CFP Board eNewsletter
March 2007
|
|
|
CFP Board eNewsletter |
 |
| Book Some Time in Your Local Library |
I love libraries. As an author and journalist, I happily spend a lot of time there. I also regularly take my children to the library, where we do research for school projects. Our most recent expedition was to find out more about the Vikings, the 8th-century Nordic marauders not the Minnesota football team. My kids like the library because it has a computer corner outfitted with PlayStation terminals. (Sometimes, kids — and adults — need a less educational incentive to get them through the doors.) But the library is also a great resource for learning more about personal finance and financial planning. Just ask Roslyn Donald, business librarian at the San Mateo Public Library. Donald is creating a “financial planning in a box” package of workshops, resource lists and marketing materials that can be adapted and used by public libraries anywhere in the U.S. The workshops will cover topics such as planning for college, the financial consequences of bereavement and divorce, the basics of IRAs, and how to prepare for a first-time home purchase. The library also has a broad range of business and economics books as well as online financial databases. Users can even access the collection from home through their computers. The impact of the San Mateo library’s financial planning resources can be dramatic. Donald tells the story of one elderly woman who called the library and asked, “What’s an annuity?” [An annuity is a type of insurance policy or investment that provides a regular annual income.] “This woman’s husband had recently passed away,” Donald recalls, “and she had to take over the finances, something she had never done before. A salesperson was pressuring her into buying an annuity over the phone, saying she had to act now or she would lose lots of money. I suggested she tell the salesperson to go jump in a lake and then explained to her how the library could help her learn about annuities.” Rick Bloom likes libraries, too, and uses them to teach patrons about the basics of financial planning. Bloom, a financial advisor who also hosts his own radio show about personal finance, has been giving talks in libraries in the Detroit metropolitan area for years. “Most people are intimidated by topics like financial planning and investment,” he says. “We’re never taught investment in school and so we grow up not knowing much about it. A library is a comfortable, relaxed setting in which to learn.” Bloom keeps his talks simple. He addresses topics like retirement and saving for college, using lots of analogies from daily life. “Are shorts a good thing to pack when you’re going on vacation?” is a question he regularly asks his audiences. The answer, of course, is: It depends on where you’re going. “The same is true of investments,” Bloom says. “Before you can answer questions about which investment is right for you, you need to know where you’re going with your money. You don’t need to be an expert on everything, but you do need an overall game plan. Otherwise, you won’t be successful.” Ed Gjertsen, a CERTIFIED FINANCIAL PLANNER™ professional and vice-president of Mack Investment Securities, Inc., has been doing talks at the Glenview, IL Public Library for the past three years. The events, which started as an outreach initiative of the Financial Planning Association (Gjertsen is president of the local FPA chapter), also include a free one-hour financial planning session. Gjertsen covers topics like estate planning and investments and then talks to participants one-on-one to answer their questions. “Most people who attend the talks just want to make sure they’re OK financially,” Gjertsen says. “They want to go through the numbers and know that they’re on track for retirement, that their expectations are realistic.” When Gjertsen asks participants why they come, many reply that the library is a safe environment in which to discuss their finances; they don’t feel like someone is trying to sell them something. “Transparency is essential,” says Gjertsen. “People need to be assured that these are educational talks, not selling opportunities.” The New York Public Library’s Science, Industry and Business Library (SIBL) has become a hub of personal financial information. Patrons have access to comprehensive electronic and print resources in the fields of business, economics, and financial planning. The SIBL has an active talks program as well. This month, for example, events include “Learn to Read and Understand Financial Statements” and “Wills Unplugged — Why They Are for Everyone — The Simple to the Complex.” The SIBL also focuses on people who already own or want to start a small business. Through the Service Corps of Retired Executives (SCORE) program, former CEOs, managers, and other business leaders provide free, one-on-one counseling to entrepreneurs on all aspects of beginning and growing a business. “Your library card is the most important card in your wallet,” says the San Mateo Public Library’s Donald. “A library is a community gathering place, a center for adult education. Librarians can organize information and provide unbiased recommendations. Once people get through the doors, they are universally floored by what’s on offer.” If your library does not offer financial planning talks, ask the librarian to contact a local CERTIFIED FINANCIAL PLANNER™ professional or the nearest FPA chapter. Then invest some time looking through the library’s collection. When you’re done, treat yourself to some time on the PlayStation. |
 |
| Everything You Always Wanted to Know about Women, Money, Divorce and Retirement but Were Afraid to Ask |
|
When Jean Lown, a professor in the Family, Consumer, and Human Department at Utah State University, started Financial Planning for Women about ten years ago, she was often asked why she decided to specifically address women’s personal finance issues. Why not just run uni-sex workshops? Lown can cite a lot of reasons. For starters, women typically earn less than men and tend to invest more conservatively. They often interrupt their careers — and therefore their earning potential — to raise children and are less likely to take part in employer-sponsored retirement plans. They live longer on average than men and have a greater chance of falling into poverty in old age. Plus, even today, too many married women leave the finances to their husbands; when their husbands die, these women find themselves unprepared to make crucial decisions. “Women are more likely to be on their own at some time in their lives,” Lown says. “They are financially more vulnerable. They need to know and understand more.” Divorce and retirement, in particular, are two issues about which women need to know and understand a lot more. Dealing with Divorce That fall can be dramatic. That’s why Ginita Wall’s advice to female clients is: Be prepared. “Always keep your career options open,” says Wall, a CERTIFIED FINANCIAL PLANNER™ professional and co-founder of the Women’s Institute for Financial Education (WIFE). “Maintain your working skills, or develop them if you don’t have them. Educate yourself about investment and personal finance. You don’t get married expecting to get divorced. But you don’t get on the freeway expecting to get in an accident either, yet you still wear a seatbelt.” Wall counsels clients to put their financial safety first even before they tie the knot. “Talk about financial issues with your spouse before he becomes your spouse,” she says. “Discuss what each of you assumes the financial obligations will be, what happens if you have kids.” Wall suggests prenuptial agreements can be effective at avoiding trouble later, especially if there are specific assets to protect. As the circumstances of a marriage change — a business is sold, debt is taken on, a second home is acquired — these agreements should change as well. If divorce does happen, Wall urges clients to stay calm and don’t rush through the process: “It sounds crazy to tell someone not to get personally involved in their own life, but emotions run high and can lead women to make decisions that are financially unwise. Sit down, go over the finances and try to look 20 years into the future to see where you will need to be. Women should take at least as long to plan their divorces as they did to plan their weddings.” Important steps in that planning process include gathering financial documents (Wall even suggests women should look through the trash if necessary to see what a soon-to-be ex-spouse may have left behind) and recalibrating priorities based on what is likely to be a significantly reduced income. And tie up loose ends: women should change their wills; name new beneficiaries for insurance policies and annuities; create trusts for minor children. These things are much tougher to deal with ten years down the road. Finally, they need to make pension arrangements. “Women often have ten or 20 years after a divorce to plan for retirement, and you can build a pretty good pension in that time,” says Wall. Reckoning with Retirement “Longevity and care-giving are the biggest issues,” says Cindy Hounsell, president of the Women’s Institute for a Secure Retirement (WISER). “Women live longer than men but they also work fewer years and earn less. Women remain the primary caregivers, and they interrupt their working lives to provide care. As a result, they must plan for a longer retirement but they start off with less income.” Many women may plan to work longer, perhaps even beyond retirement age, in order to fill the pension gap. That’s a fine strategy — unless your health or marriage fails or a loved one or family member requires care. A WISER report cites a study of 51- to 61-year-olds that found more than three quarters of the people surveyed in this age group experience divorce, job loss, health problems, widowhood, or the onset of frailty among parents or in-laws. Crises like these are trying during the best of times. But if they occur before retirement preparations are complete, the financial impact can be enormous. “A coaching process needs to occur,” says Marilyn Capelli Dimitroff, CFP®, president of Capelli Financial Services, Inc. and a member of CFP Board’s Board of Directors, “and the first step is for women to get clarity about their situations. They need to understand where they are. And if nothing changes, where does that lead?” Dimitroff counsels her female clients to take care of their own retirement needs first. “Women often make decisions that put their children’s well-being ahead their own,” she says. “I advise them not to give money to their children on demand. If a woman is bereaved and a life insurance policy pays out, that can look like a lot of money. She may think, ‘Maybe I can help out so-and-so.’ She has to realize, though, that she may need to live on that money for the next 30 years, and that securing her own financial future is a huge gift to her children.” Dimitroff says she often observes a shifting of roles in women and men as they get older. “As men age, they tend to soften up a bit emotionally, while many women become more straightforward, more gung-ho about a career, charity work or doing something for themselves, like learning the piano. Retirement should not be a winding down of the good times, but a time for women to discover the possibilities of what they can do.” Sound retirement planning is the oil that will keep the good times rolling. Online Resources Focusing on Women and Money MsMoney.com National Program on Women & Aging Social Security Administration Wider Opportunities for Women (WOW) The Women’s Institute for a Secure Retirement (WISER) Wi$e Up Women’s Institute for Financial Education (WIFE)
|
|
| Survey: Do You Have an Emergency Fund? |
Specific financial goals are an important part of getting control of your finances. But it’s also important to be financially prepared for the unknown and to set aside savings to get you through that unexpected emergency, whether it be the sudden loss of your job or an unexpected major car repair. Let us know the status of your emergency fund.
|
|
| Financial Alerts |
The Federal Trade Commission (FTC) recently issued a consumer alert warning against home equity loan scams, and North American Securities Administrators Association (NASAA) and the U.S. Securities and Trade Commission (SEC) each recently issued consumer alerts highlighting fraudulent investment schemes. FTC cautions all homeowners — especially elderly and low-income individuals and those with credit problems — against borrowing from untrustworthy lenders. Several deceptive practices used by some lenders could cause you to lose your home as well as the equity you’ve already built up. Learn about the different traps some lenders set for home equity borrowers and read tips to help you avoid these situations at: NASAA warns investors against investments advertised as “IRA Approved” and promoted as being endorsed by the IRS. The IRS does not sanction retirement investments, and there is no such thing as an “IRA Approved” retirement investment. Learn more about these schemes and how to protect yourself against them at: www.nasaa.org/Investor_Education/Investor_Alerts___Tips/1691.cfm SEC cautions investors about promissory notes marketed to the general public. While it’s common for companies to raise money by issuing promissory notes to investors willing to loan the company money, those marketed largely to the general public often turn out to be a scam. Learn more about promissory note fraud, how to avoid it and what to do if you think you’ve been a victim of this type of scam at: Read more about these and other financial alerts.
|
|
| Focus on Ethics |
CFP Board’s Code of Ethics and Professional Responsibility includes seven basic Principles that define the type of service you should expect when dealing with a financial planner who holds CFP® certification:
These seven Principles form the basis of the ethical ideals CFP® professionals are expected to exemplify through their professional activities. Certain obligations related to those Principles — such as the duty to demonstrate fairness in disclosing compensation methods and conflicts of interest or the duty to provide only those services one is competent to provide — accompany the Principles in a more detailed set of Rules. CFP Board recently released a proposal to change the way those Rules are organized and stated. Among the goals for the proposed changes is the desire to state CFP Board’s ethical standards in a way that financial planning clients will understand clearly. The proposal also strengthens some key standards. For example, the current rules require that CFP® professionals use “reasonable and prudent professional judgment” on behalf of the client. The proposed change will require a CFP® professional to “at all times place the interest of the client ahead of his or her own.” Additionally, the rules currently require CFP® professionals to act “in the interest of the client” when providing financial planning services to a client, and the proposed changes will raise that standard to a “fiduciary” duty of care, which is partly defined as acting “in the best interest of the client.” CFP Board is accepting comments on the proposed changes, and we encourage anyone who has used or thought about using the services of a CFP® professional to take a look at the proposals and provide feedback. The proposed changes, along with side-by-side comparisons of CFP Board’s current and proposed rules and a brief online survey, are available for review and comment through April 25, 2007 at: www.CFP.net/aboutus/Exposure_Draft.asp
|
|
| Doing Your Homework – Checking a Financial Planner’s Background |
|
 |
|
