Biased financial advice is shockingly common, but investors don't take the unbiased stuff - Oregonian Biased financial advice is shockingly common, but investors don't take the unbiased stuff - Oregonian

Saturday, May 19, 2012

Biased financial advice is shockingly common, but investors don't take the unbiased stuff - Oregonian

Biased financial advice is shockingly common, but investors don't take the unbiased stuff - Oregonian
In recent decades, research has shown what Wall Street's known all along: We are hazards to our own financial health.

We overestimate our abilities or chase the hottest trend. We fall prey to inaction, procrastination and information overload. Losses hurt a lot more than gains soothe.

Now, a flurry of research has emerged in the U.S. and Europe looking at whether financial advisers can help us overcome these pitfalls.

The results are not encouraging.

Advisers who get paid for the products they sell tend to harm their clients' portfolios, two studies suggest. These advisers appear to make our biases worse.

Unbiased financial advice exists. But investors who need it most don't seek it, a third study shows. Investors who do rarely follow it. And those who do follow it need the advice the least.

I'm not sure what to say about all this other than it's time we all woke up. Regulators, employers and advisers can do more to protect our savings from biased money managers. But a whole lot of our success hinges on us.

How bad is general financial advice? Fairly bad and widely available, according to a study published in March by the National Bureau of Economic Research.

In the study, researchers from Harvard University and Massachusetts Institute of Technology sent secret shoppers to nearly 300 financial professionals around Boston. These trained financial auditors pretended to seek help improving their retirement portfolios.

Some of the mostly female shoppers told the advisers they wanted to invest in the best-performing funds. Others walked in with one-third of their investments in their own employer's stock, another no-no.

A third group already held a portfolio of well-diversified, low-cost index funds, which research consistently shows to be the best way for average consumers to save for retirement.

The study doesn't reveal where the advisers were employed other than to say banks, retail investment firms and independent shops. Most were paid on commission based on the fees and volumes they generate.

Initially, many advisers praised the shoppers' portfolios, possibly to butter them up. But when they made recommendations, they favored funds with higher fees and commissions. In only 21 cases, about 7.5 percent of the time, did the advisers suggest index funds.

Worse, 85 percent of the shoppers with efficient, low-cost, passively managed investments were discouraged by the adviser from continuing with the strategy. Most were steered into higher-cost, actively managed funds. This was particularly true if the client was wealthy, where the fee income that would be generated for the firm would be higher.

"Our evidence suggests that advisers' self-interest plays an important role in providing advice that is not in the best interests of their clients," the authors wrote, adding that "the market for advice works very imperfectly."

A 2009 study of German advisers found similar results.

Researchers from Goethe University got access to the performance of 37,000 investment accounts at a commercial bank and a brokerage. They compared the results of investors who made their choices with those who relied on advisers.

Advised clients had significantly lower annual returns: 8 percent versus 13 percent for those who invested on their own. They also owned riskier investments. And they traded more often, which generates more income for advisers and their employers but lower overall returns.

"Our findings imply that many financial advisers end up collecting more in fees and commissions than any monetary value they add to the account," the authors wrote.

Surprisingly, those who relied on advisers were more likely to be richer, older, more experienced, self-employed, female investors rather than poorer, younger, inexperienced and male ones.

That led authors to liken these advisers to baby sitters.

Baby sitters, they said, are hired by well-to-do parents to perform a service parents can do better. They charge for it. But a child's achievement is not boosted by baby sitters.

The investors, the authors concluded, were experienced but inattentive and failed to effectively monitor advisers and the outcome of their activities.

It's buyer beware, right? If we'd just seek out financial advisers or planners who take no commissions -- or turn a nanny cam on those who do -- we'd be able to retire early.

Unfortunately, many of us seem both ignorant of these conflicts or eager to peer past them.

Remember those mystery Harvard/MIT shoppers? They expressed willingness to go back, with their own money, to nearly 70 percent of the advisers they visited, researchers found.

And if investors aren't ignoring what they see, they seem tone-deaf to unbiased advice, if they seek it at all.

Don't believe me? Get a load of this study, published in January in Oxford University's The Review of Financial Studies.

Researchers worked with one of Germany's largest brokerages in 2009 to offer 8,200 customers free advice for their self-directed portfolios. A computer program would produce the recommendations, with no commissions or other incentives tied to them.

All, it turns out, could've used some help. The customers' returns, on average, significantly underperformed benchmark indexes.

Still, only 385 customers took advantage of the free offer. Of those, 260 failed to follow the advice. The 125 who did take the advice didn't follow it very closely, and no one followed it perfectly.

And the 385 who accepted the offer were less likely to need advice. They were older, wealthier and more financially sophisticated than those who spurned it.

Had they followed the advice, their investments would have gained nearly 25 percent in the following six months, researchers found. Instead, those who made some changes logged, on average, a 21 percent gain. Those who made none gained 18 percent. Those who didn't participate gained 17 percent.

Perhaps as important, the recommended portfolios would have been much less volatile, or risky. That's a characteristic that gives investors more peace of mind.

When I asked this of the study's lead-author, Utpal Bhattacharya, an associate professor of finance at Indiana University, he spoke bluntly: "I don't know that I can say anything positive."

Bottom line, he said, the government's efforts to regulate biased advisers aren't enough. We need to better educate consumers, too, to rid them of their biases.

Some of Bhattacharya's colleagues in Germany are now researching the best ways to get investors to follow good financial advice.

Let's hope they come up with something.

Until then, it's time we bucked Wall Street and examined our own behavior. What kind of advice are we getting? How do we know it's good? Are we willing to seek out, and pay, for unbiased advice? Will we follow it?

-- Brent Hunsberger welcomes questions about his column or blog. Reach him at 503-221-8359. Follow It's Only Money on Facebook, Google+ or Twitter.

Financial Times: Ukraine's boycott blues -

Road money is still just a trickle - Vancouver Business Journal
JAMES CITY — With road money reduced to a trickle, look for no new projects in the next six years. Officials project $1.14 million, with just $227,377 starting July 1.

The six-year plan released this week reflects last year’s priorities since nothing has changed.

Someday: Olde Towne Road will be straightened at the sharp turn in front of The Colonies at Williamsburg. When the timeshares were developed, VDOT gave up surplus right-of-way for buffers and The Colonies gave up land to fix the curve. The project will cost $2.66 million.

Croaker Road will be widened to four lanes from Richmond Road to the James City County Library. The project includes replacing a new two-lane bridge over the train tracks. The total project cost is $12.67 million, of which $984,211 is already funded.

Longhill Road will expand to four lanes between Route 199 and Olde Towne Road and get sidewalks. The road is already over capacity. The project will cost $11.8 million, with about $135,000 in hand.

County officials consider this project the most urgent, but Olde Towne and Croaker will likely reach the construction phase beforehand.

Racefield Drive would be paved under a project that sets aside money annually until enough has accrued to complete a project. So far, the county has $69,000 toward $177,600 needed.

Hicks Island Bridge over Diascund Creek will be replaced under a similar funding scheme. The bridge has a low sufficiency rating and has been pinpointed by VDOT as priority for replacement. The project will cost $726,000, of which $280,800 is funded.

The Board of Supervisors will review the priorities next week.

Want to go?The supervisors will meet at 7 p.m. Tuesday, May 22, in Building F of the County Government Complex, off Mounts Bay Road.

iStar Financial's Board of Directors Approves New $20 Million Stock Repurchase Program -
iStar Financial Inc. (NYSE: SFI) announced today that its Board of Directors approved a new stock repurchase program. The program authorizes the Company to repurchase up to $20 million of its common stock from time to time in the open market and privately negotiated transactions. The Company may make purchases through a 10b5-1 trading plan.

 *           *          *

iStar Financial Inc. (NYSE: SFI) is a fully-integrated finance and investment company focused on the commercial real estate industry. The Company provides custom-tailored investment capital to high-end private and corporate owners of real estate and invests directly across a range of real estate sectors. The Company, which is taxed as a real estate investment trust ("REIT"), has invested more than $35 billion over the past two decades. Additional information on iStar Financial is available on the Company's website at

SOURCE iStar Financial Inc.

Small Business with Community in Mind - Examiner
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    Slideshow: J.Lo may be leaving 'Idol', but we'll always have these pics.

    See her in sexy swimsuits

  • Casino money ready to flow - Columbus Dispatch
    By  Joanne Huist Smith

    DAYTON DAILY NEWS Saturday May 19, 2012 5:17 AM


    Guards await the arrival of the first players at the downtown Horseshoe Casino Cleveland before its opening on Monday.

    Pro-gambling interests have invested heavily on a simple bet: There is money to be made in Ohio.

    Construction costs alone for four casinos will approach $1.5 billion. Millions more were spent convincing Ohioans that casino gambling would give the state a much-needed economic jolt — a campaign debt that as of January was still being paid off.

    As the state’s first casino opened in Cleveland on Monday, a review by the Dayton Daily News showed that as of January, subsidiaries of Penn National Gaming Inc. and Rock Gaming were still making contributions to the group that led the 2009 campaign to amend the Ohio constitution and allow casinos in Ohio.

    Penn National and Rock each will develop two of the Ohio casinos, which will open in stages through the spring of 2013.

    “I don’t know the casino business, but I do know a lot of money flows through it,” state Sen. Bill Beagle, R-Tipp City, said. “I don’t know if they would have invested all that money into a campaign if they felt the risks outweighed the benefits.”

    The opening of the $350 million Horseshoe Casino Cleveland will be followed by the $320 million Hollywood Casino Toledo, the $400 million Hollywood Casino Columbus and the $400 million Horseshoe Casino Cincinnati.

    The building bonanza follows one of the most-expensive issue campaigns in the history of Ohio, as gambling companies sold voters on a promise of jobs if allowed to open casinos in Cleveland, Columbus, Cincinnati and Toledo.

    According to campaign-finance reports filed in January with the Ohio secretary of state, Rock and Penn subsidiaries made $1.8 million in in-kind contributions to the Ohio Jobs and Growth Committee, the political-action committee that led the 2009 Ohio Issue 3 campaign effort. The donation of anything of value is considered an in-kind contribution, such as if a donor pays a consultant’s fee or a printing bill for services provided to a campaign.

    Bob Tenenbaum, spokesman for the PAC and for Penn National, which is building the casinos in Toledo and Columbus, said the contributions are paying off obligations incurred during the campaign. State records show those contributions funded campaign strategy, voter outreach and consulting fees.

    “This is a significant amount of money, but Ohio is a large state,” said Tenenbaum, whose company also is considering relocating a harness-racing track to Dayton.

    Supporters of the ballot issue overall contributed a little more than $47 million in cash and $18 million for in-kind services to the PAC from 2009 through December 2011.

    State Rep. Clayton Luckie, D-Dayton, who supported the casino ballot issue and favors allowing slot machines at Ohio’s seven horse-racing tracks, said the campaign contributions were private funds, and the companies’ prerogative to make.

    “It was their money. I’m glad they chose to spend it in Ohio,” Luckie said. “Our constituents were gambling anyway in other states. Now, we have more control over it.”

    No magic bullet

    The billion-dollar bet that gambling companies placed on bringing casinos to Ohio shows how convinced they are there is money to be made here. But, state officials and economists say gambling alone won’t create the economic windfall some expect.

    Overall, Ohio’s four casinos and video lottery terminals proposed for the state’s horse tracks are expected to generate revenue of about $2.7 billion a year, said Rob Nichols, spokesman for Gov. John Kasich. The state’s estimated annual take: $475 million a year from the casinos and $425 million from the slot machines, once all are operational.

    “It’s helpful. Is it a magic bullet? Absolutely not,” Nichols said. “Ohio can’t expect gaming to lead the state back to prosperity. It’s going to take more than that.”

    Peter Vanderhart, a professor of economics at Bowling Green State University, said he doesn’t think the casinos will have a dramatic impact on the state’s economy, although they will keep some Ohioans from spending their entertainment dollars at out-of-state casinos.

    “I wouldn’t call it a bold new era,” Vanderhart said. “At the end of the day, these are service and entertainment jobs. It’s not like manufacturing, where you export a product that brings money back.”

    Beagle said he thinks Ohioans have reason to be optimistic, as it appears the state is turning an economic corner. While it remains an unknown whether casinos will be the economic engine that supporters predicted, Beagle said the industry is creating jobs.

    It was that prospect that drove many voters to support the casino issue in 2009, which was the state’s fifth major gambling referendum in two decades. A telephone survey of 687 voters, conducted a month before the election by the University of Cincinnati’s Institute for Policy Research for Ohio’s major newspapers, found a majority (53 percent) of casino backers cited the prospect of new jobs as the most important reason for their support of the issue.

    The promise to voters made by the Issue 3 campaign: the casinos would create 34,000 jobs — 19,000 construction jobs and 15,000 permanent jobs.

    Last week, Nichols said the state did not have an updated jobs number for the casinos, and Tenenbaum said it still is too early to tell how many jobs will be created.

    But, he added, “We said 1,200 permanent jobs at the Toledo (casino), and we’ve already surpassed that and we’re not even open.”

    Social consequences

    Beagle said that voters made it clear they were ready for casinos in Ohio when they passed Issue 3.

    “I have hope for great success for the casinos,” he said. “I’m optimistic for the economic benefits, but I also understand there are social costs.”

    Ohio lawmakers are preparing for the potential social impact of gambling on communities by earmarking funds for addiction services, Beagle said. The version of HB 386, an overhaul of state gambling laws passed by the state Senate on Wednesday, would give the Ohio Lottery Commission discretion on how much video-slot-machine revenue to earmark — up to 1 percent — for gambling-addiction services.

    A conference committee of House and Senate members will meet to reconcile differences between the two versions of the bill.

    Sen. Peggy Lehner, R-Kettering, said she’s concerned about the proliferation of gambling in Ohio, beyond the four casinos.

    “My sense is that every time we turn around, we’re discussing another venue: video lottery terminals at racetracks, charity card rooms,” Lehner said. “My concern is that we’re seeing an explosion of gambling without paying any real attention to the consequences.”

    She said the state needs to pay more attention to gambling addictions and crime related to gaming.

    Robert Walgate of the American Policy Roundtable, a conservative, anti-gambling group, has been making the case for three decades that casino gambling and good government don’t mix. Currently, the Roundtable leads a number of plaintiffs in a suit filed to enforce the constitutional language of Ohio Ballot Issue 3.

    “Once voters say yes to ‘limited’ casino gambling, the industry takes yes to never mean no,” Walgate said. “Sadly, the governor and Statehouse politicians are only too willing to please the new casino overlords. The voters have been kicked to the curb along with the constitution.”

    Better Business Planning, Inc. Connects its Local Community Through Social Media - YAHOO!

    With the unveiling of the agency’s Illinois insurance blog, the team at Better Business Planning hopes to better serve both the insurance and social needs of its neighbors.

    Itaska, Illinois (PRWEB) May 19, 2012

    Local Illinois insurance agency, Better Business Planning, Inc., has proudly launched an interactive social media strategy geared toward strengthening both business and personal bonds within the community. With the unveiling of the agency’s Illinois insurance blog, the team at Better Business Planning hopes to better serve both the insurance and social needs of its neighbors.

    The fresh new blog will allow members of the surrounding Illinois community to conveniently access relevant insurance advice, as well as local community news. From video clips and accompanying links to personal greetings and insurance tips, the innovative Better Business Planning blog will provide Illinois companies with truly valuable information. The blog includes access to content regarding both general and specific insurance requirements. Whether individuals need to stay safe on the road with Illinois vehicle insurance or a company wants to obtain Illinois group health insurance to save its employees money, Better Business Planning will use its expertise to effectively address these needs.

    This revitalized approach to connecting with local consumers coincides with the agency’s mission to not only continue to serve their loyal customers but to expand its service for all of those in need of reliable coverage. The fresh, new blog also comes with collaborative links to the agency’s Facebook and Twitter, while allowing visitors to grab hold of advanced insurance knowledge by subscribing to the Better Business Planning RSS feed. Current and potential customers can now receive in-depth, community-centered insurance information right at their fingertips.

    Better Business Planning’s use of social media will bring a modern feel to the way the agency engages with and markets to the community. Whether businesses want to look into Illinois group health insurance or simply want to know what’s going on in their neighborhood, they can find the answers they are looking for with Better Business Planning.

    About Better Business Planning, Inc.:

    In 1977, Better Business Planning was founded at a kitchen table in a western suburb of Chicago with the mission of providing quality Illinois insurance solutions. Through the years, the agency has perfected its craft and now offers a variety of group insurance coverages throughout the entire state of Illinois. The staff at Better Business Planning is dedicated to servicing clients’ specialized Illinois insurance needs. We continue to strive to improve the quality and affordability of benefits for all of our customers and their employees.

    Jennifer Nottage
    Astonish Results
    (401) 921-6220
    Email Information

    Sweepstakes business continues to operate - Newburyport Daily News

    SEABROOK — Despite a cease and desist order, 3D Business Center, whose owner is alleged to be running a sweepstakes gambling parlor on New Zealand Road, was still in operation yesterday.

    Building and Code Enforcement officer Paul Garand on Tuesday ordered the company at 14 New Zealand Road to stop any gambling activities not because they were illegal, but because they violated the terms of the Planning Board's approval for the site. In November, the Planning Board approved a business center, fax, photocopy and Internet center at the property,

    Garand said yesterday he has been back to inspect the company after it reopened.

    "The town is aware of the situation, and it's in the hands of our attorney," he said.

    According to Garand, neither company owner Cindy Loring of Revere nor her attorney, Mark Puffer, have contacted the town in writing to appeal the cease and desist order since it was served.

    Under the order, Loring must reapply to the Planning Board for a "change of use" approval to continue running the sweepstakes at the location.

    The cease and desist order was issued following Garand's inspection of the business, during which he found evidence it was being used as a cafe and for sweepstakes gambling. The inspection found 60 sweepstakes gambling machines on site.

    The order allows for all lawful activities consistent with the Planning Board's approval to continue at the site. But failure to take corrective action on any alleged nonlicensed activity will result in the initiation of legal proceedings, the order says. Fines of up to $275 a day are possible.

    Town Manager Barry Brenner has said the town is not opposed to gambling in general. The town has actually testified in favor of state legislation that would legalize casino gambling and bring a casino with slot machines to Yankee Greyhound Park in Seabrook. Officials said they see legalizing casino gambling as a way to generate local jobs, as well as augment state and local revenues and possibly lower taxes.

    The issue at 3D Business Center involves a code violation, Brenner said. He said the Planning Board was told the company was a business center and not what many term a "slot-machine parlor."

    Seabrook Selectman Aboul Khan, who was the selectmen's representative on the Planning Board when 3D's application was approved, said the owners never mentioned sweepstakes gambling — legal or not — would be conducted at the site, which is zoned for business and professional office space.

    "One of the Planning Board members asked the owner if the business would be like a Kinko's," Khan said. "And the owners said, 'Yes, it would be just like a Kinko's.' But it isn't."

    According to those who have been there, customers at 3D purchase phone cards, then have the money transferred to one of the sweepstakes video gambling machines that pay off in cash if points are won. If players win, the points are worth a penny each. If players lose games, they lose points and could continue playing by putting more money on their phone cards.

    According to Seabrook site plan regulations, even locating a restaurant in the multi-office building complex would require the Planning Board's approval for a change of use.

    In response to a letter from Garand in March informing Loring about the use violation, her attorney wrote in an April 27 letter that the sweepstakes gambling did not qualify as gambling according to the state's current definition. Puffer did not address the change of use issue in his letter, saying only that the state doesn't allow towns to prohibit amusement devices, which is what he calls the sweepstakes gambling machines.

    "First, no gambling or wagering takes place at 3D Business Center," Puffer wrote. "Sweepstakes are not gambling, because they lack the essential element of consideration. 3D Business Center provides various services, including the sale of phone cards. The sweepstakes are used to promote the sale of these services."

    Although the sweepstakes machines appear to be a loophole in the state's gambling regulations, that could soon change. On Wednesday, the New Hampshire Senate approved House Bill 1260, which changes the definition of gambling and gambling machines to include sweepstakes activities.

    It also makes a person who "knowingly and unlawfully promotes, conducts or offers a sweepstakes that is executed through the use of visual display of gambling machines" guilty of a class B felony. The penalty for conviction of a single count of class B felony is 31/2 to seven years in state prison and fines up to $4,000.

    Because the Senate amended the bill, it must now go back to the House for approval. Then, it would be sent to the governor to enact into law. Under the bill's language, the law would take effect immediately upon passage.

    The state is acting because more than a dozen sweepstakes gambling establishments exist in New Hampshire, allowing huge amounts of money to change hands without state supervision.

    According to Paul Kelley, the director of the New Hampshire Racing and Charitable Gaming Commission, an Elks Lodge in Nashua, N.H., with just five phone card/sweepstakes gambling machines earned $70,000 in cash in only five months, even after paying winners and giving 40 percent of the take to the vendors supplying the machines.

    Through the Charitable Gaming Commission, the state regulates and protects those who play games of chance for money, as well as the charitable organizations the activity benefits. However, there currently is no government oversight in the sweepstakes gambling industry.

    Small-business lending record touted by Wells Fargo - Las Vegas Review Journal

    Wells Fargo & Co. approved more than $548 million in Small Business Administration 7(a) loans nationwide in the first half of the federal fiscal year. The company announced the results Friday as it opened its annual Small Business Appreciation Celebration.

    "SBA loans are an important financing tool for many small business owners and we want to do everything we can to help small businesses stay competitive and grow," said David Rader, head of SBA lending.

    Wells Fargo also is the largest SBA 7(a) lender in dollars in 12 states for the first six months of the fiscal year, including Nevada.

    SBA 7(a) loans are extended to qualifying businesses in a wide range of industries that in general have average revenues of less than $20 million and 500 or fewer employees.

    Contact reporter Chris Sieroty at or 702-477-3893.

    Imposing sanctions on Iran damaging West financial recovery’ - Presstv

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    The sanctions have created a lot of disturbances for us, but we have overcome those challenges and difficulties, and are making up for what was lacking.” Iran's Minister of Economic Affairs and Finance Shamseddin Hosseini The Iranian minister of economic ...

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