Who Can You Trust With Your Money?: Get the Help You Need Now and Avoid Dishonest Advisors

220 Pages·2010·2.76 MB·English

by  Bonnie Kirchner

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Who Can You Trust
With Your Money?
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Who Can You Trust
With Your Money?
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G H Y N N
ET THE ELP OU EED OW
A D A
AND VOID ISHONEST DVISORS
B K , CFP®, MST
ONNIE IRCHNER
Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
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Senior Compositor: Jake McFarland
Manufacturing Buyer: Dan Uhrig
©2010 by Pearson Education, Inc.
Publishing as FT Press
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publishing this book. Each individual situation is unique. Thus, if legal or financial
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Printed in the United States of America
First Printing February 2010
ISBN-10: 0-13-703365-6
ISBN-13: 978-0-13-703365-2
Pearson Education LTD.
Pearson Education Australia PTY, Limited.
Pearson Education Singapore, Pte. Ltd.
Pearson Education North Asia, Ltd.
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Pearson Educatión de Mexico, S.A. de C.V.
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Library of Congress Cataloging-in-Publication Data
Kirchner, Bonnie, 1967-
Who can you trust with your money? : get the help you need now and avoid dishonest advisors /
Bonnie Kirchner.
p. cm.
Includes index.
ISBN 978-0-13-703365-2 (hardback : alk. paper) 1. Financial planners—United States. 2.
Investment advisors—United States. I. Title.
HG179.5.K57 0010
332.6—dc22
2009042822
Who Can You Trust With Your Moneyis dedicated first and
foremost to my parents, Ted and Kathy Kirchner, who gave
me the tools at a very young age to become a financially
responsible adult so that I could in turn help others. Without
their love and support and that of my sister, Peggy Cavanaugh,
and my brother, Eric Kirchner, my niece and nephew, Katie
and Sean Cavanaugh, as well as my truly amazing friends,
colleagues, and clients, I don’t know how I could have found
my footing after my ex-husband’s dramatic confession, along
with all that ensued, and emerge on the other side stronger,
more compassionate, open and loving, and better equipped to
deliver financial education with passion. I am forever grateful
to all of you. My mother-in-law, Mary Frances Bleidt, who
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has always inspired me with her dedication, passion, creativity,
and inner strength, continues to do so despite being a
victim herself. I thank her and her family, including my
step-children, for being so supportive of me despite all of
the turmoil introduced into their own lives.
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Contents
Acknowledgments . . . . . . . . . . . . . . . . xi
About the Author . . . . . . . . . . . . . . . xii
Introduction . . . . . . . . . . . . . . . . . . xiii
Chapter 1 Recent Investment Scams . . . . . . . . . . . 1
Bradford C. Bleidt . . . . . . . . . . . . . . . . . 1
Bernard Madoff . . . . . . . . . . . . . . . . . . 8
Chapter 2 What Is Financial Planning? . . . . . . . . . 15
Chapter 3 The Meaning Behind Advisor Designations
and Licenses . . . . . . . . . . . . . . . . . . 21
Chapter 4 Advisor Compensation . . . . . . . . . . . . . 31
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Chapter 5 Deciphering Fee Structures . . . . . . . . . . 35
Portfolio Development and Asset
Management . . . . . . . . . . . . . . . . . . . 35
Financial Planning . . . . . . . . . . . . . . . . 36
Stocks, Bonds, and Exchange Traded Funds . . . 36
Mutual Funds . . . . . . . . . . . . . . . . . . 37
Variable Annuities . . . . . . . . . . . . . . . . 39
Indexed Annuities . . . . . . . . . . . . . . . . 41
Insurance . . . . . . . . . . . . . . . . . . . . . 41
Chapter 6 Finding Additional Fees . . . . . . . . . . . . 43
Managed and/or Brokerage . . . . . . . . . . . 43
vii
WHO CAN YOU TRUST WITH YOUR MONEY?
Variable Annuities . . . . . . . . . . . . . . . . 44
Mutual Funds . . . . . . . . . . . . . . . . . . 45
Exchange Traded Funds and Index Funds . . . 46
Chapter 7 Financial Products and Advisor
Compensation . . . . . . . . . . . . . . . . . 47
Investment-Related . . . . . . . . . . . . . . . 48
Insurance Coverage . . . . . . . . . . . . . . . 49
Financial Planning . . . . . . . . . . . . . . . . 50
Chapter 8 Statements, Communications, and the
“Dreaded” Prospectus . . . . . . . . . . . . . 51
Statements . . . . . . . . . . . . . . . . . . . . 51
Prospectuses—Mutual and Exchange
Traded Funds . . . . . . . . . . . . . . . . . . 53 ptg
Shareholder Updates and Annual Reports . . . 55
Prospectuses—Variable Annuities . . . . . . . . 56
Standard Charges (on Most Contracts) . . . . . 56
Rider Electives . . . . . . . . . . . . . . . . . . 57
Proxy Materials . . . . . . . . . . . . . . . . . . 57
Chapter 9 The Roles of Various Financial
Institutions . . . . . . . . . . . . . . . . . . . 59
Investments in Insurance Products . . . . . . . 61
Investment Management and Investment
Product Sales . . . . . . . . . . . . . . . . . . . 63
The Broker/Dealer . . . . . . . . . . . . . . 63
The Custodian . . . . . . . . . . . . . . . . . 64
viii
CONTENTS
The Federal Deposit Insurance
Company . . . . . . . . . . . . . . . . . . . . . 65
The Securities Investment Protection
Corporation (SIPC) . . . . . . . . . . . . . . . 66
Chapter 10 Understanding What You Need . . . . . . . . 67
Chapter 11 Choosing Advisors to Consider . . . . . . . . 77
Chapter 12 Choosing Candidates to Interview . . . . . . 81
Chapter 13 Interviewing Candidates . . . . . . . . . . . . 85
Preparing for the Meeting . . . . . . . . . . . . 85
During the Meeting . . . . . . . . . . . . . . . 92
After the Meeting . . . . . . . . . . . . . . . . 97
Chapter 14 Spotting Red Flags: Advisors to Avoid . . . . 101
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The Name and Information
Gathering Phase . . . . . . . . . . . . . . . . 101
During the Meeting . . . . . . . . . . . . . . 104
After the Meeting . . . . . . . . . . . . . . . . 106
Advisors to Avoid . . . . . . . . . . . . . . . . 107
Chapter 15 The Rules of Engagement . . . . . . . . . . 111
Chapter 16 Maintenance of the Advisor–Client
Relationship . . . . . . . . . . . . . . . . . . 127
Chapter 17 Activity . . . . . . . . . . . . . . . . . . . . 131
Chapter 18 Accessibility . . . . . . . . . . . . . . . . . . 135
Chapter 19 The Dysfunctional Relationship . . . . . . . 137
Chapter 20 Criminal Versus Non-Criminal
Behavior . . . . . . . . . . . . . . . . . . . . 143
ix