I don’t know if you heard but Thursday the House passed a bill repealing the 2012 1099 “bookkeeper and accountant permanent employment job” act that would have required any business paying anyone over $600 (bestbuy, quiznos, taco bell, etc) to 1099 that business or individual. Businesses would have to file hundreds of 1099s and would probably have to increase their fees to absorb the additional costs (although if you use a credit card to pay for stuff, the reporting requirement falls to the credit card processor, not the business, so there was a partial solution.) Now we have to wait for the Senate to pass their version of the bill (which I believe is similar) which is part of the new FAA bill that should be passed soon. So one less worry in 2012 (I hope).
Brian’s Financial Musings
Let’s talk about Brokerage Managed Funds. They are funds managed directly by a brokerage that your broker will sell to you. They can sometimes be sold by independent financial advisors, but most of the time they are an inhouse product. My problem with these funds is that most of the time your broker or advisor is paid a much larger fee to sell you this product. This can create a conflict of interest with your broker. These funds can have a place in your portfolio, but if there is a non inhouse fund with similar asset makeup and performance, it will usually pay a smaller broker fee and probably be cheaper to you, the investor. Just make sure there is a valid reason for getting into this fund besides buying your advisor a new car.
Brian’s Financial Musings
Do you use a broker or other financial professional to manage your investments? If so you need to know how they are being paid. Some charge a percentage of your assets to manage your money, others get paid in commissions and mutual fund fees. Some take the mutual fund fees and a percent of assets. This is neither right or wrong, but a cost of investing, but you should know how he is paid, because you are paying him. When you first signed up with your financial advisor he or she was supposed to disclose to you how they were paid and what estimated amount they would make from your account. If you can’t find this, ask your advisor. They should be glad to discuss it with you (if not, maybe they are selling you a bridge in the desert).Tomorrow I want to talk about the dreaded brokerage managed funds.