Talking about estate plans

Baby Boomers don't like talking to their parents about estate planning, and for a number of logical reasons. They don't want to appear greedy, they don't want to acknowledge their parents' mortality and they're just not comfortable having such a significant yet stressful conversation with their folks.

But the Hartford Financial Services Group recently released the results of a study suggesting that Boomers should get over their hang-ups and have that chat with mom and dad because it's what their parents really want.

Hartford surveyed older parents ages 70-79 and adults 45-65, primarily Boomers with at least one living parent. Here are the key findings:

• 76 percent of older parents say they are very comfortable with talking about their estate compared to 45 percent of Boomers who say they are very comfortable

• Parents are far more comfortable discussing the content of their wills than their children realize, with 71 percent of parents saying they are very comfortable compared with 54 percent of children
  

• Boomers underestimate the importance that parents place on providing for their heirs, improving their children's lifestyles, helping their children prepare for retirement, and helping grandchildren attend college
  

• Significantly more older parents report having important estate planning documents such as living wills and durable power of attorneys than Boomers report they are aware of
  

• Almost all older parents report talking to their children about their estate plan but fewer Boomers claim to have had this discussion
  

• In general, Boomers say that their actual knowledge about their parents' estate issues is significantly less than their parents claim

What should we glean from all this? Quite simply, have the conversation. Look for an appropriate time and start the dialogue. You'll be glad you did.

Just a tad short

The granddaddy of all marathons is held in Boston every Patriots' Day. To be an official participant, a runner must "qualify" by running another marathon in a specified time depending on age and sex. A few participants in Saturday's Kansas City Marathon are bound to be a bit disappointed.

To the 440 of you who trained hard, tested your endurance and thought you ran a marathon in Kansas City Saturday:

You didn't.

The hilly course that stretched from downtown to Swope Park and back was about .4 mile short of regulation length because of a mix-up at the loop in front of the Liberty Memorial.

The Kansas City Marathon is certain to be thrown out as a qualifying marathon for Boston because of the foul-up. Oops.

"A magnitude 3.2 event"

I heard the loud BOOM in my sleep but it wasn't enough to bring me to full consciousness. The bed shaking and cats flying in all directions got me to stir a bit and then Mrs. THC asked, "Was that an earthquake?"

The U.S. Geological Survey says it was a 3.2 and was located:

2 km (1 miles) NE (48 degrees) from Piedmont, CA
4 km (3 miles) NNE (14 degrees) from Oakland, CA
6 km (4 miles) E (93 degrees) from Emeryville, CA
19 km (12 miles) ENE (70 degrees) from San Francisco City Hall, CA

Gee, those are pretty much the directions to our house.

Top dogs' top firms

The wealthiest Americans have excellent brand awareness of the big investment firms yet many of them favor small, boutique asset management outfits.

These are the findings of the Luxury Institute, a New York firm that surveys the upper 10% of Americans about their preferences. These upper-crusters represent about 11 million households with an average net worth of $2.7 million and they own 77% of all stocks and mutual funds.

The survey indicated that wealthy Americans enjoy the attention lavished upon them by boutique wealth management firms and the independence of their advisors.

They were asked:

"Which wealth management brands are you aware of?"

• Merrill Lynch 82%
• Charles Schwab 76%
• Smith Barney 73%
• Fidelity 69%
• Goldman Sachs 65%
• Morgan Stanley 65%
• J.P. Morgan Private Bank 62%
• Citigroup Private Bank 60%
• Lehman Brothers 60%
• Bank of America 54%

The carnivals are up!

The Carnival of Personal Finance and The Carnival of the Capitalists are both up at Optimized Living and Willisms, respectively. There are lots of great entries at each carnival and here are two of my favorites:

On the personal finance front, Financial Baby Steps, presents a great baby gift idea from a rather unique perspective. Very creative.

From The Carnival of the Capitalists, Joe Kristan of Roth and Company relays news of a little accident on the San Mateo Bridge that impacts about 30,000 estimated tax payments. Liquified, huh?

(The photo is the album cover from Leon Russell's "Carney" from 1972. I owned it on 8-track).

Widgets and free credit reports

Beginning this month consumers in all fifty states are entitled to a free copy of their credit report from each of the big three credit reporting firms, Equifax, Experian and TransUnion.

Citizens of thirteen western states were privy to free credit reports beginning last December and the privilege has gradually rolled out across the country and is now complete with fourteen eastern states, the District of Columbia, Puerto Rico and all U.S. territories going on-line September 1st.

Signed into law on December 4th, 2003, The Fair and Accurate Credit Transactions Act, is intended to ensure that lenders make decisions on loans based on full and fair credit histories and not on discriminatory stereotypes, to improve the quality of credit information and protect consumers against identity theft.

To be sure, this is a sweet deal for consumers but the CEO of Equifax doesn't see it exactly the same way.

"..It's unconstitutional to cause a public company who has a fiduciary responsibility to return profit to shareholders to give away the product," Chapman said to reporters following a speech at the Commonwealth Club of California in San Francisco..."

He has a point. What if you were in the business of making widgets and Congress comes along and tells you that you must give each American a free widget every year? Oh well, at least your two major competitors have to give everyone a free widget too. So is there anyone left who will actually buy a widget?

Certainly every one of us should check our credit histories on a regular basis to guard against inaccuracies and fraud. But these reports have been easily accessible in the past, usually for less than ten bucks. Anyone serious about protecting their credit wouldn't let a Hamilton stand in their way, would they? Free reports are a good thing for consumers, but is it really right for government to force companies to give away their product?

That said, get your free credit reports at annualcreditreport.com.

Fibonacci, Elliott and the Nasdaq

It was July of 2000 and the Nasdaq Composite had already shed 20% of it's value, from just above 5,000 down to around 4,000. The freefall we had experienced was bad enough but what was still to come was inconceivable.

One of the firm's technical analysts had come to our office from New York to discuss his craft. (Technical analysis employs the use of historical performance to evaluate securities. It uses charts and market statistics to the exclusion of fundamentals like sales, earnings, management expertise, etc. to predict performance).

About a dozen financial advisors showed up to see the presentation and learn something about what our technical analysis department was thinking and see if there was anything useful to cull from the meeting. While most of us believed there was some redeeming value to technical analysis, it seemed a little too much like voodoo or witchcraft to hang our professional reputations on.

Part of the analyst's presentation dealt with Fibonacci Retracements combined with Elliott Waves and the uncanny accuracy this technique produced. One disbeliever asked, from the back of the room, "So, what do your fiba-what-cha-ma-call-it numbers say the market's gonna do?"

The analyst hesitated to respond but finally admitted that his analysis put the Nasdaq at between 1,000 and 1,200. That would be 2,800-3,000 points below it's value on that summer day five years ago and nearly 4,000 points below its high! Unbelievable. People walked out. It was totally absurd to even consider that kind of bloodbath. Impossible.

It took a little more than two years, but in September of 2002 the Nasdaq finally bottomed at just under 1,200, exactly as the analyst had predicted. It makes one stop and think, doesn't it?

The technical analyst who spoke to us that day was Rick Bensignor.

The economics of wages, revisited

The members of the California State Senate apparently were all sleeping during freshman economics.

The state Senate passed a bill Wednesday to increase the minimum wage by $1 over the next two years and tie future increases to the pace of inflation, though it faces a likely veto by Gov. Arnold Schwarzenegger.

On June 13th I posted this after a study was released that suggested that many San Francisco restaurants were moving elsewhere or closing altogether due to the high minimum wage law in the city:

The conventional wisdom for raising the minimum wage, or for having one in the first place, is to help the working poor. It's very appealing to suggest that everyone should have a living wage, however, it's just not that easy.

To understand why such a law is actually harmful to low-wage workers, consider the employers' alternatives. If, for example, an employer is required to pay a worker $9 per hour for work that he values at only $6, he/she has several options. First, the employer could fire the low-wage workers and replace them with more productive employees. Secondly, he/she can outsource to contractors or worse yet, outsource to foreign workers. A third alternative is to automate. An employer can also chose to hire illegal workers who seem to be plentiful and willing to work for lower wages and virtually no benefits. Finally, as San Francisco restauranteurs are doing, they can chose to quit business altogether or relocate to an environment that is more business-friendly.

Shouldn't there be some sort of continuing education requirements for lawmakers? Or, how about some minimum educational requirements?

Carney time

Anyone interested in personal finance or capitalism (two of my favorite subjects) will be amused and entertained by this week's Carnival of Personal Finance and Carnival of the Capitalists. Thanks to Savvy Saver and Rethink(ip) for your hard work.

Disaster drill for financial documents

What if you have only ten minutes to evacuate your home due to rising flood waters, a terrorist attack, a wildfire or toxic spill? Sure, you round up the family and pets, grab the photo albums and whatever family heirlooms you can carry, but what about your financial documents? What documents can you gather in ten minutes? Or would you even think to grab your important papers at all?

In an emergency situation most of us would be too overwhelmed to think about what documents we will need, or even where they are located. So, consider assembling an evacuation bag that you can grab quickly, kept in a home safe or lockbox that contains sealable plastic bags to protect documents from water. A small backpack is ideal since you may end up walking some distance and need to keep your hands free for other things.

Items to keep in the evacuation bag:

• Cash
• Key to your safe deposit box
• Phone numbers for insurance agents, banks, attorneys and financial advisors
• Account numbers for bank, credit card and investment accounts
• Social Security Numbers for all family members
• Current backup of computer files
• Last three years tax returns, federal and state
• Copies of the documents in your safe deposit box (insurance policies, wills, deeds to house and cars and your house inventory)
• Medical information such as doctors' names and phone numbers, prescriptions, immunization records
• Phone numbers for family and friends
• Photocopies of birth certificates, passports, marriage certificates and powers of attorney
  

Cash is listed first on this list because it can be extremely important in a major disaster. ATMs will be out of service as will credit card machines that rely on phone lines for verification. Cash will be king. In situations where people are on their own for days, black markets erupt up for everything from food and water to blankets and clothing. Be assured that the guy selling toilet paper for twenty bucks a roll doesn't take American Express.

It may not be convenient, but consider keeping your safe deposit box at a bank that is some distance from your home. After all, you don't want it to be under the same flood waters as your home.

Keep credit card balances low or paid off. While this is always a good idea, after a disaster you might need to pay for weeks of living expenses before seeing an insurance check or relief money.

What other financial documents might be useful to have with you in an evacutation?

Katrina and Abraham

The CFP Board and the Financial Planning Association have notified members that they plan to offer financial planning help to the victims of Katrina. Certified Financial Planner(TM) professionals are being asked to volunteer to answer victims' questions.

Now, freshman psychology was a long time ago for me but I seem to recall something about a fellow named Maslow and his "hierarchy of needs". On that hierarchy, I'm pretty sure that food, shelter and clothing rank somewhere ahead of things like asset allocation and the tax treatment of capital gains. Katrina's refugees are asking where they will sleep tonight and how will they feed their families, not "Do I have enough international exposure in my portfolio?" or "What are the AMT implications of exercising my non-qualified stock options?"

Perhaps the CFP Board and the FPA are jumping the gun a tad but their intent is noble and I suppose it's better to be prepared too early rather than too late. Eventually the victims' focus will turn to the financial losses they have sustained and there will be important questions to be answered. I have already signed up as a volunteer.

Gasbloggin'

I received this email from an old friend yesterday:

PETITION FOR PRES. BUSH: Presidential Petition--Please do NOT let this petition stop and lose all these names. If you do not want to sign it, please forward it to everyone you know.

To add your name, click on "forward". You will be able to add your name at the bottom of the list and then forward it to your friends. Or, if necessary you can copy and paste and then add your name to the bottom of the list.

PETITION TO LOWER GAS AND DIESEL PRICES IN THE UNITED STATES:

It then asks the 2,000th petitioner to forward it to President Bush and gave an email address. There were over 1,500 names attached.

Now folks, let's get serious. Just what do you expect the President to do about gas prices? He's had it tough enough trying to influence U.S. laws (Social Security, tort reform, etc.) how can he be expected to have any influence over the law of supply and demand?

The price of gasoline has been driven up by the forces of too many dollars chasing too few goods. More precisely, two many dollars, yen, euros and yuan chasing too few barrels of crude. Prices will come down if and when production is increased, demand is decreased, or both.

It's a really great thought that Dubya could slash pump prices back to a buck a gallon with the stroke of a pen or some sort of Presidential proclamation, but it just doesn't work that way. Sorry.