Finding the best airfares

Step 1 - Choose the destination

The Sunday Journal recently ran a story on finding the lowest airfares. It lays out the process of finding those cheap fares, beginning with a site where the traveler can choose his destination.

Farecompare.com is a good first stop for leisure travelers with flexible travel dates or locations. You may want to visit the Caribbean sometime this summer, for example, without having a particular city in mind.

The Getaway Maps link mentioned in the article is located here. I started by selecting the airport I wanted to fly out of. I could also have chosen a city, and used all the surrounding airports as the starting point. Then I was able to select from a general region (Europe, Caribbean, Mexico, etc.) and get a list of the destinations from cheapest to most expensive. I chose New York as my starting point, and the Caribbean as my destination. Then I drilled down into Bonaire, and the site showed me what month of the year had the cheapest flights (January, February, March and April, which seems counterintuitive since that's the high season in the Caribbean.)

Step 2 - Choose how soon to go

After choosing the destination, the next step in the article is selecting when to buy the tickets.

Farecast.com helps travelers time the ticket purchase once they've decided on a destination.

[...]

Travelers can get a graph showing fare history on a select route, along
with a prediction of whether they should buy now or wait a few days.

Farecast didn't have predictions on ticket price changes for a trip to Bonaire. However, it did list about 50 or 60 other cities where I could get predictions on ticket prices over the next 90 days. Most of the destinations were domestic. The site has a pretty straightforward interface. Having used many online flight search tools, it was easy to figure out.

Step 3 - Get a refund if the ticket price drops

Finally, after purchasing the ticket, the article notes a site that can help you get a refund if the ticket price falls. This is especially relevant for the leisure traveler who may be purchasing the tickets far in advance.

Yapta.com, launched this year, watches fares for specific flights. A handful of airlines, like United andAmerican, will sometimes issue credits if the fare drops after the ticket
purchase.

Yapta keeps tabs on users' itineraries and sends an email when fares dip, so they can circle back to the airline and ask for a voucher or partial refund.

The link to check on refunds is here.

All in all, an informative article with some good tips.

How to get free financial planning advice - part 2

This is the second in an occasional series on getting free financial planning advice (part 1).

Last time I looked into American Century. This time I'll go over T. Rowe Price's free benefits (I'm using a list of mutual fund companies from Morningstar as my starting point) . All information is from the company Web site.

T. Rowe Price

Program Name: Advisory Planning Services/Select Client Services

Assets Needed: $500,000 for Advisory Planning Services, or $100,000 in new assets. $1,000,000 for Select Client Services

Type of advisor: Advisory counselor and Advisory planning services team

Frequency of advisements: Ongoing consultations

Fee benefits: waiver on small account fee

URL: http://www.troweprice.com/common/index3/0,3011,lnp%253D10129%2526cg%253D970%2526pgid%253D11221,00.html

Multiple trustees

Here's another article I read as I research trusts (free WSJ Digg link). More trusts are being set up with multiple trustees.

Increasingly, however, families are "slicing and dicing" trustee duties, says Dennis Belcher, a trust lawyer with McGuireWoods LLP in Richmond, Va. Families are specifying that one trustee, typically an institutional trust company, hold custody of the assets and handle the administrative trustee duties. Meanwhile, another fiduciary -- often a family investment committee -- has the authority to direct investments. Trust creators are also naming separate trustees to handle distributions to beneficiaries.

Better rates on cash

I know all about the online savings accounts offered by HSBC Direct, EmigrantDirect, or ING Direct. An article in BusinessWeek led me to a site where I found better rates on cash than those offered by these online savings accounts. From the article:

Like many retirees, John Urban shops for the best rates on the CDs and money-market accounts that make up a large chunk of his portfolio. The 65-year-old Bristol (R.I.) resident scours the Internet looking for banks offering the highest yields, but lately he often finds the best deals at an online auction run by Zions Direct, a division of Salt Lake City-based Zions First National Bank.

At Zionsdirect.com, the company generally runs five auctions a week of $1,000 CDs, typically with 1- to 18-month maturities. Since debuting on Feb. 27, it has conducted 59 auctions, approximately 60% of which have netted participants rates above the highest available at the time on Bankrate.com, which tracks rates nationwide, according to Bankrate's own analysis. Urban, who purchased CDs in six auctions so far, says he checks advertised rates at local banks and on Bankrate.com and then submits a bid for a slightly higher yield. "You win some and you lose some, but the rates I've gotten I wasn't able to find elsewhere."

I did a quick comparison of the latest rates Zions displayed on https://www.auctions.zionsdirect.com/, and they generally seemed at or higher than the best rates I could find through bankrate.com. The calendar of upcoming or in progress auctions is located at https://www.auctions.zionsdirect.com/calendar.

With CDs, the cash put in is generally tied up until the CD matures. Presumably this won't be an issue for the mass affluent segment with a high level of liquid investible assets. I can also spread out the investment over several CDs, investing say 1/6 of the cash in a 6 month CD every month for 6 months, and then rolling over the cash if it wasn't needed. If it was needed, there would be a CD maturing every month which would provide cash.

Alternatives to measuring portfolio performance

Tired of using the S&P 500 as a benchmark against which to measure your portfolio? There are some new options (free WSJ Digg link).

And as investors add more complex assets such as real estate and commodities to their traditional holdings of stocks and bonds, the S&P 500 and other well-known indexes have become even less reliable indicators of whether you're getting a reasonable return from your portfolio given the level of risk you're taking on.

[...]

An appropriate benchmark also can show whether any fee you're paying for investment management is money well spent. Without good benchmarks, "you're flying blind," says Bud Green, a principal at Santa Monica, Calif.-based Fortress Wealth Management.

[...]

The next step is to build a custom benchmark by assembling a list of index mutual funds and exchange-traded funds that track the asset classes represented in your portfolio. To find out which funds track which asset classes, investors can use the data tool at indexuniverse.com or the mutual fund and ETF screeners at Morningstar.com. A boom in ETFs means these funds now track virtually every slice of the market, including high-yield bonds, real estate and emerging market stocks.

Finally, investors can use free portfolio-tracking tools available at sites like finance.yahoo.com or Morningstar.com to assemble and track their custom benchmark, along with their actual portfolio. If, for instance, your portfolio is 50% U.S. stocks, 20% foreign stocks, 15% short-term Treasury bonds, 10% real estate, and 5% commodities, you might create a custom benchmark consisting of 50% Vanguard Total Stock Market Index fund, 20% Vanguard FTSE All-World ex-US Index fund, 15% iShares Lehman Short Treasury Bond ETF, 10% DJ Wilshire REIT ETF and 5% PowerShares DB Commodity Index Tracking ETF.

I'm fine with just using the S&P 500 as a benchmark, or the Wilshire 5000. I'll look at the Morgan Stanley EAFE index to measure my foreign mutual fund performance against. I dabbled in creating a custom benchmark as the article laid out, but boy is it time consuming. This could be an opportunity for Yahoo! Finance to add some slick custom benchmarking tools.

Sharing ownership of vacation homes

BusinessWeek has an article on ways to share ownership of vacation homes without destroying family relationships. From the article:

The best way to keep the property and the family intact starts with the original owners. Rather than make heirs joint owners, most lawyers recommend leaving the property to an independent entity, such as a trust or a limited liability company (LLC), and giving the heirs shares in the enterprise. The plans should also include a way to sell or transfer shares. For tax reasons, property should not be placed in a corporation, says Stuart Hollander, a lawyer in Suttons Bay, Mich., and author of the forthcoming Saving the Family Cottage: A Guide to Succession Planning, which he is self-publishing.

(Mr. Hollander's book is on Amazon here.)

Trusts are one area where I will seek out expert advice from a trusts and estates attorney. I'm comfortable handling most other areas of my finances on my own, but when it comes to trusts, I will go to a professional. The article gives other pointers on how to structure the sharing of ownership that is palatable to all family members involved.

Organic lawns

This has nothing to do with personal finance, the mass affluent, travel, muscle cars or anything else this site is supposed to be about, but I found it interesting (must be the enviro-liberal-commie in me). It's a Journal article on lawn care (free WSJ Digg link).

130/30 mutual funds

I ran across this article on 130/30 mutual funds in the Wall Street Journal (free WSJ Digg link). Its basic explanation of these long/short funds is:

A 130/30 fund may invest $100 in a basket of stocks, such as those in the Standard & Poor's 500-stock index, then short an additional $30 in stocks believed to be overvalued. That means the fund borrows $30 worth of those overvalued stocks, hen sells them in hopes that they can be replaced with cheaper shares later.

The article gives an indication that investing in these funds may be worthwhile for someone seeking alternative investments, but who doesn't have the money needed to invest in a hedge fund (such as the mass affluent segment).

It's too early to judge most of the 130/30 mutual funds. But Mr. Deutsch said initial results from separately managed accounts -- often run by traditional long-only money managers -- suggest the managers are beating their benchmarks and producing "alpha," or returns above those that a typical investor is expected to make based on market averages.

Time-Shares

This article on time-shares has a lot of facts about the industry. I liked its advice that:

time-shares can be a perfectly reasonable purchase — just stay informed. The basic idea is to buy a place that you'll want to visit every year or that is in high demand among other travelers.

I'm able to take advantage of using a time-share through the generosity of relatives. I don't own a time-share myself. The greatest benefit to me is the ability to exchange weeks through services like RCI and Interval International.

The story cites an average cost of a one week time-share of $16,000. That's a lot higher than I expected. There are much better deals than that average, as I've found prices of $3,500 for a week at the last time-share where I stayed. It was an older property, but I still found it very nice, and would consider buying a week there at some point in the future.

How to get free financial planning advice

I've given my reasons why I don't like to use financial planners. But if you can get some free financial advice, why not take advantage? By investing enough money with some financial services companies, they'll provide either one-time or ongoing financial planning. I plan to do a series of posts on this topic. I'll start with the mutual fund companies in general, and with American Century Investments in particular. All information is from the company Web site.

American Century Investments

Program Name: Priority Investor

Assets Needed: $500,000

Type of advisor: Dedicated representative that will provide personal guidance

Frequency of advisements: Semiannual

Fee benefits: No account maintenance fees, IRA custodial fees orAmerican Century Brokerage Access account fees. $10 off per trade in an American Century Brokerage account.

URL: https://www.americancentury.com/ivs/benefits.jsp?source=info/pi_benefits

One final note on fees. American Century says that it charges a $12.50 semiannual account maintenance fee to investors whose total investments are less than $10,000 for each taxpayer identification number. The fee is waived if the accounts are managed online. Now, if you are investing $500,000 with them, you would obviously qualify, but I want to point out that American Century waives this fee if total investments with them across accounts (one fund per account) are greater than or equal to $10,000. Some mutual fund companies don't look at total combined investments but instead assess fees to each individual account. For example, you could have $28,000 invested with a fund company across 7 accounts, with $4,000 in each account. If that fund company assessed a fee on individual accounts with balances with less than $5,000, fees would be assessed even though the total of all accounts was more than $5,000.

Merging private banks

The world of private banking is where presumably resides the best financial advice possible. Here are a couple of stories (free WSJ Digg link) on the acquisition of U.S. Trust by Bank of America (free WSJ Digg link). The first article ranks of private banks by assets under management. JPMorgan Chase is first at $258 billion, then Bank of America at $172 billion, Northern Trust at $135 billion, Citibank at $100 billion and U.S. Trust, which Bank of America is acquiring, at $93 billion.

Bank	Assets
JPMorgan Chase	$258 billion
Bank of America	$172 billion
Northern Trust	$135 billion
Citibank	$100 billion
U.S. Trust	$93 billion

The second article talks about how Bank of America is getting rid of the old tiers of $3 million for its private client service and $50 million for its private bank and combining them into one operation. It should be interesting to watch this merger.

Why I love the WSJ

I love The Wall Street Journal. I like it not just for its financial news, but also for stories like this (free WSJ Digg link). At least twice a week, it runs great stories like this that have nothing to do with finance, but that are absolutely engrossing. For other sites/authors I visit/read see the right side of the page.

Do you trust TripAdvisor's reviews?

Here's a travel post. I've been meaning to write about this article in the Journal on how accurate TripAdvisor is in its reviews (free WSJ Digg link). A good example from the story:

But on a trip in January my family discovered that some people who write reviews on TripAdvisor.com are thrilled to pay $280 to spend the night next to an eight-lane highway. Ranked on the Web site as the No. 1 property in Carlsbad, Calif. -- ahead of the Four Seasons Aviara and the famous La Costa spa -- the West Inn & Suites wasn't only far from the center of the quaint oceanside town, it was also next to a working train track with a view of a large power plant.

The article goes on to talk about how important it is to study each review and the reviewer who wrote it. Carefully look at reviews that differ greatly from the average review given. Check out the reviewer to see if she is a frequent review writer, and the types of reviews she gives. Do this by clicking on the reviewer's name to see a list of her reviews. It's possible to even send her a message through the site. Get to a reviewer's profile page by going to http://www.tripadvisor.com/members/membername.

Having lived in New York for many years, my favorite quote in the article was this:

The reviewer's hometown can count even within the U.S. Bob McDevitt (whose screen name is Cap10Bob), doesn't believe anything written by a New Yorker. The 58-year-old salesman from Boston says "people from there wouldn't like anything anyway."

I haven't used TripAdvisor to plan a vacation, but I have been comparing the reviews on it to my own experiences (kind of like Monday morning quarterbacking). The reviews of the hotel where I've stayed in Aruba were pretty accurate. A few years ago I spent some time in Argentina and after reading the reviews of the hotels I stayed in, I'd say they were also on target.

The article also recommends some other sites to use to get reviews, including fodors.com, gusto.com, hotelshark.com, igougo.com and zoomandgo.com. For the Caribbean, I personally like debbiescaribbeanresortreviews.com.

Retirement tips

I don't plan on writing too often about retirement, since I think there are a number of excellent online sources on the topic already. I do want to point out some tips from BusinessWeek's annual retirement guide. I liked these because they were broken out by age.

Tips for your 20s
Tips for your 30s

A small sampling:

You'll spend $500,000 on each child before they turn 25, so you'll want to be sure to have them off your payroll when you are ready to retire.

Tips for your 40s
Tips for your 50s

Financial counseling 101

Not to make light of anyone's problems, but if I think I can deal with something like this.

Musings on financial planners

I don't use a financial planner. I'm a do-it-yourselfer when it comes to financial planning. I can't justify spending the several hundred dollar fee for a planner when I have access to so much free information about financial planning. I think I can do just as well or even better with my money and investments without using a planner. I know I'd also be a tough client, constantly asking why the planner's suggestions weren't doing as well as benchmarks if performance fell behind.

I think that there are a lot of planners out there that are most interested in generating commissions for themselves and selling their own firm's products. That's not to say that I think all planners are bad. But if I ever did use a planner, he or she would have to be an independent one that was fee-only.

Expanding into younger markets

Planners are now focusing on the emerging mass affluent market of younger people (free WSJ Digg link).

Financial planners are beginning to pay closer attention to people in their 20s and 30s, a group that has long received the brushoff from the financial-services industry because of its lack of wealth.

[...]

For the most part, [this age group] are largely underserved by the financial industry. Research by the Financial Planning Association, an umbrella group for planners, shows that just 11% of the industry's client base is under the age of 40, though that same research also indicates that people approaching 40 are the most eager for financial advice.

[...]

The best time for young people to consider hiring a financial professional "is when you land your first real job," says Barbara Roper, director of investor protection for the Consumer Federation of America. "At that point, you have a variety of financial issues to consider, such as your 401(k) plan and your benefits," and a financial plan will set you on an appropriate course, she says.

For savers with modest assets, Ms. Roper says, a fee-only planner is generally the best match. These planners only sell their time, at a cost of between $100 and roughly $250 an hour, depending on where they're based geographically. Because they don't pitch products tied to a particular company, "it minimizes the potential conflicts," she says.

I'm still not convinced that planners are worth it for my financial situation. I know I can research and plan for the majority of financial topics mentioned in the article (IRAs, 401(k)s, college savings plans, etc). I also don't think planners are always a good bet for the mass affluent segment to use, based on the limited service they can provide in relation to their cost. Maybe if I had a particularly tricky financial situation, or were pressed for time, I would consider using a planner.

But they're good for some people

To be fair to financial planners, I'll point out this article from the Times that demonstrates a person who had good success with a financial planner:

Two years ago, Marty Dragutsky was downsized out of a job selling pharmaceuticals. That startling event forced him to finally take account of his finances. After 30 years in sales, the last 17 years with a division of Abbott Laboratories, Mr. Dragutsky had accumulated a nest egg of nearly half a million dollars in his 401(k) account — nearly all of it in Abbott Labs stock.

Mr. Dragutsky, 59, of Gainesville, Fla., knew that would not be enough to sustain him and his family through retirement. He had a brokerage account with PaineWebber but rarely used it. So he turned to Davis, Monk & Company, a Gainesville financial services firm, which urged him to diversify.

[...]

"I listened to my adviser, Greg Grooms, and in two years, I've had about a 30 percent gain in my portfolio, while Abbott shares lost about 11 percent last year following an 8 percent drop the year before," Mr. Dragutsky said. "A novice like me really needs somebody to look at the state of my financial affairs."

Mr. Dragutsky is one of the mass affluent: the 22 million American households with $100,000 to $1 million in assets, excluding real estate, that can be invested. Despite a collective $6 trillion in estimated assets, according to Beacon Advisors, a market strategy firm in Boston, this group is being given a perfunctory look by the big brokerage houses and investment firms that prefer high-net-worth individuals with more than $3 million in their portfolios.

[...]

The mass affluent are either fending for themselves or struggling to find good financial advice. "For this group of investors, the smaller firms actually offer an advantage because it's the relationship that is the critical asset, the differentiator, not the product push," said Constance M. O'Hare, managing partner of Beacon Advisors. Her firm recently published a study on the mass affluent.

[...]

In general, I think that the more you have to invest, the better your outcome with a planner will be. In the above case, the gentlemen had almost $500,000 to invest.

There are firms that will give you free advice if you invest a certain amount of money with them. I'll write about that topic at another time.

Who are the mass affluent?

In customer segmentation models, 'mass affluent' consumers are often slotted in above the middle class, or mass market, but below the really wealthy, or high net worth. I would characterize the mass affluent segment as upper middle class. Different financial services companies use different definitions of 'mass affluent' consumers. Some, like Charles Schwab, use $100,000 to $1 million in investable (liquid) assets as the criteria for group membership. Other companies use a lower limit of $250,000 or $500,000 in investable assets. (The upper limit also varies, from $1mm to $3mm. Above that level of investable assets, financial services firms consider these customers high net worth clients, and these customers are probably serviced by a special team. At the $30mm to $50mm level, these customers are considered ultra high net worth, and are probably serviced by a private bank.)

On this site, I'll talk about retirement, banking and brokerages, and try to discuss the topics from a mass affluent perspective. I hope that my words will be entertaining and interesting. I also like to talk about travel, so this won't strictly be a personal finance site. I may wander into real estate and other topics from time to time. I welcome feedback.