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A History Making Year in Finances: Lessons Learned From 2008

by Robin S. Davis, CFP

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A History Making Year in Finances: Lessons Learned From 2008

Due to the enormity of the history-making events of the previous year, I feel compelled to continue my advice from our January issue regarding how to make 2009 a better year. Those events include a historical presidential election; huge interest rate reductions by the Federal Reserve; massive foreclosures and personal bankruptcies; corporate corruption, mergers, and bailouts; daily market record-lows and record- highs; as well as eye-popping oil prices. However, the most damaging event, in my opinion, is the history-making 50 billion dollar Ponzi scheme, run by Bernard L. Madoff, that turned many affluent investors into paupers, put many corporate investors out of business, and decimated many trusts, charities, and foundations. 

Why is this an important topic? Because it has to stop. Because we have no idea how many more people are currently being victimized by unscrupulous professionals. Because many wealthy Americans who thought they would be paying more taxes under the new administration may not be "spreading the wealth" at all.  Because the world has changed and may see many more changes that will affect its financial future.  Because your financial future depends on it.

"It would be a wonderful thing if our industry could find a way to make all financial advisors and money managers accountable for the recommendations they make, since there isn't a way to be certain that your advisor is being watched like a hawk by the regulatory agencies" –This is a quote from my book Who's Sitting On Your Nest Egg. As I wrote this chapter titled Accountability, I did not even believe that the agencies who regulate the financial industry could miss a scheme of this magnitude. A previous Ponzi scheme, run by Samuel Israel III, did not even come close at 400 million.  

The message is that you have to make your financial advisors, legal advisors, health care providers and tax preparers, as well as all other professionals in your life, accountable. How do you do that? One way to make them accountable is to ask a lot of questions. You are doing yourself a disservice if you worry about asking "dumb questions". If you don't know the answer, it's not a dumb question. Find time to call and discuss with them something you receive in the mail that you do not understand, such as an investment statement or a medical bill. Meet with them several times a year and make them "account" for their time billed, returns earned (or not earned), taxes owed, or fees charged. Make sure you understand what the projected outcome of a recommendation may be over a stated period of time, whether or not you are meeting those expectations, and why or why not.

The technical message regarding your investments is you have to know why you own a certain investment and what it is supposed to do for you. Although past performance does not predict future results, your advisors past experience with a particular investment should be of great importance to you. I suggest working with a financial professional who is not their own broker-dealer as Mr. Madoff was. A broker-dealer can be another layer of protection for the investor as they regulate their advisors to keep them compliant with industry rules. 

If your advisor manages your accounts himself, make sure you understand his/her trading strategies, and, what would cause them to change; make sure they work with many different types of investments (as opposed to only one) so they can match you up with the right one for your situation; make sure they are just as concerned with the tax effect of their recommendations as they are with the amount of money you have to invest, as well as who they will be accountable to should you become ill, and how your estate will pass to your heirs at your death (in order to properly name accounts and list beneficiary designations); and make sure there is an auditing process in place.  You will want to question returns that do not seem possible because "if it's too good to be true . . .", well, you know the rest. 

The bottom line is you are the first line of protection in your own finances and totally trusting and relying on one person in today's world of dishonesty, corruption, and just plain inadequacy, can cause major damage to your financial future. Be knowledgeable, be responsive, and most importantly, be alert. Because, your retirement depends on it.

Robin S. Davis is a Certified Financial Planner™, a member of the Financial Planning Association, and is the owner of Davis Wealth Enhancement Group, Inc., in Stuart, Florida. She has been advising retirees since 1984 and has held over 500 public seminars on financial issues. She is the author of the book Who's Sitting On Your Nest Egg? Why You Need a Financial Advisor and Ten Easy Tests for Finding the Best One. Davis expresses the importance of utilizing a competent financial advisor. For more information, please call (800) 896-5422 or (772) 463-4441, visit, or email:

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