In a recent column, I talked about one aspect of the value provided by a financial planner being the combination of detachment and knowledge that can keep a client from making “the big mistake.” I have since read an article that goes even further to answer the question of whether clients really receive value for their financial planning fees.

Since KFG’s 25-year client retention rate tops 90 percent, our clients apparently feel they are getting good value. Still, about once a year someone raises this question. It is a pertinent one that every savvy client should ask from time to time.

It’s hard to quantify an answer. However, a recent article by Roy Diliberto, CFP®, from Ft. Myers, FL, sheds some new light on the real value of having a financial planner manage your investments. In his article in the November Financial Planning magazine, Diliberto cites a recent study by Dalbar, Inc. According to Dalbar, a financial planner or investment advisor will earn you up to an additional $85,000 on every million dollars you have invested in equities.

Dalbar studied various returns on a portfolio of stocks from 1984 to 2002. During this 19-year time frame, they found the average do-it-yourself investor, who did not use a financial planner or investment advisor, earned less than the inflation rate. The average return garnered by such investors was a dismal 2.57% per year. The inflation rate was 3.14%. During that period, the S&P index earned 12.22%.

Put into dollars, go-it-alone investors earned about $25,000 on every million invested in the stock market. Had they simply put that million into the S&P index and left it alone—the most basic strategy an advisor might have suggested—they would have earned $120,000 a year. That’s a loss of $85,000 annually. That makes the annual cost of an investment advisor or financial planner, at $10,000 or less per million, a phenomenally good buy.

Why do investors without professional help do so poorly? While the article didn’t state a conclusion, I have an idea. My experience, plus data from other studies done on behavioral finance, indicates that most go-it-alone investors do not diversify among asset classes. In addition, they make most of their decisions to buy or sell emotionally, using factually irrational analysis and conclusions.

So far we’ve been talking only about the returns garnered by using index funds. In the investment business, a good portion of the compensation for most mutual fund and money managers is based on their “beating the market,” or obtaining a return that is higher than the index. Likewise, many investment advisors and financial planners, myself included, spend a lot of time constructing portfolios that will beat the market. Investment professionals consider it exceptional if they beat the market by 1% or 2% over a period of time.

Diliberto points out that the time spent to squeeze out that extra 1% or 2% may be better used in providing other important financial planning services to a client. He makes a good argument that if a financial planner can add 8.5% of additional annual return to clients just by helping them manage expectations and keeping them from making the big mistake, an extra percent or two return is not highly meaningful. Even further, he suggests that if a financial planner underperforms the market index by 2%, he is still adding 6.5% of additional return to the client.

He has a point. Maybe his message to financial planners is, “Don’t sweat the small stuff.” Certainly, his message to those not using a financial planner is resoundingly clear. Financial planning fees are an investment that pays bigger dividends than even most planners are aware.

When you work for years developing a successful technique for getting people to understand where they stand with money, take the time to work with professional colleagues to articulate it, and have a major publisher think enough of it to publish it – life can be good. Yet thousands of books are published every year, and one has to wonder how many people out there actually “get” what was written. Did it sink in? Was it clear? Will it help?

Sometimes, having a book reviewed by a magazine or a newspaper offers valuable (although sometimes painful) market research on the end result. I’m sure I speak for my co-authors of The Financial Wisdom of Ebenezer Scrooge: 5 Principles to Transform Your Relationship with Money when I say that Clytie Bunyan of The Oklahoman “gets it.” I learned of Ms. Bunyan’s review on Christmas Day when good "Okie" friend and associate, Troy Jones, CFP, called to tell me. From the review, published here http://newsok.com/article/1714614/, it seems apparent that the work Ted Klontz, Brad Klontz, and I did on this book was worth it.

Another good review appeared today in The Chronicle Herald, Halifax, Nova Scotia, by Roger Taylor.  Taylor writes he first thought the book was a gimmick to capture Christmas book sales, but changed his mind once he started reading it.  You can read his review here. http://www.herald.ns.ca/Search/473330.html

I encourage you to read both of these reviews. Or, better yet, read the book. See if you “get it,” too!

The work I’ve done with Onsite Workshops around what we think, feel, and believe about money has taught me that our past affects our current-day finances in a big way.  Some of us have a pretty good relationship with money, but many of us do not.  I’ve co-written two books on how to facilitate permanent behavioral change around dysfunctional money scripts.

Readers of those books will know that to modify our most entrenched money beliefs, we need to dissipate the difficult emotions that hold them in place.  Until now, I didn’t have the tools or process to help clients suffering from unconscious, unhealthy, and even dysfunctional money behaviors to permanently change those behaviors, other than referring them to the Onsite program.   

In 2006, KFG will offer a weekly group called "Money and Meaning" that will explore participants’ past money relationship and assist them to transform it.  The group will be led by Laura Longville, who has 20 years of experience in facilitating similar groups.

Why a money group?  My research has found that people modify problematic money behaviors much more quickly when they are part of a group experience.  In our money group, participants will explore their feelings, beliefs, and values around money in a safe and supportive atmosphere.

One of the more powerful aspects of a small group is to discover that you are not alone in your shame or "secrets" around money.  While most people enter the group experience thinking they are terminally unique in their money behaviors, they leave with the understanding that while there are different issues, almost everyone struggles in one way or another with shame.  In the group setting, we are able to shed our shame and begin to see ourselves and our circumstances clearly and objectively.  This leads to a greater capacity to live life fully, authentically, and with abundance. 

The cost for the "Money and Meaning" group will be $50 per week, with a minimum of a 26-week commitment.  The group meets every Thursdays at 4 pm to 6 pm at the KFG offices.  Call Laura at 342-3580 or Rick at 343-1400 for more information if you are interested in participating.  The group is limited to 8 people and, unlike our other workshops, is not remotely available for attendance by webinar, tele-class, or recording.   

I really enjoyed my interview with Susan Lee, CFP, host of WBAI’s "You and Your Money," this morning.  I thought Susan did an exceptional job in guiding the interview.  It was obvious she had fully read the book.  My only regret is that I totally lost track of time and the program ended just before I hit the key point in how to facilitate permenent behavior change.  I guess listeners will need to buy the book!  The program is available on their archives by clicking here. 

AuthorsTalk.com is featuring an interview with my co-author, Ted Klontz, on our latest book just released this month, The Wisdom of Ebenezer Scrooge.  To listen to that interview click here.

Additionally, "Scrooge" is also the featured book on Libraryselections.com, OnTheBookshelf.net, and TheBookInsider.com.  We are really pleased that Scrooge is generating some attention from these leading Internet sites.

Santa may get all the credit, but who really does all the work when it comes to toy-making? Just think about the enormity of the job of producing those millions of toys he hands out every year.

One thing we can count on—those gifts have to be the product of a lot of cheap labor. All the elves at the North Pole have to be working for little or nothing. Of course, they do get room and board—and from the size of Santa’s belt, Mrs. Claus is evidently a great cook. But what about health insurance and working conditions? Has OSHA approved the safety procedures in the workshop? Does the EPA monitor its air quality? The paint fumes alone must be a significant health hazard.

Then there is the question of long-term security. Does Santa Claus offer a pension plan? Is there a 401(k)?

Perhaps the biggest concern is whether the elves really have other choices. If they don’t like their wages or working conditions, what are they going to do? The North Pole is a one-employer place, so they can’t go across the street and get a different job. Relocating isn’t an option, either—just think of the distance they’d have to go through all that ice and snow in order to get anywhere. A strike might be a possibility—but it’s way too cold up there to walk a picket line. Any rebellious elves would just have to be locked out of the workshop, and the frigid conditions would bring them to their knees in twenty minutes. It’s possible that these poor workers are being exploited in sweatshop conditions.

Oh, they seem happy enough. Any time you see Santa’s elves in movies or books, they are singing while they work, bustling about with apparent joy in what they do. Just remember, appearances can be deceiving.

On the other hand, maybe it’s true that the elves are genuinely happy in their work. If this is the case, it’s probably because a great deal of the labor that goes into Santa’s toys is outsourced. The real labor force behind all those gifts is a vast army of workers all over the world—all volunteers.

These unpaid workers are the ones who brave shopping malls on Saturdays during December. Some of them even get up at dawn to fight their way through crowds of shoppers on the day after Thanksgiving. Others spend hours creating special gifts of wood, fabric, or yarn crafted with love in every stitch or stroke of a paintbrush. Still others stay up half the night on Christmas Eve to assemble dollhouses or bicycles. Then these selfless volunteers wrap the gifts with care—and label them, “From Santa.”

Those generous volunteers are the parents and grandparents who delight in making Christmas a time of joy for the children they love. Many of them find ways to give, as well, to children they don’t even know. This is the real source of Santa’s wealth, the true secret behind his ability to bring joy to so many children in so many places.

Maybe you are one of those countless Santa’s helpers. Maybe your Christmas this year includes the great pleasure of watching small children open gifts from Santa. Maybe your little ones are grown up and have long since graduated to being Santa’s helpers themselves.

Whatever the circumstances, may your Christmas be a joyous one that is focused on family and those you love. As you celebrate this year, please take a moment to help me join Tiny Tim in his heartfelt wish: “God Bless Us, Every One!”

Our introductory teleclass for this evening is full with 25 participants. It will be offered again on Tuesday, January 3, at 9:00 am MST or 11:00 am EST.  Just click here to register.

I’ll be doing a radio interview on WBAI, New York City, on Susan Lee’s program, "You and Your Money."  The program will air at 8:30 am MST (10:30 am EST) on Friday, December 23.  "You and Your Money" is WBAI’s personal finance show dedicated to serving New York City by giving vital financial information in a progressive and holistic context. "You and Your Money" is about helping people live out their dreams in a financially balanced and financially healthy way. You can listen to it online here http://www.wbai.org/index.php?option=content&task=view&id=333&Itemid=42

Susan Lee, EA, CFP, is a tax consultant and financial planner.  She is also a member of the Nazrudin Project, so she is very in tune with the financial integration evolution of the financial planning profession.  You can listen live on the Internet by clicking here at 8:30 am on Friday.

If I had a chance to ask Santa something this year, I wouldn’t ask for a hassle-free dream cruise, a well-behaved new kitten, or even a gourmet chef in my own kitchen. I’d have just one question: “How do you pay for all those toys?”

I’ve been shopping for toys. Those Barbies and remote-control Hummers don’t come cheap. Even a handful (or would that be a footful?) of stocking stuffers can easily set you back ten or fifteen bucks. So how does Santa fund that extravaganza of giving that he does every Christmas?

The obvious assumption is that he must be independently wealthy. If so, Santa is well aware that he better not spend more than 4% of his portfolio if he wants to preserve it. That means, to keep his portfolio in line with inflation, he would need to earn an average of 7% over time. Of course, to earn 7% going forward, Santa probably has 60% of his portfolio in stocks and 40% in bonds.

How large would his portfolio have to be in order to get gifts for all those children around the world? First let’s try to estimate now many kids that might be. The population of the world is about six and a half billion. About a third of those are Christian; about 16 percent are not religious. If we assume the non-religious people also celebrate Christmas, that gives us 49% of the world’s population. Half of six and a half billion is three and a fourth billion. If we further assume that half of those are children, that means Santa is providing gifts for more than one and a half billion kids.

Even if we figure only five bucks a pop, a billion and a half gifts comes out to seven and a half billion dollars. If that is 4% of Santa’s portfolio, he has to have a net worth of at least 187.5 billion dollars. That’s a serious chunk of change. To put it in perspective, the two leaders on the Forbes magazine list of the world’s richest people for 2005 are Bill Gates, with a net worth of 46.5 million dollars, and Warren Buffett, with a net worth of 44 million dollars. The total net worth of the world’s ten richest people comes to 262.2 billion dollars.

Santa was already giving gifts when Clement Moore wrote about him in 1822, so he’s been building his fortune for at least 200 years. My guess would be that he invested heavily in real estate during the early days of the United States. Obviously, he has had a diversified portfolio over the years. He probably made fortunes in railroads, oil, gold, and—in recent years—Microsoft stock. I’ll bet more recently Santa’s owned property in London, New York, and Paris. I wonder if he’s selling now? Of course, the fact that there is no income tax at the North Pole would have helped a lot.

Even with such a huge fortune, Santa obviously has to do his gift-buying wisely. He certainly gets some significant quantity discounts, whether he’s buying toys or the raw materials to make them. He very likely follows the example set by such giants as Wal-Mart, negotiating the best contracts with suppliers in China and other developing countries. That would help offset what must be enormous transportation costs to get everything to the North Pole.

Many billionaires have used their fortunes to do a lot of good in the world. Santa Claus, though, may be the most extreme example ever of how much you can give away if you are a wise long-term investor.

DO YOU:

1. Make the same money mistakes over and over?
2. Consistently buy high and sell low?
3. Know you should be saving more and still don’t?
4. Lie awake at night worrying about money problems?
5. Frequently overspend and hate yourself for it?
6. Have frequent disagreements with your spouse over money?
7. Worry that you will never have enough money?

If you answered "yes" to any of these questions, I have developed some scientifically proven methods that will turn your “yes” to a “no.” Those methods are detailed in the two books I have co-authored, Conscious Finance and The Financial Wisdom of Ebenezer Scrooge.

Now you have the opportunity to join our financial coach, Laura Longville, and me for an eight-week book study and coaching class that will take you through the life-changing process that has transformed scores of our clients’ financial lives.

This eight-week teleclass will use Conscious Finance as our main text. It begins on January 12, 2006, at 5:00 pm and will continue every week at the same time until March 2. The cost for this course is $395 for non-KFG clients; it is free for KFG clients.

Here is what some of the participants in our first class had to say about the teleclass:

• "The Conscious Finance teleclass was a wonderful experience. I really feel like I made progress towards my goals." Michele, Rapid City
• "It was a valuable experience that will not only impact my future decisions, but my life goals and happiness.” LM, Rapid City

In case you want to test drive this process, join us for an introductory teleclass. It will be offered twice; on Tuesday, December 20, at 5:00 pm MST or 7:00 pm EST, and on Tuesday, January 3, at 9:00 am MST or 11:00 am EST.  Just click on the corresponding link to register:

Tuesday, December 20, at 5:00 pm MST or 7:00 pm EST

http://www.courseregistrationsystems.com/tci/catalog_full.html?courseid=6727

Tuesday, January 3, at 9:00 am MST or 11:00 am EST