Roth IRA Basics

Roth, Roth, Roth.  Everyone, it seems is talking about Roth, and if you haven’t, rest assured – you will.  Over the next few months, you will probably hear a lot about Roth IRAs because of a change in the rules that will take effect in 2010 regarding converting a traditional IRA into a Roth IRA.  That subject is just a little too complicated for most people, so let’s take a quick look at some of the fundamentals.

Roth Basics

If saving for your retirement is one of your financial goals (and it should be), you might want to consider investing in a Roth IRA.  You should know that some people earn too much to qualify; here are the limitations:

In general, if you file as a single, you can make the full contribution provided that you earn no more than $105,000; if you’re married and file a joint return, that maximum is $166,000.  It’s actually a bit more complicated than that, but if you’re interested in learning the nitty gritty, here is a link explaining how to calculate the amount you can earn and still contribute to a Roth IRA.

Investment Choices

As with a traditional IRA, you can invest in a number of things: Certificates of Deposit, stocks, bonds, mutual funds, etc.

Advantages

With a Roth, all earnings on your investments escape taxation completely. This is unique.  All other investment vehicles are either taxed currently or tax-deferred.  By tax-deferred, I mean that you don’t pay any taxes until you take the money out.  Examples of tax-deferred investments are 401(k)s and 403(b)s, as well as traditional IRAs.

Other benefits of a Roth IRA include avoiding the early distribution penalty on certain withdrawals and eliminating the requirement to take minimum distributions after age 70½.

Disadvantages

So what’s the catch?  The primary disadvantage of a Roth IRA is that you don’t get a tax deduction when you contribute to it, as you do with other retirement options.  Your personal situation will drive what is more important, tax-free growth or a current tax deduction.  But that decision to go with a Roth will also depend on the assumptions you make about what your tax bracket may be when you retire.

Another disadvantage of a Roth, albeit a minor one, is that you have to go out of your way to use it.  What I mean by that is you have to actually open an account with a bank, brokerage firm or mutual fund.  With a 401(k) or 403(b), you just pen your John Hancock to some forms at work and you’re good to go.

Aside from the (in)convenience aspect, psychologically it is easier to save though an employer sponsored plan, simply because you never see the money; it comes right out of your paycheck.  And, of course, many employers match your contribution either in full or in part, which you ordinarily wouldn’t want to miss out on.  That is, after all, found money.

Limits

What’s the maximum you can contribute to a Roth IRA?  The same amount as the traditional IRA.  For 2009, it’s $5,000 if you’re younger than 50 years old; otherwise, it’s $6,000, and both spouses can make contributions to a Roth.  You should be aware that contributions are a “use it or lose it” proposition; in other words, if you fail to take advantage of this year’s contribution, you can’t do it retroactively.

Summary

For a quick summary of your choices, Understanding the Roth IRA has a useful table comparing the various options.

Conclusion

In general, a Roth IRA is a very smart choice in saving for retirement for many people.  To make the right decision for you, discuss the question with your financial planner or accountant.

Beyond a Simple Will

Most people understand that it is important to have a will which spells out the way they would like their property to be distributed after they die.  Nevertheless, many people are uncomfortable (to say the least) contemplating their own mortality, so they put off taking care of even writing a basic will.  That’s quite understandable, but in most cases, it’s a mistake.

I think it is imperative that you confront your fears and put something in writing, especially if you have minor children.  Having a will and naming a guardian is nothing short of mandatory.  My experience is that many people, who definitely know better, have not taken care of this responsibility.  That’s quite sad.  Parents spend so much time and energy in ensuring the successful viability of their children’s (long term) future in terms of education and comfort, but fairly little in considering who will care for them (in the short term) if the worst thing that could ever happen happens.

Whether you should take a step beyond just a simple last will and testament and also use a trust is the subject of a June 3rd article in The Wall Street Journal, Deciding if Your Kid Is Trust-Worthy, by Stacey L. Bradford. She raises several pertinent considerations in estate planning.

The subject of trusts can be intimidating, but it is well worth your time to become acquainted with the issues. Fortunately, Bradford explains in plain English “why parents may want to consider estate-planning tools beyond a will.” Here are some relevant quotes.

Even middle-class folks can benefit from trusts when it comes to estate planning. That’s because children under the age of 18 can’t directly inherit more than a small amount of money. If you have more than that to leave to your minor child and make no provisions in your will, a court will appoint a property guardian to manage your child’s assets until he reaches 18 or 21, depending on the state.

That property guardian may be a complete stranger who won’t understand your values. Perhaps more important, the guardian could add one more layer of bureaucracy to an already complicated situation. When your child needs money, the guardian may have to make a formal request that then goes through the court system. It can be a real headache for your kids to get funds when they need it, and it’s not an arrangement that’s always in their best interests.

One way around the court system is to set up a custodial account for your kids through your will. In that case, you get to name the custodian, and he decides how the money is spent. Once your son or daughter is legally considered an adult, he or she inherits the money outright. The problem with this setup is that your kid might blow through the money and have nothing left over for college or grad school.

For many parents, setting up a trust is a better alternative that allows them more control over how their money is spent once they’re gone. If you have the means and want your child to go to private school, for example, include that in the trust document. A trust can also delay the age at which your kids get their hands on the money.

While setting up a trust is a bit more complicated than a custodial account — it requires a lawyer’s assistance, for one thing — it also provides more financial security for your children and is therefore worth considering. Ideally, you should set up a trust when you draft your will. But you can always add a trust later as your estate gets more complicated or your assets grow.

Here are a few questions to ask yourself to determine if a trust is right for your family:

Do you anticipate leaving your children more than a modest sum of money?

Do you want to have some say in how your children’s money is spent?

Would you prefer that your children not inherit the money when they turn 18 or 21?

Do you want the money to be used for a college education?

Bradford also discusses choosing a trustee and how your guardian and trustee will work together.

Even after reading just these excerpts that I posted here, you will know enough to ask the right questions of your attorney. Reading the article in its entirety or the book on which the article is based, The Wall Street Journal Financial Guidebook for New Parents, couldn’t hurt either. By the way, in my opinion this book will be valuable for parents who are not so new and even grandparents.

And, of course, it is absolutely imperative to work with a knowledgeable lawyer who specializes in estate planning issues. Trusts are highly complicated and simply not a do-it-yourself project.

What you spend upfront on the lawyer fees will be saved many times over, if the need ever arises.

Financial Literacy, Part 2

“What good is it if high-school students learn about Flaubert, biology, and trigonometry if they don’t learn how to take care of their money?” – Stephen J. Dubner.

In my last post, I discussed the importance of access to financial education and advice for everyone.

A post by Stephen J. Dubner, co-author of Freakonomics, asks a very provocative question: Are We a Nation of Financial Illiterates? 

He asks:
1. Do you consider yourself financially literate?
2. If so, how did you get that way?
3. How important is widespread financial literacy to the health of a modern society?

Dubner believes that financial literacy is a very important issue (obviously, or he wouldn’t have written the article).

To assess your own competence, answer Dubner’s three sample questions, which have, by the way, been used in national surveys. Note that only 1/3 of respondents 50 and older got all three questions right!

His prescription for increasing financial literacy is derived from an interview with Annamaria Lusardi, a professor of economics at Dartmouth. Given yesterday’s inauguration of Barack Obama, of particular interest is her answer to the question, “If you were president of the U.S. for a day (or longer), what are 5 pieces of financial literacy that you’d try to have taught to everyone?”

Dubner provides his own answer to that question.

Financial Literacy, Part 1

Given the state of the global economy, the need for financial literacy should be self evident. Life is complicated. And in that complicated life, we all must make sometimes difficult choices, based on the best information we can gather and our interpretation of it.

But, according to a column by Robert Shiller in yesterday’s New York Times, that knowledge is sorely lacking. In How About a Stimulus for Financial Advice? Shiller extols the benefits that would be derived if the government subsidized the financial advice and education that the majority of people desperately require.

Shiller discusses several studies which prove that lower-income consumers are no match for the sophistication of financial service providers. Some of the revelations are quite shocking. Take his example of payday loans. You probably get spamvertisements for them in your email box all the time. But did you realize that  “payday loans — advanced to people who run out of cash before their next paycheck — exploit people’s overoptimism and typically succeed in charging annual rates of interest that may amount to more than 7,000 percent.” You read that right, 7,000%.

Shiller focuses on the need for financial education specifically for those less fortunate, because, in his reasoning, wealthy folks already have access to good advice. I, however, would say that we all need more education, sophistication and good advice; case in point, the billions of dollars lost by wealthy “educated” investors in the Madoff scam.

To confirm that you too need objective advice, ask yourself (or check your records) how much money is your financial advisor making from you? I can pretty much guarantee that your financial service provider knows the answer to that question, probably to the penny. See my previous posts on why it is not in his or her best interest for you to know that answer.

Here are some relevant quotes from the Shiller article.

In evaluating the causes of the financial crisis, don’t forget the countless fundamental mistakes made by millions of people who were caught up in the excitement of the real estate bubble, taking on debt they could ill afford.

Many errors in personal finance can be prevented. But first, people need to understand what they ought to do. The government’s various bailout plans need to take this into account — by starting a major program to subsidize personal financial advice for everyone.

A number of government agencies already have begun small-scale financial literacy programs. For example, the Treasury announced the creation of an Office of Financial Education in 2002, and President Bush started an Advisory Council on Financial Literacy a year ago. These initiatives are involved in outreach to schools with suggested curriculums, and online financial tips. But a much more ambitious effort is needed.

The government programs that are already under way are akin to distributing computer manuals. But when something goes wrong with a computer, most people need to talk to a real person who can zero in on the problem. They need an expert to guide them through the repair process, in a way that conveys patience and confidence that the problem can be solved. The same is certainly true for issues of personal finance.

One wishes that all this financial cleverness could be focused a bit more on improving the customers’ welfare!

The theory of capitalism, going back to Adam Smith over 200 years ago, sees an alignment of interest between consumers and businesses. Only those companies that produce what consumers really need will succeed. Those that do not will be beaten in the marketplace as consumers shop elsewhere. This puts pressure on providers to innovate and to better satisfy consumer needs.

This theory assumes, however, that consumers are rational in their choices, and to a large extent they are. But in some areas, notably personal finance, it is important to recognize that a good share of Americans have difficulty figuring things out.

Most people get financial advice only from sales representatives of one sort or another: real estate agents, mortgage brokers, sellers of financial products. Some of these providers could use their sophistication to exploit people’s tendency to behave irrationally, and to manipulate the judgment errors that consumers typically make. And competitive pressures tend to make providers promote products that exploit those errors to the hilt, unless, of course, we offer consumers real financial advice.

Conclusion

Shiller acknowledges that there is no silver bullet to the issue of financial education and risk taking. However, “it’s still likely that advisers who built long-term relationships with their clients, and who pledged to look after their welfare, would have been a helpful influence, suggesting caution to those who were getting over their heads in debt, and warning that adjustable-rate mortgages could be reset upward, just as the fine print said. For these reasons, financial advisers probably would have reduced the severity of the housing bubble.

Professional financial advice is now generally accessible only by the relatively wealthy. Changing this would be an important corrective step. Giving the general public access to trained advisers would be a boon for the nation in this time of doubt and distrust.”

Shiller raises some very good points. He envisions a government subsidy to help pay for one-on-one financial counseling. I personally believe that part of the needed education and counseling could be delivered with a combination of classes and individual consulting, in order to keep costs down. But I am with him entirely when he says that advisers should have long-term relationships with their clients and that advisers should pledge to look after their clients’ welfare.

A previous post discusses the desirability and practicality of working with someone who is a fiduciary, as opposed to a registered representative.

Frugal Times: Why and How to Save More.

You’ve probably heard this a hundred times over the past year: Spend less and save more money. Obviously, that’s great advice. But just how do you do it? M.P. Dunleavey’s brief article in the January 9, 2009 edition of The New York Times, Making Frugality a Habit, answers that not-so-simple question, first, though, giving some useful context.

Actually saving some money — let alone the thousands you might need to weather a crisis — results from a chain of habits and choices that does not, for many people, come naturally.

Among the families surveyed for the study, 75 percent “couldn’t survive for three months, if they had to do it on savings alone.”

My husband and I could easily be one of those families. Every time our emergency fund hits the one-month mark some crisis strolls along and gobbles up our funds. Then we start over. Now, I am determined to save the $15,000 that would cover our family’s most basic needs for at least three months.

A few tricks that might help. Start by finding a specific chunk you can save — perhaps cutting back cable, quitting smoking, renting out the garage or limiting spending on restaurant meals.
THEN do an end-run around your own inertia and use automatic transfers to deposit a set amount — $100, $200 or $300 — every month into an account not linked to your checking and definitely not accessible by PIN or with any piece of plastic. The first time I tried this, I saved $3,000 so fast it made my wallet spin.

So take care of yourself in this rocky economy. Fear can be a powerful motivator, but so is the lure of knowing that you have created some peace of mind.

25 Ways I Save Money, an older blog post at Cash Money Life, lists 25 very specific (and quite useful) ideas on how to cut expenses – some so basic, you’ll wonder why you didn’t think of it first!

Conclusion

We all know that having an emergency fund makes sense. Creating that emergency fund is another matter entirely. What doesn’t make sense, though, is to set yourself up to fail from the onset. What I mean by that is you should set an obtainable, realistic, end goal and make regular, realistic, contributions to get there. Hopefully, these articles will be enough to get you motivated.

Making Better Financial Choices, Part 2

“Poor asset allocation, ill-considered active management, and perverse market timing lead the list of errors made by individual investors.”- David Swensen.

In my last post, I suggested that a great many investors would benefit from a financial advisor who could help them create and implement a comprehensive financial plan and who can manage their investments. Whether or not you heed my suggestion depends on whether you consider yourself a do-it-yourselfer or a delegator.

To handle your own investments, you must first know yourself. Be honest. Do you have the time, inclination, and emotional fortitude to do this right?  Successful investing takes both knowledge and discipline.

Do you understand risk management, asset allocation and asset location? Are you capable of writing and sticking to an Investment Policy Statement?

Perhaps you’ve shot yourself in the foot one too many times? It happens to a lot of novice (and not-so-novice) investors. Many individual investors tend to be too enthusiastic after market prices have gone up and go into a buying frenzy; conversely, they become overly pessimistic after market prices have fallen and then are anxious to sell.

If you realistically doubt your investment skills, then you are a delegator, someone who will rely on a professional to invest your hard-earned money for you. If that is the case, you should be looking for an investment manager who will listen to your needs and goals and implement an investment strategy that makes sense to you and for you.

In my opinion, and I’ve said this numerous times, you should only work with someone who has your best interests at heart – and that means someone who is a fiduciary.

The most common arrangement in working with a Registered Investment Advisor (RIA) is to pay an annual fee, which is based on a percentage of assets, though some financial advisors do work on a retainer basis.

If you are not clear on what fees you are paying, or if your prospective advisor cannot explain what fees you will be paying, you are most likely working with a stockbroker or insurance agent, i.e. someone who receives a commission. I cannot and do not recommend this approach for two simple reasons: It is not transparent, and there are possible conflicts of interest.

For most individuals, the investment management or retainer fee is well spent, because you will avoid the costly mistakes that most investors make. Since the manager will be both an implementer and a behavioral coach, it is crucial that you understand and accept his or her investment philosophy.

Trusting someone to manage your personal investments is one of the most important decisions you will ever make. Here are two books I recommend that you read in preparation for your search for an investment manager.

Simple Wealth, Inevitable Wealth (3rd Edition) by Nick Murray

Wise Investing Made Simple by Larry Swedroe

Notice that both books have the word “simple” in the title, but don’t let that mislead you, investing is not a slam dunk. As Warren Buffet is quoted as saying, “Investing is simple, but not easy.”

Making Better Financial Choices, Part 1

New Year’s Resolutions are often included as a part of every individual’s holiday tradition. My own resolution – not new, because it’s the same every single year – is to get more exercise. In general, though, resolutions don’t have a good record of success. Even as you’re reading this now, it’s likely that many of your own resolutions have already been abandoned.

But, if your resolution was and is to make better financial decisions in 2009, I applaud you. It’s an honorable and worthy goal, and one that can be achieved with relatively little pain. Helping individuals to make better financial decisions, so that they maximize their chance of achieving their goals: That’s my professional objective; it’s also another of my perennial resolutions, but one I faithfully keep.

Rather than writing my own killer “Top Ten Things to do to Get a Grip on your Finances,” I did a Google search on what has already been written. There’s an amazing amount of stuff out there on the net, some of which is quite basic – spend less, save more, have an emergency fund – but still apropos. There is one standout among the crowd, The Best Financial Advice Ever by Liz Pulliam Weston.

Assuming you already know the basics, here is an excellent article: 10 Resolutions to Fix Your Finances by Allan Townsend.

Although the last update was more than a year ago, this Money Central article is still a keeper. It definitely goes beyond the basics.

No. 1: Set up a system.
No. 2: Bank online.
No. 3: Take stock of what you own.
No. 4: Get out of debt.
No. 5: Create a budget.
No. 6: Review your 401(k) plan.
No. 7: Check your insurance coverage.
No. 8: Check your estate plan.
No. 9: Don’t give your money to Uncle Sam.
No. 10: Make new goals.

You’ll either find this list “old hat” or quite intimidating. There are links to further information on the various suggestions, and if you’re at all confused by what you’ve read, I urge you to read on.

Conclusion

For most people, developing a financial plan is well worth their time. Just as you plan a vacation, by carefully selecting a destination based on your needs, wants and desires, and determine the best way to get there given your individual situation, your financial decisions should involve the same type of strategic thinking.

After reading Townsend’s article, you may decide that you need help in analyzing your current situation, your required savings, and in developing a long term strategy. Thinking strategically and monitoring your results regularly will let you know if you are on track to reach your goals.  It will also indicate when you need to adjust your existing financial plan to match your new or changing financial situation.

It may not be easy to set up a financial plan by yourself, but you needn’t do it alone. A good financial planner will help you analyze where you are and what you need to do to achieve your goals. For most people, having an experienced financial advisor prepare a comprehensive financial plan is well worth the time and money.

Although you may be very successful in your own field of expertise, you may not have the time or inclination to keep up with changing tax laws and new investment products. There is no shame in delegating these tasks to someone who does them full time. You may also not have the discipline to manage your own investments, and there’s no shame in that, either.

The key is to start immediately. You need to harness your motivation now, create a plan and then begin to take the steps to implement it. A good planner will outline all of the steps required to reach your goals.

Financial Planners’ Reflections on 2008

I recently attended a meeting of financial planners in Northern New Jersey. Ordinarily, we meet once a month to listen to presentations given by experts on a variety of topics such as insurance, portfolio management and estate planning. This time, though, our group met specifically to discuss the recent upheaval of the stock markets and how that has affected, not just our clients, but us. (It’s been a very stressful year for planners.)

The members of our group are very experienced, individually and collectively, and they take financial planning and investment management very seriously. The consensus was that almost everyone has been adversely affected in some way or another by this year’s stock market decline. “It’s been a humbling experience,” said one planner.

Some members of the group expressed dissatisfaction with various mutual fund managers. Others revealed that they have revised their asset allocation recommendations, according to their changed outlook for various asset classes.

Here are some observations of general interest:

A great many people are genuinely frightened about the current economic situation, perhaps because the media continuously emphasizes the bad news. Some clients believe, rightly or wrongly, that the bad news will likely continue and things will probably get worse.

As various Wall Street industry icons went out of business, some clients became concerned about the financial stability of their custodians and Money Market accounts. Fortunately, planners were able to reassure their respective clients about these issues.

Planners are referring to 2008 as a “black swan” event, a comparison drawn from the book, The Black Swan: The Impact of the Highly Improbable  by Nassim Taleb.

While diversification is a valuable strategy in a typical year, 2008 has been anything but typical. As one participant said, “Diversification works over time, but not every time.”

While 2008 was a very difficult year, it was not totally unprecedented. Planners with long memories looked back to 1973 – 1974 and 1987 for some solace. Those were also difficult times, but we got through them.

All planners agreed that it was time to revisit their clients’ Investment Policy Statements and their personal financial plans.

One planner admitted to being right about one issue (investing in commodities), but not necessarily for the right reasons. (It was that kind of year.)

Naturally, the Benard Madoff mess came up. Providentially, the clients of only one manager were affected, and then, only by a very small amount. In this particular case, diversification definitely paid off.

Special concern was expressed for those individuals who have recently retired or are just about to retire. The markets may not recover in time enough for these people to fully and thoroughly enjoy what is supposed to be their golden years. As these retirees draw down funds, they will have less and less available to keep invested for the eventual rebound which most people expect. Various strategies were discussed for retirees.

Some technical issues were discussed such as Roth conversions, tax loss harvesting and the best strategies for rebalancing, when markets are volatile and people are worried.

One planner expressed concern about municipal bonds, since many states are under heavy fiscal and financial pressure.

The group consensus was this: We will all be very relieved to say goodbye to 2008.

Choosing a Financial Advisor, Part 4

When shopping for a financial advisor, just how do you ensure that he or she has the “right” experience and training?

A recent article in Money Magazine, Don’t Judge an Adviser by His Title, by Walter Updegrave, warns that “you should be on guard” against “unscrupulous salespeople posing as trustworthy advisers” who are using “dubious retirement credentials.”

Earlier this year, state insurance and securities regulators approved model regulations that will prevent advisers from implying they have expertise about retirement planning that they don’t actually have.

The new regs will make it illegal for advisers to tout made-up or self-conferred designations, or credentials that are real but granted by organizations that don’t set rigorous standards.

That said, it may take well into 2009 before most states adopt them. And no regulations can totally eliminate abuses. You still have to exercise caution when you seek retirement advice. Here’s how.

Don’t be awed by a string of initials.

Given the dozens of official-sounding titles floating around, it’s virtually impossible to know which are marketing gimmicks, which are legitimate and which fall in between. I’d view any credential that contains words like senior or retirement with skepticism.

Earlier this year, a reader e-mailed me to say he’d met with an adviser with a Wharton Certificate in Retirement Planning. How much credence should he give it?

What I found is that the certificate is available only to advisers affiliated with the insurer AXA who attend a five-day program at the Wharton School. There’s no final exam, no grade. I don’t want to suggest that the program is a sham. It is taught by Wharton professors, and AXA sends only experienced advisers. Then again, it’s not exactly a Wharton M.B.A.

When a designation does connote a special skill, consider how relevant that expertise is. The Certified Senior Advisor designation, while legit, is largely meaningless as a gauge of retirement planning proficiency.

Why? Its purpose is to increase awareness of the aging process. It requires no special financial training.

Do a background check.

Even if an adviser’s credentials are beyond reproach, his or her integrity may not be. Before signing on with an adviser, check with your state securities commission (nasaa.org) and state insurance department (naic.org) to see if he or she has a history of disciplinary problems or consumer complaints.

Plus, don’t attend free-lunch seminars that target retirees – they are often nothing more than a way for sales-people to peddle high-fee investments. Instead, screen for a planner who concentrates on retirement at the Financial Planning Association’s site (fpanet.org).

Be wary of safety claims.

Older investors are understandably worried about retirement today. Unfortunately, advisers who misrepresent themselves with misleading credentials may also see this as a perfect opportunity to prey on those fears.

Insurance commissioners in several states have recently warned that some advisers are using concerns about the health of insurer AIG to persuade annuity owners to switch into a new annuity.

Such a move can be a great deal for the adviser, who earns a fat commission. But it may not be a wise decision for the investor, since a transfer may trigger early-withdrawal penalties, not to mention start the clock on a new set of surrender charges.

It’s during uncertain times like these that you’re most likely to seek financial advice. Just make sure you end up with a real adviser, not a salesman with a fancy title posing as one.

Conclusion

This article is useful regarding what to avoid in looking for a financial planner, but you need more information to be successful in finding the right person for you.

I have written before about the importance of having a financial advisor who puts your interests first, i.e. a fiduciary. Fee-only planners, who are members of NAPFA, all agree to act as fiduciaries and sign a fiduciary oath.

Aside from the very important issue of the manner in which your financial advisor is compensated, keep in mind that different planners have different areas of expertise. Knowing this may help you choose the individual who best suits your needs. To a large extent, the best financial advisor for you will largely depend on the kind of advice you are seeking. A brief rundown of the alphabet soup of designations, which follow the name of a financial advisor, will help you sort it out.

Designations

The following designations have rigorous standards and are widely recognized and respected. One could debate whether the course requirements are comprehensive enough and just how difficult the tests are.

Nevertheless, if you are working with someone who has one or more of these designations, you know that the planner is serious enough about the craft of financial planning to meet the requirements. It’s not an ironclad guarantee of competence, but it is a good indicator.  In all cases, there are continuing education requirements.

Certified Financial Planner (CFP®) – The CFP® designation requires a minimum of three years of experience and the passing of a rigorous two-day exam. Certified Financial Planners should be able to provide a broad range of financial advice.

Certified Public Accountant (CPA) – A CPA is an experienced accountant who has met strict education and licensing requirements. A CPA is a good choice for tax issues.

Personal Financial Specialist (PFS) – CPAs, who undergo additional financial planning education and pass an exam, can use the PFS designation.

Chartered Financial Consultant (ChFC) – Insurance professionals, who specialize in some aspects of financial planning by meeting additional education requirements in economics and investments, can use the ChFC designation.

To be continued …

Financial Experts?

 

 

 

 

 

 

 

 

 

 

 

 

This cartoon is courtesy of Nick Anderson, the Editorial Cartoonist of the Houston Chronicle.

I think it captures beautifully the irony of banks and brokerage companies still holding themselves out to be “experts”even though they have imploded due to poor risk management.

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