Your Money eZine

Your Money eZine www.yourmoneyezine.com

Your Money eZine www.yourmoneyezine.com

In mid-May, the United States Security Exchange Commission (SEC) proposed several rule amend-ments that are targeted towards increase protec-tions for investors who entrust their money to wealth advisers. Advisors in this context have “custody” of clients’ funds and the SEC seeks assurance that ad-visors are handling those assets properly.

Reasons behind the changesThese planned changes (which are now open to public comments) should not come as a surprise to anyone in the investment management field, com-ing after the highly publicized Bernie Madoff scheme (among others) and the SEC’s own investigative weaknesses which was exposed in some of these cases.

The new safeguards proposed by the SEC in-clude a yearly “surprise exam” of investment advisers performed by an independent pub-lic accountant to verify client assets. In addi-tion, when an adviser or an affiliate directly holds client assets, a custody control review would have to be conducted by a US registered public company

auditor. “These new safeguards are designed to decrease the likelihood that an investment adviser could misappropriate a client’s assets and go unde-tected,” said SEC Chairman Mary Schapiro.

the amendments pRoposedA.J. Donohue, a Director of the SEC, added, “The

amendments proposed by the Commission would significantly strengthen controls over client assets held by registered investment advisers — especially when those assets are held directly by the adviser itself or a related person of the adviser.”

Another proposed amendment would apply to in-vestment advisers whose client assets are not held or controlled by a firm independent of the adviser. In such cases, the investment adviser will be required to obtain a written report from an auditor that, among other things, describes the controls in place, test the operating effectiveness of those controls, and pro-vides the results of those tests.

analysis by cpa tutoRs and consul-tantsJamaica’s CPA Tutors & Consultants, studied the SEC’s press release and their team of lec-turers made the observation that the SEC’s proposal, while a good start, misses the main problem area auditors should address. This area is that of un-audited (and sometimes unsub-stantiated) investment percentage returns being banded around by advisors in an effort to attract more investment funds under management.

This is the key indicator that ignites investors atten-tion, similar to profit being made by a company at-tracting the interest of existing and potential share-holders. The level of income that can be generated is one of the greatest investor motivators which wealth managers target. The solution we believe is to have auditors attest (give an audit opinion) to the fair computation of the investment performance be-ing reported by fund managers. Today, the Income Statement’s net profit figure is not in doubt as it is part of the financial reports that the auditors report on.

Having auditors report on the accuracy of investment fund’s percentage return made in a particular time period, will prove to be a stronger solution for the SEC, in concert with the other proposals the SEC is now considering. The independence and proficiency of the auditor will be paramount in making this pro-posal a success.

Jamaica’s investors should be alert to see what moves the local regulatory authorities may propose in light of this new environment.

Duane Barrett is part of the team at CPA Tutors & Consultant, Jamaica’s largest CPA & CFA exam cen-ter. He may be contacted at [email protected]

usin

ess l

ou

ng

eb

y:

du

an

e b

arr

ett

, c

pa

New ProPosals To ProTecT INvesTors’ FuNds

new rules proposed by the sec

advertisement

Your Money eZine www.yourmoneyezine.com

Question: My ten-year old daughter is always asking me for expensive things without a care about what they cost. I’m worried that she’ll grow up not knowing how to live within her means. How can I teach her about money man-agement?

Answer: Set your kids on the road to be-coming financially smart adults by imparting prac-tical money values to them. It’s important to show them how to be responsible with money from an early age. Here are ten smart ways to teach your children about money:

1. Be good role models. Parents should first practice smart money management habits, as children will usually follow what their parents do and not what they say.

2. Start them saving early. Help your kids to collect coins to deposit in a piggy bank, and open bank or credit union accounts as soon as they have enough savings. Convince them to put aside their gift money instead of spending it.

3. Show them how money grows. Let them keep their bank books to watch their savings increase over time. Download a savings calculator at www.financiallysmartonline.com and show them how to play around with different savings amounts, interest rates and time periods to see how fast their money can grow.

4. Teach them how to budget. Show them your bills and your pay slip and help to them calculate the home budget. Encourage them to come up with their own ideas to reduce expenses at home.

5. Explain the difference between wants and needs. Teach them that getting the things you want, as against those that are vital for survival, should only come when you have excess money to afford them.

6. Show them how to shop wisely. Let them help you make up the grocery list and look for bargains in the newspaper. At the supermarket, show them how to compare different goods to see which ones are less expensive.

7. Set saving and spending goals. Issue a challenge to see how quickly they can put aside money to reach a savings target. When they ask for non-essential items, encourage them to save up to buy them, and offer to help by matching their savings amounts.

8. Make money lessons fun. Use internet sites such as YoungInvestor.com, Investing for Kids or RichKidSmartKid.com. Find out more about Rich Dad’s books and games for children by emailing: [email protected]

9. Develop their entrepreneurial abilities. Help them to look for ways to earn extra money such as cash washing in the community, or mak-ing sandwiches for school lunches.

10. Help them to be content with what they already have. Encourage an early spirit of philanthropy by asking them to donate a toy or item of clothing for every new one they receive.

mo

ney $

ma

Rt.

..R

ais

e y

ou

r Fin

an

cia

l iQ

! -

Teach your children about money

provided by: Financially s.m.a.R.t. services

Financially S.M.A.R.T. Services is Ja-maica’s number one source for prac-tical, down-to-earth and independent answers for all questions relating to personal finance. Get more money smart advice at www.financiallysmar-tonline.com. Email [email protected] with comments or questions.

((

Your Money eZine www.yourmoneyezine.com

re we preparing financially for retirement? Are we giving this important task the atten-tion and effort it requires in order to do it right?

In western societies, people are required to retire at a certain age. For women, the usual retirement age is 60 years, and for males it is 65 years. Mod-ern medicine and technology however, are helping us to live longer. At the turn of the 20th century, the average age at death for females was 59 years, and for males, 55 years. The average age at death now for females is 82 years and for males, 76 years.

Most of us pay little or no attention to retire-ment planning until it is much too late. As we get closer to retirement age, panic sets in. We often feel overwhelmed, and just hope that things will work out fine. Without proper planning and effort, they usually do not.

If we fail to accumulate adequate resources during our working life to support ourselves post retirement, we will end up outliving our money. In other words, we will be old and poor, a state of affairs described by some elderly persons as ‘worse than death’. That is what is known in long term financial planning circles as ‘living too long’

Here are a few facts regarding old age that we should seriously consider:-

We are living longer after re tiring from work. This means a longer time to support ourselves without a salary or wages.

Our pension alone will not be enough to sup-port us.

Our health will deteriorate as we age and our health care costs will increase significantly.

Inflation will reduce the purchasing power of our savings. We will be able to buy less with the same amount of dollars over time. Unless our pension is indexed for inflation, we will gradually slip into poverty.

Our pension cheques will be sig-nificantly less than our last salary cheque while our expenses remain the same or increase.

Here are a few things we can do:

Contribute regularly to a registered pension scheme or to some other cash accumulation vehicle. Get the facts on the operation of the plan and show interest.

Review the status of our pension fund accumu-lation periodically for adequacy, at least once per year. Contribute the maximum allowed under the law.

Reinvest our pension refunds when we change jobs.

Supplement our pension with other invest-ments, e.g. real estate

Ensure that we have good health insurance before retiring.

Ensure that our pension payouts will be indexed for inflation.

We choose the quality of life we will enjoy during our retirement years by what we do during our working years. If we do not want to live too long, let us make sure our old age money in adequate quantities is in place when we get there.

min

d y

ou

r b

usi

ness

Managing Money risks -“living Too long”

by: Michael McGibbon CLU

A

( (Mike is a veteran long term financial security planning advisor and an en-trepreneur. He is passionate about creating wealth via several strong income streams. He is a commit-ted Kiwanian. See more of his work at http://miketheentrepreneur.wordpress.com E-mail him [email protected]

Your Money eZine www.yourmoneyezine.com

CreditsPublisher

eZines Limited

Managing DirectorTyrone Wilson

Your Money ReportersAndre’ Burnett

Ryan BlakeLatoya Hutchinson

Columnist/ContributorsMichael McGibbon, CLU

Financially S.M.A.R.T ServicesDuane Barrett, CPA

Design and Layout Omar Phinn

[email protected]

[email protected]

Your Money eZine is a product of eZines Limited, and is distributed via e-mail and other online sources such

as Facebook. To subscribe FREE, log onto www.yourmoneyezine.com

today or email to [email protected]

[email protected]