"It is impossible for ideas to
compete in the marketplace if no forum for
their presentation is provided or available."
Thomas Mann, 1896
The Business Forum
By Gurdayal Singh
Traditional financial thinking of the
past has always emphasized the rate of return on our investments. The
faster you want your money to grow, the greater the risk you would have
to take. Many words have been spoken and written about risk tolerance
and risk management, so I am not going to rehash popular current
financial thinking. I do think the element of risk is important, but
only to the extent that if you did not have to take a risk, and could
receive positive rates of return, would you pursue that course of
It is a popular belief that the only way to
make your money grow is to get higher rates of return. Every time I hear “higher
rate of return,” I ask a question: “Who is at risk, you or the one making the
recommendation?” There is another way to increase your wealth without the worry
of risk. It is called the Efficiency of Money. Now I am not talking about
strict budgets, buying off-brands, and doing without. I am talking about the
complete opposite. You should have the finer things in life and enjoy them. The
only thing stopping you from improving your lifestyle is money, and more
precisely, transferred money.
We unknowingly and unnecessarily transfer away most of our wealth and it is out
of control. Have you ever stood in a supermarket line with that ½ gallon of ice
cream you forgot to get for the kid’s birthday party, only to have the person in
front of you contest the cost of one of their items? The argument starts out
polite enough over this $.10 difference in cost, and escalates into a conflict
between the store manager and a cell phone call to the shopper’s attorney.
Finally, it is resolved with some U.N. intervention. Meanwhile, your fudge swirl
delight is dripping down your arm and onto your new shoes. The shopper leaves
the store victorious in battle, proud and happy, eager to share the success of
their confrontation with all who will listen.
Did I get off track there? Not really. If we
had the passion and the knowledge to confront the transfers of our wealth, we
would surprisingly win most of the battles. Instead of a $.10 victory, the
savings could be in the thousands of dollars with no risk of loss.
There are ten major transfers of your wealth.
Owning a Home
We will be discussing some of them in great
detail. It will take some encouragement by me for you to begin thinking a layer
deeper than you are accustomed to. Remember, the purpose of taking you a layer
deeper is not to uncover defects in your thinking, but to expand your thought
process through knowledge so you will be able to make better financial
decisions. Without this process, you may suffer unintended consequences in your
When we are finished, you will have a defining
moment in the way you think about money. You will have a greater appreciation of
opportunities that you did not have before. Let us face it, finance companies,
banks, the government, credit card companies, mortgage companies, etc. are all
standing in line for their share of your money. Where do you and your family
stand in this line? At the end! We will change this. However, in order to change
it your thought process must change.
About 6,000 months ago, it was a
widely accepted scientific fact that our planet, the Earth, was flat.
About 600 months ago, my father was told he would probably retire to
two-thirds of his income, thus, he would be in a lower tax bracket.
About 60 months ago, we were told of such enormous surpluses controlled
by the federal government that our society would prosper from increased
government programs. All of these beliefs turned out not to be
true. Tax reform acts designed to relieve tax burdens on the public,
actually resulted in the government collecting more revenue than ever
from its citizens, you and me. The shell game of lowering tax rates
while eliminating deductions has been very profitable for the
government. Back in our grandparents’ day, Social Security was the
save-all safety net they needed in lieu of the lack of retirement plans.
Although well intended it was the first step of a long journey of
dependency on the government.
The 16th Amendment of the U. S. Constitution
allowed taxation of income of its citizens.1
Originally, the idea of income tax was ruled unconstitutional in the
1890's. Article 1, Section 9 of the Constitution states clearly that no direct
tax “shall be laid, unless in proportion to the census or enumeration herein
before directed to be taken.”2
The 16th Amendment gave new powers to the federal government that
conflicted with the 10th Amendment that reserves any other power, other than
stated in the Constitution, to the individual states.3
In 1913, 400 pages of tax law were created. Today almost 47,000 pages of tax
codes and rulings exist. We will continue, later on, to look into transfers of
your wealth to the government, that were created by the government.
Four score and several years ago our
forefathers brought forth onto this continent a new notion, that all men are
created equal . . . when it comes to taxes. Once again, most of the popular
beliefs have been handed down generation to generation, father to son, mother to
daughter with very little effort given to studying these beliefs. Now we
are at a point where there is confusion between myth, opinion, and fact.
Misinformation has caused all of us enormous amounts of lost money, in the form
of transfers that we have made unknowingly and unnecessarily.
The government isn’t the only player trying to
share your wealth. Banks are notorious for dipping into your wallet. One rule of
the bank you must understand. If a bank is late on doing something it is called
a “process.” If you are late with the bank it is called a “fee.” Most recently,
a bank charged me a $360.00 fee for not doing something - for not setting up an
escrow account for a mortgage. Think about it, $360.00 for doing nothing. When
they were questioned about this fee, they said it was simply part of the process
of the mortgage. The process of setting up nothing. When asked where that money
goes . . . well, the silence was deafening. I could actually hear the crickets
Constitution, Amendment XVI.
U.S. Constitution, Article 1, Section 9.
U.S. Constitution, Amendment X.
Besides mortgages, other spin-offs of their
creations, such as credit cards, home loans, auto loans, ATM’s, checking
accounts, saving accounts, and certificates of deposit (CD) all create fees.
Late fees, early withdrawal fees, minimum balance fees, debit fees, and in some
cases, a fee to talk to a teller. On credit cards, it’s almost the goal that you
be a couple of days late on your payments. Late fees are big business, and so
are charge-offs from bad debts. To create higher possibilities of late payments,
the billing cycle has been shortened. Instead of sending out your billing 14
days before the due date, it is sent out 10 days before the due date, and the
due date is probably on a weekend. Would it not be terrific if we could
be the bank? If you are interested in creating your own personal bank and
eliminating regular commercial banks from your life, you must read on.
It is truly reassuring and comforting
to know that your bank savings, should the bank fail, is insured by an
agency of our federal government that is over $6 trillion dollars in
debt itself. Someone once said, “Banks will lend you money if you
can prove to them you do not need it. A banker is a fellow who
lends you his umbrella when the sun is shining and wants it back the
minute it begins to rain.”
IT IS DIFFICULT TO GET THE RIGHT SOLUTIONS WHEN YOU START OUT
WITH THE WRONG PREMISE
Never Go Into A Bank Without A Ten Foot Pole
Let us get one thing straight here.
You, by putting money into a bank, are lending money to that bank, so
they can lend it to someone else. They earn interest from that loan and
charge fees to it on a regular basis. In return for you “lending” the
money to the bank, you receive a pitiful interest rate, but they also
charge you fees to keep that account open at their bank. Think about it
. . . you put the money in their savings account and receive 2%
earnings. You may also be charged fees for that savings account. They
take your money and lend it to someone in the form of a credit card and
receive 18% interest and receive fees on a monthly basis for that credit
Not only do they charge us interest, but they
charge fees. They raise existing fees, invent new ones and make it harder to
avoid them by raising minimum balance requirements. Looking through my bank
records and the documents given to me when I opened my accounts, I found and
identified over one hundred separate fees banks impose on their customers. Over
the past few years the size of the fees rose twice the rate of inflation.
Charges and fees account for more than 40% of the banks revenues. The banks have
become a fee-based operation. They consider you naive when it comes to the
sophisticated business of banking. They determine there are certain things
you do not “need to know.”
Here is a partial list of fees and charges I
Saving account fee
Check cashing fee
Monthly account fee
Automated transaction fee
Manual transaction fee
Monthly overdraft mgmt. fee
Automatic payment amend fee
VISA account fee
Automatic payment fee
Set up fee
Unpaid bill payment fee
Checking account fee
Account special request fee
Checking overnight fee
Stop payment checking fee
Checking account statement fee
Customer investigation fee
Overdraft application fee
Online banking fee
International service fee
Traveler’s checks fees
Bank draft fee
International money transfers fee
Safe deposit fee
Home loan application fee
Personal loan fee
Credit card replacement fee
Credit card collection fee
Cash advance fee
Telephone call center fee
Account closure fee
Wire transfer fee
Special statement cutoff fee
Telephone transfer fee
Night deposit fee
Analyzed business fee
Loan processing fee
Tax service fee
Credit report fee
Closing title company fee
Escrow waiver fee
Document prep fee
Late payment fee
Early payoff fee
You would think the government would step in
and help protect its citizens. That is what they are paid to do, right?
WRONG! You see, the government needs the banks. The Federal Reserve, which
represents banks in this country, prints our dollars and lends them to the
Federal Government, which in turn creates the ever-growing federal debt. The
government pays interest on these loans. This debt is passed on to you and me in
the form of taxation. If this debt continues to grow will your taxes ever go
down? No. Who is happy with this whole scenario? Yes, the
banks. They charge interest on that debt. It costs the banks very little to
print the money to give to the government. It costs the government very little
to dole out this money. However, we will spend our entire lives paying on this
debt in the form of taxes, without ever coming close to paying it off
completely. That is why you will never see the government aggressively go after
the banks. They need each other!
15 vs. 30
The two most common types of mortgages
sold today are the 15-year and 30-year mortgages. Once again,
misinformation clouds the choice between these two types of mortgages.
In the 15-year mortgages, people assume the shorter the loan period, the
less they will have to pay. Secondly, they believe they will save
interest payments. With this line of thinking, you must conclude that,
once again, the best alternative would be paying cash for the house. Let
us get out the microscope and take a look at these two mortgages.
Person A chose a 30-year mortgage for
$150,000.00 with a 6.5% loan rate. She knows that under those terms her monthly
payment will be $948.10. Person B obtained a 15-year mortgage for $150,000.00
with a 6.5% loan rate. He knows that his monthly payment for that loan will be
$1,306.66. Person A believes that her monthly payment at $948.10 is a good deal
because it is $358.56 per month cheaper than the $1,306.66 payment for the
15-year mortgage. She is going to invest the savings of $358.56 per month into
an account that averages a 6.5% return for 30 years. This grows to a tidy sum of
$396,630. Person B, who wasn’t born yesterday, plans to save $1306.66 a month
for 15 years after he makes the last payment on his 15-year mortgage. He too
predicts a 6.5% average return for those 15 years, and his investment would grow
to an impressive $396,630.00. NOTE: It is the same amount as Person A’s account.
I have to ask you: Which person would you rather be?
In making the above comparison, I assumed a
6.5% mortgage loan rate and a 6.5% rate of return on their monthly payments.
What would happen if both Persons A and B thought they could get an 8% average
rate of return over that period of time on their investments? Person A’s $358.56
per month for 30 years at 8% would grow to $534,382.00. Person B’s $1,306.66 per
month for 15 years would total $452,155 at an 8% earning rate. That is a
difference of $82,227.00 in the favor of Person A. The compounding of interest
works in Person A’s account, causing the money to grow to a larger sum.
Remember, Person B’s banker told him he would save money with a 15-year
Hold on there, Kemosabe. You are thinking, “If
I took a 15 year mortgage, my interest rate might be lower than that 6.5%
30-year note.” You are right. Let us say the interest rate was 6.0% on that
15-year mortgage. Then both Person A and Person B invested the difference at 8%
return just as we described above. You are probably thinking, “Ah hah! Got you!”
Try again. Person A’s savings still ends up $35,697.00 greater than Person B’s
account. Do not forget, Person A also received 15 more years of tax deductions
that created an even greater savings.
Enough Is Enough
Elderly people will be grilled by bank
employees when trying to withdraw large sums of money. They will be
asked what they intend to do with it. The banks will use scare tactics
to imply that what the clients are planning to do with the money is
crazy or ill-advised. In reality, it is none of their business
what someone wants to do with their money. The bank’s aim is to
hold your money as long as they possibly can, since every day they hold
it is one more day of earnings to be made from your money. Also, getting
financial information and advice from a bank can be a huge mistake.
Their focus is to control your money and
collect interest and charge fees WHENEVER they can. They will steer you to their
bank products when it comes to investments and saving, not because those
products are the best choice for you, but because they profit from sales of
their products. Also, the financial consultants housed in banks cannot sell
other company’s investments or products, even if another company’s product is
better suited for you and your financial profile. But they do not tell you that,
they merely give you the idea that their bank’s products are the best for you.
The less informed you are the better bank client you become. No one is safe. If
you need “banking service” (that is an oxymoron, by the way), find yourself a
local credit union. It is the lesser of two evils. As discussed in previous
chapters the ideal solution would be to create your own “banks.” Follow
the rules of basic banking. Learn to pay your banks back, save the
interest and whenever possible, deduct interest payments when the law allows.
Your “banks” will be funded by eliminating or reducing the ten major transfers
of your wealth.
Your savings could be staggering!
The Federal Reserve ~ Bridging The Gap To Plunder
The central core of banking under the
guide of the Federal Reserve is very simple:
An ability to print money at very little cost,
which has no real value, no backing of gold or silver, and loan it out to
purchase things that do have value. This in return provides value to the
un-backed money printed. Holding property liens on things you purchased gives
the banks the right to book these as bank assets, minus the balance of the debt.
All the money that has been created by the banks is created out of nothing.
In November, 1910, a secret meeting was held
on Jekyll Island in the State of Georgia.
Present at this meeting were Senator Nelson
Aldrich, Chairman of the National Monetary Commission, associate of JP Morgan,
father-in-law to John D. Rockefeller Jr. Also present were: Abraham Pratt
Andrew, Assistant secretary of the U.S. Treasury; Frank A. Vanderlip, President
of the National City Bank of New York, representing William Rockefeller and the
international banking house of Kuhn, Loeb, and Company; Henry P. Davison, Senior
partner of JP Morgan Company; Charles D. Norton, President of JP Morgan’s First
National Bank of New York; Benjamin Strong, head of JP Morgan’s Bankers Trust
Company, and; Paul M. Warburg, partner in Kuhn, Loeb, and Company, a
representative of the Rothschild banking dynasty in England and France, brother
to Max Warburg, head of the Warburg banking consortium in Germany and the
Every one of the participants was pledged to
secrecy. It was only after many years and much research that the meeting and its
purpose was uncovered. What formed out of this meeting was a banking cartel, a
proposed monopoly of the industry. By doing this they would create control of
the financial monetary systems; yours, mine, and the government's. Even creating
a name for this cartel was well thought out. They agreed that the word “bank”
should not be used in its title. Thus, the birth of the Federal Reserve, a
cartel agreement with five objectives:
1) Stop the growing competition from the
nation’s newer banks;
2) Obtain a franchise to create money out
of nothing for the purpose of lending;
3) Get control of the reserves of all
banks so that the more reckless ones would not be exposed to currency drains
and banks runs;
4) Get the taxpayers to pick up the
cartel's inevitable losses, and;
5) Convince Congress that the purpose was
to protect the public.
Specifically, the Federal Reserve was designed
as a legal private monopoly of the money supply, operated for the benefit of the
monopolists under the guise of protecting and promoting the public welfare.
Constitutional restraints prohibited the
federal government from printing paper fiat money.4
Fiat money is money that has no valuable asset; gold, silver, etc., to back it.
However, there is no such restraint on the Federal Reserve. But, the banks, i.e.
the Federal Reserve, wanted the government to have a system to pay for the money
they printed for the government. Say the magic words: Sixteenth Amendment. This
amendment allowed the government to charge a tax on income.5
At that time, the federal gold and silver
reserves were still sufficient to back all its printed money. As the country
continued to grow and the advent of government social spending increased, the
government surpassed the ability to back its fiat money. In its own wisdom, the
government eliminated its gold and silver standards. Remember the days when our
printed money stated that it was a silver certificate right on the front of the
bill? That’s gone. So are our gold and silver stockpiles. Now the printed money
says "Federal Reserve Note" across the top. Since that change, the national debt
(not the deficit, they are two different things) has spiraled out of control.
Our country’s debt is compounded because the Federal Reserve charges interest on
that debt, which is repaid by the tax revenues collected by the government.
The connection between the banks and the
government is an interesting one. I would recommend the reading of the book The
Creature from Jekyll Island by G. Edward Griffin. It is an in-depth look at the
Federal Reserve. Understanding how the government, banks, and Federal Reserve
relate to each other will open your eyes to the transfers of your wealth that
they have created, controlled, and profited from. Remember, they are the ones
constantly reminding us that they will help us financially. The reality is,
between the three of them, we transfer away over two-thirds of our wealth over
our lifetimes. All the plans and products they support create unintended
consequences for us and more profits for them.
Fuzzy Wuzzy Thinking
It has been a long time since I have
seen an investment broker, accountant, or talk show financial expert
prove mathematically that any of their opinions work. I am not talking
about the one-sided comparison where they blow off any idea contrary to
theirs as stupid. (Meaning, if you don’t do it their way, you must be
lacking intellectually). By disarming those who even dare to think
outside their box as "stupid," these self-proclaimed experts do not have
to prove a thing. People, in general, take offense to being called
stupid, so they tend to take the their-opinion-must-be-fact of these
experts as gospel, fearing the wrath of being labeled.
United States Constitution, 10th Amendment.
United States Constitution, 16th Amendment.
Imagine being confronted by two salesmen
selling laundry detergent. The first salesman says, “Well, you would be stupid
to buy a detergent that does not create enough suds to clean.” The other
salesman says, “You are stupid if you believe what the first guy said.” Great
comparison, eh? No matter what you do, you are stupid by someone’s account. I
have heard professionals in the financial industry tell clients essentially the
same thing. “You would have to be dumb to pass this up.” “It would not take a
rocket scientist to figure this out.” “How long do you want to be ripped off?”
There are hundreds of statements like these made every day implying that you are
I was watching one of these so-called
financial expert's TV show, we'll call her Ms. Fuzzy, and I was amazed how many
times she implied the callers were stupid. She did it in a nice way, but the
implication was that the caller was stupid, and she was not.
Ninety percent of what she told people was
simply her opinion, NOT fact. To be an expert, Ms. Fuzzy knows she must deal
with lower intellects to maintain her lofty title of "expert." But when
cornered, Ms. Fuzzy reverts to belittling the caller rather than giving the
caller a legitimate answer. Then she dismisses the caller’s ideas as "dumb" and
frowns at the television audience to emphasize the point.
Ms. Fuzzy received a call from someone who had
bought life insurance, the "wrong kind," according to Ms. Fuzzy. Her
conclusion went something like this, “Get rid of that and the guy that sold it
to you.” (You are stupid.) “He is a salesman” (You are really stupid.)
“A S-A-L-E-S-M-A-N, that is all!” (You have
moved from the stupid class to the idiots class.) Great reasoning, Ms. Fuzzy!
Nice comparison, filled with knowledge and facts.
One question for you Ms. Fuzzy: Is it salesmen
that you hate? Probably just about everything Ms. Fuzzy owns, she purchased from
a S-A-L-E-S-M-A-N. Does that make her stupid also?
To come to her conclusions for this caller,
Ms. Fuzzy used no math, no facts, no research, and no independent studies. There
was no discussion about income, cost, age, family status, amount of insurance,
the person’s personal debt, their tax bracket, the love of his family, or
quality of the company. NOTHING, NOTHING, NOTHING to justify her "conclusion,"
just Ms. Fuzzy’s opinion. How one can have such a strong opinion, without
knowing all the facts about the caller, in my OPINION, is stupidity at its
But the public sucks it up. The failure to
think a layer deeper about financial concepts is causing the transfer of
thousands of dollars of your wealth to someone else. Over the past
twenty-five years, so-called modern day financial planning has had mixed
reviews. Let us face it, people became and continued to become millionaires long
before financial planning became vogue. The thought of making millions by buying
the right investments is right up there percentage wise with winning the lotto.
Is there any correlation between financial planning over the last 25 years and
the monetary predicament John Q. Public is in today? As Americans moved to
investing in the markets, there also appeared larger sums of personal debt.
Although the two are separate, it is all within the same time frame. What
happened? Personal debt and bankruptcies and foreclosures are at an all
time high and growing. Is it that personal income has not been able to keep pace
with inflation and taxation? Possibly, increases in taxation have grown
far greater than incomes. What happened? You would think that with
all this professional financial help out there, the magazines, financial TV
shows, investment brokers, and financial consultants (planners) that these
problems would not exist. Or have they actually created more problems in the
last 25 years?
In order to improve your life you had to learn
to change. You learn to eat differently to control your cholesterol. You learn
to workout to stay in shape. You even learn to improve your golf game by taking
lessons. All of these lessons require you to make changes in the way you used to
do things. If you have a bad golf swing, buying a new driver won’t improve your
game (trust me on that one). Yet golf club manufacturers will always tell you
different. Now what changes have you made financially? Banks and investment
companies continue to insist that changing products, not your thinking, is your
only solution to your financial problems.
Tax Cuts And The Rich
Another common misconception is that
tax cuts are for the rich. This is nothing more than political
"get-me-re-elected" talk. It is obvious that the rich make up such a
small portion of the tax paying population, the politicians view this as
a small group of voters. There are more poor, middle class, and upper
middle class voters then there are rich voters. So do not be surprised
when a politician favors the area where there are more voters. The
tactic is as old as dirt. Divide and conquer, blame someone else for
your problems, so you will vote for them. These are not
poor or middle class people running for office. Remember, these people
will spend millions to get elected to a position that pays a couple of
hundred thousand dollars a year. Makes sense, right?
I would like to compare our system of paying
taxes to ten people going out to dinner. The common belief is the rich get more
back than us ordinary tax payers and that is not fair. The reality is, the rich
pay more so they should get more back.
If ten people went out to dinner, and when the
bill came we used the rules of the tax code to pay this bill, it would look
something like this: The bill for dinner for ten came to $100.00; Persons #1
through #4 would pay nothing; Person#5 would pay $1.00; Person #6 would pay
$3.00; Person #7 would pay $7.00; Person #8 would pay $12.00; Person #9 would
pay $18.00, and; Person #10 (the richest person) would pay $59.00.
If the restaurant owner decided to give the
group a 20% discount, the dinner for 10 is only $80.00. How should they divide
up the $20.00 savings? Remember, the first 4 paid nothing to begin with, so the
savings should be divided between the remaining six.
Twenty dollars divided by six equals $3.33
each. If you subtracted that amount from those six people's share, then persons
#5 and #6 would be paid to eat their meals. This doesn’t seem fair, so the
equitable answer is to reduce each person’s bill by the same percentage. The
results look like this: Persons #1 through #5 would pay nothing; Person #6 would
pay $2.00; Person #7 would pay $5.00; Person #8 would pay $9.00; Person #9 would
pay $12.00; Person #10 (the richest person) would pay $52.00 instead of $59.00.
Now everyone starts comparing and complaining.
Person #6 complains because he only got $1.00 back and Person #10 got $7.00
back. "Why should he get $7.00 back when I only got $2.00?" shouted person #7.
“Why should the wealthy get all the breaks?” Person #1 through #4 yelled “We
didn’t get anything back. This system exploits the poor!” Then the nine people
surrounded Person #10 and beat him up. That seemed to satisfy them. The next
time they went out to dinner, Person #10 did not show up, so they sat down and
ate without him.
When they were finished the bill came and they
discovered they were $52.00 short!
The people who pay the highest taxes get the
most benefit from a tax deduction. It is common sense math. If you tax
them too much and attack them for being wealthy, they may decide not to show up
at the table anymore. For everyone involved that would create an
unintended consequence. Everyone would have to pay more.
Don’t Limit 401(k) Deductions To The Amount Matched. . .
I found the following sage advice in a
local newspaper: Even though the company matches only part of the
401(k) contribution, it is to your benefit to put the most away in your
401(k) plan as you can, since 401(k) plans are an excellent way to save
for retirement. The author of the article went on to profess that
often many investors contribute only up to the company match within
their 401(k) plan, and do not take advantage of their 401(k) plan if the
company does not match, and he states that this is a mistake. He
finalizes this train of thought by stating that with a 401(k) plan, an
investor receives a double tax benefit. Not only is someone not taxed on
contributions into a 401(k) plan, but all the income continues to grow
on a tax deferred basis.
Half The Story
These are the types of planning
strategies we are presented with all the time. It is “surface thinking”
at its simplest. I kept looking for the rest of the article that would
tell the whole story and the truth. This was another example of someone
deciding that the public didn’t need to know the “rest of the story.”
They decided that it was not important to discuss the taxation issues of
these strategies with the public.
The article should have concluded as follows:
Although accumulating money for retirement should be everyone’s goal, there are
things that should be taken into consideration. A qualified plan simply defers
the tax, as well as the tax table, to a later date. The assumption that you will
retire to a lower tax bracket than the tax bracket you were in when you
deposited the money is flawed. Studying the country’s demographics, debt, and
the history of the federal marginal tax bracket could lead you to the conclusion
that it is very possible that you may retire to a higher tax bracket. If that is
so, then the strategy of using a 401(k) as your main retirement savings vehicle
may be a losing one. You are at the mercy of the Federal Government. When was
the last time the government allowed you, as this planner cited, a double tax
benefit without their ability to recoup those taxes, if not more, at a later
This article left a lot of questions
unanswered. Failure to mention the effects of taxation on this 401(k) money
could be considered an omission of the facts. Unintended consequences could
result if you feel that taxes will go up in the future. I’m not saying all
retirement plans are bad. I feel that when loading up or overloading qualified
retirement plans and exposing yourself to future taxation, whatever level that
may be, you should think at least twice about it. Once again, whose future are
you financing, yours or the government’s?
Fee-Only Advisors And Conflicts Of Interest
I found more “wise” financial advice
in a local periodical indicating that because of the pace of change in
the market environment in tax laws and other areas, it is getting more
difficult for the average person to manage their portfolio. Therefore,
the idea of dealing with a professional makes sense. The author promoted
the use of a fee-only advisor as opposed to a salesperson, since a true
fee-only financial advisor will not have the conflict of interest
inherent with commissioned salespeople.
As I mentioned previously, the investment
industry has fought this battle for a long time. All too often planners want to
put the client in the middle regarding the fee based or commission question.
There Is A Cost When Dealing With Garbage, There Is A Fee For Picking It Up
The assumption that planners who
charge their clients a fee to talk to them are the only planners who are
professional and truly care about their clients, smells. I have had the
opportunity to read and listen to such pompous ramblings. Along with
losing investment picks, half-truth solutions and opinionists’
“wanna-be” facts, they have the gall to charge client fees.
Make no mistake, a fee is no different than a
commission. Fee-based planners would like us to assume that they are not
motivated by money. Fees, commissions, and management and expense charges
are all transfers of one’s personal wealth. The “holier than thou” attitude
assumes everyone who disagrees with them is not a professional. However, as an
educator to students, clients and financial professionals, I have found that
many of the sanctions against financial planners imposed by the SEC and NASD
were and are against fee-based planners. You see, a crook is a crook. Bad
fee-based planners and gouging commissioned planners make great cell mates.
More often than not, if I decide to wrestle
with a skunk, I know I can win but I’ll end up smelling funny. Remember,
there are many professionals that charge fees. There are fees, sales charges,
commissions and loads associated with every product a financial professional,
whether fee-based or commissioned, promotes. How about some “no load, no fee”
It always amazes me how people react
to money. I recently observed people lined up at a gas station to buy
gas that was a nickel cheaper than the station just across the street.
They would wait ten minutes in line for this savings. Even if they had a
17 gallon gas tank they would save 85 cents. If these people filled
their tank once a week, they would only realize a savings of $3.40 per
month. When they finish pumping their gas, most of them hop back in
their cars and are off to work where they allow the government to deduct
$50.00 more than they will owe for taxes from their paychecks each week.
On a monthly basis, this comes to an overpayment of about $200 per
month. For some reason, this has become perfectly acceptable.
Not only do these people wait in line for 10
to 15 minutes for gas, they also wait up to 12 months for the refund of the
overpayment of their taxes. Now I am not saying that you should not find good
prices on things you buy, just do not confuse a tax refund with a winning
strategy. It is not a windfall. You overpaid for something and fought to get it
back, only to find out it belonged to you in the first place. The government got
to use your money all year for free. When was the last time you got to use
someone else’s money at no charge?
There are all observations and
opinions, but most misguided wisdom runs in a different direction than
logic. The purpose here was to try to make you think. Most people have
thoughts, but have lost the ability to think. They have taken 20 second
sound bites about finances and become convinced that’s all they need to
know. All too often someone else is determining what you need to know.
Why? If you had all the information you needed to make better financial
decisions you may not need some of these professionals and in turn they
would lose money.
This educational material contains the
opinions and ideas of the author and is designed to provide useful
information in regard to its subject matter. The author, publisher and
presenter specifically disclaim any responsibility for liability, loss
or risk, personal or otherwise, that is incurred as a consequence,
directly or indirectly, of the use and application of any of the
contents of this information. No specific company or product will be
discussed. Promoting specific products, or applying any sales
recommendation with this information is prohibited. If legal advice or
other expert assistance is required, the services of a competent person
should be sought.
Singh is a Fellow of The Business Forum Institute.
Currently he is
the principal of Jyot Financial
and Insurance Services, an independent firm specializing in
comprehensive financial planning. Gurdayal specializes in
financial planning for small businesses, individuals and families.
He graduated from Delhi University in India with a masters degree in
Business Administration. He is fully licensed and accredited by the
State of California to provide both financial and insurance
services. He participates in continuing education programs in this field
to remain up to date on all applicable laws and regulations. Gurdayal is an active member of
the Sikh community in Southern California and an active supporter of The
American Heart Association.
Search the ENTIRE Business
Forum site. Search includes the Business
Forum Library, The Business Forum Journal and the Calendar Pages.
Editorial Policy: Nothing you read in
The Business Forum Journal
should ever be construed to
be the opinion of, statements condoned by, or advice
from, The Business Forum, its staff, workers, officers, members, directors, sponsors or shareholders. We pass no opinion whatsoever on the content
of what we publish, nor do we accept any responsibility for the claims, or
any of the statements made, within anything published herein. We merely
aim to provide an academic forum and an information sourcing vehicle for
the benefit of the business and the academic communities of the Pacific States of America
and the World.
Therefore, readers must always determine for themselves where the statistics, comments, statements and
advice that are published herein are gained from and act, or not act, upon such entirely and always at their own risk. We
accept absolutely no liability whatsoever, nor take any responsibility for
what anyone does, or does not do, based upon what is published herein, or
information gained through the use of links to other web sites included
Please refer to our:
Calendar The Business Forum Journal
Contact The Business Forum
The Business Forum
Beverly Hills, California United States of America
© Copyright The Business Forum Institute 1982 - 2012