A recent column advocating a fiduciary standard for all financial advisers — meaning always putting the client’s interests first — prompted a spate of questions about how to make sure advisers adhere to such a standard.
I’ll discuss that and also how to find an adviser who can help you even if you don’t have a lot of money.
First, we need to know this:
— Registered investment advisers, or RIAs, who are regulated by the U.S. Securities and Exchange Commission and/or the states where they do business, must legally adhere to the fiduciary standard.
— Advisers who’ve earned the certified financial planner (CFP) designation, conferred by the independent group Certified Financial Planner Board of Standards, also are expected to act as fiduciaries based on their code of ethics (the same person can be an RIA and CFP).
— Stockbrokers, who fall under the jurisdiction of the industry group Financial Industry Regulatory Authority, are not held to the fiduciary standard. "Dually registered" brokers who are also RIAs must legally act as fiduciaries when giving investment advice but don’t have to when selling products as brokers.
Being held to a fiduciary standard, however, is no guarantee the standard will be followed. It’s up to you to ask questions.
"The adviser should be willing to state in writing his or her status as a fiduciary," said Knut Rostad, a member of the Committee for the Fiduciary Standard, a group of a dozen prominent investment advisers.
Also ask the adviser to explain, as part of a written "investment policy statement," how he performs "due diligence" before picking an investment and how investments will be monitored.
"If an adviser cannot articulate this, that’s a red flag," Rostad said. The adviser should also fully disclose and resolve, in the client’s favor, all unavoidable conflicts car loan rates.
Say your adviser is paid, as it is common, based on "assets under management" or a percentage of the money you invest. You ask whether you should pay down your mortgage. The adviser must give you his best recommendation while disclosing his conflict: Paying down the mortgage will reduce the amount you invest and lower his compensation.
You can find other questions to ask advisers at the Certified Financial Planner Board of Standards website. Among them: What services do you offer? How will I pay for your services? Could anyone besides me benefit from your recommendations? Go to www.cfp.net and click on "Learn about financial planning."
The best planner in the world can’t help you, however, if you cannot afford him or her. Most fee-only fiduciary advisers charge about 1 percent of assets under management "and cannot make a living" advising the 80 percent of Americans who have a net worth of less than $250,000 including the value of their home, said Robert Schumann, a certified financial planner with Cambridge Financial Advisors LLC in Colorado.
Some advisers who charge by the hour provide "as needed" services to those who can’t afford or don’t need an ongoing relationship. Still, I agree with Schumann that most Americans may not afford or be willing to pay the hourly fees of $150 or more these planners typically charge.
An option worth considering — one I believe will become more prevalent — are Internet-based, fee-only fiduciary registered investment advisers such as People’s Financial Advisor (www.peoplesfinancialadvisor.com), developed by Schumann.
While never as good as face-to-face advice from a trusted fiduciary, they beat hucksters pushing commission-laden products for their benefit, not ours.
The U.S. economy took a first step toward recovering from the worst recession since the 1930s in the second quarter as companies reduced inventories, spending started to climb and profits grew.
Gross domestic product shrank at a 1 percent annual rate from April to June, less than the 1.5 percent decline projected by economists in a Bloomberg News survey, a Commerce Department report showed Thursday in Washington. Corporate earnings rose by the most in four years, the department also said.
Government programs, including "Cash for Clunkers" and first-time homebuyer incentives, are boosting manufacturing and housing, indicating the gain in sales that began last quarter will be sustained in the second half of the year.
"We’re on a pretty decent recovery path," said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. "There was a better mix last quarter with almost every major component of final demand being revised up and inventories being revised down. That puts us in a pretty decent position going into the third quarter."
Corporate profits, not included in the advance GDP estimate released in July, rose 5.7 percent from the first three months of the year, the biggest increase since the first quarter of 2005.
The median GDP forecast was based on a Bloomberg survey of 75 economists. Estimates ranged from declines of 1.8 percent to 0.8 percent. Thursday’s reading matched the government’s initial calculation issued last month and followed a 6.4 percent pace of contraction in the first three months of the year.
The drop in GDP was the fourth in a row, the longest contraction since quarterly records began in 1947. The world’s largest economy has shrunk 3.9 percent since last year’s second quarter, making this the deepest recession since the Great Depression.
Thursday’s report is the second of three estimates on second-quarter growth. The figures will be revised again in September as more information becomes available.
Consumer spending, which accounts for about 70 percent of the economy, fell at a 1 percent pace, less than anticipated, following a 0.6 percent increase in the prior quarter. Purchases were forecast to drop 1.3 percent.
Car dealers had a few more hours to get reimbursed for their Cash for Clunkers deals after the government extended the deadline for filing applications for the $3 billion government incentives into Tuesday evening.
All sales under the program ended Monday. But after already pushing back the deadline to submit records for the car rebate deals to noon Tuesday, the Transportation Department said the deadline would be extended to 7 p.m. St. Louis time.
Before the extension, all the paperwork was due to be submitted by Monday night, but an influx of submissions shut down the government’s computer filing system temporarily. Transportation officials said the computer system was up and running on Tuesday. Alex Perdikis, executive vice president of the Koons Automotive Companies dealer chain, said employees weren’t able to access the claims system for about 45 minutes Tuesday afternoon. "It’s a waiting game every time you put a deal in. You cross your fingers and hope the site is up," Perdikis said.
The U.S. economy isn’t contracting as fast as it was six months ago, but there are still only a few signs of actual growth, according to the latest data.
Thus far, the expectation that gross domestic product will increase in the third quarter is just that: an expectation. Economists are pretty sure the economy will begin to grow, based on well-established leading indicators that point to a recovery beginning soon.
Another top forecaster signaled the end of the recession Monday. "The longest and deepest recession of the postwar era has ended," said IHS Global Insight. In the last week, the Conference Board and the International Monetary Fund have said the recession is waning.
"Massive inventory liquidations in the first half of 2009 have set the stage for rebounds in global production and trade," said Global Insight chief economist Nariman Behravesh. "Financial markets have stabilized and investors’ appetite for risk is returning, although credit will remain relatively tight as banks rebuild their capital positions."
The recovery could lose steam in a few quarters, Behravesh continued. "A sustained, robust global recovery depends on renewed growth in consumer spending and capital investment. The coming expansion will be restrained by cautious consumers."
The median forecast of economists surveyed by MarketWatch looks for annualized growth of 3 percent in the third quarter and 2.5 percent in the fourth quarter. The GDP data for the third quarter will be released in late October.
Growth will likely be propelled, in part, by a slower pace of inventory reduction and by higher exports. Domestic demand may not be very strong, with still-weak business investment offsetting a temporary jump in consumer spending from the Cash for Clunkers deal, they say.
Most investors want to avoid motion sickness.
Even if the final results could be the same, arriving at those results on a smooth road with few bumps is preferable to veering up and down like a roller coaster.
Yet those same investors also have difficulty shaking off a commonly held belief that volatility leads to investment success while smoother vehicles will probably take them nowhere.
"There really isn’t any evidence I’ve seen that says lower-volatility funds will significantly lag their higher-volatility peers over the long run," said Ryan Leggio, mutual fund analyst with Morningstar Inc. in Chicago.
Investors should look at mutual funds that have a consistent strategy of owning cheap, high-quality companies with little debt, reliable earnings and high profit margins, Leggio said. Those funds fared best during this bear market and also in the long run, he said, because their strategy leads to more reliable performance.
"The less-volatile investments are definitely the high-quality, blue-chip dividend-paying stocks that are purchased when they offer good value," said Kelley Wright, managing editor of the Investment Quality Trends newsletter in Carlsbad, Calif., noting that a low price with a high yield provides great value, as well as potential for that price to rise in the future.
Wright prefers companies whose stock has sufficient liquidity for ease in buying and selling and whose debt load "isn’t an albatross hung around their necks." Too much debt means more of a company’s earnings must be applied to servicing that debt rather than areas that improve the bottom line, such as research and development.
It makes sense to be careful these days. "Investors tend to underestimate volatility," observed Ron DeLegge, editor of ETFguide.com in San Diego. "For example, they underestimated volatility in financial stocks in 2008 and in technology stocks in 2002 because they were looking to history as the guide to the future."
Investors blind to the potential downside were taken by surprise when dot.com stocks crashed and when big financial stocks cut or eliminated dividends, he said. Such dramatic possibilities weren’t in their memory bank.
Yet no one should expect miracles either, since even those investments operate in the real world.
"One mistake investors make is assuming that because a fund is less volatile it won’t ever lose any money, or that it will lose very little money, in a downturn," said Leggio, pointing out that a number of the less-volatile funds are fully invested in stocks.
"Another mistake is selling whenever a fund is dropping in value because your expectations have been too high, since those dips could present buying opportunities."
Jensen Fund is a high-quality fund recommended by Leggio that owns fewer than 40 companies and has large holdings of Johnson & Johnson, Procter & Gamble and Coca-Cola Co. It seeks companies with steady revenues and clean balance sheets.
Vanguard Dividend Appreciation Index Fund and its exchange-traded sibling Vanguard Dividend Appreciation ETF focus on companies with consistent dividends, while Amana Trust Growth Fund is a well-run fund that doesn’t invest in companies with debt worries. Leggio recommends all three.
In international funds, Leggio suggests First Eagle Overseas "A" and Tweedy, Browne Global Value Fund. Both have long-tenured managers, value strategies and competitive fees. They find dependable foreign stocks.
AIM Charter "A" boasts respected manager Ron Sloan, who openly tells his investors he won’t do as well as rivals in market upturns but will do a lot better in downturns. An accomplished risk-avoider, Sloan sidestepped last year’s debacle in financials. Despite holding a considerable amount in cash, in the recent market upswing he has kept pace with the Standard & Poor’s 500, said Leggio.
The well-known Sequoia Fund is a dependable choice that always holds some cash — currently a significant 20 percent of its portfolio. It holds 29 stock names, led by Berkshire Hathaway Inc.
"Investors should look at which asset classes tend to be less volatile and an easy way to do this is through ETFs," said DeLegge. "If you want to dial down the risk, look at asset classes or areas with lower volatility."
Though they’ve underperformed this year, utilities and health care are such sectors considered "safe havens" and steadier than many other groups even in recession. Utilities Select Sector SPDR and Health Care Select Sector SPDR are ETFs recommended by DeLegge. Another "dull" sector is industrials, with Industrial Select Sector SPDR DeLegge’s ETF choice there.
For investors who wish to avoid a case of nerves, Wright recommends dividend-paying stocks. In pharmaceuticals, Abbott Laboratories is a bargain with a dividend yield over 3 percent, Wright said. Telecom giant AT&T Inc., yielding around 6.5 percent, offers good value even when the dividend is lower than that.
Beverage leader Coca-Cola Co. is an outstanding value that features a yield of about 3.5 percent yield, Wright said, while Colgate-Palmolive Co. is a quality, easily understood business likely to be around for a long time. It has a yield of around 2.5 percent.
No one can promise an investment ride with no bumps, or with investments that will never go down in value. But with careful planning you can improve your odds.
David Payne knows well the history of his family’s electrical contracting business. He has seen the business change many times since its start in the 1950s in Flint, Mich., as a company that primarily worked servicing auto plants. He saw his father make aggressive moves to diversify the industrial projects it worked on, which included moving the company to St. Louis.
So it isn’t without precedent that Payne has stepped up and made changes of his own since taking the helm in the mid-1990s.
In 2000, he led the company in buying commercial electrical contractor Crest Electric. That move proved key in stabilizing the company’s workload and earned it larger projects as well, including work at the Lumi
This week’s indictment of a hacker believed to be responsible for the biggest retail-store data breaches in U.S. history doesn’t necessarily make shoppers safer from having their credit card numbers plundered.
Accomplices are believed to be on the loose in Russia or other countries where U.S. authorities are less likely to get them. And the underlying security holes mined by the hackers still exist in many payment networks.
Albert Gonzalez, a Miami hacker who once worked as a government mole tracking down identity thieves, is accused of playing a critical role in all the largest credit card heists on record.
With Monday’s indictment of Gonzalez on conspiracy charges in U.S. District Court in New Jersey, the Justice Department says he helped steal 130 million card numbers from payment processor Heartland Payment Systems, 4.2 million from East Coast grocery chain Hannaford Bros., and an undetermined number from 7-Eleven. He previously was charged in other computer break-ins, most notably at TJX Cos., the chain that owns retailers T.J. Maxx and Marshalls, in which as many as 100 million accounts were lifted.
Gonzalez is in jail and awaiting trial next month in New York for allegedly helping to hack the computer network of the Dave and Buster’s restaurant chain.
The fact that hundreds of millions of card numbers could be stolen from retailers illustrates the flaws in a payment system built more for speed than security, as an Associated Press investigation found this year. For instance, credit and debit card numbers are not always encrypted as they move from retail stores to banks for approval.
Consumers don’t directly pay the costs of most fraud. Banks and retailers eat those charges. But consumers bear it indirectly, in the form of higher prices.
According to prosecutors, Gonzalez and his associates exploited vulnerabilities that remain widespread. Among them: flaws in the way retailers’ computers handle requests in the so-called Structured Query Language, which is used to manage data — such as credit card information — stored in databases low cost car insurance. Hackers who detect these holes can trick databases into coughing up more information than they should.
Security experts also noted that Gonzalez’s latest indictment charges two unnamed co-conspirators who live "in or near Russia."
Dan Clements, president of CardCops, which tracks stolen credit card data online, called it a "cleverly written indictment" that suggests the government might be trying to squeeze its former informant for more information about Hacker 1 and Hacker 2. However, extraditing those suspects is unlikely, Clements added.
"We are not safe," he said. Gonzalez is "here on U.S. soil. That was his big flaw. If he were anywhere else, he’s not going to jail."
Ori Eisen, founder of Scottsdale, Ariz.-based security firm 41st Parameter and previously worldwide fraud director for American Express, added that Gonzalez is "most likely not the kingpin. The kingpin would not risk being in the United States. They operate out of the Ukraine or Russia, and they’re former militants or ex-KGB who know their way around just enough not to get caught."
Consumers don’t have many options for monitoring whether the stores they frequent are good at protecting their card numbers. Stores aren’t given public grades on their computer security. The best advice: Regularly check your credit report, and set free fraud alerts with the credit-reporting agencies.
In this case, the thieves might have failed by being too successful. It’s hard to unload hundreds of millions of stolen credit card numbers on the black market.
Many of the numbers stolen in the breaches cited in the Gonzalez indictment already have been canceled and replaced.
Southeast regional bank BB&T Corp, which on Friday agreed to buy assets of lender Colonial Bank, said it is making an offering of $750 million of its common stock.
BB&T, shares of which were down 4.6 percent in midday trading, said the proceeds will boost its equity capital and will be used for general corporate purposes.
Last week, the Federal Deposit Insurance Corp said BB&T will buy about $22 billion of Colonial’s assets. The FDIC and BB&T agreed to share losses on about $15 billion of those assets. The bank had deposits of about $20 billion as of June 30.
The Winston-Salem, North Carolina, bank said it will grant underwriters an option to purchase up to an additional 15 percent of the offered amount of shares.
“This is somewhat of a safety measure for the bank, and they showed earlier this summer they have an ability to readily raise capital,” said Chris Marinac, an Atlanta-based bank analyst at FIG Partners LLC.
BB&T in May raised $1.5 billion in the wake of the government’s “stress tests” aimed at determining big banks’ potential to withstand a more severe economic downturn.
The following month, it repaid the U.S. government’s $3.1 billion Troubled Asset Relief Program, or TARP; it is one of the few banks to do so this year online payday loans.
The latest offering buttresses the bank’s tangible common equity ratio on the heels of the Colonial acquisition, a deal dilutive to BB&T’s capital. During the ongoing banking sector downturn, analysts and industry observers have used the tangible common equity ratio to gauge a bank’s health and ability to absorb climbing credit issues.
Most banks, analysts said, are attempting to keep the ratio at more than 6 percent; BB&T’s stood at 6.5 percent at the end of June, but that was before the Colonial takeover.
“They want to keep it at 6 percent, there’s no doubt about that,” Marinac said.
Credit Suisse Securities LLC and Deutsche Bank Securities are underwriters for the common stock offering and it will be co-managed by subsidiary BB&T Capital Markets.
BB&T shares were trading at $26.93, down 4.6 percent, on the New York Stock Exchange, underperforming the KBW Banks .BKX, which was down 3.2 percent.
(Additional reporting by Archana Shankar in Bangalore, Editing by Dinesh Nair and Gerald E. McCormick)
Struggling Northwest Plaza in St. Ann is scheduled to absorb another blow when it is expected to enter foreclosure Sept. 1.
St. Ann City Administrator Matt Conley said Thursday that the city hopes the mall will remain open and will be redeveloped in the vision proposed by its owners when they bought Northwest Plaza in 2006.
The foreclosure notice filed this week is against NW Plaza Owner LLC, which was formed by Somera Capital Management, of Santa Barbara, Calif., and Zelman Development Co., of Los Angeles. Efforts to reach representatives of both companies were unsuccessful. Tim Just, the mall’s manager, declined to comment.
Conley said he anticipates the foreclosure will result in the lenders assuming ownership of the mall. Such an outcome, common in foreclosures of commercial property, typically leads to the lender’s effort to find another buyer for the property.
The meltdown last year in the financial industry "has really put a crimp on redevelopment projects" such as Northwest Plaza, Conley said. The lender is a group of about 17 investment and pension funds, he said.
"There’s no money to do these projects," he said. "All the money from Washington, D.C., has not trickled down to the local street level."
St. Louis County records show that NW Plaza Owner LLC paid $45 million for the mall, once billed as the world’s largest shopping center, in June 2006. The mall has since declined in value. Northwest Plaza’s appraised value of nearly $44.3 million in 2008 fell to $31.8 million this year, according to county assessment records.
At the end of March, the 1.8-million-square-foot mall was 40 percent occupied, according to Fitch Ratings. Contributing to the skid were the closings of Dillard’s and Steve and Barry’s. The anchor stores remaining are Macy’s and Sears.
The trouble at Northwest Plaza is far from unique among older, enclosed malls. General Growth Properties, the Chicago company that owns the St. Louis Galleria, is in bankruptcy. General Growth also manages Northwest Plaza and has stakes in other malls nationwide.
Crestwood Court, which lost its Macy’s last year and was once a competitive St no fax payday loans. Louis County mall, is trying to remake itself as a center for arts groups. Downtown’s St. Louis Centre, now closed and awaiting redevelopment, went through foreclosure in 2004.
Retail analysts say shoppers’ preference for newer, outdoor "lifestyle" centers hurt enclosed malls. Those not close to major highways also tend to suffer even more, the analysts say.
Northwest Plaza’s current owner put the mall up for sale in 2008. At the time, the owner and the city said a $250 million redevelopment plan, including $96 million in public funding, would proceed. The plan was to return the mall to its open-air format. Retail space was to be reduced, and up to 450,000 square feet of office space was to be added. But that plan, including the addition of a Wal-Mart Supercenter, never materialized.
Salespeople at mall stores said Thursday they had heard nothing about the foreclosure. One clerk, who did not want to be identified, said there have been rumors that developers were unable to get financing to convert the property back into an open-air mall.
NW Plaza Owner LLC bought Northwest Plaza from Australia-based Westfield Group, which had owned the mall for about nine years. Westfield at one point owned six St. Louis-area malls, renaming them with variations of the name "Shoppingtown." The company sold the last of its St. Louis malls last year.
Westfield bought Northwest Plaza in 1997. New York-based Paramount Group bought the mall in 1984 from its original owners, Saul Brodsky and brothers Louis I. and Milton L. Zorensky, who built the mall in the 1960s.
Conley said the structure of the public assistance for mall redevelopment remains. He noted that city officials hope for an eventual revival of St. Ann’s largest commercial property.
"I don’t think there’s anybody who would disagree that something needs to be done up there," he said.
Gail Appleson of the Post-Dispatch contributed to this report.
Microsoft Corp put its new Zune HD digital music and video player on sale on Thursday, pricing it below comparable Apple Inc iPod devices, in an attempt to claw some market share away from the dominant leader.
The devices, which are available for pre-order but won’t hit shelves until September 15, are priced at $219.99 for the 16 gigabyte version and $289.99 for the 32 gigabyte version. Comparable iPod Touch players are priced at $299 and $399 respectively.
A 16-gigabyte player typically holds about 4,000 songs fast cash personal loans.
Microsoft’s new Zune HD is slimmer than previous version and has a touch screen for the first time. The range comes in five colors and has a built-in radio receiver, Wi-Fi, and can display high-definition video to a big screen.
(Reporting by Bill Rigby; Editing by Derek Caney)
Powered by WordPress -- XHTML 1.0