Baby Boomers – More on Who Do You Trust Now

My last post was about who do you trust now. It received double the about of views my posts normally get. So I am obviously touching a nerve here.

The problem though is the title belied to some extent the content of the post. Although it did say not to put all your money with one fund manager it really didn’t address who do you trust now.

When I see what is going on in the USA with the appointment of Geithner and others and the whitewashing of their indiscretions and “human mistakes” I know now is not the time to trust anyone except yourselves.

As an aside it seems Geithner is the ONLY PERSON in the USA who will get the US and the world out of the financial mess? My answer is that is ridiculous. From my reading he never saw it coming all he did was get involve in the Paulson fix because he was on the spot at the time.

What about all those people that kept warning Congress, IMF, the FED of the imminent problems, often called the Doom and Gloom Merchants. Shouldn’t they have significant roles in resolving the issues?

The only person you should trust now is yourself. Many of the financial guys are trying to cover their tracks in case there is a great witch hunt. Many should be burnt at the stake but I expect few will be.

I have always believed that the best security you can have is one on one transactions when giving people your money. That’s how banks used to work. You had a relationship with the bank manager. You need to see the whites of their eyes when you hand over your money and let them know you expect them to look after it as if it were their own.

Tom Hopkins the Master Salesman called this an “Emotional Tie Down” in the sense you are getting them to commit emotionally to look after your money.

Giving your money to someone who gives it to a fund manager who then sub contracts some of your money out to another fund manager or gives it to a Bernie Madoff secretly, is a recipe for mismanagement, fraud, or theft. This is now self-evident.

Disassociated a person from their money basically seems to absolve people from their moral obligations. They don’t know you and likely won’t care too much about risking your money for high risk gains. We have just seen evidence of the worst case of this have we not?

Unfortunately you have to put your money somewhere. Under the bed may be the safest bet but it is just not practical. So anything government guaranteed is probably the next best thing.

So what if you are not getting much interest right now. It won’t be for ever. Ignore the wealth managers telling you not to leave your money in cash. It’s just for now. Preservation of capital is the most important thing right now – not returns.

With luck the financial markets will revive soon and the wealth managers will be out from under the threat of jail. They will be on their best behaviour too for a while. It is then that you might want to consider putting some of your money with different fund managers. If possible no more than 10 or 20% is probably best.

They will tell you it is not cost effective or practical. You don’t want cost effective or practical. You want to try and protect yourself against being defrauding of your retirement nest egg. Losing 10% to a fraudster will not send you broke.

Just make sure all investments are fully explained in writing by your financial adviser. I’ll say that again, get it all in writing in plain english so you understand what you are investing in.

You will want to know exactly what the fund invests in and that it does not have the right to place your money with a third party to invest for you or with a third party fund on the other side of the world.

Let your financial adviser know in writing too if any money is invested with a fund you have not approved and you lose money, you will expect to be compensated for any losses.

Then keep track of your money and the funds it is invested in anyway. You must do this yourself and always check your financial adviser is doing what was agreed – in writing. Insist on monthly detailed reports on the fund performance. Make sure you have real-time on-line access to the funds if at all possible.

Insist on full transaction lists of all transactions done to your account each month and question anything you do not understand or agree with. Get active.

Vigilance is your best defence. The only person you should trust is yourself. Put everyone else on a watch list for potential bad behaviour when it comes to your retirement nest egg.

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