Financial site: Finance, Banking & Stock markets

Stern advice how to vet that investment adviser

May 16The Securities and Exchange Commission is taking its own sweet time coming up with a rule that would make all investment advisers put their clients' interest first. Almost a year and a half after saying it was going to pursue this so-called "fiduciary standard," the agency seems stuck. That's because it is trying to contort the standard in such a way that brokers who are paid commissions to sell products could fit under that definition. For many individual investors seeking guidance, that defies logic. How can an adviser put my needs first, if he is paid to sell only one shelf-full of products? And paid more to sell some than others?It's no wonder that the financial services industry remains among the least trusted the United States, according to an annual survey by public relations firm Edelman. Fewer than half of consumers said they trusted financial services firms, and more than half of them said they think financial companies need more government regulation. In the meantime, the financial advice industry is moving on without the SEC. Traditional brokers are leaving the field and instead becoming independent registered investment advisers who must adhere to a traditional fiduciary standard."The wirehouses (big brokerage companies)are losing their grip on high net worth investors," Tom Nally, a senior executive at TD Ameritrade, recently told a meeting of independent advisers. TD Ameritrade is a brokerage company that holds assets and does trades for clients of many independent advisers. Nally told members of the National Association of Personal Financial Advisers, or NAPFA, meeting in Chicago that his firm has seen an 11 percent increase in the number of 'breakaway brokers' since last year. But the move by more advisers to a fee-driven model is just one small step forward and hasn't really answered many questions for individual investors. One reason is that a fiduciary is good to have, but it is just one piece of the vetting process.

Another reason is that advisers themselves have clouded the waters, with more than a dozen different designations and several different business models."The real challenge is that consumers still don't know the difference between a real fiduciary and a salesman because of the convoluted and deceptive use of titles by many financial services firms," Brightscope's Mike Alfred wrote recently in Forbes. His company publishes data on advisers for consumers to use to compare them. So, yes, start with a fiduciary adviser, but then take it from there. Here's how to find an investment adviser now.-- Refuse to play semantics. Many advisers now call themselves "fee-based." That's not the same as fee-only. It may just mean that they charge you fees AND sell products to you that then kick back extra to them. Ask, "Are you making money from anyone but me on my account?" Ask them if they are "fee-only."

Some companies are what's called dually-registered: They have investment advisers registered with the SEC but also do trading that has them registered as a broker with FINRA, the Financial Industry Regulatory Authority. Sometimes these dual registrants are just in transition from brokers to advisers. But it's better to keep those functions separate. "Don't go to a dually-registered adviser," says John Ritter, a Cincinnati, fee-only adviser and chairman of NAPFA's public policy committee. Use an adviser that is fee-only and a fiduciary.-- Go for a brand-name custodian. It's fine to have a one-person company giving you investment advice or even making trades for you. But don't let them hold your money directly. That's the mistake that clients of Bernie Madoff (who was nominally a fiduciary) made. Make sure that your account is housed at a brand name SIPC-backed brokerage firm, like an Ameritrade or a Charles Schwab or the like.-- Don't overpay. Even when they take fees instead of commissions, the big brokerage houses charge more than the independents, says Cerulli Associates, a research firm. On average, the big brokers charge about 1.1 percent of assets to manage an account; the independents charge 0.9 percent, says Tyler Cloherty, a Cerulli analyst.

Even those amounts may be high if you're just getting generic mutual fund-picking advice, and if you're willing to do your own trades. If you have a $1 million portfolio and are paying an adviser 1 percent, that's $10,000 a year for investing advice. "What exactly are you getting for that?" asks Sheryl Garrett, a Shawnee Mission, Kansas, adviser who only bills hourly or by the project. She says she typically gives a year's worth of investment planning for clients for roughly $2,000 or $3,000 a year.-- Benchmark those returns. You might have an honest and caring and affordable financial adviser, but if she's managing your money, is she doing any better than you could do on your own with a couple of generic mutual funds? That's hard to tell, because there's no standard way in which advisers publish their results. Next week, Brightscope and Spaulding Group, a performance measurement company, will announce plans to create a uniform performance standard for advisers. Their idea is that they will create a way for advisers to measure and report the performance of the investments they manage in a way that will allow clients and potential customers to compare them. That could take a while, of course. In the meantime? If you are investing for retirement, find a proxy by which you can measure your adviser. Look at a low-cost target date retirement fund for your age group, or use a web site that allows you to monitor "play" portfolios to create a no-brainer portfolio of low-cost stock and bond funds. For example, you could check your adviser's performance against that of the Vanguard Target Retirement Fund at h this site Or you can create and follow a fake portfolio at Yahoo Finance (h this site) or Morningstar (ht tp://this site Over time, of course, your money manager should provide higher returns, net of fees, than the DIY approach.

Your money the financial lessons of game of thrones

(The writer is a Reuters contributor. The opinions expressed are his own.)By Chris TaylorNEW YORK, March 25 If you ever find yourself at a fan convention for the popular HBO series "Game of Thrones," look at the person next to you. He or she just might control billions. With nearly 20 million total viewers for the series, whose fifth season debuts on April 12, and 25 million copies in print of the George R. R. Martin books, the "Game of Thrones" franchise does not just appeal to comic-book geeks. Powerful money managers get drawn in too, like Gavin Baker, head of Fidelity's $13 billion OTC Portfolio fund. Since Baker is conquering 98 percent of his peers over the last five years, investors should be curious about the financial lessons he and others are drawing from "Game of Thrones."Here are a few of the key takeaways, other than the ultimate lesson of the bloody series: valar morghulis ("All men must die"). Lesson One: Listen for weak signals"Be open to evidence that suggests that your view of the world is wrong," advises Baker. In the seven kingdoms of Westeros, the powers-that-be tend to dismiss the dangers gathering around them, such as the mysterious and vicious White Walkers to the north, and the fire-breathing dragons that are growing across the seas. In the next book - which Martin is toiling on right now - one can only assume that these adversaries will come back to haunt those in power. Lesson Two: Make dispassionate decisions

As behavioral economists always tell us, mixing emotion and investing is a bad idea. So it is in Westeros. When the Stark family goes to war with the Lannisters, Robb Stark falls in love and breaks his previous engagement to the daughter of a powerful ally. "Meanwhile, his rival, Tywin Lannister, makes very few emotional decisions," says Baker. Guess who comes out ahead?Stark falls after being stabbed in the heart."He makes an emotional decision; that is the reason he dies," Baker says.

Lesson Three: Leverage what you haveNear the beginning of the series, Daenerys Targaryen - the so-called Mother of Dragons - has "no money at all," says Michael Anderson, a financial planner with True North Advisors in Dallas. She is widowed and wandering foreign deserts. What she does have, though, is a fast-growing trio of dragons, the likes of which have not been seen in the kingdom for many years. She also boasts a powerful family name, being descended from a line of previous rulers. As a result she "leverages those assets into huge gains," says Anderson. Specifically, a fierce army that takes over several cities and threatens to return and take over Westeros itself. Lesson Four: Too much debt is a killer

You might think that power in Westeros resides with the crown, and its gilded capital of King's Landing. Or perhaps with the Lannister family, thanks to their land holdings and famous taste for gold (Hence the popular saying, "rich as a Lannister.")But according to some experts, real power lies somewhere else entirely: with the Iron Bank of Braavos, in a city across the seas."It is absolutely the power behind the throne," says Lisa Woolfork, an associate professor at the University of Virginia who teaches a course on "Game of Thrones.""Its bankers are not sentimental, and just want to back who is going to win."When you are in deep debt to the Iron Bank, it can weaken your hold on the throne. And when you can't get any more loans from them, that becomes a problem."Lesson Five: Hard assets matterBeing a favorite of the Iron Bank of Braavos is one path to wealth. Another path: real estate. To wit, the Tyrell family controls much of southern Westeros, and their land is essentially the breadbasket for the seven kingdoms. They, in turn, help prop up the Lannister regime, even funding a wedding between the two families."Real estate is a key to real power," says Woolfork. "It's the basis for most wealth, and converts into military power."Indeed, without land in the world of "Game of Thrones," you are of little consequence."Everyone thinks 'Game of Thrones' is about revenge, but it's really about property," says Anderson. "You don't win anything without gaining ground, and controlling it."