My Conversion to INDEX FUNDS made me a better Financial Adviser

I have worked with and used managed managed/mutual funds for much of my professional career. Most, if not all my clients use them in some form or another. Early on in my career as an adviser I would try and stay afloat of all the funds which would come onto the market, promising above market returns via hedging, absolute returns or some other creative investing style. However, after much research and viewing of the “fund manager” market, I have come to the realization that most funds will become index if they are already not. The major exception to this are pure hedge funds, which in my opinion haven’t done all that well considering the risk return ratio applicable to them also their relatively high fee’s can be somewhat disconcerting.

I felt that as an adviser it was my responsibility to keep actively looking for the highest returning funds for my clients. Then I came to 3 major realizations about what I do and how I should go about it.

Firstly, I came to understand that most actively traded funds will eventually start to perform as as an index fund would, either because of their higher associated costs or that they fear not having certain stocks in their portfolio.

Secondly, once it occured to me that generally it would be in my clients interest to use INDEX funds, I found that clients appreciated their financial STRATEGY more than the actual investments themselves. This is because the STRATEGY is what sets them up for the future, it sets the path for their financial future and gives them clear direction. They can see how things will interact and work together to form a total financial package, from retirement funding to personal insurance to budgeting/cashflow management. ALL good financial advisers/planners should concentrate on STRATEGY first, the investments will follow.

Thirdly, having had my first 2 break throughs, it came to me that clients want contact, not everyday or even every month, but consistent contact even if you state at the beginning that it will be every 6 months, make sure it’s done. The clients will feel better that their money is being taken care of and actually being monitored and that you actually care about their situation. CARE, it’s a simple word but very powerful. I use to be somewhat of an “client churner”, new client came in, file was put away, next client please. It was a real, dare I say it, “car salesman” style of thinking and way of doing business, I didn’t particularly care about ongoing contact, big mistake, it’s usually the clients that you take care of that will provide you with the best leads down the track

My take on www.fool.com

I’ve gone through much of the “material” written up on this website which is supposedly aimed at providing investors with knowledge on proper share/managed fund investing techniques.

I’ve come to the conclusion that much of the material presented is, to take a phrase from John Bogle, “… financial pornography” indeed they use provocative and seductive headlines like … “$1000 to $1,000,000” it’s all very slick and utterly convincing.

However as I kept reading, I noticed over and over again how many of the stories/articles wound up somehow directly or indirectly promoting one of their “how-to investment” services.

In fact many of the articles were basically advertisements for these services which may or may not be any good, I’ve never tried them, but to try and pass off these articles as “information” as opposed to “informercials” is plainly wrong in my book, perhaps even misleading or fraudulant conduct.

My overall thoughts on fool.com, it’s a site promoting itself as a place for financial education but is in actuality a front to lure would-be customers into using their “investment” services.

Financial Knowledge is the Key to Financial Prosperity

Australian Credit Card Debt Soars to Record Highs

It has been recently reported that in australia, “…. On average, Australians spend $14,310 a year on their cards, with an average monthly balance of $2775.”

This is a disturbing trend for a number of obvious reasons, the weekly average household disposable income in Australia is $542. This equates to $2168.

This is truly dire news meaning that on average households are increasing their credit card debt by about $607 per month. Or for more impact that’s $7284 in additional debt yearly.

I find this incredible in a time where supposedly the average wealth of australians is ever increasing. Sure the assets maybe increasing in value but unfortunately if you don’t have sufficient cashflow then you can’t put food on the table.

I will analyse this situation further in coming posts.

Financial Knowledge is the key to Financial Prosperity

Personal Finance bloggers asking for “Donations” … WTF

Hmm … over the last few months I have started to look at and read more and more personal finance blogs (PFBs) and I am finding what I see as a disturbing trend.

That is PF bloggers asking for “donations”.  Donations for what? I’m not entirely sure, from what I can gather it’s a donation to the blogger for their own personal use.  Are these bloggers charity cases? I’m surely hoping not.

So then what’s going on there, is it becoming acceptable to, from my point-of-view anyways, BEG for money.  Are PFBs becoming like beggers street corners where they the blogger tinker a tin can at you as you walk past with “paypal” written across the front of it.

As you can tell, I’m alittle annoyed by this, fair enough if you throw on a few ads in your blog, I do the same, albiet in a very small corner which is generally out of the way of my general conten.  But to actually throw up a link with “donation” on it, that is only 1 micro-step away from “work for food stamp” signage.

Firstly, if I’m going to donate my hard earned cash to anything it better be for something worthwhile, not just to “support” a blog, that’s what google adsense is for.  Given that you can actually start up a blog for free, asking for “support” money rubs me up the wrong way even more.

Now I’m a big believer in charitable donations, my wife and I sponsor 2 underpriveleged kids myself, 1 in Africa and 1 in the Philippines.  But to bloggers out there, please don’t try and portray yourself as someone even worthy of charity, I’ll assume that because you’ve got a blog you’ve got a computer, got the cash for an internet connection, and the time to actually write a blog in the first place.

Well thats enough ranting from me … I apologise if this post was rather negative, but I just felt the need to put down my thoughts on this.

Financial Knowledge is the key to Financial Prosperity

Picking A Good Financial Planner/Adviser

There are many ways to educate yourself on personal finance and wealth creation, read books and look up some websites, like this one hehe.

But 1 step I think that would benefit a large majority of people would be to seek the advice of a Financial Planner.  I know for a fact that in Australia, Financial Planner’s are required to attend ongoing financial training, either in the form of written tests, assignments or seminar workshops.  This allows them to keep up-to-date with the latest information and rule changes.  I know because as indicated in my about me section I am a Financial Planner by trade, have been for many years.

But let me tip you on how to find the best of the best financial planners, no matter what country your in.

When you initially meet with your planner, the only things you should be talking about are STRATEGIES.  Because at the end of the day, it’s really the one of thing which will keep your dreams of financial prosperity afloat, because no matter what the markets are doing, if you have a solid financial strategy in place, you should come out a winner in the end.

If the planner you are talking to begins to straight away talk about, you should invest in company XYZ or fund manager ABC, it’s a definite sign that the planner is just a pure salesperson with no real technical savvy or skills.  I mean it is definitely fine to approach the subject of product types like, superannuation or 401k accounts, but if the talk turns towards specific fund managers, steer clear friend, DON’T DO BUSINESS WITH THEM, there interests are will never be aligned with your own, because they are in the business of getting rich through commissions as opposed to getting you rich through proper planning.

Remember a GOOD FINANCIAL PLANNER, talks STRATEGY FIRST, the PRODUCT and PRODUCT PROVIDER choice should be a by-product of your agreeance to the strategy meeting YOUR NEEDS!!

Financial  Knowledge is the  key to Financial Prosperity

Richest Man In Babylon – By George S. Clason – Part 1

In today’s post I will take a somewhat hardline stance, perhaps even a slightly contraversial view, about all the books on personal finance out there today. They are all RUBBISH when compared to George S. Clason’s – RICHEST MAN IN BABYLON written back in 1926!!, especially given the fact that many of the idea’s written in this book have been plagiarised and twisted by current “financial guru’s” to make it seem as if most of their idea’s are original or profound in some way. And I’ll state write now, my own wealth creation strategies, which I dedicated a section on this blog to, is primarily based on the principals found in this book but with a few modern updates naturally.

The book itself can be viewed as a collection of stories or fables which provide the reader with a set of money principals which in my view stand the test of time and will do so long after we are all dust. Lets take a look at the most common principals most personal finance guru’s espouse today and how they basically just ripped the idea’s from this book.

1. Setting aside a part of your income to build up your savings and wealth. This is a very reasonable and highly recommended step towards achieving financial prosperity. Take for example David Bach’s “pay-yourself-first” principal, indeed a fantastic and very sound idea, but it seems it’s already been put forward many years before with one of the books very first and main laws of money, “… a part of all you earn is yours to keep” or as explained further in the book under SEVEN CURES FOR A LEAN PURSE,

“… For every ten coins thou placest in thy purse take out for use but nine. Thy purse will start to fatten at once and it’s increasing weight will feel good in they hand and bring satisfaction to the soul.”

Roughly translated, keep at least 10% of all you earn aside as savings, MAGIC, I’d say David Bach’s made plenty of 10% savings from all the books he’s sold espousing this 1 principal alone.

I will continue this review in the following days …

New Search Engine Promises to prevent “Click Fraud”

Megaglobe.com, a new search engine to be launched soon has asked me to review them. The site aims to protect advertisers from fraudulent clicks with a revolutionary new technology called “Pay Per Valid Click.” Megaglobe.com uses a new patent-pending technology to protect its advertisers from the perils of fraudulent clicks.

The site should be live on the Internet soon, and its search features will be available in 45 languages. Megaglobe effectively protects advertisers from fraudulent click-throughs on sponsored spots. The patent-pending technology, called “Pay Per Valid Click,” has been apparently been developed exclusively for Megaglobe. If this technology actually works it would be a serious boon for the PPC as a whole as advertisers would more than likely be more willing to pump more into PPC advertising, which in turn means more available dollars for website owners/bloggers.

Megaglobe’s “Pay Per Valid Click” technology will bring in a measure of accountability to the search engine world, giving advertisers far more assured value for money. Megaglobe is also a member of the prestigious Interactive Advertising Bureau (IAB), which includes Google, Yahoo! and MSN in its roster: http://www.iab.net/about/general_members.asp In addition to its powerful search formula, Megaglobe comes in as many as 45 different languages, 310 urls and its advertisements and sponsored spots will be available in 50 currencies. Megaglobe will go into a beta testing phase soon. Journalists and Webmasters can obtain beta testing codes by emailing press@megaglobe.com.

This has been a sponsored article.

Step 1. Money Management – Stage 1: Cashflow Protection & Budgeting

Money management, I feel it is the basic foundation to all wealth creation strategies, it must be easily repeatable and built upon solid principals. I will break money management down into 3 stages that will hopefully lay solid groundwork for future investing. Each stage will have it’s own post.

The first stage of money management as I see it are CASHFLOW PROTECTION & BUDGETING. If you don’t have sufficient and regular cashflow it’s a pretty hard slog in today’s society, also if you don’t plan your future cashflow’s you’ll inevitably find yourself short or at the very least to unable pay some large bill that you hadn’t accounted for previously.

My Basic Wealth Creation Strategy

I have contemplated for some time how to provide a basic roadmap for wealth creation which mirrors my own strategy. I feel that the following is my best attempt at how to provide a consistent top level structure to wealth creation which can be repeated by anyone and which closely follows how I view and approach wealth creation.

As a primer to the following 4 steps.

The Start of a Journey to Wealth through Effective Budgeting

Hello, I would like to thank you for coming with me on this journey to help myself and in turn others just like you to get their personal finances into order. The flow on effect will be an automatic increase in overall wealth by treating personal finance exactly the same as budgeting and running a professional business. Assets VS Liabilities will be the key theme here and Good Debt Vs Bad Debt the ongoing battle to get ahead.

So once again I thank you for coming. Remember, it’s not how much you earn, it’s how much you do with your earnings.

BigBuddha – Budget Well, Budget Wealth