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Subject: persfin-digest V4 #70
Date: Thu, 7 Aug 1997 08:09:47 -0400 (EDT)
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persfin-digest Thursday, August 7 1997 Volume 04 : Number 070
IN THIS ISSUE:
ADVERTISEMENT: MCI InfoSource [Oppenheimer Software <Connect-Sales@mcima]
It's Better Not To Use the Roth IRA [Edward Chang <echang1@hotmail.com>]
Re: Driving across country, AI fraud prevention [David Meyers <dmeyers@pa]
If Too Many People Bought Index Funds, The System Would Collapse [Ken Sto]
Re: Roth IRA rollover question ["L. Chen" <am302@FreeNet.Buffalo.EDU>]
Re: Step up in basis at death for Joint Tenants? ["Lester M. Levy, MD" <l]
Re: Estate and long term gains taxes ["Lester M. Levy, MD" <llevy@hoflin]
Any experience with MetaStock and OmniTrader trading system? [Michael Lie]
Common Law Spouse Dies Without a Will, Creating Messy Estate [colston@via]
Canadian investors info available [publix@quebec.net]
re: Why not Treat Everything as Income? ["Ken Meinken" <kmeinken@one.net>]
Re: Roth IRA rollover question [David Meyers <dmeyers@panix.com>]
The Role of Government ["Mark Hamann" <hamann@myk.ilc.or.jp>]
Re: Under New Tax Law, Bill Gates' Tax Rate is Less Than Mine [David Meye]
Re: Misleading Knight-Ridder Article on Living Trusts [Randy Barnes <rbar]
Re: Web Site with New Tax Law Explanation ["Vernon K. Jacobs" <rpi@sky.n]
Attorney at closing/along the way? [George Kolb <GCKOLB@NERVM.NERDC.UFL.E]
VA Mortgage Question [amy kennedy <akennedy@connix.com>]
Roth IRA Rollover Question [Michael Remily <remily@open.org>]
RE:NET COST Comparisons for Life Insurance / Financial Planners ["Cal Les]
Re: Real Life Results of Chemistry BS/MS/PHD Salaries [Avrum Lapin <avrum]
where can I find the rating for investment bankers? [Charles Huang <chuan]
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Date: Thu, 7 Aug 1997 07:40:15 -0400 (EDT)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
Subject: ADVERTISEMENT: MCI InfoSource
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Fax:800-492-6862
------------------------------
Date: Thu, 7 Aug 1997 07:41:03 -0400 (EDT)
From: Edward Chang <echang1@hotmail.com>
Subject: It's Better Not To Use the Roth IRA
By the way, here's something that wasn't obvious to me at first. Let's
say someone with $100,000 in a "traditional" IRA decides to switch it
into the new Roth IRA (or IRA Plus, or whatever it's called) so they
won't have to pay taxes on it in the future. For the purposes of this
analysis, let's assume the person is in the same 40% marginal tax
bracket now and when the money is withdrawn. Also assume a 10% annual
return and 20 years before withdrawing the entire amount.
Traditional IRA: $100,000 * 1.1^20 * (100% - 40%) = 403,650
Roth IRA: (100% - 40%) * $100,000 * 1.1^20 = 403,650
Surprise! The ending after-tax values are the same. In reality, if you
use a traditional IRA, you'll probably be in a lower bracket when you
withdraw the money, so it's better not to use the Roth IRA.
Ed
------------------------------
Date: Thu, 7 Aug 1997 07:41:44 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Driving across country, AI fraud prevention
>
>If you plan to leave your normal residence location and use your credit
>card as you travel across country, it is my understanding that the new AI
>(Artificial Intelligence) programs may sense possible fraud. If the bank
>calls your home to check about the card usage, and you're not home, then
>the card may be "stopped."
I certainly cannot say for all, but for Citibank, they
certainly DO check. I was called at my office while
my wife was driving from NY to GA -- the folks at
Citibank noticed some charges coming from places
that I don't frequent and wanted to check to make sure
it was OK. I don't know if they would have cancelled
the card had I not said they were OK, but I would hope
that they would.
I was also sent a follow-up letter, noting that I'd
been so contacted, and asking how I felt about the
service. Apparently, lots of folks do not want the
card company doing this.
>It is best to notify your CC company before you begin your trip about the
>fact so you aren't inconvenienced.
I've neer done this, but I'd hope that if they weren't
able to contact me as they did, that they'd _stop_
the card, not cancel it -- and have me verify it from
the next retailer at which I tried to use it.
Anyone else have such an experience with any other
cards?
- --D
------------------------------
Date: Thu, 7 Aug 1997 07:44:53 -0400 (EDT)
From: Ken Stone <kstone@pantheon.yale.edu>
Subject: If Too Many People Bought Index Funds, The System Would Collapse
I just read an interesting article about index funds on the Slate web site.
(Slate is an internet-based magazine sponsered by Microsoft and edited by
Michael Kinsley. It can be found at www.slate.com.) The basis of the
article is that if too many people bought index funds then the system would
collapse. In other words, the few who do the index route can only benefit
if the majority of fools try to play and beat the market. However, once too
many start indexing, the system falls apart.
I have placed the article at my web site for access by persfiners to
discuss this issue. (The articles on Slate rotate and addresses change.)
You can point your browser to this site to read the article:
http://www.mindspring.com/~us012121/indexfunds.html
I will probably remove it after a week or so because I am likely violating
copyright laws. That is probably a subject for 'perslegal digest'. <g>
Ken Stone
(Editor's Comment - Seems to me that it has the same danger as other
derivatives (remember Orange County's bond investments)? Suppose everyone
bought the index funds and nobody bought the stocks. Then the index
fund's price would be based on a demand for the fund's shares, totally
divorcing it from the economic worth of the stocks making up the index.
- -IK)
------------------------------
Date: Thu, 7 Aug 1997 07:45:46 -0400 (EDT)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Roth IRA rollover question
I recently changed job and have money in the old company 401K plan. It was
my intent to roll it over directly into my IRA (no tax payments or
withholding this year with a direct roll over).
>Now that the Roth IRA is there, and has a preferred treatment of gains, I
>wonder if I can roll over the 401K directly into the Roth IRA ( again with
>no tax payments or withholding this year with a direct roll over).
If you roll over to a Roth IRA -- direct or owtherwise -- you will have
to pay tax (spread over 4 years, I think) on the withdrawal; although
there will not be no penalty for "early withdrawal".
No free lunch.
Lily Chen
------------------------------
Date: Thu, 7 Aug 1997 07:46:20 -0400 (EDT)
From: "Lester M. Levy, MD" <llevy@hoflink.com>
Subject: Re: Step up in basis at death for Joint Tenants?
<<A question for the tax experts on the list:
I recently read in "Better Investing" that the "step up in basis"
that happens upon death does not apply to assets held in "joint
tenancy". I was under the impression that there was a 50% step up at
death in such situations. Am I wrong?>>
Not an expert, but when an asset in held in joint tenancy with rights of
survivorship, the decedent's half is stepped up to fair market value at
time of death, while the survivor's half remains with the original
basis.
Interestingly, in a community property state, an asset held as community
property has its entire value stepped up to the fair market value at
time of death of the decedent.
- --
-Lester M. Levy, MD llevy@hoflink.com
------------------------------
Date: Thu, 7 Aug 1997 07:47:32 -0400 (EDT)
From: "Lester M. Levy, MD" <llevy@hoflink.com>
Subject: Re: Estate and long term gains taxes
<<<Four questions:
1. The news stories I have read about the new budget bill, talking about
raising the exemption on estate taxes from $600,000 to $!,000,000 say
that this will be "over ten years." What does this mean? That it will
only last for ten years? That it will be phased in over a ten year
period? And if the latter, what is the schedule for doing this?>>>
Mark J. Welch discusses this on his excellent web page:
hhtp://www.ca-probate.com/a_budg97.htm
Briefly the excluded portion goes up from $600,000 in small $25,000
increments every one or two years until 2004 when it makes a $150,000
jump, and ends up at $1,000,000 in 2006, if not changed before. This is
not very impressive since the $600,000 took effect in 1986 or 1987, and
even if they allow it to rise to one million 20 years later, it's about
three percent annual rise or just about recent inflation rates.
<<2. Is an estate taxed according to pre- or post taxes. If part of an
estate includes equities and if no income tax has yet been paid on these
equities or their returns, what is taxed? Their value before taxes are
paid or after?>>
The estate is composed of all assets (including cash) owned by the
decedent valued at the fair market value at time of death, or optionally
at FMV 6 months after death (I think). Income taxation is not related to
estate taxation (except for the somewhat obscure credit for estate taxes
paid on income in respect of a decedent).
<<3. Under the current law if I leave an estate of $600,100, will the
estate be taxed on $100 or on $6000,000?>>
Actually, you calculate the estate tax on the total $600,100, and then
subtract the credit of $192,800. This becomes equivalent to exempting
the first $600,000, and taxing the balance at a rate starting at 37%.
<<4. On long term gains, I buy stock A, pre-tax. Seven years later I
roll this over into stock B. Two years I sell stock B. As far as the
tax law is concerned on a two- or a nine-hear holding basis?>>
The holding period generally starts with the purchase of stock. There
are certain exchanges of stock which are not immediately taxable. Thus
if a company buys company A, and exchanges the stock A with stock B,
they may have obtained a ruling that the exchange is not taxable.., in
which case the original basis of stock A may carry over to stock B. (Not
a tax pro)
- --
-Lester M. Levy, MD llevy@hoflink.com
------------------------------
Date: Thu, 7 Aug 1997 07:48:17 -0400 (EDT)
From: Michael Liew <MAL2@wapet.com.au>
Subject: Any experience with MetaStock and OmniTrader trading system?
I am thinking of getting into computer based technical trading software.
Does anyone have any (positive & negative) experience with either
MetaStock or OmniTrader?
MetaStock is a fairly powerful, customisable and popular trading
package. It has some automation but still requires quite a bit of manual
manipulation to get any result.
OmniTrader is less customisable but "fully" automated and can also
optimise an buy/sell signals generated to recommend the best course of
action.
Michael Liew
x6475
------------------------------
Date: Thu, 7 Aug 1997 07:49:40 -0400 (EDT)
From: colston@viagrafix.com (Lloyd Colston)
Subject: Common Law Spouse Dies Without a Will, Creating Messy Estate
I recently read in "Better Investing" that the "step up in basis"
that happens upon death does not apply to assets held in "joint
tenancy". I was under the impression that there was a 50% step up at
death in such situations. Am I wrong?
______
I am not an expert. I do have a client whose common-law spouse
died without a will. The estate is a mess. (This is your plug for
getting your wills all drawn up nice and neat NOW.)
After all is said and done, it appears that the survivor will
have about a snowball's chance in Hades of collecting anything more than
25% of the land they owned as tenants in common. And it ain't worth
much.
So, there you have my two cents. Add 73 more cents and go buy
you a decent cup of coffee. :)
- --
Lloyd Colston Success comes in cans, not can'ts
Pryor, OK USA social worker, writer, editor
Member: International Small Business Consortium
KC5FM Home page http://www.viagrafix.com/colston
Auto-responder mailto:kc5fm-info@freeyellow.com
------------------------------
Date: Thu, 7 Aug 1997 07:50:37 -0400 (EDT)
From: publix@quebec.net
Subject: Canadian investors info available
Greetings to all.
I really enjoy this list and would like to contribute more fully. To that
effect, I will gladly answer any question related to the Canadian mutual
funds market. Please post here, and email publix@quebec.net.
Alternatively, I have a site designed for investors at:
http://spike.quebec.net/~publix/FMD/
Access is absolutely free, and it features information, hundreds of links
and some downloadable tools.
Pat St-Arnaud
FMD Brokerage
Montreal, CAN
Pat St-Arnaud
FMD Brokerage
Investors Jump Point
http://spike.quebec.net/~publix/FMD/
------------------------------
Date: Thu, 7 Aug 1997 07:51:06 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: re: Why not Treat Everything as Income?
> The first 15-20K no taxes, the next 30-50K at some percentage, and
> everything else at a little higher percentage. Put the whole thing
> on a postcard. If they want to give be a tax break, reduce what it
> costs me to do my taxes. I haven't heard back. He must be busy.
> Jim Garcia jimgarci@pacbell.net
>
Jim,
but why should low income people be exempt from paying their share?
Why should they be freeloaders?
Why should high income people pay a higher percentage? They already
pay a higher $$ figure even at the same percentage.
If taxes are too high, then we should cut taxes for everyone (and, of
course, cut government spending even more).
The government used to exist on a tremendously smaller budget and the
country did quite well, probably better than it does now.
Ken
kmeinken@one.net
------------------------------
Date: Thu, 7 Aug 1997 07:52:39 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Roth IRA rollover question
>Now that the Roth IRA is there, and has a preferred treatment of gains, I
>wonder if I can roll over the 401K directly into the Roth IRA ( again with
>no tax payments or withholding this year with a direct roll over).
Given that the Roth IRA is funded with _after_ tax dollars - ie.
you cannot deduct what you put into it - I'm pretty sure that
if you wanted to fund your Roth IRA with money from your 401k,
that they'd need to tax it on the way. If they don't, then it
is a _huge_ loophole -- everyone who put money into 401ks will
roll it into Roths and _never_ pay income taxes on it.
I certainly don't know for sure - I don't think anyone really
does - but I'd guess that if they allow 401k -> Roth rollovers,
you'd pay income taxes on the value of the rollover. (and,
of course, no future taxes on it since the point of the Roth
was that whatever is in it _grows_ tax free).
The Roth IRA is a means of paying income taxes _now_, while the
401k is a means of putting off paying income taxes until later.
- --D
------------------------------
Date: Thu, 7 Aug 1997 07:53:53 -0400 (EDT)
From: "Mark Hamann" <hamann@myk.ilc.or.jp>
Subject: The Role of Government
David Martin wrote:
> The government's main and only job _should_ be to protect my
> life and my property.
I think the government's job is to do everything that benefits society
collectively but doesn't seem to benefit us individually. To explain I
will point out the Prisoner's Dilemma. A basic dilemma goes like this.
You and your buddy committed a crime and the police have captured the two
of you and put you in separate rooms. They make the same offer to each of
you. If you tell on your buddy, and he doesn't cooperate, you will be sent
to prison for only one year but he will go to prison for 8 years. If you
both cooperate with the police and tell on each other you both get a six
year sentence. If neither of you cooperate, they can only get you for a
lesser crime and you both go to prison for 2 years. Do you sing or keep
the secret?
Minimizing your own prison sentence, you are better off telling on your
buddy no matter what your buddy does. The same holds for your accomplice.
But each of you minimizing your own sentence sends both of you to prison
for six years. If you both do the stupid thing (which is a loser no matter
what your partner says) and keep quiet, you both go to prison for only two
years.
The numbers seem contrived at first glance but in our highly nonlinear
world, there are all sorts of examples. The Prisoner's Dilemma and a class
of models based on a variety of multiplayer Prisoner's Dilemmas turn out to
apply to all kinds of social policy questions. Thomas Schelling, a
professor of Political Economy at Harvard (atleast in 1978) wrote a
humorous and informative book called _Micromotives and Macrobehavior_ about
such issues (including gaper's block, immunization, used cars, grazing
cows, what if you could choose your baby's gender, as well as more serious
topics.) It turns out that maximizing the welfare of society by each
person maximizing his/her own welfare only works in some of the models,
though it is an "obviously true" and unquestioned assumption held by almost
everyone.
So the question I want to ask is "Can the government
compel/coerce/encourage people to do what is collectively beneficial even
though everyone involved can think of a thousand ways that they could
individually be better of without the interference?" Building the
interstate highway system doesn't save my life or protect my property, but
I believe the government should have done it and not waited for private
industry to do it. Lowering the speed limit on the interstate highway does
save lives and property, yet most people who want the government restricted
to those roles also want to drive at 75MPH rather than 65MPH (atleast among
my Texan friends.)
Please note that I am not saying that everything the government does today
is collectively beneficial. I am saying that everything that is
collectively beneficial is eligible to be in the proper role of government.
Sorry for the long post on the tangential topic of the role of government,
Mark Hamann
------------------------------
Date: Thu, 7 Aug 1997 07:54:35 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Under New Tax Law, Bill Gates' Tax Rate is Less Than Mine
>Realize that what you get OUT of SS is based on your earnings. In
>theory, you will get a much higher percentage back than Bill will.
>Furthermore, Bill's SS income will be taxed more heavily than yours.
Nice. Not quite true, but a nice sentiment. What you get
_out_ of SS has much more to do with _when_ you retire
than it does with how much you paid in SS taxes over time.
Folks who retired, say, 20 years ago will have gotten back
a huge windfall compared to the taxes they paid in. Folks
who will be retiring in, say, 20 years, will end up getting
a whole lot less than if they were to have simply put those
taxes they paid in the bank. There is some variation due
to the amount paid in within the same age group, but the
above makes a much bigger difference.
Moreover, the rules are quite complex and the benefit
structure vs. the taxes paid very strongly favor single
earner married couples in lower income groups.
>I don't think it's really fair to include SS taxes in the discussion,
>it is a separate issue. And very complex. SS is supposed to be more
>of a (poor performing) annuity than a tax.
Unless I have a choice about paying it, it is a tax.
It is structured, loosely, more like an actuarily
unsound insurance plan, but it is effectively simply
a tax on one's earned income. As soon as I am permitted
to put that money into a private investment account
which I _own_, rather than into goverment coffers,
I will be willing to call it something other than a
tax. Untill that day, ie. now, it is simply a tax,
not an investment of any sort.
>I think there is a difference between income that **comes in to me**
>as in a salary, and income that comes from selling a stock where the
>money is just moved from one investment to another. I'm not
>convinced that the later should be taxed until it is used for
>something else (again, tax consumption, not paper gains.)
This is an argument for unlimited IRA-like accounts for all
individuals. All earned income which is deposited into the
account is deductible. All net withdrawals from the account
are taxed as income. This is the only reasonable form of
a consumption tax I can think of implementing. To spend
money, you have to withdraw it from the account - thus all
money _spent_ is taxed. Money unspent stays in the account.
Moreover, this system could easily be implemented without
the problem of double-taxation that a sales tax would cause
to those who've _already_ paid income taxes on the money
they have and will spend in the future.
- --D
------------------------------
Date: Thu, 7 Aug 1997 07:55:23 -0400 (EDT)
From: Randy Barnes <rbarnes@atl.mindspring.com>
Subject: Re: Misleading Knight-Ridder Article on Living Trusts
>
> Second, the article praises the tax benefits
> of living trusts, but neglects to note that
> ANY TAX BENEFIT IN A LIVING TRUST can also be
> accomplished with a will. By incorrectly
> linking "tax savings" with "living trusts,"
> the article plays into the hands of unscrupulous
> "trust mills" which sell living trusts using
> deceptive marketing.
Mark et al,
I find this very interesting as I've been considering the establishment
of a living trust and believed that this was the only way to double the
tax exemption. How does one do this without the living trust? Do you
simply provide for the spouse to disclaim the estate into a bypass trust
in the will? Help, and thanks for the great input.
Randy Barnes
------------------------------
Date: Thu, 7 Aug 1997 07:56:16 -0400 (EDT)
From: "Vernon K. Jacobs" <rpi@sky.net>
Subject: Re: Web Site with New Tax Law Explanation
An explanation and comparison of the new tax law is
available from the House Speaker's web site at
http://speakernews.house.gov/mgr1.htm If you have
a problem with that URL try http://gop.house.gov/
and then follow the links to the speaker's page.
What you will get is a 1.2+ megabyte single file
that provides an explanation of the House bill, the
Senate amendment, existing law and the final details
as worked out by the House/Senate Conference Committee.
If you try to read that file or to print it out, you
will soon discover that it's very unwieldy and you
may be tempted to break it up into smaller segments.
However, I've already downloaded that document and
have broken it into 44 separate chapters to make it
easier to work with. I've also created an index page
to link to the various chapters. You can get my edited
version at http://www.rpifs.com/t97index.htm.
Vern Jacobs, CPA
- --------------------------------------------------------------------
Vernon K. Jacobs, CPA/CLU Moderator of The Asset Protection & Offshore
Forum. Editor & Publisher of The Jacobs Report on Asset Protection
Strategies and Tax Solutions. Tax Editor for OFFSHORE, an eJournal [tm].
(email vkj@rpifs.com <> Web site at http://www.rpifs.com)
Research Press, POB 8194, Prairie Village, KS 66208 (913) 362 - 9667
------------------------------
Date: Thu, 7 Aug 1997 07:56:41 -0400 (EDT)
From: George Kolb <GCKOLB@NERVM.NERDC.UFL.EDU>
Subject: Attorney at closing/along the way?
My wife and I are looking into buying a house and wondered if an attorney
is necessary during the process and/or at closing? I realize this may be
the _preferred_ route, but I'd like to hear from people who decided to
"go it alone," and what their feelings were on the process.
I'm the type of person who will actually read all the small print when I
sign something, read all the "change in terms" notices whenever a credit
card sends them out, etc., so I wanted to know if the new house process
is *so* complex that it's nearly unheard of to do it without an attorney.
If so, should I have an attorney for certain times/documents? Other than
reviewing documents, what does an attorney do at closing? I'm not averse
to getting an attorney, but if reviewing documents is the main job, and I
can get them ahead of time and go over them myself, I would probably opt
for doing it myself.
What are some of the most important pitfalls to this alternative, and if
I do go ahead and go it alone, do the banks give you adequate time to
review documents?
TIA,
George Kolb
Gainesville, FL
------------------------------
Date: Thu, 7 Aug 1997 07:57:27 -0400 (EDT)
From: amy kennedy <akennedy@connix.com>
Subject: VA Mortgage Question
Using VA to purchase home. Should we put down some cash ($10,000)or is
it more advantageous tax-wise to have a bigger mortgage and use the cash
to make the monthly payment? Anyone out there who can provide any tips
on the VA process? House is $190,000. Income $80,000. Thank you. Amy
Kennedy
akennedy@connix.com
------------------------------
Date: Thu, 7 Aug 1997 07:58:05 -0400 (EDT)
From: Michael Remily <remily@open.org>
Subject: Roth IRA Rollover Question
We are looking with interest to these new IRA's. My wife currently holds a
TSA. Within a year she will be leaving her job and staying home. This may
be very long term. When she leaves she will have the option of rolling her
TSA over to an IRA. She currently has 3200 dollars in the plan and will be
adding another 4800 within 12 months. This is not her only retirement plan -
a state pension as well - .
Since we will not be adding money to her TSA ( No income) Wouldn't a TAX
free earning plan be a better place to leave her money.
We certainly fit under the 160,000 dollar limit.
Also.. could you roll this money over before she leaves employment?
Currently it is pre-tax money. We do not qualify for an IRA deduction after
taxes since we both earn stae employee pension funds. If it were benefitial
we would be willing to take new contributions to a ROTH IRA and then roll
over the existing plan into the new one after she quits.
TIA
------------------------------
Date: Thu, 7 Aug 1997 08:00:42 -0400 (EDT)
From: "Cal Lester C.L.U." <Cal_Lester@msn.com>
Subject: RE:NET COST Comparisons for Life Insurance / Financial Planners
>>>>
I did not make an assumption, unfounded or otherwise. I have seen
"NET COST comparisons" made by life insurance agents, and NOT ONE of
them took into account the time value of money. I am certain that the
"industry programmers" understand the time value of money very well. I
am not so sure that the people who ARE SOLD Whole Life Insurance
Policies do.
But, if you are telling me that industry practices have changed
(notwithstanding the enormous financial settlement recently paid by
MetLife as a result of the false and misleading statements made by its
agents),then I am willing to be educated. Would you be willing to
post one of your representative NET COST comparisons so that we may
all learn from it?
- - -- John K. Mahony, M.B.A.
>>>> John and all other Persfiner's, please allow me to close this
"argument" as gracefully as I can. As I mentioned earlier, it was not, and
is not my intention to be casting stones in either direction.
I am not a programmer, and therefore do not have access to construction of
computer programs. When I was selling, I did use programs provided to me by
the carriers that I represented. I will not post such a comparison, ONLY
because it would be between 6 and 8 pages long. The NAIC requires that any
proposal must include ALL of the explanatory material, and not be incomplete,
as does the NASD for mutual fund presentations.
>From: John_Mahony@lamg.com (John Mahony)
>Subject: Commission vs. Fee-Only Financial Planners
JM> ...WHEN [A FINANCIAL PLANNER] IS PAID ON COMMISSION, then there is a
JM> built-in incentive for him (or her) to sell THOSE PRODUCTS WHICH PAY
JM> THE HIGHEST COMMISSIONS, even if those products are not necessarily
JM> the best ones for the client.
CL> Would you therefore be inferring that if the payment was based on
CL> something other than a "commission" that the seller or agent would be
CL> " more honest "[?]
I feel strongly that Fee-Only Financial Planners have the "right
kinds" of incentives: they do better (i.e., make more money) when
their clients do better (i.e., make more money). Salesman who are
paid on commission, on the other hand, make the most money when they
sell you the product that pays the highest commission. Their best
interests do not necessarily coincide with your best interests. And
we all know that, in general, people behave differently when they are
given a different set of incentives.
>>>> The operative phrase here is "I feel". If you had prefaced your earlier
remarks with that phrase, there would have been no comment from me. Everyone
is entitled to their own opinion. I only object to the use of "a broad brush"
to paint all people good or bad.
CL> A successful Life Insurance [Salesman], one that has been in the
CL> industry for a number of years, and has attained the designation of
CL> CLU, ChFC, or CFP would have certainly learned that it is always in
CL> the best interest of the agent to provide the best product for the
CL> client, regardless of commission structure.
There is now lots of evidence that even Medical Doctors, who make
enormous sacrifices in order to pursue their sincere desires to help
people, behave differently when they are given different financial
incentives. Doctors in traditional fee-for-service health plans, who
are paid for each procedure they perform, end up performing lots of
procedures. Doctors in HMO's, who are paid a "capitation fee" for
each patient assigned to them, perform a much smaller number of
procedures. Their compensation plans apparently influence their
judgments about "what is best" for their patients.
- - -- John K. Mahony, M.B.A.
>>>> I really fail to see the relevancy. Is it possible that you have
never heard of HMO affiliated doctors who provide LESS THAN MEDICALLY
RECOMMENDED SERVICES because that too would affect the NET earnings. Are
you inferring possibly that LESS is ALWAYS better. Have you never heard of
"financial planners" that take a clients money, without providing what
other financial planners might consider to be the BEST FINANCIAL PROGRAM.
Please John, let's stop the name calling, and concentrate
on service. Life insurance is something that is designed to provide
dollars when needed most, usually at death. ANY life insurance policy,
regardless of how or whom it was provided, that is IN FORCE at death is a
good policy.
Cal Lester CLU, Insurance Course Coordinator
Broward Community College
------------------------------
Date: Thu, 7 Aug 1997 08:02:18 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Real Life Results of Chemistry BS/MS/PHD Salaries
>>
> Years since B.S. degree: 2-4 20-24 40 or more
> B.S. degree $35.0 $58.0 $67.1
> M.S. degree $40.5 $62.0 $64.0
> PhD degree --- $75.0 $81.0
>
>Interesting stuff. The average person who earned an M.S. degree 40 or more
>years ago (in the 1950s) is earning *less* than someone who earned a B.S. at
>the same time ($64K vs $67K). I assume (?) that this is because the
>population is vastly different and the "good" performers at the M.S. level
>left chemistry and are not available to respond to the survey.
I saw a similar curve in the mid sixties at Bell Laboratories which showed
that those hired in the early 1930's had lower 1965 salaries than those
hired later on. They never recovered from the depression era starting
salaries.
Salary compression lives on (except in the public sector) . For the rank
and file the bigger raises go to those most likely to quit and look
elsewhere. An employee with 20 years service is less likely to change jobs
and so will get a smaller raise while the larger raises go to the employees
with say less than seven years service. Large raise packages (and out of
sequence raises) follow a year of unexpected high natural attrition.
Starting salaries jump in the face of not enough new graduates.
Somethings to watch for in salary surveys are that those who have moved
into management and sales tend to have higher salaries than those who
remain at the bench and this is independent of degrees. Theire also may be
sectors or sub-specialties which have unusually higher or lower salaries
than the average.
This is the free market.
Avrum Lapin
Upland., CA
------------------------------
Date: Thu, 7 Aug 1997 08:09:25 -0400 (EDT)
From: Charles Huang <chuang@rambus.com>
Subject: where can I find the rating for investment bankers?
Does any one know where can I find the rating for investment bankers,
such as Morgan Stanley, goldman sachs?
===================================================
Charles Huang email: chuang@rambus.com
Rambus Inc. phone: (415) 903-4696
fax: (415) 965-1528
===================================================
------------------------------
End of persfin-digest V4 #70
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