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July 31, 2009

Stirring the pot: Should the SEC put a lid on pay?

It’s the old Watergate adage, whispered in that dark garage, that has governed a lot investigative journalism. I think it’s one that investors should follow, too, to protect their own interests.

It is: Follow the money.

The Obama administration’s proposals to broaden the Securities and Exchange Commission’s powers include a provision that follows the money.

The SEC could write rules to ban brokers or investment advisors from receiving pay that is unfair or compensation that stacks the deck against the investor, such as bigger commissions for selling this in-house mutual fund rather than one from an outside company that might be better for the customer.

But the SEC gets to decide which pay practices it could regulate and what is fair or unfair.
So could it ban broker commissions? Should it?

Should it set maximums for fees for investment advice?

What should the SEC do about pay?

Would regulation of pay help investors get better advice?

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July 30, 2009

Why is it so hard to find a financial adviser (and I didn't even say a good one)?

The Wall Street Journal reports that four major Wall Street brokerage firms watched $8 billion flow out of their hands last year. At the same time, registered investment advisors gained $108 billion in new money to manage.
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People are and have been on the hunt for new advisers. And I know this is a nail-biting experience for many. They aren’t sure who to call. What questions to ask. How to make a good decision. How even to measure whether they’ve done the right thing.

I’ve written those “How to pick a financial adviser” stories or “Here’s what the credentials mean” columns several times. Each time I do, the phone rings. And a reader asks, “So, those questions are good, but, do you know anyone? Who do I call?”

If not lead to a brokerage by some zillion-dollar marketing campaign, the public seems to be lost. People have trouble finding an investment advisor. (And you'll notice I didn't even say a good one.)

For the life of me, I can’t figure out why. If all sorts of professionals -- attorneys and doctors come to mind -- advertise or do something else to make their names known, why don’t good financial advisers do the same?

I guess you don’t see too many accountant ads, either. Is it unseemly? Would it make any difference, considering most people go on word-of-mouth referrals? Are there some professional rules against it? Is it complicated by the notion that some advisors can also act as brokers? Are they hiding?

There has to be a reason, but I’m not sure what it is.

Why don’t advisers try to connect with the public? How do they expect the public to find them?

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July 28, 2009

A laundry list of readers questions.

It's time to take care of business. Here are answers to some of your recent questions. Anyone who wants to throw any other issues into the wash, please put your questions in the box at the right.

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With no notice, three of my credit cards slashed my credit limits by more than $10,000 each. Then they doubled my rate and changed from a fixed rate to a variable one. Is there anything that I can do?
Matt in Coral Springs

You could call your credit card company and make the case to show your situation hasn't changed. But honestly, I don't believe it will work. Credit card companies are doing these things to good customers everywhere. I don't believe they care what the reaction is. What I'd do instead is start shopping. For a better card or set of cards.

Where can I find textbooks to buy used or at a discount
-Melinda

A few years ago I wrote about the savings that can be found on websites devoted to textbooks. Since then, plenty of competitors have entered the fray. So along with my list, below, you might try some of the others, including Better World Books, which gives a portion of purchases to a fund to increase global literacy.

Popular sites for buying and selling textbooks:
half.com
TextbooksRus.com
ecampus.com
Buy.com
TextbookX.com
BarnesandNoble.com
Amazon.com
BestBookBuys.com

Can you buy a house if you do not have a job?
-Leanne

I hope not. Isn't that part of how we got into this mortgage mess, because people who couldn't afford to repay mortgages were allowed to borrow anyway?
Seriously, though, there are cases where you can buy a house without having a job. If you have enough cash. Or enough assets that are producing income that will cover the mortgage, a job isn't always necessary.
But a loan that doesn't require proof of income is very hard to get these days.

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July 27, 2009

Tax help for school costs

Camp, college, back-to-school shopping soon. It’s a busy season for families
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A reminder from the IRS: There are new tax breaks available for college costs. There’s a maximum $2,500 per student credit designed to offset the cost of the first four years of college. It’s broader than the Hope tax credit for this year and next. It will be available to higher-income and lower-income taxpayers. It can be used for tuition, fees and books.

And, there’s a special tax provision for that laptop that the colleges require. If you plan to use money in a Section 529 college savings plan to pay for college, the law now says you can use it to buy computers, Internet access and related equipment or services. No games software, but educational things.

So save those receipts. You’ll need ‘em at tax time.

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July 24, 2009

Credit card reform derailed

Regulators are fighting other regulators over financial reform this week.
Meanwhile, some very important (to consumers) reforms that Congress passed just two months ago are already being derailed.
Heard enough from me yet about credit cards? No, no you haven't. Here's my latest commentary from The Nightly Business Report on PBS.


 

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July 22, 2009

Minimum Wage law loopholes

As if having teen unemployment north of 20 percent were not enough -- right, it's twice as high as the unemployment rate in Florida -- there's one little bomb tucked into Friday's federal minimum wage hike: It won't apply to teenagers with summer jobs.

There's a special subminimum wage for anyone younger than 20 during the first 90 consecutive days of employment. It is only $4.25 an hour. After that, the pay must go up to the federal minimum for everyone else, which will be $7.25 as of Friday.

So that means a teenager would have to had started his or her summer job back in April in order for the new minimum wage to apply now. At least of the teenagers I know, very few were working at that time. They didn't start until school let out.

(Oh, and, there's a special summer job exemption, too, which says places like camps don't have to pay the minimum wage at all.)

But the good news: "I have never seen anybody pay the teenager training rate," said Maria Perez, president of the Broward County Association of Payroll Professionals.

The reason: No one would apply for those jobs. Other employers are paying more than the minimum, she says. And the statistics back her up. Very, very few workers get the minimum wage any more.

The teenager training rate was inserted into the law back in 1996, but attorney David Buchsbaum, a partner in the Fort Lauderdale office of Fisher & Phillips, a labor and employment law firm, says he wouldn't advise employers to use it.

That's because there's another provision in this section of the law that says employers cannot get rid of another worker just to hire that teenager and pay the sub-minimum rate.

"If that teenager at the subminimum wage is taking a spot that used to be held by someone else, I would have some concerns about the displacement issue," he said.

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Tune in

If you haven't heard me rail about credit cards often enough, tonight's your chance.

Catch me on television, talking about how credit card reform is being derailed by the industry.

Tune in to The Nightly Business Report on PBS stations nationwide. I'm doing the Money File segment, near the end of the show.

In South Florida, NBR airs at 7 p.m. on WPBT Channel 2.

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July 21, 2009

One worry I don't have

I'm so not worried about inflation.
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And it's not because I believe Federal Reserve Chairman Ben Bernanke in this morning's Wall Street Journal.
It's because the signs all around are pointing the other way, for some time to come.

Others think so too.

Try these articles from SmartMoney.com:
http://tr.im/tkM8

You'd have zero sense of history to think the Fed has lost all sense of how to fight inflation and the importance of the battle. I mean, we've been there. Not that anyone needs to have lived it, but its legacy is huge and respected and economists learned from it.

You can go through two days of Bernanke testimony, if you can make it to the end of it all, and you won't get much more than what he said in today's column: We have tools to fight inflation and we'll use them. When the time comes. But it's not now.


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July 20, 2009

Money makeover brings strong reaction

Readers certainly do have strong feelings about Rochelle Strauss, the single parent of two teenage girls that I wrote about on Sunday. Working with Certified Financial Planner Thomas Balcom, we tried to give her some direction for living on a budget of $54,600. She pays out nearly one-quarter of her after-tax income for tuition to a private religious school for her daughters. She values education and her religion very highly and is willing to live with the stress this puts on her finances.
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"I can really identify with the mother," said one caller. "But she should talk to the school about cutting the tuition." Answer: She already has. The more than $10,000 that she pays is a discounted rate.

"It was sickening to see that she can't save on $54,000," said another. "She should call me for advice on how to do that."

"I am a 26 year old single mother, making an income of $34,000 with no child support or help, responsible for rent, bills, food, child care, and a car payment," wrote Denise Brown. "I work a full-time and part-time job, seven days a week, just to make ends meet. I could only dream of putting my child in a private school!"

And there was this, from Michael Saba, who offered to provide Strauss with complimentary dry cleaning at his small chain of stores. "As a businessman I am always reading about the economical crisis the world is in, and very often think to myself, if all the American businesses would all do one small thing for someone else we would all get through these tough times and still be standing with an even stronger business at the end."

Here's the story:
http://www.sun-sentinel.com/business/sfl-makeover-harriet-072009,0,477324.story

Here's her budget:
http://www.sun-sentinel.com/business/sfl-makeover-boxthree-071209,0,6584855.story

Here's how to get your own Money Makeover:
http://www.sun-sentinel.com/business/sfl-makeover-boxtwo-071209,0,7987518.story
--

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July 14, 2009

Messages to Madoff

JustinM.jpg
This might be one care package that Bernard Madoff doesn’t want to get.

Investors, critics, anyone who cares to can post a note to the disgraced financier at Madoffmail.com.

Whoever organized the site promises to send the posts to Madoff twice a year. And to put some of them up at an art show in New York later this year.

Love the post that I borrowed of Madoff in the dunce cap in front of the blackboard. Whoever made it, stand up and take credit.

And in other important personal finance news, just thought you Bernie fans would love to know that he may have work to do. In the garden.

According to something called Mother Nature Network, Madoff is in the nation’s first and only green-certified prison.

Says mnn.com:
Among the prison’s sustainable aspects are bicycle storage, alternative fuel refueling stations, specified parking for alternative transportation, reduced site disturbance, storm water management and an exterior designed to reduce the heat island effect.

And this:
Madoff will be able to spend his time in the library, recreation yard or watching television – as long as the programs are rated PG-13 or lower. He’ll also have a chance to get a job taking care of some of that sustainable xeriscaping

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July 13, 2009

Credit cards: Mine's the worst. It belongs in...

12456977871712665073hrum_trash.svg.thumb.pngI warned you.

I have had such a problem with my credit card that I'm telling my story. On video.

Why not have a look...And then, maybe you can tell me yours.


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July 9, 2009

Credit cards punish us

I hate my credit card.
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But more on that later.

David Lazarus of the Los Angeles Times reports that JPMorgan Chase increased its monthly minimum payments to 5 percent, from 2 percent of the balance, for about 1 million cardholders.

Other shenanigans:

Fixed-rate cards are becoming variable-rate cards.

In May, a Federal Reserve survey showed that 65 percent of senior loan officers said they had lowered credit limits to their customers.

Average late fees can be as high as $38.50, Bankrate says

Most cards charge you if you want to pay by phone with a human being involved.

All this bad behavior is normal for some credit card issuers.

But others are prompted to act now before the new credit card reform legislation takes effect next February

Once again, consumers are the target.

Did they notice what's happening to consumer spending? Did they notice that credit card defaults are up?

Do they really want us to dislike their cards so much that we don't want to use them?

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July 8, 2009

We don't want you to know this but....

Maybe my sense of humor is warped, but I'm cracking up over some of the lines in a new book, 1,001 Things They Won't Tell You, by Jonathan Dahl and the editors of Smart Money magazine. (Workman, $16.95)

1001-Things-They-Won%27t-Tell-You.JPG

We'll let you borrow more than you can afford -- from the college financial aid office.
We'll disconnect you in a heartbeat -- from the utility company
This bottled water is actually tap water - from the gourmet grocer
We're more secretive than the CIA - from the home insurer
Once you'll move in, you'll never see me again - from the home builder

It's hilarious, in a consumers-are-toast sort of way.

I learned something from each one of these statements. And the utility, by the way, will charge you a disconnect and a reconnect fee in addition to just cutting you off.

I'm not much into guides on how to spend money, but this one is good. The subtitle: An Insider's Guide to Spending, Saving, and Living Wisely.

Kudos to anyone who can make consumer battles amusing and turn them into something we can learn from.

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July 6, 2009

Better investor protection, but not in the U.S.

It's advantage UK, at least for investors.

Financial advisors in England and the rest of the United Kingdom won't be allowed to receive commissions when selling investments pension or life insurance products, starting in 2012.

The UK's Financial Services Authority, the industry regulator, came to this conclusion as part of its review of the British financial services industry, The Financial Times reported.

Investors will be given a choice: Choose to pay a fee or have the cost of financial advice deducted from m their investment." The amount the advisor receives will be negotiated with the investor.

Harold Evensky, of Evensky & Katz in Coral Gables, doesn't hold out much hope that the same standard will ever be adopted here. But he and a small group of well-known certified financial planners and advisors are trying. They're circulating a petition to get Congress to adopt a "fiduciary standard" for the financial services industry.

Their first demand is that the advisor "put the client's best interest first."

Another plain-language concept in their petition: "Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts."

"It will probably be a while (i.e., never) before we catch up with the investor protection provided investors in the U.K.," Evensky said in an e-mail.

But there's a chance. Congress seems to be in the mood to consider it.

Advisors, it would seem, may be more interested in this idea than ever before. That's considering how much suspicion is circling around their profession, due to the Madoff scandal, trouble in financial products that seemed straightforward (think target-date funds) and generally lousy investment results.

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July 2, 2009

Suit says Boca Raton-based IBM credit union was negligent

A lawsuit alleges the IBM employees credit union in South Florida caused its members to lose millions by steering them to investments in bonds from a now-bankrupt Georgia finance company that made loans to churches and faith-based organizations.

The claim, made in a lawsuit filed this week in federal district court in West Palm Beach, is against the 85,000-member IBM Southeast Employees Federal Credit Union, which is based in Boca Raton. It has $800 million in assets and 22 branches, according to the credit union's web site.

The suit says the credit union directed members to Wellstone Securities, a broker-dealer that has gone out of business, and that Wellstone recommended members buy bonds issued by Cornerstone Ministries Investments, which is now in liquidation and under investigation by George securities regulators.

"The credit union and its CEO Lary McCants deny the allegations and intend to vigorously defend themselves in court," said its attorney Michael D. Lozoff of Adorno & Yoss in Miami.

He said the suit is one of many where victims of fraud, bad judgment or the troubled economy seek to "recover their losses by imposing blame on the nearest deep pockets."

Three South Florida law firms -- Sallah & Cox in Boca Raton, Dimond, Kaplan & Rothstein in Miami, and Blum & Silver in Boca Raton - filed the suit on behallf of Claudie Schorrig, a retired IBM employee. The suit sees class-action status, for what the attorneys say are "hundreds of victims."

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July 1, 2009

My recent stories

Sorry, I have gotten behind on my blogging. I think I'll blame Bernie. 44871871-04093813.jpg

Here's what I've been writing for the newspaper this week. First, Wednesday's column about a dysfunctional Florida program that aims to help homebuyers but it doesn't have any money or procedures for people to use it. The story is here:
http://tr.im/qwO2

And the second is a screed filled with the the anger of South Floridians at Bernard Madoff. My story about his sentencing is here:
http://tr.im/qwPn

And the third was last Sunday's column, about term life insurance, where rates have been low for years, but premiums are going up soon.
http://tr.im/qwTO

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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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