| Archived Articles • 2008 |
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April 2008Fee-only must mean just that [Financial Post, 29Apr08] "MacKenzie says the trend has been for some firms originally grounded in true fee-only planning to drift into the more lucrative field of fee-based or what might be more accurately termed 'asset-based' compensation. 'There is a difference between what I would call pure fee-only planning where the fee is based on the time involved, and fee-only planning where the fee is based on the size of the account.' He says a conflict arises in that asset-based fee-only advisors have an incentive to recommend investments with higher growth potential."Discuss on FWF
Book helps advisers and their clients [Toronto Star, 29Apr08] "Toronto lawyer Ellen Bessner has distilled 20 years of experience defending and teaching financial advisers into a simple book... Tips in her book should make for better advisers, fewer surprises and less misunderstanding. Meanwhile, consumers who read the book will be better equipped to select the sort of adviser who acts with care and professionalism, and know better how to work with that person."
Tough questions for advisors [Strategic Imperatives, 28Apr08] "In recent conversations with financial advisors, I’ve asked them about the tougher questions they’ve gotten from prospects - here are some of the questions which advisors have been asked."
Fee-only pioneers keep time [Financial Post, 22Apr08] "Despite the similarity of terms, there is a huge difference between fee-based and fee-only. True fee-only advisors work like lawyers or accountants, charging by the hour or setting fees for defined tasks, such as wills or tax returns. They do not receive commissions on the sale of securities, investment funds or insurance products nor asset-based fees. More than 10% of the United States' 57,000 certified financial planners are fee-only, but they are relatively rare in Canada."
Fee-based accounts sound good, but they're just as open to abuse [Globe and Mail, 22Apr08] "Securities regulators are taking a close look at an increasingly popular trend where people pay for investment advice through a regular flow of fees based on the size of their account... Reputable people in the investment industry believe fee-based accounts are the most ethical way to do business because they eliminate the bias for advisers to recommend products that benefit them more than clients. But it's now obvious clients can be exploited in fee-based accounts, too. What's an investor to do? Put integrity at the top of your list of requirements when finding an adviser."
The increasing complexity - and masked risks - of wealth management [Globe and Mail, 19Apr08] "In any investment structure, the majority of the extra return, if there is any, belongs to the buyer who is taking the risk. In too many products today, this is not the case. The current generation of structured products have little or no transparency and, as a result, they mask the risks being taken and how the potential rewards are being apportioned... If you don't understand what you're getting into, don't buy it."
And It All Comes Down to This... [WSJ, 06Apr08] [If link is dead, search Archive for "clements", then select 04/06/08 article.] "How can I keep you on track in the years ahead? Here, culled from my two decades as a personal-finance writer, are eight simple suggestions.
Just think, the fees you could charge Buffett [Financial Times, 12Mar08] "Warren Buffett's emergence as the world's richest man illustrates the power of compound interest. Warren neither pays nor makes management charges... Suppose he had adopted a more conventional investment management structure, charging the 2 per cent management fee and 20 per cent of performance common in private equity and hedge funds. How much of that $62bn wealth would have been the property of Buffett the manager – Buffett Investment Management – and Buffett the investor – the Buffett Foundation? The answer is astonishing. At “2 and 20”, the split is $57bn for Buffett Investment Management and $5bn to the Buffett Foundation."
CanadianFixedIncome.ca [PFIN, Mar08] "CanadianFixedIncome.ca provides investors with the information they need to invest knowledgeably in the Canadian fixed income market. We provide access to the best offer prices and yields available through CBID - Perimeter Financial's electronic fixed income marketplace."
At its heart, investing is about risk, and stacking the odds in your favour [Globe and Mail, 08Mar08] "Investing is about taking risk. Being thoughtful about it. Prudent. And stacking the odds in your favour when you can. Risk is the fuel that drives a portfolio. It must be present to generate returns in excess of the risk-free rate, namely Government bonds... There is a wonderful piece written by François Sicart, the chairman of Tocqueville Asset Management in New York, in which he describes his unbreakable rule. He says, 'I never invest in a situation in which I cannot lose money.'"
Beware: Same price, but fewer tax returns [Toronto Star, 08Mar08] "QuickTax Standard for 2007 includes two returns for Canadians with more than $25,000 in income, compared with five returns in previous years." There is, of course, no reduction in price for this 60% reduction in number of returns. There are, however, several lower cost alternatives to QuickTax.
New tax-free account means there's planning ahead [Globe and Mail, 01Mar08] "TFSAs are an investing equalizer. No matter what you put in it, and you can invest in all the same things as you can with an RRSP, you don't pay tax on your gains. Nor is there any tax to pay when you withdraw money from a plan... investors have some planning to do in the lead-up to the introduction of this new program next year."
How well do you know your financial adviser? [Toronto Star, 25Jan08] "It's RRSP season and as we scramble to make contributions in investments that will yield us the best returns, the critical question you must ask yourself is: how well do you know your financial adviser?... Take the time you need by placing the RRSP contribution in a cash account until you have had adequate time to select a financial adviser with the credentials to provide you with investment strategies consistent with your needs. Investors must understand that anyone with as little as several hours of online instruction can refer to himself as a financial adviser."
Pension questions to ask when changing jobs [Toronto Star, 24Feb08] "Here's advice for anyone switching jobs: Find out how the new pension plan works. Ask the right questions... Barbara was in a defined benefit pension plan. She was contributing 7 per cent of her income, an amount her employer matched. She asked whether there was a defined benefit pension plan at her new workplace. No, she was told. There was a defined contribution plan... In her new job, she was shocked to find she was contributing only 2 per cent of her income and so was her employer."
How to tell if it's just a bad patch, or if it's just some bad advice [Globe and Mail, 12Feb08] "To properly gauge whether your investments are performing well, you need to compare them to the appropriate mix of benchmark stock and bond indexes. Here's an example of how this might work using the benchmark calculator on a website called Show Me The Benchmark (showmethebenchmark.com)"
Straight From The Source: Jonathan Clements [IndexUniverse, 07Feb08] "IndexUniverse.com assistant editor Heather Bell recently spoke with Jonathan Clements, senior special writer for The Wall Street Journal, who writes the newspaper's widely read personal finance column, 'Getting Going.'"
Anti-bank rivals offer interesting choices [On Your Side, 07Feb08] "ING has hopped onto the bandwagon of index funds and introduced its own version of the couch potato portfolio. The Streetwise Fund lets you bundle index funds together into a portfolio that suits you. The balanced fund, for example, is 40 per cent Canadian bonds, 20 per cent Canadian stocks, 20 per cent U.S. stocks and 20 per cent international stocks."
New ETFs a rung higher than mutual funds [Globe&Mail, 07Feb08] "There are two new reasons for investors to consider exchange-traded funds before they so much as touch a mutual fund. One is the Claymore Premium Money Market ETF, which will be listed for trading on the Toronto Stock Exchange on Feb. 19. The other is the Claymore 1-5-Yr Laddered Government Bond ETF, which began trading last week under the symbol CLF. Both are low-fee options in categories where cost is the crucial difference between products."
Fifty Years from Now [Efficient Frontier, Feb07] "What will the best-practice portfolios of our children and grandchildren look like? What rules will they operate under? Put another way, which of our beliefs and intermediations will they retain, and which will they look back on as quaint and outmoded? Only a few things are certain: First, human nature will not change. There will always be bubbles and panics; valuations will go to extremes in both directions. Second, risk and return will continue to be joined at the hip."
Vanguard Steps Up To The Plate [Forbes, 28Jan08] "The master of indexing got a late start introducing ETFs. For investors, it was worth the wait... Brennan's rationale for selling ETFs to investors is like that of a dad with teenagers: They're going to drink anyway, so it's safer if they drink at home. 'It's paternalism,' he says with a sigh. 'But I guess it's better that they buy a health care ETF than health care stocks.'"
Diehard II: Reboot [IndexUniverse, 25Jan08] "Now in its 10th year, the Diehards forum has built a reputation as one of the best sites on the Internet. You can find some of the most intelligent discussions on everything from debates about individual asset allocation plans to critiques of the latest research and articles pertaining to index mutual funds and exchange-traded funds (ETFs)"
Advice to Investors: Sit Tight and Batten Down the Hatches [Knowledge@Wharton, 23Jan08] "What about the small investor, the individual who is socking away modest sums for retirement or college costs? Should small investors rush for the sidelines? Or should they view this as a buying opportunity and plough more money into the market? Neither, according to the majority of experts Knowledge@Wharton interviewed in recent days..."
What's a Small Investor to Do? [WSJ, 23Jan08] [If link is dead, search Archive for "clements", then select 01/23/08 article.] "How do you keep your head, when all about you are losing theirs?... My advice: Calculate what portion of your portfolio is in stocks and stock funds. After the recent market carnage, you likely have far less in stocks than your original allocation called for -- which means it's time to start buying. What if stocks keep falling? You keep buying, so you maintain a full stock-market weighting. That's what I plan to do."
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