocratic British family in the early decades of the 20th century.

Over the three seasons that the show has graced PBS’ “Masterpiece”, a number of money lessons have been showcased — mostly what NOT to do!

For example, don’t bet the family fortune on a railroad thousands of miles away (i.e., massive lack of diversification).  A professional advisor working in concert with the Earl of Grantham probably would have prevented him from concentrating so much capital in a Canadian railway!

Downton’s money lessons include financial and estate-planning disasters, bad investments, messy trusts, and inadequate business succession plans.

Here are some key takeaways and tie-ins:

  • Spell out control and ownership when passing the baton of a family company
    (the generational transfer of Downton Abbey from Robert to Matthew)
  • Use trusts to protect the family fortune
    (to protect Robert Crawley’s from his own poor decisions)
  • Make a will before giving birth
    (think of Matthew Crawley’s untimely demise)
  • Set up a medical directive
    (the terrible struggle of how to handle Sybil in childbirth)

We can’t wait for more Dowton Abbey and money lessons in season four!

 


Guide to Car Buying and Leasing

  • February 28, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

Our friends at the The Big Picture have published an excellent and very up-to-date guide to buying and leasing a car.

Here’s an overview of how to expertly navigate this process while saving time and money.

1) Set Up Your Online Shopping Identify:

Get a Google Voice account (its free) then get a LeeMail account (its free). These are the only numbers/addresses you use until you decide which car you are getting from which dealer.

2) Do your homework: Before you ever step foot on a dealer’s lot, you need to figure out a few things:

a) What kind of transport? Are you looking for a minivan, convertible, truck, coupe, SUV, etc.
b) The range of competitive vehicles for that car type
c) Your actual budget (including your “bottom line” monthly price)
d) Buy or Lease? (see #3)

3) Buy or lease? Most people should own, not lease cars. Its better not to pay for just the most expensive years of a depreciating asset.

The exception is if you can lease with pre-tax dollars — if you own (or are senior enough in) a company, than a lease may be a great deal. But without that tax advantage, the numbers favor owning.

4) Know Your Price Range and Approximate Cost of Cars: All of the cars I mentioned have extensive websites where you can build and price vehicles. You end up with MSRP.

5) Understand Factors Which Impact Pricing: The cost of any given car is a function of its retail price (MSRP), specific programs dealers are running, financing, what is hot or not, and other factors.

6) Be aware of the sales routine: If you followed steps 1-5, you know the approximate cost of the car, plus the options you want, and how that prices it.

7) Understand the buying/leasing math: The purchase math is simple: Negotiated cost of car plus financing expenses.

8) Use Online Salespersons: I asked several dealers for quotes on cars. If they ignored my request for an emailed quote and called, I held that against them. Different dealers have differing demands for specific cars. Some of the deals were very competitive .

9) Go to Competing Dealerships: Don’t be afraid to cast a wide net.

10) Use a car buying service:  That was the suggestion for people who are too busy or intimidated or who simply dont want to be bothered. Leading suggestions: USAA, Credit Unions, and (mulitple recommendations) CostCo.

Check out TBP’s full guide at http://www.ritholtz.com/blog/2013/02/guide-leasing-buying/


PBS’ venerable “Nightly Business Report” purchased by CNBC

  • February 21, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

We are disappointed to report that the Nightly Business Report has been purchased by CNBC.

“Nightly Business Report,” the 34-year-old nightly business news show that airs on public television stations across the country, will start being produced by CNBC, according to a deal announced today.

We have often referenced NBR as trusted source for unbiased advice, news and perspective for long-term investors.   However, the takeover by CNBC is a cause for grave concern. CNBC, in our opinion, is a source of financial “noise” that inspires investors to take rash decisions and erode they long-term investing discipline.

We fear the public’s interest will be supplanted by private interests. The worst is the name will probably be kept giving the appearance that NBR puts the public’s interest ahead of the interests of CNBC shareholders and advertisers.

 

 


Like Herding Cats?

  • February 7, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : NorthStar, Seeking Prudent Advice

Do you ever get the feeling that managing your finances is like herding cats? If you’re like the typical person with dozens of banking, credit card and investment accounts housed at an array of financial institutions, it sure can feel like it!

Here are two great ways to corral your accounts and take control of that herd!

#1 Use Mint.com to get a comprehensive, “live” view of your accounts

Mint.com is a free web-based personal financial management service. Mint’s primary service allows users to track bank, credit card, investment, and loan transactions and balances through a single user interface. Users can also make budgets and goals.

It takes less than five minutes to set up an account and start loading your accounts.  Each time you log in, Mint automatically polls your financial service providers for the most up-to-date balances for all your accounts.

#2 Consolidate your retirement accounts

It’s not uncommon for people to have four or more investment accounts (e.g., 401(k)s, profit-sharing accounts, IRAs, etc) that they have accumulated from working at various companies or even inherited.  You should consider rolling accounts that have the same tax deferred treatment into a single giant IRA.

Consolidating your accounts will make it easier for you to monitor performance, rebalance your portfolio, maintain your asset allocation, and manage required distributions.

NorthStar Capital Advisors has an article What to Do with Your Old 401(k) that walks through the options including creating a consolidated “Rollover IRA” that will help you see the big picture more easily and help you make more informed decisions.

 

 


Six ways our brains make bad financial decisions

  • January 31, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Retirement, Seeking Prudent Advice

Click to zoom

Our brains are hard-wired to choose short-term payoff over long-term gain. Duke University professor of psychology and behavior economics Dr. Dan Ariely has a great article on this subject. Here are six common mistakes investors make – and how to avoid them.

  1. SAVING: What’s more important: buying a new iPad nowor saving that moneyfor the future?
  2. RETIREMENT PLANNING: How much money do you think you need for your retirement, assuming you plan on maintaining your current lifestyle?
  3. INSURANCE: Why do we make such bad decisions when it comes to insurance?
  4. SHOPPING: Why do we invest in extended warranties?
  5. MORTGAGES: Why do we buy mortgages from the same old suspects?

Read Dr. Ariely’s article here and learn how to avoid these bad decisions.

 


Get Your Nest Egg in Shape

  • January 17, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement, Seeking Prudent Advice

Source: Wall Street Journal


Financial Planning Made Easy?

  • January 10, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement, Seeking Prudent Advice

Here’s an awesome chart from BusinessWeek:

(click for gigantic flowchart)


IRS Raising Limits on Retirement Contributions for 2013

  • January 3, 2013/
  • Posted By : admin/
  • 0 comments /
  • Under : 401(k), Retirement, Seeking Prudent Advice

Good news! The Internal Revenue Service has raised the annual limit on contributions to 401(k)s and individual retirement accounts.

The new contribution limits for 2013 are the following:

  • 401(k): $17,500 ($23,000 if you are 50 years old or older)
  • Traditional/IRA Rollover: $5,500 ($6,500 if you are 50 years old or older)
  • Roth IRA: $5,500 ($6,500 if you are 50 years old or older)
  • SIMPLE IRA: $12,000 ($14,500 if you are 50 years old or older)
  • SEP IRA: $51,000 ($51,550 if you are 50 years old or older)

Remember you can still make IRA contributions until April 15, 2013 for tax year 2012 but the old 2012 contribution limits will apply.

Why is this good news?

First, it’s always nice to have the ability to defer taking the tax hit on a bit more money.  Second, these increased contribution limits give you the opportunity to put aside more money for your retirement. This accumulation is often more important than allocation, particularly when you’re first staring off as an investor.  Your personal savings rate, the amount of money you’re saving and investing for the future, is just as critical as your rate of return.


Fortune’s 10 Stocks To Last The Decade? Forget about it!

  • December 27, 2012/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

This time of year magazines and newspapers are brimming with articles purporting the virtues of “buy-and-forget” portfolios comprised of “10 stocks to last the decade” and the likes.

Despite the exuberance of these articles and investors’ never-ending quest for the magic bullet to put their portfolios on the right path, these sort of recommendations are almost always categorically wrong and should be ignored.

We’re strong believers in making data-driven decisions when it comes to investments.  So what do the numbers say when it comes to the buy-and-forget portfolios?  In August 2000, Fortune magazine recommended “10 stocks to last the decade” based on their prediction of major trends that should shape the next 10 years.

Here’s are those 10 stocks and their share price on August 14, 2000  when Fortune published their article:

  1. Nokia (NOK: $54)
  2. Nortel Networks (NT: $77)
  3. Enron (ENE: $73)
  4. Oracle (ORCL: $74)
  5. Broadcom (BRCM: $237)
  6. Viacom (VIA: $69)
  7. Univision (UVN: $113)
  8. Charles Schwab (SCH: $36)
  9. Morgan Stanley Dean Witter (MWD: $89)
  10. Genentech (DNA: $150)

And here are these stocks’ value a decade later on December 19, 2012:

  1. Nokia (NOK: $4.22, -92.2%)
  2. Nortel Networks (NT: $0, -100%)
  3. Enron (ENE: $0, –100%)
  4. Oracle (ORCL: $34.22, -53.8%)
  5. Broadcom (BRCM: $33.28, -86.0%)
  6. Viacom (VIA: $54.17, -21.5%)
  7. Univision (UVN: $0, -100%)
  8. Charles Schwab (SCH: $14.61, -59.4%)
  9. Morgan Stanley Dean Witter (MWD: $14.20, -84.0%)
  10. Genentech (DNA: $95, -36.7%)

If you had taken Fortune’s advice, your portfolio would have tanked, falling 63.8% !  During the same 10 years the S&P 500 gained 23.4%.

Searching for the best thing for your portfolio?  Spend your time finding a very good adviser and avoid articles & TV shows that are overly focused on your investments.

 

 


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