There are oodles and oodles — and then some — of articles out there about how to find, interview and ultimately hire yourself a good financial planner or money manager.

I can’t recall a single one of them, though, talking about the IAPD. Which is too bad because, up from its humble and essentially unusable beginnings, the IAPD is now an excellent and quick way to smarten up about the financial planning and money managing folks you are thinking of bringing into your life (or those you already have in your life . . . ).

So what’s that you say? You’ve never even heard of the IAPD?

You are not alone!

But you really should know about it because, when it comes to being smart about financial planners and money managers and the like, to know how to use the IAPD — the Investment Adviser Public Disclosure website — is to know the first thing about how to be smart about those particular kinds of financial services professionals, and you really owe it to yourself to know, at least, the first thing about each aspect of your financial life, so if you have that kind of financial service professional in your life, or if you are considering bringing one in, then you really ought to take a look-see at that FSP in the IAPD and see what there is to see.

Or at least so sayeth Friedman’s Law of the First Thing, as applied to this very important part of building up and maintaining your financial brain trust.

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When You Get Financial Advice for Free, are You the Product?

Tuesday, May 7, 2013 at 7am
By John Friedman

If you do a Google search for the word MBAism, you’ll mostly find references to business degrees minted by the International School of Management, as in, an MBA from ISM. But that’s not what I use it for; I use the term to refer to widely-used sayings about business that are simple yet hopefully encompass a whole-wide-world of wise, i.e. an MBAism, like a business truism that an MBA might say. As in em-bee-eh-iz-mmm.

So, given the Google search that I just did, it appears that I might have made this word up. And so, by these words I doth lay claim to it. Mine. My precious. My presssshhhhyyyyuuuussss.

Or should I say:

? ? ? ?

* * *

To help you get your MBAism-bearings, here are three classic MBAisms:

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Teach Your Children Well . . . About the Financial Aspects of Living in the Material World

Thursday, May 2, 2013 at 5am
By John Friedman

Most of us don’t-learn about money the same way we don’t-learn about the birds and the bees: from our parents.

Yup, it’s sad but true that most of our parents never taught us nothin’ ’bout sex and never taught us nothin’ ’bout no money (though some of them were big on teaching us to not use double and triple negatives . . .) (and to not split infinitives . . . ).

But not all parents are like that. And, indeed, most of the parents with whom I work are quite explicitly looking to teach their children well.

To which I say: Yay. And to which I add: Parents, you are, indeed, feeding them on your dreams — as well as on your fears and your hopes, as well as on your no-go’s and your yes-go’s, your hesitations and your gitty-ups, your perfections and your foibles . . . and on and on and on . . . and your everythings.

* * *

The other day I was speaking with a couple who were, indeed, teaching their child about the financial world out there and about the financial self we each grow within our selves, often with our parents’ unwitting help, starting at about the age of . . . what? . . . one or two years of age maybe? . . . starting when we are with, typically, mommy at the store and we say/think/gesture a simple utterance, sans subject but with a single, very-clear, very elemental notion:

WANT!

with the Full Monty, I WANT THAT, waiting until sometime later, and with the urge-brought-to-near-full-fruition AAAAGGGH, I WANT THAT NOW OR ELSE! being in the not-too-distant future.

It was during the conversation with these smart parents that I realized, in some ways all anew and in other ways all over again, that teaching your children well about financial health brings up a much broader range of topics than simply money.

It brings up hope, it brings up endeavoring, it brings up possibility, it brings up every yearning we have as children and every yearning we will have as adults, etc., etc., etc. And it definitely brings up what it means to be living in the material world.

So how could a simple discussion about a toddler having a piggy bank get that broad? (And, while we’re at it, who did the piggy bank branding work? Excellent job!)

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Not All Total-Bond-Fund Bond Index Funds are Alike

Tuesday, April 30, 2013 at 11am
By John Friedman

I read Morningstar’s annual report the other day, and saw something interesting in there: Morningstar’s business is being hurt by the rise of passive investment approaches and the mirror-image fall of active investment approaches.

That makes sense, right? After all, Morningstar helps folks be better informed about, primarily, mutual funds, and most mutual funds are about, primarily, active investing. So when passive is ascending and active is descending, that spells trouble with a capital T for morningstar with a capital M, right?

It also makes sense because quite a few people think that excellent mutual fund picking, like excellent stock picking, can be had via digging-in and doing the heavy-lift research, so as to divine which fund is likely to have the hot hand for the next umpty-ump years (is that future hot hand more likely to be attached to the fund with the hot hand right now, or the fund attached to the cold hand right now? Hmmm . . . . )

And that’s where Morningstar comes in: they help people research mutual funds, ranking them from 1 to 5 stars, with, to some folks’s surprise, 5 stars being really excellent (and rare), and 1 star being really terrible (and also rare).

So when passive investing — the opposite of active investing — is romping throughout the investing landscape and frolicking in the autumn mist, that’s bad for Morningstar’s business.

And so it was said, within M-star’s annual report Overview (yes, the Overview has no page numbers):

The investment industry continues to face challenges as assets flow to passive and fixed-income products.

as well as this in the Letter to Investors (Page 4):

It’s no secret that 2012 was a challenging year. In addition to a lackluster global economy, the investment industry has been hurt by low interest rates, client risk aversion, and increased regulation. And, for many firms, the popularity of passive products and alternative investments is a major challenge. This often leads to lower revenue expectations and higher expenses, so asset managers and brokerage firms tighten their belts. For us, this means longer sales cycles and smaller price increases. It’s also tough to get clients to try new providers.

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Don’t Be Usin’ the B-Word Unless You Need to Be Doin’ the B-Word (Hint: B-Word = Budget)

Monday, April 29, 2013 at 5pm
By John Friedman

Are you saving 15% of your take-home pay? And have you been doing that for most of your working life?

If so, then don’t even think about using the B-word — you don’t need to even go there. Just enjoy the 85% you’re spending — enjoy it thoroughly — and be smart about how you stow the other 15%. And from there, simply don’t worry, be happy.

But if you’re spending everything you bring home or, worse, you’re spending more and going further and further into debt, then please say hello to my little friend — that little B-word of a B-word.

* * *

I refer, of course, to budgeting.

Budgeting is for people who need to keep their spending in check for one reason or another.

Budgeting, unto itself, is not fun. In fact, for most folks, it’s the opposite of fun. So it should be avoided at all (or at least nearly all) costs.

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