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Which way the money flows
After a two-hour discussion last week with a group of financial planners about exactly whose interest comes first – the advisor’s, a broker’s, or your interests as a consumer – I came away more confused than ever. If I’m in a muddle, I’m guessing you are, too.
To recap: A broker must recommend investments that are suitable for you. No wild and crazy investments for conservative folks who’ll need their money tomorrow.
An investment advisor has to recommend what’s best for you, no matter whether this recommendation will make money for the advisor.
A broker has a suitability standard. An investment advisor must be a fiduciary, putting your interests first.
As an example, if the right investment for you is a Standard & Poors 500 index fund, the broker can sell you one that his firm offers for a sales charge of 3 percent. The investment advisor looks around and finds one that has a sales charge of less than a third of one percent. The broker may know the cheaper index fund is out there, but he gets a bigger commission by selling you the expensive index fund. You're getting what's suitable, but not what's best. Because by paying the higher fee, you have less money to invest.
This not-too-clear line got more blurry in recent years when the Securities and Exchange Commission gave brokers a loophole. Brokers would not have to follow the same rules as investment advisors and could offer financial planning and investment advice, so long as it was only incidental to their main business of being brokers. Brokers could be planners but not fiduciaries. Got it?
The Financial Planning Association got sick and tired of that, filed a suit and not long ago won. The broker loophole was struck down.
The SEC says it won’t challenge that court decision. But it might make some new rules, maybe this summer.
In the meantime, it’s more important than ever to protect yourself when you are going into a relationship with a financial advisor. Always ask, Are you a fiduciary? All the time or only in some situations? If a broker asks you to change from one sort of account to another, ask the reason why. Examine the fees and see which way the money goes.
As a journalist, I use the Watergate adage: Follow the money. Only when you know how the advisor is paid will you be able to figure out the advisor’s motivations.
Harriet Johnson Brackey, the personal finance writer for the Sun-Sentinel, has been an award-winning business...
Comments
Actually, the article is half way right.
If you opted for dd of your refund AND chose to have your "fee" (whether it is from TurboTax, TaxAct, H&R Block etc) to be taken out of your refund (vs taken out of a debit/credit card at that time of filing) then the economic stimulus check will be sent via mail. Which is ridiculous. And they won't have it any other way. We requested that it be DD, but told that was a no go. We have since moved and would rather have it DD , just like we do every year for taxes than to wait for the awful carrier to "re-deliver" it, which in most times we don't even get our mail on a daily basis.
Posted by: Frustrated | May 9, 2008 11:49 PM
This blog is really nice and informative. We are pleased to know this blog is really helping people and it’s our pleasure to post informative content on this useful blog created by webmaster.
Here’s our market view on American stock market for 10th October, 2008
The stock market has collapsed - since Sept. 19 the DJIA is down 25% and the S&P 500 is down 28% and down 42% from a year ago.
How can this happen so quickly and so dramatically when so many good things have occurred? Oil is down to $82 a barrel; interest rates are very low; the dollar is up; valuation levels are extremely attractive among many blue chip stocks.
What's the real problem? The problem that is killing the stock market is a lack of hope about the future.
Hope springs from optimism that is based on facts and history. Look at the history of America and really all of mankind. Life is full of setbacks and problems - that's just the deal. But this too shall pass, as all scary periods have.
Doomsayers have been around forever and their batting average is zero. Buying stock is based on hope - hope for the future. If one doesn't have hope, they shouldn't be in this business.
So what is the best service we, as professionals, can provide for our clients?
First, discuss the fact that we are dealing with serious problems but it is not at all like 1929. The Federal Reserve and the Treasury Department are doing many things to restore confidence in the financial system. There is global coordination in attacking the problem, which is lack of confidence.
Tell your clients to look at history of our great nation and what has happened since 1776 when we faced very serious problems. The stock market actually rose steadily about six months after Pearl Harbor and until the end of WWII even though the outcome was not at all clear for several years.
No one knows when the stock market will bottom and a new bull will commence. We do know that stocks and mutual funds offer the best values we have seen since Black Monday, Oct. 19, 1987.
Almost all Americans have hope about the future of our nation, but they need help to control their normal fears.
ThePowerStocks.com Team
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Posted by: ThePowerStocks.com Team | October 13, 2008 7:44 AM
This blog is really nice and informative. We are pleased to know this blog is really helping people and it’s our pleasure to post informative content on this useful blog created by webmaster.
Here’s our market view on American stock market for 16th October, 2008
Stocks sold off sharply yesterday and the major averages have given back more than two thirds of the advance from last Friday's lows to Tuesday's highs.
The session got off to a bad start as investors began to react again to economic news: specifically, pre opening, the September retail sales and October Empire Manufacturing index were disappointing and stock futures sold off.
Pressure on the market came throughout the session on light volume in what we think was a classic buyers' strike after the significant volatility the past few sessions.
Many market participants were just content to stand aside and let the dust settle. Adding to the selling pressure was further second guessing of the government's rescue plan that we spoke of Tuesday carrying into yesterday's session.
The CBOE Volatility Index, the VIX, rose more than 14 points to 69.25, just shy of its record close reached last Friday at 70. The CBOE NASDAQ 100 indicator reached a new new record close at 72.93.
The number of bulls in the Investors' Intelligence survey fell to another multi-year low at 22.4%. The internals of the market were overwhelmingly negative: NYSE issues 8/1 negative and 97% of the volume to the downside. NASDAQ issues were 6/1 negative and 98% of the volume was to the downside.
Based on the extreme fear and dramatic sell-off on big volume last Friday, we believe the market has probably seen its lows for this bear market but a full retest is underway. Today - Worldwide markets were down overnight and U.S. stock futures are signaling flat to lower opening. Today will be a big test for the market.
ThePowerStocks.com Team
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http://www.thepowerstocks.com
Posted by: ThePowerStocks.com Team | October 17, 2008 4:47 AM
This blog is really nice and informative. We are pleased to know this blog is really helping people and it’s our pleasure to post informative content on this useful blog created by webmaster.
Here’s our market view on American stock market for 16th October, 2008
Stocks sold off sharply yesterday and the major averages have given back more than two thirds of the advance from last Friday's lows to Tuesday's highs.
The session got off to a bad start as investors began to react again to economic news: specifically, pre opening, the September retail sales and October Empire Manufacturing index were disappointing and stock futures sold off.
Pressure on the market came throughout the session on light volume in what we think was a classic buyers' strike after the significant volatility the past few sessions.
Many market participants were just content to stand aside and let the dust settle. Adding to the selling pressure was further second guessing of the government's rescue plan that we spoke of Tuesday carrying into yesterday's session.
The CBOE Volatility Index, the VIX, rose more than 14 points to 69.25, just shy of its record close reached last Friday at 70. The CBOE NASDAQ 100 indicator reached a new new record close at 72.93.
The number of bulls in the Investors' Intelligence survey fell to another multi-year low at 22.4%. The internals of the market were overwhelmingly negative: NYSE issues 8/1 negative and 97% of the volume to the downside. NASDAQ issues were 6/1 negative and 98% of the volume was to the downside.
Based on the extreme fear and dramatic sell-off on big volume last Friday, we believe the market has probably seen its lows for this bear market but a full retest is underway. Today - Worldwide markets were down overnight and U.S. stock futures are signaling flat to lower opening. Today will be a big test for the market.
ThePowerStocks.com Team
Get 56 days free trial on our exclusive newsletter. Offer Limited.
http://www.thepowerstocks.com
Posted by: ThePowerStocks.com Team | October 17, 2008 7:56 AM
This blog is really nice and informative. We are pleased to know this blog is really helping people and it’s our pleasure to post informative content on this useful blog created by webmaster.
Here’s our market view on American stock market for 16th October, 2008
Stocks sold off sharply yesterday and the major averages have given back more than two thirds of the advance from last Friday's lows to Tuesday's highs.
The session got off to a bad start as investors began to react again to economic news: specifically, pre opening, the September retail sales and October Empire Manufacturing index were disappointing and stock futures sold off.
Pressure on the market came throughout the session on light volume in what we think was a classic buyers' strike after the significant volatility the past few sessions.
Many market participants were just content to stand aside and let the dust settle. Adding to the selling pressure was further second guessing of the government's rescue plan that we spoke of Tuesday carrying into yesterday's session.
The CBOE Volatility Index, the VIX, rose more than 14 points to 69.25, just shy of its record close reached last Friday at 70. The CBOE NASDAQ 100 indicator reached a new new record close at 72.93.
The number of bulls in the Investors' Intelligence survey fell to another multi-year low at 22.4%. The internals of the market were overwhelmingly negative: NYSE issues 8/1 negative and 97% of the volume to the downside. NASDAQ issues were 6/1 negative and 98% of the volume was to the downside.
Based on the extreme fear and dramatic sell-off on big volume last Friday, we believe the market has probably seen its lows for this bear market but a full retest is underway. Today - Worldwide markets were down overnight and U.S. stock futures are signaling flat to lower opening. Today will be a big test for the market.
ThePowerStocks.com Team
Get 56 days free trial on our exclusive newsletter. Offer Limited.
http://www.thepowerstocks.com
Posted by: ThePowerStocks.com Team | October 17, 2008 8:09 AM
This blog is really nice and informative. We are pleased to know this blog is really helping people and it’s our pleasure to post informative content on this useful blog created by webmaster.
Here’s our market view on American stock market for 16th October, 2008
Stocks sold off sharply yesterday and the major averages have given back more than two thirds of the advance from last Friday's lows to Tuesday's highs.
The session got off to a bad start as investors began to react again to economic news: specifically, pre opening, the September retail sales and October Empire Manufacturing index were disappointing and stock futures sold off.
Pressure on the market came throughout the session on light volume in what we think was a classic buyers' strike after the significant volatility the past few sessions.
Many market participants were just content to stand aside and let the dust settle. Adding to the selling pressure was further second guessing of the government's rescue plan that we spoke of Tuesday carrying into yesterday's session.
The CBOE Volatility Index, the VIX, rose more than 14 points to 69.25, just shy of its record close reached last Friday at 70. The CBOE NASDAQ 100 indicator reached a new new record close at 72.93.
The number of bulls in the Investors' Intelligence survey fell to another multi-year low at 22.4%. The internals of the market were overwhelmingly negative: NYSE issues 8/1 negative and 97% of the volume to the downside. NASDAQ issues were 6/1 negative and 98% of the volume was to the downside.
Based on the extreme fear and dramatic sell-off on big volume last Friday, we believe the market has probably seen its lows for this bear market but a full retest is underway. Today - Worldwide markets were down overnight and U.S. stock futures are signaling flat to lower opening. Today will be a big test for the market.
ThePowerStocks.com Team
Get 56 days free trial on our exclusive newsletter. Offer Limited.
http://www.thepowerstocks.com
Posted by: ThePowerStocks.com Team | October 17, 2008 8:11 AM
This blog is really nice and informative. We are pleased to know this blog is really helping people and it’s our pleasure to post informative content on this useful blog created by webmaster.
Here’s our market view on American stock market for 17th October, 2008
The major stock averages had another dramatic day of swings yesterday, the Dow reversing from down 380 in the morning to close up 401 points. The averages finished just shy of their highs of the session and the NASDAQ Composite led the way.
Stocks briefly rose at the opening, then reversed lower as a plunge in the October Philly Fed index (reported -37.5 v. estimated -10) and disappointing reading on September industrial production (reported -2.8% v. estimated -0.8%) weighed heavily. Follow-through selling from Wednesday was also a likely factor adding to the pressure on stocks.
The measures of fear again reached record levels in the morning plunge. The CBOE Volatility Index, the VIX, and the CBOE NASDAQ 100 volatility indicator both rose to new intraday all-time highs of 81.17 and 84.62, respectively. Stocks steadily slid to their late morning lows. At that point, the DJIA was down 380 and the NASDAQ 62 point and the internals of the market were overwhelmingly negative for both the NYSE and NASDAQ.
From the lows, the Dow rallied more than 500 points in an hour, gave back 200 points from their early afternoon peaks and settled into narrow ranges. A late acceleration sparked another 500-point rally up to the close. With the stock market successfully holding onto to their gains, the VIX and NASDAQ Volatility indexes eased back into their closes. The broad market finished solidly positive. Volume picked up substantially from the previous day's low levels.
Today - Volatility will also rise as a significant amount of options expire in a triple-witching session. The opening looks lower.
ThePowerStocks.com Team
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http://www.thepowerstocks.com
Posted by: ThePowerStocks.com Team | October 18, 2008 4:12 AM
You can learn the secrets of world monetary flow if you will simplify the concept. The Allegory of a "The Beach Ball," is not taught in all universities, perhaps it should be. Learn what the elite know about the money flow. This abstract thought "The Beach Ball Effect" help to bring light to the flow of money in World Economies for your personal financial future and assist you in teaching your kids about the world of money.
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vidhi
Make Money-Make Money
Posted by: vidhi | December 18, 2008 8:06 AM
You can learn the secrets of world monetary flow if you will simplify the concept. The Allegory of a "The Beach Ball," is not taught in all universities, perhaps it should be. Learn what the elite know about the money flow. This abstract thought "The Beach Ball Effect" help to bring light to the flow of money in World Economies for your personal financial future and assist you in teaching your kids about the world of money.
---------------------
vidhi
Make Money-Make Money
Posted by: vidhi | December 18, 2008 8:07 AM
You can learn the secrets of world monetary flow if you will simplify the concept. The Allegory of a "The Beach Ball," is not taught in all universities, perhaps it should be. Learn what the elite know about the money flow. This abstract thought "The Beach Ball Effect" help to bring light to the flow of money in World Economies for your personal financial future and assist you in teaching your kids about the world of money.
---------------------
vidhi
Make Money-Make Money
Posted by: vidhi | December 18, 2008 8:08 AM
nice post, thanks for sharing such information. it was very helpful.
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