Money Smarts for the Real World

June 9, 2011

There's Nothing Glamorous About It 

Talking finances with people usually gets them fired up -- for the moment at least. 
"Yes, we need wills and Guardians for the kids," I often hear.  Yet, time passes and decisions about the really important things get put off.  Why?  Sometimes what we have to face is unpleasant (like imagining your kids being orphaned) and sometimes it is just plain overwhelming (Where to start?  What to do?).  Read the article below, Life's Unpleasantries, to find out what you need to get in order.
Sometimes we need to roll up our sleeves and take the time to make sure our investments are serving us well (and not bleeding us dry), Finding Financial Strength will shed some light on how you can look out for your best interests. 
There is no getting around the gritty work that needs to be done if you want to harvest the fruit.  It is labor, and your hands have to get dirty and it isn't fun. But, the rewards will be sweet and your sleep will be peaceful.  Can you live with that?

Life's Unpleasantries 


My husband was up to something. He was pounding away at the computer and printing like a madman. When I didn't hear the whir of the printer, there was the distinct sound of the three-hole punch chewing its way through paper. 


"I'm working on something," is all he would say. It seemed to excite him, this project. I wondered what it was.


When "it" appeared, it wasn't impressive looking. It was a plain white three-ring binder.


"Open it," is all he said, smiling.


I wondered if it was something romantic. He was beaming like a cat that just dragged home a bird carcass as an affectionate offering.


"What is it?" I asked. Click here to read more.


Finding Financial Strength  

When most of us go to make an important purchase - a refrigerator, furniture, or a car - we shop around.  We want to make sure that we don't get taken advantage of and that we get a good value for our money.  So why is it that when it comes to investments, (mutual funds, in particular) many of us have no idea what we've invested in and what it costs?  Why would we rather haggle with a car salesman on a one-time purchase, than pay attention to our investment costs and our long-term financial goals?

There are many possible answers: maybe we're not sure what we should be paying; or, in order to find out what we pay we have to read the dreaded prospectus (who wants to do that, and who can understand it, anyway?); or perhaps we really don't believe that we can win this game, so why try?   Right?  Wrong.  Click here to read more.



$mart Question

What is the difference between a stock broker and an investment adviser?

It's easy to be confused by (and possibly, misled by) the terminology the financial industry uses.  Investment Advisers are paid for their advice and expertise and by law have a fiduciary obligation to clients, meaning they must do what is in the client's best interest.  If you are dealing strictly with a fee-only Registered Investment Adviser firm (or RIA, such as our sister company, ATI Investment Consulting, Inc.), the only compensation the RIA earns comes from clients for professional services. Some charge an hourly rate, a retainer fee, or a percentage of the assets managed.  No products are sold (just advice) so the RIA  does not earn commissions from a third-party (such as a mutual fund company), and therefore, there are no conflict of interests.   Some advisers may earn commissions (in which case they would not be considered fee only advisers); however, they must disclose to clients any conflicts of interest that may exist and any special compensation they receive outside of the client relationship. 


Brokers (and many insurance agents) earn commissions when they transact for the client (buy and sell), they also can earn trail commissions (e.g., a mutual fund company will pay them a percentage of the clients' assets as long as clients remain invested in the fund).  Brokers have an obligation to sell clients a product that is suitable, which is a less stringent standard than the best interest/fiduciary standard that Registered Investment Advisers must abide by.   To compare the RIA fiduciary standard to the Broker's suitability requirement, consider this:  If a client needs long-term growth and a S&P 500 fund is an appropriate investment choice, but one option carries fees of 1.5% in addition to a 5% commission, and the other carries a fee of 0.15% with no commission, the RIA would be obligated to recommend the lower cost option, because low fees are in the client's best interest.  The broker could sell the one that paid him more (a commission) even though it was more costly to the client, because the investment was still suitable for the client.

Sometimes Broker/Dealer Firms do not refer to their salespeople as brokers, but by other distinctions, such as Registered Representatives, Account Executives, Financial Consultants, Financial Representatives, Relationship Managers, and Investment Consultants, etc., which can make it confusing to the public.  The question you should always ask anyone who is handling your money is, "How are you compensated?"  You should know if the person handling your money is getting paid by someone else to make certain recommendations on your behalf.  If the answer you receive is unclear, chances are commissions are part of the compensation.  


The article above (Finding Financial Strength) also covers this topic in greater detail.


Every issue we will answer a question from one of our readers. Submit your question here.


In This Issue
Life's Unplesantries
Finding Financial Strength
$mart Question
$mart Move
$mart Move:
Go Green, Save Green

Here are some easy ways to reduce your consumption of energy and increase your monthly cash flow:

  • Did you know that your tv, computer, DVD and cellphone adapters all consume energy even when they are not in use?  Lower your electric bill by plugging these items in to a power strip and make sure to power down when you are not using these items.
  • Turn off the lights when you leave a room and use energy-efficient bulbs. 
  • Check your doors, windows and attic doors for gaps and leaks.   Install weather stripping or caulking where needed.
  • Install a programmable thermostat to saving money on cooling and heating costs.
  • Do an audit of your home's energy efficiency.  Check out Energy Star's Home Energy Yardstick to find out where your home is costing you and to learn ways you can conserve energy and money.
Quick Links
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Real$martica, Inc. is available to hold workshops for PTAs, local organizations, schools, and other groups and associations.  Topics include basic personal finance (handling money, using a budget, credit issues, and saving) to more complex issues such as buying versus renting; investing for retirement; managing the college selection, funding and financial aid processes; and estate issues.  Real$martica is also available for one-on-one consultations.   Contact us for more information.
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Dina Isola, President

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