Declaration of independence

Investment Advisor magazine is hosting the blog of Mike Patton, who is letting us observe his transformation into an independent financial advisor:

In this blog, Mike will chronicle in real time his new professional life as an independent advisor, with all its triumphs and challenges, extending his first-person report that will appear from time to time in Investment Advisor magazine. Mike Patton is the principal of the newly founded Integrity Wealth Management, in Baton Rouge, Louisiana, where he works with high-net-worth clients as their "Personal CFO."

In the three months of the blog's existence, Patton has already examined a number of crucial topics, including fees, financial planning tools, and the four sources of his income. Considering that most independent advisors fly solo or nearly so, the give-and-take in Patton's blog comments will turn out to be a valuable source of insider insights for financial advisors navigating their way when they go independent.

In addition to Patton's blog, Investment Advisor Magazine also hosts three more blogs that we'll examine in future posts.

And the award goes to...

How do you think the concept of retirement income will acquire any real traction in the industry? Did I hear you say "awards"? (Investment News):

The Retirement Income Industry Association will honor advertising groups and academics in the industry at its annual meeting and awards dinner. The dinner will be held Sept. 17 at the Royal Sonesta Hotel in Cambridge, Mass.

The awards will be given to researchers and institutions that provide the most helpful contributions to financial advisers as the industry shifts its focus from accumulating assets to the retirement income distribution phase.

“There are clients who need advice right now, and the market won’t wait for the industry to catch up,” said Francois Gadenne, founding chairman of the Boston-based RIIA. [...]

The awards will be given in four categories: practical research, advertising, defined contribution communications and retail communications. Leaders in the financial services media will head a selection committee in each group.

Suzanne Siracuse, publisher of InvestmentNews, will head the retail-communications awards committee.

The RIIA defines itself as a "national organization whose members are defining the future of retirement security."

College vs. retirement: no contest

Many investors see investing for college versus investing for retirement as some kind of either-or dilemma. It's not. (Lisa Shidler at InvestmentNews):

Americans are split on whether to save for their children's college education or for their own retirement, according to a new study.

The study completed by Country Insurance & Financial Services in Bloomington, Ill shows that 43% believe saving for college is more important while another 43% say retirement takes precedence.

The study also showed that 40% of respondents do not think they have enough knowledge to make the right financial decisions about saving for college. And, 25% of them estimate the costs of college and think it will cost less than $50,000 to send children to college.

As my co-blogger Karen Valdez once explained it to me: "Plenty of people will lend you money to go to college, but nobody will lend you money for retirement."

It makes a great deal of sense: a loan for college uses the future earning power as collateral. In retirement, there is no future earning power — it's sad but true.

Here's the rule of thumb: Always, always, always invest to the max for retirement first. What's left can go to investments for college.

Stop whining and give us your money

One of the things that young people seem to want in large amounts is money. But with the media telling them exclusively about millions of ways to spend money, few young people have any idea how to accumulate it.

Here at Praxiomatic we are happy to reveal to you the magic secret of accumulating lots of money. And we will do it in only four words. Brace yourself: Save and invest regularly.

But you need money to make money, right? Fear not, investment-ready young people! Now comes a flock of investment firms who suddenly realized en masse that you may be young and beautiful but you can't necessarily can't pony up a $10,000 account minimum (Eleanor Laise in WSJ, sub. req'd):

Mutual-fund firms have a new message for young investors: Stop whining and give us your money.

In an attempt to attract the next generation of customers, Wall Street is rolling out a host of new offerings designed to squelch the excuses that keep many 20- and 30-somethings from investing outside of their 401(k) plans.

Can't afford the hefty four- and five-figure minimums required by many mutual funds? They'll slash the minimum investment below the cost of an iPod. Not sure which funds to buy, and in what amounts? They're launching all-in-one products that take much of that work off your hands. Don't know how to save for a car, a house and that far-off mirage called retirement? They'll deluge you with online tools and easy-to-enroll individual retirement accounts.

Now you can invest with Schwab for a hundred bucks — that's fifty bucks less than a measly 2GB iPod nano.

You want to be rich when you're old? Then be smart when you're young.

Is the Price Right?

After a few years of decreasing fees, advisors have increased their fees. The primary reason-- advisors need to be compensated for the services they provide. A positive take-away is that the industry recognizes that finacial advice is not a commodity. Lower fees are not always better than higher fees. And you may not always be getting better service for a higher fee. For investors, it is important to understand what you pay and what you get for those fees. For advisors, make sure you communicate the services you are providing for the fees you collect.

Many firms that increased fees, also increased the minimum account size for investors to $555,500. Firms that maintained or decreased fees had smaller account minimums -- $321,000 on average. Firms and advisors that are in a growth mode tend to have lower fees and account minimums. Of course, as a group they tend to be less profitable as small accounts often require as much work as larger accounts. A key takeaway here is that smaller investors -- if you consider less than $300,000 as a smaller investor -- can get access to investment professionals.

Read Getting the Price Right for details on study findings.