The Independent Investor: Let's Have a Jewelry Party

Contrary to all the present and future trends in retailing, multilevel marketing (MLM) is still alive and well in this country. Exactly what is MLM and why are so many Americans enamored with hitting up their friends and relatives in an effort to succeed at personal retailing?

MLM is a marketing strategy in which the sales force is compensated not only for what they sell but for the sales of other people they recruit. These new recruits in the chain are referred to as the participant's "downline" and, if done right, can provide multiple streams of compensation.

Most readers are familiar with these companies. Amway, Avon and Mary Kay come to mind, as does Herbalife, a company most recently accused of being nothing more than a pyramid scheme. Many of these companies have been around since the late sixties and have never accounted for more than 1 percent of retail sales in the United States. And yet, every day hundreds, if not thousands, of new recruits are happy to shell out money, time and effort in order to win the golden ring of promise so aptly portrayed in MLM advertising.

A look at just one jewelry website gives one a flavor of the sales pitch. Not only will you create lasting friendships, make your own hours and get rewarded every step of the way, promises the company, but "a consultant holding just 1 average party a week, earns $850/month," while "a leader holding two parties a week with a team of three consultants will earn about $3,000/month,"

For someone sitting at home as a house spouse or looking to make some part-time money, these offers can be irresistible.

"I wanted to make some extra money," said one newly-minted saleswoman/social worker, who also happens to have a master's degree in psychotherapy and a private practice in the same field. "It is part time, a different kind of work and it's fun, besides I don't have to go back to school or retrain to sell jewelry."

She has only been doing it for a month and has already made $1,000 plus $700 in free jewelry. All she was required to invest was $139 for a starter kit of forms, brochures and jewelry. So far she has held four parties. The guests have been all her family and friends in the area, which is typically how new salespeople get started. But what happens when she runs out of people she knows?

"I haven't really thought that far ahead," she confesses. "I'm a little obsessed with it all. I'm having fun with it, but really haven't thought about how things will turn out down the road. I guess I could move out of my region if I wanted more clients."

Barbara, my wife and president of Berkshire Money Management, has attended four of these events and hosted one of them. Twelve of her friends showed up and bought over $1,500 in merchandise. She received $500 in free jewelry for hosting the event.

"It's really an excuse to get together with my women friends and have fun. I guess I've spent $100 per party so far, but for most of us who have attended there will come a time where we won't buy any more. For example, I am committed to attending four more parties but at most I plan to buy only one piece."

Granted, these are only anecdotal incidents, but clearly both buyers and sellers seem to be enjoying the process. It is these attractions which make the MLM business so enticing to so many. In my next column, we will look at the pitfalls to avoid if you are thinking of entering personal retailing on your own.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: Giving Up Control in the Event You Need To

The more successful you are, the more difficulty you face in wrestling with one inescapable fact. In preparing to pass the torch to your heirs, you need to give them the power to decide what happens to you and your estate in the event you can't.

That's not an easy thing to get your arms around if you have been the go-to guy or gal that the family depends on when life's hard knocks come visiting. How do you entrust your own health and wealth to others? Even if you love them to death, are they really capable of taking care of you in your time of need?

No question, it is a problem that you need to deal with and resolve before that family meeting I have been writing about in this series. Specifically, there are three documents you must create and complete: a durable power of attorney (DPOA), a living will and a health-care proxy.

Let's begin with the DPOA.

This document allows someone to act on your behalf or allows you to act on someone else's behalf, such as your parents. That means you can sign checks for them and other legal documents like tax returns, etc. Bottom line: the DPOA allows someone to control your money, so you better be sure whoever you pick is trustworthy, responsible and knows something about managing money. It is best to name one person and have another as a back-up just in case.

In addition, it is important that you or your parents have a durable power of attorney for each other. I had a client who failed to do so and created for his wife endless problems. She could not change investments for him in his tax-deferred accounts when the markets took a dive, nor could she draw money from his checking account to pay bills.

A living will is different than a will, which I covered in a prior column. While a will explains to your heirs who gets what, the living will is all about advance directives. These are legal directions you want followed in the event you require serious medical care. Your living will would address questions such as the kind of medical treatment you want (or don't want), which person can make medical decisions for you when you can't, or how comfortable you want to be and what, if anything, you want your loved ones to know.

For those interested, you can actually purchase a copy of something called "Five Wishes" from Aging with Dignity based in Florida for a nominal sum. It addresses all of the above concerns and can act as a legal document as long as it is witnessed and notarized. Take a look at it on the Internet.

The second advance directive is familiar to many of us — the health care proxy, also called a health-care power of attorney. The person who holds this power is equally as important as whoever you trust with your DPOA. The health care proxy holder has the responsibility of making certain that the doctors and medical staff carry out your wishes specified in your living will.

In the event of a life and death decision, it is this person who has the authority to make that call. Your child may not be the best person for this job. I know my wife had that responsibility when her father became ill and it is not a pleasant task. You may want to select a close friend instead and never select more than one person.

I realize that this has not been the most uplifting of columns. The sober subject matter can certainly be a downer, but it is necessary. It will be a big elephant in the room when your family meeting gets started. You may even want to pass this column along to your prospective heirs before discussing you or your parents' thinking on these subjects. The point is to begin the conversations now rather than wait until it may be too late.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: What Do Prince, You and a Will Have in Common?

What do Prince, you and a will have in common? The short answer is maybe nothing, unless, like so many of us, you still have not finalized such a document. If you haven't, get on the phone with a lawyer and get it done.

The passing of Prince was a sad day, but even sadder is the fact that this week his sister just opened a probate case in Carver County, Minn., the home of the late rock star.

"I do not know of the existence of a will and have no reason to believe that the Decedent executed testamentary documents in any form," Tyka Nelson wrote in her filing.

Prince had no spouse or children but he does have several siblings and an estate valued at $300 million. There is also the supposed treasure trove of unreleased musical material, a sizable estate tax bill (if no estate planning was in place) and who knows what else. One thing is sure; there will be plenty of time, effort, controversy and expense necessary to resolve a settlement through probate court. All of which was unnecessary if Prince had lived long enough to read this column.

You may not have the wealth of Prince, but you do have an estate. Don't leave the courts to decide who and how much of your assets your family members will receive. If you do, you are leaving your loved ones needless expense, confusion and possibly bad feelings. That is not the kind of legacy you want to leave.

If you don't leave a will, the courts will name an executor who will oversee the settling of your estate and they charge a large fee to do so. In addition, every state has its own rules and regulations covering estates and without a will, your assets are subject to the whims of whatever state you happen to be residing in when you pass.

For the most part, many of us never drafted a will. A document like that would force us to emotionally acknowledge that someday we are going to die. What we draft in that will, after all, is final. Then there are those among us who, like Prince "thought he'd live until he was one thousand nine hundred and ninety-nine years old," according to his former attorney and close friend, Londell McMillian.

Each of your parents and/or you and your spouse should draft individual wills because your spouse may have different personal desires than you. Every nitty-gritty object or item does not necessarily have to be spelled out, but rather your will should explain who receives what among your tangible property. A letter of instruction can be attached to your will outlining and identifying specific items that will go to certain individuals.

No one likes to pay lawyer's fees, but in this case I suggest you hire an attorney to help draft your will. It is imperative that the will is considered a legal document in the state where you claim residency. I would also look for a lawyer who is familiar with estate planning rather than real estate or some other area.

Not every asset you own needs to be included in the will. Life insurance policies, annuities, IRAs and other retirement plans, for example, should have had your heirs (beneficiaries) listed at the time you purchased or opened those investments. Those listed on the beneficiary statement of these investments takes precedence over anything you may direct in your will. If, for example, your insurance policy of 30 years ago lists your now-deceased parents as beneficiaries and your will states your spouse, sorry to say that your parent's estate receives the insurance money. If you haven't done it already, it would be a good idea to gather all your investment and insurance policies in one place and check that all the proper beneficiaries are in place.

In my next column, we will discuss additional tools you will need in order to pass from this world into the next without worrying about your heirs. In the meantime, take hold of your destiny today and call an estate planning attorney.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: Leaving your Legacy

It may not seem so sometimes, but your children value your opinion. The older they get, the more importance they place on things like your ethics, moral teachings and values. That's why it is extremely important to leave a legacy after you are gone that your children can turn to when they need it.

Leaving your legacy is an integral part of my on-going series of columns on estate planning. My last column on "passing the torch" to another generation concerned the family meeting. Hopefully, the Alpha Child (you or another sibling) has arranged the date, time and place of this momentous occasion and all the invitees (advisor, parents and adult kids) are on hand.

The room is quiet. A certain tension builds, since no one knows how this will turn out. The parents' adviser asks if anyone has any questions. If not, than I suggest the first subject to be addressed is your legacy and that of your spouse. It is a good ice breaker and normally changes the mood while developing a rapport among the family.

Whether you know it or not, you, your parents and your kids share virtues and values that have built and guided your family through the years. It is up to you to articulate those that you would like to see continued through the family's future generations. These are the things that you feel bring out the best in you and your family. They are values that you share and have shaped your individual lives. These values can also apply to such things as the environment, property and even your country.

You may have certain charities or other nonprofit organizations that have become important in your lives. You might want to include these organizations in your will. Faith and religion may also be an important element in your family life. Are there traditions, beliefs, cultural, and/or religious doctrines that you would like to perpetuate in some way?

Are there items such as that antique silver cross or menorah, for example, that your ancestors prized and carried to these shores when they immigrated? Who will be entrusted to preserve and take care of such things? Have you left any religious organizations in your will? If so, what are they and how can they be found?

Family traditions may be important to you. Your family may be big on holiday get-togethers or reunions, family trips or gatherings with friends. My son-in-law's family, for example, meets once a year. The clan gathering is so large at this point that the organizers must rent hotel space for 40-50 people or more. There is a lot of history exchanged during those weekends, where the kids learn rituals and hear stories of their relatives and ancestors.

In this Baby Boomer age of acquiring possessions — collections, memorabilia, jewelry, household items, etc. — passing them down to your kids may not be as easy as it looks. Take it from me; no one (including Goodwill) wants your brown furniture. Furthermore, what may have emotional or sentimental value to you may not be your childrens' cup of tea. That stamp, coin or baseball card collection may not have a willing taker. It is best that you know that now, rather than have it sold or auctioned off at a distressed price later.

That diamond brooch or necklace you acquired in South Africa may have several expectant daughters (or in-laws) assuming they will be the lucky beneficiaries. You need to create a designated plan on how all these items will be distributed. Don't let the kids sort it out after you go. The last thing you want to do is create fights or hard feelings among your loved ones.

If you are planning to make financial gifts to anyone in your will, they should be enumerated. I know one client who plans to leave half his estate to someone other than his family. Better the kids know it now than later.

Finally, have you documented you and your family's lives together? Are there documents that you would like to leave behind? Photo albums, electronic or otherwise, journals, diaries, scrapbooks, all of those items should be gathered and placed in a safe place where those who care can find them. You might have a family tree or genealogical studies, as well as important documents such as passports that need to be included. How about doing a series of videos where you can recount your life, lessons learned and advice to your kids and grandchildren?

That's enough to think about for now. As you now realize, these are not trivial matters. It will take some thought and discussion between you and your spouse to develop a legacy that is right for you. We will get into the nitty gritty of topics that come next in this family meeting. Such things as wills, durable power of attorney, and real estate will be explored in future columns, so stay tuned.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: Have You Had 'The Talk' Yet?

Whether you are a Baby Boomer or the child of one, it is about time you faced the music.

We all know that life ends, no matter how hard we try to ignore it. Having a family meeting before it is too late may save all of you needless heartache and financial turmoil.

Today, we are in the midst of an enormous transfer of wealth within America. Trillions of dollars of assets are passing from one generation to another and will continue to do so over the next couple of years. And whenever large amounts of money are involved, there is a need for knowledge, advice and estate planning. You can't do that if you or your family is in the dark when it comes to family finances.

Most experts will tell you that a family meeting is the best way to address this elephant in the room. It is a meeting where all the players come together — outside professionals (financial adviser, lawyer or accountant), parents and children. It should not be a "spur of the moment" event, nor scheduled around a traditional family get-together like Thanksgiving. The last thing you want is the grandkids or extended relatives or friends interrupting the meeting, nor do you want your parents or siblings "surprised" by an impromptu talk after Sunday dinner.

Subjects such as long-term care (see my last two columns on this subject), investments, tax-deferred savings accounts, income needs of ailing parents or children, federal and state taxes, (both now and when settling the estate), the fate of any real estate property, including the parent's home (and possibly a second home) are just some of the issues involved. As you can imagine, it is an important event where quite a bit of data may need to be located, gathered, presented and discussed. Take it seriously because done right; a huge burden will be lifted from everyone's shoulders.

My own parents were products of the Great Depression. They were taught to waste nothing, save everything and above all never, ever, confide financial information to anyone — least of all the kids. As a Baby Boomer, you may have inherited those same traits and your parents may still be alive. If so, you may need to confront those ideas and put them to bed. In fact, you may have to have two family meetings, one with your parents and a second with your adult children.

Clearly, whatever generation you represent, broaching the topic of your family's personal finances can be daunting at best but someone needs to get the ball rolling, and it might as well be you. A few years back, Allianz Life Insurance conducted a study called The American Legacies Study, which revealed that within every family existed an alpha child. That's the person who communicates the most between family members, who plans, schedules and makes sure you all attend those traditional get-togethers. It is the person the family comes to for advice. That is the person who should organize and co-facilitate the meeting.

If you are that alpha child then this responsibility is on your shoulders but if not, swallow your pride and ask a sibling who qualifies to accomplish this. Once that is settled, the next person you need to get on board is your parent's most trusted adviser or if you are talking to your kids, invite your own professional. In your case, that might be a money manager, like me, or a financial planner, but your parents may have relied on their accountant , a family lawyer or even someone they know at their local bank. In any case, ask your parents and make sure that person is not only invited to attend but will help you prepare for the meeting.

In my next column, I will explore in more depth what should actually occur during the family meeting and what items are absolutely essential to be discussed and planned for.

In the meantime, I suggest you pick up a copy of an excellent book on the topic: "Can We Talk? A Financial Guide for Baby Boomers Assisting Their Elderly Parents" by Bob Mauterstock, The author is an expert on the subject. His book is a comprehensive and practical guide in helping elderly parents gets their financial lives in order.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.