FINANCIAL CONCERNS

Everybody's Uncle

I am 73 years old and have managed my own financial affairs all my life. I am now concerned that I do not understand new developments, or companies, or funds the way I used to, or the way I should. I think I need a financial advisor to give me advice and suggestions regarding my approximately $200,000 portfolio. Any suggestions?

Unsigned

Dear Unsigned,

I will answer your question and provide some general information for other readers.

For most senior citizens, the most important considerations are:
Yield, to enhance your life style
Preservation of principal, to avoid losing assets that can or do generate income.

If you ask an insurance salesman for financial advice, he will sell you insurance or insurance related products. These are high commissioned products that exchange your present cash for future insurance benefits. Do not hesitate to ask the amount of commissions he receives on the products he offers. (Watch him squirm.)

If you call a Securities Broker, you may be introduced to stock, bonds, mutual funds and whatever other products they have to sell. Security sales are supposed to be risk appropriate but the lure of high commissions can alter the perception of " appropriate."

For seniors with no need to increase income, I recommend Bank CD's with no more than 24-month maturities and regular reviews with an eye to interest changes. Covered call writing on owned equities is strongly advised.

Government Security Funds, Utility Funds, Municipal or Corporate Bond funds, as well as Blue Chip Stock Funds have various risks that must be weighed on a case to case basis.

"Fee only" financial consultants that sell NOTHING are expensive but may be your best bet in the long run. Unfortunately, you may find yourself hearing about arrangements you need: living wills, annual service contracts, special needs trusts, long term health care, etc.

Again, these have to be considered on a case to case basis. Where contracts are involved a competent attorney is a must. Hire a completely independent lawyer, not one recommended by YOUR financial consultant. Collusion is always possible.

Generally speaking:

The question you must ask is "How can I get objective advice from a salesman with a product to sell?"

Here is how:
Understand that you have an obligation to educate yourself regarding any investment you make.

There are many excellent books available at bookstores and the local library that explain various products, typical fees, commissions and risk factors in each type of investment.

Armed with some knowledge, conversations with "salesmen" will be less intimidating and perhaps insightful.

For many individuals an "annual renewable term life" insurance policy is the least expensive protection for family needs. Term insurance combined with an established mutual fund that complements your investment risk tolerance can be an excellent financial program.

With a little knowledge you can avoid salesmen in adviser's clothing or, better yet, let them talk, insist on written information, assemble information, study, and then make your own decisions.

Letting them know that you have legal counsel in the wings and Everybody's Uncle on your side should keep them objective.


Everybody's Uncle