Yearly Archives: 2011

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Exploring Alternatives to Traditional Banking

During the last decade, online banking has become one of the fastest growing Internet activities.  Online banks, also called virtual or direct banks, have no physical network of branches. Proponents say the resulting lower cost structure allows online banks to offer reduced fees and more competitive rates.

Online bank customers can bank 24 hours a day, 7 days a week from home or office via the Internet through secure websites, by phone or chat, or via mail using postage-paid envelopes.  Deposits can be made online using scanning applications provided by the bank.  Disadvantages of using an online bank include the inability to make cash deposits and waiting longer for physical items such as certified checks (these can take 7 to 10 days to arrive in the mail).

Another alternative to the traditional bank is a credit union.  These non-profit membership co-ops provide most of the services of a traditional bank. However, fans say credit unions deliver more personal customer service.  Being non-profit, credit unions may pass savings on to their members in the form of lower and fewer fees and more attractive rates, just as online banks can. Membership usually requires an affiliation of some sort through employment or other connection.  For example, one prominent credit union serves mainly current or former members of the military.  But, as Mark Huffman of ConsumerAffairs.com points out, “Over the years, these requirements have been loosened to the point that almost all consumers can find a credit union they can join.”

Keep in mind that switching banks can be complicated.  For example, direct deposits have to be rerouted to the new account.  Any automatic periodic bill payments also must be set up anew.  Some banks offer Switch Kit, a step-by-step guide (including forms, telephone numbers and other information) to walk consumers through the process of getting a new bank account up and running.

By |December 27th, 2011|Current Affairs, Financial Planning|

Is it Time to Roll Over Your Retirement Accounts?

How many retirement accounts do you have? If you’ve changed jobs a few times throughout your career, you could have several accounts housed in different employers’ plans.

While it is certainly acceptable to leave money in an old plan, in some cases it may be a better idea to consolidate your assets. (If your account value is less than $5,000, your former employer can cash you out of the plan, making it imperative to have a back-up destination for those assets.) Having your retirement portfolio in one place can make it easier to track performance and make changes, which help ensure proper asset allocation of your portfolio.

Be sure to first compare the investment options of your old and new plans — and/or any IRA option you are considering — and their associated fees. Were you able to properly diversify your assets in your old plan?  If your investment choices were limited, you may want to move your money. Are the investment fees in your old plan higher or lower than in your new plan? If you were paying more for the investments in your old plan, it could help save you money to move your assets.

Is it time to roll over your retirement accounts?

Your investment advisor or financial planner can help you find the answers to these questions and decide if a rollover makes sense in your situation.

Initiating a rollover is easy. First, check your current plan rules to confirm that rollovers are permissible (the vast majority of workplace retirement plans accommodate rollovers). Next, simply contact the financial institution that will house your account. They will either have you fill out a form or have a representative help you through the process.

Be sure to understand the difference between a rollover and a distribution. A rollover allows you to transfer your money from one qualified retirement account to another without incurring any tax consequences. A “qualified” account can be either your new employer’s plan or a rollover IRA.

A distribution is essentially a withdrawal from your account. If you request a distribution, the account administrator is required by law to withhold 20 percent of your account balance to pay federal taxes. State taxes, if applicable, are also due. If you are under age 59½, you could be subject to an additional 10 percent federal early-withdrawal penalty. You can roll over assets from a distribution within 60 days of receipt and reclaim those tax withholdings. If you wait longer than 60 days, a rollover is not permissible.

Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
Required Attribution: Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content. © 2011 McGraw-Hill Financial Communications. All rights reserved.
By |December 13th, 2011|Investing, Retirement, Taxes, Uncategorized|

Leadership, Perseverance, Hope

Last month, I attended the Schwab IMPACT conference for investment advisors in San Francisco. This invitation-only financial-industry conference brings together independent investment advisors with influential presenters, exhibitors and experts to learn about and collaborate on key issues and best practices. It was my extreme honor to speak on a panel about building and managing an advisory business.

Photo Caption: Investment Advisor Mike McCann (left) with U.S. Navy Captain Mark Kelly at the Schwab IMPACT conference, November 2011

In addition to continuing education sessions, I had the pleasure of sitting in on inspiring keynote presentations by Tony Blair, former Prime Minister of the United Kingdom; Maria Bartiromo, anchor of CNBC’s Closing Bell and host/managing editor of the nationally syndicated Wall Street Journal Report; and Charles Schwab, founder and chairman of the Charles Schwab Corporation. Their insights on the economy, global events and the future were enlightening.

American hero, U.S. Navy Captain Mark Kelly also was a keynote speaker at IMPACT. Kelly served in the Persian Gulf and flew in dozens of missions during Operation Desert Storm. During his tenure with NASA, Kelly  was an astronaut on four space shuttle missions, including one as the leader of Discovery and another as the commander of the final flight aboard Endeavour in May of this year. He spoke, in part, about the importance of thinking individually and dangers of falling into a “group think” mentality. “None of us is as dumb as all of us,” Kelly said, quoting a popular NASA saying.

He is married to Congresswoman Gabrielle Giffords, who was the target of an assassination attempt in January 2011. Regarding Giffords’ surprise return to Congress in August 2011, Kelly asked, “Have you ever packed for your wife for a trip? This is the most risky thing I’ve ever done.”

Kelly’s overall message of leadership, perseverance and hope was both humbling and uplifting. He believes America must continue to be a leading presence in the world, sharing our values of freedom, family, community and self-reliance for the betterment of all humankind.


By |December 6th, 2011|Advisors, Company News, Current Affairs, Uncategorized|

How Closely Correlated Is Your Portfolio?

Investors hear a lot about the benefits of asset allocation, that is, spreading your assets among different types of investments to help reduce risk. But less discussed is an equally important measurement: correlation, which is a way to measure how closely related two types of investments are. In theory, you could be invested in multiple securities of differing types and classes, but if they are all closely correlated, your portfolio may not be as diverse as you think — and that could open you up to more risk than you intended.

Correlation is expressed as a number between 1.00 and -1.00:

  • 1.00 indicates an absolute positive correlation (that is, the assets under comparison always move together in the same direction).
  • 0 correlation indicates there is no relationship between the assets.
  • -1.00 indicates an absolute negative correlation (the assets always move together in opposite directions of each other).

Generally, most experts consider a correlation value between 0 and 0.50 as a weak correlation, while a value of 0.50 and higher is progressively stronger. The farther from a 1.00 correlation two investments are, the more diversification you may realize.

If you’d like to determine the correlation of your portfolio, the easiest way may be to contact your financial professional. You can also search the Web for an investment correlation calculator — a number of brokerage firms and other financial sites have tools, but few are free to use.

The Markets March in Unison

One important consideration for investors to keep in mind is that the financial markets are increasingly marching in unison, making correlating your investments increasingly difficult. A variety of factors are causing this trend, including:

  • Globalized economies: The growth of global trade and the proliferation of worldwide investment firms mean that the fortunes of both large corporations and the investors who own their stock are tied together as never before.
  • Reliance on U.S. dollars: Many foreign governments and global financial institutions rely on U.S. dollars as a reserve currency to pay debts or to influence exchange rates. Given this situation, the health of the U.S. economy and the actions of the Federal Reserve reverberate globally, as do events in Europe and beyond.

What Investors Can Do

If climbing correlations concern you, consider strategies that may help you balance risk and return, including:

  • Combining stocks with other types of assets. Adding exposure to bonds, real estate and commodities may help you to balance returns over the long term.
  • Considering investments that generate income. Dividend-paying stocks, bonds and REITs are popular with investors searching for income. When stock returns are uncertain, dividends may provide something in the way of a return (though dividends are not guaranteed).

Remember that alternative investments and commodities are risky, too. REITs are subject to the ups and downs of the real estate market, and the volatility of gold during the past 10 years is close to that of stocks. The returns of these investments do not always track the U.S. stock market.1

1Source: Standard & Poor’s. Returns are for the 10-year period ending December 31, 2010. Volatility is measured by standard deviation.
Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
Required Attribution: Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content. © 2011 McGraw-Hill Financial Communications. All rights reserved.
How Closely Correlated Is Your Portfolio?
By |November 29th, 2011|Current Affairs, Investing|