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Author: Aida2003 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: After meeting with a Financial Advisor Date: 10/3/2003 1:13 PM
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I wanted to tell you, Fools, about my yesterday's meeting with a financial advisor. In case anyone has any thoughts, I would be happy to hear them.
So, I went there just for my curiosity because I've heard many stories and I was anxious to see what impression I will have after the meeting.

Here is what my DH and I heard...
In order to have calculations prepared how much we will need in the retirement years costs starting $750 and up depending on the complexity of the calculations.

Since we said we have little Term life insurance (thru our companies and at the time being we're not concerned about extra because we have no kids yet), the advisor suggested buying a Variable Universal life insurance. So, we discussed both UL and VUL insurances, but for some reason he talked more about Variable UL. According to him, Variable UL insurance costs almost the same as UL but it has investment opportunities. He mentioned Phoenix Life Insurance is a good company to buy VUL insurance. He said that even though having a VUL insurance is not a great investment but it makes you to be disciplined and in the retirement you can take loans against the cash value. Besides, whatever we take out, we will not be taxed. We will just have to make interest payments back to our policy. Also, as long as “there is $1 left in the bucket, your beneficiaries will receive a full death benefit after you die.” What is your opinion about having a VUL insurance for let's say $100,000 just to cover most important expenses when my DH passes away? As the advisor puts “Term Life insurance stays term and nothing is yours, but it's different with VUL insurance, because it's always yours unless you let the policy lapse.” Is it true, that if we pay the same premium every year/month without skipping any, we might accumulate the cash value that we'll be able to stop paying, but instead borrow the money against it?

With regards to investing, he said that Vanguard is a great company (who doesn't know that yet??!!). I said to him that I want to have a Roth IRA for myself and I asked him if he would do it for me (in case we want him to be our advisor), or I just go and open an account with Vanguard or Fidelity. His answer was “Vanguard and Fidelity are no-load funds, so you can do that by yourself. If you wanted me to do, then I would offer load mutual funds such as Oppernheimer <wrong spelling?>, Templeton, Fidelity Advisors, etc. that are good load mutual funds, but I cannot really say anything right now because for my advice I would expect to be paid.” Then I thought to myself that performance of load mutual funds does not differ much from the no-load mutual funds, so at least I would save on expenses if I go with Vanguard. Am I right? The advisor said that load mutual funds have 4-5% expense ratio.

Well, the whole meeting lasted 3 hours, and after that I and my DH decided not to have a financial advisor and try on our own, unless we decide to buy a VUL insurance. However, before I decide, I must get lots of information of pros and cons of UL and VUL, because I don't want to have surprises in 10-20 and more years.

Any thoughts are welcome. Aida
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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37368 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 1:26 PM
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aida2003 writes,

With regards to investing, he said that Vanguard is a great company (who doesn't know that yet??!!). I said to him that I want to have a Roth IRA for myself and I asked him if he would do it for me (in case we want him to be our advisor), or I just go and open an account with Vanguard or Fidelity. His answer was “Vanguard and Fidelity are no-load funds, so you can do that by yourself. If you wanted me to do, then I would offer load mutual funds such as Oppernheimer <wrong spelling?, Templeton, Fidelity Advisors, etc. that are good load mutual funds, but I cannot really say anything right now because for my advice I would expect to be paid.” Then I thought to myself that performance of load mutual funds does not differ much from the no-load mutual funds, so at least I would save on expenses if I go with Vanguard. Am I right? The advisor said that load mutual funds have 4-5% expense ratio.

I don't think Warren Buffett himself could give you investment advice good enough to overcome a 5% load.

I'd run away from this guy as fast as you can. If you need life insuracne, buy term and invest the difference in cost between term and VUL in a low-fee mutual fund.

intercst


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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37369 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 1:35 PM
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Whew! I think this guy met you and heard the "cha-ching" of the cash register. Run in the opposite direction (which you appear to be doing).

Load funds are in general a bad idea. To make it worse, he would be tying his advice to the commission he gets for selling you the funds - a definate no-no. Stick with what you already do.

If you are interested in finding out what you need to retire, a good starting place is the safe withdrawal study at www.retireearlyhomepage.com They should also have links to other calculators that are a bit more sophisticated than the run of the mill stuff.

On the life insurance: you need to consider your likely needs for insurance, especially how much and for how long. If you have enough term coverage now and you have enough left in the term that you will no longer need it by the time the policy expires, you are all set. If not, you should consider how long you will need coverage. If you need coverage for more than 20 or 30 years, you may wish to consider a UL or VUL policy, since they cover you for life as long as you pay the premiums. However, these types of policies mix life coverage with investing, and the investing component is usually not all that great compared to what you could get in a mutual fund, etc. In particlar, VUL policies resemble expensive mutual funds wrapped in a life policy with a hefty commission. Not real attractive, IMO, but a popular choice (then again, so is tobacco). The other issue with UL/VUL is that the premiums are much heftier than a term policy with the same coverage amount. You may "get something" if nobody dies, but you pay a lot more for it.

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Author: gogreengo Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37370 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 2:48 PM
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In regard to life insurance:

Go with term insurance. It's infinitely cheaper than the other types.

If your DH passed away tomorrow, how much money per month would you need to meet your obligations? Multiply that by 12 months. That's what you would need per year. Then multiply that number by 20: you'll get the amount you need in insurance so that you could invest the principle at 5% interest and just live off the interest til the cows come home. Another general rule is to get 10 to 12 times your DH's yearly salary for his policy.

In our case, DH makes 75k per year. I'm not working now. Our expenses are about $4000 per month. We have about $900,000 of insurance on DH, and it costs about $43 per month. And we got it for a 20-year level term, as we should be close to having a full retirement nest egg by then.

Hope that helps. You're "Foolish" to decide on managing your own finances! Good luck!

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37371 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 2:52 PM
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I think that all financial planners who work on a commission basis will be selling some form of load type investments.

If you want to use a financial planner and invest in no-load funds, then you have to hire a Fee-Only planner. They simply charge by the hour for their time, and don't make commissions.

NAPFA (National Association of Personal Financial Advisors) promotes Fee-Only Planning, and you can find a NAPFA member near you using their website: http://www.napfa.org/

Russ

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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37372 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 2:53 PM
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Do not walk, do not run, instead SPRINT as fast as your legs can carry you in the opposite direction from this so-called financial advisor. Instead:

(1) Visit the bookstore or library and grab 3 - 4 books on investing and read. You will get 80% to 90% of what you need in one month of night time reading.

(2) Regards insurance, shop for term insurance that suits your needs. Usually, the best deal in term coverage will come from a mutual company (or a mutual program from a stock company) that is sponsoring some kind of program related to work, professional affiliation or even an avocation.

TheBadger


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37373 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 5:26 PM
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Aida2003, you wrote:

<< Here is what my DH and I heard...
In order to have calculations prepared how much we will need in the retirement years costs starting $750 and up depending on the complexity of the calculations.
>>

Hmmmm??? Then $750 for a “simple” calculation looks pretty darn high. . . .when it might take all of 1 hour to do. I would think that such retirement income planning would tend to start more around $250 to $350. But, maybe the person simply doesn't want to do anything “simple” to at least get a minimum billable time of $750.

<< Since we said we have little Term life insurance (thru our companies and at the time being we're not concerned about extra because we have no kids yet), the advisor suggested buying a Variable Universal life insurance. So, we discussed both UL and VUL insurances, but for some reason he talked more about Variable UL. According to him, Variable UL insurance costs almost the same as UL but it has investment opportunities.>>

COI (Cost of Insurance) and a few other insurance related charges may be about the same (maybe this is what he was referring to). BUT . . . . .the investment side of a VUL has MUCH higher costs involved than a UL due to the likeness of the separate account to mutual funds (from in insurance policy point of view). From an investment point of view, the “investment” has the COI as an added cost that can weigh heavy. A comparable comparison for a VUL is much like buying term insurance and investing in loaded mutual funds in some kind of tax shelter. So, the “costs” in a VUL really are NOT “almost” the “same.”

<< He mentioned Phoenix Life Insurance is a good company to buy VUL insurance. >>

Phoenix Life does have a “good” VUL contract. That doesn't mean that there aren't other that might be better.

<< He said that even though having a VUL insurance is not a great investment but it makes you to be disciplined and in the retirement you can take loans against the cash value. Besides, whatever we take out, we will not be taxed. >>

Whether or not you'll be taxed DEPENDS on just how much you take out and when . . . . AND particularly HOW you “take out” the money. There are caveats he should be talking to you about . .. like: If you have outstanding policy loans, what happens if the policy is surrendered or lapses for some reason?

<< We will just have to make interest payments back to our policy. >>

Actually one doesn't HAVE TO make interest payments. There are other options to include letting the interest accrue. Some VUL contracts have what's called Zero Net Interest where the funds used for collateral for the loan(s) earn a fixed rate the same as what is charged.

<<Also, as long as “there is $1 left in the bucket, your beneficiaries will receive a full death benefit after you die.”>>

Be VERY careful about taking that literally.

<< What is your opinion about having a VUL insurance for let's say $100,000 just to cover most important expenses when my DH passes away? >>

I really like VUL's. I own 3 of them in addition to other types of life insurance contracts to include a lot of Term. But, VUL or any type of variable life contract is NOT suitable for most people . . .even the great majority of people. It's a very complex type of contact and best suited to those who don't mind complexities AND has a very high risk-tolerance.

<< As the advisor puts “Term Life insurance stays term and nothing is yours, but it's different with VUL insurance, because it's always yours unless you let the policy lapse.” Is it true, that if we pay the same premium every year/month without skipping any, we might accumulate the cash value that we'll be able to stop paying, but instead borrow the money against it? >>

Yes, it is true with careful planning and managing. A lot depends on the investment assumptions you make. The key to keeping the policy in force is that as long as there is sufficient cash in the investment accounts to pay for COI and the other policy expenses (including the investment expenses), the policy will stay in force. What affects whether or not there is enough there is how much you've put in AND how well the investments you choose perform – and of course, amount “withdrawals.”

<< With regards to investing, he said that Vanguard is a great company (who doesn't know that yet??!!). I said to him that I want to have a Roth IRA for myself and I asked him if he would do it for me (in case we want him to be our advisor), or I just go and open an account with Vanguard or Fidelity. >>

A Roth IRA and term insurance can be a better choice assuming you stay insurable long enough to redo the insurance and keep it well into old age.

<< His answer was “Vanguard and Fidelity are no-load funds, so you can do that by yourself. If you wanted me to do, then I would offer load mutual funds such as Oppernheimer <wrong spelling?>, Templeton, Fidelity Advisors, etc. that are good load mutual funds, but I cannot really say anything right now because for my advice I would expect to be paid.” Then I thought to myself that performance of load mutual funds does not differ much from the no-load mutual funds, so at least I would save on expenses if I go with Vanguard. Am I right? The advisor said that load mutual funds have 4-5% expense ratio. >>

Well, he has a good point as is appears he can only get paid by way of commissions. So, if you want help with investment issues from a professional, you'll have to weigh the costs of doing business by way of commission or on a fee bases with someone who will charge fees. Otherwise, yes . . . you can just go at it on your own and save the expense of using any professional advise.

<< Well, the whole meeting lasted 3 hours, and after that I and my DH decided not to have a financial advisor and try on our own, unless we decide to buy a VUL insurance. However, before I decide, I must get lots of information of pros and cons of UL and VUL, because I don't want to have surprises in 10-20 and more years. >>

From the sound of it, it doesn't sound like you and your DH are good prospects even suitable for a VUL. As I said, I like them and own them but that doesn't mean I think everyone should have one. The issues involving VUL or even UL are really too complex to provide any specific advice. But as you want to “get lots of information” you might settle on just getting a term policy (maybe an Annual Renewable Term with Phoenix Life that is very inexpensive for a couple of years) to get coverage in place and give you time to make a well informed decision.


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Author: jesserivera67 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37374 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 9:25 PM
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Aida2003...i'm the guy that is still dealing with a scenario for my parents (search for "parents burned" to see the thread.) All the fools have been huge in advising me to sprint in another direction and basically do some homework.

You'll feel a lot better when you do. Yeah, sometimes it's a pain but when you go through some of the fee calculations you suddenly realize how much fees can kill you. Keep in mind that advisors are trained to sell and gain your confidence.

I don't think VUL's are necessarily bad but depends on you situation. Age, income required, for how long? I'm going with a convertible low load term policy for 20 years...at which point I'll probably transer to a cash value policy depending on my health and family status.

Best of luck...

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Author: drnonlinear Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37376 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/3/2003 11:24 PM
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Aida (cool name BTW!),

Do not take the recommendations of the Fools on face value (I happen to agree with them, BTW). Educate yourself. Create an Excel spreadsheet, and run the VUL versus Term scenarios (same for load vs. no-load funds). That's the only way you will appreciate the difference, which will in turn motivate you to invest more time in educating yourself about these matters.

Thanks,
-dr.nonlinear-


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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37382 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 1:51 PM
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intercst:

I don't think Warren Buffett himself could give you investment advice good enough to overcome a 5% load.

I'd run away from this guy as fast as you can. If you need life insurance, buy term and invest the difference in cost between term and VUL in a low-fee mutual fund.


I laughed out loud at your Buffett observation! <s>

And people wonder why I choose to do my OWN "due diligence" and investment decisions!? Where do these people get "certified" as "advisors"!?

I have a term policy on me, just until our final mortgage payment is made, so my wife would not be stuck. Premium was locked in several years ago, too.

The cost of "whole" life is so much more than term that it is shocking. I agree with all you say.

Oh, and for a retired couple to be taken in by these ads on TV for "units" of (obviously, whole) life insurance, with no physical.... ye gods.

Vermonter

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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37383 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 2:55 PM
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Where do these people get "certified" as "advisors"!?

Who said you have to be certified??? If one is a fnanical advisor (uncertified) the barriers to entry are pretty low; e.g. a business card & a phone line; the barriers to entry are still low even if certified; simply take an exam and pass; presto, you are a CFP.

IMHO, herein lies the problem --- the barriers to entry are virtually non-existent (not unlike being a residential real estate broker); therefore we have too many of them. Further, IMHO, it probably takes a minimum of 10 hours to think through & document a decent financial plan for anyone. Say that process is really worth $100 per hour or a minimum of $1000. Who is willing to pay $1000 for a financial plan that can quickly become $2500 including the slightest bit of complexity --- I think almost no one. So, what does the fianncial planner do? He gives the financial plan away as a loss leader and is then forced to sell what I consider to be inappropriate investments to the client (e.g. ones with big commissions) in order to put food on his own table.

Now addmittedly, there are fixed fee financial planners out there; albeit not many. Further, their fees normally start at $2500 and go way up. Their services are potentially worthwhile for people with net assets of $5mm and up.

TheBadger


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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37384 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 4:13 PM
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Just reading this thread, it would appear that the consensus of the board is that: A). No Financial Advisor is worth the money they charge and B). No Financial Advisor has enough ethics to recommend what's best for their clients regardless of the commission involved.

I don't happen to agree with that consensus. A good Financial Advisor is like any other good investment, difficult to find but worth the effort. Superior Financial Advisors are just as rare as superior investments.

While a lot of posters here appear to be able to make their own good investment decisions, a good Financial Advisor would still probably be worth the extra charge over a discount brokerage.

Just my 2 cents.

PosFCF

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37385 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 6:05 PM
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Interesting...

Guess I'll just be satisfied doing my own and being retired! ;#)

Vermonter

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37386 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 6:08 PM
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"A good Financial Advisor is like any other good investment, difficult to find but worth the effort. Superior Financial Advisors are just as rare as superior investments." - PosFCF

While I cannot argue with this conclusion, I find the premise severely flawed. How can one find that rare "good financial advisor" without losing many dollars in the search? Since good ones are rare, in your own words, isn't it expensive to sort through all of the bad ones?

In my investing career, which began almost 40 years ago, I have worked with at least 25 financial advisors at at least 12 different investment firms. These firms are represented by lots of great and notable big names such as Smith-Barney, Merrill-Lynch, Bear-Stearns, Edward-Jones, A.G. Edwards, Prudential, Raymond James, and Payne Webber. I worked with some local small firms too. I cannot begin to count the money I lost listening to these idiots. They seldom gave consistent advice that beat the averages. Overall, their loses were far more destructive than their winners were constructive to my portfolio. Unfortunately, I was so busy working at my job and making money to invest for my future that I had no time to figure this out. I just kept sending them money to fund every new idea that they came up with. Heck, they all sounded good to me! What did I know? They were supposed to be the damned experts. I was the raw capital earner!

One day, I sat down and did the math. Of all of the brokers, only one had consistently given good advice. That was Payne Webber, by the way. All of the rest never beat the market...not one year out of many. Some never made money for me...after many years, my account was about equal to the cash I had fed into it over time. I was being fooled by my own contributions. Others made money fairly consistently, but when compared to the S&P 500, they were pitifully tiny gains. Unfortunately, back in those days, the existence of index funds was well concealed. No broker ever suggested an index fund to me. The comparison to their own piss-poor performance would have been too easy to spot!

Luckily, I came to see the real problem. The real problem was me! I was too trusting and too naive. I realized that I could work for myself and make far more money than relying on financial analysts for my success. However, this took too much time away from my work so I retired at age 49 and went to work full time for myself. Today, I beat the market every year because it really is not that hard to do.

At first, I bought some index funds to use as my tell tale. Each year I compared my results to the fund's results. The first year I failed to beat the indices. However, I still had lots of the losers the experts had talked me into. I was slowly learning though. The second year I beat the index funds by a small percentage. Since then it has been no contest. Beating the idex funds is a no brainer once you find out what is going on.

I am not a day trader either. I rarely sell stocks and I buy maybe five stocks at most each year. However, investing has become my full time job. I really dislike mutual funds and indwx funds. Both rob the investor of his ownership in a company.

When you buy a fund, you give up your stock voting rights to the fund manager. Fund managers almost always vote with the company management. In my opinion, this is exactly what caused the problems we now see on Wall Street. The individual investor has given up control to the "experts" who have no real interest in the individual. If they do not like what a company is doing, they do not blow the whistle on the business, they just sell it. Someone else will buy it. There is always a sucker out there to buy anything. The funds will still vote with the management of their new purchases. That has proven to be a real mistake. Management is out for management...not for the stockholder. Stock Options prove that simple fact.

If more folks did what I do, Wall Street would be a far better place. I follow the businesses I own and I vote my shares as I see fit for my advantage. That is how it is supposed to work. The stockholders own the business...not the management. The management works for us. Stockholders provided the capital that made the business possible...the business needs to repay us for our risk taking. Some great businesses understand this fact...many do not. The key is to be able to spot the difference between the ones who care about the stockholders and the ones who do not. It really is not that hard to do. BUt, you cannot do that if you do not own the shares yourself.

Ignorant investors cannot give up their control fast enough. They know how little they really know so they are anxious to leave the decisions to others. That is where the bad experiences begin. For, in the end, after you have been fleeced, you have no one to blame but yourself. For, in the final review, it is your money on which you are giving up control. Who do you honestly think cares as much about your money as you do?

Thank God, I figured this out early enough. Otherwise, I could still be working my ass off, saving like crazy and getting nowhere fast. For, you see, I trusted the experts to have my best interest at heart...and that is just not their job. Their job is to make themselves rich! They do not give a flip about you or me...we are just here to provide the money for their enjoyment. If we happen to make a profit, it is just luck. For, if we fail to make a profit, what can we do except fire our experts? There is always another sucker out here for the expert to fleece. The suckers think they need him because the novices are honest enough to know how little they know. The expert is smart enough to make the sucker think he actually knows something...but he does not. He is just like you and me. He sells what he is told to sell. He is no expert...he just tries to act like he is one.

The investor has go to take back control...otherwise this whole thing is out of control. It bothers me to see how few people actually understand any of this. The only real control is for the investor to know what he owns and why he owns it. He cannot trust anyone else to care. If any company you own starts to make moves in ways that you do not like...sell. It is your company...get rid of it! If the management will not act for your benefit and their story makes no sense to you...get out. Do not be a sucker. Make your own decisions. If they prove to be wrong, learn from the experience. Soon, you will know exactly what to look for in your businesses and beating the market will be easy for you. Great businesses almost always beat the market. It is inevitable because the market is made up of many businesses...some bad, some average and some very great ones who understand what I am saying right here. Indices average all of these businesses. Smart Investors own the great ones! That makes beating the averages a no-brainer.

Remember, everyone has an ulterior motive...except you. You have no ax to grind but your own. That is what gives you an advantage over everyone else. Most everyone else wants something for nothing...they want someone else to do their work for them. That is just not the way it works in America. You must pay for your lack of work in this country. Once you give up control, you are going to be fleeced...one way or another. The sooner we all admit this fact, the better off we will all be in the future.

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Author: Aida2003 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37387 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 6:18 PM
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Wow, I am amazed by the number of responses to my posting. Thank you, Fools for your opinions and advise. Yes, we have already decided not to have an advisor or as you say, learn and educate ourselves. Actually, that's what I've been doing for the last 2 months. It's quite interesting though sometimes it can be confusing.

To TTRoberts: you might be right that my DH and I are not the people who should consider UL or VUL insurance. Yesterday, I read about the UL and VUL in the Consumer Reports Money Book. It seems we're way too conservative to buy VULinsurance, because I do not have high-tolerance to the risk. Therefore if I consider anything, that would be only UL or/and Term. I don't think I would have enough time to follow performance of investments in the VUL and then see them tumbling down when next recession hits America. UL offers 4% guaranteed at least.

To Dr.nonlinear: Could you, please, advise how I could create a spreadsheet to see the differences between VUL and Term? Or maybe you know any web-site which could enlighten me how to perform such calculations. What variables are involved in the calculations?

Actually, I'm curious to run my own calculations how much I will need in my retirement instead of paying $750+ to someone else. Once I started a spreadsheet but at that time I have a vague idea what variables are involved in the calculations, but now I'm getting a little grip thanks to you, Fools.

Thanks to everyone, Aida

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37388 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 6:31 PM
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...a good Financial Advisor would still probably be worth the extra charge over a discount brokerage.

Assuming you even felt the need for one, where and how do you find one you can trust?

Now THAT is the problem!

Vermonter

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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37389 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 7:00 PM
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BuildMWell

Excellent post and response!

What follows is not an attempt to be argumentative, but rather, an attempt to foster a discussion of what does constitute a good Financial Advisor and then perhaps generate some ideas on how to find such an individual.

"A good Financial Advisor is like any other good investment, difficult to find but worth the effort. Superior Financial Advisors are just as rare as superior investments." - PosFCF

While I cannot argue with this conclusion, I find the premise severely flawed. How can one find that rare "good financial advisor" without losing many dollars in the search? Since good ones are rare, in your own words, isn't it expensive to sort through all of the bad ones?


I think I would counter here that one doesn't have to buy every stock and lose all that money to discover what constitutes a good (or better) investment. Along that vein, perhaps one doesn't have to kiss all the frogs to find their Prince in the brokerage community.

In my investing career, which began almost 40 years ago, I have worked with at least 25 financial advisors at at least 12 different investment firms. These firms are represented by lots of great and notable big names such as Smith-Barney, Merrill-Lynch, Bear-Stearns, Edward-Jones, A.G. Edwards, Prudential, Raymond James, and Payne Webber. I worked with some local small firms too. I cannot begin to count the money I lost listening to these idiots.

I too, happen to believe that it isn't the name of the firm as much as it is the quality of the person behind the desk that matters most.

Ignorant investors cannot give up their control fast enough. They know how little they really know so they are anxious to leave the decisions to others. That is where the bad experiences begin. For, in the end, after you have been fleeced, you have no one to blame but yourself. For, in the final review, it is your money on which you are giving up control. Who do you honestly think cares as much about your money as you do?

That is too true!

Too bad I can only rec your post once!

So tell me, if you could construct your ideal Financial Advisor, what qualities would you absolutely insist just had to be there in that individual? (It's OK to look in the mirror to help answer that question). Or perhaps if one catalogs what went wrong with all those other brokers, some patterns might also emerge for what to avoid.

PosFCF



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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37390 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 7:32 PM
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My Financial Advisor Attributes would include:

1. (s)he is a CFP and CPA.
2. has at least 10 years of experience.
3. never, ever takes a commission for products purchased.
4. segments his services: pure financial planning; tax solutions; investment advice; each of which is purchased separately.
5. never ever recommends bundled life inurance / investment products.
6. never ever recommends load mutual funds.
7. prefer he never recommend any mutual fund except to invest in specific market segments that are difficult / impossible to get to without use of a mutual fund.
8. has good fundamental and multiple resources for developing a stable of 100 to 150 stocks that are good beginning cannon fodder for selection.
9. has good access to debt markets.
10. is aperson I can like, trust & respect.

Sorry to say that I have yet to meet this person, so I just continue struggling along doing it myself.

TheBadger


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Author: ImAGolfer Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37391 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 8:10 PM
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Just reading this thread, it would appear that the consensus of the board is that: A). No Financial Advisor is worth the money they charge and B). No Financial Advisor has enough ethics to recommend what's best for their clients regardless of the commission involved.

I don't happen to agree with that consensus. A good Financial Advisor is like any other good investment, difficult to find but worth the effort. Superior Financial Advisors are just as rare as superior investments.

While a lot of posters here appear to be able to make their own good investment decisions, a good Financial Advisor would still probably be worth the extra charge over a discount brokerage.

Just my 2 cents.

PosFCF

Hey PosFCF. I tend to agree with your observations about Financial Advisors. I like investing but I can't see myself doing this sort of thing when I'm in my 70's and 80's. I would much rather someone else take care of the day to day running of my account. I realize that I have the ultimate responsibility and will monitor the account accordingly. Just my $.02.

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37392 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 8:28 PM
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Thank you for recommending this post to our Best of feature.

BuildMWell, You get my rec for an interesting, and well written post even though I don't necessarily agree with all of your points. I am more of a mutual fund and especially index fund guy.
Your experience with 25 advisors over a number of years was especially telling. Although you indicated that most did not beat the indexes and many didn't make you money you can be assured that the advisors made enough to make up for it. I'm sure you helped finance many advisor vacations and educations for their children.

Bob

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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37394 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/4/2003 11:58 PM
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TheBadger

Given all the attributes you would have to have from your Financial Advisor, I think it might be a better starting point to define what services you want from that Advisor.

CPA, CFP, Stock Broker, Insurance Licensed, that's a lot under one shingle for one person to carry. Then add "no commission" and "You can advise but don't advise this, and don't advise that, and don't advise the other thing (bundled insurance, load funds, anything with a commission, etc.)

I'm not surprised you haven't found your ideal candidate yet. I suspect there are not a lot of people out there that fit that bill. The ones that are, that are any good and have been in the business 10 years probably are either not accepting new clients or insisting on high net worth only at this stage.

Merrill Lynch insisted all their brokers become CFPs and work in teams that provided all those services, yet I can't say I'm overly impressed with their performance as a group.

I don't know, for me, I don't really care if my Financial advisor is a CPA, if I need a CPA (which, so far, I haven't), I'll go find one. I also don't really care if my Advisor is or is not a CFP (or a Financial Planner at all), I think I can pretty well figure out that if I live within my means and save regularly, things will turn out OK over time. And, although it would seem that longevity in the field would mean something, I'm not so sure it really does. I've seen some folks who have been in the business 15 or more years that didn't have a clue about how to evaluate a company.

What I want from a Financial Advisor is Investment advice. And darn good advice at that! I think I'd like to pick his/her brains for what they think about this or that company or this or that fund, and see what they say. (I will want to ask about a company that I have done my homework on and that I am very clear about.) If he asks me for time to do his research, that's fine, it took me time to do mine.

When I mention "cash flow" do they know what it is? How to derive it? How to determine if its selling at apremium or a discount? What does the concept of "a margin of safety" mean to them? Do they have a viewpoint of the economy, if so, what is it? What are their own top 5 or 10 holdings, when and why did they buy, when and why will they sell? What portion of their business is annuities? (this will indicate whether I am talking to a Financial Advisor or an Insurance Salesman). In other words, what I'm trying to get a handle on, is 1). How much does he know (and all the degrees, and letters after the name and number of years in the business are no subsitute for this answer); 2). How in touch does he seem to be with my viewpoint on investing and the economy; 3). How soon (if ever) is he going to try to talk me into an annuity?

I really don't care that much about the commission. Either he's going to make it or someone else will. So, if he's doing a good job for me, I'd rather it be him. Of course, if I'm going to be doing some volume, I'll expect to negotiate a discount and I'll only want to negotiate once. I don't want to feel like I have to beg for the discount on every trade, let's just settle on a routine number and apply it by default.

I want to have quarterly performance reviews. I calculate earnings very simply: Net proceeds minus total cost = gain; Gain plus dividends paid = total gain; Total Gain divided by total cost = yield. Let's keep it simple, after all fees and commissions were paid, what did I make?

I guess I just want my Financial Advisor to be the professional they're supposed to be. I have to have benchmarks by which to evaluate the likelihood of that which is why the questions I ask, and then it is my responsibility to evaluate performance regularly to see what's what.

PosFCF

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37395 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/5/2003 12:04 AM
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ImAGolfer writes,

Hey PosFCF. I tend to agree with your observations about Financial Advisors. I like investing but I can't see myself doing this sort of thing when I'm in my 70's and 80's. I would much rather someone else take care of the day to day running of my account. I realize that I have the ultimate responsibility and will monitor the account accordingly. Just my $.02.

I'm a long way from age 70 or 80, but if I get to the point where I can't muster the 2 or 3 hours per month I spend managing my retirement portfolio, I'll just sell everything and put it in the Vanguard Balanced Index Fund (a fund that maintains a mix of 60% S&P500, 40% bonds.)

The odds are that that will outperform anything an advisor can do for me.

intercst

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Author: ObliqueApproach Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37406 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/6/2003 4:52 PM
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A few small comments:

When you buy a fund, you give up your stock voting rights to the fund manager. Fund managers almost always vote with the company management.

Most individual shareholders (99%?) don't own enough shares to make any difference in proxy voting. Not sure where you going with this.

The individual investor has given up control to the "experts" who have no real interest in the individual. If they do not like what a company is doing, they do not blow the whistle on the business, they just sell it.

What would you have them do? Engage in proxy battles? And who will pay for that?

I follow the businesses I own and I vote my shares as I see fit for my advantage. That is how it is supposed to work. The stockholders own the business...not the management.

Unless you are VERY rich or investing in pennies, your vote - in isolation - will not make any difference in the management of the company. I'm not sure why having your own voting rights makes one a better investor. Explain?

At first, I bought some index funds to use as my tell tale. Each year I compared my results to the fund's results. The first year I failed to beat the indices. However, I still had lots of the losers the experts had talked me into. I was slowly learning though. The second year I beat the index funds by a small percentage. Since then it has been no contest. Beating the idex funds is a no brainer once you find out what is going on.

Great job! Just curious, are computing returns on a time or dollar weighted basis? And how do you handle index comparisons when there is fluctuating capital in your portfolio?

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Author: ObliqueApproach Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37407 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/6/2003 5:38 PM
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Then I thought to myself that performance of load mutual funds does not differ much from the no-load mutual funds, so at least I would save on expenses if I go with Vanguard. Am I right? The advisor said that load mutual funds have 4-5% expense ratio.

The advisor probably said that the front end load, his commission, is 4-5%. That's the amount that you pay for his advice in selecting the portfolio. This differs from the annual expense ratio of the fund itself, which is the recurring part of the arrangement (assuming, of course, he doesn't sell you a back end loaded fund, and this can get very complicated very fast). If you can pick the funds yourself from Vanguard or Fidelity then yes -there is no need to use someone like him. He admitted that.


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Author: Aida2003 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37408 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/6/2003 7:56 PM
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I have some more questions. I've been reading about a few mutual funds (Vanguard, Dodge&Cox, and Fidelity). Beforehand, I must admit I haven't educated myself that much that I feel comfortable with buying stocks (neither is there a promise I will ever do that).

Since I'm not going to buy separate stocks, does it make sense to open a Non-retirement account in any of the mentioned funds? I intend to open a RothIRA this year and contribute $3,000 in it. But I will still have some extra money (another $3k-$5k) to invest and I would like to do that.
When people open Non-retirement accounts, do they follow the same logics as with Retirement accounts, that is look for no-load funds, buy and hold long-term, etc.?
Which makes more sense: opening an account within a fund, sell it if I don't like it and invest with another mutual fund OR open an account at Scottrade and when I don't like one mutual fund I just transfer the money to another mutual fund of a different company?

Thank you, Aida

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Author: ObliqueApproach Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37409 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/6/2003 9:00 PM
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Since I'm not going to buy separate stocks, does it make sense to open a Non-retirement account in any of the mentioned funds? I intend to open a RothIRA this year and contribute $3,000 in it. But I will still have some extra money (another $3k-$5k) to invest and I would like to do that. When people open Non-retirement accounts, do they follow the same logics as with Retirement accounts, that is look for no-load funds, buy and hold long-term, etc.? Which makes more sense: opening an account within a fund, sell it if I don't like it and invest with another mutual fund OR open an account at Scottrade and when I don't like one mutual fund I just transfer the money to another mutual fund of a different company?

An IRA is just a wrapper that transforms your investment into something that grows tax-free. Thus, if you think you would otherwise have dividends or capital gains distributions in your investment it is best to put that into an IRA instead of a regular account. Other than that, your investment should be dictated by your time horizon. If the taxable side of your portfolio is for a long term time horizon, like retirement, then you can invest it in the same way as the tax-free side if you wish.

You should be aware of fund supermarkets, which are accessible through your brokerage account. If I were interested in Fidelity funds, for example, and other funds, I would put the account with the brokerage side, not a specific fund account. Many fund companies participate free of charge (check the broker for details) in the supermarkets, though for cost reasons Vanguard doesn't participate in these places (for free at least).

However, if you plan to index but still want additional flexibility, you can also use one of the many exchange traded funds (SPY for the SP500, for example) in a brokerage account, which is just like buying a stock (and you should figure out how much the brokerage commission adds to the purchase before doing this). Alternatively, you can use Vanguard directly. Again, if you plan to index, you probably won't be doing any shifting anyway.

There is no "exact" answer here. You can do pretty much anything you please.

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Author: jesserivera67 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37411 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 12:38 AM
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I'm a fan of keeping things simple after helping my folks out...the companies you mentioned are good companies with some good no load funds from what I know of them.

$3k in the Roth IRA sounds good...I'm curious who you'll be opening it with?

The extra money you'd like to invest I'm in complete agreement with the rest of the pack...there is no "right" answer. How much time do you want to invest in this? Lots, middle of the road, just enough to be in the know? How long do you intend on investing the money? For what purpose?
Do you have an emergency cushion with your DH that you both are comfortable with (3-6 months...sorry if you already answered this)? Will the $3000-$5000 be an annual deposit? Have you or your DH maxed a 401(k) if available? It really depends on what your goals are.

I don't mean to make it seem complex and sorry if it seems that way. I put a similar post as yours and these are all the questions the Fools came back with. Pretty daunting eh? Don't sweat it since it's not that hard once you get cracking and the Fools are who sent me to Vanguard once I had gone through the calculations and determined what kind of investor I was...they will force you to do some homework I must admit.

I keep pretty much all my accounts at Vanguard. They have a clean website where I can consolidate and do what I need to. They have plenty of funds for me to get the diversity I need for the growth I'm looking for. (and most importantly for the right price!)

If you like investing a little more time an ETF (e.g. SPY) through Scottrade will be tough to beat I think.

I noticed you were also looking for an insurance quote and retirement tool...here are a few you may want to check out...

Insurance:
www.term4sale.com (term insurance only)
www.quickquote.com
www.instantquote.com
www.accuquote.com
www.insuremarket.com
www.selectquote.com (term only)

Retirement calculators:
www.financeware.com (you'll need to register to use the tool based on Monte Carlo. See the site for details)
www.zunna.com (if you have trouble finding the tool try http://dev211.edthosting.com/)

These retirement calculators will give you a little more detail based on historical trends instead of an average return.

btw, if you have Quicken or Microsoft Money I believe they come with one.

Best of luck to you!



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Author: Aida2003 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37412 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 11:49 AM
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Thank you for your replies. Yes, it definitely prompts me to do some thinking and analyzing since at times all this investing seems like a huge MAZE because of taxes, time horizons, economy fluctualions and so forth.

When I mentioned extra money besides RothIRA, I was referring to the money we will not need for a very long time. We determined that we have too big Efund (which is over $50k), therefore we would like to invest 3-5 thousand somewhere for a long term. I don't think I want to wait (or should I wait??) another year and see what a 401k plan I'll be offered by my employer (I do NOT have a 401k plan yet, but my DH max-outs on his). We do not qualify for IRAs except RothIRA.
I read a bit about investing into an IRA contributing after-tax money. It also sounds confusing a bit.
I also explored ETFs a bit, but since we don't consider ourselves active investors who would check brokerage account (what we do not have yet) every week. We are more like to invest for long-term and not jumping from one place to another unless there are major concerns. Isn't what long-term investors do: invest and wait at least 3-5 years and see if their chosen fund performs the way they anticipate to? If performance is positive, keep the money there, if not then explore/consider other ways/options.

Thanks for everybody's thoughts. And yes, I'm coming to realize that there is no right or wrong answer since everything hinges on a personal situaltion.

Aida

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Author: ObliqueApproach Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37413 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 12:10 PM
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We do not qualify for IRAs except RothIRA.

Fwiw, I'm not expert on this, but I don't think the qualification requirements are any different for the regular IRA or Roth IRA. You just have to have earned income. The only thing that changes with a regular IRA is whether the contribution is tax-deductible, and that depends on your income.

All money contributed to a Roth-IRA is after-tax money, in that you don't get to take a tax deduction in the year you contributed. However, like a regular IRA the money grows tax free but unlike a regular IRA with a Roth IRA all earnings can be removed tax-free when you hit 59 1/2 (original contributions can be removed at any time, though your brokerage firm or fund company may charge a fee for this). Because of this, Roth IRAs are unbelievably powerful investment vehicles and you should run, not walk, to open one up this year if you can do so. Here is more info on IRAs and RothIRAs:

http://www.ira.com/faq1.htm
http://www.rothira.com/

I also explored ETFs a bit, but since we don't consider ourselves active investors who would check brokerage account (what we do not have yet) every week. We are more like to invest for long-term and not jumping from one place to another unless there are major concerns.

I was confusing in my earlier note. The ETF I mentioned - SPY - is for all intents and purposes almost identical to the Vanguard 500 fund. Both are SP 500 index funds. Thus, if you WANT to have the flexibility of getting out of this particular index fund quickly (into stocks or other funds or for any reason), buying the SPY through a standard brokerage account might be your best bet. You could open an account at Scottrade, put the money in the account, and spend $7 for a market order to buy SPY and then never touch the account or do anything in the account for the next 5 years. This may be cheaper than buying the Vanguard 500 fund. That's the only reason I mention this.

Fwiw, I would do some serious reading if I were you. Start with "Making the Most of Your Money" by Jane Bryant Quinn and take the time to read the various Motley Fool tutorials online. You really want to get more knowledgeable before doing anything.

For disclosure, I'm one of those mean evil people that BuildMWell warned you about, though I'm like nothing he ever dealt with.


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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37417 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 3:33 PM
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"Most individual shareholders (99%?) don't own enough shares to make any difference in proxy voting. Not sure where you going with this." - ObliqueApproach

You know, I used to think the same thing. I used to tell myself my vote was useless because I only owned a few shares. But, I have come to learn that way of thinking is exactly what leaves the door open for the system to be abused. It is just the same with a political election...most voters think their vote does not matter so they stay at home. Then they bitch and moan when things do not go their way. I see my stock proxy votes precisely the same way.

If a person knows enough about the vote, he or she will care enough to cast a vote. Then, when the results are in, the informed voter knows what is going on. In a business, when the vote does not go your way, it is a sure sign that you need to take a second look and really understand what is going on. For instance, if the management has just asked you to vote them huge stock options, it is very likely time to get the Hell out! If they have cut themselves giant salary increases or benefit packages while the business is tanking, it is time to get the Hell out!

Unlike a political election where you cannot get out and have to suffer the consequences of a misguided vote, with a stock you always can have a recourse. That is unless you give that recourse up to a mutual fund or index fund manager who always votes with management. Ignorance is not bliss in investing. You have to know what is going on with your money.

On this subject I said, "The individual investor has given up control to the "experts" who have no real interest in the individual. If they do not like what a company is doing, they do not blow the whistle on the business, they just sell it."

To which ObliqueApproach replied, "What would you have them do? Engage in proxy battles? And who will pay for that?"

You're Damned right they should get involved with proxy battles! What are we paying them for anyway? Anyone can buy a bunch of stocks and take a commission for their trouble. A fund, in my opinion, has a duty to fight for the rights of their stockholders. That is unless they think that management shenanigans are just peachy! If so, they owe it to the investor in the fund to tell the buyer that they always vote with management. However, many funds hold millions of shares of a business...that voting block can make a huge difference to the management. Again, only if the shares are voted in the best interest of the stockholder. That is what a fund manager should be doing. But, they don't do that and the bad business manager knows that. The game rolls right on along!

"Just curious, are (you) computing returns on a time or dollar weighted basis? And how do you handle index comparisons when there is fluctuating capital in your portfolio?"

At the end of each calandar year, I take the closing balance in my accounts on December 31, and do a very simple comparison. I take the closing balance from the previous year for the funds and for my personal stocks and I subtract the present year's account balances from the previous year's amount and divide that number by the previous year's amount. That is how I figure my personal gain versus the index fund's gain. My gains usually run in the range of 30% to 40% while the funds either lose money or gain maybe 25% at their very best. Actually, my real gains run close to 100% per year but that is on my active investments. I always have some holdings that are just rolling along on cruise control.

What is so funny is I could teach anyone how to do what I do in about an hour. Every bit of data is available right here on the Motley Fool with under five key strokes. Plus, it is all very rational, easy to calculate and almost foolproof. It does help greatly to read the newspaper or listen to the news though. The news has way too much negative influence on the markets. That makes the making of money that much sweeter when you know what to believe and what to ignore. The most important thing I possess is a very solid belief system. I will invest large sums when I think I am right.

I can give lots of great examples in the past ten years. They appear all the time. Basically, I listen to the news and ask myself, "Does what I just heard make any sense?" If the answer is "NO!" I get real busy and see if the situation can make me some money. So far, I have yet to be disappointed.

When I receive a proxy statement, I ask myself, "Does what they are asking me to do make good sense for me as an investor?" I vote my pocketbook. If the vote goes against me, I begin to look for an exit strategy. There is going to be plenty of time because almost no one else even bothers to read their proxy statement. And, mutual funds just vote with management. That puts me anywhere from six months to a year ahead of the average investor.

Let me give you one prime example. Look at the Citicorp long-term graph:

http://quote.fool.com/Chart/chart.asp?osymb=&osymbols=C&symbols=c&currticker=C&time=all&uf=0&compidx=aaaaa%7E0&ma=0&symb=c&freq=1mo&lf=1&comp=&type=2&sid=117685

Remember when they were accused of being involved in the Enron debaccle in late 2001 and early 2002? I knew they were involved to some extent, but I also knew they were very, very smart people. Surely, they were not stupid enough to not have their backsides well covered. So, when I saw the stock going well below my desired buying price of $32/share I asked myself, "Does this make any sense?"

The answer was, "NO!" In my heart I knew Citicorp was way too smart to be caught up is some tawdry scandal like the Enron silliness. I figured out what Enron had been doing and I could see why the game worked and was also legal...there was no real exposure for Citigroup or for JP Morgan either. Both were being tossed out along with the Enron bathwater. All of the bad news overshadowed the strength of these great businesses. This made for a huge buying opportunity.

I bought way too many shares of both stocks but this example is about C. I got in at about $23 to $25 and knew that it was worth close to $50/share. Actually, it had been up to around $60 in 2000. Citigroup could easily see $55 before 2003 year-end. I will gladly take my 100% long-term gain on my shares, or I may just keep on holding it. After all, my analysis shows me that Citigroup has grown at about 16-17% per year since 1982 plus they pay a decent dividend. I can live with that until another great deal comes along...and it will. They always come along because the media loves bad news. I just bet on that simple fact. Meanwile, 17% per year will beat most funds!

So, while Citigroup will double my investment in 2002/2003, I still hold stocks that I bought with the same method in 1998, 1999, 2000 and 2001. These may only grow at 15%. But overall, I make my easy 30 to 40% total return...year after year. It really is not that hard to do. All you do is listen to the news and do the right thing.

I have lots more examples if anyone is interested. But, what we need to look at is in the future. My past success is worthless today. We need the next great investment for 2003 and 2004. I am still looking and listening for two or three new opportunities for next year. So far, I have found no way to make money off of Arnold's groping yet. However, this year I have made a 50% return on Gray Davis' lying about Duke Power's involvement in his energy debaccle plus I get a 9% dividend for as long as the dividend holds.

I was waiting for a buying opportunity for DUK below $25/share and a few weeks of bad press got me thousands of shares at half my "want" price. Duke could easily be at $35/share this time next year. I do not understand the market...maybe that is why it rewards me so nicely. I do not try to understand it. I just use it to my advantage. When the market acts stupidly, I recognize the stupidity and act rationally. Plus, I never believe what I hear on the news...the news is biassed as are most of the people who make the news. Most folks do not understand this fact. Mosy folks never ask themselves, "Does this make any sense?"





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Author: ObliqueApproach Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37419 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 3:54 PM
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Well, I guess if that 100% return on your active investments continues along, going in tandem with the 40% annual returns, you certainly don't need feedback from anyone else...

take care, and good investing.

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37421 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 4:31 PM
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"Well, I guess if that 100% return on your active investments continues along, going in tandem with the 40% annual returns, you certainly don't need feedback from anyone else..." - ObliqueApproach

That's what I tell the three to four financial consultants who call me every week. I never ask anyone for help any longer. I learned this is the surest way to lose your money. The ones whom you ask for help, help themselves first...that is just human nature. You know, that old survival of the fittest thing.

Plus, once you get a second person involved, that gives you a scapegoat. Now, you have someone to blame for your failures. Some folks like to pass the buck. I have come to realize that the buck cannot be passed. Not my bucks anyway. I will pay one way or the other. I prefer to pay myself for my great financial advice. I am worth it!

By the way, I did not say I made 100% plus the 40%! I said I made 30% to 40% overall. My yearly or bi-yearly investments into news related stock "busts" brought my average up to the 30 to 40%. My "average" stock grows at maybe 13% to 15% per year. Let's say I put 30% of my portfolio into three things that can easily double in a year like I explained earlier. The other 70% grows on average at 11% and pays a 3% dividend. The "net" beats 30% consistently...the math proves it.

Of course, this has become a full time job for me. I really wish the Motley Fool would have regional meetings where some of us could share our knowledge with others in person. My methods are not easily put into words nor can I draw my graphs on the computer. I do all this by hand because it is far easier that way. However, if you saw what I do, it would be easy for you or anyone else to do the exact same thing in a matter of minutes per stock. Once the work is done, the rest is just up to the market and the news to cooperate...and they always do.



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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37422 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 4:53 PM
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Ok, I'll bite. Give us you top 5 stock picks right now.

TheBadger


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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37424 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 7:10 PM
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ObliqueApproach

Fwiw, I'm not expert on this, but I don't think the qualification requirements are any different for the regular IRA or Roth IRA. You just have to have earned income.

I think if you compare the AGI limits for "phasing out" the allowable contribution amounts you may find a big difference in who can qualify. The Roth has much higher income limits.

PosFCF

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37429 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/7/2003 8:41 PM
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"Ok, I'll bite. Give us you top 5 stock picks right now." - TheBadger

I assume you are asking me. I have no picks right now. I said that in one of my posts. I am looking though.

My last four purchases were C, JPM, HAL and DUK. C has doubled as has JPM...the two charts look almost identical since late 2001. HAL, of course was hit because Dick Cheney was the past CEO plus the media decided to recycle the old asbestos news that has been out for twenty years. I bought it at under $10...today it is at about $25 and going higher. HAL is a great business that I have followed for many years. I wanted to buy it if it dropped below $25...I couldn't believe it was on sale at $15 and again at $11. I bought way too much at $9.

DUK dropped below $13 in March while I was in the Bahamas. Luckily, I had access to a computer and was able to buy a load of shares at $12.85. I had previously been buying at $16 and at $14. My goal was to buy DUK below $25. I still cannot believe my good fortune in finding someone willing to sell it at under $13/share.

Right now the "bad news" press is concentarated on mutial funds, Arnold and Gray Davis. Not much to hurt any stocks in those news items. But, give the media some time...there is an election coming up in less than 13 months! They will be talking down the economy big time from now until the election.

Back in early 2000 my picks were Philip Morris (MO), RJR, AXA and NGH. NGH was Nabisco which was bought by MO from RJR. The President was looking for some cover due to the Monica debaccle so he tried to attack tobacco thinking that he could divert attention to something people disliked more than his labido. MO and RJR were both flying high in late 1999 but were down 60% by February 2000 because of the bad news. I knew in my heart that people smoke because they want to...no one makes anyone smoke. Heck, I quit myself years ago. Thus, I bought way more MO and RJR than I should have. MO went from $19 to $55 and RJR went from $17 to $70! NGH which was beaten down from over $25 to under $8 because of the liability the market foresaw from the President's attack returned to $30 when MO bought the shares for $36 from RJR. RJR ended up with $2 billion in cash or about $19 per share. Remember, I bought it at $17.

That is the type of foolishness I was talking about. The market will destroy a great stock for no good reason. Just a little research into the real situation allows one to buy the right stocks at bargain basement prices. But, great companies come roaring right back. They always do. Take AZA for example. Alza was a relatively small pharmaceutical business that had a stream of great products but no ability to market them. Abbott Labs entered into a negotiation to buy AZA. The stock soared to about $40/share. However, the deal fell through and the stock plummetted to under $20. I bought lots of AZA at $18/share firmly believing that either the Abbott deal would be reactivatd or someone else would step up and buy the business. Sure enough, JNJ bought the shares at more than Abbott had offered and took the deal away from ABT. Since then the JNJ shares which were offered for my AZA stock have split 2:1 and JNJ is now at $50/share. That is a 500% gain.

You do not need but two or three of these each year. It takes study and patience. But, I can assure you that if I can do it, anyone can do it. I just listen to the news and watch what is going on. I would never have looked into AZA unless I heard something about it on CNBC and looked into the business.

Right after 9/11 I saw Hilton Hotels was selling at about $6/share. I had sold my HLT about six months earlier at $13. I knew it was a great business and worth far more than $6...today it is selling at over $16. As far as I was concerned, it was a no-brainer buying at $6/share. The market was just over-reacting to a one-time catastrophy. Surely, HLT would rebound and continue it's old growth patterns. Of course it did just like I expected it to.

Anyway, I am sorry I have no hot picks today...I will let yopu know when I spot one. In the meantime, just watch the news. There will be opportunities galore!

I could go on and on...there are too many to list. But, the

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Author: WileyCyote One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37449 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/9/2003 6:59 PM
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Good post.

I too was one of those poor souls who ACTUALLY trusted brokers, analysts etc because they were the "experts". These people really knew the market, international monatary policy, currencies and all those wonderfull things that I just did not have the time to become familiar with. Yessir if I just let them "do their thing" then life would be in good shape.

Then one day a few years ago I read "Paper Money" by Adam Smith (not THE Adam Smith, but the penname of George whatchamacallit)and a light began to come on. I followed that up with some writings of von Mises and Hayak and started to actually do some homework i.e. track predictions, look at what money REALLY is. What a shock to the nervous system.

Along the way I found an AMAZING thing! YOU CAN'T TRUST THE %$$#@&*(&^%$&*'s. Big houses, little houses, analysts, many goofy financial publications etc.

HOMEWORK! lots of HOMEWORK! Now I had to learn how to actually read and understand financial statements, proxys, 10k's ------- etc. Having accepted that as a fact of life, whether I like it or not, I try to do these things to the best of my ability. I still have some failures, but I didn't get killed off in the recent Market of Oz.

One hard cold fact I have come to realize in my adult life is that my wonderfull school system NEVER TAUGHT ME (OR MY CLASSMATES) ANYTHING ABOUT MONEY AND ITS MECHANICS! I had to learn that out in the real world. And I am still a student of EVERYTHING in the marketplace.

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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37452 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/9/2003 7:32 PM
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WileyCoyote

One hard cold fact I have come to realize in my adult life is that my wonderfull school system NEVER TAUGHT ME (OR MY CLASSMATES) ANYTHING ABOUT MONEY AND ITS MECHANICS! I had to learn that out in the real world. And I am still a student of EVERYTHING in the marketplace.

Amazing isn't it? We live in the most capitalistic country on earth and most of us don't get even one minutes education in what that means. Not about money, nor finances, nor credit, nor asset accumulation nor financial planning nor any of it. Yet here we are on top of the world. Imagine what we could accomplish if we started out with good fundamentals!

PosFCF

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37455 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/9/2003 9:05 PM
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PosFCF writes,

<<WileyCoyote

One hard cold fact I have come to realize in my adult life is that my wonderfull school system NEVER TAUGHT ME (OR MY CLASSMATES) ANYTHING ABOUT MONEY AND ITS MECHANICS! I had to learn that out in the real world. And I am still a student of EVERYTHING in the marketplace. >>

Amazing isn't it? We live in the most capitalistic country on earth and most of us don't get even one minutes education in what that means. Not about money, nor finances, nor credit, nor asset accumulation nor financial planning nor any of it. Yet here we are on top of the world. Imagine what we could accomplish if we started out with good fundamentals!


I'd argue that the economy would be far less robust if every American was financially savvy and avoided excessive debt and mindless consumerism.

What would the big banks, insurance companies and Wall Street firms look like if every investor knew enough to reject high-commission mutual funds in favor of low-fee index funds and reject whole life insurance in favor of term?

Who would buy all the crap at Best Buy and Nordstrom's without a credit card?

How many people would buy a big, Detroit-made SUV without 0% financing?

Financially illiterate people make the world go round. <grin>

intercst


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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37456 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/9/2003 10:23 PM
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intercst

Financially illiterate people make the world go round. <grin>

Ah well, it was fun for a moment to fantasize about a country the size of the US with the financial strength and stability and acumen of a Switzerland. (not that I'm an expert on the Swiss)

PosFCF

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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37457 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/9/2003 11:26 PM
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PosFCF, you wrote:

<< Amazing isn't it? We live in the most capitalistic country on earth and most of us don't get even one minutes education in what that means. Not about money, nor finances, nor credit, nor asset accumulation nor financial planning nor any of it. Yet here we are on top of the world. Imagine what we could accomplish if we started out with good fundamentals! >>

AMEN!

I really mean that.



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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37458 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 10/9/2003 11:29 PM
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intercst, you wrote:

<< I'd argue that the economy would be far less robust if every American was financially savvy and avoided excessive debt and mindless consumerism.

What would the big banks, insurance companies and Wall Street firms look like if every investor knew enough to reject high-commission mutual funds in favor of low-fee index funds and reject whole life insurance in favor of term?

Who would buy all the crap at Best Buy and Nordstrom's without a credit card?

How many people would buy a big, Detroit-made SUV without 0% financing?

Financially illiterate people make the world go round. <grin>
>>

I don't have any idea what our world would be like in such a condition. But I'm sure it would be very different!



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Author: Aberlaine Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39214 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 2/13/2004 4:57 PM
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Hi Badger,
I'd just like to clear up a statement you made. About a financial planner just taking an exam and, presto, they're a CFP. I'm taking a class to become a CFP. It consists of six classes: investing, insurance, taxes, estate planning, budgeting and financial reports, and retirement planning. I'm taking the course online through Boston University. It takes eighteen months to complete. Not many people pass the exam, but those who do are then "certified". They follow strict principles, one of which is practicing honestly and ethically.

I realize that lots of financial planners these days are in it for the money. But who of the "ruling" generation isn't. The "Me" generation will be retiring soon and you'll be seeing a whole new group of financial advisors out there who will put your interests first.

Contact me in two years. I'll be a CFP who will give you good advice, not because I want to get rich off you, but because I want you to experience as good a retirement as I currently do.

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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39215 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 2/13/2004 5:12 PM
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Aberlaine...

I don't doubt your sincerity, however, I do take exception to a couple of your statements.

I realize that lots of financial planners these days are in it for the money. But who of the "ruling" generation isn't. The "Me" generation will be retiring soon and you'll be seeing a whole new group of financial advisors out there who will put your interests first.

If you are not "in it for the money" then maybe you can donate your skills to those who need it most. Also, in my opinion, the current retiring "Me" generation will be closely followed by the next "Me" generation.

I wish you well...really!

Regards,
Bill


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Author: Aberlaine Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39324 of 74759
Subject: Re: After meeting with a Financial Advisor Date: 2/20/2004 10:26 PM
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Hey Bill,
Guess I'm just too old for this world. I don't like people who are in it only for themselves. I wasn't brought up that way. I have the old fashioned work ethic which isn't valued these days. I quit my job because I was reprimanded for it. Of course, employers haven't been real honest with their employees either. If they won't look out for their employees, I guess the employees have to. Such a shame.

I'm already "doing it for free". I've organized a group of employees I used to work with into an investment "group". I periodically send them information on diversification, asset allocation, budgeting, etc. I've also helped someone online (never met the woman) who had a tough financial decision to make.

If I feel an individual will appreciate the information I provide, I'll do it for free. I believe that big business has pulled a fast one on current employees by going with 401(k) plans. Now they're left with an account that they haven't a clue how to manage. I'm one of the few lucky ones - I retired with a defined benefit pension benefit. I've spent the past four years learning about investing for retirement. I'm willing to share that knowledge if someone needs it.

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