Financial Answers "IN SIMPLE LANGUAGE"

In Simple Language has been recently writing about the new financial reform bill called the “Restoring American Financial Stability Act of 2010” (see In Simple Language blog articles dated April 7, 2010 titled Do We Really Need More of This? And June 2, 2010 titled Financial Reform Bill passes the Senate.  Now What?).

Senator Chris Dodd is the lead senator in getting this bill through congress.  He and many other senators and representatives are pushing hard to get this financial reform bill passed to help prevent another financial meltdown of what took place in 2008 and 2009.

Let’s dig deeper into this bill

Something that has not been discussed about this bill is its implications to its sponsors…the senators and representatives pushing it.  If we did deeper into why these members of congress are trying to pass this bill we have to wonder are they just doing their jobs or do they, or at least some of them, have an ulterior motive for wanting this bill passed.

If we look at some of the senators and representatives that are pushing this bill we find that they have many financial connections to the very organizations that they are going to more heavily regulate.  So you ask is that such a bad thing?  Good question. Let’s discuss it further because it does directly affect you.

Let’s ask some tough questions

Should you be concerned if certain senators and representatives or their spouses sit on the boards of many of these financial companies that will fall under this new bill?  And if so, does the bill really address the needs of the public or is it something that is going to benefit the senators and representatives and their spouses?

If you do your homework you will find out that many of these senators and representatives have ownership interests in financial companies.  Many own a large portion of voting stock.  Many sit on the boards or their spouses sit on the boards.  Is that really a problem?  Does it really matter if their wife or husband sits on the board of a financial services company?  Is that a conflict of interest if it is disclosed or not disclosed?  Should these senators and representatives not be directly involved in the writing of this financial services bill?

You could go on and on with questions but does it really matter?  You voted for and sent these people to Washington, D. C. to represent you fairly and honestly. If they don’t then you need to vote them out now.   Where do you draw the line to know if they are, in fact, doing a fair and honest job especially when it comes to protecting your money?  Only you can answer that.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

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Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media, LLC now at (502) 569-1714.

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The massive new financial reform bill passed by the Senate will have a direct and decisive affect on most Americans.  Now the House of Representatives and the Senate need to get together to put all the pieces and parts of the House bill that were passed in December 2009.

In my previous blog article of April 7, 2010, titled “Do We Really Need More of This?”  I briefly discussed Senator Chris Dodd’s senate bill called the “Restoring American Financial Stability Act of 2010”.  You remember Senator Dodd who was running for president and got soundly beaten to a pulp.  He is also not running for the Senate again because he knows he can’t win and wants to retire as a “winner”.

This Senate version is his baby.  Time will tell if it is going to do any good.

 So what’s in this bill?

The Senate bill creates a new consumer protection agency, I guess yet to be named.  I knew we needed “another” government agency… but they didn’t ask me.  The bill also wants more ways to monitor the financial system so the government regulators can monitor and liquidate any failing firms that appear on their radar screen. 

The new Senate bill is also going to more closely monitor all of the crazy and complex securities that have been created over the last decade or so.  The government wants new rules created by the bill to prevent all these “hybrid” securities from getting out of control again and creating another economic crisis.

Both Democrats and Republicans alike have supported this new Senate bill with members of each party for and against the bill.

 What’s not in the bill?

What’s not in the bill is any action against a replay of the government affiliated mortgage giants Freddie Mac (Federal Home Loan Mortgage Corporation) and Fannie Mae (Federal National Mortgage Association) to raise their mortgage lending standards so they don’t get into trouble again.  Both these affiliated government agencies were taken over in 2008 by the FHFA (Federal Housing Finance Agency), a part of the United States Treasury Department.

Freddie and Fannie have fallen off the radar screen of the American press and public and that is not good.  Their mess is far from over because of all of their defaulting high risk loans.  The government has already poured over $145 billion of your hard earned money back into them to keep them from going under.

This may just be the tip of the iceberg.  Why this wasn’t addressed in this financial reform bill is anybody’s guess.  You can be sure; however, that politics played some kind of role in the decision to leave Freddie and Fannie out.

In Simple Language is following this bill closely and will keep you up-to-date on what is happening.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

• Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.
•  Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.
•  Did you remember to bookmark this blog?

 Thank you for taking the time to visit In Simple Language.    

Copyright © 2008-2010 “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media, LLC now at (502) 569-1714.

 Check out the “SERVICES” tab above the beginning of the post for all available services.

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Sowa Financial Media, LLC is pleased to announce the launch of a new and exciting resource for financial professionals.  This new resource is called “Financial Pro Talk”.

If you are anything like me than you are probably tired of looking through newspapers, magazines, and internet articles for information that you can use to enhance your professional practice?  Wouldn’t it be more effective for you to listen to an expert talk about the topics that will help you to continue to build your practice? 

Imagine having an expert stop by your office and discuss topics that are relevant to you building and maintaining your professional practice.  And that expert is available at your convenience anytime you want to hear them discuss the topic of interest.

Financial Pro Talk is a monthly financial audio interview service which will save you, the financial professional, time and energy searching for timely and appropriate information to more effectively run your professional practice.  Each monthly audio interview, 50+ minutes in length, will bring an expert financial pro into your office discussing information and issues in a conversational format.  You can use this information to run your professional practice more efficiently and effectively saving you hours of time researching the relevant topics.

The Financial Pro Talk family members make suggestions as to what topics of interest are most relevant to them and their professional practice.  Then Financial Pro Talk interviews an expert in that area.  You get to hear the experts discuss the topics of interest in a relaxed, unedited conversation as if you where sitting there listening to the conversation in person.

There are many more benefits to you, the financial professional, by becoming a family member of Financial Pro Talk.  Go to http://www.financialprotalk.com/ now and check it out.  There is no obligation on your part to test drive a trial membership and get a feel for how Financial Pro Talk can benefit you and your professional practice.

If you are a professional involved in any aspect of the financial global market than Financial Pro Talk is for you?   Go to http://www.financialprotalk.com/ now and check it out.

Thank you,

Rich Sowa, CFP®

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This is the 200^th blog post article

Here’s a new twist on what you have been hearing lately in the news.  It seems that every time we turn around another financial professional is being arrested, indicted, and/or hauled off to jail for stealing from you and me.

Yet rarely do we hear about anyone, especially regulators, pointing the finger at the bad guys.  Well folks here it is.

New Hampshire regulator steps forth

Just when you thought that all regulators forgot how to talk, except when it came to blaming everyone else but themselves, out of the woodwork pops the “white knight” of mindful public protectors. 

So who is this super regulatory hero “white knight” protector of the public wallet and well being…Mark Connolly?  Mark Connolly is the former Director of the Bureau of Securities for the beautiful State of New Hampshire. Unfortunately this individual will not be there to help protect you anymore. Mr. Connolly has decided that enough is enough and has resigned his position effective May 14, 2010.

According to Mr. Connolly, he can’t remain in his current position or as a state employee because he feels that the public’s best interests are not being served.  Mr. Connolly is pointing his finger at the New Hampshire state banking department for its failure to provide full disclosure in the investigation of Financial Resources, Inc., a New Hampshire mortgage company.

The specific reason for resigning

According to a lawsuit filed in 2006, Financial Resources, Inc. is accused of swindling $80 million from hundreds of investors.  What makes this case unique is the fact that the individuals being accused are Pastor Robert Farah and his son, church treasurer Scott Farah.  They are being accused of taking money from parishioners and not investing it where they said they were going to invest the parishioner’s money.

After Financial Resources, Inc. closed suddenly in November of last year, many former investors are suing the company.  Federal authorities have brought criminal wire fraud charges against Scott Farah, the company’s president.

Connolly has stated that his resignation will bring light on the handling of this case and would put an end to the political games being played. 

Maybe we need more of these “whistleblower” regulators to shake up the system…to shake the complacency and apathy out of our government watchdogs.  I for one say, “Good for you Mr. Connolly”. 

Do you know of any other “white knight” regulator stories that you have heard.  Let In Simple Language know if you did.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

•  Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.
•  Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.
•  Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.
•  Did you remember to bookmark this blog?

 Thank you for taking the time to visit In Simple Language. 

Copyright © 2008-2010 “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media, LLC now at (502) 569-1714.

 Check out the “SERVICES” tab above the beginning of the post for all available services.

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Target date mutual funds have been a hot topic ever since they took such a dismal beating in 2008.  Many people, especially in their 401(k) programs, lost hundreds of millions of dollars when the stock market got wacked.  To prevent this from happening again, since target date mutual funds are so popular, congress has been looking at ways to minimize damage to people’s 401(k) programs that are using target date mutual funds.

So what is a target date mutual fund?

A target date mutual fund is a mutual fund, or basket of investments, that uses a specific date, like 2020 or 2025 or 2030, as a target date for when a person will need to use those specific funds.  That use could be, and usually is, for retirement although it doesn’t have to be. 

The idea is when you put your money into a target date mutual fund, and depending on when you will need it again, the fund will start off investing your money more aggressively.  As you approach your target date the investments in the target date mutual fund will become more and more conservative…protecting your money.  Or so it is thought.

So what happened in 2008 when the market went into a dumpster?  The portfolio managers of most target date mutual funds were not doing what they were supposed to be doing.  Many of the target date mutual funds that were reaching their target date of say 2008-2010 were overly aggressive in stocks causing the funds to lose a large percentage of their values.

People 65 years old or older, which had upcoming target dates of say 2010, where shocked to see the losses in their target date mutual funds which were supposed to be invested conservatively, yet weren’t.  Too much of their money was invested in stocks causing them to lose a great deal of money.

Congress doesn’t want this to happen again.  Target date mutual funds are very common in 401(k) plans with an estimated $245+ billion held in these funds.  That is a significant amount when you consider how many different mutual fund types are in the investment world.

Things are getting better

After the 2008 bloodbath within target date mutual funds, many of the mutual fund companies have decided that they don’t want to have that happen again.  Whether that is for your protection or their continued existence it is good to see many of the mutual fund companies taking the initiative to prevent this from happening again.

One of the methods that some of the fund companies want to put into place is to give the target date mutual fund manager more flexibility in how they invest.  The target date mutual fund, like all mutual funds, is guided by what the mutual fund’s prospectus directs. 

So if the mutual fund prospectus says that no more than 50% of your money will be invested in stocks then that is the way the fund is “supposed” to be run.  Of course this was a major part of the problem in 2008 when many mutual fund managers did not adhere to what the prospectus said.

Some fund companies are talking about re-balancing their funds more often…quarterly or monthly instead of annually.  Re-balancing refers to keeping the fund within the parameters of what it states such as 50% stock, 45% bonds, and 5% cash.  When the target date fund exceeds any of these parameters then that part that exceeds these set parameters is sold off and the money is re-distributed to bring the fund back into line with its 50%, 45%, 5% ranges.

Time will tell if these actions will help in the next financial meltdown…and there will be another meltdown.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

•  Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.
•  Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.
•  Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.
•  Did you remember to bookmark this blog?

 Thank you for taking the time to visit In Simple Language. 

Copyright © 2008-2010 “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media, LLC now at (502) 569-1714.

 Check out the “SERVICES” tab above the beginning of the post for all available services.

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