Ken Himmler.com

In the wake of the recent 300-million dollar investment scandal in Sarasota, financial advisor Ken Himmler has five questions every investor should ask before selecting a financial representative. View this link to hear Ken’s recent interview on Tampa Bay’s Channel 10.  

http://www.tampabays10.com/news/local/story.aspx?storyid=98649

1) Does the advisor have a clean record? Regulatory bodies such as the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) provide on line resources for investors to research in any complaints have been filed against a financial professional. Third party resources, such as the National Ethics Bureau, allow for consumers to gather the comprehensive background information of a financial professional.

FINRA http://www.finra.org/brokercheck

SEC http://sec.gov/investor/brokers.htm

NEB www.ethicscheck.com

#2 Does your financial representative have custody of your financial accounts? Firms that have full custody of your financial accounts are technically in the position to liquidate those accounts. Advisors with custody do not have strict regulatory channels to go through when making trades on your behalf.

#3 Where is the advisor recommending you put your money? Be involved in your advisors investment strategy and don’t be afraid to check their work and ask questions.

#4 Does your financial representative invest your money in private funds? Hedge funds are private investment vehicles and are only lightly regulated. Often, the person who sells and manages the fund is also the controller of invested monies and is the one responsible for verifying the fund amount to any regulatory party.

#5 Is your financial representative held by fiduciary rules or rules of suitability? Stockbrokers otherwise referred to as registered representatives, are typically only held to the rules of suitability, rather than fiduciary responsibility. Suitability rules mean if the broker or manger loses your entire account value while under his or her management, but can establish you were an accredited investor or could afford the loss; their liability for the loss would be limited. Investment advisors, financial planners, and similar are subject to higher regulatory guidelines meaning they are liable for the overall financial strategy and could be held liable if they were to lose a significant portion of one’s investment portfolio.

In today’s plunging real estate market, more and more properties are being sold for far less than their previously held value from years past. While it is certainly a buyer’s market in many communities, this doesn’t mean that investment properties are the best investments if you are retired or retiring soon.

Traditionally, real estate investments appreciate in value but this typically takes a considerable amount of time, especially when you consider any fix-up repairs, mortgage interest, property taxes, and the commissions you would have to pay to the selling agent.

There are pros and cons to both short-term and long-term property investments so you’ll want to speak with an investment advisor to see if real estate is a viable option based on your long-term plans. For example, if the plan is to keep the property for 15-20 years then a higher return is more probable but your long-term repair liabilities will also be much higher than if you only planned to hold a property for five years.

With a short-term property investment you will typically face a greater risk because of the volatile nature of the market and the need for retirement funds to be more easily accessible. As well, if the idea is to turn the home into a rental property then you’ll want to make sure that you’re up for the typical tasks and frustrations of being a landlord.

For some, taking on the role of landlord can become stressful and expensive, whereas others find it enjoyable. It really comes down to the tenants you lease to and the price you paid for the property. If you pay too much for the property then this will affect both your long-term return when it’s time to sell and your short-term gains because you’ll be pocketing less each month after making your payments.

Another huge consideration before deciding to purchase investment property is the threat of unforeseen expenses such as roof repairs, replacing carpeting, electrical issues, etc. The last thing you want is to be forced to use retirement funds to repair a home you don’t plan on holding for the long term because this will severely impact how much you profit or lose in the ultimate sale of the property.

If you do decide to pursue a rental property, it’s critical that you leave emotion out of it. While your own home may have been an emotional purchase, which can lead to bloated "I gotta have it!" type offers, you can’t afford to fall into the same trap when pursuing investment property. You need to be logical and if you’re going to be emotional over anything, become emotional over the numbers and make sure the return on investment is going to pay off.

Even if you fully intend to carry a bond through to maturity, the issuer of the bond may have other plans. If interest rates fall heavily and the issuer of your investment bond opts to lower its interest rate expenditures then they may exercise their right to redeem or call in their bonds even before they mature.

If you own a bond that is “callable” then there is some risk of this happening if interest rates drop to attractive levels for the issuer. Should this occur, the issuer will only be required to pay you par value for the bond and this will result in you receiving less than the current market price.

One of the unfortunate aspects of having a bond called is that the market environment that motivates issuers to redeem a bond is the same that often leads to higher bond prices. So not only do you lose the potential of a pre-maturity profit by selling the bond, you’re forced to sell earlier and for less money than you want.

While many callable bonds will have call protection where the bonds can’t be called for a certain period of time, you won’t have any choice but to take par value when and if they do opt to call it in.

It needs to be said that even if interest rates fall, this doesn’t mean your bonds are automatically going to be called in. The issuer will have to see that it can lower its costs by redeeming the bonds at par value and then selling additional bonds with lower yields. Typically, interest rates would have to drop significantly for this to happen.

Because callable bonds carry the risk that you won’t get the return you anticipate, they typically pay a higher rate of interest than non-callable bonds. When considering bond investments, you’ll want to weigh the pros and cons of higher interest/higher risk or lower interest/lower risk depending on your investment goals.

In today’s volatile market environment, more and more investors are seeking refuge in stability. When most people think about investment bonds they conjure up words such as safe, steady, reliable.

In reality, it is still possible to lose money in bond investing which is why investors are urged to diversify their bond investments. By building a portfolio of investment bonds with varying interest rates, maturity dates, and associated risks such as creditworthiness, you can better protect the overall return on your investment.

Many people are aware of the obvious risks in bond investing, such as the issuer going bankrupt or defaulting on scheduled interest payments, but what about the less obvious risks that can still impact bond investment return?

While it’s true that the interest payments you will receive from owning an investment bond will be steady, the actual return that you receive when you sell your bond can vary. Let’s explore how the risk of interest rate fluctuation can influence the profit or a loss you take on your bond investments.

You may think that a higher interest rate would equate to a higher return, but the opposite is true in bond investing. When interest rates rise, it is highly probable that the issuer will offer new bonds with a higher paying interest rate. If this happens, then the value of older, lower-yielding bonds will take a hit. Given the choice, investors will opt for the higher interest return and this will impact your ability to sell.

It’s important to note that this fluctuation only applies to investors who opt to sell or trade bonds before their maturity date. If you hold an investment bond to maturity then you will be paid the full face value of the bond. That said, planning to hold a bond to maturity still doesn’t guarantee a return. In fact, interest rate fluctuations, especially a fall, can still impact your bond investments.

For example, if interest rates fall significantly, as they certainly have over the past year, bond issuers may opt to exercise their right to call in their bonds even before maturity. In our next post, we’ll explore why this happens and how exposed you are to the risk of having a bond called in early by an issuer.
 

This new law was just signed by President Bush on December 23, 2008 and it includes the suspension of Required Minimum Distributions (RMDs) for 2009. It states that individuals are are not required to take any distribution from their IRA or any other retirement plan for 2009.  This legislation contains numerous pension related provisions; however, a taxpayer who attained age 70 1/2 during 2008 has to receive their initial distribution by April 1, 2009 despite this law change, as that distribution is for 2008.  Taxpayers in this situation may have already received their initial distribution in 2008, and thus no further action is required.

The RMD is calculated based on life expectancy tables that are applied to the fair market value of the retirement account(s) as of the end of the prior calendar year.  Under the Internal Revenue Code, upon reaching the age of 70-1/2, individuals must begin receiving RMDs from their IRAs, 401(k) plans, and other retirement plans.  The initial RMD must be received no later than April 1 of the year following the year the age of 70-1/2.  Thereafter, annual distributions are required.

It should be noted that taxpayers who are required to get RMDs during 2008 have had to receive distributions based on the much higher fair market value of their retirement plan asset portfolios that existed on December 31, 2007, compared with the current values.  The 10% penalty for premature distributions taken from an IRA or other retirement plan prior to age 59-1/2 has not been changed for 2009.

Although this new law has been signed, many people will still choose to  take distributions from IRAs and other retirement plans during 2009 to cover living expenses and provide necessary cash flow in these difficult times .