Answers
I have money invested in a series of mutual funds through a financial advisor. Every so often, based on market performance, he will sell the funds that aren't doing well, and re-invest the money in more profitable funds. My question is, when the old funds are sold, does this count as "income" that should be reported to the IRS? I'm a bit confused on the issue.
If its not in a tax-sheltered account, such as an IRA, your capital gains are taxed either as short or long term. It doesnt matter if its reinvested the same day in something else, six months from now or a year from now. You owe taxes on the sale. And it doesnt matter if the money stays in your account with your broker or you take possession of it. You owe taxes on the sale, if its not in a tax-sheltered account.
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Is a bachelor degree necessary or not?
I know that a license is not necessary, but for those who want to sell stocks, bonds, mutual funds a certification is necessary; so what can a personal financial advisor do without a license?
Anyone can call themselves a personal financial adviser, but unless they are certified by a nationally recognized organization, such as the "Financial Planning Association," their advice is not worth anything. Savvy clients understand that, so you better get your certification.
But, no, you do not need a degree in financial planning...just the certification
I am considering a move into financial advising career and I wanted to know where to find good information on the federal or CA state regulations. Do I need to be licensed to manage my customers portfolios (buy/sell stocks or mutual funds)? If I only have few accounts, can I do it with a power of attorney?
There should be a local securities commission that can advise you on what you need to be a Financial Advisor.
In Canada, if you pose as a Financial Advisor or charge money to do so, without licensing you could be seriously fined or go to jail. Every State and province ooperatesa little different though. Personally, I would NEVER work with someone with my money through someone that doesn't have some sort of proof of licensing or designation...FAR too many scams out there these days and there is far too much to know about taxation and whatnot for someone to do it part time or half assed.
I was given a job offer from a company that sells mutual funds, life insurance, annuities, college savings 529, fixed. How do you actually make money on this career. It seems you have to sell to all of your friends and family otherwise you won't get enough clients. Anyone have experience doing this? Thanks.
I was offered $30,000 for the first year base + commissions. This sounds really good for a recent college grade but I don't want to bug my friends and family every day to sell something.
First of all, you'll need your Life Insurance producer's license, and the Series 7 and state license exams if necessary in your state. Starting fresh out of college will be tough. To be successful you need to sell, and sell often. Selling your friends won't do much for you as they won't be putting much into the market. Consider mutual funds at a front load of 4.5%. If you get 10 friends to each set aside 100 a month in an IRA invested in mutual funds, your commission will be $45.
You need to land a couple of big clients every now and then to keep you going, but it's hard to do as the wealthiest people will know as much as you do, and probably have had relationships with their advisors for years.
Having a base salary to work with is a great way to get started in the business for your first year, but it goes away fast and then it's sink or swim. One thing to consider; if you feel like you'd be bugging your friends or family, people who know and trust you, just imagine how a cold prospect will feel. You have to believe in the stuff you're selling, otherwise you'll either 1.) Go broke or 2.) Give poor advice just to bump up your commissions.
To put it simple, I want to sell high and buy low, but if the price of your shares are down, should I still go ahead and trade into a better performing fund? That is what my financial advisor is advising, and he adds "it's never a good idea to wait for your principal to recover".
Also, how to trust worthy are those financial advisors at major brokerage firms? I was told by mine that he makes no commission on my trade, and he's on salary, and he's simply trying to increase the value of my portfolio?
Any opinions on my two questions?
I would rather just hold my shares to wait out this financial catastrophe, but all the advisors I spoke with encourage me to trade. This brokerage is one of the very well know SIPC insurance brokerage.
Without knowing what you're invested in now, it's hard to comment. But if you've got a broadly diversified mutual fund(s) - large caps, mid caps, small caps, international, I say stick with them.
Your broker may make no commission, but is there not a fee involved in moving from one fund to another??
Everyone of my funds, is down from where it was a year ago. But I've got a diversified allocation, with a decent group of funds. So I am content to stick with them. You may well want to do the same.
Performance-Based Fund Fees Near Dead
Because hedge-fund managers make money only when shareholders profit, TFS management brought a pay-for-performance mentality to their mutual funds. They started TFS Small Cap with the aim of not only beating the Russell 2000 Index, but beating the benchmark by 2.5 percentage points; that's a lofty goal that sounds great but is hard to achieve. Thus, if the fund beat the Russell by more than 2.5 percentage points, management will be entitled to a bonus that, at its maximum, brought expenses to a level of 3% (by that point, management would be beating the benchmark by at least five full points). Lag the index, however, and management would rebate fees to shareholders, dropping expenses as low as 0.5%, or just enough to cover basic administrative costs. The problem that TFS encountered, however, was that the fee structure lagged performance. Think of it this way: If you had a great 12 months last year, you get paid more this year, when results could be below-average. Thus, you are paying expenses based on past success or failure, unlike the hedge fund world where costs ride on current performance. Eiben noted that the lag is a big part of the problem, because financial advisors wanted predictability and had a hard time explaining the structure and the timing disconnect to their clients. As the fund cancels the performance fee, it will set expenses at 1.75%; that's above-average for equity funds, but easy to explain to the buying public. "It's disappointing to us, because we think everyone should be able to understand fees that are based on results," Eiben said. "But if people don't understand the structure—and the rules don't allow us to do something more simple and elegant—and they don't buy the fund, then we have to go to a structure they will understand." That's a loss for fund investors, because it makes it less likely that other fund firms will take the performance-fee route in the future. Without a demand for change in fee structures, investors will be stuck with the payment setup they have now and fund managers will continue to bring in big paychecks, even when their performance is worthy of something less.
...News
No Upfront Fees Mean No Sales for Indian FundsWall Street Journal - Feb 26, 2010
Unwilling to ask for money directly from investors, financial advisers, banks and even the post office have stopped pushing most mutual funds, and more »msnbc.com - Feb 26, 2010
Finally, low-turnover assets like indexed mutual funds or a blue chip stock you plan to keep for many years belong in a taxable account because that's where and more »Mashtrends - Feb 25, 2010
Financial Planner) work on commissions received by the mutual funds they sell. A minority of planners work by the hour as “fee only” advisors. theirMoneylife Personal Finance Magazine - Feb 25, 2010
most financial advisors had no incentive to sell and service funds. Between August 2009 and December 2009, when the Sensex gained 15%, the mutual fund and more »
Vancouver Sun - Feb 24, 2010
Planner) or RFP (for Registered Financial Planner) work on commissions received by the mutual funds they sell. The letters after a financial advisor's and more »Zacks.com - Feb 25, 2010
Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds. Stock/Mutual Fund Screening - Find better and more »CNNMoney.com - Feb 24, 2010
We are 3800 people total, and we regulate 35000 public entities: 12000 public companies for their disclosure, 11300 investment advisers, 8000 mutual funds, and more »