The Root of All Evil

That's what the Bible says about the love of money. Oh, money is nice but obsessive concern over it is a form of mental illness that claims many victims each year. The culprits in these instances are, for the most part, financial advisors. These are the people that offer advice on where to put your money so that it will grow. The most popular investment vehicles are 401(k) plans, IRAs, and Roth IRAs. In a word, these are pension plans and as recent history has shown plans of kind have been poorly managed, as has the rest of the economy. The employees of Enron were invested in the company and held stock as well as 401(k) plans; where are they now? What did they have left when the company went bust?

Nothing!

Pension funds have been looted for decades leaving many retirement age people with little or nothing to show for their efforts. And now the scare tactics financial advisors are using to get your money is fear over not having enough to retire on.
Here's a typical promo;

What an Independent Financial adviser Can do for You

When considering using a financial planner for your retirement financial plan, you will likely want them to look at your overall situation. However, financial planners can also help with a single issue -- though the advice should be given in the context of your overall goals, risk tolerance and needs.

Below are some of the ways people use retirement financial planners:

Integrated Planning -- Retirement Planning: With integrated financial management and planning, the financial planner will usually look at all details of your existing financial situation -- your assets, liabilities and how you currently and historically spend money and try to understand your overall goals -- both financially and personally.

The financial planner will take this information and create a detailed plan for achieving your goals of successful money management. Because so many financial concerns are inter-related and complicated (for example, making a particular investment could have beneficial or damaging tax consequences after retirement) it is essential that retirement financial planners know about all the investments and financial products you have that might affect your retirement plan.
Comment: Invite a stranger into your home, tell him all about your finances, and he will come up with a detailed plan to manage your money successfully, for which he will charge you a fee. The plan will always involve putting your money into investment schemes that will tie up your money for protracted periods of time, and which will penalize you for withdrawing these funds early, in the case of need. And you will have nothing to say about it. Your money will be managed by people who are basically interested in attaining their own goals, not yours. Just look at the record. There are more retirement age people working than ever before, and those who can't are struggling to make their fixed incomes stretch.

Budget Review: A financial adviser can help you analyze how you spend your money and make suggestions for improving your budget.
Comment: If you need someone to analyze how you spend money or how to develop a budget you are really in trouble. Learn to manage your own money, distinguish between needs and desires, and find economical ways to fill your needs; Goodwill Industries, the Salvation Army, Dollar Stores, and other thrift stores. Need new clothes? Try going around to dry cleaners and asking what they have left beyond the 30-day limit for holding items: just pay the cleaning bill and walk away with some real bargains.
Bottom Line: Manage your own money.

Tax Planning: There is no way around it -- taxes are confusing, daunting and have a big impact on your finances. A financial planner will understand the tax implications of the different kinds of financial decisions and help you optimize your tax situation -- now and in retirement.
Comment: There are over seventy million people who pay no income tax at all! In court case after court case the IRS has not been willing or able to cite any law that requires wag earners to pay taxes on their wages. So, you may be paying taxes under the fraudulent misconception that you are required to. Do you think a financial advisor will ever tell you that? If you have Capital Gains for which you are required to pay taxes, why not go directly to the IRS for information? Just make sure you document your inquiries clearly; with whom did you speak, what did he/she tell you? And get it in writing!
Bottom Line: Do your own research (the Internet is a great source) and act on your own knowledge. Tax laws are constantly changing and no one can formulate a plan that will suffice over much more that a year or two.

NOTE: It is important to understand the difference between tax planning and tax preparation. Tax planning tailors your financial situation to minimize lifetime tax liabilities. Tax preparation is preparing and filing the paperwork.
Comment:Makes sense.

Estate Planning and Retirement Planning: As if planning for how to pay for the rest of your life in retirement were not tricky enough -- most retirement plans also include provisions for what you would like to leave behind. A financial planner will help you with: living trusts, wills, powers of attorney, life insurance, trusts, heirs, charity and other estate planning issues.
Comment:Estate and retirement planning are long range estimates that are usually based on overly optimistic views and cannot predict future economic conditions. It's a best guess. Consider the current financial crisis; how many financial planners saw it coming twenty or thirty years ago? Again, more senior citizens are working today than ever before and many more are just scraping by. It is impossible to make accurate long term decisions in a market where investors and money managers only look ahead to the next quarter.
Bottom Line:Start budgeting as early as possible. If in debt start paying off the highest interest loans first, set 10% aside for savings, even if it's a dollar or two. One trick that Dave Ramsey talks about is to spend bills and save change. It works!

Insurance Analysis: When most people think of insurance, they think of fire insurance that enables you to recover after such a disaster or health insurance that helps cover your medical bills.

However, insurance can also be a powerful financial tool with a multitude of benefits -- helping with asset protection and quality of life as well as providing a legacy to your heirs.

No retirement financial plan should be created without considering insurance. Of particular importance is long term care insurance, which can help protect your retirement and estate from ruin that might result from expenses associated with unexpected illness or injury.
Comment:When I think of insurance I think about AIG, the world's largest insurance company that almost went bankrupt dealing in DCSs (Debt for Credit Swaps). These were highly leveraged speculative instruments that bond holders bought to hedge against losses. The problem was that the process was not regulated, so people who didn't even own bonds bought DCS coverage. It was like this; You buy life insurance. Your health starts failing so I buy a policy on you life. As you health continues to deteriorate all your friends, family, and neighbors buy policies. When you die the insurance companies have to pay out on every policy. As long as you remain alive the insurance companies are collecting premiums from all these people; die and they have to pay the claims of all these people.
Bottom Line:Take care of your health: it's easy to stay fit than it is to get fit once you've let yourself slide. Watch your diet, exercise, and stop worrying about the future. And, most important, save money. Long term care insurance might be a good idea but nothing to be concerned with when you are still in your twenties and thirties.Build your resources; if long term care look like a possibility, that's the time to get that kind of, well ahead of any true need. The premiums will be higher as you get older but will still be far less than all the money you would be spending on LTC insurance over twenty or thirty years.

Investment Planning: Advice and Monitoring of Retirement Investments: Financial planners can monitor how your investments are doing relative to the goals that you have set. These investments can include various financial products like stocks, bonds, mutual funds held in different types of accounts (taxable, tax deferred and tax free).
Comment:This is the clincher: put your money in the hands of others to manage for you. A fool's mission, especially as you have no way of knowing if your financial advisor is recommending investment vehicles to be put to brokers and mutual fund managers he knows and is receiving kickbacks on these deals from. It's very tempting and constitutes a serious conflict of interest.
Bottom Line: If you want to invest be smart about it. There are many local companies that would welcome your capital. Visit them under disclosure agreements; meet the managers, inspect the premises, look at the books, see what they have in the pipeline for expansion. When you are satisfied that it's a good prospect, structure your own deal. Offer them funds on terms that you want; how much in debenture bonds, how much in stocks, and most important; try to locate a company that has not yet gone public but intends to within a certain time frame. Make this a part of your agreement:they must go public at the specified time or you withdraw your investment.
Bottom Line: Be the captain of your own ship.