Financial Planners Set Sights on Rebuilding Public Trust : Investments: An international convention of security counselors opening Wednesday in Anaheim will underscore the need for candor.

Financial planners laugh when asked why they must re-establish public trust in professional investment counselors. Steven D. Wymer, Michael Milken, Ivan Boesky . . . they could go on.

So when the convention of the International Assn. of Financial Planners opens here Wednesday, the agenda will be heavy on advice about candor with investors.

One speaker, Kenneth S. Phillips, president of Denver-based Portfolio Management Consultants, said he even sells his flat-fee “wrap” investment service based on public distrust: “People wonder, when there’s a commission (on transactions), whether the salesman is just needing another car payment or house payment, or whether it’s in the legitimate interest of the client.”

Wrap accounts are so named because the investor pays just one fee for various services, which include a custom portfolio of stocks or bonds run by a professional money manager and monitored by the investor’s broker.

Security, low-risk and investment planning for the future are themes running through this year’s convention, the 23rd annual gathering of the association. With 11,000 members, the association is the nation’s largest membership organization in the financial services industry.

So solid is this group’s intent that it is offering a money-back guarantee for all conventioneers who do not benefit from the 70-odd sessions. No one has requested a refund yet, according to the association.

About 2,000 people are expected to attend the convention, which runs through Friday and is open to the public. The cost is $625 for three days for members, $855 for non-members. There is a small discount ($35) for those who join the association when registering.

Several pre-convention seminars will be held Tuesday, at a cost of $175 to members, $235 to non-members. People may register at the door at the Anaheim Convention Center.

Some industry luminaries who plan to speak include William Bachrach Jr., president of investment adviser Bachrach & Associates in La Jolla. He has gained some fame advising other financial planners how to motivate prospects and clients to invest.

He teaches planners to ask questions that reveal a client’s values and goals, which is information that helps the planner build trust.

“A lot of the industry has been transaction-oriented, uncovering a need as a way to sell a product,” Bachrach said in a telephone interview. “There’s a transition now to solid, long-term relationships.”

Speaking on theories of portfolio management is Roger C. Gibson, president of Pittsburgh-based Gibson Capital Management Ltd., an investment advisory firm.

And Don Phillips, publisher of the Morningstar Mutual Funds newsletter out of Chicago, will speak on “Firing Portfolio Managers.” His newsletter tracks the performance of mutual funds.

While some speakers are set to address the how-to’s of sound investment, others will talk about the people who are most likely to need financial advice.

One group, which is growing steadily, includes the couples who wait until their late 30s or early 40s to have children. At the same time that these new parents begin saving for their children’s college education, they must also think about a retirement fund for themselves: The two expenses are likely to concur.

Then, their own parents are likely to live longer and need financial help as well.

“It’s a triple whammy,” said Christine Grillo, who works at the association’s Atlanta headquarters as director of communications. “People in this age group have parents who are living longer, but they may not have done the planning they needed to do for those extra years. A lot of families are finding they have to kick in a little to help out.”

A little-publicized change in estate planning law makes it possible for even middle class people, 55 and older, to make themselves “poor enough,” through investments in trusts and annuities, to qualify for medical impoverishment. A family can save $50,000 to $100,000 on the cost of nursing home care for one of its members, based on national averages, said Charles Grobe, an estate lawyer in Los Angeles. He will speak at several sessions of the convention, as well as one of the pre-convention seminars Tuesday.

“You can have $1 million and still be a pauper for the purpose of medical applicability,” Grobe said.

His specialty is receiving new attention in the past five years, Grobe said, as consumers become more interested in living trusts and more sophisticated about financial planning in general.

That sophistication, together with an economy that has wiped out the savings of many investors, has led to more lawsuits against financial planners in the past few years, as well. Speaking about how to avoid those suits--or the need for arbitration by the National Assn. of Securities Dealers--is Mark Bass, a financial planner with Pennington, Bass & Associates in Lubbock, Tex.

He advises financial planners to document their client’s goals together with a realistic outline of what the planner can to do help achieve them. A surprising number of planners do not go to that trouble, Bass said, though the lawsuits are waking them up to the necessity.

Doesn’t realism about the potential return on an investment hurt a planner’s ability to sell? Bass doesn’t think so: “The best way to connect with a client is in candor,” he said. “If you’re painting him a blue sky, he’ll know it.”

Steady Saving Pays Off

It’s surprising how saving just $25 a week at a specific interest rate adds up over time. For instance, if you put away $100 a month at 10% compound interest for your 3-year-old, when it’s time to enter college, he or she would have more than $40,000 for school.

Interest 5 yrs. 10 yrs. 15 yrs. 20 yrs. 25 yrs. 30 yrs. 5% $6,810 $15,502 $26,595 $ 40,754 $ 58,823 $ 81,886 6% 6,984 16,331 28,839 45,577 67,977 97,953 8% 7,345 18,137 33,994 57,294 91,528 141,830 10% 7,723 20,161 40,192 72,453 124,409 208,084 12% 8,119 22,427 47,643 92,083 170,401 308,423 14% 8,534 24,964 56,600 117,513 234,794 460,610

Interest 35 yrs. 5% $111,319 6% 138,068 8% 215,740 10% 342,845 12% 551,666 14% 895,399

Source: The Black Woman’s Guide to Financial Independence: Money Management Strategies for the 1990s, Hyde Park Publishing, Oakland, Calif.; Black Enterprise magazine

Researched by DALLAS M. JACKSON / Los Angeles Times

A Quiz: Balancing Risk vs. Return

Knowing where to invest your money and in what percentages is a very personal decision. It is often a delicate balance between how big a risk you’re willing to take for the possibility of a high return on your investment. While some investors are at an age or financial position to take greater risks for greater returns, others are more comfortable with a lower return because they are uncomfortable with high risk.

Money-market funds are a low-risk method of investing. It is a select group of high-paying, diversified stocks, and you can write checks against your account or have cash wired to your bank. Fixed-income vehicles , such as domestic and international bonds, provide medium risk. Domestic and international equities , including real estate and venture capital, provide the highest returns but has the highest risk.

The following quiz is designed to help you find the best investment mix that meets your financial objectives and risk tolerance. Rate the following statements on a scale of 1 to 5; 1 means you strongly disagree, and 5 means you strongly agree. Add your total score, and check the results at the bottom.

The Quiz

1. One of my investment objectives is to achieve high long-term total return, which will keep me ahead of inflation and allow my capital to appreciate.

Score:. . .

2. I want investments that defer taxes on my interest and capital gains.

Score: . . .

3. High current income is not one of my top priorities.

Score: . . .

4. I would like to pursue relatively long-term investment goals.

Score: . . .

5. I am willing to tolerate extreme swings in the return on my investment in pursuit of high returns.

Score:. . .

6. I am willing to risk short-term losses in the pursuit of long-term returns.

Score: . . .

7. I do not require a high degree of liquidity in my investment portfolio.

Score: . . .

How Did You Score?

Depending on your score, you may want to consider the following percentage of investment mixes:

Score Money-market Fixed-income Domestic/int’l range funds vehicles equities 30 to 35 10% 10% 80% 22 to 29 20 20 60 14 to 21 30 30 40 7 to 13 40 40 20

Source: Dean Witter Reynolds Inc.; Black Enterprise magazine

Researched by DALLAS M. JACKSON / Los Angeles Times