TideRock Financial is proud to be a fee-only registered investment advisor (RIA) and fiduciary for its clients. But this important distinction and its advantages for the clients we serve can sometimes be overlooked. A story in today’s Wall Street Journal on the different breeds of financial advisors and how they charge their clients summarizes this issue quite succinctly:

“The distinction in how advisers are paid could affect the advice they give you. Regulations require financial advisers who charge commissions to make sure a product is appropriate for an investor before selling it, but RIAs are held to a higher standard: They are fiduciaries, meaning they have an obligation to think about what investments would best serve the client. Also, fee-only advisers are paid only by their clients, which means they have no incentive to sell you particular financial products.”

The article goes on to warn investors about the “incentives” some advisors may have to steer clients into a particular fund or investment product – whether it’s a fat commission or a bonus for hitting a certain sales target. Again, as a fee-only advisor, TideRock eliminates these conflicts of interest for its clients.

To read the entire Wall Street Journal story, please read “Questions to Ask Your Adviser About Fees”.

“1. How are you registered?
Advisers’ pay and their obligations to clients are related to whether they are registered with the Financial Industry Regulatory Authority or the federal Securities and Exchange Commission.

Finra-registered advisers—”registered representatives” of securities firms—typically are paid by commissions when investors buy or sell securities. Advisers who charge fees for advice generally are “registered investment advisers,” or RIAs, overseen by either the SEC or state securities regulators. Many individuals wear one hat for part of their business and a different hat for the other. If you deal with them in both capacities, you may pay them both an advisory fee and trading commissions.

The distinction in how advisers are paid could affect the advice they give you. Regulations require financial advisers who charge commissions to make sure a product is appropriate for an investor before selling it, but RIAs are held to a higher standard: They are fiduciaries, meaning they have an obligation to think about what investments would best serve the client. Also, fee-only advisers are paid only by their clients, which means they have no incentive to sell you particular financial products.

2. What am I paying you and your firm directly?
This can include commissions to trade securities and fees that may be set by the hour or as a percentage of your assets being managed by the adviser.

Knowing exactly what these charges are allows you to factor those costs into your investment behavior. For instance, if you know how big the commission is that you pay every time a trade is made on your behalf, you can decide if there is a point where those fees start to eat up too much of the gains you seek from switching investments. Or if your adviser charges an hourly fee, knowing what that fee is can help you decide how much consultation you really need.

Sometimes there is a free lunch, or at least an appetizer: A financial specialist sometimes will provide some free advice now in hopes of selling you products down the road. Many offer an initial portfolio review for no upfront cost.

3. What payments are built into the products I may buy from you?
You also want to know about compensation that isn’t as obvious. There’s almost always a cost for advice, even if it’s built into the cost of the products you end up buying, says Dan Keady, director of financial planning at financial-services firm TIAA-CREF.

For instance, all mutual funds charge for their expenses, which can include compensation for sellers. But those charges vary widely, and higher charges produce lower returns for investors, so it pays to shop around. Also, a single mutual fund may be available in several share classes with different fees.

Knowing about the fees built into products also can help you spot potential conflicts of interest. A firm benefits if its staffers sell products the firm designs or oversees. Those products aren’t necessarily bad for you, but it’s worth scrutinizing their charges to see if they compare favorably with those of alternatives.

When investors buy or sell mutual funds through discount brokerage firms’ “no transaction fee” marketplaces, part of the funds’ expense charges are going to compensate the brokerage firms. If you know what those charges are, you may be able to find a cheaper class of the same fund or a similar fund with lower charges from another provider.
In the case of individual bonds, firms usually collect the difference between the price at which they buy the bonds and the price at which they resell them to investors. This “spread” is also assessed when investors trade foreign currencies through a brokerage firm. Spreads vary, so be aware that you might be able to find a better price from another broker.

Investors may also be charged if their adviser invests part of their account in a hedge fund or private-equity fund. Typically this charge will be obvious. But the investor may not be told about any commission the adviser earns from the funds, a potential conflict of interest, so you should be sure a better deal isn’t available elsewhere.

Another potential conflict of interest: Some advisers may get incentives—a trip or a bonus, for instance—if they hit certain sales targets or sell specific products. There’s no way for you to know if that’s the case, but knowing that it could be is another reason to shop around to make sure you’re getting the best possible deal.”

In estate planning circles, so often our focus is on passing down our assets to our heirs. But equally, if not more, important is the opportunity to impart a legacy of values to the next generation. What is the best way to do this?

The Wall Street Journal recently published a great story on the benefits of taking the time to capture the values, memories, life lessons, and good old-fashioned advice that is so important for parents and grandparents to pass along.

TideRock is pleased to be able to offer its clients exactly the kind of valuable interview experience and family keepsake video that is described in the article through our Legacy Planning services. Please enjoy the story below, and for more information on creating a Legacy Video with TideRock, please visit www.TideRockLegacyPlanning.com.
For more on this article, please see, “Before Passing Along Valuables, Passing Along Values”.
“THE GOOD LIFE
Before Passing Along Valuables, Passing Along Values
Why legacies and life lessons are an increasingly important part of estate planning
By ROBERT POWELL

Todd Fithian recently made a film for his four children. “I took the time to capture my stories, life lessons and family traditions, many of which have been passed down to me from my parents,” says Mr. Fithian, a 43-year-old managing partner of Legacy Cos., a Hingham, Mass., consulting firm to financial advisers. “These things have a trickle-down effect, but rarely do we take the time to capture them.”

Mr. Fithian’s video is part of a burgeoning effort in estate-planning circles to ensure that life lessons are passed on to loved ones. Educators, financial advisers and technology providers are approaching the task on two fronts: encouraging and helping older adults to share their stories and values before they die, and teaching adult children and grandchildren how to tap their parents’ and grandparents’ thoughts.

“The admonishment I would pass along, both to seniors and their adult children, is to be proactive about [addressing] one’s tangible estate and the often more impactful intangible legacy,” says Tim Maurer, vice president of Financial Consulate, a financial-management firm in Hunt Valley, Md., and co-author of “The Ultimate Financial Plan: Balancing Your Money and Life.”

A case in point: the Legacy Project, founded by Karl Pillemer, a professor of human development in the College of Human Ecology at Cornell University and author of “30 Lessons for Living.” On the project’s website (legacyproject.human.cornell.edu) and its YouTube channel, users can read and listen to lessons from hundreds of older Americans on more than a dozen subjects, including careers, marriage and parenting.

Take the topic of risk. Much of the advice tends toward the bold. “What you are going to regret is what you didn’t do rather than what you did,” Mr. Pillemer says. “It’s criminal if you don’t take advantage of the opportunities that come up in your life.”

Holiday and family gatherings provide an opportunity to capture some of the wisdom elders have to offer. Adult children and grandchildren can start by asking older relatives to share memories and anecdotes—but shouldn’t stop there, Mr. Pillemer says. If a grandparent served in World War II, for example, don’t just listen to those stories or details of time in the service—ask what he or she learned from that experience.

“Ask them for their life stories, but try to tap their life’s wisdom,” Mr. Pillemer says. “If you ask a person for advice, it empowers them. It honors a person’s life experience.”

Mr. Fithian says the more relaxed the setting, the better. “I have seen many families and advisers put too much pressure on the ‘right way’ to perpetuate and leave a lasting legacy—and the result is often nothing,” he says. In a casual setting, he adds, you can begin the process “without anybody realizing it.”

One technique: sitting around the table or in front of a fire and having each generation talk about a family tradition they love and their view of how it became a family tradition.

George Kinder, president of the Kinder Institute of Life Planning in Littleton, Mass., which trains financial advisers, says a growing number of websites and tools—such asYourafterlife.com, where you can write your digital autobiography—can help “adult children pry life lessons out of reluctant or shy seniors.”

Older adults should also consider drafting an ethical will, a document that transmits your core values and principles, says Mr. Pillemer. “It can be very powerful for themselves and their families,” he adds.

Indeed, life lessons should take priority in estate planning, says Jim Stovall, author of “The Ultimate Gift,” in which the main character passes on 12 life lessons to his grandson. “I think it is critical that people pass along their values before they pass along their valuables,” he says. “Giving second- or third-generation family members resources without a mental, emotional and informational foundation is like giving them a loaded weapon without instruction or caution.”

Mr. Powell is the editor of Retirement Weekly and a columnist at MarketWatch.com. He can be reached at next@wsj.com. A version of this article appeared December 10, 2012, on page R5 in the U.S. edition of The Wall Street Journal, with the headline: Before Passing Along Valuables, Passing Along Values.”

We all have been told to be careful whom we accept investment advice from. The dream of becoming the next overnight millionaire is inherent in so many of us that many investment decisions are made without enough consideration given to the source of the information. Don’t take stock tips from your neighbor. Don’t invest in the new multi-level pyramid scheme your sibling is in. Now add one more: Don’t take investment advice from bestselling authors.

Earlier last month, Robert Kiyosaki, bestselling author of the “Rick Dad, Poor Dad” series, filed for Chapter 7 bankruptcy protection after failing to keep his promise to the Learning Annex, a group largely responsible for Kiyosaki’s massive success in promoting his series of personal finance books. Using yet another one of his “secrets of the rich”, Kiyosaki decided to keep his personal fortune of over $80 million in his pocket and send one of his corporations, Rich Global, into bankruptcy. The Learning Annex claims that Kiyosaki owed them over $20 million. A U.S. judge back in April 2012 agreed, slapping Rich Global with a judgment of equal magnitude.

We all know that protection of personal assets is one of the key reasons to start a corporation. However, sticking it to the people who have helped us become rich and famous destroys ethical and moral boundaries and should never be rewarded. Maybe I am just a softie, maybe this is just what it takes to stay at the top, or maybe Kiyosaki has simply let greed get the better of him.

There is likely a lot more to this story than meets the eye. But we should all remind ourselves to leave the “advice” portion of “financial advice” to the true professionals and not marketing gurus/authors such as Kiyosaki.
For more on this article, please consider, “‘Rich Dad, Poor Dad’ author files for bankruptcy”
“Robert Kiyosaki, author of the bestselling “Rich Dad, Poor Dad” series, has filed for Chapter 7 bankruptcy protection after losing a nearly $24 million court judgment to The Learning Annex,The New York Post reports.

As one of Kiyosaki’s earliest backers, The Learning Annex was responsible for arranging the speaking engagements and platform that led to his massive success.

But apparently the fame went to his head because according to court papers obtained by the Post, Kiyosaki, who published his first “Rich Dad” book in 1994, never paid the Annex its rightful share. Said founder and chairman Bill Zanker: “Oprah believed in him, and Will Smith believed in him, but he didn’t keep his promise to us.”

Kiyosaki’s Rich Global company was ordered by a U.S. judge in April to cough up $23,687,957.21, which in turn led him to file for corporate bankruptcy on Aug. 20.

Despite the blow to the personal finance guru’s reputation, Kiyosaki probably won’t feel the pinch in his wallet. Forbes pegs his net worth around a cool $80 million, and Kiyosaki, who’s written 11 books, operates as many as ten other companies. Rich Global was said to be worth a few million when it went under.

“Rich Dad, Poor Dad” became an overnight sensation when Kiyosaki made the rounds on feel-good daytime TV like “Oprah” and aired his speaking programs on PBS. Cash-strapped consumers identified with his inspirational story of learning how to manage money from one father who struck it big and another who died penniless and alone.

Of course, not everyone bought into the schtick. As Helaine Olen’s wrote in Forbes Thursday, the guru’s “tips ran the gamut from ridiculous to illegal and downright hurtful and included advocating for insider trading, arguing for the purchase of multiple real estate properties with little or no money down and telling followers they could purchase stocks on margin via unfunded brokerage accounts.”