September meeting: Nuts & Bolts Beyond Money

At our September 16, 2009 meeting, Kip Child, Community Affairs Specialist with the New England Office of the Federal Deposit Insurance Corp (FDIC) spoke to the group about the functions of the FDIC, the Community Reinvestment Act, consumer finance issues, and asset protection.  His PowerPoint presentation, The Nuts & Bolts Beyond Money, can be found here.

Child advised us to be wary of predatory lenders and their scams and to beware of offers for free credit reports which may come with strings attached.  Individuals are entitled to one free credit report annually from each of the 3 major bureaus (Experian, TransUnion and Equifax).  He suggested ordering one report from one of the bureaus every 4 months as an effective way to monitor identity theft.  The site to use to order free reports is  www.annualcreditreport.com.

Child spoke of  FDIC’s  financial education curriculum called Money Smart which is designed to help individuals increase their financial intelligence.  Money Smart is available in two curricula (adult and young adult) and two formats: online or CD.

Ever wonder how much your deposits are insured for? EDIE the Estimator can calculate your FDIC insurance coverage for each FDIC-insured bank where you have deposit accounts. EDIE lets you know in a printable report for each bank whether your deposits are within or exceed coverage limits.

What can one do to preserve a favorable FICO score?  Child suggested that unused credit card accounts not be closed.  The ratio of outstanding credit card balances to available balances is a factor in FICO.  Lenders like to see a higher available balance.  Other credit card advice:  if your  interest rate increases, it is worth calling the credit card company to let them know you may take your business elsewhere.  They may offer to keep the rate unchanged in order to keep your business.

Want to protect your savings and investments?  Child believes that by spreading our financial knowledge through volunteering our time with the lower income community, we all come out ahead.  Educating those most at risk to investment scams and predatory practices, reduces the reliance of the disadvantaged on government services and consequently our overall tax burden.  Consider becoming a EITC/VITA (Volunteer Income Tax Assistance Program) volunteer.   Past tax help sites include the Newton Senior Center,  the Boys & Girls Clubs and the West Suburban YMCA.

Take control of your investments!

For more on how to protect yourself when investing, see the article Taking Control, from the Wall Street Journal on June 1.  It has suggestions from regulators, academics and consumer activists on how to be your own financial watchdog.  While the ideas have been mentioned before at our Retirement Planning Club meetings, they certainly bear repeating!

Photo (cc) by  thomas.merton and republished here under a Creative Commons license. Some rights reserved.

Be Sure to Read the Fine Print

If your retirement portfolio includes guaranteed variable annuities, you may want to look at this June 7th article from the Wall Street Journal, Annuity Fine Print: Guarantees Aren’t Always Guaranteed.  The title pretty much says it all; ”[u]nder some provisions, the insurance company that issued the guarantee can cancel it, or sharply reduce its annual payout.” 

Photo (cc) by  Wade From Oklahoma and republished here under a Creative Commons license. Some rights reserved.

How to Choose a Financial Advisor

If you decide to work with a financial advisor, “how can you guarantee that your expert is reliable?  The short answer is that you can’t. There are no guarantees. But you can be a lot more sure than many investors are today.”

The Wall Street Journal suggests seven points to consider when choosing an advisor.

Protect Yourself from Investment Fraud

Are you unsure about a recommended investment?  Before you invest, find helpful information at FINRA’s saveandinvest.org website.

The site has many useful features, including a step-by-step Ask and Check guide to evaluating an investment or financial salesperson, information on the Psychology of a Scam, and Fraud Risk Meter and Scam Meter quizzes to assess how vulnerable you might be to an unwise investment.  You can also read about Common Investment Scams.

We have print copies of several of the online brochures (Fighting Fraud 101: Smart Tips for Older Investors, and Avoiding Investment Scams), available for distribution at our meetings.

SIPC Protection

A question came up at our January meeting regarding SIPC (Securities Investor Protection Corporation) coverage “when a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing.”  An example would be the Bernard Madoff case, which is currently highlighted on the SIPC website.

SIPC protection insures accounts for up to $500,000 each, including a maximum of $100,000 in cash.

The SIPC only protects customers of broker-dealers as long as the broker-dealer is a SIPC member.  “Among the investments that are NOT protected by SIPC are commodity futures contracts and currency, as well investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.”  Their website and brochure cover all this in more detail.

What’s in a title?

In “Don’t Judge An Advisor By His Title,” Money Magazine senior editor Walter Updegrave reinforces the advice given to us earlier by Attorney Tony Drenzek of the Secretary of State’s Securities Division, that we need to carefully check out any financial advisor, and the qualifications they hold, before we go along with their investment advice.

Massachusetts already has regulations regarding use of designations implying specific expertise in advising senior investors.

See FINRA’s information on professional designations for more on this topic.