Saturday, Sep 29, 2007
Some financial advisers are really dumb
FT Money Makeover: Don’t put all your apples in one basket
He actually says they should should trade down to secure their finances. How dumb can you be??? Tee Hee!!! :)
Posted by financial planner @ 12:04 PM (580 views) Add Comment
10 Comments
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1. mybrainhurts said...
I may be stupid, but what is dumb about it?
2. financial planner said...
There is nothing dumb about it - its irony. Sorry, if that's beyond you.
But I thought the following might be a clue: "Tee Hee!!! :)" Oh, also the fact that I'm a bear. Duh!
3. mybrainhurts said...
the advice is neutral about the direction of prices. Read the headline. duh!
4. planning4acrash said...
Hangovers and handbags at the ready!
5. dugmug said...
Financial Planner..."Jonathan Davis, chartered financial adviser at Armstrong Davis, reckons the first step will be to spend less and earn more." Is this you, perchance? And you can make a living out of telling people they'll be wealthier if they spend less and earn more??!! How do I get into this racket again?
6. dugmug said...
I've just re-read that and I still can't believe it. "Spend less, earn more." Priceless. :-)
7. Max said...
How come if he dies, his wife will be forced to sell their home and trade down?? There's no mortgage to pay. It doesn't make sense..
8. deepak said...
I think this is the common story. "Asset rich - cash poor".
And why "Asset Rich" just hyped evaluation. Now if that comes down what will you read. "Asset poor - cash poor" in the fourth largest economy in the world ( based on GDP)
9. paolo88888 said...
Francis Klonowski, certified financial planner at Klonowski & Co, calculates that if Barham wishes to be financially independent at 60 on an income of £40,000 he will need a capital sum of £719,000.
“To accumulate this sum, he will need to invest £14,800 a year between now and then,” says Klonowski.
The future value (FV) function on Excel tells me that to achieve this in the 17 years to age 60 will require the investments to return over 10.8% continuously. Is this reasonable, considering that Mr Barham says he would like “a fortress of financial security,” and therefore presumably wants safe investments?
10. Bjedean said...
I guess the assumptions used by the "Certified Financial Planner" were :
1) Contributes monthly into a pension totalling £14,800 per year
2) Higher rate taxpayer so can contribute £24,667 into a pension for a cost of only £14,800 = 60% * £24,667
3) Current age 44 years less 7 months
4) Return on Investments after expenses 6.5%
Then the formula FV(1.065^(1/12)-1,(60-44)*12+7,14800/0.6/12,0) does equal 719,000
But then his fund of 719,000 is only able to purchase a flat rate joint annuity of £40,000 per year, leaving his and his wives income to be eroded away by inflation as they reach their 70s and 80s. The adviser should have recommended an inflation linked annuity, which would have cost nearly twice as much, or only given him an initial income of £25,000 at age 60 for the same fund.
Also the adviser recommends a fund of funds. The charges on these can be well over 2% of fund size per annum, so he would need a return on investments before charges of 9%+ which sounds far too optimistic for a diversified portfolio of equities, cash and bonds.