Big name German auto builders, Volkswagen AG and Daimler’s Mercedes-Benz, have reported drops in recent local market sales and focus on the Chinese market to regain composure.
The companies reported to have sold significantly larger numbers in China this year compared to 2009. Audi reported to have sold 53 percent more cars in July whilst Mercedes-Benz reported up to 300 percent more export sales this year compared to last. BMW also increased its exports to China by 82 percent.
This is all on the contrary to the manufacturers reporting drops in sales in their home country. According to Automotive News, Audi and Mercedes-Benz sold fewer cars in Germany the past month compared to the same period last year. Although, BMW has reported a slight increase in local sales by 4 percent.
Showing posts with label financial planner. Show all posts
Showing posts with label financial planner. Show all posts
Thursday, August 19, 2010
Friday, March 19, 2010
Make Money Online with Twitter- New Social Media Marketing Software
New software which takes advantage of the ever increasing popularity of Twitter allows anyone to make money online with just a few basic principles. This social media marketing software combines the sheer popularity of the website Twitter along with some clever social media marketing strategies to make anything from a few extra dollars a day to several hundred.
If you are new to the whole make money online concept you may wonder what 'social media marketing' means. Well in a nutshell its taking advantage of large social networks like Facebook and Twitter to sell and market products to make you money.
tweetomaticprofiteer.com is new software that teaches the average person on the street how to start doing this. On their website you can watch a video explaining how revenue from $200-$800 can be gained relatively easy. The good thing about Tweetomaticprofiteer is that the software does most of the job for you.
Don't worry you do not need your own product or service, nor do you need a website. With Twitter there a millions of 'buying users' online constantly. You can target these with offers and deals which aren't yours but which you will receive high commission for. tweetomaticprofiteer.com makes all this easy once set up and you can start developing your own online income stream taking advantage of one of the biggest growing online trends.
Read more and get the software here
Related items
* Twitter Social Media Marketing Strategy Tips and Techniques
* New Software to Make Money Online Using Twitter Social Media Marketing
* Free Press Release Distribution Social Media Tips, Services & Statistics
* New Twitter Marketing Strategy Reveals Secret to Making Money Online
* Facebook Better Social Media Marketing Intimacy- Twitter Better Viral Expediency
If you are new to the whole make money online concept you may wonder what 'social media marketing' means. Well in a nutshell its taking advantage of large social networks like Facebook and Twitter to sell and market products to make you money.
tweetomaticprofiteer.com is new software that teaches the average person on the street how to start doing this. On their website you can watch a video explaining how revenue from $200-$800 can be gained relatively easy. The good thing about Tweetomaticprofiteer is that the software does most of the job for you.
Don't worry you do not need your own product or service, nor do you need a website. With Twitter there a millions of 'buying users' online constantly. You can target these with offers and deals which aren't yours but which you will receive high commission for. tweetomaticprofiteer.com makes all this easy once set up and you can start developing your own online income stream taking advantage of one of the biggest growing online trends.
Read more and get the software here
Related items
* Twitter Social Media Marketing Strategy Tips and Techniques
* New Software to Make Money Online Using Twitter Social Media Marketing
* Free Press Release Distribution Social Media Tips, Services & Statistics
* New Twitter Marketing Strategy Reveals Secret to Making Money Online
* Facebook Better Social Media Marketing Intimacy- Twitter Better Viral Expediency
Tuesday, November 24, 2009
Making jobs in a recession
Daunted by approaching Thanksgiving, with its mandated menus and gratitude? Here's something easy to be thankful for: Jim Purcell's pizza and his foolish midlife itch.
Purcell must be a fool. In a recession, he's starting a restaurant chain. He has tripled down on his idea of an upscale pizza place called Tazinos, opening restaurants in Oak Creek, his home, and in Menomonee Falls and Kenosha. He's got big windows, fashionable colors, carpet on the floors (so you don't see staff mopping). He's got big TVs, so customers don't stay home to see games.
And he's got pizza, basic or suburban-mom kinds like chicken or pesto. It's all-you-can-eat, but he dreads the word "buffet." It suggests, says Purcell, "10 people scarfing over one pizza," and his unbleached-flour product really is a notch or three higher. It's a pizza and salad bistro, the sign says.
Purcell's got plans. The big one is to go national. He has started what he hopes is a national chain. "We have a ton of potential," he says.
So he's nuts, yes?
Restaurants have a dauntingly high failure rate, says Douglas Kennedy, who teaches the business at the University of Wisconsin-Stout. Starting a chain is a second expertise, in franchising. It takes a particular kind of entrepreneurial nerve, he says.
Purcell has it. He says he was soul-searching: "I'm 50 years old. What am I going to do now?" was his thinking. He'd owned a bakery and a pizzeria. He worked for years in the supply business, being grocer and equipment supplier to fast-food chains, eventually through his own company, which he sold. He figures he knows enough about the business side of restaurants, where dreams often falter, to make Tazinos work.
His oldest restaurant has been open a year. Purcell says he's in a "holding pattern" because banks are skittish, but he sees the recession as having cleared the field of competitors. Kennedy confirms there's something to that. "These times of weakness are times of opportunity for a player with a good idea," he said.
Such bright vistas are nice for Purcell. It's more than that, though. "This isn't about me. It's about all these guys," said Purcell of his staff. But in a way, he's wrong. It is about him and people like him who are fool enough to try starting a business. Such people are doing work that benefits us all.
They end up making jobs. Tazinos now employs about 100 people, and Purcell says it's a pleasure to walk into a restaurant and see people he's put to work: "I'm like, 'That guy loves his job.' "
Building one of the restaurants takes about 12 construction workers 90 days, so that's more work, and Purcell says Tazinos spends about 90% of its money, even including equipment, within 100 miles of Milwaukee. This is production that leads to consumption that permits recovery.
Purcell is doing it by betting there's an unfilled need - for a nicer pizza experience below $10 - and filling it. Other people do the actual filling, by mixing dough, managing staff and installing ovens, but none of their supply would ever meet customers' evident demand without someone like Purcell organizing it in the first place.
There are easier, safer ways to make money. "I really didn't want to go out and create my own brand," said Purcell, but other franchises didn't seem to fit. Then, he says, starting a chain could create chances for other people to open a restaurant and make opportunity. "I think I can really make a difference in people's lives," he said.
That sounds almost altruistic. Maybe Purcell means that. But suppose he's in it just for money. Here's a beautiful thing: We all still benefit. He only gets big if the customers stay happy. In getting big, he'll still end up employing many people in jobs that didn't exist before and, if the franchising thing works, creating opportunities for other entrepreneurs.
That's what a recovery looks like. Purcell gets rich by restarting a little bit of the economy. And the pizza's good, too. What a great country we live in.
Purcell must be a fool. In a recession, he's starting a restaurant chain. He has tripled down on his idea of an upscale pizza place called Tazinos, opening restaurants in Oak Creek, his home, and in Menomonee Falls and Kenosha. He's got big windows, fashionable colors, carpet on the floors (so you don't see staff mopping). He's got big TVs, so customers don't stay home to see games.
And he's got pizza, basic or suburban-mom kinds like chicken or pesto. It's all-you-can-eat, but he dreads the word "buffet." It suggests, says Purcell, "10 people scarfing over one pizza," and his unbleached-flour product really is a notch or three higher. It's a pizza and salad bistro, the sign says.
Purcell's got plans. The big one is to go national. He has started what he hopes is a national chain. "We have a ton of potential," he says.
So he's nuts, yes?
Restaurants have a dauntingly high failure rate, says Douglas Kennedy, who teaches the business at the University of Wisconsin-Stout. Starting a chain is a second expertise, in franchising. It takes a particular kind of entrepreneurial nerve, he says.
Purcell has it. He says he was soul-searching: "I'm 50 years old. What am I going to do now?" was his thinking. He'd owned a bakery and a pizzeria. He worked for years in the supply business, being grocer and equipment supplier to fast-food chains, eventually through his own company, which he sold. He figures he knows enough about the business side of restaurants, where dreams often falter, to make Tazinos work.
His oldest restaurant has been open a year. Purcell says he's in a "holding pattern" because banks are skittish, but he sees the recession as having cleared the field of competitors. Kennedy confirms there's something to that. "These times of weakness are times of opportunity for a player with a good idea," he said.
Such bright vistas are nice for Purcell. It's more than that, though. "This isn't about me. It's about all these guys," said Purcell of his staff. But in a way, he's wrong. It is about him and people like him who are fool enough to try starting a business. Such people are doing work that benefits us all.
They end up making jobs. Tazinos now employs about 100 people, and Purcell says it's a pleasure to walk into a restaurant and see people he's put to work: "I'm like, 'That guy loves his job.' "
Building one of the restaurants takes about 12 construction workers 90 days, so that's more work, and Purcell says Tazinos spends about 90% of its money, even including equipment, within 100 miles of Milwaukee. This is production that leads to consumption that permits recovery.
Purcell is doing it by betting there's an unfilled need - for a nicer pizza experience below $10 - and filling it. Other people do the actual filling, by mixing dough, managing staff and installing ovens, but none of their supply would ever meet customers' evident demand without someone like Purcell organizing it in the first place.
There are easier, safer ways to make money. "I really didn't want to go out and create my own brand," said Purcell, but other franchises didn't seem to fit. Then, he says, starting a chain could create chances for other people to open a restaurant and make opportunity. "I think I can really make a difference in people's lives," he said.
That sounds almost altruistic. Maybe Purcell means that. But suppose he's in it just for money. Here's a beautiful thing: We all still benefit. He only gets big if the customers stay happy. In getting big, he'll still end up employing many people in jobs that didn't exist before and, if the franchising thing works, creating opportunities for other entrepreneurs.
That's what a recovery looks like. Purcell gets rich by restarting a little bit of the economy. And the pizza's good, too. What a great country we live in.
Tuesday, October 27, 2009
What to do with extra PAC money?
Something wasn’t sitting right with former Rep. Jim McCrery after he finished a telephone interview on the donations made to former colleagues while he sits out a mandatory yearlong ban on lobbying them directly.
Sure, he had kept his campaign committee open for business — which he insists help his firm, Capitol Counsel — but he spent most of his leadership political action committee's money before he left and turned over the reins to fellow Louisiana Republican Charles Boustany.
He wanted that known. He dialed back.
"I just wanted to get a little bit of credit for doing something the right way," he said. "Rather than take it with me and dole it out as see fit, I thought it best to turn it over to a sitting member of Congress." McCrery's perspective raises a question with no easy answer: What do you do with a leadership PAC when you're no longer in office?
Is it better to keep the money and parcel it out to former candidates and colleagues? Or is it better to hand over a large sum of money to a single friend? If it isn't spent to influence Congress or help friends, should it be used for travel or other creature comforts? Or should you close out the PAC by making charitable contributions?
In McCrery's case and that of former Rep. Dave Hobson (R-Ohio), the answer was to bequeath the PAC to a home-state colleague.
Hobson inherited his Pioneer PAC from close a friend, former Rep. John Kasich (R-Ohio). Hobson then willed it to Kasich's successor in the House, Rep. Patrick Tiberi (R-Ohio).
It's a legal maneuver but one that could potentially result in the transfer of huge sums of money from an outgoing lawmaker to a sitting member he or she might try to influence in the future.
To illustrate: Former Rep. Tom Reynolds, a New York Republican who is still under the one-year lobbying ban, has nearly $550,000 in his Together for Our Majority PAC. He's free to will that entire amount to a former colleague, although he’s given no indication that he intends to do so.
Reynolds did not respond to an e-mailed request from POLITICO for comment.
When McCrery left, there was less than $10,000 in his PAC’s coffers, leaving Boustany enough to pay salaries while he rebuilt the war chest.
"In effect, the money was zeroed out," Boustany says. "I inherited the infrastructure."
Sure, he had kept his campaign committee open for business — which he insists help his firm, Capitol Counsel — but he spent most of his leadership political action committee's money before he left and turned over the reins to fellow Louisiana Republican Charles Boustany.
He wanted that known. He dialed back.
"I just wanted to get a little bit of credit for doing something the right way," he said. "Rather than take it with me and dole it out as see fit, I thought it best to turn it over to a sitting member of Congress." McCrery's perspective raises a question with no easy answer: What do you do with a leadership PAC when you're no longer in office?
Is it better to keep the money and parcel it out to former candidates and colleagues? Or is it better to hand over a large sum of money to a single friend? If it isn't spent to influence Congress or help friends, should it be used for travel or other creature comforts? Or should you close out the PAC by making charitable contributions?
In McCrery's case and that of former Rep. Dave Hobson (R-Ohio), the answer was to bequeath the PAC to a home-state colleague.
Hobson inherited his Pioneer PAC from close a friend, former Rep. John Kasich (R-Ohio). Hobson then willed it to Kasich's successor in the House, Rep. Patrick Tiberi (R-Ohio).
It's a legal maneuver but one that could potentially result in the transfer of huge sums of money from an outgoing lawmaker to a sitting member he or she might try to influence in the future.
To illustrate: Former Rep. Tom Reynolds, a New York Republican who is still under the one-year lobbying ban, has nearly $550,000 in his Together for Our Majority PAC. He's free to will that entire amount to a former colleague, although he’s given no indication that he intends to do so.
Reynolds did not respond to an e-mailed request from POLITICO for comment.
When McCrery left, there was less than $10,000 in his PAC’s coffers, leaving Boustany enough to pay salaries while he rebuilt the war chest.
"In effect, the money was zeroed out," Boustany says. "I inherited the infrastructure."
Monday, October 26, 2009
Will UK go bust after the elections?
Sir Howard Davis made some very refreshing comments at recent HSBC clients gathering in London. It is clear that the public do not understand the scale of the crisis which was caused by a collapse of the giant pyramid scheme. The demands of those who are still at work, from postal workers to university professors, make it clear that the current crisis appears as something unreal. And, ironically, it is.
The government have no idea of the size of liquidity hole they are trying to plug. It may still be some hundreds of billions, if not trillions, of pounds. On top of that they keep on spending money to sustain artificially the lifestyle the UK cannot afford any longer (if it ever afforded at all). This puts the country in even more debt. As the government does not want to lose the next elections (or to lose them by the least possible margin), they keep the public in delusion of affluence like someone who got unemployed and is draining his credit cards to their limits.
The Conservatives, seeing the public mood and appetite for continued high lifestyle, are too afraid of telling the harsh truth: that the UK is already in a very deep debt hole and tightening of the belt has to start now. They do not want to be accused of scaremongering by the Labour, which may well result in scuppering their elections chances of near-certain (at the moment) victory.
It is this rather unholy alliance of interests of both sides of political spectrum: the Labour's and the Conservatives' that contributes not only to irresponsible but economically irrational behaviour. We try to live financially as nothing has happened. After the publication of the recent economic figures, the time till the next elections increasingly looks like the last dance on the Titanic. The reality check will come after the elections. Doesn't matter who wins: there is a pretty good risk that the UK will be bust by then.
We seem to believe that what happened to Albania in 1996 – 1997, Argentina in 1999 – 2002 and is happening in Zimbabwe now will never happen to us. That all these can happen to others. Well, it may already have started happening…
The government have no idea of the size of liquidity hole they are trying to plug. It may still be some hundreds of billions, if not trillions, of pounds. On top of that they keep on spending money to sustain artificially the lifestyle the UK cannot afford any longer (if it ever afforded at all). This puts the country in even more debt. As the government does not want to lose the next elections (or to lose them by the least possible margin), they keep the public in delusion of affluence like someone who got unemployed and is draining his credit cards to their limits.
The Conservatives, seeing the public mood and appetite for continued high lifestyle, are too afraid of telling the harsh truth: that the UK is already in a very deep debt hole and tightening of the belt has to start now. They do not want to be accused of scaremongering by the Labour, which may well result in scuppering their elections chances of near-certain (at the moment) victory.
It is this rather unholy alliance of interests of both sides of political spectrum: the Labour's and the Conservatives' that contributes not only to irresponsible but economically irrational behaviour. We try to live financially as nothing has happened. After the publication of the recent economic figures, the time till the next elections increasingly looks like the last dance on the Titanic. The reality check will come after the elections. Doesn't matter who wins: there is a pretty good risk that the UK will be bust by then.
We seem to believe that what happened to Albania in 1996 – 1997, Argentina in 1999 – 2002 and is happening in Zimbabwe now will never happen to us. That all these can happen to others. Well, it may already have started happening…
Sunday, October 25, 2009
FACTBOX: German parties' plans on financial policy
BERLIN (Reuters) - German Chancellor Angela Merkel's conservatives sealed a coalition deal with the Free Democrats (FDP) on Saturday after marathon talks.
Below is what they agreed on finance policy, according to a draft coalition agreement and party officials.
TAX RELIEF
* From 2010, the parties will implement 14 billion euros ($21.01 billion) in tax relief agreed by the outgoing government. Additional corporate and inheritance tax reforms, and changes to child allowances will take the total tax relief for 2010 to an estimated 21 billion euros.
* From 2011, they plan income tax relief worth a total of 24 billion euros annually, with low- and medium-income households and families with children set to benefit most.
* Under the corporate tax reform taking effect from 2010, rules governing the deduction of interest rate payments from taxable profits will be made more attractive. Writing off losses against tax will become easier.
* Inheritance tax rules are to be simplified from 2010 with the aim of helping family owned businesses.
* Also from 2010, child benefit will be increased by 20 euros to 184 euros ($276) per month and the child tax allowance will rise to 7,008 euros from 6,024 euros now.
* Merkel has ruled out tax increases but left open the possibility that social security contributions might rise, saying the government will review the situation in 2011.
BUDGET DEFICIT
* The parties say in the draft coalition accord: "We stand for a solid budget and finance policy," adding that compliance with the European Union Stability Pact is a priority for them.
* They aim to boost economic growth to generate revenues to tackle Germany's swollen budget deficit, and say they will review all state spending.
* The parties say the state should reduce its stakes in banks and other companies as soon as possible and work must now begin on exit strategies.
FINANCIAL MARKET SUPERVISION
* The parties agree German banks will have to meet tougher capital requirements and that supervisory powers for financial markets, until now split between Germany's Bundesbank and watchdog Bafin, will be concentrated at the central bank.
* They will work "vehemently" to avoid financial market inflation risks.
* The parties back the development of a European rating agency.
* In future, no financial product, market institution or financial market may go unregulated or supervised, they say.
Below is what they agreed on finance policy, according to a draft coalition agreement and party officials.
TAX RELIEF
* From 2010, the parties will implement 14 billion euros ($21.01 billion) in tax relief agreed by the outgoing government. Additional corporate and inheritance tax reforms, and changes to child allowances will take the total tax relief for 2010 to an estimated 21 billion euros.
* From 2011, they plan income tax relief worth a total of 24 billion euros annually, with low- and medium-income households and families with children set to benefit most.
* Under the corporate tax reform taking effect from 2010, rules governing the deduction of interest rate payments from taxable profits will be made more attractive. Writing off losses against tax will become easier.
* Inheritance tax rules are to be simplified from 2010 with the aim of helping family owned businesses.
* Also from 2010, child benefit will be increased by 20 euros to 184 euros ($276) per month and the child tax allowance will rise to 7,008 euros from 6,024 euros now.
* Merkel has ruled out tax increases but left open the possibility that social security contributions might rise, saying the government will review the situation in 2011.
BUDGET DEFICIT
* The parties say in the draft coalition accord: "We stand for a solid budget and finance policy," adding that compliance with the European Union Stability Pact is a priority for them.
* They aim to boost economic growth to generate revenues to tackle Germany's swollen budget deficit, and say they will review all state spending.
* The parties say the state should reduce its stakes in banks and other companies as soon as possible and work must now begin on exit strategies.
FINANCIAL MARKET SUPERVISION
* The parties agree German banks will have to meet tougher capital requirements and that supervisory powers for financial markets, until now split between Germany's Bundesbank and watchdog Bafin, will be concentrated at the central bank.
* They will work "vehemently" to avoid financial market inflation risks.
* The parties back the development of a European rating agency.
* In future, no financial product, market institution or financial market may go unregulated or supervised, they say.
Friday, October 23, 2009
In New York City, Obama presses for proposal financial industry overhaul
Obama presses for financial industry overhaul
NEW YORK — President Barack Obama is asking the financial industry to support his push for changes he says would help prevent another economic crisis and would be good for the country in the long run.
Obama made his plea Tuesday night a Democratic Party fundraiser in New York City, speaking to donors who paid $30,000-per-couple to hear him just two weeks before the Nov. 3 elections.
Obama defended administration efforts to bail out the financial industry, calling it unpopular but the right thing to do.
Now, he says the right thing for the industry to do would be to support the changes he has proposed, including creating a federal agency to protect consumers.
NEW YORK — President Barack Obama is asking the financial industry to support his push for changes he says would help prevent another economic crisis and would be good for the country in the long run.
Obama made his plea Tuesday night a Democratic Party fundraiser in New York City, speaking to donors who paid $30,000-per-couple to hear him just two weeks before the Nov. 3 elections.
Obama defended administration efforts to bail out the financial industry, calling it unpopular but the right thing to do.
Now, he says the right thing for the industry to do would be to support the changes he has proposed, including creating a federal agency to protect consumers.
Wednesday, October 21, 2009
Banks still a good place to keep emergency funds
The month of October began with the Federal Deposit Insurance Corporation (FDIC) taking control of the assets of Warren Bank and turning them over to Huntington Bank. On a national level, the FDIC has taken control of nearly 100 banks, year to date.
If the current rate continues, that number will easily exceed 100 by the end of the year. Fortunately, the takeovers are virtually seamless to the depositors, provided that their account balances are under the maximum FDIC limits.
It's important to the nation's stability that we have a dependable and reliable banking system. Just a year ago, many experts thought that the entire banking system was about to collapse. Although several banks continue to have financial problems, it appears that the banking industry has sidestepped a potential freefall.
As a financial advisor, I believe everyone should have adequate liquid cash reserves, and a bank is an appropriate place to keep them. I have recently received a number of faxes and e-mails, all asking the same underlying questions. "Why are the interest rates at the bank so low?" And "Isn't there a better place to put our money?"
Certainly there are investment vehicles with higher interest rates. For example, a little due diligence will uncover a number of equities with yields in the 8 percent to 10 percent range. Depending on your circumstances and risk tolerance, some of your money probably should be in equities.
But let me issue a word of caution. Only bank and credit union deposits have an underlying guarantee beyond the institution itself. Other investments may or may not have better rates, but in all likelihood they are not as secure because they simply lack the extra layer of the FDIC guarantee. There are many reasons why interest rates are so low. One contributing factor is the fee that banks are required to pay for the FDIC protection. Not long ago, a typical bank would contribute 12 to 14 cents into the system for every $100 worth of deposits. Today, that number is closer to 16 cents. Additionally, to shore up the program that's taken over nearly 100 banks this year, the FDIC has come up with a special assessment for banks.
Simply stated, they are asking member banks to prepay three years worth of assessments. I have little doubt that the added expense of the increased fees and the special assessment are significant reasons why bank interest rates are so low.
On top of that, the collapse of the real estate market has left many banks scrambling to stay afloat. As more and more homeowners default on their mortgages, the banks not only stop collecting money, they are suddenly becoming homeowners.
The bottom line is that, even though rates are low, it's important to have emergency funds in the bank. Over the past year, many investors took some serious losses on their investments, even as their housing values plummeted.
Such downturns illustrate why it is so important to have adequate cash reserves. And it's vital that those reserves are in a safe place. You do not want to, nor should you take risks with your safe money. Interest rates may be at historical lows, but it's good to know that if your bank gets into trouble, you won't lose your emergency money.
If the current rate continues, that number will easily exceed 100 by the end of the year. Fortunately, the takeovers are virtually seamless to the depositors, provided that their account balances are under the maximum FDIC limits.
It's important to the nation's stability that we have a dependable and reliable banking system. Just a year ago, many experts thought that the entire banking system was about to collapse. Although several banks continue to have financial problems, it appears that the banking industry has sidestepped a potential freefall.
As a financial advisor, I believe everyone should have adequate liquid cash reserves, and a bank is an appropriate place to keep them. I have recently received a number of faxes and e-mails, all asking the same underlying questions. "Why are the interest rates at the bank so low?" And "Isn't there a better place to put our money?"
Certainly there are investment vehicles with higher interest rates. For example, a little due diligence will uncover a number of equities with yields in the 8 percent to 10 percent range. Depending on your circumstances and risk tolerance, some of your money probably should be in equities.
But let me issue a word of caution. Only bank and credit union deposits have an underlying guarantee beyond the institution itself. Other investments may or may not have better rates, but in all likelihood they are not as secure because they simply lack the extra layer of the FDIC guarantee. There are many reasons why interest rates are so low. One contributing factor is the fee that banks are required to pay for the FDIC protection. Not long ago, a typical bank would contribute 12 to 14 cents into the system for every $100 worth of deposits. Today, that number is closer to 16 cents. Additionally, to shore up the program that's taken over nearly 100 banks this year, the FDIC has come up with a special assessment for banks.
Simply stated, they are asking member banks to prepay three years worth of assessments. I have little doubt that the added expense of the increased fees and the special assessment are significant reasons why bank interest rates are so low.
On top of that, the collapse of the real estate market has left many banks scrambling to stay afloat. As more and more homeowners default on their mortgages, the banks not only stop collecting money, they are suddenly becoming homeowners.
The bottom line is that, even though rates are low, it's important to have emergency funds in the bank. Over the past year, many investors took some serious losses on their investments, even as their housing values plummeted.
Such downturns illustrate why it is so important to have adequate cash reserves. And it's vital that those reserves are in a safe place. You do not want to, nor should you take risks with your safe money. Interest rates may be at historical lows, but it's good to know that if your bank gets into trouble, you won't lose your emergency money.
Tuesday, October 20, 2009
Financial shares slip after bank earnings
BOSTON (MarketWatch) -- U.S. financial stocks fell on Thursday but closed off their lows following a late day rally in the broader market.
Major financilal stocks ended were mired in the red as quarterly earnings reports from Goldman Sachs Group Inc. and Citigroup Inc. didn't live up to investors' lofty expectations.
Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 186.25, +0.75, +0.40%) slipped after the company said its third-quarter earnings topped analyst forecasts, but investors may have been hoping for an even better showing after J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 46.12, +0.14, +0.30%) reported a blowout quarter earlier this week.
Goldman posted quarterly profit of more than $3 billion. See full story.
/quotes/comstock/13*!xlf/quotes/nls/xlf XLF 15.33, +0.04, +0.26%
Meanwhile, Citi /quotes/comstock/13*!c/quotes/nls/c (C 4.58, +0.04, +0.88%) shares fell 5% and were the biggest decliner among the financial stocks in the S&P 500 after the troubled banking giant said its per-share loss narrowed, but it continued to book huge credit losses in the tough economic climate. See complete article.
An exchange-traded fund tracking financial stocks, Financial Select Sector SPDR Fund /quotes/comstock/13*!xlf/quotes/nls/xlf (XLF 15.33, +0.04, +0.26%) , slipped more than 1.2% in afternoon trade. The ETF jumped over 3% on Wednesday after J.P. Morgan's quarterly results easily surpassed Wall Street estimates.
Elsewhere on the earnings front, Charles Schwab Corp. /quotes/comstock/15*!schw/quotes/nls/schw (SCHW 18.32, -0.21, -1.13%) said its third-quarter net income slipped by about a third from the year-ago period. The online broker's stock fell about 5%. Read more.
In other news, shares of Capital One Financial Corp. /quotes/comstock/13*!cof/quotes/nls/cof (COF 37.36, +0.08, +0.22%) were losing ground after the credit-card firm said delinquencies and charge-offs rose in September with more borrowers in financial straits.
Shares of Invesco Ltd. /quotes/comstock/13*!ivz/quotes/nls/ivz (IVZ 23.80, +0.68, +2.94%) closed off 3.6% Thursday after Pali Research downgraded the asset manager's shares to neutral from buy. Analyst Douglas Sipkin in a research note said the stock, which closed at $23.97 on Wednesday, was essentially at his target price of $24.
"We think that for shares to move materially higher in the short term, an acquisition is becoming crucial. One transaction in particular, [Morgan Stanley's] Van Kampen, has been discussed as a target," he wrote.
Additionally, Sipkin noted Invesco's asset growth in the third quarter lagged peers. "Invesco is still one of the best-positioned managers for the long-term, just at current levels we think it is fairly valued for now," the analyst said.
CIT Group Inc. /quotes/comstock/13*!cit/quotes/nls/cit (CIT 1.19, -0.02, -1.65%) was among the few financial stocks moving strongly to the upside Thursday. The lender, which is trying to stave off bankruptcy, is in negotiations with some bondholders to amend the terms of its $28 billion debt exchange, Bloomberg reported Thursday.
Separately, Reuters reported CIT is moving closer to finalizing the terms of a new loan that would give the company $3 billion to $6.5 billion. The terms of the loan, which is being arranged by Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 17.23, +0.07, +0.41%) , could be finalized as soon as this week, Reuters said.
Major financilal stocks ended were mired in the red as quarterly earnings reports from Goldman Sachs Group Inc. and Citigroup Inc. didn't live up to investors' lofty expectations.
Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 186.25, +0.75, +0.40%) slipped after the company said its third-quarter earnings topped analyst forecasts, but investors may have been hoping for an even better showing after J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 46.12, +0.14, +0.30%) reported a blowout quarter earlier this week.
Goldman posted quarterly profit of more than $3 billion. See full story.
/quotes/comstock/13*!xlf/quotes/nls/xlf XLF 15.33, +0.04, +0.26%
Meanwhile, Citi /quotes/comstock/13*!c/quotes/nls/c (C 4.58, +0.04, +0.88%) shares fell 5% and were the biggest decliner among the financial stocks in the S&P 500 after the troubled banking giant said its per-share loss narrowed, but it continued to book huge credit losses in the tough economic climate. See complete article.
An exchange-traded fund tracking financial stocks, Financial Select Sector SPDR Fund /quotes/comstock/13*!xlf/quotes/nls/xlf (XLF 15.33, +0.04, +0.26%) , slipped more than 1.2% in afternoon trade. The ETF jumped over 3% on Wednesday after J.P. Morgan's quarterly results easily surpassed Wall Street estimates.
Elsewhere on the earnings front, Charles Schwab Corp. /quotes/comstock/15*!schw/quotes/nls/schw (SCHW 18.32, -0.21, -1.13%) said its third-quarter net income slipped by about a third from the year-ago period. The online broker's stock fell about 5%. Read more.
In other news, shares of Capital One Financial Corp. /quotes/comstock/13*!cof/quotes/nls/cof (COF 37.36, +0.08, +0.22%) were losing ground after the credit-card firm said delinquencies and charge-offs rose in September with more borrowers in financial straits.
Shares of Invesco Ltd. /quotes/comstock/13*!ivz/quotes/nls/ivz (IVZ 23.80, +0.68, +2.94%) closed off 3.6% Thursday after Pali Research downgraded the asset manager's shares to neutral from buy. Analyst Douglas Sipkin in a research note said the stock, which closed at $23.97 on Wednesday, was essentially at his target price of $24.
"We think that for shares to move materially higher in the short term, an acquisition is becoming crucial. One transaction in particular, [Morgan Stanley's] Van Kampen, has been discussed as a target," he wrote.
Additionally, Sipkin noted Invesco's asset growth in the third quarter lagged peers. "Invesco is still one of the best-positioned managers for the long-term, just at current levels we think it is fairly valued for now," the analyst said.
CIT Group Inc. /quotes/comstock/13*!cit/quotes/nls/cit (CIT 1.19, -0.02, -1.65%) was among the few financial stocks moving strongly to the upside Thursday. The lender, which is trying to stave off bankruptcy, is in negotiations with some bondholders to amend the terms of its $28 billion debt exchange, Bloomberg reported Thursday.
Separately, Reuters reported CIT is moving closer to finalizing the terms of a new loan that would give the company $3 billion to $6.5 billion. The terms of the loan, which is being arranged by Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 17.23, +0.07, +0.41%) , could be finalized as soon as this week, Reuters said.
Monday, October 12, 2009
What Is CPA Marketing?
Cost Per Action marketing is one of the simplest methods for beginner Internet marketers to begin making money online. For years, this type of affiliate marketing has been an industry secret of the insider “big players. It was never really a secret, but while most people in Internet marketing had their hands busy promoting Clickbank products, the big kahunas were playing on a whole different level.
Cost Per Action, sometimes referred to as “CPA,” is a type of Internet marketing that requires consumers to complete specific actions ” this usually entails filling out a form and requesting a free product sample, signing up for a free trial. In some cases, it involves asking the consumer to try a new product or service by making a small purchase.
What it means is that you, as offer promoter, get paid for the “actions” taken by the traffic you steer to advertisers. As a basic example, let’s say a company wants to test the consumer feedback on a new product line that they are introducing. They create an offer where they agree to pay $1.50 for each person who submits their e-mail address and zip code ” your job is simply to direct traffic to that site and then collect $1.50 for each person who opts in.
This is a fairly standard promotion type. Others might pay as much as $37 for an optin (though if the payout is higher, the offer might require much more information from the customer or ask for a small upfront payment.
In essence you, as a CPA marketer, are really a traffic broker: You buy traffic on one end, send it to an offer page and get paid based on how well it converts. Sounds so simple, doesn’t it? It can be easy, but it generally isn’t.
Because it is so profitable, CPA marketing is extremely competitive, and for a beginner, it can be intimidating to start trying to compete with super-affiliates making $100k a day and even more, or even with the more common affiliates who are making $500 to $1,000 a day running CPA campaigns. When you try to get started, you’re going to be up against all of that competition, and it can be very challenging. The truth is, a lot of beginners simply get frustrated and give up when they figure out that CPA marketing can be difficult and expensive. Like any new thing, it’s best if you check out the most effective way of doing it, before you dive in head first.
Cost Per Action, sometimes referred to as “CPA,” is a type of Internet marketing that requires consumers to complete specific actions ” this usually entails filling out a form and requesting a free product sample, signing up for a free trial. In some cases, it involves asking the consumer to try a new product or service by making a small purchase.
What it means is that you, as offer promoter, get paid for the “actions” taken by the traffic you steer to advertisers. As a basic example, let’s say a company wants to test the consumer feedback on a new product line that they are introducing. They create an offer where they agree to pay $1.50 for each person who submits their e-mail address and zip code ” your job is simply to direct traffic to that site and then collect $1.50 for each person who opts in.
This is a fairly standard promotion type. Others might pay as much as $37 for an optin (though if the payout is higher, the offer might require much more information from the customer or ask for a small upfront payment.
In essence you, as a CPA marketer, are really a traffic broker: You buy traffic on one end, send it to an offer page and get paid based on how well it converts. Sounds so simple, doesn’t it? It can be easy, but it generally isn’t.
Because it is so profitable, CPA marketing is extremely competitive, and for a beginner, it can be intimidating to start trying to compete with super-affiliates making $100k a day and even more, or even with the more common affiliates who are making $500 to $1,000 a day running CPA campaigns. When you try to get started, you’re going to be up against all of that competition, and it can be very challenging. The truth is, a lot of beginners simply get frustrated and give up when they figure out that CPA marketing can be difficult and expensive. Like any new thing, it’s best if you check out the most effective way of doing it, before you dive in head first.
Saturday, October 10, 2009
Why “Vendrification” Will Never Happen in NYC
t feels like the fervor over street vendors has reached a peak this year, but it didn’t happen overnight. It started more as a slow trickle years ago. Two German brothers selling sausages on 54th Street. A former chef from the Russian Tea Room doing an upscale version of lamb over rice. A couple of SoCal exports selling carne asada in Soho. Street food has slowly been getting a lot better in NYC. And as the newer carts have gotten better, people have started to become more interested in what was being sold on the street. It’s reflected in the media coverage, and the increasing popularity of the Vendy Awards- the annual event put on the Street Vendor Project to reward the hard working food vendors of New York City. Even vendors who had been there for years, like those at the Red Hook Ball Fields were being “discovered” for the first time.
But it wasn’t until 2 years ago that the real explosion started. Kim Ima’s Treats Truck was the first I can remember, followed pretty quickly by the Wafels and Dinges Truck and the Dessert Truck. When these lavishly painted trucks, with cute logos, and internet savvy chefs hit the scene it seemed like something clicked. The coverage of these new trucks was out of control, not just from the food blogs (guilty as charged) but from the traditional media as well. The stories wrote themselves, and the trucks didn’t even have to pay PR companies to make it happen.
Combine that with the proliferation of twitter, the well publicized success of trucks in other cities (like Kogi BBQ in LA), and the recession, and it’s no surprise that every chef and restauranteur in the country has at least thought about opening a food truck. And, as you know, plenty of them have succeeded. So much so that two weeks ago Blackbook Mag coined a new term for this invasion of upscale food trucks: vendrification.
The word is genius, and there is no question that these new “hipster” trucks are taking over the country. From the West Coast (in LA, San Fran, and Portland), to Austin, Philadelphia, and of course here in New York City. Turning street vending, an occupation that many people still consider to be dirty and sketchy, into a hip, “clean”, well marketed, business that will in theory attract a far larger clientele than your tourist driven hot dog carts and Mister Softee trucks, or immigrant driven taco trucks and halal stands.
And even though right now it seems like the forces of capitalism could easily take hold, and allow for this new wave of carts and trucks to replace their less flashy old school counterparts, I don’t think it will ever happen on a massive scale. Gentrification is one thing, and it’s not hard to understand why Midtown has been taken over by countless branches of Chipotle and Pret a Manger. But the economics of street food are different, and I think there are certain factors that will insure that it will remain the inexpensive, immigrant run trade that it has always been.
First and foremost, you can’t make real money from street food vending in New York City from a single cart. I wrote about this a few weeks ago, and it’s something that a lot of the new vendors are starting to realize. You are incredibly limited in the time you can actually sell, the locations you can park in, and the volume you can do from a mobile kitchen. When you factor in the cost of a commercial kitchen, monthly parking charge at the commissary, and the unavoidable tickets that all street vendors get, the numbers just don’t add up. Once you get in the trenches, that “no rent” “low cost” start up business that seemed so lucrative in your business plan, doesn’t really amount to much in the way of a profit. Or at least not enough to profit to make it worth the time you have to put it. So the natural inclination… mulitple carts!
Sadly, multiple carts are not a viable option. One of the main engines of gentrification is the economics of scale, and it is no different in street vending. The more locations you have for a business, the better your profit margins. And nowhere is that more true than Manhattan. It costs the same amount of money to bring supplies to a single Manhattan restaurant as it does to bring supplies to ten. So if you own multiple locations, your costs are spread out- making it easier for each individual location to be profitable. And since there are more of them, the burden of profit on each location is far less. The small business owner needs to make enough money from his one business to support his entire family. Own 10 restaurants and the profit burden on each individual one is far less.
The same is true for street carts… but it’s hard enough “finding” a permit for one street cart, let alone an army of them. With only 3000 permits available, and an annual waiting list for new permits that takes years to climb, it is virtually impossible to obtain a permit legally. Every one of the new carts or trucks that you have seen hit the streets in NYC over the past two years has either purchased their permit illegally on the black market, or went around the law by finding a person who already had a permit and making them an “employee” or part owner of their business. Either way, cart expansion is not as easy as signing a lease. And as the economics of street vending become more clear to entrepreneurs (whose end goal is to make money) I think many will be deterred. In fact, ask many of the new school street vendors for advice about opening a cart or truck- and most of them will say the same thing. Don’t do it.
So if new trucks aren’t making money, how do the old school vendors make money? The answer is two fold. First, they sell a low cost, high volume product, that is guaranteed a certain amount of business. There is a reason why street food is made mostly of hot dogs, street meat, and drinks. The profit margins are great, and it’s easy to do the kind of volume necessary to turn a profit. If you base your business model on providing a better product than what is available on the streets now, chances are your profit margins are going to be lower and you will be more limited in the volume you can produce.
But more than that, the old school vendors themselves are willing to work crazy hours to make far less money than most entrepreneurs would be willing to make.
That’s not to say there isn’t money to be made from opening a truck. Many new school vendors are using the notoriety they’ve gained from their cart to make money outside of the food they sell on the street. Private corporate events are huge, where some trucks can make more in an hour than in an entire week of selling food on the street. Catering is also very lucrative, and what better way to advertise your catering business than selling food out of a truck right outside the giant office buildings that order catering. Carts and trucks are even appearing in commercials for VISA (the Treats Truck) and T-Mobile. But if you need the most direct proof that opening a truck is not as easy as opening a permanent location- look at how many mobile businesses have gone the traditional route since becoming famous as street vendors. The Vendy Award winning Calexico cart opened a restaurant in Red Hook this year, Dessert Truck has abandoned their truck for a store in the Lower East Side, and Lev from the Cupcake Stop Truck has said a number of times that opening permanent cupcake shops is an option he is very interested in.
Vendrification could be a possibility if businesses start to use carts and trucks as a loss leader to gain notoriety. The La Cense Burger Truck doesn’t need to be profitable. It’s a moving billboard for a giant online steak and beef distributor, and has gotten that company tons of publicity. If big businesses see street vending as a cheap way to get free PR, I could see them using deep pockets to force out many of the traditional food vendors. Luckily I think we are savvy consumers, and as more and more generic companies turn to street vending for PR the less effective it will become. The Taco Bell Truck or White Castle Burger mobile seems super exciting now. But if Midtown became filled with these carts and trucks, there could easily be a backlash. And, do you think if sombody opened a truck selling cupcakes today it would get as much publicity as the Cupcake Stop Truck got when they hit the scene?
The other way it works as a business model is if businesses already have a brick and mortar store that they are paying rent for. Rickshaw Dumpling already has a kitchen in their restaurant, so trucks represent a cheaper way for them to franchise. Daisy May’s BBQ Cart is in the same boat. Extra sales, but far less overhead because they are already paying rent for the restaurant on 11th Ave
But even that is not foolproof. And even if more restaurants start doing this, I think there is one final obstacle to keep vendrification from becoming widespread in New York City. Let’s say new school vendors find ways to be profitable. Let’s say somebody discovers the secret to selling fancy, “high end” food and drinks or desserts, or anything from the streets. If it was easy to get a permit, and became very profitable to do this- every business in New York would want in on the action. Every restaurant would want a cart. Every bakery would go mobile. Every coffee shop would be on wheels. And the people paying all that rent for their storefronts would be turned into automatic suckers. I don’t think it could ever happen, because for most businesses the economics of running a street cart aren’t there. But even if they were. Even if there was some magic equation, the city would then step in and prevent it.
Think about how much of the economy in this city is built around real estate. The more businesses that bypass that system, by parking their restaurant or cafe on the “rent free” streets of NYC, the more likely it is the government will step in and just eliminate street vending altogether. Right now, businesses and government have begrudgingly accepted the existence of hot dog vendors and street meat vendors because these are immigrant vendors, making such a small amount of money, selling such a cheap product, it’s not worth going after them on a massive scale. It that little bit of money, turned into anything significant, the business owners in Midtown would want their share.
Of course this is only true in New York City. In a city like Portland, OR, the carts are like actual businesses. And they pay rent to landlords who own the lots where they park. They are a legitimate part of the real estate market, and for that reason have been allowed to proliferate in a way that is helpful to the overall Portland economy- not harmful.
The fact that street vending is not a profitable enterprise is precisely why it’s allowed to exist. Gentrification happens because it makes more money for the business community as a whole. Landlords are happy, because these big chains can pay the exorbitant rents that small businesses can’t afford. It’s an improvement to the system financially. We get crappier food, but everybody makes more money. Vendrification would have the opposite effect on one of the main engines of the New York City economy. And for that reason alone, it will never fully happen.
But it wasn’t until 2 years ago that the real explosion started. Kim Ima’s Treats Truck was the first I can remember, followed pretty quickly by the Wafels and Dinges Truck and the Dessert Truck. When these lavishly painted trucks, with cute logos, and internet savvy chefs hit the scene it seemed like something clicked. The coverage of these new trucks was out of control, not just from the food blogs (guilty as charged) but from the traditional media as well. The stories wrote themselves, and the trucks didn’t even have to pay PR companies to make it happen.
Combine that with the proliferation of twitter, the well publicized success of trucks in other cities (like Kogi BBQ in LA), and the recession, and it’s no surprise that every chef and restauranteur in the country has at least thought about opening a food truck. And, as you know, plenty of them have succeeded. So much so that two weeks ago Blackbook Mag coined a new term for this invasion of upscale food trucks: vendrification.
The word is genius, and there is no question that these new “hipster” trucks are taking over the country. From the West Coast (in LA, San Fran, and Portland), to Austin, Philadelphia, and of course here in New York City. Turning street vending, an occupation that many people still consider to be dirty and sketchy, into a hip, “clean”, well marketed, business that will in theory attract a far larger clientele than your tourist driven hot dog carts and Mister Softee trucks, or immigrant driven taco trucks and halal stands.
And even though right now it seems like the forces of capitalism could easily take hold, and allow for this new wave of carts and trucks to replace their less flashy old school counterparts, I don’t think it will ever happen on a massive scale. Gentrification is one thing, and it’s not hard to understand why Midtown has been taken over by countless branches of Chipotle and Pret a Manger. But the economics of street food are different, and I think there are certain factors that will insure that it will remain the inexpensive, immigrant run trade that it has always been.
First and foremost, you can’t make real money from street food vending in New York City from a single cart. I wrote about this a few weeks ago, and it’s something that a lot of the new vendors are starting to realize. You are incredibly limited in the time you can actually sell, the locations you can park in, and the volume you can do from a mobile kitchen. When you factor in the cost of a commercial kitchen, monthly parking charge at the commissary, and the unavoidable tickets that all street vendors get, the numbers just don’t add up. Once you get in the trenches, that “no rent” “low cost” start up business that seemed so lucrative in your business plan, doesn’t really amount to much in the way of a profit. Or at least not enough to profit to make it worth the time you have to put it. So the natural inclination… mulitple carts!
Sadly, multiple carts are not a viable option. One of the main engines of gentrification is the economics of scale, and it is no different in street vending. The more locations you have for a business, the better your profit margins. And nowhere is that more true than Manhattan. It costs the same amount of money to bring supplies to a single Manhattan restaurant as it does to bring supplies to ten. So if you own multiple locations, your costs are spread out- making it easier for each individual location to be profitable. And since there are more of them, the burden of profit on each location is far less. The small business owner needs to make enough money from his one business to support his entire family. Own 10 restaurants and the profit burden on each individual one is far less.
The same is true for street carts… but it’s hard enough “finding” a permit for one street cart, let alone an army of them. With only 3000 permits available, and an annual waiting list for new permits that takes years to climb, it is virtually impossible to obtain a permit legally. Every one of the new carts or trucks that you have seen hit the streets in NYC over the past two years has either purchased their permit illegally on the black market, or went around the law by finding a person who already had a permit and making them an “employee” or part owner of their business. Either way, cart expansion is not as easy as signing a lease. And as the economics of street vending become more clear to entrepreneurs (whose end goal is to make money) I think many will be deterred. In fact, ask many of the new school street vendors for advice about opening a cart or truck- and most of them will say the same thing. Don’t do it.
So if new trucks aren’t making money, how do the old school vendors make money? The answer is two fold. First, they sell a low cost, high volume product, that is guaranteed a certain amount of business. There is a reason why street food is made mostly of hot dogs, street meat, and drinks. The profit margins are great, and it’s easy to do the kind of volume necessary to turn a profit. If you base your business model on providing a better product than what is available on the streets now, chances are your profit margins are going to be lower and you will be more limited in the volume you can produce.
But more than that, the old school vendors themselves are willing to work crazy hours to make far less money than most entrepreneurs would be willing to make.
That’s not to say there isn’t money to be made from opening a truck. Many new school vendors are using the notoriety they’ve gained from their cart to make money outside of the food they sell on the street. Private corporate events are huge, where some trucks can make more in an hour than in an entire week of selling food on the street. Catering is also very lucrative, and what better way to advertise your catering business than selling food out of a truck right outside the giant office buildings that order catering. Carts and trucks are even appearing in commercials for VISA (the Treats Truck) and T-Mobile. But if you need the most direct proof that opening a truck is not as easy as opening a permanent location- look at how many mobile businesses have gone the traditional route since becoming famous as street vendors. The Vendy Award winning Calexico cart opened a restaurant in Red Hook this year, Dessert Truck has abandoned their truck for a store in the Lower East Side, and Lev from the Cupcake Stop Truck has said a number of times that opening permanent cupcake shops is an option he is very interested in.
Vendrification could be a possibility if businesses start to use carts and trucks as a loss leader to gain notoriety. The La Cense Burger Truck doesn’t need to be profitable. It’s a moving billboard for a giant online steak and beef distributor, and has gotten that company tons of publicity. If big businesses see street vending as a cheap way to get free PR, I could see them using deep pockets to force out many of the traditional food vendors. Luckily I think we are savvy consumers, and as more and more generic companies turn to street vending for PR the less effective it will become. The Taco Bell Truck or White Castle Burger mobile seems super exciting now. But if Midtown became filled with these carts and trucks, there could easily be a backlash. And, do you think if sombody opened a truck selling cupcakes today it would get as much publicity as the Cupcake Stop Truck got when they hit the scene?
The other way it works as a business model is if businesses already have a brick and mortar store that they are paying rent for. Rickshaw Dumpling already has a kitchen in their restaurant, so trucks represent a cheaper way for them to franchise. Daisy May’s BBQ Cart is in the same boat. Extra sales, but far less overhead because they are already paying rent for the restaurant on 11th Ave
But even that is not foolproof. And even if more restaurants start doing this, I think there is one final obstacle to keep vendrification from becoming widespread in New York City. Let’s say new school vendors find ways to be profitable. Let’s say somebody discovers the secret to selling fancy, “high end” food and drinks or desserts, or anything from the streets. If it was easy to get a permit, and became very profitable to do this- every business in New York would want in on the action. Every restaurant would want a cart. Every bakery would go mobile. Every coffee shop would be on wheels. And the people paying all that rent for their storefronts would be turned into automatic suckers. I don’t think it could ever happen, because for most businesses the economics of running a street cart aren’t there. But even if they were. Even if there was some magic equation, the city would then step in and prevent it.
Think about how much of the economy in this city is built around real estate. The more businesses that bypass that system, by parking their restaurant or cafe on the “rent free” streets of NYC, the more likely it is the government will step in and just eliminate street vending altogether. Right now, businesses and government have begrudgingly accepted the existence of hot dog vendors and street meat vendors because these are immigrant vendors, making such a small amount of money, selling such a cheap product, it’s not worth going after them on a massive scale. It that little bit of money, turned into anything significant, the business owners in Midtown would want their share.
Of course this is only true in New York City. In a city like Portland, OR, the carts are like actual businesses. And they pay rent to landlords who own the lots where they park. They are a legitimate part of the real estate market, and for that reason have been allowed to proliferate in a way that is helpful to the overall Portland economy- not harmful.
The fact that street vending is not a profitable enterprise is precisely why it’s allowed to exist. Gentrification happens because it makes more money for the business community as a whole. Landlords are happy, because these big chains can pay the exorbitant rents that small businesses can’t afford. It’s an improvement to the system financially. We get crappier food, but everybody makes more money. Vendrification would have the opposite effect on one of the main engines of the New York City economy. And for that reason alone, it will never fully happen.
Thursday, October 8, 2009
Constitutional Financial Innovation
I had a number of interesting conversations over the weekend about housing derivatives. People have reminded me that are plenty of derivatives that trade without being able to purchase the underlying, an obvious one being weather derivatives. Provided there is enough liquidity, people can hedge (or synthetically hedge) within the futures market itself. But the issue then changes to whether or not we can get enough liquidity – and I don’t see enough people wanting to get on the other side of the housing market at any time to get liquidity going.
And I had no idea Shiller has revived his Microshares see-saw idea to try and sell these derivatives. It’s based on the same terrible leveraged ETF design as his crude oil ETF, the one that imploded last year in a display the Wall Street Journal called “This fizzle, after a year-and-a-half run, is one of the highest-profile embarrassments for the growing ETF industry over the past year. Turns out the funds, the brainchild of famed Yale economist Robert Shiller, were too smart for their own good.” (The WSJ piece is a good overview.) Good luck with this the second time around; nice 1.25% expense ratio on the fund (can you call it a fund if you hold leveraged T-bills instead of the underlying?).
Constitutional Financial Innovation
I’m going to read one level into Shiller’s argument and note that, at the end of the day, he’s concerned that average Americans need better tools to manage the risks of their incomes and investments. I think Reihan Salam and other smart neoliberals has flirted with this idea of derivatives designed for the middle-class to help them deal with risk management in a post-Risk-Shift world. The idea that consumers could buy put options on themselves – options that are more valuable the worse things get, that can provide a floor under which losses could not go – to help them manage the downside risks they face in volatile assets and increasingly uncertain labor markets, would be a huge innovation if we could pull it off. But in the same way that nobody would naturally want to insure the housing market, I can’t see enough people wanting to insure the middle class to get instruments like this to start.
Here’s something that should make conservatives happy. The best, and I mean the best, put option contract for consumers ever conceived, is written right into The Constitution: “To establish…uniform Laws on the subject of Bankruptcies throughout the United States.” Yes, viewing bankruptcy as a financial engineer does, as a put option on assets and volatility for consumers, handles all of this risk management in a way that is cleaner and more efficient than any derivatives market foreseeable in the future.
Bankruptcy As a Put Option
Shiller is worried that we don’t have a way for a household to write a put options on its assets. For a simple example, let’s say a household has a house worth $500k (assets), and a debt worth $400k (liabilities), and there’s a very high probability that it can make the payments on those liabilities.
People like Shiller wants you to be able to pay a small fee so that if the asset is suddenly worth $300K you get $100K in value – the put option is presumably written at the level of liabilities. He also wants you to be able to hedge income, so that if the probability of you being able to make the payments decreases – long unemployment spells, health problems, etc. – you can get a payout that would reduce the liability to the point where the house can manage them.
Notice that if the household goes bankrupt, because assets are less than liabilities, liabilities are marked down accordingly, directly as if a put option has been exercised. In an ideal bankruptcy, it would be marked down that $100K in the example above, or marked down to the point were payments have decreased so they are manageable.
Taboo Talk
I know it is taboo to talk about it this way, since bankruptcies are nasty zero-sum games evil people do but put options are wonderful gee-whiz innovations that are in no way zero-sum, but I honestly don’t see a net difference between a household declaring bankruptcy and a household collecting money on a put options it has written on itself. You are being charged for credit risk by the people who lend to you; you are already paying the fee for having this put option.
If anything, bankruptcy handles the moral hazard problem better with these “insurance” like contracts and it is held by the debt lender, so the cost of the option (how much extra you are charged to compensate for credit risk) can be individualized in a way a commodity market couldn’t handle. Sure lawyers collect a fee for pushing people into bankruptcies, but I have a hard time believing it’s any worse than a 1.25% expense ratio the derivative sellers are getting. And key is that it is only exercised if the household can’t manage the liability payments – someone has to pay me, zero-sum, if my house declines in value even if I can make the original payments on liabilities with this hypothetical put option. Someone only has to ‘pay me’ in bankruptcy if I can’t manage the payments – in this case, I hold this risk longer as long as it is optimal for me to do so.
I need to flesh this out more, and I’m interested in the minute differences between the two in equilibrium. But the last time I checked, we are currently trying to dismantle this financial innovation as it is part of the neoliberal vision of governance to dismantle and then privatize the social safety net, regardless of whether or not a functioning market is in place and how well the social safety net provided. If anything we should be expanding this – mortgage cramdowns would have been the financial innovation needed to survive the foreclosures and raw neighborhood destruction that is going to characterize 2010.
Tuesday, October 6, 2009
The Global Economy Makes a Critical Transition
Statement by Secretary Timothy F. Geithner at the International Monetary and Financial Committee (IMFC) Meeting
On behalf of the United States and our delegation, I'd like to thank Turkey and the people of Istanbul for hosting this year's Annual Meetings. We meet as the global economy makes a critical transition away from crisis and toward recovery. Less than one year ago, with the global economy facing serious and unprecedented challenges, countries put in place significant and extraordinary measures to stabilize financial markets and support the global economy.
The United States has been a leader throughout this period, with the Administration enacting a sizeable stimulus plan; restoring confidence in the financial system and the flow of credit to consumers and households through the Financial Stability Plan; and helping marshal resources for emerging markets and developing countries through President Obama's call for large scale resources to backstop the global financial system.
Conditions have improved considerably. Stresses in financial markets have declined, confidence has improved, international trade is recovering, and economic growth has resumed in most countries and globally. While global growth is forecast to accelerate in 2010, output gaps will persist, unemployment may rise further, and downside risks remain.
For this reason, Leaders in Pittsburgh agreed to sustain their strong policy responses and not prematurely withdraw fiscal, monetary and financial sector support measures until durable, private sector-led growth is firmly achieved. When the time is right, credible exit strategies will be prepared to begin gradually withdrawing public sector support in a way that is cooperative and coordinated but does not jeopardize the recovery.
In Pittsburgh, G-20 Leaders reached an historic agreement to put the G-20 at the center of their efforts to work together to build a durable economic recovery while avoiding the fragilities and excesses of the past that led to the crisis.
They pledged to adopt the policies needed to lay the foundations for a healthy global economy by creating a Framework for Strong, Sustainable, and Balanced Growth; by building a robust system of financial supervision and regulation; and by modernizing the international financial institutions to take on the challenges of the 21st century. As IMF Governors, we have an important responsibility to work collaboratively to advance the reform agenda to support a durable recovery and head off future crises.
Forging a Framework for Strong, Sustainable, and Balanced Growth
The crisis revealed critical weaknesses in the pattern of global growth, in which some countries consumed well beyond their incomes and others relied heavily on exports to generate growth and, in the process, accumulated vast amounts of foreign exchange reserves. This pattern of demand growth and global capital flows was excessively unbalanced and ultimately unsustainable.
To manage the transition to a more balanced and sustainable pattern of global demand, Leaders have created a new framework for economic cooperation, the "Framework for Strong, Sustainable, and Balanced Growth", in which G-20 Finance Ministers and Central Bank Governors will work together, through mutual assessment, to help ensure that our individual policies are collectively consistent and more balanced, within a forward-looking framework.
We are committed to seeing this cooperative process of mutual assessment work so as to help prevent unsustainable trajectories of debt, credit, leverage, demand, and reserve accumulation becoming forces of destabilization in the future. We look to the IMF to play a key role in assisting the assessment of G-20 economic and financial policies and in providing its view on the likely balance and sustainability of the global economy. We expect that the IMF will report regularly to the G-20, in addition to the IMFC.
Strengthening Financial Sector Supervision and Regulation
Perhaps most dramatically, the crisis revealed gaps in our regulatory system that allowed the build-up of excess leverage and risk within and alongside the banking system. In the United States, we are working to implement reforms designed to protect consumers and investors and create a more stable, more resilient financial system.
In Pittsburgh, G-20 Leaders advanced an ambitious agenda to create a seamless web of financial regulation and supervision - addressing the deficiencies in our financial regulatory framework that contributed to the virulence and global spread of the financial crisis. Strengthening firms' capital must be at the core of this effort.
The United States is committed to specific deadlines for implementation of more and higher quality capital, stronger liquidity, a simple leverage ratio to constrain excess risk-taking and building buffers that firms can draw down in periods of stress.
Compensation reform is also critical, and the United States has shown leadership in this area by already taking a number of actions to reform compensation practices to support financial stability. Since the April G-20 meeting, we have put in place tough new restrictions for firms receiving public assistance, including restrictions on bonuses and golden parachutes and a requirement that boards of directors review the relationship between compensation and risk; appointed a Special Master for Executive Compensation, empowered to review compensation structures for the top 100 employees at firms receiving exceptional assistance; and proposed legislation, already passed by the House, that will require all public companies to permit shareholders to cast an annual "say on pay" vote and make their compensation committees independent in fact, not just in name.
The U.S. has also moved to strengthen the transparency and the functioning of the over-the-counter derivatives market, and is working to develop tools to effectively resolve large failed financial institutions.
As we in the United States strengthen our system, we urge other nations to take steps to strengthen their own systems and ensure that the global financial system is safer and more stable. The United States is undergoing an IMF Financial Sector Assessment Program, reflecting our commitment to accept the obligations and responsibilities of being an IMF member.
The IMF's work, through annual surveillance, the FSAP, Global Financial Stability Reports, new early warning exercises, and intensified cooperation with the expanded Financial Stability Board (FSB), is making an important contribution to strengthening financial systems around the world. IMF-FSB collaboration is essential to a stronger, more resilient global financial system.
*Modernizing the IMF*
"Enhanced Resources"
The IMF's actions since the crisis began have stabilized markets and boosted confidence, winning broad support and underscoring the Fund's central role in crisis response. A critical component of the response was ensuring the IMF has adequate resources to address the needs of members hard hit by the global crisis. To this end, countries delivered on commitments to renew and expand the IMF's New Arrangements to Borrow (NAB) by over $500 billion to backstop the IMF. Dynamic emerging economies contributed a critical share to an expanded NAB, and the U.S. moved quickly to pass legislation enabling our $100 billion contribution. The IMF's action to supplement members' reserves and boost global liquidity through an allocation of Special Drawing Rights (SDRs) also demonstrated the international community's willingness to take bold steps in support of a global recovery.
We welcome IMF approval of a package of extraordinary measures to sharply increase the resources available to low*-*income countries. Resources from the planned sale of IMF gold and other internal sources will more than double the Fund's medium*-*term concessional lending capacity and frontload these resources over the next two years. In addition, the new Standby Credit Facility will fill a longstanding gap in the concessional facilities architecture, by providing maturing low-income countries with an instrument specifically designed for intermittent Fund engagement. These welcome and ambitious measures will allow the IMF to help meet the needs of the poorest countries through the crisis and beyond.
"Mandate"
Resources are only part of the equation. The tools available to the IMF, and the institution's capacity to identify potential vulnerabilities and appropriate policy responses, are equally important to restoring and maintaining confidence.
The Fund recently enhanced its lending toolkit to provide countries with contingent finance to guard against sudden stops. The newly created Flexible Credit Line (FCL) is proving to be an effective crisis prevention instrument for the strongest performing emerging market countries. Both the FCL and the High Access Precautionary Arrangement (HAPA) have helped restore confidence in countries that have used them during the current crisis. We continue to support the Fund's efforts to strengthen its capacity to help its members cope with financial volatility, reducing the economic disruption from sudden swings in capital flows and the perceived need for excessive reserve accumulation.
The IMF's role in the newly announced "Framework" highlights the importance of candid surveillance assessments, especially when individual country policies have systemic implications. The crisis underscored the importance of strengthening financial sector surveillance, including linkages between the financial sector and the real economy. Effective exchange rate surveillance for all members remains at the core of the IMF's duties. The Fund should complement its unique role on exchange rate surveillance with stepped-up engagement in making the international system less prone to crisis. Moreover, greater transparency is critical to underpin the credibility and effectiveness of IMF surveillance. Since the crisis has taught us that no nation is immune, we call upon all IMF members to allow the publication of their annual Article IV reviews.
"Governance Reform"
A more representative, responsive and accountable governance structure is essential to strengthening the IMF's legitimacy, ensuring that it remains at the center of an evolving international monetary and financial system. Agreement in Pittsburgh to reform the global architecture to meet the needs of the 21st century was a watershed event. In addition to designating the G-20 as the premier forum for international economic cooperation, G-20 Leaders committed to a shift in IMF quota share to dynamic emerging market and developing countries of at least 5% from over-represented to under-represented countries. Attention must now shift to implementing this agreement, and we call on the IMF to facilitate this process by providing scenarios of how the quota shift could be implemented in the very near-term.
Reform of the Executive Board remains an essential component to modernizing the IMF's governance structure to better reflect the 21st century global economy. The United States has called for reducing the size of the Board while preserving the existing number of emerging market and developing country chairs. Further, the past six months have plainly demonstrated the benefits of securing stronger Ministerial engagement in setting strategic policies and priorities of the International Financial Institutions. To sustain this level of Ministerial engagement, we must find a way to enhance the effectiveness and efficiency of the IMFC. I look forward to discussion of concrete proposals to achieve greater involvement of the Fund's Governors in providing strategic direction to the IMF.
Global Cooperation to Combat Illicit Finance
We strongly support the cooperation among the Financial Action Task Force, the IMF, the World Bank, the FSB and the Global Forum to strengthen compliance with international standards. For example, global cooperation to address cross-border tax evasion has led to more tax information exchange agreements being signed in the last ten months than had been signed in the prior ten years. We continue to emphasize the importance of global efforts to combat money laundering, terrorist financing, financing of proliferation of weapons of mass destruction, and other forms of illicit finance.
We underscore our concerns over illicit finance emanating from Iran and the severe deficiencies in its regulatory regime. We emphasize FATF statements calling upon the international community to implement countermeasures to protect the international financial system from money laundering and terror financing risks emanating from Iran, and we urge all nations to respond appropriately. We further urge all nations to implement the financial provisions of UNSCR 1803 by exercising enhanced vigilance over the activities of their financial institutions with Iranian financial institutions - including branches and subsidiaries abroad - and particularly with respect to Bank Saderat and Bank Melli.
On behalf of the United States and our delegation, I'd like to thank Turkey and the people of Istanbul for hosting this year's Annual Meetings. We meet as the global economy makes a critical transition away from crisis and toward recovery. Less than one year ago, with the global economy facing serious and unprecedented challenges, countries put in place significant and extraordinary measures to stabilize financial markets and support the global economy.
The United States has been a leader throughout this period, with the Administration enacting a sizeable stimulus plan; restoring confidence in the financial system and the flow of credit to consumers and households through the Financial Stability Plan; and helping marshal resources for emerging markets and developing countries through President Obama's call for large scale resources to backstop the global financial system.
Conditions have improved considerably. Stresses in financial markets have declined, confidence has improved, international trade is recovering, and economic growth has resumed in most countries and globally. While global growth is forecast to accelerate in 2010, output gaps will persist, unemployment may rise further, and downside risks remain.
For this reason, Leaders in Pittsburgh agreed to sustain their strong policy responses and not prematurely withdraw fiscal, monetary and financial sector support measures until durable, private sector-led growth is firmly achieved. When the time is right, credible exit strategies will be prepared to begin gradually withdrawing public sector support in a way that is cooperative and coordinated but does not jeopardize the recovery.
In Pittsburgh, G-20 Leaders reached an historic agreement to put the G-20 at the center of their efforts to work together to build a durable economic recovery while avoiding the fragilities and excesses of the past that led to the crisis.
They pledged to adopt the policies needed to lay the foundations for a healthy global economy by creating a Framework for Strong, Sustainable, and Balanced Growth; by building a robust system of financial supervision and regulation; and by modernizing the international financial institutions to take on the challenges of the 21st century. As IMF Governors, we have an important responsibility to work collaboratively to advance the reform agenda to support a durable recovery and head off future crises.
Forging a Framework for Strong, Sustainable, and Balanced Growth
The crisis revealed critical weaknesses in the pattern of global growth, in which some countries consumed well beyond their incomes and others relied heavily on exports to generate growth and, in the process, accumulated vast amounts of foreign exchange reserves. This pattern of demand growth and global capital flows was excessively unbalanced and ultimately unsustainable.
To manage the transition to a more balanced and sustainable pattern of global demand, Leaders have created a new framework for economic cooperation, the "Framework for Strong, Sustainable, and Balanced Growth", in which G-20 Finance Ministers and Central Bank Governors will work together, through mutual assessment, to help ensure that our individual policies are collectively consistent and more balanced, within a forward-looking framework.
We are committed to seeing this cooperative process of mutual assessment work so as to help prevent unsustainable trajectories of debt, credit, leverage, demand, and reserve accumulation becoming forces of destabilization in the future. We look to the IMF to play a key role in assisting the assessment of G-20 economic and financial policies and in providing its view on the likely balance and sustainability of the global economy. We expect that the IMF will report regularly to the G-20, in addition to the IMFC.
Strengthening Financial Sector Supervision and Regulation
Perhaps most dramatically, the crisis revealed gaps in our regulatory system that allowed the build-up of excess leverage and risk within and alongside the banking system. In the United States, we are working to implement reforms designed to protect consumers and investors and create a more stable, more resilient financial system.
In Pittsburgh, G-20 Leaders advanced an ambitious agenda to create a seamless web of financial regulation and supervision - addressing the deficiencies in our financial regulatory framework that contributed to the virulence and global spread of the financial crisis. Strengthening firms' capital must be at the core of this effort.
The United States is committed to specific deadlines for implementation of more and higher quality capital, stronger liquidity, a simple leverage ratio to constrain excess risk-taking and building buffers that firms can draw down in periods of stress.
Compensation reform is also critical, and the United States has shown leadership in this area by already taking a number of actions to reform compensation practices to support financial stability. Since the April G-20 meeting, we have put in place tough new restrictions for firms receiving public assistance, including restrictions on bonuses and golden parachutes and a requirement that boards of directors review the relationship between compensation and risk; appointed a Special Master for Executive Compensation, empowered to review compensation structures for the top 100 employees at firms receiving exceptional assistance; and proposed legislation, already passed by the House, that will require all public companies to permit shareholders to cast an annual "say on pay" vote and make their compensation committees independent in fact, not just in name.
The U.S. has also moved to strengthen the transparency and the functioning of the over-the-counter derivatives market, and is working to develop tools to effectively resolve large failed financial institutions.
As we in the United States strengthen our system, we urge other nations to take steps to strengthen their own systems and ensure that the global financial system is safer and more stable. The United States is undergoing an IMF Financial Sector Assessment Program, reflecting our commitment to accept the obligations and responsibilities of being an IMF member.
The IMF's work, through annual surveillance, the FSAP, Global Financial Stability Reports, new early warning exercises, and intensified cooperation with the expanded Financial Stability Board (FSB), is making an important contribution to strengthening financial systems around the world. IMF-FSB collaboration is essential to a stronger, more resilient global financial system.
*Modernizing the IMF*
"Enhanced Resources"
The IMF's actions since the crisis began have stabilized markets and boosted confidence, winning broad support and underscoring the Fund's central role in crisis response. A critical component of the response was ensuring the IMF has adequate resources to address the needs of members hard hit by the global crisis. To this end, countries delivered on commitments to renew and expand the IMF's New Arrangements to Borrow (NAB) by over $500 billion to backstop the IMF. Dynamic emerging economies contributed a critical share to an expanded NAB, and the U.S. moved quickly to pass legislation enabling our $100 billion contribution. The IMF's action to supplement members' reserves and boost global liquidity through an allocation of Special Drawing Rights (SDRs) also demonstrated the international community's willingness to take bold steps in support of a global recovery.
We welcome IMF approval of a package of extraordinary measures to sharply increase the resources available to low*-*income countries. Resources from the planned sale of IMF gold and other internal sources will more than double the Fund's medium*-*term concessional lending capacity and frontload these resources over the next two years. In addition, the new Standby Credit Facility will fill a longstanding gap in the concessional facilities architecture, by providing maturing low-income countries with an instrument specifically designed for intermittent Fund engagement. These welcome and ambitious measures will allow the IMF to help meet the needs of the poorest countries through the crisis and beyond.
"Mandate"
Resources are only part of the equation. The tools available to the IMF, and the institution's capacity to identify potential vulnerabilities and appropriate policy responses, are equally important to restoring and maintaining confidence.
The Fund recently enhanced its lending toolkit to provide countries with contingent finance to guard against sudden stops. The newly created Flexible Credit Line (FCL) is proving to be an effective crisis prevention instrument for the strongest performing emerging market countries. Both the FCL and the High Access Precautionary Arrangement (HAPA) have helped restore confidence in countries that have used them during the current crisis. We continue to support the Fund's efforts to strengthen its capacity to help its members cope with financial volatility, reducing the economic disruption from sudden swings in capital flows and the perceived need for excessive reserve accumulation.
The IMF's role in the newly announced "Framework" highlights the importance of candid surveillance assessments, especially when individual country policies have systemic implications. The crisis underscored the importance of strengthening financial sector surveillance, including linkages between the financial sector and the real economy. Effective exchange rate surveillance for all members remains at the core of the IMF's duties. The Fund should complement its unique role on exchange rate surveillance with stepped-up engagement in making the international system less prone to crisis. Moreover, greater transparency is critical to underpin the credibility and effectiveness of IMF surveillance. Since the crisis has taught us that no nation is immune, we call upon all IMF members to allow the publication of their annual Article IV reviews.
"Governance Reform"
A more representative, responsive and accountable governance structure is essential to strengthening the IMF's legitimacy, ensuring that it remains at the center of an evolving international monetary and financial system. Agreement in Pittsburgh to reform the global architecture to meet the needs of the 21st century was a watershed event. In addition to designating the G-20 as the premier forum for international economic cooperation, G-20 Leaders committed to a shift in IMF quota share to dynamic emerging market and developing countries of at least 5% from over-represented to under-represented countries. Attention must now shift to implementing this agreement, and we call on the IMF to facilitate this process by providing scenarios of how the quota shift could be implemented in the very near-term.
Reform of the Executive Board remains an essential component to modernizing the IMF's governance structure to better reflect the 21st century global economy. The United States has called for reducing the size of the Board while preserving the existing number of emerging market and developing country chairs. Further, the past six months have plainly demonstrated the benefits of securing stronger Ministerial engagement in setting strategic policies and priorities of the International Financial Institutions. To sustain this level of Ministerial engagement, we must find a way to enhance the effectiveness and efficiency of the IMFC. I look forward to discussion of concrete proposals to achieve greater involvement of the Fund's Governors in providing strategic direction to the IMF.
Global Cooperation to Combat Illicit Finance
We strongly support the cooperation among the Financial Action Task Force, the IMF, the World Bank, the FSB and the Global Forum to strengthen compliance with international standards. For example, global cooperation to address cross-border tax evasion has led to more tax information exchange agreements being signed in the last ten months than had been signed in the prior ten years. We continue to emphasize the importance of global efforts to combat money laundering, terrorist financing, financing of proliferation of weapons of mass destruction, and other forms of illicit finance.
We underscore our concerns over illicit finance emanating from Iran and the severe deficiencies in its regulatory regime. We emphasize FATF statements calling upon the international community to implement countermeasures to protect the international financial system from money laundering and terror financing risks emanating from Iran, and we urge all nations to respond appropriately. We further urge all nations to implement the financial provisions of UNSCR 1803 by exercising enhanced vigilance over the activities of their financial institutions with Iranian financial institutions - including branches and subsidiaries abroad - and particularly with respect to Bank Saderat and Bank Melli.
Hana Financial Says It May Sell New Shares; Stock Declines
Oct. 5 (Bloomberg) -- Prudential Financial Inc., the second-biggest U.S. life insurer, said it’s studying whether to sell its brokerage and fund management businesses in South Korea.
The company is exploring options including a possible sale of either or both Prudential Investment & Securities Co. and Prudential Asset Management Co., Newark, New Jersey-based Prudential said in a statement today.
Prudential, which acquired the Seoul-based, securities and asset management units in 2004 from state-run Korea Deposit Insurance Corp., is seeking to exit part of its business in the nation after the government allowed banks and securities firms to engage in each other’s businesses, leading to an increase in competition.
The law is forcing industry participants to “make a choice for survival in Korea, which is one of the most dynamic markets,” said Woo Jae Ryong, head of the Wealth Management Research Institute at Tong Yang Securities Co. in Seoul. “They should become a big player or target a niche market as a small player.”
The insurer bought 80 percent of Prudential Investment for 355.5 billion won ($303 million) in February 2004. The remaining 20 percent was purchased in January 2008 for an unspecified amount, according to July 1 regulatory filings in South Korea.
Prudential said on Sept. 22 it’s looking for acquisitions in Japan and reiterated it may fund deals with debt or equity issues. Vice Chairman Mark Grier said on Sept. 22 the company would be conservative in funding acquisitions.
Profit
Prudential reported second-quarter net income of $163 million, its best profit in a year, as the stock market rebound let the insurer reduce the amount of money it set aside to protect savers from asset declines.
Prudential Investment, formerly known as Hyundai Investment & Securities Co., had an 11 billion won net loss in the year ended March 31, compared with a 101.9 billion won profit the previous year.
Prudential owns 99.8 percent of the Korean asset management company, which used to be one of the nation’s top three asset managers. Prudential Asset Management now manages 7.4 trillion won of assets, the 15th largest as of Sept. 30, according to Asset Management Association of Korea’s Web site.
The asset management company had 6.77 billion won of net income in the year ended March, according to a financial regulator’s statement on June 2.
The 10 biggest of 63 fund managers in Korea control 65 percent of the nation’s industry, according to a Financial Supervisory Service’s statement on June 1.
Prudential’s life insurance business in South Korea won’t be affected, the statement said today.
The company is exploring options including a possible sale of either or both Prudential Investment & Securities Co. and Prudential Asset Management Co., Newark, New Jersey-based Prudential said in a statement today.
Prudential, which acquired the Seoul-based, securities and asset management units in 2004 from state-run Korea Deposit Insurance Corp., is seeking to exit part of its business in the nation after the government allowed banks and securities firms to engage in each other’s businesses, leading to an increase in competition.
The law is forcing industry participants to “make a choice for survival in Korea, which is one of the most dynamic markets,” said Woo Jae Ryong, head of the Wealth Management Research Institute at Tong Yang Securities Co. in Seoul. “They should become a big player or target a niche market as a small player.”
The insurer bought 80 percent of Prudential Investment for 355.5 billion won ($303 million) in February 2004. The remaining 20 percent was purchased in January 2008 for an unspecified amount, according to July 1 regulatory filings in South Korea.
Prudential said on Sept. 22 it’s looking for acquisitions in Japan and reiterated it may fund deals with debt or equity issues. Vice Chairman Mark Grier said on Sept. 22 the company would be conservative in funding acquisitions.
Profit
Prudential reported second-quarter net income of $163 million, its best profit in a year, as the stock market rebound let the insurer reduce the amount of money it set aside to protect savers from asset declines.
Prudential Investment, formerly known as Hyundai Investment & Securities Co., had an 11 billion won net loss in the year ended March 31, compared with a 101.9 billion won profit the previous year.
Prudential owns 99.8 percent of the Korean asset management company, which used to be one of the nation’s top three asset managers. Prudential Asset Management now manages 7.4 trillion won of assets, the 15th largest as of Sept. 30, according to Asset Management Association of Korea’s Web site.
The asset management company had 6.77 billion won of net income in the year ended March, according to a financial regulator’s statement on June 2.
The 10 biggest of 63 fund managers in Korea control 65 percent of the nation’s industry, according to a Financial Supervisory Service’s statement on June 1.
Prudential’s life insurance business in South Korea won’t be affected, the statement said today.
Monday, October 5, 2009
Advisory firms must work together
The investment advisory profession is facing a number of serious policy issues that could dramatically alter the manner in which it is regulated and transform the high ethical standards that have been a hallmark of the profession for decades.
Financial services reform [has been high on Congress'] priority list in the wake of the seismic changes wrought by the subprime debacle. Other developments, notably the Bernard Madoff scandal involving a $65 billion Ponzi scheme, have created a perfect-storm environment for consideration of unprecedented changes to the manner in which investment advisers are regulated.
Possibilities that were nearly unthinkable a short time ago are now open for active discussion and potential action. In congressional hearings examining the Madoff scandal, [Securities and Exchange Commission] officials have spoken openly about the need to “harmonize” investment adviser and broker-dealer laws and regulations and suggested the creation of a self-regulatory organization for investment advisers.
In January, the Senate Banking Committee convened a hearing to confirm Mary Schapiro as SEC chairman. Ms. Schapiro, the former chief executive of [the Financial Industry Regulatory Authority Inc.], lamented that “far fewer resources are available for inspection and oversight” of investment advisers than for broker-dealers.
The SEC, which among other roles serves as the regulator for the investment advisory profession, has been heavily criticized for its role in the Madoff scandal and for its alleged failure to regulate firms and practices that contributed to the financial crisis.
How the regulation of investment advisory firms would be affected by reforms would obviously depend upon many devilish details. What is clear is that, in the context of the broad discussion taking place in the policy arena, the odds have in-creased that a fundamental restructuring of securities laws and regulations will occur.
If and when Congress takes action in this important area, it could alter the fundamental fiduciary standard governing the advisory profession while subjecting advisory firms to costly oversight by Finra, the self-regulatory organization for the brokerage industry.
In light of the Madoff scandal, it is abundantly clear that the environment is ripe for legislation and regulations that could dramatically change the current framework governing the investment advisory profession.
DYSFUNCTIONAL GIANT
In terms of sheer numbers, the U.S. investment advisory profession is a giant. The profession consists of more than 11,000 SEC-registered firms that collectively manage more than $40 trillion for nearly 20 million clients. Clients run the full spectrum, from individuals and families who want a financial professional to handle their investments to institutions such as pension funds, state and local governments, corporations, banks, insurance companies, mutual funds, endowments, foundations, and hedge funds.
Simply looking at the vast amount of assets entrusted to investment advisers, it is clear that the performance of the profession is critical to the financial health and future well-being of millions of people.
Despite its size, the investment advisory profession has not done an adequate job of explaining what it is and what it does. Few investors understand the core characteristics of an investment adviser or appreciate the key differences between investment advisers and other financial services providers.
Even “specialists” in the financial media are not well-informed and many tend to characterize large mutual fund or brokerage complexes as “typical” investment adviser shops. Many policymakers, including members of Congress who have responsibility to craft laws governing investment advisers, have little understanding about the basics of the profession.
For these reasons, some might think of the investment advisory profession as a “sleeping giant” that has yet to reach its full potential by engaging in advocacy and educational efforts commensurate with its size.
Perhaps a more fitting description is that of a “dysfunctional” giant. Investment advisory firms come in all shapes and sizes. There is enormous diversity even among investment advisory firms that appear to be similar.
By and large, advisory firms do not conduct business with each other. It should come as no surprise that the advisory profession often is described as “fragmented.” Accordingly, many investment advisers do not feel any particular kinship with each other, despite the fact that the law treats them similarly. This leads to an insular mentality and a lack of solidarity in pursuing a common agenda.
Challenge No. 1: The diversity of firms. The investment advisory profession is characterized by its variety. On one level, the size of advisory firms runs the gamut from very small to very large. Even among firms that are similar in size, there can be huge differences in investment philosophy, clientele, business structure and services.
Here's a simple example that demonstrates the wide gulf that tends to separate investment advisers:
Everyman Wealth Management Co. is an investment advisory firm located in Smalltown, USA. Ernest Everyman, 68, a certified public accountant, founded the firm in 1976 when his accounting clients increasingly began asking for investment advice.
His son, Ernest Jr., is also a CPA and, among other duties, serves as the firm's chief operating officer. The firm employs two others who primarily perform administrative functions. The firm has 190 accounts and manages $140 million in client assets, primarily for individuals. The firm provides financial planning, investment, tax and accounting services.
Global Financial Co. is an investment advisory firm with offices in New York, Los Angeles, London and Hong Kong. The firm is majority-owned by a European bank. The firm concentrates on institutional clients, including public funds, central banks, insurance companies, endowments, foundations and retirement plan sponsors.
The firm offers a variety of investment products, including mutual funds, hedge funds, wrap fee programs and separate accounts. The firm has an affiliated broker-dealer that is used primarily to distribute the firm's mutual funds. The firm has more than 1,500 employees and manages more than $300 billion in client assets.
Everyman and Global illustrate the solidarity challenge confronting the investment advisory profession. They are very different enterprises. Their clients are different. Their investment services are different. Their resources and focus are different.
What, if anything, do Everyman and Global have in common? Are there any compelling reasons that they should work together to achieve shared goals? Do they even have any shared goals? Why should either firm be concerned about achieving solidarity with the other?
Challenge No. 2: The lexicon challenge. At a very basic level, the lack of a broadly accepted and well-understood lexicon contributes to the solidarity challenge facing the investment advisory profession.
Terms used to describe those who provide investment advisory services include the following: investment adviser, asset manager, investment manager, portfolio manager, financial adviser, financial consultant, money manager, wealth manager, investment counsel and financial planner.
The lexicon challenge (and related investor confusion) is further exacerbated by complexities related to various professional designations. While federal laws and regulations do not specify any minimal certification or educational requirements for investment advisers, there is an array of certifications, accreditations and designations that investment professionals can acquire to burnish their credentials.
For example, the chartered financial analyst and certified financial planner designations are well-recognized, established designations that require significant time and effort to attain, including successful completion of certifying examinations.
Challenge No. 3: Alphabet soup. Washington is home to hundreds of trade groups and associations. Like investment advisers, they come in every size and shape. There are high-profile groups like AARP and the National Rifle Association, as well as scores of lesser-known organizations like the National Candle Association, the Popcorn Board and the International Carwash Association. Virtually every industry and interest group has a membership organization that represents its collective interests.
At their core, associations work to advance and promote the interests of their members by serving as the liaison between industry and government. Membership organizations typically perform a wide variety of other services for their constituencies and may be involved in one or more of the following activities: providing information, research and statistical data; education/professional development; developing standards, codes of ethics and certification programs; and providing a forum to discuss common problems and solutions.
A number of groups compete to represent investment advisers, including the following:
• Investment Adviser Association: represents more than 500 SEC-registered investment advisory firms that collectively manage more than $9 trillion in client assets
• Investment Company Institute: represents U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts.
• Financial Planning Association: represents financial planners, attorneys, accountants, bankers, insurance agents, stockbrokers, investment consultants, money managers and others involved in the financial planning process.
• Securities Industry and Financial Markets Association: represents 650 financial services firms, primarily broker-dealers.
• Managed Funds Association: represents the hedge fund industry and attracts professionals [from] hedge funds, funds of funds and managed-futures funds.
• American Bankers Association: the largest association that represents the banking industry [including] community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks.
The confusing conglomeration of organizations representing investment advisers contributes to the general lack of understanding about the advisory profession. If you are a member of Congress, and two different groups (or more) purporting to represent the interests of investment advisers come to you with very different positions, what are you to conclude? What policies are you supposed to support? Whose side are you on? On the other hand, if you are a member of Congress and every SEC-registered investment adviser in your district comes to you with a unified message, it increases the odds that you will appreciate and understand their concerns and positions on key issues.
Challenge No. 4: The GDI Syndrome. As a general proposition, investment advisers are fiercely independent. They are highly intelligent and well-educated GDIs (gosh-darn independents). They tend to be self-reliant and self-supporting. They have worked hard to get where they are. They revel in intensive research and creative thought. Many would be flattered to be referred to as “contrarian.”
By nature, they are tough. The business of making investment decisions for clients is not easy. Investment advisers must deal with a host of complex and ever-changing issues. Unless an investment adviser has a solid understanding of the markets and specific securities, and the acumen and discipline to focus on and follow a consistent investment strategy — not to mention the management skills to operate a business — things can unravel rather quickly.
Independent, tough — and auto- nomous. Investment advisers tend to abhor the herd mentality. Instead, they admire those who really “know their stuff” and who demonstrate originality based on thorough and objective analysis. Many have developed unique approaches to investment research and portfolio management based on rigorous analysis and steady application.
Challenge No. 5: Aversion to publicity. The traditional investment advisory business is based on a high level of discretion and confidentiality. Older generations of investment counselors would not even acknowledge their advisory clients when passing them on the street. Advertisements were eschewed as vulgar. Speaking with reporters was generally avoided if at all possible.
These historical tendencies of the investment advisory profession are somewhat at odds with well-run advocacy and educational initiatives that by definition need to highlight the profession, its attributes, and details of relevant issues. Advocacy results generally are tied to concerted, visible and oftentimes widely publicized activities.
A trade organization can provide “cover” for individuals and firms that would prefer not to be on the front line of particular advocacy debates. The investment advisory profession must come to grips with the reality that public discourse — from dealing with the financial media to meeting with policymakers — is a necessary element of effective advocacy.
Challenge No. 6: Who likes regulation? Sometimes, the issues just aren't that “sexy.” Most advocacy issues are tied directly to legislative and regulatory policies. The reality is that many advisers view legal, regulatory and compliance issues as nothing more than a detraction and distraction from their primary job of serving clients.
Moreover, legal and regulatory issues may be complex and difficult to grasp for senior management not immersed in the day-to-day nuances of compliance. As such, there is a natural tendency on the part of many investment advisory firms to avoid — or at least ignore — nascent legal and regulatory matters and conclude that it's “someone else's job” to try to deal with them.
Let's return to our original questions. Do Everyman Wealth Management Co. and Global Financial Co. have anything in common?
Are there any compelling reasons that Everyman and Global should work together to achieve any shared goals or objectives? Should either firm be concerned about achieving solidarity with each other?
The answers are yes, yes and yes.
Everyman and Global are both “investment advisers” within the meaning of the Investment Advisers Act of 1940. Even though their firms appear to be completely dissimilar, both are in the business of providing investment advisory services to their clients. They are subject to the same SEC registration and disclosure requirements. Both owe a fiduciary duty to their clients.
Both are subject to regulations under the Advisers Act, including the compliance program, code of ethics, proxy voting, privacy, custody, insider trading, books and records, and advertising rules. They are subject to examinations by the SEC.
They both have serious risks related to non-compliance. They both face potentially negative consequences if the laws and regulations governing the profession become overly burdensome or are not appropriately tailored to the investment advisory business.
Everyman and Global also can benefit from positive perceptions of their profession — by investors, the media, and policymakers. They both have a critical stake in promoting high ethical standards for their profession. And they both can gain from organized and collective efforts to promote a better understanding of their profession.
Financial services reform [has been high on Congress'] priority list in the wake of the seismic changes wrought by the subprime debacle. Other developments, notably the Bernard Madoff scandal involving a $65 billion Ponzi scheme, have created a perfect-storm environment for consideration of unprecedented changes to the manner in which investment advisers are regulated.
Possibilities that were nearly unthinkable a short time ago are now open for active discussion and potential action. In congressional hearings examining the Madoff scandal, [Securities and Exchange Commission] officials have spoken openly about the need to “harmonize” investment adviser and broker-dealer laws and regulations and suggested the creation of a self-regulatory organization for investment advisers.
In January, the Senate Banking Committee convened a hearing to confirm Mary Schapiro as SEC chairman. Ms. Schapiro, the former chief executive of [the Financial Industry Regulatory Authority Inc.], lamented that “far fewer resources are available for inspection and oversight” of investment advisers than for broker-dealers.
The SEC, which among other roles serves as the regulator for the investment advisory profession, has been heavily criticized for its role in the Madoff scandal and for its alleged failure to regulate firms and practices that contributed to the financial crisis.
How the regulation of investment advisory firms would be affected by reforms would obviously depend upon many devilish details. What is clear is that, in the context of the broad discussion taking place in the policy arena, the odds have in-creased that a fundamental restructuring of securities laws and regulations will occur.
If and when Congress takes action in this important area, it could alter the fundamental fiduciary standard governing the advisory profession while subjecting advisory firms to costly oversight by Finra, the self-regulatory organization for the brokerage industry.
In light of the Madoff scandal, it is abundantly clear that the environment is ripe for legislation and regulations that could dramatically change the current framework governing the investment advisory profession.
DYSFUNCTIONAL GIANT
In terms of sheer numbers, the U.S. investment advisory profession is a giant. The profession consists of more than 11,000 SEC-registered firms that collectively manage more than $40 trillion for nearly 20 million clients. Clients run the full spectrum, from individuals and families who want a financial professional to handle their investments to institutions such as pension funds, state and local governments, corporations, banks, insurance companies, mutual funds, endowments, foundations, and hedge funds.
Simply looking at the vast amount of assets entrusted to investment advisers, it is clear that the performance of the profession is critical to the financial health and future well-being of millions of people.
Despite its size, the investment advisory profession has not done an adequate job of explaining what it is and what it does. Few investors understand the core characteristics of an investment adviser or appreciate the key differences between investment advisers and other financial services providers.
Even “specialists” in the financial media are not well-informed and many tend to characterize large mutual fund or brokerage complexes as “typical” investment adviser shops. Many policymakers, including members of Congress who have responsibility to craft laws governing investment advisers, have little understanding about the basics of the profession.
For these reasons, some might think of the investment advisory profession as a “sleeping giant” that has yet to reach its full potential by engaging in advocacy and educational efforts commensurate with its size.
Perhaps a more fitting description is that of a “dysfunctional” giant. Investment advisory firms come in all shapes and sizes. There is enormous diversity even among investment advisory firms that appear to be similar.
By and large, advisory firms do not conduct business with each other. It should come as no surprise that the advisory profession often is described as “fragmented.” Accordingly, many investment advisers do not feel any particular kinship with each other, despite the fact that the law treats them similarly. This leads to an insular mentality and a lack of solidarity in pursuing a common agenda.
Challenge No. 1: The diversity of firms. The investment advisory profession is characterized by its variety. On one level, the size of advisory firms runs the gamut from very small to very large. Even among firms that are similar in size, there can be huge differences in investment philosophy, clientele, business structure and services.
Here's a simple example that demonstrates the wide gulf that tends to separate investment advisers:
Everyman Wealth Management Co. is an investment advisory firm located in Smalltown, USA. Ernest Everyman, 68, a certified public accountant, founded the firm in 1976 when his accounting clients increasingly began asking for investment advice.
His son, Ernest Jr., is also a CPA and, among other duties, serves as the firm's chief operating officer. The firm employs two others who primarily perform administrative functions. The firm has 190 accounts and manages $140 million in client assets, primarily for individuals. The firm provides financial planning, investment, tax and accounting services.
Global Financial Co. is an investment advisory firm with offices in New York, Los Angeles, London and Hong Kong. The firm is majority-owned by a European bank. The firm concentrates on institutional clients, including public funds, central banks, insurance companies, endowments, foundations and retirement plan sponsors.
The firm offers a variety of investment products, including mutual funds, hedge funds, wrap fee programs and separate accounts. The firm has an affiliated broker-dealer that is used primarily to distribute the firm's mutual funds. The firm has more than 1,500 employees and manages more than $300 billion in client assets.
Everyman and Global illustrate the solidarity challenge confronting the investment advisory profession. They are very different enterprises. Their clients are different. Their investment services are different. Their resources and focus are different.
What, if anything, do Everyman and Global have in common? Are there any compelling reasons that they should work together to achieve shared goals? Do they even have any shared goals? Why should either firm be concerned about achieving solidarity with the other?
Challenge No. 2: The lexicon challenge. At a very basic level, the lack of a broadly accepted and well-understood lexicon contributes to the solidarity challenge facing the investment advisory profession.
Terms used to describe those who provide investment advisory services include the following: investment adviser, asset manager, investment manager, portfolio manager, financial adviser, financial consultant, money manager, wealth manager, investment counsel and financial planner.
The lexicon challenge (and related investor confusion) is further exacerbated by complexities related to various professional designations. While federal laws and regulations do not specify any minimal certification or educational requirements for investment advisers, there is an array of certifications, accreditations and designations that investment professionals can acquire to burnish their credentials.
For example, the chartered financial analyst and certified financial planner designations are well-recognized, established designations that require significant time and effort to attain, including successful completion of certifying examinations.
Challenge No. 3: Alphabet soup. Washington is home to hundreds of trade groups and associations. Like investment advisers, they come in every size and shape. There are high-profile groups like AARP and the National Rifle Association, as well as scores of lesser-known organizations like the National Candle Association, the Popcorn Board and the International Carwash Association. Virtually every industry and interest group has a membership organization that represents its collective interests.
At their core, associations work to advance and promote the interests of their members by serving as the liaison between industry and government. Membership organizations typically perform a wide variety of other services for their constituencies and may be involved in one or more of the following activities: providing information, research and statistical data; education/professional development; developing standards, codes of ethics and certification programs; and providing a forum to discuss common problems and solutions.
A number of groups compete to represent investment advisers, including the following:
• Investment Adviser Association: represents more than 500 SEC-registered investment advisory firms that collectively manage more than $9 trillion in client assets
• Investment Company Institute: represents U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts.
• Financial Planning Association: represents financial planners, attorneys, accountants, bankers, insurance agents, stockbrokers, investment consultants, money managers and others involved in the financial planning process.
• Securities Industry and Financial Markets Association: represents 650 financial services firms, primarily broker-dealers.
• Managed Funds Association: represents the hedge fund industry and attracts professionals [from] hedge funds, funds of funds and managed-futures funds.
• American Bankers Association: the largest association that represents the banking industry [including] community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks.
The confusing conglomeration of organizations representing investment advisers contributes to the general lack of understanding about the advisory profession. If you are a member of Congress, and two different groups (or more) purporting to represent the interests of investment advisers come to you with very different positions, what are you to conclude? What policies are you supposed to support? Whose side are you on? On the other hand, if you are a member of Congress and every SEC-registered investment adviser in your district comes to you with a unified message, it increases the odds that you will appreciate and understand their concerns and positions on key issues.
Challenge No. 4: The GDI Syndrome. As a general proposition, investment advisers are fiercely independent. They are highly intelligent and well-educated GDIs (gosh-darn independents). They tend to be self-reliant and self-supporting. They have worked hard to get where they are. They revel in intensive research and creative thought. Many would be flattered to be referred to as “contrarian.”
By nature, they are tough. The business of making investment decisions for clients is not easy. Investment advisers must deal with a host of complex and ever-changing issues. Unless an investment adviser has a solid understanding of the markets and specific securities, and the acumen and discipline to focus on and follow a consistent investment strategy — not to mention the management skills to operate a business — things can unravel rather quickly.
Independent, tough — and auto- nomous. Investment advisers tend to abhor the herd mentality. Instead, they admire those who really “know their stuff” and who demonstrate originality based on thorough and objective analysis. Many have developed unique approaches to investment research and portfolio management based on rigorous analysis and steady application.
Challenge No. 5: Aversion to publicity. The traditional investment advisory business is based on a high level of discretion and confidentiality. Older generations of investment counselors would not even acknowledge their advisory clients when passing them on the street. Advertisements were eschewed as vulgar. Speaking with reporters was generally avoided if at all possible.
These historical tendencies of the investment advisory profession are somewhat at odds with well-run advocacy and educational initiatives that by definition need to highlight the profession, its attributes, and details of relevant issues. Advocacy results generally are tied to concerted, visible and oftentimes widely publicized activities.
A trade organization can provide “cover” for individuals and firms that would prefer not to be on the front line of particular advocacy debates. The investment advisory profession must come to grips with the reality that public discourse — from dealing with the financial media to meeting with policymakers — is a necessary element of effective advocacy.
Challenge No. 6: Who likes regulation? Sometimes, the issues just aren't that “sexy.” Most advocacy issues are tied directly to legislative and regulatory policies. The reality is that many advisers view legal, regulatory and compliance issues as nothing more than a detraction and distraction from their primary job of serving clients.
Moreover, legal and regulatory issues may be complex and difficult to grasp for senior management not immersed in the day-to-day nuances of compliance. As such, there is a natural tendency on the part of many investment advisory firms to avoid — or at least ignore — nascent legal and regulatory matters and conclude that it's “someone else's job” to try to deal with them.
Let's return to our original questions. Do Everyman Wealth Management Co. and Global Financial Co. have anything in common?
Are there any compelling reasons that Everyman and Global should work together to achieve any shared goals or objectives? Should either firm be concerned about achieving solidarity with each other?
The answers are yes, yes and yes.
Everyman and Global are both “investment advisers” within the meaning of the Investment Advisers Act of 1940. Even though their firms appear to be completely dissimilar, both are in the business of providing investment advisory services to their clients. They are subject to the same SEC registration and disclosure requirements. Both owe a fiduciary duty to their clients.
Both are subject to regulations under the Advisers Act, including the compliance program, code of ethics, proxy voting, privacy, custody, insider trading, books and records, and advertising rules. They are subject to examinations by the SEC.
They both have serious risks related to non-compliance. They both face potentially negative consequences if the laws and regulations governing the profession become overly burdensome or are not appropriately tailored to the investment advisory business.
Everyman and Global also can benefit from positive perceptions of their profession — by investors, the media, and policymakers. They both have a critical stake in promoting high ethical standards for their profession. And they both can gain from organized and collective efforts to promote a better understanding of their profession.
In the Money: Year end tax and financial planning tips
You might wonder why I've chosen early October to discuss income tax planning. Fall might not be the most obvious time of year to think about taxes, but this is actually an excellent time to review both this year's tax picture and to begin preparing for 2010. You aren't yet distracted by the holidays, and you still have several weeks to implement any changes that should take place before Dec. 31.
Compare your year-to-date tax payments with last year's tax liability. If your expected total 2009 income or deductions will be significantly different from 2008, calculate whether your current withholding or estimated tax payments will be adequate. Although you might not incur a penalty for under-withholding if you cover at least 100 percent of last year's tax liability, you don't want to be surprised with a big tax bill next April. If your income has dramatically declined, you might be paying too much. Adjust your withholding or estimates accordingly. Everyone loves a big tax refund, but especially in difficult times, you can put that money to better use now.
Time is running out to qualify for the federal First-Time Homebuyer Credit. Taxpayers with income below $75,000 (single) or $150,000 (joint) may receive a credit of up to $8,000 for the purchase of a primary residence, if they have not owned a home within the past three years. The closing date on the transaction must occur prior to Dec. 1, 2009.
You have plenty of time to qualify for the federal energy tax credit. Purchases of certain energy-efficient products and other improvements to your primary residence before Dec. 31, 2010 will qualify for a credit of up to $1,500. Tax credits are more valuable than tax deductions, because credits reduce your income tax liability dollar for dollar.
See www.energystar.gov for more information.
This is typically the time of year when employees have an opportunity to make changes to their company benefit selections, such as how much to contribute to 401(k) plans. If your company retirement plan provides for matching contributions, be sure you are deferring at least enough to receive the full match. Doing anything less means you are throwing away free money. Increasing numbers of plans now include Roth-401(k) provisions, which permit employees to designate some or all of their salary deferrals as after-tax Roth contributions.
Although the portion allocated into the Roth is not tax deferred, future qualifying withdrawals will be completely tax free.
Employees of companies that offer tax free flexible spending accounts must decide whether they wish to set aside a portion of their salary on a pre-tax basis for certain types of medical expenses, and specify the dollar amount to allocate.
If you're already participating in such a plan, now is the time to tally the amount you've utilized so far this year.
This information will not only help you estimate the appropriate amount to contribute for next year, but you'll also know how much you have left to spend before the end of 2009.
Since any balances not used before Dec. 31are forfeited, knowing where you stand today gives you time to arrange or rearrange medical or dental appointments.
Before writing off this year's surplus as an expensive mistake, be sure you've submitted receipts for expenses you've already incurred, such as office visit co-pays and prescription deductibles.
If you still have money left in the account, look for creative but legitimate ways to utilize the balance. Medical spending account funds may be used to purchase items such as eyeglasses, non-prescription medications and first aid supplies.
For a more comprehensive list of allowable and non-permissible expenses, see IRS Publication 502 at www.irs.gov/formspubs or call (800) 829-1040.
Since tax laws are so complex, consult with your tax advisor before making any significant changes to be sure they fit your circumstances.
Don't wait until tax filing time to meet, because some strategies might need to be implemented before the end of the year.
Compare your year-to-date tax payments with last year's tax liability. If your expected total 2009 income or deductions will be significantly different from 2008, calculate whether your current withholding or estimated tax payments will be adequate. Although you might not incur a penalty for under-withholding if you cover at least 100 percent of last year's tax liability, you don't want to be surprised with a big tax bill next April. If your income has dramatically declined, you might be paying too much. Adjust your withholding or estimates accordingly. Everyone loves a big tax refund, but especially in difficult times, you can put that money to better use now.
Time is running out to qualify for the federal First-Time Homebuyer Credit. Taxpayers with income below $75,000 (single) or $150,000 (joint) may receive a credit of up to $8,000 for the purchase of a primary residence, if they have not owned a home within the past three years. The closing date on the transaction must occur prior to Dec. 1, 2009.
You have plenty of time to qualify for the federal energy tax credit. Purchases of certain energy-efficient products and other improvements to your primary residence before Dec. 31, 2010 will qualify for a credit of up to $1,500. Tax credits are more valuable than tax deductions, because credits reduce your income tax liability dollar for dollar.
See www.energystar.gov for more information.
This is typically the time of year when employees have an opportunity to make changes to their company benefit selections, such as how much to contribute to 401(k) plans. If your company retirement plan provides for matching contributions, be sure you are deferring at least enough to receive the full match. Doing anything less means you are throwing away free money. Increasing numbers of plans now include Roth-401(k) provisions, which permit employees to designate some or all of their salary deferrals as after-tax Roth contributions.
Although the portion allocated into the Roth is not tax deferred, future qualifying withdrawals will be completely tax free.
Employees of companies that offer tax free flexible spending accounts must decide whether they wish to set aside a portion of their salary on a pre-tax basis for certain types of medical expenses, and specify the dollar amount to allocate.
If you're already participating in such a plan, now is the time to tally the amount you've utilized so far this year.
This information will not only help you estimate the appropriate amount to contribute for next year, but you'll also know how much you have left to spend before the end of 2009.
Since any balances not used before Dec. 31are forfeited, knowing where you stand today gives you time to arrange or rearrange medical or dental appointments.
Before writing off this year's surplus as an expensive mistake, be sure you've submitted receipts for expenses you've already incurred, such as office visit co-pays and prescription deductibles.
If you still have money left in the account, look for creative but legitimate ways to utilize the balance. Medical spending account funds may be used to purchase items such as eyeglasses, non-prescription medications and first aid supplies.
For a more comprehensive list of allowable and non-permissible expenses, see IRS Publication 502 at www.irs.gov/formspubs or call (800) 829-1040.
Since tax laws are so complex, consult with your tax advisor before making any significant changes to be sure they fit your circumstances.
Don't wait until tax filing time to meet, because some strategies might need to be implemented before the end of the year.
Friday, October 2, 2009
EU eyes year-end deal on reform of financial supervision
GOTHENBURG, Sweden, Oct. 1 (Xinhua) -- European Union (EU) countries were expected to reach a deal on an overhaul of financial supervision in the 27-nation bloc by the year end, the EU presidency said on Thursday.
It is the EU Presidency's ambition "to have all the (reform) package signed in December," Swedish Finance Minister Anders Borg told reporters after chairing informal talks with his EU counterparts in the Swedish port city of Gothenburg.
Sweden, currently holding the EU rotating presidency till the end of this year, takes financial supervision as a top priority for its six-month agenda.
The European Commission last week adopted an important package of draft legislation to significantly strengthen the supervision of the financial sector in Europe, both on the macro and micro levels.
On the macro level, the legislation will create a new European Systemic Risk Board (ESRB) to detect risks to the financial system as a whole with a critical function to issue early risk warnings to be rapidly acted on.
On the micro level, it will also set up a European System of Financial Supervisors (ESFS), composed of national supervisors and three new European Supervisory Authorities for the banking, securities and insurance and occupational pensions sectors.
The package needs approval from EU governments and the European Parliament to become law. The commission hoped it could come into force in 2010.
It was the first time that EU finance ministers had discussion on the draft legislation.
Borg said EU finance ministers were poised to agree on the micro-level reform later this month, while a deal on the macro-level reform was expected in December.
But Britain had expressed certain reservations concerning the future leadership of ESRB and the power of three new European Supervisory Authorities to override national decisions.
It had been suggested that ESRB should be led by the governor of the European Central Bank (ECB), which is the central bank of eurozone countries. This has drawn concern from EU countries outside the euro zone, including Britain.
Under the commission's proposal, the three new European Supervisory Authorities would have the power to make a final decision if two member states cannot agree with each other. Britain wants that power to be strictly limited.
It is the EU Presidency's ambition "to have all the (reform) package signed in December," Swedish Finance Minister Anders Borg told reporters after chairing informal talks with his EU counterparts in the Swedish port city of Gothenburg.
Sweden, currently holding the EU rotating presidency till the end of this year, takes financial supervision as a top priority for its six-month agenda.
The European Commission last week adopted an important package of draft legislation to significantly strengthen the supervision of the financial sector in Europe, both on the macro and micro levels.
On the macro level, the legislation will create a new European Systemic Risk Board (ESRB) to detect risks to the financial system as a whole with a critical function to issue early risk warnings to be rapidly acted on.
On the micro level, it will also set up a European System of Financial Supervisors (ESFS), composed of national supervisors and three new European Supervisory Authorities for the banking, securities and insurance and occupational pensions sectors.
The package needs approval from EU governments and the European Parliament to become law. The commission hoped it could come into force in 2010.
It was the first time that EU finance ministers had discussion on the draft legislation.
Borg said EU finance ministers were poised to agree on the micro-level reform later this month, while a deal on the macro-level reform was expected in December.
But Britain had expressed certain reservations concerning the future leadership of ESRB and the power of three new European Supervisory Authorities to override national decisions.
It had been suggested that ESRB should be led by the governor of the European Central Bank (ECB), which is the central bank of eurozone countries. This has drawn concern from EU countries outside the euro zone, including Britain.
Under the commission's proposal, the three new European Supervisory Authorities would have the power to make a final decision if two member states cannot agree with each other. Britain wants that power to be strictly limited.
The world and its presidents
Despot and Dictator President Robert Mugabe of impoverished Zimbabwe signed a power sharing agreement recently with Morgan Tsvangirai just before locking up two of its most prominent members.
Cholera grips Zimbabwe. One fourth of all Zimbabweans are exiled abroad. Hyperinflation stalks the land. People are starving. Zimbabwe, the former white ruled Rhodesia where the natives were excluded by white colonials was capable of feeding its own people and was described as the bread basket of Africa.
Mugabe is banned from the European Union and the United States. Grasping Grace Mugabe (44) wife of 84 year old Mugabe, his former mistress and secretary, has visited Asia, specificaly Hong Kong, Singapore, Vietnam, Thailand and Malaysia in order to purchase properties for their inevitable exile from justice. Mugabe has developed strong contacts with intermediaries in Malaysia where they are believed to have property and bank accounts. The only overseas branch of a Zimbabwean bak is found in Malaysia. Grace and Robert Mugabe are fully funded by the Zimbabwean Central Bank. The Mugabes like to visit Singapore, Hong Kong and Bangkok specifically the Meritus Mandarin Hotel, Singapore, the Shrangri-La in Hong Kong and the InterContinental in Bangkok. Entire hotel floors insulate the Mugabes from unwelcome riff-raff.
Mugabes financial dealings are shabby, involving clandestine paper work and hotel bills settled with bags of cash. In November 2008 the United States treasury department tightened sanctions against Mugabe and his associates who kept him in power by means of violent intimidation of opponents who had defeated him and his party at the polls. All of Mugabe's assets and those of his associates within United States jurisdiction were frozen. Western governments state categorically that Mugabe runs one of Africa's most corupt regimes and that he has siphoned off millions of pounds from Zimbabwe into bank accounts and properties.
Mugabe and grasping Grace will very soon have to worry about the security of their Far Eastern investments. These will come under closer scrutiny in Hong Kong where new money laundering laws have enacted a special category of 'politically suspect persons' for surveillance. Experts say regulators are obliged to monitor their transactions.
The Hong Kong legislation defines such persons as those persons from countries 'where corruption is widespread' and includes such risk factors as 'unexplained wealth', the use of accounts at a government bank and any request for secrecy.
Why has Mugabe lasted so long? South African President Thabo Mbeki supported him for a long time until he resigned last year. Incoming President Jaco Zuma promises to deal with Mugabe. Will he?
Cholera grips Zimbabwe. One fourth of all Zimbabweans are exiled abroad. Hyperinflation stalks the land. People are starving. Zimbabwe, the former white ruled Rhodesia where the natives were excluded by white colonials was capable of feeding its own people and was described as the bread basket of Africa.
Mugabe is banned from the European Union and the United States. Grasping Grace Mugabe (44) wife of 84 year old Mugabe, his former mistress and secretary, has visited Asia, specificaly Hong Kong, Singapore, Vietnam, Thailand and Malaysia in order to purchase properties for their inevitable exile from justice. Mugabe has developed strong contacts with intermediaries in Malaysia where they are believed to have property and bank accounts. The only overseas branch of a Zimbabwean bak is found in Malaysia. Grace and Robert Mugabe are fully funded by the Zimbabwean Central Bank. The Mugabes like to visit Singapore, Hong Kong and Bangkok specifically the Meritus Mandarin Hotel, Singapore, the Shrangri-La in Hong Kong and the InterContinental in Bangkok. Entire hotel floors insulate the Mugabes from unwelcome riff-raff.
Mugabes financial dealings are shabby, involving clandestine paper work and hotel bills settled with bags of cash. In November 2008 the United States treasury department tightened sanctions against Mugabe and his associates who kept him in power by means of violent intimidation of opponents who had defeated him and his party at the polls. All of Mugabe's assets and those of his associates within United States jurisdiction were frozen. Western governments state categorically that Mugabe runs one of Africa's most corupt regimes and that he has siphoned off millions of pounds from Zimbabwe into bank accounts and properties.
Mugabe and grasping Grace will very soon have to worry about the security of their Far Eastern investments. These will come under closer scrutiny in Hong Kong where new money laundering laws have enacted a special category of 'politically suspect persons' for surveillance. Experts say regulators are obliged to monitor their transactions.
The Hong Kong legislation defines such persons as those persons from countries 'where corruption is widespread' and includes such risk factors as 'unexplained wealth', the use of accounts at a government bank and any request for secrecy.
Why has Mugabe lasted so long? South African President Thabo Mbeki supported him for a long time until he resigned last year. Incoming President Jaco Zuma promises to deal with Mugabe. Will he?
Financial planner
A financial planner or personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners). The work engaged in by this professional is commonly known as personal financial planning. In carrying out the planning function, he is guided by the financial planning process to create a financial plan; a detailed strategy tailored to a client's specific situation, for meeting a client's specific goals.
Contents
* 1 Objectives
* 2 Defining personal financial decisions
* 3 Scope
* 4 The process
* 5 What is a financial planner's job function?
* 6 Licensing, regulations and self-regulation
o 6.1 Australia
o 6.2 Malaysia
o 6.3 Other countries
o 6.4 From the California Department of Corporations
* 7 History of certifications in financial planning across the globe
* 8 Accredited business school, training centers and other providers
* 9 See also
* 10 References
* 11 External links
Objectives
People enlist the help of a financial planner because of the complexity of knowing how to perform the following:
* Providing direction and meaning to financial decisions;
* Allowing the person to understand how each financial decision affects the other areas of finance; and
* Allowing the person to adapt more easily to life changes in order to feel more secure.
Defining personal financial decisions
Personal financial planning is broadly defined as a process of determining an individual's financial goals, purposes in life and life's priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. The individual's goals are used as guideposts to map a course of action on 'what needs to be done' to reach those goals.
Alongside the data gathering exercise, the purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual's situation. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual's current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.
Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual's current lifestyle so that the 'pain' in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.
Scope
Financial planning should cover all areas of the client’s financial needs and should result in the achievement of each of the client's goals. The scope of planning would usually include the following:
Risk Management and Insurance Planning
Managing cash flow risks through sound risk management and insurance techniques
Investment and Planning Issues
Planning, creating and managing capital accumulation to generate future capital and cash flows for reinvestment and spending
Retirement Planning
Planning to ensure financial independence at retirement including 401Ks, IRAs etc.
Tax Planning
Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes
Estate Planning
Planning for the creation, accumulation, conservation and distribution of assets
Cash Flow and Liability Management
Maintaining and enhancing personal cash flows through debt and lifestyle management
Relationship Management
Moving beyond pure product selling to understand and service the core needs of the client
Education Planning for kids and the family members
The process
The personal financial planning process is generally accepted as a six-step process as follows:
Step 1: Setting goals with the client This step (that is usually performed in conjunction with Step 2) is meant to identify where the client wants to go in terms of his finances and life.
Step 2: Gathering relevant information on the client This would include the qualitative and quantitative aspects of the client's financial and relevant non-financial situation.
Step 3: Analyzing the information The information gathered is analysed so that the client's situation is properly understood. This includes determining whether there are sufficient resources to reach the client's goals and what those resources are.
Step 4: Constructing a financial plan Based on the understanding of what the client wants in the future and his current financial status, a roadmap to the client goals is drawn to facilitate the achievements of those goals.
Step 5: Implementing the strategies in the plan Guided by the financial plan, the strategies outlined in the plan are implemented using the resources allocated for the purpose.
Step 6: Monitoring implementation and reviewing the plan The implementation process is closely monitored to ensure it stays in alignment to the client's goals. Periodic reviews are undertaken to check for misalignment and changes in the client's situation. If there is any significant change to the client's situation, the strategies and goals in the financial plan are revised accordingly.
What is a financial planner's job function?
A financial planner specializes in the planning aspects of finance, in particular personal finance, as contrasted with a stock broker who is generally concerned with the investments, or with a life insurance intermediary who advises on risk products.
Financial planning is usually a multi-step process, and involves considering the client's situation from all relevant angles to produce integrated solutions. The six-step financial planning process has been adopted by the International Organization for Standardization (ISO).[1] Financial planners are also known by the title financial adviser in some countries, although these two terms are technically not synonymous, and their roles have some functional differences.
Although there are many types of 'financial planners,' the term is used largely to describe those who consider the entire financial picture of a client and then provide a comprehensive solution. To differentiate from the other types of financial planners, some planners may be called 'comprehensive' or 'holistic' financial planners.
Other financial planners may specialize in one or more areas, such as insurance planning (risk management) and retirement planning.
Financial planning is a growing industry with projected faster than average job growth through 2014.[2]
Licensing, regulations and self-regulation
The title of 'financial planner' is largely an unregulated term in many countries. Lack of regulation has allowed financial services personnel in these countries to use the title indiscriminately. Often, financial products intermediaries, such as life insurance and unit trusts agents, use the title to project a professional image to clients even when they are not trained in the professional aspects of financial planning. This has sometimes led to abuse. Clients may be deceived to receive financial planning services that are unprofessional, from unethical providers.
To protect the industry, financial planning professionals and practitioners from across the globe (starting from the United States) have begun to form trade organisations to provide self-regulations and to maintain some orderliness in the industry. Some, such as the FPA, have begun to organize high-level training programmes and certify members who successfully completed these programmes.
The title of 'financial planner' continues, however, to be used by individuals in the financial industry in most countries, as there are little or no legal barriers to prevent the use of the title. The governments in many countries where the financial planning profession is taking roots are beginning to play an increasingly active role in tasking themselves to ensure the market is orderly. More stringent laws and guidelines are being progressively introduced to keep the profession in check. Additional qualifications have also recently emerged that have extended on the financial planner series of designations, to include specialist skill sets like those in wealth management or private banking.
Australia
In Australia, the financial planning services are initially delineated by law by the granting of licence to deal in securities or advise on investments. Licences are issued under stringent criteria by the Australian Securities and Investments Commission (ASIC), which has evolved these regulations vigorously over the years.[3] Financial planning is now a highly regulated industry in Australia especially where financial advice to the public is involved. Practitioners who offer advice that could influence a client's decision to purchase a financial product must meet minimum training requirements and be licensed by the ASIC. The meaning of 'licenced' refers to Australian Financial Services Licence (AFSL) holders and representatives or authorised representatives of licence holders. Broadly, most people embarking in financial planning will start as an authorised representative of a licence holder.
Becoming a financial planner in Australia involves two main steps:
1. Meet the training requirements of Regulation Guideline 146;
2. Select a licence holder with whom to be affiliated.
The licence holder is the authorised representative, and will be ultimately responsible for the advice given by the planner. The licence holder therefore must make sure the representatives meet all compliance and training prerequisites. As of November 2005, there were approximately 4,300 licence holders registered with ASIC and over 42,500 authorised representatives in Australia.
Malaysia
The first country to introduce legislation that requires a person to be licensed before he can hold himself out to be a 'financial planner' is Malaysia. Financial planning is considered a newer profession in the Asian region as compared to those in the west, such as the United States and Australia where the profession is more established. The Securities Commission (SC) of Malaysia introduced legislation through amendments made to the Securities Industry Act in 2003 to regulate financial planning and the use of the title or related-title of 'financial planner' or to conduct activities related to financial planning.[4]
In 2005, amendments to the Malaysian Insurance Act require those who carry out financial advisory business (including financial planning activities related to insurance) and/or use the title of financial adviser under their firm (which, like in Singapore, must be a corporate structure) to obtain a licence from Bank Negara Malaysia (BNM).[5] Some persons who offer financial advisory services, e.g. licenced life insurance agents, are exempted from licensing as a practising requirement.
Again, in 2007, the Capital Market Services Act (CMSA) comes into force as another of the consolidation exercises of the government to move the industry towards a one regime regulatory environment.
As it currently stands, one of the basic requirements to apply for a financial planner or financial adviser licence in Malaysia is that the key company officers, e.g. directors, must be an RFP designee (most if not all Malaysian FChFP designees also carry the RFP designation). Subsequently, in September 2006, the CFP qualification is included as one of the alternatives that can be used by the financial adviser licence applicant. With this development, the demand for financial planning courses has begun to take root in more concrete forms in Malaysia. The licence applicant must also be a member of a self-regulatory organisation (SRO) in financial planning recognised by the authorities. For this purpose, the two SROs currently recognised by both the Security Commission and Bank Negara are the Malaysia Financial Planning Council (MFPC) and the Financial Planning Association of Malaysia (FPAM). The purpose of this requirement is to ensure some form of self-supervision for persons practicing financial planning.
Other countries
In some countries, e.g., the United States, financial planners must be registered as an investment advisor first. This requires an employee within a firm to pass the series 65 or 66 Registered Investment Advisor Exam. A private advisor or company can apply to the state and SEC for an RIA Registered Investment Advisor License or Status.
Being 'licensed' to practice financial planning is not the same as merely having a professional 'qualification' in financial planning. A person may be professionally qualified in financial planning, but without a licence required by the law, he cannot practice the trade in that country or call himself a financial planner there. As of now, there are quite a bit of qualifications related to financial planning that can be found in world. The most prestigious financial planning designations are those which are not just of advanced standing and well-known, but are also recognised by the relevant authorities for licensing purpose.
In some places, individual employees within a licensed & registered Investment Advisor firm such as a: brokerage, bank or insurance company may be exempt if providing complementary financial planning services in relation to their existing products and services. Moreover, financial planners should be extremely careful in providing estate planning or taxation advice for a fee, as these fields are highly regulated by government agencies that control the practice of lawyers and Certified Public Accountants (CPAs). The term "Investment Advisor" also includes any person who uses the title "financial planner" and who, for compensation, engages in the business, whether principally or as part of another business, of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as part of a regular business, publishes analyses or reports concerning securities.
From the California Department of Corporations
A financial planner will be registered with the state if he or she has less than $25 million in assets under management (AUM), and with the SEC if he or she has more than $30 million in AUM. The planner is required to present a client with the ADV Part II or equivalent before the client enters into a contract with the planner. No certification, tests or training ensure that any planner is suitable for the client or any investor, and it is important to read the ADV Part II, interview them, and fully understand any contract.
History of certifications in financial planning across the globe
In a newly emerging profession such as financial planning, there is a lack of regulation, especially in the early years of development. The need for some forms of self-regulation and the demand that a financial planner be competent and trustworthy have prompted several independent financial services organizations to introduce certifications and ethical benchmarks to meet these challenges in accordance to the need in each country. Those who meet the requirement of the certification process and ethical standards will be awarded a professional financial planning designation.
One of the oldest, best-known financial planning certification trademarks is the CERTIFIED FINANCIAL PLANNER certification, which has gained global recognition because of its active standard setting activities and worldwide presence. CFP certification was first introduced in the United States in the early 1970s to meet the need of the consumers. CFP Board, based in Washington, D.C. owns the CFP marks within the United States. The CFP marks are owned outside of the United States by Financial Planning Standards Board, a non-profit standards-setting body based in Denver, Colorado.
CFP Board was founded in July 1985 as the International Board of Standards and Practices for Certified Financial Planners, Inc., (IBCFP) by the College for Financial Planning (College) and the Institute of Certified Financial Planners (ICFP). The IBCFP became Certified Financial Planner Board of Standards Inc. (CFP Board) on February 1, 1994. As a professional regulatory organization acting in the public interest by fostering professional standards in personal financial planning, the CFP Board establishes and enforces education, examination, experience and ethics requirements for CFP certificants. The CFP service mark is promoted world-wide through member associations, the FPAs.
The Fellow Chartered Financial Practitioner (FChFP) designation was developed by the National Association of Malaysian Life Insurance and Financial Advisors] (NAMLIFA) in 1996. The designation was adopted by the Asia Pacific Financial Services Association (APFinSA) in 2001 as the unified designation for its member associations in 11 countries.
The Registered Financial Planners Institute (RFPI) formed in 1983 in the United States to promote professionalism among those who are or will be active in the field of financial planning for individuals and businesses. The RFPI is an international organization with chapters and members throughout the world. The RFPI offers study programs both in classroom conducted seminars and correspondence courses. RFPI is a collective membership of financial planners and is designed to serve the interest of both its members and the general public in matters relating to financial planning. RFPI recognizes qualified individuals by designation of RFP, SRFP who are in the field of financial planning which would include: insurance, attorneys, real estate, bankers, CPAs, stock brokers, securities or other professionals licensed in similar fields that have the ability to properly financial plan individuals or businesses in their related fields. In a separate development, the Malaysian Financial Planning Council, incidently also introduced a professional designation for financial planners called Registered Financial Planner (RFP) in 2004, which was recognised by the regulatory bodies, Bank Negara and Securities Commission in the country for the purpose of licensing financial planner.
The Personal Financial Specialist (PFS) credential was established for CPAs in the United States who specialize in personal financial planning. The credential is awarded exclusively to members of the American Institute of Certified Public Accountants (AICPA) who have demonstrated considerable experience and expertise in that area. As of today, the AICPA has granted approximately 3,300 CPA/PFS credentials.
In Australia, the financial planning specialisation, CPA (FPS), is available to those members of CPA Australia who can demonstrate their eligibility through experience and education within the financial services industry.
The objectives of the FPS designation are to:
* achieve public recognition for those who hold the specialisation;
* enhance the quality of financial planning services that members provide; and
* increase practice development and career opportunities for CPAs.
The FPS designation is available to CPAs, and is based on a points system, where a minimum of 100 points must be accrued. Although all CPA Australia members who provide financial product advice must be licensed by ASIC, a member does not have to be licensed to first obtain the CPA (FPS) designation.
The Chartered Financial Consultant (ChFC) is another financial planning qualification, conferred by The American College. To date, more than 41,000 individuals have attained this distinction. This designation has also spread to Asia, where designees are found in countries like Singapore, Malaysia, Indonesia, China and Hong Kong.[citation needed]
In Europe, the €uropean Financial Planner (€FP) designation conferred by the €uropean Financial Planning Association (€FPA) is gaining ground as a financial planning certification mark. The €FPA is the largest professional and educational organisation for financial planners and financial advisors in Europe and is the only Financial Planning Association created solely in the interest of European financial planning consumers and practitioners.
Globally the Chartered Wealth Manager (CWM) is one of the fastest growing financial planner specializations which focuses on developing critical relationship management skills for financial planners and advisors. The designation is conferred by the Board of Standards of the American Academy of Financial Management in 145 countries.
The rest of the certification qualifications related to financial planning include: Fellow, Financial Services Institute (conferred by LOMA, USA; the Certified Private Banker designation (conferred by the American Academy of Financial Management); the Certified Financial Marketing Consultant (CFMC) conferred by the Institute of Marketing Malaysia.
Accredited business school, training centers and other providers
Globally, cross-recognition agreements are being developed to facilitate the learning of financial planning. The 2 major accrediting agencies, the Association to Advance Collegiate Schools of Business (AACSB) and the Association of Collegiate Business Schools and Programs (ACBSP), which accredit over 560 of the best business school programs, provide the Certification of MFP Master Financial Planner Professional from the American Academy of Financial Management, which is available to AACSB and ACBSP business school graduates with finance or financial services related concentrations.
Contents
* 1 Objectives
* 2 Defining personal financial decisions
* 3 Scope
* 4 The process
* 5 What is a financial planner's job function?
* 6 Licensing, regulations and self-regulation
o 6.1 Australia
o 6.2 Malaysia
o 6.3 Other countries
o 6.4 From the California Department of Corporations
* 7 History of certifications in financial planning across the globe
* 8 Accredited business school, training centers and other providers
* 9 See also
* 10 References
* 11 External links
Objectives
People enlist the help of a financial planner because of the complexity of knowing how to perform the following:
* Providing direction and meaning to financial decisions;
* Allowing the person to understand how each financial decision affects the other areas of finance; and
* Allowing the person to adapt more easily to life changes in order to feel more secure.
Defining personal financial decisions
Personal financial planning is broadly defined as a process of determining an individual's financial goals, purposes in life and life's priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. The individual's goals are used as guideposts to map a course of action on 'what needs to be done' to reach those goals.
Alongside the data gathering exercise, the purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual's situation. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual's current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.
Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual's current lifestyle so that the 'pain' in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.
Scope
Financial planning should cover all areas of the client’s financial needs and should result in the achievement of each of the client's goals. The scope of planning would usually include the following:
Risk Management and Insurance Planning
Managing cash flow risks through sound risk management and insurance techniques
Investment and Planning Issues
Planning, creating and managing capital accumulation to generate future capital and cash flows for reinvestment and spending
Retirement Planning
Planning to ensure financial independence at retirement including 401Ks, IRAs etc.
Tax Planning
Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes
Estate Planning
Planning for the creation, accumulation, conservation and distribution of assets
Cash Flow and Liability Management
Maintaining and enhancing personal cash flows through debt and lifestyle management
Relationship Management
Moving beyond pure product selling to understand and service the core needs of the client
Education Planning for kids and the family members
The process
The personal financial planning process is generally accepted as a six-step process as follows:
Step 1: Setting goals with the client This step (that is usually performed in conjunction with Step 2) is meant to identify where the client wants to go in terms of his finances and life.
Step 2: Gathering relevant information on the client This would include the qualitative and quantitative aspects of the client's financial and relevant non-financial situation.
Step 3: Analyzing the information The information gathered is analysed so that the client's situation is properly understood. This includes determining whether there are sufficient resources to reach the client's goals and what those resources are.
Step 4: Constructing a financial plan Based on the understanding of what the client wants in the future and his current financial status, a roadmap to the client goals is drawn to facilitate the achievements of those goals.
Step 5: Implementing the strategies in the plan Guided by the financial plan, the strategies outlined in the plan are implemented using the resources allocated for the purpose.
Step 6: Monitoring implementation and reviewing the plan The implementation process is closely monitored to ensure it stays in alignment to the client's goals. Periodic reviews are undertaken to check for misalignment and changes in the client's situation. If there is any significant change to the client's situation, the strategies and goals in the financial plan are revised accordingly.
What is a financial planner's job function?
A financial planner specializes in the planning aspects of finance, in particular personal finance, as contrasted with a stock broker who is generally concerned with the investments, or with a life insurance intermediary who advises on risk products.
Financial planning is usually a multi-step process, and involves considering the client's situation from all relevant angles to produce integrated solutions. The six-step financial planning process has been adopted by the International Organization for Standardization (ISO).[1] Financial planners are also known by the title financial adviser in some countries, although these two terms are technically not synonymous, and their roles have some functional differences.
Although there are many types of 'financial planners,' the term is used largely to describe those who consider the entire financial picture of a client and then provide a comprehensive solution. To differentiate from the other types of financial planners, some planners may be called 'comprehensive' or 'holistic' financial planners.
Other financial planners may specialize in one or more areas, such as insurance planning (risk management) and retirement planning.
Financial planning is a growing industry with projected faster than average job growth through 2014.[2]
Licensing, regulations and self-regulation
The title of 'financial planner' is largely an unregulated term in many countries. Lack of regulation has allowed financial services personnel in these countries to use the title indiscriminately. Often, financial products intermediaries, such as life insurance and unit trusts agents, use the title to project a professional image to clients even when they are not trained in the professional aspects of financial planning. This has sometimes led to abuse. Clients may be deceived to receive financial planning services that are unprofessional, from unethical providers.
To protect the industry, financial planning professionals and practitioners from across the globe (starting from the United States) have begun to form trade organisations to provide self-regulations and to maintain some orderliness in the industry. Some, such as the FPA, have begun to organize high-level training programmes and certify members who successfully completed these programmes.
The title of 'financial planner' continues, however, to be used by individuals in the financial industry in most countries, as there are little or no legal barriers to prevent the use of the title. The governments in many countries where the financial planning profession is taking roots are beginning to play an increasingly active role in tasking themselves to ensure the market is orderly. More stringent laws and guidelines are being progressively introduced to keep the profession in check. Additional qualifications have also recently emerged that have extended on the financial planner series of designations, to include specialist skill sets like those in wealth management or private banking.
Australia
In Australia, the financial planning services are initially delineated by law by the granting of licence to deal in securities or advise on investments. Licences are issued under stringent criteria by the Australian Securities and Investments Commission (ASIC), which has evolved these regulations vigorously over the years.[3] Financial planning is now a highly regulated industry in Australia especially where financial advice to the public is involved. Practitioners who offer advice that could influence a client's decision to purchase a financial product must meet minimum training requirements and be licensed by the ASIC. The meaning of 'licenced' refers to Australian Financial Services Licence (AFSL) holders and representatives or authorised representatives of licence holders. Broadly, most people embarking in financial planning will start as an authorised representative of a licence holder.
Becoming a financial planner in Australia involves two main steps:
1. Meet the training requirements of Regulation Guideline 146;
2. Select a licence holder with whom to be affiliated.
The licence holder is the authorised representative, and will be ultimately responsible for the advice given by the planner. The licence holder therefore must make sure the representatives meet all compliance and training prerequisites. As of November 2005, there were approximately 4,300 licence holders registered with ASIC and over 42,500 authorised representatives in Australia.
Malaysia
The first country to introduce legislation that requires a person to be licensed before he can hold himself out to be a 'financial planner' is Malaysia. Financial planning is considered a newer profession in the Asian region as compared to those in the west, such as the United States and Australia where the profession is more established. The Securities Commission (SC) of Malaysia introduced legislation through amendments made to the Securities Industry Act in 2003 to regulate financial planning and the use of the title or related-title of 'financial planner' or to conduct activities related to financial planning.[4]
In 2005, amendments to the Malaysian Insurance Act require those who carry out financial advisory business (including financial planning activities related to insurance) and/or use the title of financial adviser under their firm (which, like in Singapore, must be a corporate structure) to obtain a licence from Bank Negara Malaysia (BNM).[5] Some persons who offer financial advisory services, e.g. licenced life insurance agents, are exempted from licensing as a practising requirement.
Again, in 2007, the Capital Market Services Act (CMSA) comes into force as another of the consolidation exercises of the government to move the industry towards a one regime regulatory environment.
As it currently stands, one of the basic requirements to apply for a financial planner or financial adviser licence in Malaysia is that the key company officers, e.g. directors, must be an RFP designee (most if not all Malaysian FChFP designees also carry the RFP designation). Subsequently, in September 2006, the CFP qualification is included as one of the alternatives that can be used by the financial adviser licence applicant. With this development, the demand for financial planning courses has begun to take root in more concrete forms in Malaysia. The licence applicant must also be a member of a self-regulatory organisation (SRO) in financial planning recognised by the authorities. For this purpose, the two SROs currently recognised by both the Security Commission and Bank Negara are the Malaysia Financial Planning Council (MFPC) and the Financial Planning Association of Malaysia (FPAM). The purpose of this requirement is to ensure some form of self-supervision for persons practicing financial planning.
Other countries
In some countries, e.g., the United States, financial planners must be registered as an investment advisor first. This requires an employee within a firm to pass the series 65 or 66 Registered Investment Advisor Exam. A private advisor or company can apply to the state and SEC for an RIA Registered Investment Advisor License or Status.
Being 'licensed' to practice financial planning is not the same as merely having a professional 'qualification' in financial planning. A person may be professionally qualified in financial planning, but without a licence required by the law, he cannot practice the trade in that country or call himself a financial planner there. As of now, there are quite a bit of qualifications related to financial planning that can be found in world. The most prestigious financial planning designations are those which are not just of advanced standing and well-known, but are also recognised by the relevant authorities for licensing purpose.
In some places, individual employees within a licensed & registered Investment Advisor firm such as a: brokerage, bank or insurance company may be exempt if providing complementary financial planning services in relation to their existing products and services. Moreover, financial planners should be extremely careful in providing estate planning or taxation advice for a fee, as these fields are highly regulated by government agencies that control the practice of lawyers and Certified Public Accountants (CPAs). The term "Investment Advisor" also includes any person who uses the title "financial planner" and who, for compensation, engages in the business, whether principally or as part of another business, of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as part of a regular business, publishes analyses or reports concerning securities.
From the California Department of Corporations
A financial planner will be registered with the state if he or she has less than $25 million in assets under management (AUM), and with the SEC if he or she has more than $30 million in AUM. The planner is required to present a client with the ADV Part II or equivalent before the client enters into a contract with the planner. No certification, tests or training ensure that any planner is suitable for the client or any investor, and it is important to read the ADV Part II, interview them, and fully understand any contract.
History of certifications in financial planning across the globe
In a newly emerging profession such as financial planning, there is a lack of regulation, especially in the early years of development. The need for some forms of self-regulation and the demand that a financial planner be competent and trustworthy have prompted several independent financial services organizations to introduce certifications and ethical benchmarks to meet these challenges in accordance to the need in each country. Those who meet the requirement of the certification process and ethical standards will be awarded a professional financial planning designation.
One of the oldest, best-known financial planning certification trademarks is the CERTIFIED FINANCIAL PLANNER certification, which has gained global recognition because of its active standard setting activities and worldwide presence. CFP certification was first introduced in the United States in the early 1970s to meet the need of the consumers. CFP Board, based in Washington, D.C. owns the CFP marks within the United States. The CFP marks are owned outside of the United States by Financial Planning Standards Board, a non-profit standards-setting body based in Denver, Colorado.
CFP Board was founded in July 1985 as the International Board of Standards and Practices for Certified Financial Planners, Inc., (IBCFP) by the College for Financial Planning (College) and the Institute of Certified Financial Planners (ICFP). The IBCFP became Certified Financial Planner Board of Standards Inc. (CFP Board) on February 1, 1994. As a professional regulatory organization acting in the public interest by fostering professional standards in personal financial planning, the CFP Board establishes and enforces education, examination, experience and ethics requirements for CFP certificants. The CFP service mark is promoted world-wide through member associations, the FPAs.
The Fellow Chartered Financial Practitioner (FChFP) designation was developed by the National Association of Malaysian Life Insurance and Financial Advisors] (NAMLIFA) in 1996. The designation was adopted by the Asia Pacific Financial Services Association (APFinSA) in 2001 as the unified designation for its member associations in 11 countries.
The Registered Financial Planners Institute (RFPI) formed in 1983 in the United States to promote professionalism among those who are or will be active in the field of financial planning for individuals and businesses. The RFPI is an international organization with chapters and members throughout the world. The RFPI offers study programs both in classroom conducted seminars and correspondence courses. RFPI is a collective membership of financial planners and is designed to serve the interest of both its members and the general public in matters relating to financial planning. RFPI recognizes qualified individuals by designation of RFP, SRFP who are in the field of financial planning which would include: insurance, attorneys, real estate, bankers, CPAs, stock brokers, securities or other professionals licensed in similar fields that have the ability to properly financial plan individuals or businesses in their related fields. In a separate development, the Malaysian Financial Planning Council, incidently also introduced a professional designation for financial planners called Registered Financial Planner (RFP) in 2004, which was recognised by the regulatory bodies, Bank Negara and Securities Commission in the country for the purpose of licensing financial planner.
The Personal Financial Specialist (PFS) credential was established for CPAs in the United States who specialize in personal financial planning. The credential is awarded exclusively to members of the American Institute of Certified Public Accountants (AICPA) who have demonstrated considerable experience and expertise in that area. As of today, the AICPA has granted approximately 3,300 CPA/PFS credentials.
In Australia, the financial planning specialisation, CPA (FPS), is available to those members of CPA Australia who can demonstrate their eligibility through experience and education within the financial services industry.
The objectives of the FPS designation are to:
* achieve public recognition for those who hold the specialisation;
* enhance the quality of financial planning services that members provide; and
* increase practice development and career opportunities for CPAs.
The FPS designation is available to CPAs, and is based on a points system, where a minimum of 100 points must be accrued. Although all CPA Australia members who provide financial product advice must be licensed by ASIC, a member does not have to be licensed to first obtain the CPA (FPS) designation.
The Chartered Financial Consultant (ChFC) is another financial planning qualification, conferred by The American College. To date, more than 41,000 individuals have attained this distinction. This designation has also spread to Asia, where designees are found in countries like Singapore, Malaysia, Indonesia, China and Hong Kong.[citation needed]
In Europe, the €uropean Financial Planner (€FP) designation conferred by the €uropean Financial Planning Association (€FPA) is gaining ground as a financial planning certification mark. The €FPA is the largest professional and educational organisation for financial planners and financial advisors in Europe and is the only Financial Planning Association created solely in the interest of European financial planning consumers and practitioners.
Globally the Chartered Wealth Manager (CWM) is one of the fastest growing financial planner specializations which focuses on developing critical relationship management skills for financial planners and advisors. The designation is conferred by the Board of Standards of the American Academy of Financial Management in 145 countries.
The rest of the certification qualifications related to financial planning include: Fellow, Financial Services Institute (conferred by LOMA, USA; the Certified Private Banker designation (conferred by the American Academy of Financial Management); the Certified Financial Marketing Consultant (CFMC) conferred by the Institute of Marketing Malaysia.
Accredited business school, training centers and other providers
Globally, cross-recognition agreements are being developed to facilitate the learning of financial planning. The 2 major accrediting agencies, the Association to Advance Collegiate Schools of Business (AACSB) and the Association of Collegiate Business Schools and Programs (ACBSP), which accredit over 560 of the best business school programs, provide the Certification of MFP Master Financial Planner Professional from the American Academy of Financial Management, which is available to AACSB and ACBSP business school graduates with finance or financial services related concentrations.
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