Monday, October 22, 2007

Tips for estate planning

Here's a link to an article on MSN filled with tips for estate planning. The article also has many links to other useful articles on estate planning. A few that were useful to me:

[...]

Most important? Providing for minor children. Your will should name both a guardian and a financial trustee for your kids in case you and your spouse die.

[...]
  • A simultaneous death clause will pass your estate to your children if your spouse dies shortly after you do.
  • Many states require that a third or half of your estate goes to your spouse, even if your will specifies a smaller share.

[...]

  • If you want to disinherit a child, spell that out in the will.

[...]

Hope my parents don't read the last one. Ha!

Thursday, October 18, 2007

Allegations against a financial planner

Allegations have been made against Ameriprise for selling financial plans that it never delivered.

New Hampshire regulators are investigating allegations that nearly 500 Ameriprise customers in New England paid $300 and more for financial plans but never received them, according to people familiar with the matter. Instead, advisers at Ameriprise appeared to be forging customers' names to make it seem that investors received plans, according to emails that are part of the state investigation.

Getting a good steak when eating out


Jack Daniel's Steak
Originally uploaded by jetalone
With some restaurants cutting corners, you need some tips on getting the best quality steaks when dining out (free WSJ Digg link).

Getting a good steak boils down to making sure you're really getting the USDA prime cut, and going to a restaurant that dry ages the meat. There were several other good pointers, but if you can remember only two things, prime and dry aged are it.

Protecting assets if you lose a lawsuit

The Journal's Getting Going column gives practical advice on how to protect assets from creditors if you lose a lawsuit. Surprisingly to me, being sued is a concern to over 2/3 of Americans.

This is one of our big fears. Over 80% of Americans believe there are too many lawsuits, according to a 2006 survey undertaken for the U.S. Chamber Institute for Legal Reform. An earlier survey, conducted for insurer Fireman's Fund, found that 67% of homeowners were concerned they might personally be sued.

In truth, while certain occupations -- notably doctors and small-business owners -- are frequent legal targets, most of us are unlikely to face a personal lawsuit because of, say, a car accident or because a neighbor tumbles down our stairs.

I'm not surprised that 4/5 of Americans think there are too many lawsuits.

Most tips and advice in the column require you to put assets in retirement type accounts, or retitle the assets. I'll highlight the insurance tip :

Get a personal umbrella-liability insurance policy, which might cost $200 to $400 a year for $1 million of coverage. These policies provide extra protection, over and above the liability limits on your home and auto policies.

The link to the book by Chris Riser mentioned in the article is here.

Saturday, October 6, 2007

Evaluating health insurance

I'm working on benefits enrollment this weekend. I've compiled all of this year's medical expenses to help decide what option to go with. I know that we're very fortunate not to have any health problems. The only times we typically see a doctor is for an annual checkup. This year, we had a baby, which increased our medical expenses. I'm going to use this year's expenses to help decide if we can go with an HSA or whether it's better to stick with our current POS plan.

POS plan basics

I have two options for the 2008 POS plan, a high and a low option. The high option costs about $5400 in premiums to insure my family for 2008, and the low option about $3900 in premiums. The main differences that would affect us come down to the low option copays being $20 more per doctor visit, and the low option covering 80% of certain costs (like lab costs), while the high option covers 90%.

Since we can rely on in-network doctors, both the POS high and low option out-of network deductibles don't really affect us. The out of pocket maximums for both in-network and out-of-network are drastically higher for the low option, so much so that I'd choose the high option if we expected any type of medical costs beyond routine checkups in 2008. The POS high option has in-network out of pocket maximums of $1200 for an individual and $3600 for a family.

HSA plan basics

The HSA/consumer driven plan costs about $3400 in premiums to insure my family for 2008, about $500 cheaper than the POS low option and $2000 cheaper than the POS high option. The HSA/consumer driven option has out of pocket maximums of $2500 for an individual and $5000 for a family. All the plans will cover preventative expenses 100%.

Comparison of the options

This year, we had about $1750 in medical costs beyond our medical insurance premiums. If we chose the HSA/consumer driven option, and had similar medical needs next year, we'd have to exceed the deductible of $1200 for an individual and $2400 for a family before coverage kicked in. This would cut the HSA/consumer driven option advantage from $2000 to $800 ($2000 in annual premium savings less the $1200 deductible).

Next, we exceeded the $1200 individual in-network out of pocket maximum on this year's POS plan and got some bills covered 100%. We'd have to exceed $2500 in expenses under the HSA/consumer driven plan before we got those same bills covered 100%. The POS high option is the better option if we had similar expenses in 2008 as we incurred this year (the low option having already been eliminated for this scenario).

Since I don't expect expenses like this year's in 2008, I'm down to the POS low option or the HSA/consumer driven option. While the HSA/consumer driven option has cheaper premiums, it has the deductible for non-preventative medical expenses, while the POS low option doesn't. A couple of trips to the pediatrician's office with a sick kid could easily wipe out the savings benefits. Because of this, and the fact that our pediatrician doesn't accept the company that provides the HSA/consumer driven option's insurance, meaning we'd have to use out of network benefits, means that I'm going with the POS low option.

The HSA part of the health plan isn't even a factor in my decision, it's the premiums. The premiums are going to have to come down significantly more before I'll consider going with the HSA/consumer driven option.

Friday, October 5, 2007

Studies indicate importance of independent mutual fund boards

This probably isn't a shocking revelation, but it seems that yes, independent mutual fund boards are good (free WSJ Digg link).

A recent study by researchers at Binghamton University and Cornell University found that funds that received good Morningstar governance grades outperformed those with bad grades by 1.2 to 1.9 percentage points a year between late 2004 and the end of last year. Another study indicated that more independent boards have less patience with poorly performing funds, and are more likely to merge them with other funds.
Another interesting thing is that the SEC has started to require boards to explain why they hired a particular fund manager. I can see it now, "Yes, we kept The Vanguard Group as the manager of the Vanguard 500 fund, because, err, the name of the frickin' fund is the Vanguard 500 fund, and they've been running the fund for the last couple of decades." I'm going to have to see if I can track down how often a mutual fund board actually drops an advisor.

Researching hospital care

Following up on yesterday's post on HSAs, here's an old Journal article on sites that have data on hospital quality (free WSJ Digg link). The sites mentioned include:

www.hospitalcompare.hhs.gov
www.leapfroggroup.org
www.nahdo.org/qualityreports.aspx
www.talkingquality.gov/compendium/
www.healthgrades.com
www.dartmouthatlas.com

Airline food

BusinessWeek has a rundown on the current state of airline food offerings. Of course, you have to pay for anything except snacks on most of the airlines the article profiles. Continental is the exception, offering complimentary coach meals. I also did a little additional research. All information was taken from the company Web site. Snacks (including sandwiches) don't count as meals. I only counted food as a meal if it included an entree.

Airline: American
Meal Web page: http://www.aa.com/aa/i18nForward.do?p=/travelInformation/duringFlight/dining/domesticMealService.jsp
Highlights: Can pay with credit or debit card. Complimentary coach meals on Europe, Latin America, Japan, and Hispaniola flights. Complimentary first class meals on all flights over two hours.
Chefs: Nancy Brussat-Barocci, Stephan Pyles, Dean Fearing

Airline: Continental
Meal Web page: http://www.continental.com/web/en-US/content/travel/inflight/dining/default.aspx
Highlights: Complimentary coach meals on Europe, Latin America, Asia and Caribbean flights. Complimentary coach meals (lunch and dinner) on domestic flights over 3 hours. Complimentary first class meals on all flights system-wide with flying times over two hours.
Chefs: James Canora, Michael CordĂșa, Paul Minnillo, Roy Yamaguchi

Airline: Delta
Meal Web page: http://www.delta.com/traveling_checkin/inflight_services/food/index.jsp
Highlights: Complimentary first class meals on Alaska, Hawaii and international flights over five hours.
Chefs: Michelle Bernstein

Airline: Northwest
Meal Web page: http://www.nwa.com/services/onboard/special/meals.html
Highlights: Complimentary first class meals. Complimentary coach meals on international flights.

Airline: USAir
Meal Web page: http://www.usairways.com/awa/content/traveltools/intheair/default.aspx
Highlights: Complimentary first class meals on flights over 3 1/2 hours.

Airline: United
Meal Web page: http://www.united.com/page/middlepage/0,6823,1057,00.html
Highlights: Complimentary first class meals on longer flights.

UPDATE:
Airline: Midwest
Meal Web page: http://www.midwestairlines.com/MAWeb/travelPlanner/customerExperience/menu.aspx Highlights: No complimentary meals, but the free chocolate chip cookies (for flights after 10AM are an excellent snack. Can ONLY pay for meals with credit or debit card (genius).

Top 25 travel Web sites

CNN (actually Travel + Leisure) has run a story on the top 25 travel Web sites. I use kayak.com whenever I'm searching for flights, and really like it. I'll also vouch for hopstop.com as a great tool for finding routes on public transportation.

Thursday, October 4, 2007

Health Savings Accounts

It's benefits enrollment season. This year I'll be investigating Health Savings Accounts(HSAs) to see if they make sense for me. I learned some useful things from the following two articles. First, a personal account of using an HSA from a University of Minnesota professor:

In the name of academic research, finance professor Stephen T. Parente got his physician wife to agree, reluctantly, to make a radical change in their family's medical coverage. The health-economics specialist who teaches at the University of Minnesota's Carlson School of Management had realized he knew a lot about health savings accounts (HSAs) as a scholar. But he had no experience with them as a consumer. So two years ago he enrolled himself and his family in a high-deductible insurance plan linked to a tax-sheltered HSA for medical expenses.

[...]

So what has he learned as a consumer? Just as with his previous insurance, he doesn't worry that medical bills will cause financial ruin. Once he exhausts his $5,000 deductible, his insurance kicks in and his family is protected against disaster. In addition, he is now fully covered for preventive care to encourage sound medical habits, a relief with three children, ages 2, 5, and 10. Such services includes immunizations and well-child care, as well as annual physicals and mammograms. Some 82% of high-deductible/HSA plans follow this practice, according to the Kaiser survey.

Parente has been surprised by the cost of using an HSA. The premium of $84.20 per biweekly pay period is only about 12% less than a preferred provider plan, and he thinks the savings should be greater. Parente also puts $3,650 in the HSA to reach the maximum contribution (the university puts in $2,000), but the money belongs to him, not an insurance company.

[...]

The savings should be much greater. Why would I assume the increased risk and increased deductible for such a paltry savings? Continuing on:

Parente says there still isn't enough data to confirm whether the combination of consumer-driven insurance and HSAs lives up to its promise. A lot of the talk in health policy circles about savvy consumers shopping for the best deal is hype. The only good price information currently involves pharmaceuticals. Consumers can go online and compare prices of brand-name drugs vs. generic competitors, or mail order vs. local pharmacy, and so on. "But the notion that it's possible to shop for physician prices, that there's a marketplace in doctors, well, it just isn't there," he says.

[...]

This article is failing to convince me to go with the HSA/high deductible health insurance plan. Then there is this WSJ article on HSAs (free WSJ Digg link):

[...]

The numbers of U.S. workers enrolled in such plans through their jobs (excluding dependents and those in firms with fewer than three workers) grew only slightly, to 2.7 million in 2006 from 2.4 million in 2005, according to the Kaiser Family Foundation. Most do it because either their companies give them no choice or the premiums are the cheapest. Enrollment is growing faster on the individual market and among sole proprietors, but that may be because the plans are often the only affordable option.

Where employees do have a choice, only 19% choose the newfangled plans, the Kaiser study estimates. In the Federal Employees Health Benefits Program,
which has offered the plans for several years, only about 50,000 of its eight million members were enrolled in them in 2006, according to industry estimates. At lightbulb-maker Osram Sylvania, just 5% of employees enrolled in the plans in
2006, their first year.

In addition, those who are in consumer-directed health plans often report lower satisfaction and confusion about how the plans are supposed to work. The general idea is for patients to conserve money in their savings accounts, which are meant to pay for care until they reach their high insurance deductible. In theory, patients who shop carefully could have money left over, which they can keep and let build into savings for bigger health-care costs down the line.

[...]

One reason for the frustration is the uphill battle many consumers describe in trying to shop for their health care. Six years ago, Howard Katz, an industrial-design research consultant in rural eastern Pennsylvania, bought a family health plan with a savings account and a deductible that is now $5,650. But getting specific price information on which to base purchase decisions for MRIs, doctor visits and blood work has been difficult, he says.

[...]

This article doesn't give me the warm and fuzzies about HSAs either. Still, I'll be doing a careful analysis of my own HSA option soon to see if it's viable.

Wednesday, October 3, 2007

How to sell hybrid cars to America


Prius hybrid
Originally uploaded by Leonid Mamchenkov
Toyota has rolled out (literally, the exhibit is in trailer) a traveling show aimed at educating America about hybrid cars. Despite their popularity, hybrids remain small sellers.
Still, hybrid vehicles overall remain a niche product, mainly purchased by affluent consumers on the coasts. Hybrids of all kinds made up just 1.5% of all new vehicle sales in 2006, with the Washington, D.C., area, Oregon and California ranking in the top three for the highest percentage of hybrids sold among new cars, according to R.L. Polk & Co.

In Indiana, where Toyota made a stop in July, hybrids made up about 1% of new car sales last year. Mississippi, Louisiana and Oklahoma ranked in the bottom three, with hybrids making up a maximum of 0.6% of new car sales, according to R.L. Polk.
What I really need is a truck that gets 50 mpg, but that can still haul all my cargo.

Tuesday, October 2, 2007

Mutual funds growing a pair

I prefer my headline, but the Journal's works too, in a story about mutual funds working for their shareholders' interests (free WSJ Digg link). The short of it is a T. Rowe Price mutual fund owned shares in a company that was being taken private. The Price fund manager thought the buyout price being offered for the company was too low, and then he waged a battle against the buyout offer. In the end he lost, but it's significant that he tried.

Early this year, mutual-fund manager Brian Berghuis learned that a company in his portfolio was targeted for takeover. Normally this would be good news. But when the T. Rowe Price manager examined the offer, he came to a different conclusion: The price for Laureate Education Inc. was so low it was "laughable," he says.

[...]

Better known for retirement accounts than rabble-rousing, T. Rowe Price is among a handful of mutual-fund firms that have loudly complained that some of the many recent management buyouts -- in which a public company's managers team up with private investors to buy out shareholders -- haven't been fair. In a traditional takeover by an outside buyer, they say, management's goal is usually to win the highest price for their company. But when managers buy their own operation, there can be an incentive to pay as little as possible.

[...]

Early this year, Fidelity Investments took a stand against a private-equity buyout of radio-broadcaster Clear Channel Communications Inc., and helped win improved terms that shareholders approved last week. After Lord Abbett Inc. and other shareholders opposed a proposed private-equity buyout of OSI Restaurant Partners Inc., which operates the Outback Steakhouse chain, the offer was sweetened; the enhanced pact won shareholder approval in June. In July, New York fund manager Pzena Investment Management helped thwart financier Carl Icahn's takeover of auto-parts supplier Lear Corp., rejecting the argument of Mr. Icahn and Lear's management that the price was fair in light of the challenges facing the big U.S. auto makers and their suppliers.

"Eventually, you just say you're not going to take it anymore," says Richard Pzena, the firm's founder.

Why don't mutual funds fight more often?

Critics say mutual-fund companies have dodged these fights in part to avoid offending companies that could be potential customers for investment services. Mutual funds deny that charge.

Fund companies say they've skirted confrontation for other reasons. There are regulatory hurdles. To monitor possible collusion, the SEC requires investors who own more than 5% of a company to register as either "passive" or "active." A passive investor isn't permitted to lobby other investors on matters that affect how a company operates or on votes in corporate elections. An active investor can seek to influence other investors, but those registering as activists are restricted from trading a company's stock for 10 days after filing.

Mutual funds are there for the benefit of their shareholders. Funds should always be fighting for better takeover terms. Stories lie these should be the rule and not the exception.

A money manager becomes an activist

What was behind Berghuis's decision to fight?

For 48-year-old Mr. Berghuis, who joined T. Rowe Price in 1985, the path to activism began in January 2006. That is when one of his holdings, Fairmont Hotels & Resorts Inc., announced a buyout involving a private equity group. The group offered to buy back shares at $45 apiece, a level that valued the company at $3.9 billion.

Mr. Berghuis felt Fairmont's valuable real-estate holdings, which included the 651-room Scottsdale Princess resort in Arizona, would make it worth $65 or more per share. T. Rowe Price went by its traditional playbook: It complained privately to the company, then voted its shares against the deal. The buyout was approved a few months later.

In July 2006, Fairmont's new owners sold the Scottsdale property for $345 million, while continuing to operate the resort. A few months later it sold seven other properties, roughly one-quarter of its portfolio, for $1.5 billion. Mr. Berghuis took the sales to mean his $65-a-share estimate had actually been low. "This was a heist!" he says.

I'm a realist. I don't expect all fund manager's to get religion and oppose sweetheart takeover deals. But it's heartening to see that there are principled ones out there fighting for their funds and the little guy.