What Makes A Difference?

I’ve been dwelling with this question for a while. Like any good, real, question it is taking me for a ride. What makes a difference? Before I get into my response to this compelling question, I just want to extoll the value of a good question.  A really good question, such as this one, doesn’t […]

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Financial Consumers, Beware: “All Financial Advice Comes with Conflicts of Interest” says MarketWatch

When it comes to getting good, unbiased financial advice, do you know where to turn? And are you confident that the fees you’re paying justify the service your financial planner is providing for you? It turns out, based on this recent column we read on MarketWatch, that even savvy investors can find themselves paying exorbitant fees for bad advice – advice that can cost them thousands in unnecessary taxes and substandard returns on their investments. Even for the majority of us with relatively modest-sized retirement portfolios, this column, written by retirement expert and author Chris Mamula, sounds an important alarm, warning us against trusting our financial adviser too blindly.

Personal Experience

“I began writing about personal finance to create a positive outlet for the anger, regret, and pain I experienced because of investing mistakes I made as a young professional,” Mamula begins his column. As he explains, he became a consumer advocate “to help others avoid repeating my mistakes” – errors which, he explains, “were the result of blindly following the advice of a financial adviser without performing due diligence.” By Mamula’s estimation, the self-serving advice of his adviser ended up costing thousands in unnecessary fees and taxes. “Compound the effects of these mistakes over decades,” he writes ruefully, “and this was literally a million-dollar mistake.”

Are all financial advisers bad people who are out to fleece their clients? Of course not, and that’s not what Mamula in his MarketWatch article is saying. Here at AgingOptions we agree that many men and women in the field of financial counseling and investment services perform an invaluable function every day for their clients who rely on their honesty, advice and expertise. The problem, Mamula suggests, is that there are a limited number of ways for financial advisers to earn a living, and in virtually every scenario, there are potential conflicts of interest in which the benefit to the adviser and the benefit to the client of any financial strategy or purchase clash. “I strongly recommend that you understand that financial advice comes with inherent conflicts of interest,” writes Mamula. “As a consumer, you must understand what these conflicts are, so you can make good decisions and protect your interests.”

Three Types of Compensation

The article provides a helpful overview of how financial advisers and planners are paid. “There are essentially three models to compensate advisers, says Mamula in MarketWatch. “You can pay for financial advice through commissions on products you buy. You can pay as a percentage of assets under management. Or you can pay a direct fee for financial advice. Each comes with unique upsides, downsides and conflicts.”

  • Commissions: Here the adviser receives a sales commission on the financial products you buy. Mamula says that for most middle-income clients, commission-based financial advice is the most common. However, he adds, “The conflicts of interest are obvious. A financial adviser paid by commissions is really a salesman of investment products.” That means you have no way of knowing if the adviser is basing his or her financial recommendation on what’s best for you or on which firm pays the biggest bonus.
  • Assets Under Management: In this common model the financial planner is paid a percentage based on the amount of your money he or she is managing. Proponents claim this model eliminates conflicts of interest: “Because advisers are paid a percentage of the wealth you accumulate,” says Mamula, “they claim an adviser’s interests are aligned with the investor’s, because both a client and adviser benefit when wealth grows.” But, he adds, “I disagree.” The problem here is that advisers are paid to keep your money under their management, not necessarily to advise you objectively. What if your funds might be better invested elsewhere? “There is incentive [under this model] for the adviser not to rock the boat. Remember, they get paid for having assets under management, not for giving good advice.”
  • Fee Only: “The third model,” says Mamula in MarketWatch, “is paying a fee only for advice you receive. This is the most transparent model” because you are paying pre-determined fees directly to the planner. While you might think that the fee method of compensation eliminates most conflicts of interest, it’s not a perfect system, because advisers don’t earn as much if they keep things simple. “The problem with paying for investing advice is the incentive it creates to make things complicated,” Mamula warns. “Unnecessary complexity is common in the financial industry. Making investing complex is a way for the financial industry to justify their existence” by forcing clients to rely on them to keep everything straight.

Compensation Can Mean Conflict

The point, Mamula reminds us, is to assume that all financial advice comes with inherent conflicts of interest. “If you plan to seek investment help, you need to understand how your financial adviser is paid and the conflicts this can create. Go in with your eyes wide open or your vision may soon be further obscured when storm clouds start forming.”

Here at AgingOptions, we think this is sound advice, but we would take it a step farther.  As Rajiv Nagaich puts it, there’s a big difference between the process of getting good advice and the process of implementing that advice. “Advice, especially financial advice, should be about getting to the how-to answers,” Nagaich says. “Then, once your strategy is clear, you can seek out the least expensive options to put that strategy to work.” By employing low-cost, low-frills firms like Vanguard or Charles Schwab, even a relatively inexperienced investor can put his or her retirement funds to work without incurring the burden of unnecessary fees, commissions and taxes. “There’s no need to pay a so-called professional for financial transactions most average retirees can manage for themselves,” Rajiv suggests.

Much More Than Money

If there’s one area where good, comprehensive advice is absolutely necessary, it’s in the area if retirement planning, where there’s far more at stake than simply worrying about money. You also need to protect yourself and your estate legally and medically. You need to prepare carefully for your present and future housing needs. You need to ensure that your family is aware of your desires and will support their implementation. The only way we know of to build a plan that encompasses all these facets is with a LifePlan from AgingOptions. A LifePlan truly becomes your road map to fruitfulness and security in all aspects of your retirement future.

We invite you to come join Rajiv Nagaich at one of our free LifePlanning Seminars. Do what thousands have done and invest just a few hours with Rajiv, and we assure you, you’ll never look at retirement planning the same way again. For a complete listing of currently-scheduled seminars, visit our Live Events page. We’ll look forward to meeting you soon at an AgingOptions LifePlanning Seminar with Rajiv Nagaich.

(originally reported at www.marketwatch.com)

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Bleak Assessment: is the Pharmaceutical Industry “Giving Up” on Finding an Alzheimer’s Cure?

Here in America we like to think the smart men and women in their lab coats, working in their well-equipped research labs, can tackle pretty much everything when it comes to our medical problems. After all, it seems to work that way in the movies! But this is real life, and while we love to celebrate the great strides medical science continues to make in preventing (and one day curing) deadly diseases like heart ailments and many types of cancer, the most frightening disease of all still remains stubbornly resistant to our scientific efforts. We just don’t seem any closer to a medical treatment for Alzheimer’s disease.

That appears to be the conclusion from this sobering column that was just published on the Quartz website. Written by Quartz reporter Katherine Ellen Foley, this article is called, “Why the pharmaceutical industry is giving up the search for an Alzheimer’s cure.” Indeed, as Foley writes, there have been a series of recent clinical trials that have failed or otherwise proved disappointing in addressing the relentless progression of Alzheimer’s disease, the dementia that afflicts well over 5 million Americans. “This year,” Foley writes, “the total cost of caring for all of the people in the US with this disease is expected to reach $1 trillion—higher than it’s ever been before. And yet despite what has obviously become a crisis, there hasn’t been a new treatment for Alzheimer’s in over a decade.”

Frustration and Failure

Foley reports that, while there are some psychiatric drugs that may help dementia patients deal with their anxiety, there are still no drugs that do a good job of slowing memory loss, and the most recent of those to be approved – sold as Namenda – is 15 years old. During the past decade and a half, a Who’s Who of pharmaceutical giants have tried and failed to get new dementia drugs successfully through clinical trials: Eli Lilly, Axovant, Merck, Biogen, and Prana Biotech. Biomed colossus Pfizer, after facing a round of clinical setbacks, announced its decision last January to “drop out of the Alzheimer’s drug game entirely,” Foley writes.

What makes Alzheimer’s disease so fiendishly hard to attack? Writing in Quartz, Foley says that this type of dementia poses three enormous challenges for researchers. First, the disease typically shows no symptoms at all for years, even decades, and by the time symptoms manifest themselves the brain is already too damaged to treat. Second, there are presently “no good methods to tell if someone has the early, biological stages of the disease,” writes Foley. “At the moment, the only definitive diagnostic tools for Alzheimer’s detection are costly or painful” – so much so that they can’t be used for general screening.   This leads in turn to the third problem, which involves the difficulty of recruiting the right patients for clinical trials. “Healthy people,” says Foley, “have no incentive to enroll in these types of drug studies, and there’s no good way to identify people with risk for the disease, or even initial biological signs of the disease.” The result is a stalemate: “In essence, scientists currently have no way to study Alzheimer’s patients for long enough to test memory-loss prevention drugs.”

Focus on Early Detection

The Quartz article goes into long and interesting detail about the history of this little understood disease, and also about funding for Alzheimer’s research which got a huge shot in the arm when the Obama administration made it a national goal (with funding to match) to find a cure by 2025. But in spite of research spending which hit $1.4 billion in 2017 (and which will decline to about $837 million in 2018 according to the National Institutes of Health), there hasn’t been much progress on the drug front. That’s why researchers are starting to focus more closely on the challenge of early diagnosis. “In theory,” the Quartz article says, “the best way to treat Alzheimer’s disease would be to stop the brain-cell destruction before it starts. The problem is that during the earliest stages of Alzheimer’s, people have no way of knowing that anything is wrong.”  Doctors are working to come up with blood tests or PET scans that can detect the presence of the plaque accumulations that are common inside the brains of those in dementia’s early stages. This approach is still in its infancy.

What about research into lifestyle changes – diet, exercise, socialization? This, too, appears promising, writes Foley (the National Academy of Sciences called one such report “inconclusive but encouraging”). As the Quartz analysis points out, though, it’s unlikely that big research dollars will flow into some of these non-pharmaceutical approaches. “Pharmaceutical companies still have the deepest pockets,” the article states. Even though clinical drug trials are terribly expensive, future drug sales typically make up for the up-front investment. Not so with lifestyle recommendations. “You can’t patent exercise or salmon-rich diets,” writes Foley. “Without the promise of a big payoff, it’s doubtful pharmaceutical companies will fund studies to explore whether and how these lifestyle interventions work.”

Plan for Any Eventuality

So what’s our advice here at AgingOptions? Is the picture all doom and gloom? Absolutely not. While a scientific breakthrough is always a possibility, the lifestyle changes most physicians advocate can only improve your quality of life, often without costing you an extra cent. But here’s our essential take-away: families simply have to do a better, more thorough job of planning for the future. This includes financial planning so you don’t run out of money. It includes planning your housing choices, so you can age in place as long as possible. You need to protect yourself legally so your wishes are honored. You need to prepare your medical plans both for the short term and long term. And on top of all that your family members – who may very likely become your primary caregivers – have got to be on the same page and know what will be expected of them. In short, you need an AgingOptions LifePlan, the only type of comprehensive retirement plan that helps you protect your assets, avoid becoming a burden to those you love, and escape the trap of unwanted and unplanned institutional care.

We urge you to bring your spouse and adult kids and join Rajiv Nagaich soon at an AgingOptions LifePlanning Seminar so you can learn more. This could absolutely be the most important investment of a few hours of your time that you will ever make! Visit our Live Events page where you’ll find dates, times and locations of upcoming seminars – then register online for the event of your choice or call us for assistance. You’ll discover peace of mind like you ever thought possible, once you embrace the protective power of an AgingOptions LifePlan.

(originally reported at https://qz.com)

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If You’re Facing Divorce, Make Sure Your Rights to Retirement Savings are Protected

We were reading financial columnist Michelle Singletary’s latest column in the Washington Post a few days ago when something in the article really grabbed our attention. It wasn’t the column itself, which was about “401(k) millionaires” – instead it was a reader comment buried far down in the Singletary column that set off warning bells. We felt this information needed to be shared with our AgingOptions blog readers.

An Unexpected Shock

A reader wrote to Singletary reporting that her husband had retired from the federal government some time ago. He had begun receiving estimated pension payments while the personnel office took their customary period of time (typically several months) to check the records and work out the details. Four months after his retirement, much to his shock, he received a letter from the federal Office of Personnel Management notifying him that henceforth half of his retirement pay and all of his retirement survivor benefits would be going to his ex-wife. Apparently, this gent had never read his divorce agreement which clearly stated what his ex would receive once his retirement date rolled around.

Fortunately, this case had a happy ending: the ex-wife had just started receiving her partial payments – completely unexpectedly – but as it happened, she was planning to remarry and wanted no part of the man’s benefits. The personnel office was able to get the situation settled in favor of spouse number two after an attorney successfully drafted documents reversing the original divorce agreement. But this does bring up a vital question: is there a way for divorcing spouses to protect each of their rights when it comes to divvying up retirement assets such as 401(k) balances, which these days are often among the largest assets a couple approaching retirement age owns?

Protecting Your Rights in a Divorce

At AgingOptions, our attorneys deal with this issue frequently. In searching for an article we could share with our readers that would answer the question, we found this insightful column on a website called The Balance, an article that appeared just a few months ago. “Even while you’re going through the difficulty of a divorce,” this article advises, “you need to make informed financial decisions regarding the division of the property that you and your spouse have accumulated during your marriage.” Because retirement savings, as we said above, are often a couples’ biggest asset, dealing properly with their disposition is vitally important. Sadly, however, this is often done improperly – or not at all. “Even as one of the most important issues, [retirement savings] also tend to be very complicated, subject to tax implications, and often not handled properly because of it,” says The Balance. The solution, this article says, is something called a QDRO, pronounced “Quadro” – a Qualified Domestic Relations Order.

Legally, if you or your spouse has an employer-sponsored retirement plan, you’re entitled to part of the balance. The converse is also true: if you’re the one with the retirement account, your spouse is legally entitled to a share. “But if your spouse was the primary breadwinner,” asks the column in The Balance, “how do you protect your share of his or her retirement account? What’s to stop your spouse’s employer from paying out the benefits to your spouse or ex-spouse, leaving you with little or nothing? The answer is generally a Qualified Domestic Relations Order.”  The QDRO is a court order that tells your spouse’s pension plan how your benefits will be paid out. Under such an order, for example, your share of the 401(k) can be separated out from the original account and deposited into your own IRA or 401(k) without penalty. The word “qualified” means the plan has to be approved both by the divorce court and by the Plan Administrator where you or your soon-to-be-ex-spouse is employed.

Preparation Requires Education

We won’t attempt to go into greater detail here, because the variables involved in a Qualified Domestic Relations Order can quickly get complicated. This is clearly one area where you need to plan ahead and get good legal counsel before proceeding with a divorce. As the column in The Balance says, “Divorce can be costly be in terms of upfront attorney fees and emotional health. But it can also have costly effects on your future financial security. Educating yourself is the first step. But be sure to take the appropriate legal steps to protect your rights and always employ a qualified team to help you do so.” We here at AgingOptions can certainly advise you in this critical area, and through our many regional offices of LifePoint Law, we can serve as your advocate should you prefer. Please contact us and allow us to walk you through the various scenarios in the often-confusing area of dividing assets – both today’s assets and tomorrow’s – in a divorce or separation.

When it comes to walking you through the various scenarios of retirement, that’s a particular specialty of ours. Retirement can also be confusing and complicated, but our desire is to help you make these important retirement planning decisions more manageable so that you can achieve the three most commonly-stated goals people have as they age: to avoid running out of money, to avoid becoming a burden to those who love them, and to avoid unplanned and unwanted institutional care. If these goals are so commonly, why do so few retirees ever succeed in realizing them? Because they fail to plan.

To protect your interests, we employ a strategy called LifePlanning, in which your finances, legal affairs, housing options, medical coverage and family communications are all woven together seamlessly, each element reinforcing the others. A LifePlan truly is the blueprint that will help you build the retirement of your dreams. Ready to learn more, without obligation or cost? Then come join Rajiv Nagaich soon at an AgingOptions LifePlanning Seminar. We have several scheduled for the coming weeks, and there’s bound to be one that’s convenient for you. Visit our Live Events page for details and online registration, or contact us for assistance. We’ll look forward to meeting you!

(originally reported at www.thebalance.com)

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