Accounting Charles

Accounting Charles

The Prince of Wales Accounting for Sustainability Project

Charles Schwab and Financial planner fee? Big question?

I am new to investing. A financial planner wants to move my retirement accounts to Charles Schwab so I may have more to chose from under one roof, and then charge me a 1.4% fee for the year on all of it for his managing services. Is this wise or reasonable?
Can I get my stuff over to Schwab on my own, pick out my own stuff, and avoid his fees? Is Schwab good? or are others better considering the cost/ service etc. Or if I go directly to the fund company for everything how does one organize it all? (ie if i diversify into 10 different funds or stuff)
And will I be further ahead for doing it this way, or should I trust him as the expert and pay? If he is the expert and assuming he gets better returns am I farther ahead with the fees than if I do average and try to do it myself?

Sorry so long, I just want to do it right. Thanks for your input.

A planner and Schwab will cost you more money than you should be paying. If you are going to pay a financial planner to manage your investments he should be trading with a low cost broker. It sounds like the planner is trying to make money and let Schwab do the work.

I also doubt that there is more to choose from at Schwab. You can buy any domestic stock from any broker. The only thing they have more of is no transaction fee mutual funds. But if you have a planner he doesn't need to go through a broker, he can buy any fund directly from the company. The planner should manage your money, not depend on the broker to do it.

If you go the mutual fund route, 10 is to many. One domestic index fund, one international fund, and perhaps one specialized fund would be all you need. Go directly to the mutual fund and they will do it for you. Your only expense will be the funds fees. And you will pay that no matter who you buy it through.

If you want to invest in stocks instead of funds, and don't feel comfortable doing it by yourself, talk to a few brokers (Schwab or TDAmeritrade) and see what they provide for the size of your account. I use Scottrade, but they will not provide you with any investment advise.

Are Your Bank Accounts Safe? FDIC Insurance Can Cover You – With the Right Planning

Are you concerned about the safety of your bank accounts? If so, your fears are justified. Early in 2008, the Federal Deposit Insurance Corporation (“FDIC”), which insures bank deposits, reported the biggest jump in "problem institutions" it has seen since the Savings and Loan Crisis of the late 1980s.  The FDIC identified 76 banks in trouble, a 52% increase from the prior year.  In fact, some experts predict as many as 200 bank failures could occur in the next few years.  As of this printing of October 26, 2009, there have been over 100 bank failures.

But there’s also good news.  With proper planning you can protect your assets, even if you have considerable assets.

The FDIC insures bank accounts.  Each individual is covered for up to $250,000 in account assets (coverage reverts back to $100,000 on January 1, 2010). The limit is based on account ownership – if you own three different accounts totaling $500,000, at any one institution, only $250,000 is covered.  One way to increase the amount of FDIC insurance at any one bank is to designate different ownership of the accounts at that bank.  Say you own the $500,000 in your name alone; in that case, only $250,000 is covered.  If you divide the accounts so you own $250,000 and your spouse owns $250,000, the full $500,000 is covered. While this is an easy way to get greater FDIC coverage for accounts at the same financial institution, it can lead to problems when the spouse whose name is not on an account needs to access the funds in that account.

Another option is to avoid placing more than $250,000 with any one financial institution.  If you and your spouse place $1,250,000 in assets equally across five different banks, all the funds will be fully insured. To make the process easier, the Certificate of Deposit Account Registry Service (CDARS), a program which divides your assets across a network of institutions, can help you maintain insurance cover-age on funds up to $50 million.

Arguably the best alternative is to place the accounts in the name of a Revocable Living Trust.  Handled properly, the amount of FDIC insurance on bank accounts owned by a Revocable Living Trust can then be much greater.  Why?  Regulations now allow coverage to be calculated not just on ownership but also based on the number of beneficiaries identified in the trust agreement.  If your trust names two beneficiaries in equal shares, the account is covered up to $500,000.  Under the right circumstances, if you and your spouse set up a joint trust, that coverage could expand to $1,000,000!

Coverage is limited only to those individuals who receive assets upon your death. If your trust passes to your son Johnny and then, upon his death, to your daughter Suzie, Johnny is the only beneficiary considered.

FDIC insurance coverage rules can become much more complicated under certain circumstances:  When there are more than two owners of a Revocable Trust, when the ownership of the trust is not in equal shares, or when the beneficiaries do not receive equal shares of the trust at the death of the owner. Plus, the regulations for calculating the amount of FDIC insurance coverage for an Irrevocable Trust are different than for a Revocable Living Trust.

Our office can help you ensure your assets are covered in the event of a bank failure, as well as help you take advantage of changes in state and federal regulations regarding your estate plan. Call us to find out how we can help you determine the best way to protect your assets and plan for your family’s future.

About the Author

This article was brought to you by the American Academy of Estate Planning Attorneys which is a member organization serving the needs of attorneys committed to providing their clients with the best in estate planning. The Academy serves law firms in over 130 geographic areas in forty-five states, and its members include some of the most widely recognized experts in the estate planning field. Members of the Academy are rigorously vetted and highly trained estate planning attorneys. Each lawyer Member of the Academy excels in Estate Planning services. and are located around the United States. The Academy’s headquarters is located at 6050 Santo Road, Suite 230 San Diego, CA 92124. Before you do it yourself, consult with the Academy Member closest to you who is listed on the American Academy of Estate Planning Attorneys Member Listing.

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