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Caring for Elderly Loved Ones from Afar

A New Approach to Selecting a Financial Advisor

What is the Real Reason You Should Invest?

CARING FOR ELDERLY LOVED ONES FROM AFAR

 There was a time when family members – grandparents, parents and children alike – lived in close proximity to each other, often in the same house. But that was then and this is now. And now, it’s becoming increasingly common for family members to live in different parts of the country. That trend is fast colliding with care-giving for the elderly.

 According to the MetLife Mature Market Institute’s Since You Care guide, there are some 34 million Americans providing care to older family members. And 15 percent of these caregivers, or 5.1 million, live one or more hours from the person for whom they are providing care.

 According to MetLife, these “long-distance caregivers,” in many instances, are caring for a parent or other older relative and are also employed and have dependent children of their own. Because of this, they are often referred to as the sandwich generation. “In some circumstances, due to actual physical distance and/or other constraints, the long-distance caregiver may be unable to provide the direct, everyday, hands on care, but is responsible for arranging for paid care and coordinating the services that are provided.”

 And that’s no easy task. In many cases, long-distance caregivers must often juggle the demands of two households. Often, they have to rely on reports from others about daily events. Just as often, they have to arrange and then rearrange work schedules, business trips and doctors’ appointments. In short, the task can be difficult, stressful, and time consuming, according to AARP. But there are a number of steps you can take to make the task more manageable.

Gather information and assess the need. Adult children should determine with their parents (and other family members) what help is needed. In some cases, adult children should consider hiring a professional geriatric care manager who can assess a family member’s needs and who, if need be, can provide ongoing case management. Geriatric care mangers are often familiar with the services that are available to aging parents. Finding a professional geriatric care manager is easy enough, say experts. The National Association of Professional Geriatric Care Managers has a Web site that provides links to association members, many of whom are former nurses or social workers (www.findacaremanager.org). A professional geriatric care manager might charge $100 to $500 for an assessment and $60 to $90 an hour for on-going care. If you choose this option,

work with geriatric managers who are licensed or certified by the states in which they work and be sure to conduct a full background check before you hire. Many states and municipalities typically have benefits and resources that can be used by qualifying individuals to help cover the costs of some of these services. Another resource, the Eldercare Locator (800.677.1116) can tell you which local agencies provide services and will refer you to the area agency on aging in your parents' community.

Be prepared. Before a crisis occurs, caregivers and older family members should complete and distribute widely a “caregiver emergency information” kit. That kit should contain all necessary medical, financial, and legal information, including doctors, medications, insurance information, assets, and Social Security numbers, wills, living wills, durable powers of attorney and health care proxies. Adult children should ask their parents to complete privacy release forms, HIPAA compliant, and keep copies on file with their parent’s doctor’s office. That way, the parent’s doctor can discuss an older family member’s health. MetLife has a caregiver booklet that can be downloaded from its Web site, www.maturemarketinstitute.com. AARP also has useful long-distance care-giving resources at its Web site, www.aarp.org. Caregivers might also consider using a personal medical alert emergency response system.

Develop an informal network. Experts say adult children should establish an informal support network composed of family, neighbors, friends, clergy, and others who might help. Adult children, when visiting their parents or older family members, should introduce themselves to neighbors and friends and keep their phone numbers and addresses handy. If an adult child can't reach a parent, calling that informal network can provide peace of mind. Plus, they may also be able to help with some needed tasks.

Visit as often as you can. Long-distance caregivers should visit their older family members every few months to check for signs of trouble – which might include changes in personal hygiene, old food in the refrigerator and chores not done. Long-distance caregivers should note, however, that such care can be expensive. According to MetLife, caregivers spend an average of $193 per month on out-of-pocket purchases and services for the care recipient and another $199 per month in traveling and long-distance phone expenses.

It might make sense to consult your financial planner early-on, to ensure that your loved ones are properly cared for in the future.

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January 2005— This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by  Heritage Financial Services, LLC, a local member of the FPA. 

A NEW APPROACH TO SELECTING A FINANCIAL PLANNER

 Selecting a financial planner has never been an easy task. Yes, experts have long advised checking such things as a person’s experience and education, as well as their regulatory record. But in recent years, selecting a planner has become especially difficult given so many financial professionals, including stockbrokers, insurance agents and bankers, often provide similar services, such as comprehensive financial plans and investment products.

 Resolution of an upcoming court case involving the Financial Planning Association® (FPA®) and the Securities and Exchange Commission (SEC), may soon make it easier to tell the difference between a financial planner and other types of financial and investment representatives.

 In the meantime, however, experts say there are a number of ways to distinguish a financial planner from other types of financial professionals.

 Consumers should focus on the following issues: regulation, fiduciary responsibility, disclosure and values. First, the issue of regulation. The SEC regulates the actions of registered investment advisors (RIAs), some of whom are financial planners and some who are also investment advisers who do no financial planning. By contrast, NASD regulates the actions of registered representatives, or what are more commonly called stockbrokers, and insurance agents who deal with securities and mutual funds.

 The SEC regulates the actions of financial planners, who must comply with the Investment Advisers Act of 1940. Under that Act, financial planners must provide—and periodically update—clients and the SEC (or state securities regulators) with information about themselves and their records; brokers are

required to provide much less information. Financial planners also perform more comprehensive services for clients, including recommendations of appropriate asset allocations. Brokers need only recommend (and handle orders for) securities purchases and sales, being careful to limit recommendations to those which they consider “suitable.”

 In short, RIAs who are financial planners are obligated to place the clients’ interests above their own. Stockbrokers were traditionally exempt from registering under the 1940 Act and were exempt from fiduciary responsibility when buying and selling securities on behalf of their clients, including non-discretionary accounts. Therefore stockbrokers need not place their clients’ interests above their own but merely meet the standard of “knowing their customer” and making “suitable” recommendations. In many cases, stockbrokers or insurance agents who provide a financial plan or investment plan do so as an “incidental” service. According to FPA, the current SEC rule presently allows stockbrokers to avoid the fiduciary and disclosure standards of the 1940 Act while being able to provide the same services as financial planners. The SEC presently prohibits stockbrokers from calling themselves financial planners, although it allows them to use similar titles such as financial consultant and financial advisor, and to provide fee-based advisory services such as retirement planning under more lenient broker-dealer sales regulations.

 As for disclosure, financial planners who are registered as RIAs with the SEC are required to disclose conflicts of interest and their qualifications.

 Of note, financial planners (and others) registered under the Investment Advisers Act face the risks of higher liability for violating fiduciary and disclosure standards; brokers registered only under the Securities Exchange Act of 1934 are not considered fiduciaries and do not have to disclose as much about themselves and their businesses. Insurance agents who call themselves financial advisers may face even less regulatory oversight than brokers.

When searching for a financial planner, consumers might consider asking whether the financial planner is legally required to act in the client’s best interest, and whether the broker’s recommendations are “solely incidental advice” or not. This is especially important given that both financial planners and stockbrokers may derive compensation from fees based on percentages of assets managed and/or hours of consultation and related services.  Brokers offering fee-based advice must also provide a consumer warning statement to new clients that the account is a brokerage, and not an advisory account.

 When searching for a planner, it’s typically a good idea to take advantage of resources that provide access to financial planners. FPA’s PlannerSearch, which can be found at www.fpanet.org/public, is one such service. In addition, FPA has several consumer publications designed to help people choose the right planner to meet their needs. FPA suggests that consumers request a written disclosure document from the planner, such as the Form ADV. Consumers can also review the NASD Web site to find disciplinary action taken against registered persons. The Form ADV answers many questions, including those regarding a planner’s work, disciplinary actions, experience, compensation, method of planning, areas of specialization, and business relationships the planner has that might present a conflict of interest. Consumers may also want to ask whether a potential planner will provide an Agreement of Engagement Letter documenting and describing all services to be provided and all fees that will be paid by the client -- and/or all compensation to be received by the planner from “outside” sources. 

 Some further issues to consider when selecting a financial planner:

 Since trust is at the heart of any working relationship with a planner, it’s important that the consumer work with someone whose actions and words are consistent with the letter and spirit of laws and rules related to financial planning.

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 April 2006— This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Anthony Rossett, CFP® , a local member of the FPA. 

WHAT IS THE REAL REASON YOU SHOULD INVEST?

Most people think they know the answer to the question of why should they invest. Yet many all too often invest for the wrong reasons—and that can lead to financial difficulties.  

Most investors assume that the goal of investing is to simply earn the highest return possible without losing money. If they’re investing in common stocks, they assume they should earn at least 10 to 11 percent every year because that’s roughly the long-term average for stocks. But often they’re not satisfied unless they exceed that by earning 20 or 30 percent or, heck, doubling the return on their investment.

But wise financial planners will tell you that earning the highest possible return should not be the real goal of investing. Rather, the main purpose of investing is—in conjunction with other components of your financial life—to help you realize major life goals: a comfortable retirement, a dream job or business, a college education for your children, funding for your favorite charities, or accumulating assets to pass on to your heirs.

 What’s the difference between these two approaches to investing, you may wonder. What’s wrong with double-digit returns? Won’t they accomplish those life goals? Nothing’s wrong with consistently earning double-digit returns. It’s nice work if you can get it.

 The problem with shooting for the highest return possible as the main goal in investing is that it can create unnecessary risks and erratic investing patterns that ultimately undermine efforts to achieve those life goals that truly matter to you.

 Most financial planners have war stories about clients, or more often, prospective clients, who come to their office expecting that the planner’s primary job is to earn them fat returns on their investments—to beat the market. When these planners respond that they can’t design a sound investment strategy until they understand the person’s goals and the other aspects of their financial circumstances, these prospective clients often leave and head for the next financial advisor, until they find one who promises them glorious returns.

 How can investing solely for the highest returns create unnecessary investment risk and erratic investing patterns?

 Holding unrealistic return expectations. A California CERTIFIED FINANCIAL PLANNER™ practitioner recalls being fired by a client during the height of the booming late 1990s stock market because though the client’s portfolio was doing very well, and was more than accomplishing the client’s goals, it wasn’t earning the 100 percent annual return the client thought it should be earning. The ensuing bear market harshly demonstrated to that former client and many other exuberant investors that high double-digit returns of the 1990s were not a given.

 Taking unnecessary risks. Much of the riskiest investing, overbuying, and panic selling during the late 1990s and early 2000s would have been avoided if individual investors had created their own investment plan for achieving long-term specific goals such as retirement or a college education. For example, investors who can reach an investment goal by earning a modest average annual return are less apt to jump into higher-risk investments than those with no plan except to always “go for the highest return.”

 Investors shooting for the highest returns also are more vulnerable to investment scams offering returns that “are too good to be true.”

 Not taking enough risk. After risking all for the highest returns during the good times, many investors who got burned bailed out of the stock market and are now afraid to invest at all. Some have even stopped contributing to their company-sponsored retirement plans.

 Again, they’ve lost sight of the real purpose of investing. The result is that they not only panicked and cashed in their losses, they shifted their entire portfolios to low-yielding savings accounts and money markets. While these vehicles can serve useful financial purposes, holding an entire portfolio in them hinders efforts to achieve long-term financial goals.

 Failing to diversify. Shooting solely for the highest returns tempts investors to chase and overload in the current hot part of the market, and ignore underperforming sections. When large-cap and high-tech stocks stumbled in 2000–2002, stock-heavy investors weren’t situated to take advantage of the previously ignored real estate investment trusts (REITs), bonds, commodities, and even gold, all of which had banner-return years.

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January 2005 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by  Anthony J Rossetti, CFP® , a local member of the FPA.